Lessons from the Theranos Saga– Part I

Just this year, the story of Theranos, the diagnostic tech giant’s saga has been in the headlines of major outlets. It also became viral news on the internet. For those of you who have been too busy to notice, here’s a short account of how this company made it to the top stories of this year.

They say Theranos is a story about a drop of blood. In essence, it is. In 2003, the company’s founder, Elizabeth Holmes, started a diagnostic laboratory that has superseded its competitors for its revolutionary fingerstick and microfluid technology. The startup had garnered much attention because Holmes, then a 19-year-old Stanford dropout, founded the firm. Her propriety machines, called Edison, made blood tests much cheaper and faster, and more successful with just a drop of blood, as compared to the traditional painful method of extraction that necessitated a vial of blood.

The success story continued until the last quarter of 2015 when questions about the diagnostic tests’ accuracy popped up. The investigations that followed exposed flaws that led to Theranos’ voiding all diagnostic results produced by Edison machines, from 2014 to 2015.  The Centers for Medicare and Medicaid Services (CMS) banned Holmes from running a diagnostic laboratory for two years. Several facilities were shut down. The company also shrunk its workforce by more than 40%. A second round of lay-offs greeted 155 employees at the start of the new year. In 2014, Theranos’ value was at $9 billion. Two years later, it plummeted to $800 million due to these incidences.

The crescendo and decrescendo of Theranos’ success teach us valuable lessons in healthcare. As we see it with the details available, here are some areas where their downfall sprouted: 

•    Compliance issues

According to an article by Wall Street Journal, out of the 240 tests that Theranos offered, only 15 were done in their propriety machine. The rest were done on conventional laboratory equipment. The notice of sanctions from Medicare and Medicaid came after it was found that the machines operated with inaccurate results that put some patients in “immediate jeopardy”, and after the company failed to comply with Clinical Laboratory Improvement Amendments’ (CLIA) condition-level requirements. According to a 121-page government report, Theranos’ deficiencies that are compliance-related include failed quality-control tests, inadequate or missing written policies for blood extraction and processing, unqualified employees conducting the tests, and failure to duly notify the patients of the inaccurate results, among others. 

•    Workforce development issues

Seventy-two percent of Theranos’ personnel who handle blood tests on diagnostic machines did not have any proof or documentation of prior training. Two-thirds of the supervisors also could not produce documentation of the right hematology training. Some of those who review patient results were also unlicensed, or unqualified. (source

Quotes from Glassdoor reviews that featured employee feedback on Theranos tell about the good and the bad side of the company. While some employees appreciate the fast-paced goal-oriented atmosphere at work, a number also expressed their dissatisfaction with the blaming and non-transparent work culture. Some also mentioned long work hours, and unbalanced family-work life due to pressures. One employee commented on the management as being centralized and tainted with nepotism. There was also a fervent call to the management to initiate communication with employees. 

•    Lack of accountability and transparency

It was the lack of transparency with how the tests run that invited the scrutiny of Theranos. There were no peer-reviewed studies of its revolutionary technology. The company shared very limited clinical data. An article says they were able to operate in “stealth mode”

Theranos’ downfall was primarily due to a culture of lack of openness. The company did not have a medium for honest dialogue and feedback where stakeholders may state their viewpoints or direct their questions. This culture eventually led to groupthink, a phenomenon wherein a body of people, due their desire to maintain harmony and cohesiveness, fails to make accurate analyses, critical evaluation and sound decisions. (source

There was also a lack of accountability. Not one executive staked his credibility to attest to the truthfulness of Theranos’ claims. Moreover, its founder, Holmes, was not quoted in her formal reply to Wall Street Journal’s scrutiny. (source

There was also no clear process to follow for unmet standards. There was a lack of documentation of critical procedures such as machine calibration. There was poor quality control. (source) 

The big question is, are the above issues preventable? What could have been done differently so that Theranos’ success became uninterrupted? More of these to be discussed in the second part of our series on Lessons from the Theranos Saga…