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Putting LabCorp Under the Microscope

Will recent legislation affect its 2021?

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Debbie Wang: We've been taking another look at LabCorp because this company is slightly undervalued and it has been under a lot of reimbursement pressure from Medicare, thanks to a new market-based reimbursement system that was heavily skewed towards the lowest-cost producers including LabCorp and Quest. Now we're seeing the diagnostic lab industry fighting back, and they have convinced Medicare to include more of the high-cost, hospital-based labs as we go into the next reset of these reimbursement rates. Most recently, we have seen bipartisan legislation come out of the House that would allow for more time for these hospital-based labs to comply with the onerous reporting requirements. In the end, we think that this will lead to higher reimbursement rates for Medicare going into 2021.

Debbie Wang does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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