Outcome Health settles investor lawsuit as company founders step down

Outcome Health
Outcome's founders, equity investors and lenders are reinvesting $159 million into the company as part of a settlement with investors. (Outcome Health)

Outcome Health has reached a settlement with the company’s investors months after a public legal battle in which the company was accused of fraud.

As part of the settlement, the company’s founders, Rishi Shah and Shradha Agarwal are stepping down from their respective positions as CEO and president. The pair will transition to chairman and vice chair of the board of directors as the company searches for a new CEO, according to an announcement issued by Outcome Health on Friday.

Agarwal and Shah will also join equity investors and lenders in recommitting $159 million to the company, $77 million of which will be used to pay down debt.

RELATED: 3 medical associations cut ties with Outcome Health, as others reconsider their partnerships

“This resolution is based on two principles: a shared belief in the performance of the company’s business model and conviction in its mission and impact as it pursues the path forward,” Shah wrote in an update to customers posted to the company’s website. “These commitments provide increased capital to further strengthen and scale our technology platform, automated processes and overall customer operations.”

Outcome Health Chief Operating Officer Nandini Ramani, will lead the company during its search for a new CEO. Under Ramani’s leadership, Shah said the company has been “shifting to technological solutions that demonstrate the efficacy of our platform with transparent and measurable campaign delivery.” Moving forward, all new campaigns will be verified through an independent third-party, he added.

RELATED: Investors sue Outcome Health for fraud, breach of contract months after $487M investment

The Chicago-based patient education technology company grabbed attention from investors with a business model that involved installing free flat screen TVs and tablets in physician offices and generated revenue by selling targeted ads by pharmaceutical companies.

But the company quickly became a cautionary tale. Outcome, came under fire in October—months after investors sunk nearly $487.5 million—when The Wall Street Journal reported certain employees at the company were misleading advertisers with inflated data. Things quickly escalated from there, and the company soon faced a lawsuit from investors, including Goldman Sachs and Alphabet’s growth equity fund CapitalG.

In its suit against Outcome, investors said the company was facing inquiries from the Department of Justice and the Securities and Exchange Commission. The accusations led three medical associations to cut ties with Outcome Health and several others to reconsider their relationship with the company.

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