Some employees at Outcome Health, which provides advertising for pharmaceutical companies in screens within doctors’ offices, allegedly misled advertisers by charging them for ad placements on more video screens than the company had installed, according to a report by The Wall Street Journal.
The startup installs screens in doctors’ offices free of charge and then runs advertisements like those for pharmaceutical companies, charging for the ad placement. According to the report, the company seems to have inflated to advertisers the number of screens that ads ran on, allowing it to generate additional revenue. If so, this would be a huge misstep in terms of internal governance for the company, especially as advertisers (like pharmaceutical companies) look for new channels to promote their products.
The Chicago-based startup said it raised $500 million at a $5 billion pre-money valuation from Goldman Sachs and Alphabet’s investment arm CapitalG in May this year. The company started in 2006 but had not taken additional capital prior to this financing round. The screens in doctors’ offices also run content beyond advertising. Benchmark Capital partner Bill Gurley poured heavy praise on the company and its CEO, Rishi Shah, around the time of the financing round.
Outcome Health certainly isn’t the only startup in the past few years we’ve heard have major problems internally. Zenefits skirted regulatory boundaries, eventually leading to the ouster of former CEO and founder Parker Conrad and company “proactively re-valued the Series C”. There was also the massive Theranos fiasco that another Wall Street Journal report exposed, which led to heaps of lawsuits hitting the company. The Journal story on Outcome Health says it “found nothing to demonstrate top executives’ involvement in the alleged misleading of advertisers.”
Update: Outcome Health has responded with a comment, and holy heck is it a doozy. We’re still parsing through it, but in the mean-time here’s the full response below:
Outcome Health exists to activate the best health outcome possible for every person in the
world. We are proud of the company we have built, helping doctors and patients make more informed decisions while having high rates of meeting our clients’ performance goals.
We have rigorous policies and practices that deliver on contractual terms with
transparency to our customers when campaigns experience issues.
When we have a shortfall in media delivery, we strive to identify the issue as quickly as
possible and address it with our client through “make-goods” or “bonus media” provisions,
such as extending a campaign or increasing the number of doctors’ offices we reach for that
We would also note that incidents that the Wall Street Journal identified occurred between
2014 and 2016. The company also strongly denies having a practice of misreporting
campaign information to customers. The company’s policy has always been to accurately
report information to every customer on every program. If there was any misconduct by
any employee, we will deal with it very strongly and take appropriate action.
We have taken the following steps to ensure our clients’ success:
(1) We retained McKinsey to recommend improvements and adopted their recommendations, including increasing reporting and transparency to our clients;
(2) We have adopted the most rigorous campaign audit standards in the industry to
verify contract delivery. Moreover, every client now has the option of having BPA Worldwide verify their campaign’s delivery as a term in its contract. BPA is a non- profit that is a leading, independent auditor of media audience claims and a certifier of compliance with established standards;
(3) BPA has 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. This review entailed certifying Outcome Health in the following 15 areas: Platform Architecture, Device Installation, Inventory Management, Advertising Delivery Process, Impression Measurement, Click Measurement, Data Filtering Procedures, Invalid Traffic Filtering, Reporting, System Monitoring, Hardware Controls, Software Development, Access Control, Documentation Standards and Disclosures and Definitions;
(4) We are increasing transparency on all current programs through enhanced
platform-level reporting; and
(5) We retained Winston & Strawn Executive Chairman Dan Webb in the past month to
review allegations about certain employees’ conduct that have been raised
In addition to the foregoing, we want to make the following clear:
• List-matching is a process to identify the offices and devices in which a campaign
will run during the campaign’s proposed period. The client provides us a list of
practitioner offices the client wants to reach and we either match our network
practitioners to that list or, upon agreement with the client, include offices into which the network may grow. We have implemented policies and practices for list-
matching to ensure our clients fully understand our current network and the doctors’ offices targeted for growth;
• ROI, or “return on investment,” is a calculation that measures the impact campaigns
have on the sales of our clients’ products. Industry-leading research firm
QuintilesIMS (or another third-party firm agreed upon with our client)
independently calculates ROIs using data it independently obtains. We do not
calculate the ROI as we don’t have the data for the calculation. The research
methodologies used by IMS to measure our ROI have been industry-standard for
decades and are used by pharmaceutical companies to measure the effectiveness of
their own sales forces;
• Outcome Health uses third-party vendors to conduct surveys when clients request
that the surveys be performed by field interviews of patients. In those instances, we
collaborate with our clients and the third-party research company to finalize the
methodology and survey questions to ensure all study objectives will be met. The
research vendor performs the field work, compiles a report, and sends the report to
Outcome Health upon completion. Often, the third-party research firm delivers the
report directly to the client. Our policy has always been to accurately report survey
results to clients.
Update #2: A Zenefits spokesperson reached out to clarify that the company “proactively re-valued the Series C” as part of the ongoing Zenefits saga.