My college did this. They don't have the strictest admission standards, but they're ranked well in STEM because of this. What's funny about people criticizing standardized tests in college admissions is, at least in a big school, 80% of your Calc I grade is effectively three standardized tests, so if someone's just "a bad test taker," throwing them into the deep end with 1200 other freshman engineers isn't doing them any favors.
My university, another state school, did the same sort of thing. They have something like a 50% graduation rate, and employ the same sort of washout techniques in science classes. My freshman CS classes dropped to less than a quarter of their initial size by the end of the first semester. The math department is very selective about transferring credits too, to stop people from taking an easier Calc class at a community college.
