As the Justice Department subpoenas Outcome Health investors following a lawsuit filed against the company alleging fraud, at least two Chicago-area hospitals are taking a step back from the much-heralded health information startup and suspending plans to expand the company’s presence in their institutions.

Some of Outcome’s top investors filed a lawsuit this week claiming they were misled by Outcome’s founders prior to their $487.5 million investment. One of those plaintiffs, an investment unit run by Goldman Sachs said that it had repeatedly sought proof that $225 million of the investment set aside to be distributed to Outcome’s founders and held by an Outcome subsidiary was being held in liquid funds, but that Outcome and its cofounders Rishi Shah, CEO, and President Shradha Agarwal ducked the inquiries, later learning from another private investment firm acting on Shah’s behalf that Gravitas was most likely transferring the money elsewhere.

[Also: Report: Outcome Health employees misled advertisers]

The lawsuit comes after a Wall Street Journal report last month alleged that some Outcome employees had charged pharma companies for ads on more video screens than what had actually been installed.

Outcome claimed fraudulent performance data could be directly attributed to the actions of certain employees but did not represent the company or its executive team’s intent. Outcome also hired legal counsel to analyze the allegations and adopted new policies to better comply with customer contracts, according to MobiHealthNews.

Amidst the roar of controversy, Advocate Health Care suspended plans to grow Outcome’s presence in their system by adding more screens. Currently, the system runs roughly 500 screens that show health-related educational material and pharma advertisements primarily in their ambulatory settings, said Advocate’s Public Affairs Vice President Lisa Lesniak.

“Our relationship is strictly around using their devices and some of their content as a tool for educational programming in our clinical environments. We are monitoring the situation closely. In the meantime, we've paused plans to expand screen installation.”

Edward-Elmhurst Health also hit pause on plans to install more of their screens throughout their facilities, which currently has 12 Outcome Health wallboards in use in their system -- one in Elmhurst Hospital's Nancy W. Knowles Cancer Center and 11 others in physician offices in multiple locations throughout the Edward-Elmhurst service area, said the systems Public Information Officer Keith Hartenberger.

“We partnered with Outcome Health because of the company's mission to educate and empower patients, and its alignment with our own vision to transform the healthcare experience. In light of recent developments, however, we are putting further technology and equipment installations on hold.”

Outcome’s star had been on the rise, even of late, with several hundred medical offices and thousands of new devices added to their network of 140,000+ digital devices, according to a company spokesperson.

“The 230,000 healthcare professionals in our Outcome Health network see the value of the education products we provide for their patients and caregivers, as evidenced by our 95 percent renewal rate. We remain committed to always delivering the best-in-class health information to all of our medical offices and health systems.”

Outcome Health co-founders Rishi Shah and Shradha Agarwal said they've been “completely transparent” their employees, customers and investors.

“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.”

Twitter: @BethJSanborn
Email the writer: beth.sanborn@himssmedia.com