Federal prosecutors build the new healthcare-related fraud cases on previous nationwide enforcement actions from 2022
Federal charges have once again been brought against a number of physicians and clinical laboratory owners in what the US Department of Justice described as the “largest ever” coordinated nationwide law enforcement effort against COVID-19 pandemic-related healthcare fraud.
In total, the DOJ filed criminal charges against 18 defendants in five states plus the territory of Puerto Rico, according to an April 20 press release.
The highest dollar amount of these frauds involved ENT physician Anthony Hao Dinh, DO, who allegedly defrauded the Health Resources and Services Administration (HRSA) COVID-19 Uninsured Program for millions of dollars, and Lourdes Navarro, owner of Matias Clinical Laboratory, for allegedly “submitting over $358 million in false and fraudulent claims to Medicare, HRSA, and a private insurance company for laboratory testing” while performing “COVID-19 screening testing for nursing homes and other facilities with vulnerable elderly populations, as well as primary and secondary schools,” the press release states. Both court cases are being conducted in Southern California courtrooms.
The DOJ’s filing of charges came rather speedily, compared to other cases involving fraudulent clinical laboratory testing schemes pre-pandemic. The amount of money each defendant managed to generate in reimbursement from the fraud represents tens of thousands of patients. If feds were paying $100 per COVID-19 test, then the $153 million represents 153,000 patients, in just 18 to 24 months.
“Today’s announcement marks the largest-ever coordinated law enforcement action in the United States targeting healthcare fraud schemes that exploit the COVID-19 pandemic,” said Assistant Attorney General Kenneth A. Polite, Jr. (above), in an April 20 DOJ press release. “The Criminal Division’s Health Care Fraud Unit and our partners are committed to rooting out pandemic-related fraud and holding accountable anyone seeking to profit from a public health emergency.” Clinical laboratory managers may want to pay close attention to the DOJ’s prosecution of these newest cases of alleged COVID-19 fraud. (Photo copyright: Department of Justice.)
Prosecutors allege that Navarro and her husband, Imran Shams, who operated Matias—also known as Health Care Providers Laboratory—perpetrated a scheme to perform medically unnecessary respiratory pathogen panel (RPP) tests on specimens collected for COVID-19 testing, even though physicians had not ordered the RPP tests and the specimens were collected from asymptomatic individuals.
In some cases, the indictment alleges, Navarro and Shams paid kickbacks and bribes to obtain the samples.
The indictment notes that reimbursement for RPP and other respiratory pathogen tests is generally “several times higher” than reimbursement for COVID-19 testing. Claims for the tests were submitted to Medicare and an unidentified private insurer, as well as the HRSA COVID-19 Uninsured Program, which provided support for COVID-19 testing and treatment for uninsured patients.
Claims to the HRSA falsely represented that “the tested individuals had been diagnosed with COVID-19, when in truth and in fact, the individuals had not been diagnosed with COVID-19 and the tests were for screening purposes only,” the First Superseding Indictment states.
The indictment further states that both Navarro and Shams had previously been barred from participating in Medicare and other federal healthcare programs due to past fraud convictions. Navarro, the indictment alleges, was reinstated in December 2018 after submitting a “false and fraudulent” application to the HHS Office of Inspector General.
It also alleges that Navarro and Shams concealed their ownership role in Matias so the lab could maintain billing privileges.
More Alleged Abuse of HRSA Uninsured Program
In a separate case, Federal prosecutors alleged that Anthony Hao Dinh, DO, an ear, nose, and throat physician in Orange County, California, engaged in a scheme to defraud the HRSA COVID-19 Uninsured Program as well.
Dinh, prosecutors allege, “submitted fraudulent claims for treatment of patients who were insured, billed for services that were not rendered, and billed for services that were not medically necessary.”
The criminal complaint, filed on April 10, alleges that Dinh submitted claims for approximately $230 million, enough to make him the program’s second-highest biller. He was paid more than $153 million, prosecutors allege, and “used fraud proceeds for high-risk options trading, losing over $100 million from November 2020 through February 2022,” states the US Attorney’s Office, Central District of California press release.
Dinh was also charged for allegedly attempting to defraud the federal Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program. He faces a maximum sentence of 50 years in federal prison, the press release states.
Dinh’s sister, Hang Trinh Dinh, 64, of Lake Forest, California, and Matthew Hoang Ho, 65, of Melbourne, Florida, are also charged in the complaint, the Los Angeles Times reported.
Both of these cases are notable because of the size of the fraud each defendant pulled off involving COVID-19 lab testing. Clinical laboratory managers may want to review the original court indictments. The documents show the brazenness of these fraudsters and detail how they may have induced other doctors to refer them testing specimens.
New lawsuit contends that the promissory notes Holmes allegedly issued on behalf of defunct clinical laboratory company Theranos are now overdue
Just weeks before Elizabeth Holmes is scheduled to begin her prison term for conviction in the federal investor fraud case related to now-defunct clinical laboratory company Theranos, the long-running legal saga of the former company founder/CEO continues to bring new twists.
This time, news emerged via a lawsuit that Holmes allegedly owes $25 million to Theranos creditors. CNBC obtained a copy of the suit and detailed its contents in a March 17 case update.
Theranos ABC, a company set up on behalf of the creditors, alleged in the lawsuit that “Holmes has not made any payments on account of any of the promissory notes,” CNBC reported. The suit was filed in Superior Court of California Count of Santa Clara.
Elizabeth Holmes (above), founder and former CEO of clinical laboratory company Theranos with husband Billy Evans of Evans Hotels. Holmes lives with Evans and the couple’s two children in the area near San Jose, California. Holmes gave birth to her second baby in February, according to People. In January, Holmes was convicted on three counts of wire fraud and one count of conspiracy. In addition to restitution, Holmes has been ordered to spend up to 11 years and three months in prison. (Photo copyright: Axios.)
Holmes Allegedly Issued Three Promissory Notes
The complaint stated that Holmes allegedly executed the following three promissory notes while she was still CEO at Theranos:
August 2011 in the amount of $9,159,333.65.
December 2011 in the amount of $7,578,575.52.
December 2013 in the amount of $9,129,991.10.
A promissory note is a written promise to pay a party a certain sum of money with a specified due date for the repayment of principal and interest.
“Theranos ABC has demanded payment of promissory note one and promissory note two from Holmes, but Holmes has failed to pay any amounts on account of promissory note,” according to the lawsuit, CNBC reported. The first two notes are overdue, and the third note is due in December.
Elizabeth Holmes’ Prison Term Could Be Delayed
News of the lawsuit, which was filed in December 2022, came to light at a court hearing on March 17. During that hearing, Judge Edward Davila heard arguments about whether Holmes should remain free pending her appeal. She is otherwise scheduled to report to prison on April 27 to begin her sentence after being convicted in January 2022 of defrauding Theranos investors.
Davila, who oversaw Holmes’ criminal case, is expected to issue a decision about her freedom during the appeal early this month. The judge is also weighing options for Holmes to pay restitution to her victims.
Prosecutors have asked that she pay back $878 million to Theranos’ former investors and other victims, according to court records reviewed by Dark Daily. The government has argued in court papers that Holmes continues to live a wealthy lifestyle despite her claiming she has no meaningful assets since the collapse of Theranos and her trial.
“Defendant has lived on an estate for over a year where, based upon the monthly cash flow statement defendant provided to the US Probation Office, monthly expenses exceed $13,000 per month,” according to court documents filed by prosecutors ahead of the March 17 hearing. “Defendant asserted that her partner pays the monthly bills rather than her but also listed her significant other’s salary as ‘$0.’”
Holmes’ attorneys argued that the government cannot take an “all or nothing” approach to restitution, and that payments should only be made to investors who testified during the trial, the Associated Press reported.
For Victims, Full Restitution Can Be Rare
The federal Department of Justice (DOJ) acknowledges in its overview of restitution that victims often never collect what they are owed by guilty parties.
“The chance of full recovery is very low,” the DOJ notes. “Many defendants will not have sufficient assets to repay their victims. Many defendants owe very large amounts of restitution to a large number of victims. In federal cases, restitution in the hundreds of thousands or millions of dollars is not unusual. While defendants may make partial payments toward the full restitution owed, it is rare that defendants are able to fully pay the entire restitution amount owed.”
Clinical laboratory professionals will note the irony that one of the biggest convicted fraudsters in US history is now largely attempting to avoid punishments associated with her crimes. If Judge Davila agrees to let Holmes remain free pending her appeal, she could stay out of prison for years and perhaps not have to pay restitution for that length of time as well.
The coming weeks will prove to be pivotal in the final outcome of the case.
Novel scheme by medical laboratory company to induce patients to collect and return their own specimen for testing is central to a federal whistleblower case alleging violations of the Anti-Kickback Statute
Handing out gift cards only to patients who return a specimen to a clinical laboratory company for colorectal cancer screening is a unique approach that is now at the center of a federal qui tamcase filed by a retired Indiana pathologist.
The defendant in this whistleblower lawsuit is Exact Sciences Laboratories and its parent company Exact Sciences Corporation (NASDAQ:EXAS). Last month, a federal judge ruled the court case will proceed following attempts by the defendant’s attorneys to have the case dismissed.
The plaintiffs (United States of America ex rel. Niles Rosen, MD) allege Exact Sciences Laboratories violated the Federal Anti-Kickback Statute (AKS) and False Claims Act by offering $75 gift cards to induce patients to return self-collected fecal samples for the lab’s Cologuard at-home colon cancer screening kit through its Patient Compliance Program.
Exact Sciences refuted the allegations and moved to have the case dismissed claiming it “had a good faith belief that its [Patient Compliance Program] complied with the law and thus lacked the requisite intent for a violation of the AKS,” according to court documents. The court denied Exact Sciences’ motion to dismiss.
“We are grateful for the hard work and courage of those private citizens who bring evidence of fraud to the Department’s attention, often putting at risk their careers and reputations,” said Brian Boynton, JD (above), Principal Deputy Assistant Attorney General and head of the federal Department of Justice (DOJ) Civil Division in a February 7, 2023, DOJ statement. “Our ability to protect citizens and taxpayer funds continues to benefit greatly from their actions.” Clinical laboratory managers will want to follow this and other qui tam cases claiming violation of anti-kickback laws. (Photo copyright: Department of Justice.)
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Was Exact Sciences’ Patient Compliance Program a Kickback?
Cologuard is a non-invasive testing kit utilized by people to screen for colorectal cancer in the privacy of their own homes. It is intended for those over the age of 45 who are at low or average risk for the disease. Exact Sciences regularly runs television advertisements urging individuals to be screened for colorectal cancer using the Cologuard test.
Following a physician’s order, and after receiving the testing kit in the mail, individuals collect a stool sample using the specimen container in the kit and return the sample to Exact Sciences Laboratories (ESL) for analysis. The test works by looking for certain DNA markers and blood in the stool sample.
According to Report on Medicare Compliance from the Health Care Compliance Association (HCCA), in 2017, a gastroenterologist ordered the Cologuard kit for Rosen, the whistleblower, but Rosen chose not to return a stool sample to ESL. A few months later, ESL sent Rosen a letter offering him a $75 Visa gift card if he performed the at-home specimen collection and then returned it to ESL by March 22, 2018. Persuaded by the offer, Rosen collected a sample, returned it to ESL, and received the gift card.
As part of its Patient Compliance Program, ESL analyzed Rosen’s sample and received $499 from Medicare for performing the test. The complaint filed against Exact Sciences states Medicare paid Exact Sciences more than $160 million for a total of 334,424 Cologuard tests in 2018 while the company offered “unlawful cash equivalent inducements directly to Medicare beneficiaries,” COSMOS reported.
“It was a straight-up kickback,” Rosen’s attorney Marlan Wilbanks, JD, Senior Partner at Atlanta law firm Wilbanks and Gouinlock, told COSMOS. “You can’t offer cash or cash equivalents to anyone to induce them to use a government service.”
DOJ Elects to Not Intervene in Lawsuit
In February 2020, Exact Sciences received a civil investigation demand by the US Department of Justice (DOJ) regarding the gift card incentive. The DOJ later filed a notice that it had elected to decline intervention in the lawsuit. This action did not prevent Rosen from continuing with the lawsuit. Accordingly, in April of 2021, he filed an amended complaint against Exact Sciences alleging violations of the Federal Anti-Kickback Statute and False Claims Act.
Rosen is seeking a monetary award for himself, and on behalf of the US government, for civil penalties, treble damages, fees, and costs.
According to Report on Medicare Compliance, Exact Sciences “refuted the allegations and asserted, among other things, that the arrangement qualifies for the preventive care safe harbor to the anti-kickback statute (AKS) and that the complaint fails for many reasons.”
Exact Sciences also noted in its motion to dismiss that “encouraging a patient to have a medical service that was already ordered by a provider isn’t an inducement under the AKS.”
At this time, the case remains unresolved and continues in federal court.
DOJ Recovers Billions of Taxpayer Dollars from AKS Violations
A qui tam lawsuit or action is a method available for individuals to help the government circumvent fraud and recover money for taxpayers. Types of fraud included in these cases often pertain to Medicare and Medicaid services, defense contractor fraud, and procurement fraud.
According to the DOJ, over $1.9 billion was recovered as a result of qui tam lawsuits pursued by either the government or whistleblowers during fiscal year 2022. The number of these types of lawsuits has increased dramatically over the years with a total of 652 qui tam cases filed in 2022 alone.
Thus, clinical laboratory professionals should be aware that this type of novel scheme to generate more patients could possibly lead to legal issues. Dark Daily would like to credit Laboratory Economics for calling attention to this fascinating case of alleged illegal inducement involving a medical laboratory company.
Healthcare attorneys advise medical laboratory leaders to ensure staff understand difference between EKRA and other federal fraud laws, such as the Anti-kickback Statute
More than four years have passed since Congress passed the law and yet the Eliminating Kickbacks in Recovery Act of 2018 (EKRA) continues to cause anxiety and confusion. In particular are the differences in the safe harbors between the federal Anti-Kickback Statute (AKS) and Stark Law versus EKRA. This creates uncertainty among clinical laboratory leaders as they try to understand how these disparate federal laws affect business referrals for medical testing.
According to a news alert from Tampa Bay, Florida-based law firm, Holland and Knight, “EKRA was enacted as part of comprehensive legislation designed to address the opioid crisis and fraudulent practices occurring in the sober home industry.” However, “In the four years since EKRA’s enactment, US Department of Justice (DOJ) enforcement actions have broadened EKRA’s scope beyond reducing fraud in the addiction treatment industry to include all clinical laboratory activities, including COVID-19 testing.”
It is important that medical laboratory leaders understand this law. New cases are showing up and it would be wise for clinical laboratory managers to review their EKRA/AKS/Stark Law compliance with their legal counsels.
“Keeping in mind that [EKRA is] a criminal statute, clinical laboratories need to take steps to demonstrate that they’re not intending to break the law,” said attorney David Gee, a partner at Davis Wright Tremaine, in an exclusive interview with The Dark Report. “[Lab leaders should] think about what they can do to make their sales compensation program avoid the things the government has had such a problem with, even if they’re not sure exactly how to compensate under the language of EKRA or how they’re supposed to develop a useful incentive compensation plan when they can’t pay commissions.” David Gee will be speaking about laboratory regulations and compliance at the upcoming Executive War College in New Orleans on April 25-26, 2023. (Photo copyright: Davis Wright Tremaine.)
How Does EKRA Affect Clinical Laboratories?
The federal EKRA statute—originally enacted to address healthcare fraud in addiction treatment facilities—was “expansively drafted to also apply to clinical laboratories,” according to New York-based law firm, Epstein Becker and Green. As such, EKRA “applies to improper referrals for any ‘service,’ regardless of the payor. … public as well as private insurance plans, and even self-pay patients, fall within the reach of the statute.”
In “Revised Stark Law, Anti-Kickback Statute Rules Are Good News for Labs,” Dark Daily’s sister publication The Dark Report noted that EKRA creates criminal penalties for any individual who solicits or receives any remuneration for referring a patient to a recovery home, clinical treatment facility, or clinical laboratory, or who pays or offers any remuneration to induce a referral.
According to Epstein Becker and Green, EKRA:
Applies to clinical laboratories, not just toxicology labs.
Has relevance to all payers: Medicare, Medicaid, private insurance plans, and self-pay.
Is a criminal statute with “extreme penalties” such as 10 years in prison and $200,000 fine per occurrence.
Exceptions are not concurrent with AKS.
Areas being scrutinized include COVID-19 testing, toxicology, allergy, cardiac, and genetic tests.
“For many clinical laboratories, a single enforcement action could have a disastrous effect on their business. And unlike other healthcare fraud and abuse statutes, such as the AKA, exceptions are very limited,” Epstein Becker and Green legal experts noted.
“Therefore, a lab could potentially find itself protected under an AKS safe harbor and still potentially be in violation of EKRA,” they continued. “The US Department of Health and Human Services (HHS) and the DOJ have not provided any clarity regarding this statute (EKRA). Without this much needed guidance clinical laboratories have been left wondering what they need to do to avoid liability.”
EKRA versus AKS and Stark Law
HHS compared AKS and the Stark Law (but not EKRA) by noting on its website prohibition, penalties, exceptions, and applicable federal healthcare programs for each federal law:
AKS has criminal fines of up to $25,000 per violation and up to a five-year prison term, as well as civil penalties.
The Stark Law has civil penalties only.
AKS prohibits anyone from “offering, paying, soliciting, or receiving anything of value to induce or reward referrals or generate federal healthcare program business.”
The Stark Law addresses referrals from physicians and prohibits the doctors “from referring Medicare patients for designated health services to an entity with which the physician has a financial relationship.”
EKRA is more restrictive than AKS, as it prohibits some compensation that AKS allows, healthcare attorney Emily Johnson of McDonald Hopkins in Chicago told The Dark Report.
Recent enforcement actions may help lab leaders better understand EKRA’s reach. According to Holland and Knight:
Malena Lepetich of Belle Isle, Louisiana, owner and CEO of MedLogic LLC in Baton Rouge, was indicted in a $15 million healthcare fraud scheme for “allegedly offering to pay kickbacks for COVID-19 specimens and respiratory pathogen testing.”
In S-G Labs Hawaii, LLC v. Graves, a federal court concluded the laboratory recruiter’s contract “did not violate EKRA because the recruiter was not referring individual patients but rather marketing to doctors. According to the court, EKRA only prohibits percentage-based compensation to marketers based on direct patient referrals.”
In another federal case, United States v. Mark Schena, the court’s rule on prohibition of direct and indirect referrals of patients to clinical labs sent a strong signal “that EKRA most likely prohibits clinical laboratories from paying their marketers percentage-based compensation, regardless of whether the marketer targets doctors or prospective patients.”
What can medical laboratory leaders do to ensure compliance with the EKRA law?
In EKRA Compliance, Law and Regulations for 2023, Dallas law firm Oberheiden P.C., advised clinical laboratories (as well as recovery homes and clinical treatment facilities) to have EKRA policies and procedure in place, and to reach out to staff (employed and contracted) to build awareness of statute prohibitions and risks of non-compliance.
One other useful resource for clinical laboratory executives and pathologists with management oversight of their labs’ marketing and sales programs is the upcoming Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management. The conference takes place on April 25-26, 2023, at the Hyatt Regency in New Orleans. A panel of attorneys with deep experience in lab law and compliance will discuss issues associated with EKRA, the Anti-Kickback Statutes, and the Stark self-referral law.
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.
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.
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.
“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.
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.
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.
