Outcome Health to Pay $70M to End Fraud Probe

Among the allegations, former executives at Outcome lied to outside auditors about revenue for 2015 and 2016 in order to secure debt financing.

Outcome Health, the Chicago-based healthcare digital advertiser, will pay $70 million to resolve allegations that it lied to drug companies and investors about the reach of its advertising inventory, the Department of Justice said.

The privately held company – which provides physician waiting rooms with video screens featuring health tips and drug ads – admitted that from 2012 to 2017 former executives and employees perpetrated a scheme that under-delivered on its advertising campaigns, but continued to bill its clients, mostly drug makers, as if it had delivered in full.

To conceal the fraud, Outcome employees falsified affidavits and proofs of performance to make it appear the company was delivering advertising content to the number of screens in its clients' contracts, DOJ said.  

The company also inflated patient engagement metrics with Outcome devices, and altered studies given to clients to make it appear that the campaigns were more effective than they were.

To cover their tracks, the former executives at Outcome lied to outside auditors about revenue for 2015 and 2016. The auditor signed off on the numbers because the schemers fabricated data to conceal the fraud. 

In the resolution agreement, Outcome admitted that former executives used the bogus revenue figures to raise $110 million in debt financing in April 2016, $375 million in debt financing in December 2016, and $487.5 million in equity financing in early 2017.

Outcome Health co-founders Rishi Shah and Shradha resigned in 2018 after the company reached a fraud settlement with investors.

"Outcome Health deceived its lenders and investors, and overbilled its clients, by fraudulently misrepresenting both the quality and quantity of its advertising services and concealing those misrepresentations from auditors," Principal Deputy Assistant Attorney General John P. Cronan said in a media release.  

As described in the agreement, after reviewing the Company's cooperation and remediation efforts, among other considerations, the DOJ determined not to prosecute Outcome Health for the past misconduct of the Company's founders and select former employees, all of whom are no longer affiliated with the Company.

Outcome CEO Matt McNally said the company is "thrilled to resolve this matter, as it enables us to move forward and focus on our mission to be the indispensable partner to patients, providers and industry partners during moments of care."

For the past two years, Outcome has overhauled its compliance and campaign-reporting policies, McNally said.

"These actions included engaging third-party auditors to ensure reporting accuracy, investing in partnerships with organizations like BPA Worldwide to validate key performance indicators, overhauling internal controls to improve the reliability of reporting, and forming an all-new leadership team, myself included," he said.

Outcome has already repaid drug makers about $65.5 million using cash payments and in-kind services, and has set aside $4.5 million to compensate any other claimants.

The resolution doesn't require Outcome to compensate scammed lenders and investors   because many of them now own the company.