Government prosecutors allege destruction of LIS database and point to Holmes’ extravagant lifestyle as evidence of fraud motive
There is a new twist in the federal criminal fraud trial of Elizabeth Holmes, co-founder and former CEO of now defunct clinical laboratory testing company Theranos. Once again, the trial has been delayed. In the meantime, however, dueling court filings between prosecutors and defense lawyers have shed additional light on the allegations against Holmes and co-defendant Ramesh Balwani, the company’s chief operating officer. The revelations will be of interest to medical laboratory leaders.
According to The Mercury News, United States District Judge Edward J. Davila cited the ongoing COVID-19 pandemic in his December 18 ruling that postponed the start of Holmes’ trial to July 13, 2021.
In his ruling, Judge Davila wrote, “The court notes sadly, the impact on our lives is grim. California is in the midst of an unprecedented surge in cases and hospitalizations.”
The judge also noted the prospects for widespread public vaccination in the coming months. “All of this supports continuing the trial [of Holmes] to a time when our community is safer,” he added. “The court recognizes that a continuance of the trial will cause great inconvenience to victims who would like their day in court, as well as Defendant, who wishes a speedy opportunity to defend against the charges. All of these rights are important, but paramount to the court is the safety and health of the community.”
On February 9, Law360 reported that Balwani’s trial was delayed even further, with jury selection now set to begin on January 11, 2022.
Wall Street Journal Exposé of Theranos and its Flawed Clinical Lab Testing
In “Elizabeth Holmes: The Breakthrough of Instant Diagnosis,” the Wall Street Journal (WSJ) put Holmes squarely in the public eye. It could be credibly asserted that the paper’s fawning coverage helped boost her credibility when no one knew who she was. Thus, it is ironic that just two years later it was the WSJ that, in a series of articles, exposed the alleged misrepresentation and fraud committed by Holmes, Balwani, and Theranos.
By 2015, the company had a stock valuation of $9 billion, but it all came crashing down after WSJ investigative journalist John Carreyrou revealed serious problems with the company’s management and technology.
In a public notification from the US Attorney’s Office Northern District of California, the government alleged that Holmes and former Theranos president Balwani promoted the company’s blood-testing technology despite knowing that it was likely to produce unreliable results.
The defendants now face 12 federal felony counts related to wire fraud. They have pleaded not guilty. According to The Mercury News, if found guilty of all charges, “Holmes faces a potential 20-year prison sentence, up to $2.75 million in fines, and possible restitution to investors the government alleges lost more than $700 million.”
Elizabeth Holmes (above), former CEO of now defunct clinical laboratory testing company Theranos, will now stand trial starting in July. Due to risk of infection from the SARS-CoV-2 coronavirus, jurors will be required to wear masks and to socially distance during the trial, CNBC reported. What will be of great interest to clinical laboratories are statements by federal prosecutors that testing data stored on the company’s laboratory information system was destroyed before it could be accessed by investigators, even though it had been subpoenaed months earlier by a federal grand jury. (Photo copyright: Forbes/Yichuan Cao/NurPhoto via Getty Images.)
Missing Clinical Laboratory Data
Though the trial has been delayed, attorneys on both sides have been busy. Last November, after failing to have the charges dismissed, defense attorneys filed a flurry of motions seeking to exclude much of the government’s evidence, The Mercury News reported. This included expert witnesses, testimony about inaccurate test results, and numerous news articles about the company and its tests.
Prosecutors responded to the motions in January, further illuminating their case while providing more fodder for media coverage.
In a January 11 filing [doc-682], the government alleged that a Theranos laboratory information system (LIS) containing patient test results and quality control data was destroyed “on or about August 31, 2018—three months after a federal grand jury issued a subpoena requesting a working copy of this database.” News of the allegation was first reported by The Register, a UK-based IT publication.
Previously, the prosecutors alleged, Theranos, with assistance from an IT contractor, had provided a backup copy of the database to the government but without a password needed for decryption. “All subsequent efforts by the government to access the data on this hard drive have failed,” even with assistance from a computer forensics expert, they wrote.
Then, the original database was permanently destroyed in August when Theranos moved out of its facility in Newark, Calif., the government alleged in its filing. “On or about August 31, 2018—three months after a federal grand jury issued a subpoena requesting a working copy of this database—the LIS was destroyed. The government has never been provided with the complete records contained in the LIS, nor been given the tools, which were available within the database, to search for such critical evidence as all Theranos blood tests with validation errors,” the filing read.
The January 11 filing was in response to a Theranos motion [doc-563] seeking to exclude evidence of “anecdotal test results.”
“The data disappeared. Defendant should be barred from arguing the government’s case is anecdotal when Theranos (and others) destroyed this data,” the prosecutors argued.
Furthermore, prosecutors wrote, “the government’s case is hardly ‘anecdotal.’ The reliability and accuracy problems in Theranos’ clinical lab were well-documented when the Centers for Medicare and Medicaid Services (CMS) investigated the lab, discovered the accuracy and reliability problems, and determined Theranos could not safely administer its tests on patients. Whistleblowers will also testify about Theranos’ accuracy and reliability problems. And patients themselves experienced these problems, receiving incorrect results that affected their treatment and deprived them of the benefit of the purportedly reliable blood tests for which they had paid.”
And Then There’s Her Lifestyle
Prosecutors also claimed in their filing that Holmes’ activities—which included “travel on private jets, stays in luxury hotels, and access to multiple assistants … [who] handled a range of non-business tasks for Defendant, including personal clothes and jewelry shopping, home decorating, food and grocery buying, and other items”—shows that Holmes was “funding an extravagant lifestyle … through company money,” CNBC reported.
And so, the saga of Theranos continues. Will Elizabeth Holmes succeed in her defense? Could a clinical laboratory phoenix bird rise from the ashes of this failed lab test company? Who knows? Probably not. But until there is a resolution, we will keep reporting on the case.
Lab leaders who adopt best practices in courier services will help ensure their lab’s supply chains remain secure
Hospital and health systems using courier services to transport patients’ biological specimens from doctors’ offices and other locations to clinical laboratories for testing and reporting are finding those services delayed or disrupted by the COVID-19 pandemic.
Limited office hours, closed physician practices, and the need for drivers to take time for symptom checking on healthcare campuses are among the growing challenges faced by couriers transporting medical laboratory specimens during this pandemic, experts told Dark Daily.
All these developments require courier operations and logistics companies to think outside the box for solutions that address the unique challenges triggered by the SARS-CoV-2 pandemic that have disrupted the normal operations of physicians’ offices, hospitals, and other healthcare providers. For example, many clinical labs struggle to obtain enough specimen collection and specimen transport supplies to sustain both their nascent COVID-19 testing programs and their routine testing operations.
One national logistics company recognized that it could help labs with the disruption in the supply chain for laboratory supplies caused by the coronavirus outbreak. In the early weeks of the pandemic, West Haven, Conn.-based Lab Logistics and its sister company Path-Tec, took the initiative to develop collaborations and strategic partnerships with several established manufacturers of medical laboratory supplies. Now it could not only be a source of much-needed supplies for its clients, but its network of couriers could supply the increase in services for all the locations where such supplies were needed.
Meanwhile, the coronavirus outbreak caused widespread disruption to the daily activities of hospitals, health systems, physician’s offices, and other providers. According to Susan Uihlein, Senior Vice President Business Development-Hospital Couriers at Lab Logistics—a company that creates, implements, and manages courier models customized to medical laboratory, hospitals, and health systems—in response to the pandemic, there was an immediate need by one of the largest multi-regional Health Systems in New York to align courier and logistics services to meet the new realities of how its facilities would respond to patient needs. It was also necessary that logistics solutions be complementary with the health systems’ COVID-19 policies.
“This health system requested that Lab Logistics’ drivers access the hospital’s personnel tracking application upon arrival,” explained Uihlein. “The health system’s new COVID-19 policy required everyone wishing to enter the health system campus to complete a coronavirus screening process—including having a temperature reading taken—and then receive a status confirmation on a smartphone screen. This obviously impacted the couriers’ progress on their routes.”
“We have 2,600 medical-specific couriers throughout the United States, and although all couriers undergo extensive orientation regarding known infectious transport, this current situation has spotlighted how important (COVID-19) is to our clients,” Brian McArdle, President and Chief Executive Officer of Lab Logistics, told Dark Daily.
“The couriers represent us and our clients,” he continued. “They are out in the field, they are picking up, delivering, and rolling with the punches as far as what a healthcare system or a clinical laboratory needs from them—from photo IDs to wearing masks and gloves. The process keeps evolving. And we have evolved with it.”
“Our operations team makes sure that we work with each client to flexibly react to changes in that day’s pickups and deliveries, as appropriate. There has been much optimization and on-the-fly changes,” said Uihlein.
In fact, the coronavirus pandemic resulted in a 26% increase in requests for specimen delivery, PPE, and COVID-19 related supply chain movement, according to data on the California, Louisiana, and New York City healthcare markets provided by Lab Logistics.
“Every day there have been changes to what is open and closed. We had to manage that through our proprietary healthcare dispatch system and with the couriers,” Susan Uihlein (above), Senior Vice President Business Development-Hospital Couriers at Lab Logistics, told Dark Daily. Lab Logistics transports medical specimens, supplies, and pharma for more than 350 US hospitals, healthcare systems, and clinical laboratories. (Photo copyright: LinkedIn.)
Clinical Laboratories Should Review Specimen Transport Procedures
Clearly, the COVID-19 pandemic is putting unique stresses on the logistics and transportation services operated by hospital systems, medical labs and anatomic pathology groups. That why it would be timely and appropriate for lab leaders to review/update best practices and necessary requirements that ensure efficient management of clinical laboratory specimens.
Topics covered in this highly-informative white paper include:
Handling and tracking laboratory specimen samples;
Confirming medical security, chain of custody, and transit tracking;
Coordinating test kits, supplies, reagents, lab equipment, and instruments;
Approaching a medical courier service conversion.
“By utilizing a logistics system that includes a dedicated courier, medical laboratories and healthcare systems can manage all aspects of transportation specimen transport, including handling and tracking of specimens, medical security, chain of custody, tracking supply inventory, and delivery. Successfully executed, all of these functions can generate financial improvements,” notes the white paper.
Tracking Specimen Arrival and Predicting Which Tests Will Be Needed
One technology that lab and healthcare system leaders can use to control costs and staffing involves online real-time tracking of drivers to enhance test turnaround time and determine when tests will be performed.
Lab Logistics’ version of this technology uses barcode scanning, GPS (Global Positioning System) tracking, and an online portal that enables its clients to view the routes and stops a driver has made for the lab. Lab leaders can determine how many specimens are expected, and what type of tests will be required, before the specimens arrive.
“They can see the volume coming in and they can staff-up based on the information we are giving them and not over-staff. It’s really good information,” Uihlein said.
Lab Logistics’ platform also integrates with a hospital’s laboratory information system (LIS) through the lab’s barcode. “The integration makes it possible for labs to get faster information from the field into their systems and create accessioning,” Uihlein explained.
Specimen Management Improved through Route Tracking
“We found that some drivers were doing daily pickups and we were not getting any specimens. Some clients were on vacation, stopped using the laboratory altogether, or weren’t doing that type of laboratory work anymore,” Napolitano told the white paper researchers.
Driver tracking also enabled Ochsner Health System in Louisiana to avoid “hot shots”—one-time delivery pickups which could be 90 miles away from the lab, explained Lloyd Gravois, Assistant Vice President of Logistics-Supply Chain, in the white paper.
Medical laboratory leaders who wish to enhance their lab’s specimen management and solve logistics issues during and after the COVID-19 pandemic are encouraged to download a copy of the Free Special Edition white paper by clicking here, or by placing this URL in their web browsers: https://www.darkdaily.com/free-special-edition-white-paper-specimen-management-and-logistics-issues-to-evaluate-for-continuous-quality-improvement-3-high-risk-medical-courier-support-services/.
A recent LIS market report shows that demand for a modern LIS is driven by a number of factors: acceleration of laboratory automation, the need for improved lab efficiency, advances in integrated functionality, importance of compliance with regulatory requirements, and the rising prevalence of chronic diseases.
Indeed, because all laboratories are now routinely being asked to do more with less, these and numerous other urgent reasons are compelling independent and hospital laboratories to invest resources in a major laboratory information implementation or upgrade.
Dark Daily is pleased to offer a new FREE White Paper providing practical insights and indispensable how-to’s regarding the enormous challenges associated with installing, converting, and interfacing a laboratory information system. This paper, written by an expert who has experienced (and overcome) these challenges, outlines for you a multi-step plan for bringing your laboratory team together toward the common goal of a modern LIS, thus expanding your lab’s capabilities, ensuring efficient operations, and yielding quality improvement.
This White Paper specifically addresses:
Questions to ask when researching a laboratory information system
Finding the right project manager who will mesh well with your laboratory and put into place the steps necessary to make your LIS installation or conversion a success
Building a realistic budget for your project, including important considerations not directly related to your implementation
Events important to include in your project plan that are often overlooked
Reasons, many not obvious, for eliminating as many variables, non-essential tasks, and complicated workflows as possible—pre go-live
And much more!
Table of Contents
Introduction
Part 1: Components of a Clinical Laboratory Information System Implementation
Phase 1: Project Initiation, LIS Preparation, Gap Analysis, and New Software
Phase 2: Installing the Laboratory Information System, Configuration, Data, Interfaces
PART 2: Critical LIS Testing and Parallels: Can We Achieve a ‘Non-Event’ at LIVE?
Phase 3: Laboratory Information System Testing and Training
Phase 4: Laboratory Information System LIVE and Support
Key Takeaways
The right LIS is key to your laboratory’s quality operations. And when it comes to LIS installations, conversions, and interface projects, there are a multitude of issues to consider. Achieving the successful implementation will not only streamline your laboratory processes, it will also provide the added benefits of improved staff morale and stronger relationships with your clients and investors.
As a member of your laboratory’s leadership team, learn what you need to know during every phase of LIS change —download your FREE copy of “Clinical Laboratory Information System Implementation Brief” below!
Download the White Paper now by completing the form below.
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Sale of respected laboratory information system company may be an early sign that investors believe clinical laboratories and pathology groups are ready to upgrade their LISs and add needed capabilities
In the past 10 years there has been little disruption to the
laboratory
information systems (LIS) market that clinical
laboratories and anatomic
pathology groups use. Yet, over that same 10-year period, almost every
hospital and physician group practice adopted an electronic
health system (EHR), primarily because of federal financial incentives that
encouraged such adoption.
For medical
laboratories and pathology groups, this widespread—nearly
universal—adoption of EHRs by the nation’s hospitals and physicians was
disruptive. Labs were required to expend resources building digital interfaces
to the EHRs of their parent hospitals and client physicians to support
electronic test ordering and test reporting.
However, because that wave of EHR adoption is now over,
clinical labs and pathology groups have an opportunity to assess the current
state of the health
information technology (HIT) that they use daily, primarily in the form of
the classic laboratory information system that handles nearly all the primary
functions needed to support testing and other operational needs.
This opportunity to help medical laboratories enhance and/or
upgrade the capabilities of their laboratory information systems may be one
motivation behind the recent sale of a well-known LIS company.
Private Equity Firm Buys Orchard Software
On Oct. 7, 2019, Orchard Software Corporation of Carmel,
Ind., announced its acquisition by Franciscan Partners, a private equity firm
based in San Francisco.
Orchard Software, founded in 1993, has grown steadily over
the past 20 years, primarily by serving physician office laboratories,
community hospital labs, and independent clinical laboratory companies. With each
stage of growth, Orchard added functionality to its LIS and related software
offerings and moved up-market to serve larger hospitals and larger labs.
The purchase price and the terms of the sale were not
announced. Orchard’s Founder, President and CEO, Rob Bush, will retire. The new
CEO is Billie Whitehurst, who came to Orchard from Netsmart Technologies, where she was Senior
Vice President. The remainder of Orchard’s management team will be kept in
place.
“Francisco Partners will provide capital and expertise to enable Orchard to grow at a faster pace and continue to develop its newer web-based products in an industry that has lagged behind in adoption of cloud-based software,” says Rob Bush (above), Orchard Software’s Founder and exiting CEO, in a press release. (Photo copyright: Twitter.)
Is the LIS Market Heating Up?
What makes the purchase of Orchard by a multi-billion-dollar
private equity company noteworthy is the fact that it is the first significant
transaction in the LIS sector probably since the mid-2000s, which saw several
significant mergers and acquisitions.
Other acquisitions or investments involving LIS companies
need to happen before it would be appropriate to say that investor interest in
the LIS sector is heating up. However, it is accurate to say that many
professional investors will be watching to see whether Franciscan Partners
succeeds with its investment in Orchard Software. If Orchard’s revenue and
operating profits increase substantially in the next few years, that may
encourage other investors to look for LIS companies and products that they can
buy.
If this were to happen, that would be a positive development
for both clinical laboratories and anatomic pathology groups, because these
investors would have a motive to add new functions and capabilities to their
LIS products. It would also wake up a sector of lab information technology that
has been relatively quiet for several years.
How medical laboratories can show value through process improvement methods and analytics will be among many key topics presented at the upcoming Lab Quality Confab conference
Quality management is the clinical laboratory’s best strategy for surviving and thriving in this era of shrinking lab budgets, PAMA price cuts, and value-based payment. In fact, the actions laboratories take in the next few months will set the course for their path to clinical success and financial sustainability in 2020 and beyond.
But how do medical laboratory managers and pathologists address these challenges while demonstrating their lab’s value? One way is through process improvement methods and another is through the use of analytics.
Clinical pathologists, hospital lab leaders, and independent lab executives have told Dark Daily that the trends demanding their focus include:
Ensuring needed resources and appropriate tests,
while the lab is scrutinized by insurance companies and internally by hospital
administration;
“Our impact on patient care, in many cases, is very
indirect. So, it is difficult to point to outcomes that occur. We know things
we do matter and change patient care, but objectively showing that is a real
struggle. And we are being asked to do more than we ever had before, and those
are the two big things that keep me up at night these days,” he added.
This is where process improvement methods and analytics are
helping clinical laboratories understand critical issues and find opportunities
for positive change.
“You need to have a strategy that you can adapt to a changing landscape in healthcare. You have to use analytics to guide your progress and measure your success,” Patricia Nortmann, System Director of Laboratory Services at St. Elizabeth Healthcare, Erlanger, Ky., told Dark Daily.
Clinical Laboratories Can Collaborate Instead of Compete
Prior to a joint venture with TriHealth in Cincinnati, St. Elizabeth lab leaders used data to inform their decision-making. Over about 12 years preceding the consolidation of labs they:
Implemented front-end automation outside the core area and in the microbiology lab.
“We are now considered a regional reference lab in the state
of Kentucky for two healthcare organizations—St. Elizabeth and TriHealth,”
Nortmann said.
Thanks to these changes, the lab more than doubled its
workload, growing from 2.1 million to 4.3 million outreach tests in the core
laboratory, she added.
Christopher Doern, PhD (left), Director of Microbiology and Associate Professor of Pathology at Virginia Commonwealth University Health System; Patricia Nortmann (center), System Director of Laboratory Services at St. Elizabeth Healthcare; and Joseph Cugini (right), Manager Client Solutions at Health Network Laboratories, will present practical solutions and case studies in quality improvement and analytics for clinical laboratory professionals at the 13th Annual Lab Quality Confab, October 15-16, 2019, at the Hyatt Regency in Atlanta, Ga. (Photo copyright: The Dark Report.)
Using Analytics to Test the Tests
Clinical laboratories also are using analytics and information technology (IT) to improve test utilization.
At VCH Health, Doern said an analytics solution interfaces
with their LIS, providing insights into test orders and informing decisions
about workflow. “I use this analytics system in different ways to answer
different questions, such as:
How are clinicians using our tests?
When do things come to the lab?
When should we be working on them?
“This is important for microbiology, which is a very delayed
discipline because of the incubation and growth required for the tests we do,”
he said.
Using analytics, the lab solved an issue with Clostridium
difficile (C diff) testing turnaround-time (TAT) after associating it with
specimen transportation.
Inappropriate or duplicate testing also
can be revealed through analytics. A physician may reconsider a test after discovering
another doctor recently ordered the same test. And the technology can guide
doctors in choosing tests in areas where the related diseases are obscure, such
as serology.
Avoiding Duplicate Records While
Improving Payment
Another example of process
improvement is Health Network Laboratories (HNL) in Allentown, Pa. A team there established an enterprise master patient index (EMPI) and implemented digital tools to find and eliminate
duplicate patient information and improve lab financial indicators.
“The system uses trusted sources of data to make sure data is clean and the lab has what it needs to send out a proper bill. That is necessary on the reimbursement side—from private insurance companies especially—to prevent denials,” Joseph Cugini, HNL’s Manager Client Solutions, told Dark Daily.
HNL reduced duplicate records in its database from 23% to
under one percent. “When you are talking about several million records, that is
quite a significant improvement,” he said.
Processes have improved not only on the billing side, but in
HNL’s patient service centers as well, he added. Staff there easily find
patients’ electronic test orders, and the flow of consumers through their
visits is enhanced.
Learn More at Lab Quality Confab Conference
Cugini, Doern, and Nortmann will speak on these topics and more during the 13th Annual Lab Quality Confab (LQC), October 15-16, 2019, at the Hyatt Regency in Atlanta, Ga. They will offer insights, practical knowledge, and case studies involving Lean, Six Sigma, and other process improvement methods during this important 2-day conference, a Dark Dailynews release notes.
Register for LQC, which is produced by Dark Daily’s sister publication The Dark Report, online at https://www.labqualityconfab.com/register, or by calling 512-264-7103.
A recent LIS market report shows that demand for a modern LIS is driven by a number of factors: acceleration of laboratory automation, the need for improved lab efficiency, advances in integrated functionality, importance of compliance with regulatory requirements, and the rising prevalence of chronic diseases.
