Very Brief Blog: Illumina Acquires Edico for $100M

Last year, I had the chance to chair two conference sessions and write an article on the topic of digital genomics, companies dedicated to the digital layer of services rather than running a wetlab at all.

Edico Genome was one of the companies discussed.  This week, it's been acquired by Illumina for $100M.  Over the past several years, Edico had raised $32M in venture capital. 

Edico enables both research and clinical technologies; for example, it's been used by Rady Children's Hospital in landmark applications of rapid genomic sequencing in very ill babies.  (See Farnaes et al., 2018, here.)

• San Diego Union Tribune, here.
• Xconomy, here.
• Genomeweb, here.

Illumina has a market cap of $38B and cash and equivalents of $2B.  

Very Brief Blog: OIG Says CMS Telehealth Payments Often Incorrect

There have been many voices calling for better Medicare coverage of telehealth, including some small legislative fixes in the recent spring Fiscal Year Budget Bills. 

However, others have been concerned that telehealth and digital delivery modalities could be subject to incorrect billing or worse.   OIG issues a report on this topic in April 2018, finding a 30% error rate.  Telehealth remains, however, a very tiny fraction of Medicare spending, despite having risen from $61,000 in 2001 to $17M in 2015.

• The OIG report is online here.
• Trade press here.

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With Telehealth spending of $17M in a budget of about $600B, telehealth is about 1/300 of one percent of each Medicare healthcare dollar.

Very Brief Blog: GAO Issues Report on CMMI Activities & Productivity; Other CMMI News

On April 25, the GAO released a report on the progress and results of 37 CMMI models.   GAO's bottom line was that of 37 plot projects, just 6 were shown to have successfully reduced spending (while maintaining or improving quality). Even fewer (2) were expanded so far.  $5.6B has been spent since the creation of CMMI by the Affordable Care Act in 2010.

• The GAO report is online here (54pp).
• Trade press at Advisory Board here, Healthcare Informatics here.
• More trade press at AJMC here and  RevCycleIntelliegence here.

This blog wrote about the GAO report on CMMI Medicaid pilots in February 2018 here.   (GAO found lack of rigor in reporting.)  

Other CMMI Recent News

Reboot & Comment
CMS/CMMI launched a "pause and reboot" project in October 2017; and a few weeks ago in April 2018 released public comments and some ideas for moving forward such as primary care direct contracting (here).

CMMI Request for Information on Direct Contracting Primary Care
Find more info about this here.  Comments accepted til May 25.

$800M Budget Cut
In May 2018, OMB proposes to cut $800M from the CMMI budget. here.  CMMI has had a ten year budget to 2019, with several billion unspent and without a spending plan, so this is more a clawback of stored funds than a cutback in programming.

New Head Adam Boehler
The Obama era head of CMMI stepped down in Summer 2017; finally in April 2018 Adam Boehler was officially named the new CMMI director.  Here.  (Boehler's name had circulated in this context since December.)   Boehler founded Landmark Health, a novel venture funded delivery system for the chronically ill (more care at home) that aimed to support Medicare Advantage and other health plans.

Brain Drain
A March 2018 article in Politico discussed "brain drain" at CMMI, here.

Rigor at CMMI? Or Not?A May 2018 article in NEJM decries the shift from randomized trials to voluntary demos at CMMI, here.   I would add that since CMMI must by statute demonstrate its programs save money and raise quality, if they are not rigorous, CMMI may be shooting itself in the foot at evaluation time.

Slow Start at Diabetes Prevention Program
This is the CMMI funded pilot-to-expansion program.  Stumbling, per an article in Kaiser Health News, April 2018.  Here.  Update in May, here.

OMB Criticizes Lack of Progress and Impact at CMMI

In June 2018, OMB head Joseph Grogan put CMMI in his crosshairs for a round of criticisms.  These are summarized in an August 2018 blog by Thomas Sullivan at the Policy & Medicine blog.  See multiple links - here.

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More generally on alternate payment models -

For a March 2017 JAMA article on value based purchasing ("Time for a reboot?") by Jha, here.

For a May 2018 editorial on measuring bundled payment programs in Annals of Internal Medicine by Provonost at Johns Hopkins, see here (trade press here.)    For a NEJM article on the poor performance of "performance measures," MacLean et al., here. 
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For a comparable to director Boehler's prior business Landmark Health, see perhaps the business Hometeam (here, here).

Very Brief Blog: Tissue Type Distribution in FMI F1 CDx FDA Data

Based on its PMA approval last November, the Foundation Medicine F1 CDx test has two types of indications.  The first set is indication(s) for several CDx genes, generally obtaining the CDx authorization by comparison to an FDA-approved legacy single gene test in 150-200 blocks.   The second indication is for pan-solid-cancer tumor "profiling" which is "for use by a physician."   This second indication gets FMI pan solid tumor coverage under the recent CMS NCD for NGS tests in oncology.

On pages 34-35 of the FDA P170019B approval, FMI lists its tissue comparability data (document section 10.)   A large scale retrospective analysis was conducted used 80,715 specimens from 43 tissue types, "to demonstrate that genomic profiling can be performed on DNA derived from FFPE specimens of any tissue type."   The document states that "the data set for analysis consisted of routine clinical samples analyzed using the F1 LDT from March 25, 2015 to March 13, 2017."

I typed the FDA data into Excel to sort it.   FMI provides technical success data for each of the 43 tumor types after DNA extraction, library capture (LC) and hybridization capture (HC).   The vast majority of specimens pass all QC steps, but note that they had presumably been screened or submitted according to some instructions about the expected number of slides or blocks or percent tumor.

Assuming the 80,000-odd blocks were routine clinical workflow, that's about 10,000 cases per quarter over 8 quarters, which more or less foots to FMI statements about clinical volume.   The top ten tumor types, reaching 75% of specimens, are shown below.   Note that I've left the data exactly as in the FDA tables except for merging pancreas together with Whipple resection.

FMI F1 CDx PMA 170019B p 35 table 24

Three cancers - lung, liver, and brain - along with "lymph node" samples, are about half of all specimens.   The top ten together are about 75%, so the next 30 are only 25%.   So that's from the perspective of concentration.

You can also look from the perspective of dispersion - thirty-some types of cancer all log in at less than 2% each.  18% of samples had rather vague denominations like "lymph node" or "effusion."

For comparison, the annual cancer deaths (a proxy for advanced cancers) are lung, 150,000; colorectal, 50,000; pancreatic, 45,000; breast, 40,000; liver, 30,000; prostate, 30,000; leukemias, 25,000.   Brain cancer would be farther down, around 15,000.  In the FDA data, lung and liver FMI tests are about the same, but the incident US death ratio is 5:1 favoring lung.  Colon and brain FMI tests are about the same, but the US death ratio favoring colon is over 3:1.

The original FDA document is here, see pages 34-35.  My typed and sorted table is in the cloud here.

The FDA doesn't seem to require 80,000 blocks in 43 tumors to merit the pan-cancer label; the MSKCC IMPACT test also is labeled as pancancer based on about 10,000 blocks in 17 cancers. 

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Update: A numeric error was corrected a few minutes after the original post.
ACS Cancer Facts 2018, here. Odds of dying of 20 cancers (e.g. testicular cancer, odds, 1 in 5094, here.

Genomeweb Scoop: Discusses FDA Response to IVD Reform Legislation

In March 2017, the House released a 215-page discussion drat of a bill that would substantially overhaul the FDA's approach to diagnostics, both LDTs and IVDs.    See the bill online here.

On May 4, Turna Ray of Genomeweb published a detailed article described an FDA technical response (comment) on the legislation.   As of a couple weeks ago, the word was that the Hill was still waiting for this FDA document to arrive.  The subscription Genomeweb article is online here.  The journal obtained, analyzed, but didn't post the FDA document.

According to Genomeweb, FDA would encourage higher positioning for its "precertification" program based on lab or manufacturer reporting/recording of analytical and clinical validity.   FDA was concerned about some details of the bill such as the breadth of its grandfathering clause.

A March 2018 Genomeweb article captured Commissioner Gottlieb's remarks at the ACLA annual meeting, where he also noted he was favorable to a long time legislative overhaul which would specialize diagnostic regulations away from the general regulation of medical devices like implants.

FDA is well along in its plans to create an all-new soup to nuts digital health pre-certification program in 2018 (here), and the future diagnostic pre-certification program would be analogous but fitted for diagnostics.   FDA first rolled out elaborate genetic test pre-certification or self-certification in germline test authorizations crafted for 23andMe several years ago.

CMS Publishes Full Code List For New Lab Codes; Big Revisions to BRCA

CMS holds an annual public meeting to allow public comment on its pricing options for new, and revised, AMA CPT laboratory codes.   CMS publishes an initial list (mostly PLA) codes in early April; CMS has now published a full list of 81 codes.   BRCA codes are scheduled for extensive revision and CMS repricing.

Details:

• See the CMS lab meeting webpage here.
• See the full Excel spreadsheet (as a zip file) titled "as of April 30 2018," here.
• The full Excel spreadsheet should have 81 agenda items.
• (Note they've left up, for now, a partial spreadsheet posted a few weeks ago.)

Registration for the public meeting is open until June 11 (click the "register" link).   Note there are also explicit instructions for your one slide Powerpoint presentation format, click on Power Point Presentation Template.  

Both registration and slides are due June 11; note that the meet could fill up prior to that date due to limited audience space (for people) and limited agenda time (for slides).

What's On Deck?

The agenda lists 2 tests for pricing reconsideration, 81334 (RUNX1, in AML) and 81326 (PMP22, in Charcot-Marie-Tooth neuropathy).

Items 3-29 (26 items) are PLA codes, the new quarterly "proprietary lab analysis" category of code.  These are diverse codes; some human genetic, some microbial, some MAAA and some FDA approved tests.

Items 30, 31, 23 are "administrative MAAA" codes (such as 0011M).

Items 33-81 are Category I genomic CPT codes for the most part and mostly single genes (80X01 is a dihydrotestosterone chemistry code).  

Agenda items 45-49 are revised BRCA codes.

• 81X78 will be BRCA1, BRCA2, full sequencing.
• 81X79 will be BRCA1, BRCA2, full dup del analysis (e.g. large rearrangements)
• 81X81 will be BRCA 1, full sequencing and 81X82 will be BRCA 1, full dup del analysis.
• 81X83 will be BRCA 2, full dup del analysis

The "new codes" agenda doesn't list deleted codes, since a deleted code does not require pricing, so the status of some existing BRCA codes like 81211 isn't explicit from the CMS CPT listing.   In its public report on the February 2018 AMA meeting, the AMA summarized as follows:

"Accepted addition of five new codes to report full sequence analysis, full duplication/deletion analysis [for] BRCA1 and BRCA2; revision of code 81162 to include full duplication deletion analysis; revision of 81216 to include HUGO gene name; deletion of 81211, 812131, 81214."  The codes-affected list was 81162, 81211, 81212, 81213, 81X78, X79, X81, X82, X83.

AMA could, possibly, make alternations between the February meeting public report and the code book going to press in summer.  Basically, from the above information, it looks like they've left in place 81162 (BRCA1, BRCA2, full seq + full dup del) but if a lab is going to report only sequencing or only dup del, it could use 81X81 alone or 81X82 alone instead of 81162.   (I would strongly predict a CMS edit not to use 81X81+81X82 together as stack codes.)   PAMA has impacts in all this, because 81162 drops in price under PAMA while 81211 rose in price under PAMA, at least, until it's deleted.

Very Brief Blog: Who Invested in Theranos?

While Theranos' valuation once exceeded a billion dollars, it also absorbed and spent $600M in cash.  Where did that come from?   Wall Street Journal provides a listing based on court documents.

High profile investors included the Walton family (Walmart; $150M), Rubert Murdoch (Fox; $121M), the DeVos Family (Betsy DeVos, Education Secretary; $100M); the Cox family (media; $100M).   Runners-up include Carlos Slim, the Mexican billionaire, and others including the ex-chairman of Bechtel and the owner of the New England Patriots. 

My library of a couple hundred media Theranos links, 2014-2016, is here.

Very Brief Blog: Gilead to Invest $90M in Verily's "Immunoscape" Immuno Cellular Profiling

Update:  On May 14, Google Ventures (GV) and Third Rock fund a Broad Institute spinout, CELSIUS, for $65M to do similar work on sophisticated molecular map analysis of immune system for disease definition & drug development.  John Carroll's Endpoints article here.  
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Providing contract research to pharma is a big industry, and includes not only clinical trials but also R&D.   Gilead, planning to move further into drugs for inflammatory diseases, announced it is investing $90M in research at Verily.   The platform will be Verily's "Immunoscape" - a name that was trademarked only last December.  Here's what it does:  "The Immunoscape platform represents the next-generation of tools to understand the immune system, harnessing the latest in genomic and immunologic laboratory technologies and leveraging Verily’s ability to curate and analyze health data at scale."

For comparison, based on their latest investor call, Foundation Medicine's annual pharma revenue is the the neighborhood of $100M.

The fact this big molecular science deal lands at Verily - part of Google Alphabet - rather than a traditional life science lab or in an offshoot from academia is telling.  Possibly the actual data - for example, high sensitivity flow cytometry and RNA expression - is relatively straightforward today and the secret is in the resulting big data or machine learning analysis.   If so, put this one in the category of the impact of digital health modalities on genomics.  (See my December 2017 article).  For another perspective, $90M would swamp the budgets of academic labs looking at immune profiling and expression across several autoimmune diseases.

Read more at Genetic Engineering News and at Forbes.   Head of the lab project is Charlie Kim PhD, who moved to Verily from his position as assistant professor at UCSF (Linked In here).  (To use the perspective theme once again, imagine booking a $90M grant as a beginning assistant professor.)

Currently, the home page for Verily Projects lists four broad investment and research categories - sensors, interventions, health platforms and population health, and precision medicine.   Each category has 3-6 projects, of which Immunoscape is one project out of 6 in the precision medicine category.

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Verily and Gilead are located in close proximity to each other on the SF peninsula.

Very Brief Blog: Is "Transformation of Healthcare Systems" Mostly Hype?

While we hear much about alternative payment models and health system reform, is much really happening?

U Penn / Wharton health policy gurus Lawton Burns and Mark Pauly are doubtful, as expressed in a new article in Milbank Quarterly.  It seems to be open access.   Find it here.

The takeaways:

• Policymakers seek to transform the US health care system along two dimensions simultaneously: alternative payment models and new models of provider organization.
• This transformation is supposed to transfer risk to providers and make them more accountable for health care costs and quality.
• The transformation in payment and provider organization is neither happening quickly nor shifting risk to providers. The impact on health care cost and quality is also weak or nonexistent.
• In the longer run, decision makers should be prepared to accept the limits on transformation and carefully consider whether to advocate solutions not yet supported by evidence.

Very Brief Blog: FMI Definitely Becoming an ADLT; Definitely Has Pan-Cancer NCD Coverage

On May 2, 2018, Foundation Medicine held its Q1-2018 quarterly earnings call, which is available online here.   See also summary at Genomeweb here.  Q1 quarterly revenue reached $53M, up from $26M one year earlier.

Definitely Pan Cancer Coverage at CMS
Based on explicit analyst questions, FMI confirmed that CMS had confirmed that it has pan cancer coverage in solid tumors.   FMI pointed to its label, which has both an indication set for several CDx genes and also a clearly stated FDA indication for pan solid tumor gene profiling.   The analyst emphasized that the NCD interpretation was perplexing to observers.   I called it a "Rubik's cube" problem in a recent blog and white paper -- but my analysis then  seems to concord with FMI statements this week, and by proxy, with CMS.  See that blog here.

Definitely Applying for ADLT Status
FMI also announced it was definitely applying for ADLT status.  It will be paid at local contractor rates since then; at least one announcement stated its local contractor rate with Palmetto was $3415.  (In the earnings call, FMI referred 3 times to Palmetto but never to the MAC in its home region, Massachusetts.) 

ADLT rules allow local MAC payment rates until an ADLT decision is made by CMS (here, likely July 1), then, 9 months of payment at the list rate, and then, payment reset annually to a market rate.  There is a clawback option if the 9 month list rate is too high above the retrospectively confirmed first year market rate.  CMS released ADLT instructions in mid March (blog with CMS links and my discussion, here).   I pointed out that labs have a lot of options for controlling the first-year data that results in the second-year median rate (here).

Definitely Shooting for TMB in an FDA Liquid Biopsy Test 
FMI emphasized that its ACT liquid biopsy test now entering FDA review would include tumor mutational burden (TMB) information.

I'm not a card carrying regulatory expert, but based on recent FDA approvals, getting a pan-cancer label out of the FDA isn't a shoo-in and it's a white space to do it in the liquid biopsy sphere.   As part of their November 2017 FDA reviews with pan-solid-cancer indications, FMI provided data from 80,000 blocks across 43 cancers, and MSK IMPACT provided >10,000 blocks across 17 cancers.  (See my Rubik's cube article cited above).

Revenue Per Test Unit
Biopharma revenue tests were reported as quarterly 7,184 units for $27.8M revenue ($3869 per unit) and one year ago 1,802 units for $9.5M revenue ($5272 per unit.)    Clinical tests were reported as 21,861 units for $18.8M revenue ($860 per unit) versus one year ago 13,900 units for $11.6M revenue ($833 per unit).   Note that revenue recognized per clinical test unit may lag as test volume grows ahead of collection cycles.  Still.  FMI noted it has switched from cash- to accrual-based clinical revenue.  If I read correctly, they state that cash-based Q1 clinical revenue would have been a bit higher, $22M, than the accrual-based Q1 clinical revenue figure.

Share Price
FMI's share price is about $70, up from about $50 just before the draft NCD was released in November.  However FMI's share price peaked at $86 in February, before the NCD was finalized.  Market cap is $2.6B. 

Brief Blog: New Cycle of Activity on "Cancer Sequencing Hype and Reality"

Science blogger Derek Lowe has a new article May 2 titled, "Cancer Sequencing Hype and Reality."  The essay is predicated on a recent debate at AACR between David Hyman of MSKCC and Vinay Prasad of OHSU.   It tracks a report on the conference published in Science by journalist Jocelyn Kaiser, here.

As Lowe tells it, in the debate, Prasad focused on the fact that only about 15% of lung cancer patients have an FDA-actionable mutation and only about half of them have a corresponding therapy response, therefore, precision medicine has too much "hype."   I'm not sure; I don't think it's a surprise to anyone in the field - it's common knowledge that a (fairly small) subset of lung cancer patients have EGFR and ALK and then ever rarer mutations.   Maybe it's "hype" that there is "hype"...

See Hyman's presentation in AACR video online, here.  Hyman's team showed that larotrectinib, an investigational drug, was active against TRK fusions in a wide range of tumors (NEJM, 2018, here.)

See an article in Medscape here that reviews Prasad's April 2018  JAMA paper on "percent of US cancer patients that benefit from genome driven oncology."
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I haven't updated it but around 2015-2016 I had a blog inventory of fifteen or twenty articles, at that time, skeptical of precision medicine (here).

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PubMed currently has 1300 citations for "HYPE" (here) only a few of which are the gene carbamoyl dehydratase (HYPE). 

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In Nature Reviews Clinical Oncology, Kimmelman & Tannock (2018) argue that precision medicine subpopulations can be so small that any outcome and comparison studies are necessarily very limited, with large error bars, thus generating paradoxical "imprecision within precision;" here.

Very Brief Blog: NAS Meeting on Genomic Health Disparities, June 27, 2018

The National Academy of Sciences has a standing committee called "Roundtable on Genomics and Precision Health," here. 

They've announced a new public workshop, to be held in Washington on June 27, 2018, with the title, Understanding Disparities in Access to Genomic Medicine.  See the webpage here.   I've clipped the homepage in this blog below the break.  I was very happy to have the opportunity to serve on the organizing committee for this workshop.

Track them at #GenomicsRT and #GenomicsDisparities. 

The group's prior workshop was November 1, 2017, on "implementing genomic screening programs in health care systems."   That webpage here; the proceedings of that autumn workshop were released as a detailed eBook on March 16.

CMS Releases Public Comments on CMMI Reform; May Launch "Direct Contracting" Initiative

Several important news items from the Center for Innovation (CMMI) at CMS.

The Request for Help in Innovation Last Fall

Last fall, with an Op Ed in the Wall Street Journal and a public request for information, CMMI asked for help in rebooting and redirecting its potentially quite powerful Center for Innovation.  Under ACA law, the CMMI can launch pilot projects at nearly any scale (local, national) and waive Medicare law for the purpose of these projects.   For links and comments on the September 2017 initiative, see my blog here.  For selected follow up available in November 2017, here.   This effort is branded the CMMI New Directions program.

Public Comments Now Released

In April 2018, CMS releases the public comments both those provided inside an online form (text boxes) and open-format PDF written comments.  See the toward the bottom of this web page, "Public comments...are available below."  Here.   There were over 1000 comments - press release on the release of public comments, here.

Note that the document-format public comments are released by CMS as one gigantic 284 MB consolidated PDF.  Don't try to open on your iPhone.  It's a scary 4,643 pages.  (My comment is p. 1409-1412).[*]

Direct Contracting Models Considered

Also in April 2018, CMS released a new and more targeted Request for Information, asking whether CMMI should roll out demonstration programs focused on Direct Contracting with providers.  (For example, this could be capitation of primary care.... the "medical home" on steroids.)   CMS notes its proposal is similarly to what is now available from some medical practices by contracting with patients for "direct primary care" or DPC.

See a summary at Healthcare Dive here.   See a follow-up article at Medscape, here. See the CMS webpage here.   CMS is taking public comments for a month, until May 25, 2018.   See a nine page CMS PDF about the topic here. 

Direct Primary Care

For Google News on Direct Primary Care, here.   For articles on PubMed, here.

For support from the Heritage Foundation, here.  For a representative local news article, here.  For a current update on Healthcare Law Blog, here.


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[*]

Last fall, I made a four-page comment on CMMI's direction.  Being a strategy consultant, I focused on three fundamentals that CMMI needed to resolve to be efficient and effective in the roll-out of any CMMI program.

First, CMMI needs to address that its legal authority to waive Medicare law is clearly directly only to demo programs, not permanent implementations.  Second, CMMI needed to have clear standards with the Actuary for the agency decision that a program was cost-saving when extrapolated outside the original study.   (If standards are too high, nothing could be expanded, since the expansion always carries financial unknowns).  Third, the CMMI should focus not only on payment policies, but sometimes on technologies were there are serious barriers to innovation that can only be overcome via CMMI's waiver authority.   My comment in the cloud here.

Brief Blog: Guardant Publishes Analysis of 7,000 Clinical Lung Cancer LBx

On April 26, 2018, Guardant Health published a peer-reviewed article in Clinical Cancer Research on validation of its plasma-based circulating tumor DNA assay.

The article is online here; open access PDF.   The company also issued a press release here.

To quote briefly:

A retrospective analysis was conducted on a series of 6,948 consecutive lung cancer patients tested with Guardant360. Of those, 543 could be compared to tissue genotyping results performed by other providers. 

The results showed that for treatment-relevant alterations in EGFR, ALK, ROS1, RET, BRAF, MET, and KRAS, the positive concordance of Guardant360 to tissue genotyping was 92-100 percent. 

Furthermore, upon following up on cases that were Guardant360-positive for an ALK fusion but negative in tissue, all patients responded to treatment with a standard-of-care ALK inhibitor.  

The Guardant360 test is under review at FDA, as is the FoundationAct liquid biopsy test. 

Very Brief Blog: ACLA 42-page Response in PAMA Court Case

Several months ago, ACLA filed suit against CMS/HHS for improper implementation of PAMA Section 216, which uses market surveys to reprice the CMS Clinical Laboratory Fee Schedule.

While I don't have access to all filings, the April 16, 2018, issue of DARK REPORT provides a multi-page summary of filings by ACLA, NASL, AdvaMed, CAP, and AAB.   It also discusses HHS's motions in regard to dismissing the case for lack of standing and similar grounds. 

One publicly available window into the case is the ACLA 42 page response to HHS, which was filed in on April 6, 2018.  See the PDF at the ACLA website here, and coverage at Dx360 here.  The ACLA document recapitulates many of HHS's assertions in order to rebut them.  The case is ACLA vs Azar, 17-cv-2645.

The ACLA document linked above includes, at PDF page 38, a letter from BioReference, the large NJ-based laboratory, requesting a redetermination of claims asserted to be underpaid due to PAMA.  The letter to Novitas is signed by BioReference's chief counsel Jane Pane Wood.

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I'm not an attorney, but as a policy observer, it seems to me neither HHS nor ACLA want to admit that the Statute here is very badly worded and very hard to apply to hospital labs.   HHS needs the statute to be clear enough that HHS has come up with a wise and appropriate implementation that cannot be legally challenged since it is a rationale implementation of what must be, therefore, a rationale statute.    ACLA probably recognizes the problems in implementing the statute-as-written, but argues strongly that it is not up to ACLA to figure out its implementation, that is CMS's job.

The statute requires the Medicare A/B revenue of the lab to be >50% from Part B fee schedules (CLFS or PFS).   If you define "lab revenue" as "revenue" from line item bills on fee schedule then hospital labs would always qualify, so the rule seems meaningless.  (That is, you would define Part A overhead as "not revenue of the lab" because it is "revenue of the hospital.")   If you include lab revenue from fee schedules AND revenue or financial support filtered in from hundreds of millions of dollars of Part A hospital stays and Outpatient care where lab tests are now bundled to surgeries and office visits, it gets complicated quickly and would become a rat's nest of hospital accounting rules.   CMS avoided this rat's nest by defining "revenue" per NPI but this takes the implementation far from what the statute seemed to intend. 

It's easy for physician labs to qualify as getting >50% of physician office revenue from Part B fee schedules (even if it's only 1% lab fee schedule per se.)  Whether you defined the revenue basket as "the physician office" or "the lab inside the physician office" (sic) either way it's mostly or entirely fee schedule based.