Theranos lab in California shut down, fined for immediate jeopardy

Due to a number of serious deficiencies rising to the level of immediate jeopardy, the Theranos, Inc., laboratory located in Newark, California, lost its Clinical Laboratory Improvement Amendments of 1988 (CLIA) certificate and faces civil money penalties (CMPs) and the cancellation of its approval to receive Medicare and Medicaid payments for laboratory payments. In a July 7, 2016 letter, CMS notified Theranos of sanctions the agency was imposing against the lab. Theranos accepted full responsibility for the problems at the Newark lab and announced its plan to “work non-stop to resolve the issues identified,” promising that its top priorities are patient safety and quality.

Theranos, a company founded by a 19-year-old Stanford dropout who became the youngest female billionaire in the United States, made its name on reinventing blood testing. It was lauded for finding a way to run multiple tests from a single drop of blood, rather than multiple vials’ worth. The concept promised to revolutionize phlebotomy, making testing faster, more accurate, and much less expensive. Questions about the company arose in the year, however, when a Wall Street Journal investigation listed concerns about whether its tests were reliable. In April 2016, a New York Times article noted that the Department of Justice and the Securities and Exchange Commission were separately investigating the company based on issues raised by the WSJ.

CMS conducted a recertification and complaint survey at Theranos in late 2015; based on the survey, CMS found that the Newark laboratory was out of compliance with five CLIA Condition-level requirements and numerous CLIA Standard-level requirements. The agency provided Theranos with a statement of deficiencies and its finding of immediate jeopardy to patient health and safety, and requested immediate action to remove the jeopardy and bring unmet Condition-level requirements into compliance. Theranos responded to the statement of deficiencies, but CMS determined that the lab’s submission did not constitute a credible allegation of compliance and acceptable evidence of correction for the deficiencies cited. Theranos was given the opportunity to submit evidence as to why sanctions should not be imposed; however, CMS again found no credible allegation of compliance or acceptable evidence for correction of deficiencies.

CMS imposed sanctions on Theranos as follows:

  • revocation of the laboratory’s CLIA certificate effective September 5, 2016;
  • limitation of the laboratory’s CLIA certificate for the specialty of hematology effective July 15, 2016;
  • CMP in the amount of $10,000 per day for each day of noncompliance effective July 12, 2016, accruing until all cited deficiencies have been corrected and the laboratory is in compliance with all Condition-level requirements or the laboratory’s CLIA certificate is limited, whichever occurs first;
  • directed portion of a plan of correction effective July 12, 2016;
  • suspension of the laboratory’s approval to receive Medicare or Medicaid payments for services performed for the specialty of hematology on or after July 15, 2016; and
  • cancellation of the laboratory’s approval to receive Medicare or Medicaid payments for all laboratory payments effective September 5, 2016.

Theranos may request a hearing before a Departmental Appeals Board (DAB) administrative law judge within 60 days of the date of CMS’ letter; cancellation of all Medicare payments, however, is effective September 5 regardless of whether a hearing is requested. Upon revocation of the laboratory’s CLIA certificate, it will not be permitted to perform any testing, regardless of whether the laboratory charges for the testing. Lastly, the Newark lab’s owners and operators, including the lab director, are prohibited from owning or operating or directing a laboratory for at least two years from the date of revocation of the CLIA certificate.

The company noted that its other lab, located in Scottsdale, Arizona, is in CLIA compliance, but if the Newark lab’s CLIA certificate is revoked, the Arizona lab would also cease to operate.