HIMSS names SMC a ‘world leader’ in digital pathology and awards the South Korean Healthcare provider Stage 7 DIAM status
Anatomic pathologists and clinical laboratory managers in hospitals know that during surgery, time is of the essence. While the patient is still on the surgical table, biopsies must be sent to the lab to be frozen and sectioned before going to the surgical pathologist for reading. Thus, shortening time to answer for frozen sections is a significant benefit.
This effort in surgical pathology is part of a larger story of the digital transformation underway across all service lines at this hospital. For years, SMC has been on track to become one of the world’s “intelligent hospitals,” and it is succeeding. In February, SMC became the first healthcare provider to achieve Stage 7 in the HIMSS Digital Imaging Adoption Model (DIAM), which “assesses an organization’s capabilities in the delivery of medical imaging,” Healthcare IT News reported.
As pathologists and clinical laboratory leaders know, implementation of digital pathology is no easy feat. So, it’s noteworthy that SMC has brought together disparate technologies to reduce turnaround times, and that the medical center has caught the eye of leading health information technology (HIT) organizations.
“The digital pathology system established by the pathology department and SMC’s information strategy team could be one of the good examples of the fourth industrial revolution model applied to a hospital system,” anatomic pathologist Kee Taek Jang, MD (above), Professor of Pathology, Sungkyunkwan University School of Medicine, Samsung Medical Center told Healthcare IT News. Clinical laboratory leaders and surgical pathologists understand the value digital pathology can bring to faster turnaround times. (Photo copyright: Samsung Medical Center.)
Anatomic Pathologists Can Read Frozen Sections on Their Smartphones
Prior to implementation of its 5G digital pathology system, surgeons and their patients waited as much as 20 minutes for anatomic pathologists to traverse SMC’s medical campus to reach the healthcare provider’s cancer center diagnostic reading room, Healthcare IT News reported.
Now, SMC’s integrated digital pathology system—which combines slide scanners, analysis software, and desktop computers with a 5G network—has enabled a “rapid imaging search across the hospital,” Healthcare IT News noted. Surgical pathologists can analyze tissue samples faster and from remote locations on digital devices that are convenient to them at the time, a significant benefit to patient care.
“The system has been effective in reducing the turnaround time as pathologists can now attend to frozen test consultations on their smartphone or tablet device via 5G network anywhere in the hospital,” Jean-Hyoung Lee, SMC’s Manager of IT Infrastructure, told Healthcare IT News which noted these system results:
TAT decreased from 20 minutes to 10 minutes.
Transferring scans of large frozen tissues up to three gigabyte in size is now possible through the 5G network.
Additionally, through the 5G network, pathologists can efficiently access CT scans and MRI data on proton therapy cancer treatments. Prior to the change, the doctors had to download the image files in SMC’s Proton Therapy Center, according to a news release from KT Corporation, a South Korean telecommunications company that began working with SMC on building the 5G-connected digital pathology system in 2019.
DIAM is an approach for gauging an organization’s medical imaging delivery capabilities. To achieve Stage 7—External Image Exchange and Patient Engagement—healthcare providers must also have achieved all capabilities outlined in Stages 5 and 6.
In addition, the following must also have been adopted:
The majority of image-producing service areas are exchanging and/or sharing images and reports and/or clinical notes based on recognized standards with care organizations of all types, including local, regional, or national health information exchanges.
The application(s) used in image-producing service areas support multidisciplinary interactive collaboration.
Patients can make appointments, and access reports, images, and educational content specific to their individual situation online.
Patients are able to electronically upload, download, and share their images.
“This is the most comprehensive use of integrated digital pathology we have seen,” Andrew Pearce, HIMSS VP Analytics and Global Advisory Lead, told Healthcare IT News.
SMC’s Manager of IT Planning Seungho Lim told Healthcare IT News the medical center’s goal is to become “a global advanced intelligent hospital through digital health innovation.” The plan is to offer, he added, “super-gap digital services that prioritize non-contact communication and cutting-edge technology.”
For pathologists and clinical laboratory leaders, SMC’s commitment to 5G to move digital pathology data is compelling. And its recognition by HIMSS could inspire more healthcare organization to make changes in medical laboratory workflows. SMC, and perhaps other South Korean healthcare providers, will likely continue to draw attention for their healthcare IT achievements.
Representatives from almost 50 different clinical laboratories, professional associations, and societies came together this week to align efforts to expand the supply and retention of qualified laboratory scientists
FORT WORTH, TEXAS—Last week, representatives from a broad cross section of clinical laboratories, lab and pathology associations, public health laboratories, and lab regulatory bodies gathered specifically to identify ways to expand the number of skilled lab professionals.
COLA organized the “Workforce Action Alliance Summit,” a one-day gathering of key clinical laboratory stakeholders who share a common interest in developing initiatives that would directly increase the number of individuals choosing to pursue a career in laboratory medicine.
This is not a new problem, as the lack of trained laboratory scientists across all scientific disciplines has been acute for many years.
In a communication sent to invited participants, COLA’s CEO, Nancy Stratton, and COO, Kathy Nucifora, described the objective of the summit, writing:
“Clearly a call to collective action is required if we are to address the impending clinical laboratory workforce shortage. The past three years have demonstrated the significance of a resilient laboratory infrastructure, not only for the daily care of millions of Americans, but also during the global pandemic. The numerous efforts currently underway to resolve the shortage are unquestionably a component of the solution. Many, however, believe that these efforts are insufficient to close the gap between the projected number of new entrants into the profession, the rate at which those currently in the profession are departing, and the future demand for laboratory testing.”
Robert L. Michel, Editor-in-Chief of Dark Daily’s sister publication The Dark Report was a participant at COLA’S workforce summit. The Dark Report regularly profiles clinical laboratory organizations that have developed innovative and productive initiatives designed to increase the number of students choosing to train as medical technologists (MTs), clinical laboratory scientists (CLSs), medical laboratory technologists (MLTs) and other skilled lab positions.
In materials distributed at the summit, the ongoing gap between demand for skilled lab professionals and the supply was illustrated thusly:
“The US Department of Labor estimates 320,000 bachelors and associates degreed laboratory professionals are working in the United States. If each of those professionals worked a standard 40-year career, the natural annual attrition of 2.5% would require 8,000 new professionals to maintain their current numbers. This exceeds the current output of accredited educational programs by more than 1,000 annually.”
Case Studies of Success
Over the course of the day, participants at the summit heard about the successes of certain laboratory organizations designed to get more students into training programs, supported by the educational courses required for them to become certified in their chosen area of laboratory medicine. These case studies centered around several themes:
Obtaining funding specifically to establish an MT/CLS training program to increase the number of candidates in a region. One example involved ARUP Laboratories and its success at working with a local Congressional representative to get a $3 million federal grant funded as part of a larger legislative package.
The medical laboratory scientist (MLS) program at Saint Louis University (SLU) worked with Quest Diagnostics to launch an accelerated bachelor’s degree program. The 16-month program combines online academic courses with intensive hands-on learning and clinical experiences in Quest’s Lenexa, Kansas, laboratory. The first students in this accelerated degree program began their studies in the spring semester of 2023.
By rethinking the structure of its existing didactic and experiential learning structure, NorthShore University HealthSystem’s MLS program, located at Evanston Hospital north of Chicago, doubled its enrollment capacity.
During the afternoon, working groups addressed ways that lab organizations can collaborate to increase recruitment and retention of laboratory scientists across all disciplines of lab medicine. This input was synthesized into action planning for the three priorities that can lead to expanding the lab workforce.
By day’s end, several working groups were organized with specific next steps. COLA is taking the lead in managing this initiative and giving it momentum. All clinical laboratory professionals and pathologists are welcome to participate in the Workforce Action Alliance (WAA). Anyone wishing to learn more can contact COLA by clicking here, calling 800-981-9883, or by visiting https://education.cola.org/contact-us-page.
Understanding requirements of digital pathology workflow matters as regulatory and reimbursement elements align toward wider adoption beyond 2023. Upcoming Dark Daily webinar May 10 to cover infrastructure requirements
Nearly all pathology residents and fellows, as well as many histologists and other medical students, have been trained using digital images and, therefore, digital pathology tools. This resounds as a major and important development now working in tandem with recent coding decisions and regulatory recommendations that may combine to advance digital pathology to a significant tipping point.
As Dark Daily’s sister publication, The Dark Report, has described in great detail over the past several years, the trend toward digital pathology implementation started in the mid-2000s. Much has been learned through trial and error that may make the practical path forward clearer for those still on the sidelines.
Digital pathology infrastructure and information technology (IT) requirements are better known after years of research at academic centers throughout the United States—but only for those closest to the action. Two examples are University of Southern California (USC) on the West Coast and Memorial Sloan Kettering Cancer Center (MSKCC) on the East Coast.
During a free 60-minute educational webinar on May 10, W. Dean Wallace, MD, (far left) of University of Southern California (USC) and Orly Ardon, PhD, MBA, (immediate left) of Memorial Sloan Kettering Cancer Center (MSKCC) will explain digital pathology infrastructure, IT, and lessons learned through firsthand experiences. The webinar is sponsored by Hamamatsu, and continuing education credit is available for listening.(Photo copyrights: USC and MSKCC.)
Seven Advantages of Early Adoption of Whole Slide Imaging and Digital Pathology
Many pathologists know that academic centers throughout the U.S. have been the first to adopt and use digital pathology scanners and systems. Early work in what have become custom digital pathology ecosystems has enabled academic pathology groups to:
Learn how to implement, validate, and design workflows that include digital pathology systems and computational pathology.
Determine how physical environments need to change for slide scanners, achieving quality images, maximizing scanner utility, and expanding scanning capabilities in medium- and high-throughput laboratories.
Contract with pharmaceutical companies and drug developers to read digital images in support of drug research and clinical trials.
Understand how digital pathology applies for various use cases, including primary diagnosis, frozen section diagnosis, consultations, second opinions, and telepathology.
Successfully spread pathologist technical and professional support across multiple laboratory locations and remote customers.
Learn best practices for conducting tumor boards and peer reviews of pathology cases.
Validate and verify new hematoxylin and eosin (H&E) stains.
Hospital and Lab Leaders Have Questions About Digital Pathology Requirements
As a result of early adopter projects, digital pathology infrastructure and IT requirements are better understood and documented for a variety of use cases, according to W. Dean Wallace, MD, Professor of Pathology at the Keck School of Medicine of USC. Wallace specializes in pulmonary and renal pathology with a strong interest in informatics, as well as radiology and pathology correlation, and he warns of the danger of implementing an “incomplete digital pathology system.”
This webinar is for hospital and health system leaders, as well as independent pathology groups and reference lab executives, who want to know:
Key workflow aspects of the components needed in a digital pathology service.
Common limitations of commercial digital pathology products.
How to structure a digital pathology implementation team.
A goal-based approach to developing a business case for digital pathology implementation.
Wallace and Orly Ardon, PhD, MBA, Director of Digital Pathology Operations at MSKCC, will lead the call and take questions during the webinar’s live Q&A segment.
Questions About Digital Pathology Implementation
At MSKCC, teams have scanned and archived more than six million histology slides and are prospectively scanning all in-house H&E slides.
“There is a lot of interest out there for digital pathology implementation,” Ardon told Dark Daily, “not only the AI-machine learning opportunities that are enabled with digital slides, but how do we even start a basic digital pathology journey. Institutions and labs don’t realize how many factors they have to think about before they start scanning the first slide.”
“People have limited understanding of the complexities of the business case,” Wallace added. “Do you want to go with a full 100% deployment or a targeted deployment? Do you want to get digital pathology to support tumor boards? By introducing scanners into the tumor board workflow, you can actually cause more problems than you are solving if you are not careful.
“The other aspect of it is the actual technical deployments. You need to begin with careful analysis of functions or services to support,” Wallace said, adding the soft costs of digital pathology can take lab and pathology administrators by surprise.
Ardon and Wallace will present their insights and experiences during the webinar, which has been sponsored by Hamamatsu. Those interested can learn more and register at Dark Dailyhere. P.A.C.E. credit is available for this program through the American Society for Clinical Laboratory Science (ASCLS).
On the Horizon: Incentives and Further Alignment Toward Digital Pathology Adoption
Dark Daily’s new webinar is timely. Earlier this year, the Centers for Medicare and Medicaid Services (CMS) entered what has been called a “tryout” period to gather data about the use of new, digital-pathology-related Current Procedural Terminology (CPT) codes in clinical laboratories and anatomic pathology groups. (See coverage in The Dark Report.)
Some believe the efforts of CMS, clinical labs, and pathology groups will result in new reimbursable codes, reimbursement values, and other incentives for using digital pathology (starting sometime in 2024)—if analysis shows use of digital pathology is as widespread as numerous publications would seem to indicate.
The CPT coding development coincides with recent discussions within the federal Clinical Laboratory Improvement Advisory Committee (CLIAC) about sweeping recommendations to allow continued remote work once the COVID-19 Public Health Emergency ends on May 11 and recognize digital data as a vital component of diagnostic specimens. (See coverage in The Dark Report.)
CLIAC’s recommendations may translate into a running start for modernizing the Clinical Laboratory Improvement Amendments of 1988 (CLIA). CLIA as it is written currently is dated and needs to account for new and emerging technologies, such as digital pathology, medical laboratory industry sources have said for years. (See a recent Dark Report – Dark Daily webinar.)
These developments, as they further align with actions by the U.S. Food and Drug Administration (FDA), could unleash swells of interest in onboarding whole slide scanners and digital pathology tools. Remote workflows became a priority during the COVID-19 pandemic, and it appears they will continue for a period as the Public Health Emergency unwinds, according to the FDA.
Watch Digital Pathology Implementation Strategies
Most executives at hospitals and health systems, private pathology practices, and independent reference labs are on the sidelines watching how digital pathology in research and clinical practice is unfolding.
However, as the pathology field integrates data science and computational pathology, forward-looking hospital and lab leaders can expect greater momentum toward advanced technologies, such as digital pathology tools.
Register here to participate in the upcoming webinar, “Digital Pathology Implementation Strategies.”
—Liz Carey
This content was developed through independent research and interviews by The Dark Intelligence Group, with support from Hamamatsu Photonics K.K., a provider of whole slide imaging systems and related technology such as optical sensors, light sources, and complex instrument systems that use them. Hamamatsu did not participate in the article’s development. Learn more about Hamamatsu at https://nanozoomer.hamamatsu.com/us/en.html.
Executives and pathologists from many of the nation’s most prominent clinical laboratories are on their way to the Crescent City today to share best practices, hear case studies from innovative labs, and network
NEW ORLEANS—This afternoon, more than 900 lab CEOs, administrators, and pathologists will convene for the 28th Annual Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management conference. Three topics of great interest will center around adequate lab staffing, effective cost management, and developing new sources of lab testing revenue.
Important sessions will also address the explosion in next-generation sequencing and genetic testing, proposed FDA regulation of laboratory-developed tests (LDTs), and innovative ways that clinical laboratories and pathology groups can add value and be paid for that additional value.
All this is happening amidst important changes to healthcare and medicine in the United States. “Today, the US healthcare system is transforming itself at a steady pace,” explained Robert L. Michel, Editor-in-Chief of The Dark Report and Founder of the Executive War College. “Big multi-hospital health systems are merging with each other, and payers are slashing reimbursement for many medical lab tests, even as healthcare consumers want direct access to clinical laboratory tests and the full record of their lab test history.
“Each of these developments has major implications in how clinical laboratories serve their parent organizations, offer services directly to consumers, and negotiate with payers for fair reimbursement as in-network providers,” Michel added. “Attending the Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management equips lab leaders with the tools they’ll need to make smart decisions during these challenging times.”
Now in its 28th year, the Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management convenes April 25-26 in New Orleans. Executive War College extends to a third day with three full-day workshops: LEAN fundamentals for lab leaders, a genetic testing program track, and a digital pathology track. Learn more at www.ExecutiveWarCollege.com. (Photo copyright: The Dark Intelligence Group.)
Challenges and Opportunities for Clinical Laboratories
With major changes unfolding in the delivery and reimbursement of clinical services, clinical laboratory and pathology practice leaders need effective ways to respond to the evolving needs of physicians, patients, and payers. As The Dark Report has often covered, three overlapping areas are a source of tension and financial pressure for labs:
Day-to-day pressures to manage costs in the clinical laboratory or pathology practice.
The growing demand for genetic testing, accompanied by reimbursement challenges.
Evolving consumer expectations in how they receive medical care and interact with providers.
Addressing all three issues and much more, the 2023 Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management features more than 80 sessions with up to 125 lab managers, consultants, vendors, and in vitro diagnostic (IVD) experts as speakers and panelists.
Old-School Lab Rules Have Evolved into New-School Lab Rules
Tuesday’s keynote general sessions (to be reported exclusively in Wednesday’s Dark Daily ebriefing) will include four points of interest for clinical laboratory and pathology leaders who are managing change and pursuing new opportunities:
Positioning the lab to prosper by serving healthcare’s new consumers, new care models, new payment models, and more, with Michel at the podium.
How old-school lab rules have evolved into new-school lab rules and ways to transition the lab through today’s disrupters in healthcare and the clinical laboratory marketplace, with Stan Schofield, Managing Principal of the Compass Group.
Generating value by identifying risk signals in longitudinal lab data and opportunities in big data from payers, physicians, pharma, and bioresearch, with Brad Bostic, Chairman and CEO of hc1.
Wednesday’s keynote sessions (see exclusive insights in Friday’s Dark Daily ebriefing) explore:
Wednesday’s keynotes conclude with a panel discussion on delivering value to physicians, patients, and payers with lab testing services.
Clinical Labs, Payers, and Health Plans Swamped by Genetic Test Claims
Attendees of the 2023 Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management may notice a greater emphasis on whole genome sequencing and genetic testing this year.
As regular coverage and analysis in The Dark Report has pointed out, clinical laboratories, payers, and health plans face challenges with the explosion of genetic testing. Several Executive War College Master Classes will explore critical management issues of genetic and genomic testing, including laboratory benefit management programs, coverage decisions, payer relations, and best coding practices, as well as genetic test stewardship.
This year’s Executive War College also devotes a one-day intensive session on how community hospitals and local labs can set up and offer genetic tests and next-generation sequencing services. This third-day track features more than a dozen experts including:
During these sessions, attendees will be introduced to “dry labs” and “virtual CLIA labs.” These new terms differentiate the two organizations that process genetic data generated by “wet labs,” annotate it, and provide analysis and interpretation for referring physicians.
State of the Industry: Clinical Lab, Private Practice Pathology, Genetic Testing, IVD, and More
For lab consultants, executives, and directors interested in state-of-the-industry Q/A and discussions concerning commercial laboratories, private-practice pathology, and in vitro diagnostics companies, a range of breakout sessions, panels, and roundtables will cover:
Action steps to protect pathologists’ income and boost practice revenue.
Important developments in laboratory legal, regulatory, and compliance requirements.
New developments in clinical laboratory certification and accreditation, including the most common deficiencies and how to reach “assessment ready” status.
An update on the IVD industry and what’s working in today’s post-pandemic market for lab vendors and their customers.
Federal government updates on issues of concern to clinical laboratories, including PAMA, the VALID Act, and more.
Long-time attendees will notice the inclusion of “Diagnostics” into the Executive War College moniker. It’s an important addition, Michel explained for Dark Daily.
“In the recent past, ‘clinical laboratory’ and ‘anatomic pathology’ were terms that sufficiently described the profession of laboratory medicine,” he noted. “However, a subtle but significant change has occurred in recent years. The term ‘diagnostics’ has become a common description for medical testing, along with other diagnostic areas such as radiology and imaging.”
Key managers of medical laboratories, pathology groups, and in vitro diagnostics have much to gain from attending the Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management, now in its 28th year. Look for continued coverage through social media channels, at Dark Daily, and in The Dark Report.
Should this AI-driven technology prove viable in clinical settings, it could contribute to easing the shortage of qualitied phlebotomists for medical laboratories worldwide
Could phlebotomists one day be out of a job? If European medical technology company Vitestro has its way, that could someday become a reality in European hospitals and in clinical laboratories worldwide. Headquartered in the Netherlands, the company has raised EUR 12.7 million ($14,057,947.50 US) in Series A financing to bring to market “the world’s first autonomous blood drawing device,” BioWorld Med Tech reported.
According to Vitestro’s website, the “device combines AI-based, ultrasound-guided 3D reconstruction with robotic needle insertion, ensuring accurate and secure blood collection. The procedure is performed fully automatically, from tourniquet to bandage application.”
This is another example of how artificial intelligence companies are finding opportunities in staffing shortages the healthcare industry is experiencing globally. In this case, the novel technology could help address the lack of qualified phlebotomists. And clinical laboratories around the world could become the proving grounds for new AI-driven devices that end up replacing human healthcare workers.
“This financing round marks a new phase of growth for Vitestro which brings the company closer to its mission of improving the venipuncture procedure for hundreds of millions of patients per year,” said Vitestro CEO and co-founder Toon Overbeeke (above), in a press release. “We look forward to growing the business and transforming patient care with Sonder Capital, leveraging their expertise in successfully commercializing medical robotic technologies.” If proven viable, clinical laboratories around the world suffering from shortages of phlebotomists could benefit from AI-driven autonomous blood draw stations. (Photo copyright: LinkedIn.)
Next Evolution for Clinical Laboratories
According to the Centers for Disease Control and Prevention (CDC), there are 14 billion clinical laboratory tests ordered annually in the US and 70% of medical decisions depend on laboratory results. One of the more common clinical laboratory procedures—venous blood draws—is pivotal in clinical diagnostics, but a worldwide shortage of skilled phlebotomists is having an impact on this critical testing method.
With the announcement of its completion of a EUR 12.7-million Series A financing round to bring the “world’s first” autonomous blood draw device to market, Vitestro seems poised to impact both the shortage and the job prospects of existing phlebotomists. This financing round was led by San Carlos, California-based Sonder Capital and included investors with experience in the clinical laboratory and medical technology industries.
“Automating this ubiquitous procedure is the next evolution for clinical laboratories, allowing them to improve quality of care for patients while building a more sustainable operation,” stated Andy McGibbon, Managing Partner at Sonder Capital in a March press release.
According to Investopedia, Series A financing refers to “an investment in a privately-held start-up company after it has shown progress in building its business model and demonstrates the potential to grow and generate revenue. It often refers to the first round of venture money a firm raises after seed and angel investors.”
Vitestro says it will utilize the capital from this financing round to accelerate production development, prepare market authorization in the European Union, and initiate production.
Vitestro’s autonomous blood drawing device prototype (above) has been tested on more than 1,000 volunteers and patients. Vitestro plans to continue its studies on the device this year and anticipates entering the European market with the device sometime in 2024. Development of this technology is something that phlebotomists and clinical laboratory managers will want to track. (Photo copyright: Vitestro.)
Coming to a Clinical Laboratory Near You
“Medical robotics will make optimal outcomes available to everyone. I strongly believe Vitestro will set the world standard in autonomous blood drawing,” said Fred Moll, MD, Managing Partner of Sonder Capital in the press release. Moll, who has been heralded as the “father of robotic surgery,” was also appointed as a non-executive board member of Vitestro. Moll co-founded Intuitive Surgical, Inc., Hansen Medical, Restoration Robotics, and Auris Health (acquired by Ethicon, a Johnson and Johnson company).
On April 12, Vitestro announced that leading Dutch clinical laboratory OLVG Lab will be the first healthcare provider to begin using their blood-drawing device. A number of hospitals, clinical laboratories, and blood drawing departments are preparing to use the device and OLVG Lab plans to have the system fully operational by late next year, according to a press release. OLVG lab provides laboratory services to hospitals, clinics, and care providers in the greater Amsterdam area.
“Robotization has become an important topic in diagnostics. Vitestro’s technology will improve the standardization and optimization of the sampling procedure. And it helps solve staff shortages in our blood drawing department,” said Anja Leyte, director of OLVG Lab, in the press release. “But more importantly, the patients are also very positive. Our staff are really enthusiastic as well and can’t wait to start using this breakthrough technology in our healthcare.”
Vitestro’s device is still in the testing phase but could prove to be very beneficial to clinical laboratories and help alleviate the shortage of trained phlebotomists. An automated blood draw machine might also improve the consistency of the blood draw experience for both patients and healthcare professionals.
New lawsuit contends that the promissory notes Holmes allegedly issued on behalf of defunct clinical laboratory company Theranos are now overdue
Just weeks before Elizabeth Holmes is scheduled to begin her prison term for conviction in the federal investor fraud case related to now-defunct clinical laboratory company Theranos, the long-running legal saga of the former company founder/CEO continues to bring new twists.
This time, news emerged via a lawsuit that Holmes allegedly owes $25 million to Theranos creditors. CNBC obtained a copy of the suit and detailed its contents in a March 17 case update.
Theranos ABC, a company set up on behalf of the creditors, alleged in the lawsuit that “Holmes has not made any payments on account of any of the promissory notes,” CNBC reported. The suit was filed in Superior Court of California Count of Santa Clara.
Elizabeth Holmes (above), founder and former CEO of clinical laboratory company Theranos with husband Billy Evans of Evans Hotels. Holmes lives with Evans and the couple’s two children in the area near San Jose, California. Holmes gave birth to her second baby in February, according to People. In January, Holmes was convicted on three counts of wire fraud and one count of conspiracy. In addition to restitution, Holmes has been ordered to spend up to 11 years and three months in prison. (Photo copyright: Axios.)
Holmes Allegedly Issued Three Promissory Notes
The complaint stated that Holmes allegedly executed the following three promissory notes while she was still CEO at Theranos:
August 2011 in the amount of $9,159,333.65.
December 2011 in the amount of $7,578,575.52.
December 2013 in the amount of $9,129,991.10.
A promissory note is a written promise to pay a party a certain sum of money with a specified due date for the repayment of principal and interest.
“Theranos ABC has demanded payment of promissory note one and promissory note two from Holmes, but Holmes has failed to pay any amounts on account of promissory note,” according to the lawsuit, CNBC reported. The first two notes are overdue, and the third note is due in December.
Elizabeth Holmes’ Prison Term Could Be Delayed
News of the lawsuit, which was filed in December 2022, came to light at a court hearing on March 17. During that hearing, Judge Edward Davila heard arguments about whether Holmes should remain free pending her appeal. She is otherwise scheduled to report to prison on April 27 to begin her sentence after being convicted in January 2022 of defrauding Theranos investors.
Davila, who oversaw Holmes’ criminal case, is expected to issue a decision about her freedom during the appeal early this month. The judge is also weighing options for Holmes to pay restitution to her victims.
Prosecutors have asked that she pay back $878 million to Theranos’ former investors and other victims, according to court records reviewed by Dark Daily. The government has argued in court papers that Holmes continues to live a wealthy lifestyle despite her claiming she has no meaningful assets since the collapse of Theranos and her trial.
“Defendant has lived on an estate for over a year where, based upon the monthly cash flow statement defendant provided to the US Probation Office, monthly expenses exceed $13,000 per month,” according to court documents filed by prosecutors ahead of the March 17 hearing. “Defendant asserted that her partner pays the monthly bills rather than her but also listed her significant other’s salary as ‘$0.’”
Holmes’ attorneys argued that the government cannot take an “all or nothing” approach to restitution, and that payments should only be made to investors who testified during the trial, the Associated Press reported.
For Victims, Full Restitution Can Be Rare
The federal Department of Justice (DOJ) acknowledges in its overview of restitution that victims often never collect what they are owed by guilty parties.
“The chance of full recovery is very low,” the DOJ notes. “Many defendants will not have sufficient assets to repay their victims. Many defendants owe very large amounts of restitution to a large number of victims. In federal cases, restitution in the hundreds of thousands or millions of dollars is not unusual. While defendants may make partial payments toward the full restitution owed, it is rare that defendants are able to fully pay the entire restitution amount owed.”
Clinical laboratory professionals will note the irony that one of the biggest convicted fraudsters in US history is now largely attempting to avoid punishments associated with her crimes. If Judge Davila agrees to let Holmes remain free pending her appeal, she could stay out of prison for years and perhaps not have to pay restitution for that length of time as well.
The coming weeks will prove to be pivotal in the final outcome of the case.
