The U.S. Centers for Medicare and Medicaid Services (CMS) is the country's chief clinical labs regulator. A CMS investigation of blood test start-up Theranos Inc.'s Newark California laboratory revealed serious deficiencies. If Theranos fails to address the problems, it can be suspended from the Medicare program.

According to an investigative piece by The Wall Street Journal (WSJ), reports of the CMS investigation will soon be released to the public. Brooke Buchanan, the spokeswoman from Theranos, said they do not have the reports from last year's CMS audit, which is regularly scheduled.

"[Theranos] has continued its ongoing work to build best-in-class systems and engage in partnership with its regulators," added Buchanan who said the company's medical provider referrals and customer volume have been "record-breaking."

The WSJ wrote, according to reliable sources, the problems CMS found were more serious than the ones they documented following its December 2013 inspection of the same lab. In the earlier CMS audit, health regulators found violations that, according to Theranos, were addressed quickly.

In October 2015, FDA said that the proprietary nanotainer was an "uncleared medical device." While Theranos waits for the Food and Drug Administration's (FDA) approval for the widespread use of its nanotainers, the controversial blood start-up has ceased its collection of tiny blood samples from patients, except for one test that detects herpes using another proprietary device called Edison. Investigations revealed that the company had been using conventional machines to conduct the over 200 tests offered to patients.

The WSJ wrote that, according to reliable sources, Theranos is experiencing losses on some of the tests it outsources to outside labs. While the company declined to comment on the financial matters and volume of the outsourced blood tests, it did say that it works with reference labs every now and then. Theranos stressed that it's one of the lab industry's common practices.

Former Theranos employees revealed that the company's Newark facility is home to its novel Edison machines and some of the traditional devices purchased from other companies such as AG and Siemens. The same sources said that during the 2013 CMS audit, the federal inspectors didn't see the Edison machines.

Theranos' Arizona lab also revealed several violations during the CMS audit in early 2015 but they were less severe compared to the findings about to hit the public. The Arizona lab violations were also resolved by the company.

The recent hurdle hurting Theranos' reputable puts its deal with Walgreens Boots Alliance Inc. in serious jeopardy. In the past weeks, the retail giant has been deliberating the closure of its Theranos wellness centers. The results of the latest CMS audit could potentially lead Walgreens to rethink its partnership with Theranos.

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