Illinois recently suspended a tax credit agreement with Chicago-based tech and advertising startup Outcome Health, the Chicago Tribune reports.
Outcome Health, which reported a $5.5 billion valuation in May, installs flat screens and tablets in physicians' offices at no cost. These screens display patient-targeted videos including educational content and pharmaceutical advertisements. Outcome Health charges pharmaceutical companies to run advertisements on these flat screens and tablets.
Here are four things to know about Illinois' decision to suspend the tax credit agreement.
1. The decision follows reports indicating a group of investors sued Outcome Health and its two founders Nov. 7, alleging the company engaged in fraud and breach of contract. The lawsuit, filed in New York State Supreme Court in New York County, built on an Oct. 13 The Wall Street Journal investigation alleging a subset of employees manipulated pricing and sales information to mislead pharmaceutical advertisers.
2. Outcome Health entered into the tax credit agreement with Illinois in November 2016 under the state's Economic Development for a Growing Economy, or EDGE, program, which offers tax breaks to companies that create jobs in the state. Under the EDGE agreement, Outcome Health pledged to add at least 175 full-time jobs in 2017 and 2018.
3. Under the agreement, Outcome Health is not eligible to collect tax credits until it reaches its investment and job creation requirements, but has two years to reach these metrics. However, companies participating in the EDGE program also lose credits while under suspension.
"Anytime that a company gets into legal trouble, almost always when the Department of Justice opens an investigation, we just suspend them for safety precautions, simply protecting taxpayer money," Jacquelyn Reineke, media relations director for the Illinois Department of Commerce and Economic Opportunity, told the Chicago Tribune.
4. In a Jan. 2 letter to the Illinois Department of Commerce and Economic Opportunity, Seth E. Darmstadter, general counsel for Outcome Health, argued the department is not allowed to "suspend agreed-to tax credits simply because [Outcome Health] has been named in a lawsuit, regardless of whether the lawsuit is meritorious."
"Outcome Health remains committed to improving healthcare outcomes for patients, creating technologies and driving innovation in Chicago," an Outcome Health spokesperson told Becker's Hospital Review in an emailed statement Jan. 8. "The company is well-positioned for success with its customers, is signing-up new customers and is committed to the ongoing expansion of its network of more than 145,000 devices at medical offices around the country."