One of the features of the PAMA raw data is that some tests (especially CYP testing and drug tox testing) had an outlying minority of very highly paid tests - e.g. >$10,000 for tests with median prices around $500.
With so much price transparency industry-wide under PAMA, both for volume and for market price distributions, there may be compression of pricing in the future.
For a hypothetical test, I modeled the impact of reducing outlier high prices on profitability.
The model test has a median price of $500, but a price range of $50 to $2000. (This doesn't match any one test, but is realistic given actual data I sampled). There is a normal volume distribution, as shown in the table, with 50 cases at the median price and 5 at the farthest outlier prices; there are 160 total tests. The cost (COGS) of the test is $250.
In this model, the lab currently has $85,750 revenue, $40,000 costs for 160 tests, and $45,750 gross profit, or 53% gross profit. Interestingly, 35% of gross profit comes from just the 15 high outlier tests.
In a future year, with so much price transparency on the table, we assume that market price ranges are considerably compressed, now falling between $250 and $750. Revenue drops to $77,500 - there are fewer super expensive tests, but fewer dirt cheap ones. Gross profit is now $37,500, or a fall in gross profit of 18% from $45,750 initially.