{"id":4681,"date":"2022-05-05T15:16:55","date_gmt":"2022-05-05T20:16:55","guid":{"rendered":"https:\/\/blogs.luc.edu\/compliance\/?p=4681"},"modified":"2022-05-05T15:16:55","modified_gmt":"2022-05-05T20:16:55","slug":"therano-no-key-clia-compliance-issues","status":"publish","type":"post","link":"https:\/\/blogs.luc.edu\/compliance\/?p=4681","title":{"rendered":"Therano-no: Key CLIA Compliance Issues"},"content":{"rendered":"

Janaki Padmakumar <\/em><\/p>\n

Associate Editor<\/em><\/p>\n

Loyola University Chicago School of Law, JD 2023<\/em><\/p>\n

In one of the greatest fraud cases of the last decade, Elizabeth Holmes, founder and CEO of Theranos<\/a>, was convicted of four federal fraud charges on January 4, 2022. Theranos was a private healthcare startup that claimed have invented a novel blood testing<\/a> method using just a drop of blood to perform multiple tests, all within minutes, and at a substantially lower cost than traditional blood testing technology. This new machine was called the Edison<\/a>, which in theory would allow up to seventy tests with a single drop of blood. While multiple factors<\/a> contributed to Theranos\u2019 downfall, including gross managerial incompetence, mishandling complaints, failure to audit, and investor fraud, a key event that put a proverbial nail in Theranos\u2019 coffin was a letter<\/a> released by the Centers for Medicare and Medicaid Services (CMS) that condemned Theranos as an immediate jeopardy to patient health and safety for CLIA violations. While the blood testing done by Theranos purported to rely on machinery, it ultimately relied on workers<\/a> who operated these machines, and their ability to accurately test, collect data and communicate regulatory concerns, thus invoking CLIA and CMS intervention.<\/p>\n

Overview of CLIA responsibilities<\/strong><\/p>\n

The Clinical Laboratory Improvement Amendments (CLIA)<\/a> is a program used by CMS, the CDC, and the FDA to regulate all laboratory testing, except research, performed on humans within the United States. CLIA\u2019s purpose is to create quality standards<\/a> for accuracy, reliability, and timeliness for patient test results, and is a federal law standardizing laboratory quality standards. Ultimately, the purpose of CLIA<\/a> is to ensure that individuals operating a lab testing on human samples are doing so competently.<\/p>\n

Generally, for labs testing on humans, there needs to be a clear regulatory framework established by the lab director that follows CLIA guideposts. There needs to be a clear system for quality and reliability testing for patient samples, and an ongoing quality assurance process to evaluate the testing process for potential errors. The FDA<\/a> has the authority to categorize tests by complexity, review waivers, and develop the rules for CLIA complexity categorization. The CDC provides technical assistance, develops laboratory practice guidelines, performs quality improvement studies, and manages the Clinical Laboratory Improvement Advisory Committee (CLIAC).<\/p>\n

By contrast, CMS<\/a> acts as the CLIA enforcer, with the authority to issue CLIA certificates, collect fees, inspect facilities, and enforce regulatory compliance, provide private accreditation and approve state exemptions, and publish CLIA rules and regulations. Testing labs\u2019 adherence to CLIA is evaluated by CMS, which evaluates a lab\u2019s compliance with condition-level requirements<\/a>.<\/p>\n

CLIA violation<\/strong><\/p>\n

In January 2016, CMS completed a facilities inspection of Theranos, and found that the company violated multiple clinical standards, including one that posed a threat to patient safety requiring immediate correction. As a result, CMS issued a 150 page lab inspection<\/a> report detailing the deficiencies in the Newark, CA testing lab, and then issued a forty-five page warning letter to contextualize the enumerated defects at Theranos. The most pressing concern in this inspection was Theranos\u2019 hematology testing<\/a> process, where CMS found the company\u2019s failure to meet clinical standards actively harmed patients. The letter<\/a> further notified Theranos that CMS was prepared to fine Theranos $10,000 daily, revoke the company\u2019s CLIA certificate, suspend Medicare payment authorization and impose a two year ban on Elizabeth Holmes, Ramesh Balwani (Holmes\u2019 COO) and Sunil Dhawan (Lab Director) from owning or operating a clinical laboratory.<\/p>\n

The CLIA sanctions stated in this case were among the most severe<\/a> in CMS\u2019 power, stopping short of criminal sanctions or the initiation of a civil lawsuit. CLIA revocation would condemn the company\u2019s business prospects \u2014 without CLIA certification, their tests could not be sold through Medicare or Medicaid, which ultimately would shut the company down.<\/p>\n

On July 7, 2016, CMS officially revoked<\/a> Theranos\u2019 CLIA certificate, and banned Holmes from owning, operating or directing a lab for a minimum of two years, given the systemic failure of her organization to comply with basic requirements of CLIA. This occurred after Theranos failed a surprise CMS inspection<\/a> of the lab facilities, which revealed that twenty-nine percent of quality control checks on Theranos\u2019 testing device completely deviated from the company\u2019s own reported accuracy standards, including basic blood tests for vitamin D and B12. This was after the company conducted close to 900,000 tests on patient blood samples since 2015.<\/p>\n

Theranos\u2019 CLIA violations effectively ended the company\u2019s deal with Walgreens<\/a> to have Edison machines at select Walgreens \u201cWellness Centers\u201d and resulted in significant financial losses for Theranos with all forty consumer testing sites being shut down. Elizabeth Holmes\u2019 lab directors also went on to testify about Theranos\u2019 CLIA violations at her criminal trial, to support the government\u2019s allegations<\/a> that Holmes and her COO Balwani knew of improper analyses at Theranos labs, and failed to inform investors of the unreliable and inaccurate testing equipment. By 2018, Theranos became defunct, and Elizabeth Holmes now faces up to twenty years in federal prison, in addition to restitution fees and fines. Holmes\u2019 sentencing hearing is scheduled for September 26, 2022.<\/p>\n","protected":false},"excerpt":{"rendered":"

Janaki Padmakumar Associate Editor Loyola University Chicago School of Law, JD 2023 In one of the greatest fraud cases of the last decade, Elizabeth Holmes, founder and CEO of Theranos, was convicted of four federal fraud charges on January 4, 2022. Theranos was a private healthcare startup that claimed have invented a novel blood testing …
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