CMS Issues Deficiency Letter to Theranos

Theranos is once again in the media spotlight due to negative attention it has received from a government regulatory agency. Last year, the U.S. Food and Drug Administration (FDA) released documents indicating its position that Theranos’ nanotainer used for collecting blood samples is a class II medical device and listing concerns about certain aspects of operations (see box). This year, in January, a Centers for Medicare & Medicaid Services (CMS) letter said Theranos’ Newark, Calif. laboratory had condition level deficiencies and posed an immediate danger to patients in the area of hematology.

The CMS letter arises from an onsite survey completed in November 2015, to determine compliance with the Clinical Laboratory Improvement Amendments (CLIA). The letter indicates the laboratory facility was not in compliance with CLIA certification conditions relating to analytic systems (42 C.F.R. 493.1250), laboratory director requirements for high complexity testing labs (42 C.F.R. 493.1441), requirements concerning technical supervisor for high complexity testing labs (42 C.F.R. 493.1447), and testing personnel conditions for high complexity testing labs (42 C.F.R. 493.1487).

As to the hematology deficiencies giving rise to immediate jeopardy, the letter explains that CLIA defines immediate jeopardy as "a situation in which immediate corrective action is necessary because the laboratory’s non-compliance with one or more Condition- level requirements has already caused, is causing, or is likely to cause, at any time, serious injury or harm, or death, to individuals served by the laboratory or to the health and safety of the general public."

CMS gave Theranos 10 days to issue a plan of correction, a typical requirement of an immediate jeopardy letter. Health care attorney Robert E. Mazer, of Ober Kaler in Baltimore, who assists laboratories with CMS inspection and CLIA issues, indicated he has not seen the actual survey report and therefore can’t comment on the specific nature of the alleged deficiencies but explains that this letter means that CMS has advised Theranos that "sanctions will not be imposed" if CMS is able to confirm that Theranos has demonstrated that it has "removed jeopardy" and "come into Condition-level compliance." A follow-up survey must also verify compliance with "all CLIA requirements" after corrective action evidence is supplied by the lab. "If [compliance] has not been demonstrated to CMS’ satisfaction, the agency can impose various penalties, including revocation of the laboratory’s CLIA certificate required to perform testing, or cancellation of its right to receive Medicare payment for its tests," Mazer adds. CMS’ letter warns that civil money penalties of up to $10,000 per day of noncompliance could be imposed.

Theranos issued a statement that the problems were all but corrected and reiterated that it was among the few labs that invited a higher level of scrutiny than required. "Theranos remains the sole company to call for—and voluntarily submit itself to—stronger regulatory oversight," it said, in reference to the fact that it had decided to submit all of its test to the U.S. Food and Drug Administration for approval.

"It’s important to note this particular survey was conducted months ago and is not a reflection of the current state of our lab in Newark, CA," the statement continued. "As the survey took place we were simultaneously conducting a comprehensive review of our laboratory’s systems, processes and procedures to ensure that we have best-in-class quality systems. CMS’ findings included standard and condition-level deficiencies, and one finding at the "immediate jeopardy" level…. To be clear, that finding does not apply to the whole lab, and none of these findings relate to our Arizona lab, where we currently process over 90 percent of our tests."

With regard to the personnel-related deficiencies cited in the letter, Theranos said it has added two new key personnel: Kingshuk Das, M.D. a board-certified pathologist and associate medical director of UCLA Health’s Clinical Laboratories; and Waldo Concepcion, M.D., chief of clinical transplantation and professor of surgery at Stanford University Medical Center.

"In some cases, a laboratory may attempt to satisfy CMS that all of its concerns have been addressed through changes in laboratory operations, without admitting that condition- level deficiencies had actually existed," says Mazer. "This is because if CMS rejects the allegations of compliance and correction and seeks to impose penalties and the laboratory files an administrative appeal, the lab will have to prove that each finding of a condition-level deficiency had been incorrect. The lab cannot avoid penalties imposed by the agency by contesting CMS’ determination, rejecting a so-called ‘credible allegation of compliance.’"

Takeaway: Theranos continues to face scrutiny from federal regulators as it reiterates its commitment to work with those regulators to achieve approvals for its testing technologies.


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