- The Centers for Medicare and Medicaid Services (CMS) has proposed banning Theranos founder Elizabeth Holmes from owning or operating a blood-testing lab for two years after the regulator found the company's efforts to fix deficiencies at its Newark, CA site to be insufficient, reports The Wall Street Journal.
- Theranos already responded to the March 18 letter from CMS and has not received any sanctions yet, according to Theranos spokeswoman Brooke Buchanan. The proposed penalties stem from a number of key violations CMS found in inspections of the Newark lab last fall.
- In addition to a possible ban of Holmes, CMS could revoke the California site's certification and impose fines.
The proposed sanctions from CMS are sweeping in scope and could be a crippling blow to the blood-testing company if imposed in full. A ban on Holmes would also apply to Theranos President Sunny Balwani and the former Newark lab director.
Theranos had ten days to reply to CMS' letter with an explanation of why the sanctions should not be imposed on Holmes and the company. A spokeswoman from the company confirmed a response was sent within the 10 day window and said no sanctions have been imposed yet.
CMS could choose to impose a number of other penalties, some of which would take effect quickly.
Within five calendar days from receiving so-called "notice of imposition," Theranos would have to pay a $10,000 per day fine. After eight days, the Newark, CA laboratory's certificate for hematology testing would be restricted, resulting in a suspension of the lab's eligibility to receive Medicare payments.
The entire lab's certificate would be revoked 60 days from a imposition notice and approval for Medicare payments would be canceled. Without a certificate, Theranos could not conduct any testing at that site.
CMS has not made its March 18 letter public yet, but The Wall Street Journal made a copy available for public viewing.
Inspections of the Newark, CA lab occurred last November and identified five major deficiencies, including one which posed "immediate jeopardy to patient health and safety." Based on those violations, CMS sent a letter to Theranos seeking information on a correction plan and what steps the company had taken to remedy the violations. Theranos submitted this to the regulator on February 12.
In response letter, CMS determined that "the laboratory's allegation of compliance is not credible and evidence of correction is not accetable." Furthermore, Theranos apparently failed to include all the documents it told CMS were included in its plan, nor did it adequately provide information on several of its conclusions.
Thearnos has a second lab in Arizona, which continues to run tests, and accounts for 90% of all the testing conducted by the company, according to a spokeswoman.
Theranos was once valued at $9 billion and looked set to revolutionize the field of blood-testing, with potentially dramatic implications for diagnostic abilities. But questions of accuracy have dampened that enthusiasm, with increased regulator scrutiny only amplifying the company's troubles.