An Advanced Diagnostic Laboratory Test, or ADLT, is a Medicare payment category created by the Protecting Access to Medicare Act of 2014 (PAMA) for high-complexity diagnostic tests that only one laboratory can perform. Rather than being priced through the standard Clinical Laboratory Fee Schedule, an ADLT is initially paid at the laboratory’s publicly listed charge for three calendar quarters, then transitions to a market-based rate calculated from private insurance payments. As of early 2026, roughly 18 tests hold ADLT status, most of them genomic cancer assays and molecular classifiers.
How a Test Qualifies
Under 42 CFR § 414.502, a test must be a clinical diagnostic laboratory test covered by Medicare Part B, offered and furnished by only a single laboratory, and it must meet one of two technical criteria.
The first pathway covers proprietary algorithm-based tests. The test must analyze multiple biomarkers of DNA, RNA, or proteins and, combined with an empirically derived algorithm, predict the probability that a specific patient will develop a condition or respond to a therapy. CMS also requires the test to provide new clinical diagnostic information that no other test or combination of tests can deliver. The test can include additional assays beyond the molecular analysis, but the algorithm-plus-biomarker core defines this route.
The second pathway is straightforward: the test must be cleared or approved by the FDA, through either the 510(k) substantial-equivalence process or the more rigorous Pre-Market Approval process for high-risk devices. An FDA-cleared test still has to meet the single-laboratory requirement, but it does not need to show the unique-algorithm-plus-new-clinical-information combination.
The two pathways are alternatives. A test needs to satisfy only one. In practice, most tests holding ADLT status qualify through the algorithm pathway, because FDA clearance of laboratory-developed tests has historically been uncommon.
The Single-Laboratory Requirement
Every ADLT must be offered and furnished by only one laboratory and cannot be sold for use by a different lab. The regulation defines “single laboratory” to include the laboratory itself, the entity that owns the laboratory, and any entity the laboratory owns. This ownership-based definition lets a corporate parent control the test’s development and marketing while a subsidiary lab performs it, or vice versa. What matters is the ownership chain.
If the developer licenses the test to an unaffiliated laboratory, the test loses ADLT eligibility. Once a second, independent lab can run it, the designation no longer fits.
Mergers and Acquisitions
ADLT status can survive a change of ownership if the acquiring entity qualifies as a “successor owner.” CMS guidance defines a successor owner as a laboratory that has assumed ownership of the original designer through a recognized transaction: a corporate merger or consolidation, the transfer of an unincorporated sole proprietorship, or a partnership change in which a partner is added, removed, or substituted. A simple transfer of corporate stock does not count as a change of ownership under these rules.
The authorized official for the laboratory must notify CMS of any ownership change within 30 days. That notification must also disclose whether the test itself has been sold or licensed to another lab, since either event can disqualify the test.
Initial Pricing at the Actual List Charge
When CMS grants a test “new ADLT” status, the test enters an initial pricing period lasting three full calendar quarters. During this window, Medicare pays the laboratory’s actual list charge for each test performed.
The regulation defines “actual list charge” as the publicly available rate on the first day the test is obtainable by a privately insured patient or marketed to the public, even if no test has yet been performed. “Publicly available” means the lowest price readily accessible through the laboratory’s website, a test registry, or a price listing to anyone without a negotiated contract. The laboratory must attest to this amount in its application.
The initial period begins on the first day of the first full calendar quarter after the later of two events: the date CMS grants ADLT status, or the date a Medicare Part B coverage determination is made for the test. If CMS approves the test in mid-February but the coverage determination doesn’t come until late March, the three-quarter clock starts April 1. This window gives the developer a period of predictable revenue before private-payor data takes over.
Transition to Market-Based Pricing
After the initial three quarters, the ADLT’s Medicare payment rate shifts to the weighted median of private-payor rates, the same core methodology PAMA uses for all clinical lab tests. The laboratory collects data on what private insurers actually paid for the test during a defined data collection period and reports it to CMS during a subsequent reporting period. For ADLTs, this reporting happens annually, which keeps rates more current than the three-year cycle applied to most other lab tests.
The regulation defines “private payor” to include health insurance issuers, group health plans, Medicare Advantage plans, and Medicaid managed care organizations. CMS uses the payment volumes and rates from these sources to calculate the weighted median that becomes the ADLT’s Medicare rate going forward.
The 130 Percent Recoupment Rule
A financial safeguard prevents laboratories from inflating their list charge during the initial period. Under 42 CFR § 414.522, if the actual list charge exceeds 130 percent of the weighted median that CMS eventually calculates, the laboratory must repay the difference between the list charge and 130 percent of that weighted median. The threshold allows for reasonable pricing uncertainty in a new test’s early months but catches significant markups. Laboratories setting an initial rate should weigh this clawback risk.
HCPCS Coding
Every ADLT must have a unique HCPCS code that describes only that test. If the test already has one, the laboratory identifies it in the application. If not, the laboratory can apply to the American Medical Association for a unique Level I (CPT) code, or ask CMS to assign a unique Level II HCPCS code as part of the ADLT application.
Expect roughly a one-quarter lag between CMS granting ADLT status and the effective date of a new Level II code. If CMS approves a test during the first quarter, the code is assigned by the end of that quarter but doesn’t take effect until July 1. Billing under the ADLT framework requires the unique code to be active, so this lag matters for launch planning.
Applying for ADLT Status
The application is submitted electronically through CMS on a standardized form. The applicant supplies all National Provider Identifiers and CMS Certification Numbers associated with the single laboratory, which verifies the lab’s legal standing and links it to its CLIA certification.
For tests qualifying through the algorithm pathway, the application must include a description of the biomarkers analyzed, a specific description of the empirically derived algorithm, a summary of the test’s intended clinical use, and an explanation of how the result provides diagnostic information not available from any existing test. CMS also requires a list of comparable tests and a detailed comparison showing how the proposed ADLT differs from each. For tests qualifying through FDA clearance, the application must include copies of the 510(k) clearance letter or PMA approval.
The laboratory must attest to the actual list charge that will apply during the initial pricing period, and it must identify the HCPCS code assigned to the test or request that CMS assign a new one. CMS will not begin substantive review until every required element is submitted. An approved notification includes the effective date of ADLT status and the dates defining the initial pricing period.
Ongoing Data Reporting and Penalties
Once the initial pricing period ends, the laboratory is subject to PAMA’s ongoing data reporting requirements. It collects private-payor rate and volume data during each data collection period and submits it to CMS through the Clinical Laboratory Fee Schedule reporting module. A designated certifier at the laboratory must verify the accuracy of the data before submission is finalized. Once certified, the submission closes and no further data can be entered for that cycle.
For ADLTs, the first report is due no later than the last day of the second quarter of the new ADLT initial period. After that, reporting occurs annually, a faster cadence than the standard three-year cycle.
Laboratories that fail to report or that misrepresent or omit information face civil monetary penalties of up to $10,000 per day for each violation, adjusted for inflation under the Federal Civil Penalties Inflation Adjustment Act. The same enforcement framework that governs other Medicare penalties under 42 U.S.C. § 1320a-7b applies. CMS has not yet established a formal penalty program under this authority, but the statutory exposure is real.
Pending Legislation
As of late 2025, the RESULTS Act (S. 2761 / H.R. 5269) had been introduced in Congress and referred to committee but had not been enacted. If passed, the bill would overhaul PAMA’s data reporting framework for most lab tests, shifting from a three-year to a four-year reporting cycle. It would not change how CMS sets rates for ADLTs or alter the ADLT definition. ADLT laboratories would continue reporting annually, and new ADLTs would still receive actual list charge pricing for three calendar quarters before transitioning to the weighted median.