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New Federal Rules on Sepsis Treatment Could Cost Hospitals Millions of Dollars in Medicare Reimbursements

Some hospital organizations are pushing back, stating that the new regulations are ‘too rigid’ and interfere with doctors’ treatment of patients

In August, the Biden administration finalized provisions for hospitals to meet specific treatment metrics for all patients with suspected sepsis. Hospitals that fail to meet these requirements risk the potential loss of millions of dollars in Medicare reimbursements annually. This new federal rule did not go over well with some in the hospital industry.

Sepsis kills about 350,000 people every year. One in three people who contract the deadly blood infection in hospitals die, according to the Centers for Disease Control and Prevention (CDC). Thus, the federal government has once again implemented a final rule that requires hospitals, clinical laboratories, and medical providers to take immediate actions to diagnose and treat sepsis patients.

The effort has elicited pushback from several healthcare organizations that say the measure is “too rigid” and “does not allow clinicians flexibility to determine how recommendations should apply to their specific patients,” according to Becker’s Hospital Review.

The quality measures are known as the Severe Sepsis/Septic Shock Early Management Bundle (SEP-1). The regulation compels doctors and clinical laboratories to:

  • Perform blood tests within a specific period of time to look for biomarkers in patients that may indicate sepsis, and to
  • Administer antibiotics within three hours after a possible case is identified.

It also mandates that certain other tests are performed, and intravenous fluids administered, to prevent blood pressure from dipping to dangerously low levels. 

“These are core things that everyone should do every time they see a septic patient,” said Steven Simpson, MD, Professor of medicine at the University of Kansas told Fierce Healthcare. Simpson is also the chairman of the Sepsis Alliance, an advocacy group that works to battle sepsis. 

Simpson believes there is enough evidence to prove that the SEP-1 guidelines result in improved patient care and outcomes and should be enforced.

“It is quite clear that this works better than what was present before, which was nothing,” he said. “If the current sepsis mortality rate could be cut by even 5%, we could save a lot of lives. Before, even if you were reporting 0% compliance, you didn’t lose your money. Now you actually have to do it,” Simpson noted.

Chanu Rhee, MD

“We are encouraged by the increased attention to sepsis and support CMS’ creation of a sepsis mortality measure that will encourage hospitals to pay more attention to the full breadth of sepsis care,” Chanu Rhee, MD (above), Infectious Disease/Critical Care Physician and Associate Hospital Epidemiologist at Brigham and Women’s Hospital told Healthcare Finance. The new rule, however, requires doctors and medical laboratories to conduct tests and administer antibiotic treatment sooner than many healthcare providers deem wise. (Photo copyright: Brigham and Women’s Hospital.)

Healthcare Organizations Pushback against Final Rule

The recent final rule builds on previous federal efforts to combat sepsis. In 2015, the Centers for Medicare and Medicaid Services (CMS) first began attempting to reduce sepsis deaths with the implementation of SEP-1. That final rule updated the Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospitals Prospective Payment System (LTCH PPS).

Even then the rule elicited a response from the American Hospital Association (AHA), the Infectious Disease Society of America (IDSA), American College of Emergency Physicians (ACEP), the Society of Critical Care Medicine (SCCM), and the Society of Hospital Medicine (SHM). The organizations were concerned that the measure “encourages the overuse of broad-spectrum antibiotics,” according to a letter the AHA sent to then Acting Administrator of CMS Andrew Slavitt.

“By encouraging the use of broad spectrum antibiotics when more targeted ones will suffice, this measure promotes the overuse of the antibiotics that are our last line of defense against drug-resistant bacteria,” the AHA’s letter states.

In its recent coverage of the healthcare organizations’ pushback to CMS’ final rule, Healthcare Finance News explained, “The SEP-1 measure requires clinicians to provide a bundle of care to all patients with possible sepsis within three hours of recognition. … But the SEP-1 measure doesn’t take into account that many serious conditions present in a similar fashion to sepsis … Pushing clinicians to treat all these patients as if they have sepsis … leads to overuse of broad-spectrum antibiotics, which can be harmful to patients who are not infected, those who are infected with viruses rather than bacteria, and those who could safely be treated with narrower-spectrum antibiotics.”

CMS’ latest rule follows the same evolutionary path as previous federal guidelines. In August 2007, CMS announced that Medicare would no longer pay for additional costs associated with preventable errors, including situations known as Never Events. These are “adverse events that are serious, largely preventable, and of concern to both the public and healthcare providers for the purpose of public accountability,” according to the Leapfrog Group.

In 2014, the CDC suggested that all US hospitals have an antibiotic stewardship program (ASP) to measure and improve how antibiotics are prescribed by clinicians and utilized by patients.

Research Does Not Show Federal Sepsis Programs Work

In a paper published in the Journal of the American Medical Association (JAMA) titled, “The Importance of Shifting Sepsis Quality Measures from Processes to Outcomes,” Chanu Rhee, MD, Infectious Disease/Critical Care Physician and Associate Hospital Epidemiologist at Brigham and Women’s Hospital and Associate Professor of Population Medicine at Harvard Medical School, stressed his concerns about the new regulations.

He points to analysis which showed that though use of broad-spectrum antibiotics increased after the original 2015 SEP-1 regulations were introduced, there has been little change to patient outcomes.  

“Unfortunately, we do not have good evidence that implementation of the sepsis policy has led to an improvement in sepsis mortality rates,” Rhee told Fierce Healthcare.

Rhee believes that the latest regulations are a step in the right direction, but that more needs to be done for sepsis care. “Retiring past measures and refining future ones will help stimulate new innovations in diagnosis and treatment and ultimately improve outcomes for the many patients affected by sepsis,” he told Healthcare Finance.

Sepsis is very difficult to diagnose quickly and accurately. Delaying treatment could result in serious consequences. But clinical laboratory blood tests for blood infections can take up to three days to produce a result. During that time, a patient could be receiving the wrong antibiotic for the infection, which could lead to worse problems.

The new federal regulation is designed to ensure that patients receive the best care possible when dealing with sepsis and to lower mortality rates in those patients. It remains to be seen if it will have the desired effect.  

Jillia Schlingman

Related Information:

Feds Hope to Cut Sepsis Deaths by Hitching Medicare Payments to Treatment Stats

Healthcare Associations Push Back on CMS’ Sepsis Rule, Advocate Tweaks

Value-Based Purchasing (VBP) and SEP-1: What You Should Know

NIGMS: Sepsis Fact Sheet

CDC: What is Sepsis?

CDC: Core Elements of Antibiotic Stewardship

The Importance of Shifting Sepsis Quality Measures from Processes to Outcomes

Association Between Implementation of the Severe Sepsis and Septic Shock Early Management Bundle Performance Measure and Outcomes in Patients with Suspected Sepsis in US Hospitals

Infectious Diseases Society of America Position Paper: Recommended Revisions to the National Severe Sepsis and Septic Shock Early Management Bundle (SEP-1) Sepsis Quality Measure

CMS to Improve Quality of Care during Hospital Inpatient Stays – 2014

Minnesota Hospitals in Financial Crisis as State’s Healthcare Systems Record Hundreds of Millions of Dollars in Losses

Nationwide, hospital losses are in the billions of dollars, which affects access to medical care including clinical laboratory testing

Hospitals and health systems across the United States continue to report substantial financial losses. At some institutions, this might severely restrict access to physicians and clinical laboratory testing for patients in those areas. The latest state to announce its hospitals were in trouble is Minnesota. The Minnesota Hospital Association (MHA) announced its hospitals are in “financial crisis” revealing that the state’s health systems experience hundreds of millions of dollars in operating losses annually.

The MHA stated that two out of three surveyed hospitals in Minnesota reported losing money in the cumulative amount of more than $400 million during the first half of 2023, KARE 11 reported. The MHA surveyed more than 70 health system members which represented facilities of all sizes and in all geographical regions of the state.

Rahul Koranne, MD, President and CEO of MHA told KARE 11 that part of the problem is that a larger proportion of patients rely on federal programs such as Medicare and Medicaid to pay hospital costs. Those programs provide lower reimbursement rates when compared to private insurers. In some facilities, almost 75% of patients are on one of these government programs. 

“Those reimbursements, or payments, are fixed. So, we can’t raise prices. These two programs are paying significantly below the cost of providing care to our patients,” he noted. “So, if you have 70% of your patients covered by these governmental programs, we can’t raise prices, and they’re paying you below the cost of care—that’s what causes [the problem].”

He went on to state that workforce staffing represents a significant challenge for hospitals and urged the state legislature to address the needs of health professionals and facilities. 

“We need to really resource it in this upcoming session and many sessions to come, so that we can have workers and staff we need,” Koranne said. “If we don’t have the money, and if we don’t have the workers, we will not be providing care and that would be sad.”

Rahul Koranne, MD

“This is a pretty grave state and, I would say, quite a crisis,” Rahul Koranne, MD (above), President and CEO of the Minnesota Hospital Association, told KARE 11. “Our not-for-profit hospitals and healthcare systems are hanging dangerously from this cliff and they’re getting tired.” Access to medical laboratory testing can be greatly affected by hospital financial losses. (Photo copyright: Twin Cities Business.)

Other US Healthcare Systems in Crisis as Well

Minnesota is not the only state with healthcare systems in financial crisis. Last year, the Washington State Hospital Association (WSHA) announced that hospitals in that state reported cumulative losses of $2 billion for 2022. Cassie Sauer, President and CEO of WSHA told the media that the massive deficits are “clear and incredibly concerning” to the state’s healthcare leaders.

In “Hospitals, Pharmacies Struggle to Be Profitable,” we reported that the WSHA survey determined that the state’s hospitals suffered collective operating losses of $750 million during the first six months of 2023.

“The financial losses that our hospitals are experiencing continue to be enormous,” Sauer told The Seattle Times. “Revenues simply are not keeping up with rapidly escalating costs. It’s most concerning as these large losses are putting patient care at risk in many communities across the state.”

The WSHA findings were based on a survey of 81 acute-care hospitals that represented about 98% of the state’s hospital beds. Of those facilities, 69 reported losing money mostly due to rising costs for supplies, labor, and other expenses as well as the need for longer hospital stays due to more complicated care and a larger percentage of patients on government programs, which offer lower reimbursement rates for care. 

“When hospitals are not financially viable and over time sustain heavy losses, you must either increase revenue or reduce healthcare services,” Chelene Whiteaker, Senior Vice President, Government Affairs at WSHA, told The Seattle Times. “Reducing healthcare services is an option nobody wants on the table. So, that leaves increasing revenues.”

Graphic

The graphic above from the Center for Healthcare Quality and Payment Reform (CHQPR) shows the number and location of rural hospitals in America that are at “immediate” risk of closure. The number of hospitals simply “at risk” of closure is substantially higher. Patients who depend on these hospitals would lose access to critical healthcare services including clinical laboratory testing. (Graphic copyright: Center for Healthcare Quality and Payment Reform.)

Becker’s Hospital Review reported last year that many hospitals across the country reported substantial losses in 2022. Three of the hospital systems in that article reported losses in the billions. They were:

In addition, Becker’s noted that five healthcare systems reported encountering losses over half a billion dollars in 2022. They include:

Critical Services Are Being Cut

In another article, Becker’s reported that 72 hospitals across the US closed departments or ended services in 2023. These cuts included the shuttering of health and urgent care clinics, the closure of outpatient cancer and pulmonary clinics, the reduction of certain surgical services and behavioral health services, and the ending of home healthcare services.

Some states are taking measures to prevent further hospital closures. But is it too late? In “California Doles Out $300 Million in No-Interest Loans to Save its Financially Struggling Hospitals,” The Dark Report’s sister publication Dark Daily covered how that state had launched an interest-free loan program to ensure local communities have access to community hospitals, their physicians, and clinical laboratories. No report on how many hospitals have been temporarily saved from closing thanks to this program.

If US hospitals continue to lose money at this rate, access to critical care—including clinical laboratory and anatomic pathology services—could be further restricted and facilities closed. These actions may also result in increased staff layoffs and have an even greater effect on patient care in Minnesota, Washington State, and throughout the US.

—JP Schlingman

Related Information:

Minnesota Hospital Association CEO Says the State’s Hospitals are in a Financial ‘Crisis’

Minnesota Hospitals and Health Systems Lose Hundreds of Millions as Revenues Fall and Inflation Hikes Labor and Other Costs

A Hard Look at Minnesota Hospital Finances

WA Hospitals Lost $2 Billion in 2022. A Plan to Up Medicaid Rates Could Help

72 Hospitals Closing Departments or Ending Services

What’s Up with Hospital Finances?

What’s Behind Losses at Large Nonprofit Health Systems?

20 Health Systems Reporting Losses in 2022

CHQPR Report: Rural Hospitals at Risk Of Closing

More Than 30% of Rural Hospitals Are at Risk of Closure, Report Warns

California Doles Out $300 Million in No-Interest Loans to Save its Financially Struggling

HospitalsHospitals, Pharmacies Struggle to Be Profitable

Study Comparing Data from Hospitals and Insurers Finds Major Hospitals Still Not Complying with Price Transparency Law

But insurers are complying under the Transparency in Coverage regulations and that is where discrepancies in the disclosure of prices to the public have been found

Despite federal regulations requiring hospitals to publicly post their prices in advance of patient services, some large health systems still do not follow the law. That’s according to a new Transparency in Coverage Report from PatientRightsAdvocate.org (PRA), which found that some hospitals are “flouting” the federal Hospital Price Transparency Rule.

By cross-referencing price disclosures by hospitals and insurance companies, which are required to publish the amounts they pay for hospital services under federal Transparency in Coverage regulations, PRA, a 501(c)(3) nonprofit, nonpartisan organization, discovered the healthcare providers’ noncompliance with federal transparency regulation.

“Prices revealed in newly released health insurance company data files show some major American hospitals are omitting prices from their required price disclosures in violation of the federal hospital price transparency rule,” according to the PRA report.

Sally C. Pipes

Hospitals conceal their prices because they don’t want people to know how much rates for the same procedure vary,” Sally C. Pipes (above), President and CEO of Pacific Research Institute, wrote in the Washington Examiner. “A lack of price transparency benefits hospitals but not patients or payers. The federal government should not let providers get away with flouting the law,” she added. Clinical laboratories are also required under federal law to publish their prices. (Photo copyright: The Heartland Institute.)

Prices Paid by Insurers Missing in Hospital Files

PRA analysts compared publicly available Standard Charge File (SCF) data from seven Ascension Health and HCA Healthcare hospitals in Texas and Florida, and Transparency in Coverage disclosures from Blue Cross Blue Shield, Cigna, and UnitedHealthcare.

“PatientRightsAdvocate.org discovered several instances in which prices were omitted from the hospital files but appeared in the insurance company files,” noted the PRA report. “These discrepancies indicate that some large hospitals are not posting their complete price lists as required by the hospital price transparency rule.”

The federal Centers for Medicare and Medicaid Services (CMS) says hospitals must post standard charges in a single machine-readable digital file, and display in a consumer-friendly way, “300 shoppable services with discounted cash prices, payer-specific negotiated charges, and de-identified minimum and maximum negotiated charges.”

But according to the PRA report and news release, the study team discovered that this was not always the case. Below are examples from the report of some of the discrepancies between prices on a hospital’s website and what payers’ websites showed as prices involving those same hospitals:

Ascension Seton Medical Center, Austin, Texas:

  • The hospital SCF for shoppable services showed “N/A” (not available).
  • UnitedHealthcare files included 16 rates it negotiated by plan and BCBS shared 12 prices by plan.

Ascension St. Vincent’s Clay County Hospital, Middleburg, Florida:

  • The hospital’s SCF “did not contain negotiated rates” for services by Current Procedural Terminology (CPT) codes.
  • UnitedHealthcare showed negotiated rates for 69 CPT codes.

HCA Florida Northside Hospital, St. Petersburg, Florida:

  • PRA analysts found in the hospital SCF file “a range of 300 codes” and “one single negotiated rate.”
  • The insurer, meanwhile, displayed “many different rates corresponding to 300+ codes in the range.”

HCA Houston Healthcare Clear Lake, Webster, Texas:

HCA Medical City, Fort Worth, Texas:

  • The provider displayed in its SCF “one distinct dollar price for all 62 MS-DRG codes that appeared as a group.”
  • BCBS of Texas Blue Premier plan displayed 58 distinct negotiated rates for the codes in that group.

The report also summarized findings for:

PRA’s report casts light on inconsistencies between what insurers and providers share with the public on prices.

“Today’s report confirms that hospitals are hiding prices from patients and [this] calls into question their public assertions that individual prices don’t exist for many of the services they provide,” said PRA Founder and Chairman Cynthia Fisher in the news release.

“The data made possible by the [federal] Transparency in Coverage (TiC) rule reveals prices negotiated with insurers that hospitals did not disclose in the machine-readable files required by law. Our report is just the tip of the iceberg of what the staggering amount of data in TiC disclosures will reveal,” she added.

Ascension, HCA Note Compliance with CMS Rule

For its part, Ascension, in a statement to Healthcare Dive, confirmed it is complying with the CMS rule and offers consumers tools to estimate costs.

“We’re proud to be a leader in price transparency,” Ascension said.

HCA told Healthcare Dive it has “implemented federal transparency requirements in January 2021 and provides a patient payment estimator in addition to posting third-party contracted rates.”

Advice for Clinical Laboratories Sharing Test Prices

Hospitals flouting the federal transparency rule is not new. Dark Daily has covered other similar incidences.

In “Two Georgia Hospitals First to Be Fined by CMS for Failure to Comply with Hospital Price Transparency Law,” we reported how CMS had issued its first penalties to two hospitals located in Georgia for violating the law by not updating their websites or replying to the agency’s warning letters.

And in “Wall Street Journal Investigation Finds Computer Code on Hospitals’ Websites That Prevents Prices from Being Shown by Internet Search Engines, Circumventing Federal Price Transparency Laws,” we covered the Wall Street Journal’s report on “hundreds of hospitals” that had “embed code in their websites that prevented Alphabet Inc.’s Google and other search engines from displaying pages with the price lists.”

Clinical laboratory leaders who oversee multiple labs in healthcare systems may benefit from advice about CMS rule compliance shared in HealthLeaders.

  • Post a separate file for each provider.
  • Be “cognizant” of different sets of standard charges for multiple hospitals under one license.

“Today’s healthcare consumer wants to know prices in advance of service. That’s because many have high deductible health insurance plans of, say, $5,000 for an individual or $10,000 for a family as the annual deductible,” said Robert Michel, Editor-in-Chief of Dark Daily and its sister publication The Dark Report.

Clinical laboratory tests may not be the most expensive healthcare service. But they are critical for high-quality hospital care and outcomes. Increasingly, patients want to know in advance how much they will cost. This is true of patients of all generations, from Baby Boomers to Generations X, Y, and Z.

Donna Marie Pocius

Related Information:

PRA New Report: Insurance Pricing Files Reveal That Hospitals are Hiding Prices

Transparency in Coverage

Hospitals Are Still Hiding Costs

Hospitals Are Hiding Prices from Patients, Advocacy Report Says

Large Health Systems Are Being Called Out for Lack of Price Transparency

Two Georgia Hospitals First to Be Fined by CMS for Failure to Comply with Hospital Price Transparency Law

Disgraced Theranos Founder Elizabeth Holmes to Serve 11 Years, Three Months in Prison, Ending the Latest Chapter in the Story of the Failed Clinical Laboratory Company

Judge will decide the restitution Holmes must pay to defrauded Theranos investors at future court date; Ex-COO Ramesh “Sunny” Balwani to be sentenced next month

Clinical laboratory leaders and anatomic pathologists who closely followed the fraud trial of Elizabeth Holmes may have wondered how the Theranos founder and ex-CEO would be punished for her crimes. Now we know.

On Friday, a federal court judge sentenced Holmes to 135 months—11.25 years—in prison in the culmination of her conviction on three felony counts of wire fraud and one count of conspiracy, according to NBC Bay Area News.

Late into the four-hour sentencing hearing, Holmes tearfully spoke, according to a twitter post by NBC reporter Scott Budman, who was in the courtroom. “I am devastated by my failings,” Holmes said. “I have felt deep pain for what people went through because I have failed them … To investors, patients, I am sorry.”

Davila ordered Holmes to surrender to authorities on April 27 to begin her time behind bars. She is free until that time. Her upcoming prison term caps off one of the biggest downfalls ever of an American entrepreneur.

[We first published this article in our Dark Daily E-Briefings newsletter. Sign up for free here to stay informed on the lab industry’s most important news and events.]

Elizabeth Holmes

Elizabeth Holmes (above), founder and former CEO of Theranos, the now defunct clinical laboratory company, as she enters the federal courthouse in San Jose, Calif., prior to her sentencing on Friday. In January, Holmes was convicted on three counts of wire fraud and one count of conspiracy. Last summer, Theranos’ former CLIA laboratory director, pathologist Adam Rosendorff, MD, expressed remorse over his testimony which led to Holmes’ defense team requesting a new trial. The judge denied that request and allowed the sentencing of Holmes to proceed as scheduled. (Photo copyright: Jim Wilson/The New York Times.)

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Defense Lawyers Plan to Appeal

Dean Johnson, JD, a California criminal defense lawyer, told NBC Bay Area News during live coverage of the hearing on Friday that Holmes’ defense team will appeal her conviction.

“I have no doubt there will be an appeal in this case,” Johnson said.

Judge Edward Davila, who oversaw Holmes’ trial and sentencing hearing in US District Court in San Jose, Calif., estimated that the total loss for Theranos investors was $121 million. Investors had committed funds to support the company’s flawed Edison blood testing technology. A separate restitution hearing for Holmes will be scheduled for a later date.

Beyond the sentencing, Holmes, 38, will be saddled by infamy for the rest of her life, with her past reputation as a charismatic innovator ruined.

In “Theranos Ex-CEO Elizabeth Holmes Convicted on Three Counts of Wire Fraud and One Count of Conspiracy to Commit Fraud after Seven Days of Jury Deliberations,” we covered how a jury convicted Holmes in January on four charges of investor and wire fraud after a four-month trial. She faced up to 20 years in prison on each of those counts.

Another Theranos executive, former Chief Operating Officer and President Ramesh “Sunny” Balwani, faces sentencing on Dec. 7. A jury found Balwani guilty of two counts of conspiracy and 10 counts of wire fraud in July.

“The judge [said] evidence shows Elizabeth Holmes was leader of the company, but not necessarily the leader of the criminal acts,” Budman tweeted. Those words clearly pointed to Balwani, who Holmes’ defense team had painted as exerting control over her and the company.

Prosecutors Sought a Stiffer Sentence for Holmes

Prosecutors had asked Davila to sentence Holmes to 15 years in prison, arguing that her conviction represented “one of the most substantial white collar offenses Silicon Valley or any other district has seen,” according to NBC Bay Area News, which cited court documents. The government also wanted her to pay $803 million in restitution.

Holmes’ defense team, however, wished for no prison time at all, instead asking that Holmes serve time under house arrest. “If a period of confinement is necessary, the defense suggests that a term of 18 months or less, with a subsequent supervised release period that requires community service, will amply meet that charge,” her lawyers wrote in a court filing.

Prior to the sentencing, Davila received 130 letters supporting Holmes and asking for leniency, NPR reported. Among them was a note from William “Billy” Evans, Holmes’ partner.

“If you are to know Liz, it is to know that she is honest, humble, selfless, and kind beyond what most people have ever experienced,” Evans wrote, NPR reported. “Please let her be free.”

Holmes and Evans have a 16-month-old son together, and she is pregnant with the couple’s second child. Her first pregnancy caused her trial to be rescheduled. Prior to last week’s sentencing, some reporters covering the trial speculated that because Holmes was the mother of an infant—and now pregnant again—the judge might be more lenient in sentencing. The 11-year, four-month sentence indicates that the judge was not much influenced by that factor.

Last Minute Pitch for New Trial Failed

Holmes’ legal wranglings continued until the very end.

On Nov. 7, Davila denied her motion for a new trial. Holmes’ lawyers had argued that key prosecution witness Adam Rosendorff, MD—a pathologist who was former laboratory director at the company—expressed remorse about his own 2021 testimony during an attempt to visit Holmes’ residence on August 2022. Dark Daily covered this event in “Clinical Pathologist Once Again at the Center of a National News Story as Theranos Founder Elizabeth Holmes Seeks New Trial.”

However, Rosendorff later told the court that he stood by his testimony about problems with Theranos’ blood testing technology.

In denying the request for a new trial, Davila wrote, “The court finds Dr. Rosendorff’s statements under oath to be credible,” according to The Washington Post.

From Teen Founder to Disgraced Entrepreneur

Holmes founded Theranos in 2003 at age 19 while she was attending Stanford University as a chemical engineering major. She dropped out of Stanford as a sophomore to focus on her new company.

Theranos claimed its technology—known as Edison—could perform diagnostics tests using a finger prick and a micro-specimen vial instead of a needle and several Vacutainers of blood. The company said it could return results to patients and clinicians in four hours for about half of the cost of typical lab test fees.

However, the promise of this technology began to unravel in 2015 following an investigative article by The Wall Street Journal that revealed the company ran only a handful of tests using its technology, instead relying on traditional testing for most of its specimen work.

Following The Journal’s exposé, the Centers for Medicare and Medicaid Services (CMS) sanctioned Theranos and Holmes in 2016. Meanwhile, the US Securities and Exchange Commission (SEC) investigated Holmes for raising hundreds of millions from investors by exaggerating or making false statements about the company’s technology and financial performance.

In 2018, the US Department of Justice (DOJ) indicted Holmes and Balwani, and Theranos closed shortly after.

Convictions Validated Pathologists’, Hospital Lab Leaders’ Concerns

Fortunately, the Theranos saga has not stunted investment in healthcare technology startups. Spending was in the tens of billions in 2021, although that number has dropped this year as the COVID-19 pandemic has waned, according to TechCrunch. Nevertheless, it is safe to assume that healthcare tech investors are scrutinizing scientific data from startups more thoroughly because of the Theranos fraud case.

Meanwhile, the saga of Theranos continues to leave a bad taste in the mouths of many clinical laboratory managers and pathologists. That’s because, during the peak period of adulation and spectacular news coverage about Elizabeth Holmes and her plans to totally disrupt the clinical laboratory industry, hospital and health system CEOs believed that they would be able to downsize their in-house medical laboratories and obtain lab tests from Theranos at savings of 50% or more. Consequently, during the years 2013 through the end of 2015, some hospital lab leaders saw requests for capital investment in their labs denied or delayed.

One example of how hospital CEOs embraced news of Theranos’ blood testing technology took place at the Cleveland Clinic. Elizabeth Holmes did such a good job selling the benefits of the Edison technology, then-CEO, Toby Cosgrove, MD, placed Theranos at number three on its list of top ten medical innovations for 2015.

In later years, Cosgrove admitted that no one at Cleveland Clinic or its pathologists were allowed to examine the analyzers and evaluate the technology.

It was for these reasons that the demise of Theranos was welcomed by many hospital lab administrators and pathologists. The fact that two of Theranos’ senior executives have been convicted of fraud validates many of the serious concerns that medical laboratory professionals had at that time, but which most major news reporters and media ignored and failed to report to the public.

Scott Wallask

Related Information:

Theranos Founder Elizabeth Holmes Sentenced to More than 11 Years in Prison

Elizabeth Holmes Is Sentenced to More than 11 Years for Fraud

Theranos Ex-CEO Elizabeth Holmes Convicted on Three Counts of Wire Fraud and One Count of Conspiracy to Commit Fraud after Seven Days of Jury Deliberations

Prosecutors Push 15-year Sentence for Theranos’ CEO Holmes

Elizabeth Holmes Sentenced to 11 Years in Prison for Theranos Fraud

Clinical Pathologist Once Again at the Center of a National News Story as Theranos Founder Elizabeth Holmes Seeks New Trial

Bid for New Trial Fails, Elizabeth Holmes Awaits Sentencing

Ramesh “Sunny” Balwani Convicted by a Jury on 12 Counts of Fraud in Theranos Trial

Hot Startup Theranos Has Struggled with Its Blood-Test Technology

Oregon Health and Science University Announces Program to Provide Patients with Hospital-Level Care in the Comfort of Their Home

As the number of Hospital at Home programs increase, clinical laboratories will want to develop programs for collecting samples from patients where they live

Shortages of nurses and hospital staff, combined with pressure to lower the cost of care, are encouraging more institutions to implement hospital-in-the-home programs. One such project involves Oregon Health and Science University (OHSU), which last November began a Hospital at Home (HaH) program that enables certain patients to receive hospital-level care in the comfort of their own homes. Clinical laboratories servicing these programs will need to develop specimen collection and testing services in support of these patients.

The OHSU program can provide healthcare for eight patients simultaneously, and it has treated more than 100 patients at home since its inception. Although this number is only a small segment of OHSU’s 576 bed capacity, it does affect the overall healthcare provided by the hospital.

Under the program, basic services, such as the monitoring of vital signs—as well as some clinical laboratory work and routine imaging studies—are performed in the patient’s home. Individuals are transported to OHSU for more complex imaging or other procedures.

Matthias Merkel, MD, PhD

“Every patient we have in Hospital at Home is one who is not waiting in the emergency room or a hallway for a bed to become available in the hospital,” said Matthias Merkel, MD, PhD (above), Senior Associate Chief Medical Officer, Capacity Management and Patient Flow at OHSU, in a press release. In the same way clinical laboratories support telehealth programs, medical laboratories will need procedures for collecting specimens and testing patients participating in Hospital at Home programs as well. (Photo copyright: Oregon Health and Science University.)

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Better Patient Experience, Increases Hospital Capacity

OHSU’s HaH program utilizes advances in technology to connect at-home patients with physicians and nurses around the clock via a smart tablet. In addition, participating patients receive real-time monitoring and at least two daily in-person visits from nurses and paramedics that have been contracted by OHSU.

“It’s a better experience for patients, plus it increases our system’s capacity to provide care for all the people who need it,” said Darren Malinoski, MD, Chief Clinical Transformation Officer and Professor of Surgery at OHSU in the press release. “It allows us to make good on our promise to take care of the state as best we can.”

The current eligibility criteria to participate in OHSU’s Hospital at Home program include:

  • Patient must be over the age of 18.
  • Patient’s primary residence must be within a 25-mile radius of the OHSU hospital.
  • Inpatient hospitalization is initially required.
  • Patient must have a diagnosis that can be managed remotely, such as COVID-19, pneumonia, cellulitis, congestive heart failure, urinary tract infections, or pyelonephritis.

Malinoski feels that OHSU’s HaH program is ready to expand. In fact, he is so confident in it he enrolled his own 83-year-old mother as one of its first patients. While undergoing treatment for lung cancer, a routine clinical checkup exposed evidence of toxicity in her blood. Typically, she would have been directly admitted to the hospital for monitoring, but instead she was entered into the HaH program.

“It was unbelievable,” stated Lesley Malinoski in the press release. “I had the feeling of being well taken care of. I was in my own home. I could cook, I could rest—anything I wanted and still have all this care.”

“They didn’t just come in and run out,” she continued. “I felt like a celebrity.”

COVID-19 Pandemic Drove Remote Healthcare Programs

HaH programs around the country were made possible through a federal waiver granted by the federal Centers for Medicare and Medicaid Services (CMS) in November 2020 in response to the COVID-19 pandemic.

According to the American Hospital Association (AHA), “this care delivery model has been shown to reduce costs, improve outcomes, and enhance the patient experience.”

Prior to the waiver, there were only about two dozen hospitals across the US that had HaH programs. However, as of May 20, 2022, 227 hospitals in 35 states had received a HaH waiver from CMS. This number represents nearly 4% of all hospitals in the country, according to Health Affairs.

Dark Daily has published many stories about Hospital at Home programs in the past. In “Hospital-in-the-Home Shows Promise for Reducing Acute Care Costs; Medical Laboratories Face Uncertainties Concerning Expanding Services to In-Home Environments in Support of Care Providers,” we described an example of an HaH model of clinical care implemented at Brigham and Women’s Faulkner Hospital in Boston where, despite initial reservations from staff, their testing of hospital-at-home care was well received.

In “Two US Studies Show Home-based Hospital Care Lowers Costs while Improving Outcomes and Patient Satisfaction,” we reported on a hospital-based home care program that involved 323 patients at Presbyterian Healthcare Services in Albuquerque, N.M. We surmised that significant growth in the number of patients treated in home-based hospital care programs would directly affect hospital-based clinical laboratories and pathology groups. Among other things, it would reduce the volume of inpatient testing while increasing the number of outpatient/outreach specimens.

And in “Australia’s ‘Hospital in the Home’ Care Model Demonstrates Major Cost Savings and Comparable Patient Outcomes,” Dark Daily saw that wider adoption of that country’s Hospital in the Home (HITH) model of patient care would directly affect pathologists and clinical laboratory managers who worked in Australia’s hospital laboratories. We reported that more HITH patients would increase the need to collect specimens in patient’s homes and transport them to a local clinical laboratory for testing, and that because they are central to the communities they serve, hospital-based medical laboratories would be well-positioned to provide this diagnostic testing.

OHSU’s overall experience with their Hospital at Home program demonstrates that such a model can be a highly successful and cost-effective method of providing patient care. It is probable that in the future, more medical institutions will create similar programs in an effort to effectively serve as many patients as possible while ensuring shorter hospital stays and rendering better healthcare outcomes. As this happens, it will give hospital-based medical laboratories an opportunity to deliver value in home-based patient care. 

JP Schlingman

Related Information:

Hospital at Home: Amid hospital Capacity Crisis, OHSU Offers an Alternative

Given Regulatory Uncertainty, Hospital-at-Home Models Are Losing Momentum

The Benefits of Treating Patients at Home Instead of in the Hospital

AHA: Extending the Acute Hospital Care at Home Program Beyond the End of the COVID-19 PHE

Hospital at Home Is Not Just for Hospitals

What We Learned from the Acute Hospital Care at Home Waiver—and What We Still Don’t Know

Hospital-in-the-Home Shows Promise for Reducing Acute Care Costs; Medical Laboratories Face Uncertainties Concerning Expanding Services to In-Home Environments in Support of Care Providers

Two US Studies Show Home-based Hospital Care Lowers Costs while Improving Outcomes and Patient Satisfaction

Australia’s ‘Hospital in the Home’ Care Model Demonstrates Major Cost Savings and Comparable Patient Outcomes

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