Faultory

Case file 75 · Systems & technology

Which test was actually run?

Theranos, 2013–2018: what separates a demonstrated lab test from a claimed one?

Subject
Theranos blood testing (2013–2018)
Reading
12 min
Evidence
5 exhibits
Reasoning
4 steps
Level
Intermediate
Two technicians working beside chemistry and hematology analyzers in a hospital laboratory.
17 June 2004 A hospital laboratory with chemistry and hematology analyzers, shown for illustration only; it is not a Theranos laboratory. Photo: Bobjgalindo · CC BY-SA 4.0 · Wikimedia Commons.
Illustrative signature. An illustrative strip-chart sketch of a test signal that wanders within a control band, then shifts and crosses the limit; it is a sketch, not laboratory data. Drawn to explain the case, not plotted from source data.

01 · The briefing

Begin with the question.

Theranos was a blood-testing company that promised a wide range of laboratory tests from small finger-prick samples, using a device it called a portable blood analyzer. The SEC later alleged that investors were led to believe the technology could conduct comprehensive blood tests from finger drops of blood. The Centers for Medicare and Medicaid Services (CMS), which oversees laboratories under the Clinical Laboratory Improvement Amendments (CLIA), surveyed the company's laboratory in Newark, California, in 2015. CMS found it out of compliance and in July 2016 imposed sanctions, including revocation of its CLIA certificate. In March 2018 the SEC charged the company, its chief executive Elizabeth Holmes and its former president Ramesh Balwani with massive fraud, alleging that the company raised more than $700 million from investors. This case separates three kinds of evidence: what the company said the device could do, which machine produced the patient results, and what the laboratory's own quality records showed about accuracy. The CMS findings and the SEC's allegations come from official documents, and the company's own statements are treated here as claims to be tested. Decide which account the public record supports.

The timeline

  1. The laboratory fails two troponin proficiency testing events. In a 2016 submission it says it could not determine the cause and voided all patient test results from March to October 2014.

  2. The onsite portion of CMS's recertification and complaint survey of the Newark laboratory is completed. The survey later found the laboratory out of compliance with five CLIA condition-level requirements.

  3. CMS sends the laboratory a list of its deficiencies on Form CMS-2567 and says their seriousness put patients at immediate jeopardy.

  4. CMS notifies the laboratory of its determination on a submission and proposes sanctions.

  5. CMS imposes sanctions, including revocation of the laboratory's CLIA certificate and a limitation for hematology testing.

  6. The SEC announces charges against the company, its chief executive and its former president, alleging massive fraud.

A researched reconstruction for learning. These reasoning steps simplify a complex record; no score can capture the full history.

02 · The evidence

What does the record show?

Compact laboratory chemistry analyzer with a sample tray and a built-in screen.
On the evidence table8 April 2024 A commercial clinical chemistry analyser of the kind conventional laboratories use, shown for illustration. It is not a Theranos device. Photo: Lazborn · CC0 · Wikimedia Commons.

Read each exhibit before settling on an explanation. The source links below every exhibit lead to the record behind it.

Exhibit 01

What the SEC says the device could do

The SEC's press release of 14 March 2018 says investors were led to believe the analyzer could conduct comprehensive blood tests from finger drops of blood. The release says the analyzer could complete only a small number of tests, and that the company conducted the vast majority of patient tests on modified and industry-standard commercial analyzers made by others. This establishes what the SEC alleges investors were told and which equipment produced most patient results. It does not give a full testing history, and the release reports allegations, not findings.

Source record s1sec.gov

Exhibit 02

Military and revenue claims

The SEC's litigation release No. 24069, dated 19 March 2018, names Theranos Inc., Elizabeth Holmes and Ramesh Balwani, The SEC alleges that the defendants claimed the technology was deployed by the US Department of Defense in Afghanistan and on medevac helicopters, and that it was never deployed by the Department of Defense. It also alleges they claimed the company would generate more than $100 million of revenue in 2014, while it generated a little more than $100,000 from operations that year. This establishes the gap the SEC alleges between claims and records. It does not establish the outcome of the case.

Source record s2sec.gov

Exhibit 03

Out of compliance after the 2015 survey

CMS's letter of 7 July 2016 describes a recertification and complaint survey of the Newark laboratory. The onsite portion was completed on 20 November 2015, and the survey concluded with critical information received on 23 December 2015. It found the laboratory out of compliance with five CLIA condition-level requirements, as well as numerous standard-level requirements. CMS listed the deficiencies on Form CMS-2567 in a letter of 25 January 2016. This establishes the regulator's findings and their severity. It does not show how many patient results each finding affected.

Source record s3wsj.com

Exhibit 04

Proficiency failures without a known cause

Proficiency testing compares a laboratory's results with reference values, so a failure is a warning about the method. CMS reports that the laboratory's April 2016 submission said it failed troponin proficiency testing in both the first and second events of 2014, but could not determine the cause. The laboratory therefore voided all patient test results from March 2014 through October 2014, the period of its troponin proficiency failures. This establishes that the laboratory had failures it could not explain. It does not establish the accuracy of other tests in the same period.

Source record s3wsj.com

Exhibit 05

Statements that did not match the records

In its April 2016 second submission, the laboratory said it stopped running tests on a Siemens BCS XP analyzer on 17 September 2015. CMS wrote that documentation given to the surveyor during the 2015 visit indicated the laboratory had used that instrument for patient testing. CMS also found that its submissions raised questions about freezers and other information, and it said these brought into question whether other information provided was reliable. This establishes that CMS did not accept the laboratory's statements at face value. It does not establish which patient results were affected by the instrument.

Source record s3wsj.com

03 · Your reasoning

Follow the strongest explanation.

Choose an interpretation, then compare it with the evidence. You can revise your choice. The goal is understanding, not a perfect score.

Reasoning step 01 of 04

Which evidence best separates a demonstrated lab test from a claimed one?

Evidence-based explanation

A demonstrated test needs evidence that a specific method, on a specific instrument, gave accurate results. Proficiency testing and investigation records provide that evidence, and CMS found the laboratory could not explain some proficiency failures. Demonstrations, presentations and coverage can show that a claim was made, not that the test was validated. The sources here come from regulators and the SEC, so they describe what was checked rather than the company's full internal work.

Weigh it against

Exhibit 01What the SEC says the device could doExhibit 04Proficiency failures without a known cause

Reasoning step 02 of 04

Which finding best shows that a laboratory result could not be relied on without more checks?

Evidence-based explanation

The strongest evidence that a result could not be relied on without more checks is the voiding of patient results after proficiency failures that the laboratory could not explain. The voided results are a concrete record of how the laboratory handled uncertainty. The timeliness, inspection and sample-size options do not establish accuracy, and two of them conflict with the CMS letter or go beyond the sources.

Weigh it against

Exhibit 04Proficiency failures without a known cause

Reasoning step 03 of 04

Which description of the device and the patient testing is best supported by the SEC's release?

Evidence-based explanation

The SEC release describes two gaps between claim and practice: the device could complete only a small number of tests, and the vast majority of patient tests were run on commercial analyzers made by others, some of them modified. The first option reverses the account, the second contradicts it, and the third repeats the claim the SEC says investors were led to believe. The release does not give an exact percentage of tests.

Weigh it against

Exhibit 01What the SEC says the device could do

Reasoning step 04 of 04

Which response to the 2016 findings is best supported by the CMS letter?

Evidence-based explanation

The CMS letter treats the laboratory's February 2016 submission as not a credible allegation of compliance, says its findings bring into question other information in the submissions, and imposes sanctions that include revocation of the CLIA certificate and a limitation for hematology testing. The other options describe acceptance the letter does not give, or deny the patient impact and sanctions the letter records.

Weigh it against

Exhibit 03Out of compliance after the 2015 surveyExhibit 05Statements that did not match the records

04 · The findings

The chain behind the outcome.

The record separates three things that the company's public account ran together. The first is a claim: the SEC says investors were led to believe the analyzer could conduct comprehensive tests from finger drops of blood, but it could complete only a small number of tests. The second is the machine behind the patient result: the SEC says the vast majority of patient tests ran on modified or standard commercial analyzers made by others. The third is evidence about accuracy. CMS found the laboratory out of compliance with five condition-level requirements after its 2015 survey. The laboratory failed two troponin proficiency tests in 2014, could not determine the cause, and voided all patient test results from March to October 2014. CMS also found that the laboratory's submissions raised questions about other information, including a Siemens analyzer the laboratory said it had stopped using in September 2015 but which survey documentation indicated was used for patient testing. CMS found the February 2016 submission was not a credible allegation of compliance, and in July 2016 it imposed sanctions including revocation of the CLIA certificate. The SEC later alleged that the military and revenue claims were false. A demonstrated test is therefore one whose specific method, on the specific instrument, produced accurate results that an independent check could verify. The public record does not show that for the device described to investors.

Contributing causes and conditions

  1. The SEC alleges that investors were led to believe in comprehensive testing, while the device could complete only a small number of tests.
  2. The vast majority of patient tests ran on modified or standard commercial analyzers made by others, so claims about the device did not describe the testing in practice.
  3. After its 2015 survey the laboratory was out of compliance with five condition-level requirements, and it could not determine the cause of its 2014 proficiency failures.
  4. Patient results were voided after failures, and the laboratory's submissions raised questions about instruments, freezers and other information.
  5. CMS found the February 2016 submission was not a credible allegation of compliance, and imposed sanctions in July 2016.
  6. The SEC alleges false claims about military use and projected revenue, and says the company raised more than $700 million from investors.

OutcomeTheranos blood testing (2013–2018)

Take the method with you

  1. Separate what a claim says a method can do from what the system did on the specific instrument and sample; these are different kinds of evidence.
  2. An unexplained failure in an accuracy check is a result in its own right, and the question is whether anyone can explain it before results are released.
  3. A regulator's letter can be checked against the company's own statements, and contradictions between submissions are evidence in their own right.

You can read findings at any time. Exploring every reasoning step marks this case as complete in your notebook.

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The open record

Sources & further reading

Read the original record and its scope before relying on a conclusion. Source references support the exhibit summaries; Faultory’s reasoning prompts are editorial reconstructions.

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Written and curated for Faultory by Yunus Emre Vurgun, with AI-assisted research and drafting. Sources and interpretations can need correction. Read our editorial standards or report an issue.

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