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Chicago startup darling Outcome Health faces allegations of falsifying data

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Outcome Health, a hot Chicago advertising startup that closed a $500 million round in May, is now facing allegations in a Wall Street Journal story that it provided misleading data to advertisers.

A startup that essentially digitizes educational health information, Outcome Health charges medical device companies, pharmaceutical companies and other life science businesses to display advertising on the Outcome Health tablets and devices, which are installed in doctor’s offices and waiting rooms. Outcome Health’s latest round reportedly gave the company a $5.5 billion valuation — making it the most valuable startup in Chicago, and one of the most valuable companies outside of the coasts.

According to the Wall Street Journal’s Rolfe Winkler, some Outcome Health staffers “provided inflated data to measure how well ads performed, created documents that inaccurately verified that ads ran on certain doctors’ screens and manipulated third-party analyses showing the effectiveness of the ads, according to some of these people and documents.”

The charges are notable because Outcome Health charges clients based upon how many screens the client’s ad is displayed upon, pulled from a desired list of practitioner offices given to Outcome Health by the client. And according to the Journal’s sources, Outcome Health sometimes charged clients double the price they should have been charged.

Lanny Davis, a lawyer representing Outcome Health, told the Wall Street Journal that the company had placed three employees on paid leave, most notably Ashik Desai, currently listed on LinkedIn as Outcome Health’s Chief Growth Officer.

According to an internal message obtained by the Journal, an unnamed Outcome Health employee asked Desai to “approve a made-up number of respondents to a survey for client Tandem Diabetes Care.” Desai reportedly replied “Yea I’d inflate it a bit more :),”

In another incident, a representative for the company Johnson & Johnson reportedly “complained to Outcome after its field representatives noticed there were no screens in some offices where J&J was being charged to run ads for an arthritis drug, according to documents and people familiar with the dispute.” Desai and Rishi Shah, Outcome Health’s co-founder and CEO reportedly apologized and then altered Johnson & Johnson’s bill to accurately reflect the number of screens its ads ran on.

In a statement provided to VentureBeat, a company spokesman said that Outcome Health “strongly denies having a practice of misreporting campaign information to customers.” The spokesman also noted that  “incidents that the Wall Street Journal identified occurred between 2014 and 2016.”

This summer, Outcome Health hired BPA Worldwide, a firm that vets audience claims, to conduct an outside audit. The Journal notes that the “firm verified the size of Outcome’s network and delivery of ads for one ad campaign.” And Outcome Health’s spokesperson said that “BPA reviewed our operations and certified our compliance with BPA’s rules for audience qualification and with the Internet Advertising Bureau’s guidelines for impression measurement.”

Founded in 2006 by Shah and Shradha Agarwal, Outcome Health has become a darling of the Chicago tech community — particularly after its latest round, which Goldman Sachs and Alphabet Inc. participated in, among other investors.  The company’s $500 million round was the largest in Chicago since a $950 million round by Groupon in 2011. Mayor Rahm Emanuel held a press conference last month announcing that Outcome Health would be adding 2,000 jobs over the next five years, and praised the startup as a “testament to Chicago and the culture of this city.”

After the Wall Street Journal story was published, Outcome Health published an open letter to clients from CEO Rishi Shah on its website. Shah writes that the company has recently implemented several steps to “elevate the standards of reporting and transparency,” including giving customers the option of receiving a third party audit from BPA on every campaign delivered, and hiring Dan Webb, the executive chairman of Chicago law firm Winston & Strawn to ” review any concerns that have been raised about the past conduct of certain employees.”

 

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