TTA’s Mid-Winter Update: CVS board boots Bertolini , VA’s exec suite revolves again, a clean look at Digital Health 2019 investing, Outcome Health exec settles, NHS snoozes, more!

 

 

February is here, can Spring be far away? It might be an early one for Mark Bertolini, booted from the board of the company he worked so hard to put together. Ashik Desai of Outcome Health may be looking at a Club Fed ‘vacation’. And James Byrne of the VA got an early furlough from Washington for that Florida holiday. So we can take a Mid-Winter’s nap courtesy of NHS, dream of digital health investments for 2020, and won’t buy into a company paying a $1 million monthly rent.

But do wake up in time for DHACA Day on 18 March! A good reason to be in London….

Considering 2019’s digital health investment picture: leveling off may be a Good Thing (Less froth, more quality)
Outcome Health’s Desai reaches settlement with DOJ, SEC (Another cautionary tale of Young Entrepreneurs Gone Wrong–somewhat like Theranos)
Comings and goings, wins and losses: VA’s revolving door spins again, NHS sleep pods for staff, Aetna’s Bertolini booted, Stanford Med takes over Theranos office

Practice Fusion costs Allscripts another $145 million–and leads a closer look at the boundaries between ethics and revenue. AR contact lenses on the way? Outcome Health’s small fish plead guilty. And in the UK, CQC’s recommendations and DHACA Day in March.

Mojo Vision’s really smart vision correcting/AR contact lenses (A bit of a moonshot)
A Practice Fusion coda: an insider’s perspective on the pressure to ethically breach an ‘objective’ service for revenue (How far is too far?)
Allscripts’ $145 million settlement with DOJ on Practice Fusion’s ‘kickbacks’ on opioid prescribing, other charges (Why PF was so cheap)
Outcome Health analysts plead guilty, cooperate with Federal prosecutors (Trap the small fish…)
Digital triage in health service – CQC’s initial recommendations (Moving towards regulatory clarification)
Calling all digital health entrepreneurs: DHACA Day on 18th March is for you! (NHSX, AI, and more)

Acquisitions and funding raises lead off with Teladoc and InTouch Health, DrChrono, and CareBridge. Where are the hottest startups?–not on either coast. But Proteus continues on the Road to No-teous. Femtech’s hot but unvalidated. And events from Dallas to Dubrovnik!

News roundup: Proteus dissolves with Otsuka, EHRs add 16 min. per patient, DrChrono mobile EHR raises $20M, CareBridge LTSS launches, ‘flyover healthtech’ soars
Femtech’s huge potential global healthcare market–but needs to connect with payers and employers (That Old Validation Again)
Consolidation crunch time in telehealth: Teladoc acquires InTouch Health for $600 million (Enterprise telehealth is the charm)
European Patient Experience and Innovation Congress (EPIC 2020) invites world health tech to Croatia (And beautiful Dubrovnik)
Texas Healthcare Challenge WISH-es on women in February hackathon (Dallas TX) (Health Wildcatters’ latest)

To kick off the New Year, we take a Gimlety view of CES and the state of health tech innovation, Babylon Health’s diagnostics, Germany’s health ID system, and the cratering value of many HIT companies.

News roundup for the New Year: NHS £40m diet on login times, Germany’s ‘cheesy’ health ID security, Livongo and Higi partner, MTBC picks up CareCloud (For a knockdown price)
CES roundup: what happened to the excitement around ‘innovation’, robots, VR, and voice assistants? (A Gimlet Eye view of CES)
Babylon Health criticized by Manchester CCG, cardiac activists in UK, Canada (Scaling and AI problems lead to more)
The CES circus opens its largest tent yet in health tech, AI, 5G, and more (Step right up…)

Our windup for 2019: the ACA mandate was found to be unconstitutional, Babylon Health’s entering the US market in January, Appello acquires Medvivo Careline. Will Outcome Health’s execs dodge Club Fed? And calendar DHACA/HTF’s pitch event on 5 February.

The last news roundup for 2019: ACA mandate unconstitutional, more $ for health research, PartnersHealthcare rebrands, Hackensack Meridian pays ransom, breaches>heart attack deaths, telepsychiatry merger, more (Bidding farewell to ’19, and a happy, healthy New Year to our Readers)
Babylon Health to enter US market with two large strategic partners: report (What $550 million will do)
Calling all pitchers! Join us at Baker Botts on 5th February for a great evening (DHACA/HTF London pitch event)
Appello acquires Medvivo Careline telecare in second major move this year (UK)
Outcome Health founders Shah, Agarwal plead not guilty in Federal court
(Dodging the Club Fed Outcome will take years)

Barely two weeks to Christmas, but a blue one for Proteus Digital Health employees and six former Outcome Health execs. HHS leadership mixes it up in public, malware bites Hackensack, but it’s lovely in Leeds–and if you have a new job.

News roundup: Proteus may be no-teous, DOJ leads on Google-Fitbit, HHS’ mud fight, Leeds leading in health tech, malware miseries, comings and goings (Proteus runs out of road for 300, DOJ looking at Fitbit acquisition, HHS execs no lika each other, malware 2020, and it’s Leeds leading)
“There were practices going on there that were wrong”: Outcome Health’s Desai pleads guilty, cooperates with DOJ. (One pleads guilty, three not guilty, with the major players pleading on Monday)


Have a job to fill? Seeking a position? Free listings available to match our Readers with the right opportunities. Email Editor Donna.


Read Telehealth and Telecare Aware: http://telecareaware.com/  @telecareaware

Follow our pages on LinkedIn and on Facebook

We thank our present and past advertisers and supporters: Tynetec, Eldercare, UK Telehealthcare, NYeC, PCHAlliance, ATA, The King’s Fund, DHACA, HIMSS, Health 2.0 NYC, MedStartr, Parks Associates, and HealthIMPACT.

Reach international leaders in health tech by advertising your company or event/conference in TTA–contact Donna for more information on how we help and who we reach. See our advert information here. 


Telehealth & Telecare Aware: covering the news on latest developments in telecare, telehealth, telemedicine and health tech, worldwide–thoughtfully and from the view of fellow professionals

Thanks for asking for update emails. Please tell your colleagues about this news service and, if you have relevant information to share with the rest of the world, please let me know.

Donna Cusano, Editor In Chief
donna.cusano@telecareaware.com

Outcome Health analysts plead guilty, cooperate with Federal prosecutors

Two financial analysts who worked at Outcome Health and reported to former EVP of business operations/chief growth officer Ashik Desai, changed their ‘not guilty’ pleas to ‘guilty’ earlier this month. Kathryn Choi and Oliver Han were charged with wire fraud by Federal prosecutors. As part of their guilty plea, they will cooperate with prosecutors, as did their former boss Mr. Desai.

As reported in our earlier articles, Ms. Choi and Mr. Han are alleged to have created statements to deceive company auditors and providing advertisers with false patient engagement metrics on Outcome Health’s tablets. Both were hired in 2014 and placed on leave in late 2017. While the charges they face carry a maximum penalty of five years, their cooperation may lead to far lighter sentences.

Their change of plea was rather predictable, given that two fairly young and junior staffers faced Federal charges in a classic squeeze play to obtain further information on the big fish, former Chief Executive Rishi Shah, former President Shradha Agarwal, and former executive Brad Purdy (COO/CFO), who face real prison time and large financial penalties. All three have pleaded not guilty.

Outcome Health’s principals are charged with 26 criminal charges of fraud in their funding raises of over $1 bn from 2011 to 2017. Advertisers were defrauded for ads which never ran in medical audiences and third-party studies were manipulated to enhance their results. The indictment details deception of their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery of actual advertising in doctors’ offices. 

Chicago Tribune, Crain’s Chicago BusinessEarlier TTA articles: 3 Dec, 12 Dec, 17 Dec

“There were practices going on there that were wrong”: Outcome Health’s Desai pleads guilty, cooperates with DOJ.

Perhaps the smartest move, under really, truly bad circumstances. Ashik Desai, the former executive vice president of business operations/chief growth officer of point-of-care health information/advertising company Outcome Health, ‘copped a plea’ this past Monday to felony wire fraud charges. According to the Chicago Tribune, Assistant US Attorney Matthew Madden told Judge Thomas M. Durkin of the Northern District of Illinois Federal Court in Chicago that Mr. Desai is cooperating with the investigation. “When I was at Outcome Health, there were practices going on there that were wrong,” Mr. Desai said, understatedly, during his court appearance Monday. “I participated in those practices that ended up defrauding Outcome’s customers.”

According to the article and other sources (WTTW), Mr. Desai is only 26; he started at Outcome as an intern when it was still Context Media and departed in 2017. With continued cooperation, the prosecution is recommending only 10 years in prison, half of what a conviction might bring at the statutory maximum of 20 years. He was released on bond and surrendered his passport.

The multiple and most serious charges in the indictment are for the two founders, Rishi Shah and Shradha Agarwal, both of Chicago, and Brad Purdy, their former COO and CFO, all in their early 30s. These are criminal charges of fraud relating to their capital raises of about $1 bn during 2011 into 2017, deceiving their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery performance.

On Monday 9 December, Mr. Purdy pleaded not guilty to six counts each of mail fraud and wire fraud, two counts of bank fraud and one count of making false statements to a financial institution. His counsel, not unexpectedly but amusingly for those of us who are experienced in the corporate pecking order and what exactly a CFO is responsible for, stated: “Ashik Desai and several of his underlings committed a massive fraud. The evidence will show Brad Purdy was not part of that fraud,” he said. “Evidence is going to show Ashik Desai repeatedly lied to Brad and others to conceal his fraud from people like Brad.” Mr. Purdy also was released on bond and surrendered his passport.

Two of those underlings, Kathryn Choi and Oliver Han, pleaded not guilty on Thursday 5 December to their respective charges of wire fraud. They face five years maximum if convicted. In this Editor’s opinion, they were indicted to bring forth additional information to buttress the major charges on Mr. Desai and the three top executives. As ‘small fry’ with at most a little profit sharing, they are sideshows–easy to pressure. They may truly spill the beans if they and their counsel sense that things are going badly–if they have any more beans to spill. 

Mr. Shah and Ms. Agarwal are scheduled to appear in court next Monday, 16 December. They have previously stated that they will plead not guilty (FiercePharma). Flight risk is undoubtedly a concern for the prosecution regarding Ms. Agarwal. According to this Refinery29  interview from 2017, Ms. Agarwal is an Indian citizen and, while a long-time legal resident, not a naturalized American. Mr. Shah was born in the US. This cautionary Tale of the Unicorn, told in the Chicago Way, warns us all to be careful of what we see, are asked to do, sign on to–and sign off on.

SEC, DOJ charges Outcome Health founders Shah and Agarwal, others, with $487 million fraud, 26 counts of indictment (updated)

All the points of information here. While we here in the US were enjoying our Thanksgiving feasts of turkey, steak, lobster, and lasagna, Outcome Health founders former Chief Executive Rishi Shah, former President Shradha Agarwal, and former executives Brad Purdy (COO/CFO), and Executive VP Ashik Desai, were being served a vastly different dish on 25 November. Underreported in the run-up to the holiday were two major legal actions against these individuals:

  • SEC charges of $487 million in investor fraud by “misrepresent(ing) the company’s business successes while raising hundreds of millions of dollars from unsuspecting investors”, billing clients (primarily pharmaceutical companies) for ads that never ran in medical offices, and manipulating third-party studies to make the company’s ad delivery look more effective than it actually was to create the impression of meteoric growth. The falsification trail was such that even they had trouble matching up their claims versus actual in their ‘selling of futures’.
  • 26 counts from a Department of Justice grand jury indictment on criminal charges of fraud relating to their capital raises of about $1 bn during 2011 into 2017 and their business practices. The indictment alleges deception of their investors, lenders, and their own auditors for profit and misrepresenting to advertisers their delivery of actual advertising in doctors’ offices which they may or may not have had, in extreme and additional detail to the SEC complaint. Arraignments for the defendants started on Tuesday 3 Dec.

Two young analysts, Kathryn Choi and Oliver Han, reported to Mr. Desai and are being charged with wire fraud. They are alleged to have created statements to deceive company auditors and providing advertisers with false patient engagement metrics on Outcome Health’s tablets. Both were hired in 2014 and placed on leave in late 2017. This action is highly unusual in reaching down to this level and naming two young subordinates.

One-time unicorn Outcome Health is, of course, still in business, selling advertising and educational materials at point-of-care, having settled with the SEC in October for $70 million in advertiser make-goods [TTA 31 Oct]. It also restructured/recapitalized in May by selling a majority stake to private equity firm Littlejohn & Co. In coming down to earth, the posturing of the executives should be less than two years ago, when Outcome was going to build its own Chicago office building–but this early October article from FiercePharma hardly moderates the healthcare change-agent hype for what is really POC advertising to inform and mostly distract patients who wait…and wait.

Additional information:

In this Editor’s view, once both SEC and DOJ are double-teamed on an indictment, avoiding Club Fed will be extremely difficult for the four main executives. (One assumes their US passports have been confiscated.) There is a huge amount of financial fraud leading to losses by some powerful companies. Even when losses are small, the Feds get their man most of the time. This Editor had a view of this at a distance, as the CEO of a company where she formerly worked was convicted of financial fraud in an enterprise formed after that company. He and his accomplice are serving five years in a Federal prison. Not even Elizabeth Holmes is facing the full fury of both Federal agencies, and she’s facing only nine counts in her indictment. 

Another unicorn loses its horn–Outcome Health finally loses the CEO and president

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2015/08/1107_unicorn_head_mask_inuse.jpg” thumb_width=”150″ /]Another Theranos? Outcome Health is a point of ‘sale’ advertising company that has wrapped itself in ‘behavior change technology’. It’s been a Chicago darling and closed a $500 million Series A led by Goldman Sachs and Alphabet only last May. Its business in ‘transforming healthcare’ is the prosaic but highly lucrative placement of monitors in doctors’ offices that provide relentless health educational content liberally laced with DTC sponsorship messages, free to the doctors but paid for by pharma companies. This also includes tablets, exam room demo wallboards, and Wi-Fi in offices. The Series A pushed up the company’s valuation to $5.5 bn and made its CEO a billionaire.

What it didn’t do, like Theranos, was deliver. Before October last year, advertisers, backed up by former employees’ testimony, realized that the data were inflated in several ways: number of screens in offices, verification of actual runs, match lists that didn’t match to the screens, made-up survey numbers, and puffed up third-party analyses of the ads’ effectiveness, e.g. for prescriptions written. A Wall Street Journal article in October last year exposed the practices. When advertisers are fleeced, they may get mad, but then they get even. There were reported refunds in the millions to Pfizer, plus millions in advertising make-goods to Sanofi SA and Biogen Inc. 250 ad campaigns are now in review across 40,000 doctors’ offices. A search for the guilty ensued, some culpable employees were suspended, the usual layoffs of 33 percent of the staff and belt-tightening ensued, and an outside person was hired to investigate and impose the usual ‘best practices’. Also MedCityNews

The mea culpas didn’t work because it’s real money and there were signs it was moving. In November, investors in that Series A, including Goldman Sachs, Alphabet, and Pritzker Group Venture Capital, attempted to claw back $225 million they gave to CEO Rishi Shah and President Shradha Agarwal held in a special fund. The investors accused them of moving the money. The court documents indicated they received subpoenas from the Justice Department (see Chicago Tribune below). The filing was in New York State Supreme Court, not in Illinois. Outcome’s response was to trumpet their integrity and that “the equity investors led by Goldman Sachs are misusing the court system to advance their own short-term, self-interest of winning an advantage over debt-holders — all to the detriment of the business, its employees and customers.” MedCityNews

Last week, they settled. Both Mr. Shah and Ms. Agarwal announced they are ‘stepping down’ from direct operations to become chairman and vice chair of the now seven-person board of directors, now including three independent directors and two representing investors. The investors, lenders, and founders are funneling $159 million to reduce the company’s debt by $77 million and buttress their operations. The COO is taking on interim CEO duties while the board searches for a new head. The release trumpets ‘reinvestment in the future’. And that HQ move to an ‘Outcome Tower’? Nixed. Illinois also pulled away two tax credit deals. Chicago TribuneMedCityNews

How three major investors didn’t do their ‘due diligence’ before writing big checks is beyond this Editor’s ken. This tale won’t be as drastic or lead to moral questions as Theranos did. There are no malfunctioning tests, misled patients and doctors– after all, it’s just advertising in offices paid by everyone’s favorite pharmas. But as yet another blot on healthcare transformation, like Theranos it’s turned into a corporate saga of posturing–ah, here’s a fig leaf to cover, a shoe to drop, and here’s your large feathered fan.