Theranos Statement on CMS Findings

Palo Alto, CAJuly 8, 2016 Theranos is working closely with the Centers for
Medicare & Medicaid Services to resolve the sanctions that the agency advised it plans
to impose on the companys Newark, California laboratory and its CLIA certificates. The
restrictions have not yet taken effect, and CMS provides 60 days to initiate an appeal.
The company is considering all its options and has been in contact with CMS to better
understand its findings.
Its important to note that the CMS review pertained to the operations of the companys
Newark lab, not its technologies. Over the last 13 years, Theranos has developed a
broad range of technologies, including small-volume sample assays, capillary collection
and testing capabilities, the ability to test small-volume samples on a variety of different
platforms (high-throughput and field devices), and a software suite for testing analysis
and decision support. The clinical lab is just one of Theranos many opportunities to
provide access to high-integrity, affordable and actionable health care information, and
the company will continue to carry out its mission under the leadership of its founder
and CEO, Elizabeth Holmes.
While it was obviously difficult to hear the outcome of the CMS findings, we will work
non-stop to resolve the issues identified. In an effort to be open with the public and
express our continued commitment to realizing the highest standards of quality and
compliance, we are sharing the letter from CMS.
Additional Q&A, attributable to the company:
1. How do the sanctions affect Theranos ongoing business?
Theranos has received notice from the Centers for Medicare & Medicaid Services
(CMS) regarding the imposition of sanctions arising from the 2015 survey of our
Newark, Calif., laboratory.
CMS has decided to impose all available sanctions regarding our lab business. While
the revocation will not take effect for 60 days, the company will not conduct any patient
testing in the Newark lab until further notice. During this period, the company will
continue to work with CMS to resolve and remediate outstanding issues in the Newark
lab and will continue to provide services to its customers through its Arizona lab.
We accept full responsibility for the issues at our laboratory in Newark and have already
worked to undertake comprehensive remedial actions. Those actions include shutting
down and subsequently rebuilding the Newark lab from the ground up, rebuilding quality
systems, adding highly experienced leadership, personnel and experts, and
implementing enhanced quality and training procedures.

While we are disappointed by CMS decision, we take these matters very seriously and
are committed to fully resolving all outstanding issues with CMS and to demonstrating
our dedication to the highest standards of quality and compliance.
2. Will patients still be able to use Theranos lab services?
The revocation does not take effect for 60 days. During this period, the company will
continue to work with CMS to resolve and remediate outstanding issues in the Newark
lab, and will continue to provide services to its customers through its Arizona lab.
3. Was anyone injured because of the issues found at the Newark, Calif., lab?
Patient safety and quality are our top priorities. As of now, we have not been made
aware -- by CMS, physicians or patients -- of any harm to patient health resulting from
our tests..
4. Why do you no longer accept Medicare?
We do accept Medicare at this time. The regulations require CMS to impose a sanction
canceling Medicare payments when a revocation sanction is imposed. The revocation
sanction, and therefore the Medicare payment cancellation sanction, becomes effective
60-days after the notice of imposition we have not arrived at that date yet. We take
very seriously CMSs notice and will continue to take actions to fully resolve outstanding
issues and demonstrate our commitment to implementation of the highest standards of
quality and compliance.
5. If Medicare cancels payments, will you continue to take other insurance
payments?
We have the ability to bill insurers. However, patients should contact their private
insurance companies to confirm whether Theranos is an in- or out-of-network provider.
6. How does this affect your other lab, in Arizona?
Regulators inspected Theranos other lab, in Scottsdale, Ariz., in 2015 and issued its
CLIA certificate of compliance. The Arizona lab currently processes all the samples that
Theranos tests; in some instances, including for our California patients, we use a third
party reference lab to process samples, a common practice in the industry. In addition,
the company hired outside experts to review the Arizona lab in the past few months and
found it to be in good standing. If the revocation of Theranos Newark labs CLIA
certificate takes effect, it automatically prevents the company from operating any labs
for a 2 year period; that means the Arizona lab would cease to operate. CMS
regulations say that this sanction does not become effective until 60 days from
imposition or, if an appeal is filed, until it is upheld by the appeals judge.
7. What practices do you undertake to ensure that your test results are
accurate? What processes do you use to ensure compliance and quality
results?
We undertake quality and compliance measures including the following that ensures:

Our laboratory leadership, including our lab director and testing personnel,
are highly qualified and well trained
Processes are properly reviewed and maintained
Quality control and quality assessment programs are followed
Lab processes, including assay verification, calibration, equipment
maintenance and environmental controls, are followed

8. Will this decision by CMS affect the prices of your tests?

We do not plan to increase our prices. We remain fully committed to our founding vision
to provide access to high-integrity, affordable and actionable health information to
people at the time it matters most.
9. Will you continue to offer all the same tests?
Yes, we will offer the same tests in Arizona through our Arizona lab and in California
through a third party reference lab for the time being. We will not conduct any patient
testing in the Newark lab until further notice. During this period, the company will
continue to work with CMS to resolve and remediate outstanding issues in the Newark
lab.
10. How can your laboratories operate without being able to do hematology?
We will offer the same tests in Arizona through our Arizona lab and in California through
a third party reference lab for the time being. We will not conduct any patient testing in
the Newark lab until further notice. During this period, the company will continue to work
with CMS to resolve and remediate outstanding issues in the Newark lab.
11. What is your path forward?
The company will continue to work with CMS to resolve and remediate outstanding
issues in the Newark lab, and will continue to provide services to its customers through
its Arizona lab.
While we are disappointed by CMS decision, we take these matters very seriously and
are committed to fully resolving all outstanding issues with CMS and to demonstrating
our dedication to the highest standards of quality and compliance.
12. What about Theranos business plan?
Clinical lab services is one of Theranos business units. Its research and development
unit has developed many technologies that are not dependent on running a clinical
laboratory. The company will continue to build infrastructure and build on its mission of
improving access through affordable diagnostic testing, and its proprietary technologies
and accessible business model. Improving access through innovative technologies is a
universal need, with growth opportunities in global and domestic vertical markets.
13. Will the AACC presentation be affected?
We are on schedule for the presentation Aug. 1.