A San Jose jury convicted Theranos founder Elizabeth Holmes on four counts of fraud, deciding that she lied to investors while raising more than $700M in funds for the company. Holmes was found not guilty on four other counts relating to defrauding patients, though Theranos ended up voiding tens of thousands of erroneous test results. Each conviction carries a maximum twenty-year sentence, although Holmes is widely expected to appeal.
The Gist: It’s rare that tech executives are convicted of fraud. Investors, including many health systems, have been flooding healthcare startups with large sums of cash in hopes of big returns. But the Theranos debacle is a reminder that Silicon Valley’s “fake it till you make it culture” is not always the best fit for healthcare. Providers must continue to hold new medical technologies to high standards, regardless of how much promise they hold to “revolutionize” aspects of patient care.
The COVID-19 pandemic revealed the need for substantial investment in public health. Journalist Anna Maria Barry-Jester, in an investigation published in California Healthline and the Los Angeles Times last week, reported that the need is pressing and that the time is ripe to formulate solutions.
“As we’ve continued to make progress in bringing the COVID-19 emergency under control, many California leaders are turning their attention to the future,” Barry-Jester wrote.
This year’s state budget set aside $3 million for an assessment of California’s public health infrastructure. “Public health leaders believe it will show that staffing and training are major issues,” Barry-Jester reported.
Starting in July 2022, annual state budgets will include $300 million to be spent to improve public health infrastructure.
The pandemic highlighted two significant public health needs in California. One is basic investment in public health infrastructure, as highlighted by Barry-Jester. The other is to address housing, diet, livable wages, and access to quality health care as part of an overarching public health strategy — a necessity highlighted by the stark racial, ethnic, and economic disparities among those who contracted and died from COVID-19.
Many Reasons for Staff Attrition
Before the pandemic, the state’s public health infrastructure already required shoring up. The COVID-19 crisis hammered the already underfunded and understaffed county and state public health systems.
In California, public health workers are leaving their jobs in droves. Counties are “losing experienced staffers to retirement, exhaustion, partisan politics, and higher-paying jobs,” Barry-Jester reported.
The exodus from public health predated this surge of resignations. Since the early days of the pandemic, experienced California public health leaders have been leaving the field, including 17 county public health officers and 27 county-level directors or assistant directors of public health. Both the director and the deputy director of the state’s department of public health resigned during the pandemic.
“Public health nurses, microbiologists, epidemiologists, health officers, and other staff members who fend off infectious diseases like tuberculosis and HIV, inspect restaurants, and work to keep communities healthy are abandoning the field,” Barry-Jester wrote. “The collective expertise lost with those departures is hard to overstate.”
Public health laboratories illustrate how much we rely on public health infrastructure for our everyday safety. The labs are largely invisible to the public but touch every aspect of daily life. “Public health labs sample shellfish to make sure it is safe for eating. They monitor drinking water and develop tests for emerging health threats such as antibiotic-resistant viruses. They also test for serious diseases, such as measles and COVID-19. And they typically do it at a fraction of the cost of commercial labs — and faster.”
Yet labs across the state are unable to hire and retain staff, and they are in danger of closing. “The biggest threat to [public health labs] right now is not the next emerging pathogen,” said Donna Ferguson, director of the public health lab in Monterey County, “but labs closing due to lack of staffing.”
Addressing Social Needs as Public Health Strategy
The pandemic highlighted the effects of income inequality and racial disparitieson health in California. Data from the California Department of Public Health highlight the stark disparities in COVID-19 outcomes. The COVID-19 death rate for Latinx people is 19% higher than the statewide death rate, and the death rate for Black people is 16% higher. The case rate for Pacific Islanders is 45% higher than the statewide rate, while the rate of Pacific Islanders earning less than $40,000 annually is 33% higher than average.
“There is an 80% higher rate of diabetes among Hispanics compared to non-Hispanic whites. We think early life nutrition is very important but also the environment where people live, which can include a combination of factors like poor access to healthy food, poor access to resources, air pollution, even chemical contaminants in the environment we found contribute to this disparity,” he told Los Angeles Times reporter Alejandra Reyes-Velarde.
These chronic diseases then put Latinx people at higher risk for worse COVID outcomes. “One of the most common recurring risk factors, not so much for rates of infection but the severity of the infection, is blood-glucose levels,” he said. “Individuals with higher blood-glucose levels seem to have a more severe response to COVID-19 infection, and of course, higher blood glucose is what contributes to diabetes.”
A Health Affairs study from the early days of the pandemic, which drew on data from California’s Sutter hospitals, noted that Black people are similarly at higher risk from the chronic illnesses that make people more susceptible to poor outcomes from COVID infections, including type 2 diabetes and congestive heart failure, as do other populations disproportionately harmed by COVID-19.
“Already underfunded and neglected even before the pandemic, public health has been further undermined in ways that could resound for decades to come,” wrote journalists Mike Baker and Danielle Ivory. The Times investigation of hundreds of health departments in all 50 states revealed that “local public health across the country is less equipped to confront a pandemic now than it was at the beginning of 2020.”
Threats, harassment, and anger directed at public health officials and workers drove many out of the field since the beginning of the pandemic and was identified as an ongoing problem by Baker and Ivory. “We have learned all the wrong lessons from the pandemic,” Adriane Casalotti told them. Casalotti is the chief of public and government affairs for the National Association of County and City Health Officials, an organization representing the nearly 3,000 local health departments across the nation. “We are attacking and removing authority from the people who are trying to protect us.”
Officials interviewed by Baker and Ivory noted that while additional funds are crucial to rebuilding public health departments, they aren’t sufficient to address the problems that have long weighed down the system or those that emerged during the pandemic.
Melissa Lyon, public health director for Erie County, Pennsylvania, put it this way: “If a ship is sinking, throwing treasure chests of gold at the ship is not going to help it float.”
A trade group representing LabCorp and Quest Diagnosticshas appealed the dismissal of its lawsuit challenging the implementation of the Protecting Access to Medicare Act, which sets laboratory payment rates according to market data reported by industry.
Federal district courts have previously dismissed the lawsuit, most recently in March, but the American Clinical Laboratory Association continues to argue that PAMA is a case of “harmful regulatory overreach” that forces an “unsustainable reimbursement model” on its members.
ACLA is targeting PAMA through the courts while continuing to push for Congress to change the law. The trade group said that, regardless of the outcome of the appeal, a legislative solution is needed to a law it argues has led to artificially low Medicare rates.
ACLA began its legal case against the implementation of PAMA late in 2017, weeks after the release of the final private payer rate-based clinical laboratory fee schedule. As ACLA sees it, HHS diverged from PAMA directives by exempting “significant categories and large numbers of laboratories” from reporting market data, meaning “Medicare rates will not be consistent with market-based rates.”
The U.S. District Court for the District of Columbia dismissed the case on the grounds that ruling on the establishment of PAMA payment amounts was barred by the statute. ACLA successfully appealed that ruling in 2019. However, the lower court again dismissed the case in late March.
The trade group said the court relied “on the same conclusions that the D.C. Circuit [appeals court] rejected.” The court ruling said the case was dismissed “for lack of subject matter jurisdiction.”
ACLA’s filing of a notice of appeal restarts a process that could take months to play out. The last time the trade group appealed, there was a nine-month wait between the submission of a notice and the delivery of the opinion of the court.
While preparing its opening brief and then waiting on the decision of the appeals court, ACLA will try to tackle PAMA from another angle.
“ACLA will continue to work with policymakers to establish a Medicare Clinical Laboratory Fee Schedule that is truly representative of the market and supports continued innovation and access to vital laboratory services, as Congress originally intended,” Julie Khani, president of ACLA, said in a statement.
Congress has already delayed the next set of fee cuts until 2022. ACLA said the cuts will reduce rates for certain tests used to diagnose chronic diseases by 15%, potentially threatening access to testing. Rates were previously cut in 2018, 2019 and 2020.
Talking to investors in April, LabCorp CEO Adam Schechter said he expects the 2022 impact to “be about the same as it was in 2019, around the $100 million mark.”
Sam’s Club partnered with primary care telehealth provider 98point6 to offer members virtual visits.
1. Sam’s Club now offers members access to telehealth visits through a text-based app run by 98point6.
2. Members can purchase a $20 quarterly subscription for the first three months; the regular sign-up fee is $30 per person. After the first three months, members pay $33.50 every three months.
3. The subscription gives members unlimited telehealth visits for $1 per visit. The service has board-certified physicians available 24 hours per day, seven days a week.
4. Members can also subscribe for pediatric care.
5. Physicians can diagnose and treat 400 conditions including cold and flu-like symptoms as well as allergies. They can also monitor chronic conditions including diabetes, depression and anxiety.
6. Members can use the app to obtain prescriptions and lab orders as well.
7. Sam’s Club has around 600 stores in the U.S. and Puerto Rico and millions of members.
“Offering access to telemedicine was on our roadmap in the pre-COVID world, but the current environment expedited the need for this service to be easily accessible, readily available and most of all, affordable,” said John McDowell, vice president of pharmacy operations and divisional merchandise at Sam’s Club. “Through providing access to the 98point6 app in a pilot, we quickly realized that our members were eager to have mobile telehealth options and we wanted to provide this healthcare solution to all of our members as a standalone option.”
With the spike in coronavirus cases in Southern and Western states, commercial laboratories say they do not have the capacity to keep up with growing demand for their testing services and predict longer turnaround times for results over the coming weeks.
The American Clinical Laboratory Association, which represents LabCorp, Quest Diagnostics and other labs, said Saturday its members have seen a steady increase in the volume of COVID-19 test orders recently, specifically calling out the fact that critical testing materials are in short supply.
Quest on Thursday issued its own warning thatdespite the rapid expansion of its testing capacity, demand has been growing faster. In particular, the lab giant noted that orders for molecular diagnostic services have increased by about 50% over the past three weeks.
U.S. commercial labs had made “significant strides” during the coronavirus pandemic by expanding testing capacity from about 100,000 tests per day in early April to more than 300,000 currently, according to ACLA.
But newly emerging hotspots like Arizona, California and Texas are putting a strain on labs and an already limited supply of testing materials, the group said.
While labs nationwide are trying to increase capacity by purchasing more testing machines and attempting to secure additional test materials from suppliers, ACLA President Julie Khani cautioned, “the reality of this ongoing global pandemic is that testing supplies are limited” and “every country across the globe is in need of essential testing supplies, like pipettes and reagents, and that demand is likely to increase in the coming months.”
Khani said ACLA has been in talks with the Trump administration and supply chain partners about the challenges labs face as they try to increase their level of respective COVID-19 testing abilities to meet the anticipated increase in U.S. demand for tests over the coming weeks.
In the absence of a solution, Khani warned that significant demand “will likely exceed” labs’ testing capacities and “could extend turnaround times for test results.”
For its part, Quest’s statement on Thursday described the U.S. coronavirus outbreak as an “evolving” situation that is putting a “strain” on the company’s COVID-19 testing resources.
“Today, we have the capacity to perform approximately 110,000 of these tests a day (770,000 a week). Despite the rapid expansion of our testing capacity, demand for testing has been growing faster,” according to Quest.
Currently, Quest’s average turnaround time for test results are one day for hospital patients, pre-operative patients in acute care settings, and symptomatic healthcare workers, and two to three days for all other patient populations. However, the company warned that “given increased demand, we expect average turnaround times near term to extend in excess of 3 days.”
Nonetheless, Quest said it is taking actions to try to increase COVID-19 testing scale, with the goal of being able to perform 150,000 tests per day. Toward that end, the company is installing additional testing platforms in its network of U.S. labs and said it is collaborating with independent labs who currently have underused capacity.
Quest’s rival LabCorp was not immediately available for comment on its testing capacity amid reports of demand increasing across the country.
The U.S. Department of Justice is charging 10 defendants for an “elaborate” pass-through billing scheme that used small rural hospitals across three states as shells to submit fraudulent claims for laboratory testing to commercial insurers, jacking up reimbursement.
The defendants, including hospital executives, lab owners and recruiters, billed private payers roughly $1.4 billion from November 2015 to February 2018 for pricey lab testing, reaping $400 million.
The four rural hospitals used in the scheme are: Cambellton-Graceville Hospital, a 25-bed rural facility in Florida; Regional General Hospital of Williston, a 40-bed hospital in Florida; Chestatee Regional Hospital, a 49-bed facility in Georgia; and Putnam County Memorial Hospital, a 25-bed hospital in Missouri. Only Putnam emerged from the scheme relatively unscathed: Chestatee was sold to a health system that plans to replace it with a newer facility, Cambellton-Graceville closed in 2017 and RGH of Williston was sold for $100 to an accounting firm earlier this month.
The indictment, filed in the Middle District of Florida and unsealed Monday, alleges the 10 defendants, using management companies they owned, would take over rural hospitals often struggling financially. They would then bill commercial payers for millions of dollars for pricey urine analysis drug tests and blood tests through the rural hospitals, though the tests were normally conducted at outside labs, and launder the money to hide their trail and distribute proceeds.
The rural hospitals had negotiated rates with commercial insurers for higher reimbursement for tests than if they’d been run at an outside labs, so the facilities were used as a shell for fraudulent billing for often medically unnecessary tests, the indictment alleges.
The defendants, aged 34 to 60, would get urine and other samples by paying kickbacks to recruiters and healthcare providers, like sober homes and substance abuse treatment centers.
Screening urine tests, to determine the presence or absence of a substance in a patient’s system, is generally inexpensive and simple — it can be done at a substance abuse facility, a doctor’s office or a lab. But confirmatory tests, to identify concentration of a drug, are more precise and sensitive and have to be done at a sophisticated lab.
As such they’re more expensive and are typically reimbursed at higher rates than screening urine tests. None of the rural hospitals had the capacity to conduct confirmatory tests, or blood tests, on a large scale, but frequently billed in-network insurers, including CVS Health-owned Aetna, Florida Blue and Blue Cross Blue Shield of Georgia, for the service from 2015 to 2018, the indictment says.
Rural hospitals are facing unprecedented financial stress amid the pandemic, but have been fighting to keep their doors open for years against shrinking reimbursement and lowering patient volume. That can give bad actors an opportunity to come in and assume control.
One of the defendants, Jorge Perez, 60, owns a Miami-based hospital operator called Empower, which has seen many of its facilities fail after insurers refused to pay for suspect billing. Half of rural hospital bankruptcies last year were affiliated with Empower, which controlled 18 hospitals across eight states at the height of the operation. Over the past two years, 12 of the hospitals have declared bankruptcy. Eight have closed, leaving their rural communities without healthcare and a source of jobs.
“Schemes that exploit rural hospitals are particularly egregious as they can undermine access to care in underserved communities,” Thomas South, a deputy assistant inspector general in the Office of Personnel Management Office of Inspector General, said in a statement.
Walmart will open two more standalone health clinics this month, including a site in Arkansas, the company said June 17.
The health clinics, called Walmart Health, will offer primary care, imaging, lab, dental and behavioral health services.
The health clinics opening this month will be in Loganville, Ga., and Springdale, Ark. The Loganville Walmart Health opened June 17. The first Arkansas location will open June 24.
The company already has clinics in the Georgia cities of Dallas and Calhoun.
Walmart said it believes that expanding the standalone clinics will help bring affordable, quality healthcare to more Americans, because 90 percent of them live within 10 miles of a Walmart store.
“Patients have responded favorably to our low, transparent pricing for key healthcare services, regardless of insurance status,” Walmart’s senior vice president of health and wellness, Sean Slovenski wrote in a blog post. “They’re also appreciative of the convenience of our facilities that offer primary and urgent care, labs, X-ray and diagnostics, counseling, dental, optical and hearing services, all in one central facility.”