Optum Sues Over Alleged Trade Secrets Brought to Amazon

January 28, 2019 - Optum is suing former employee David Smith over allegations that Smith has shared Optum’s trade secrets with his new employer, the as-yet-unnamed collaboration between Amazon, JP Morgan Chase, and Berkshire Hathaway.

Optum is UnitedHealth Group’s data analytics services subsidiary.  The company offers insights into population health management, care delivery improvement, and operational efficiency for employers, governments, health plans, and providers.

The lawsuit, filed in Massachusetts district court, accuses Smith of gathering confidential information about Optum’s business practices and market status, in violation of his contract, at the same time as he accepted an offer from Amazon’s new enterprise, referred to in court documents as company “ABC.”

“Smith was a senior executive at Optum who, during his employment, was repeatedly and extensively exposed to Optum’s trade secrets and played an integral role developing Optum’s critical strategies for its Corporate Strategy and Product business units,” the lawsuit states.

“Smith now intends to work for Optum’s competitor, TCORP62018 LLC (“ABC”), as Director of Product Strategy and Research, in violation of his restrictive covenants with Optum.”

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Optum asserts that Smith solicited confidential information from other employees, printed confidential documents using corporate resources, and has refused to discuss his new role with Optum executives, giving rise to the suspicion that the positions will overlap to a significant degree.

The lawsuit appears to be a preemptive strike against the Amazon coalition, which has not publically announced any details of its intended purpose or focus. 

However, industry observers have opined extensively on the role of the new entity in a rapidly changing healthcare environment, and the consensus appears to be that ABC will use its broad data analytics experience and enormous reach to bridge the gaps between the quality of care and the payment for healthcare services.

“According to one Bloomberg article, ABC will ultimately ‘make those innovations available freely to other companies, meaning that if it’s successful, its effects could be felt more broadly among the more than 150 million people in the U.S. who get their health insurance through work,’” the lawsuit says, citing an article written in June of 2018, just after ABC named Dr. Atul Gawande as its CEO.

Naturally, the prospect of open-source innovations with the backing of three major market forces is worrying to Optum.  The company states that its success is “is directly tied to its trade secrets and other proprietary, confidential information. Optum’s trade secrets are among Optum’s most important assets.”

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Smith, who was deeply involved in product development and financial matters in his role at Optum, “agreed to several nondisclosure, noncompete, and nonsolicitation restrictive covenants,” Optum says. 

Among other details, these clauses state that he would not poach Optum employees or solicit confidential information from Optum employees within two years of ending his employment.

In conversations between legal officers from UnitedHealth Group and ABC, however, lawyers for the Amazon entity “took the position that ‘there is no product or service competition between UnitedHealth and [ABC], nor does [ABC] anticipate that there will be any such initiatives or activities that would violate Mr. Smith’s non-compete covenant,’” the document states.

“Similar to ABC, Smith took the position that ABC and Optum are not competitors because ABC ‘has no products’ and ‘does not compete for business with Optum.’”

That doesn’t mean they won’t.  ABC has repeatedly stated that its intention is to offer solutions to the healthcare industry at large, and it does not stretch the imagination to assume that those products and services will overlap with one or more of Optum’s areas of focus: the insurance market, the provider market, and the prescription drug market.

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It is also difficult to believe that this type of cross-company pollination will be an isolated case, especially as payers adopt analytics strategies historically found in the retail and financial services environments.

Experienced healthcare executives are hard to find, and the fierce competition between cash-rich, data-driven entities, including non-traditional players like Amazon, Google, and Apple, will no doubt prompt many experts to reconsider their employment.

The challenge for health payers and other companies targeting the insurance market will be to retain their employees – and their invaluable knowledge – in a high-pressure environment where new entrants are rapidly altering the traditional parameters of doing business.

Payers may find it easier to keep expertise in their pockets by spinning off their data analytics and health IT services businesses into separate entities that are laser focused on generating new insights and innovative products, such as Humana is doing with its Boston-based Humana Studio H initiative.

Alternatively, simply buying up the competition’s innovation expertise, like CVS did to Aetna, could create an attractive environment for high-value employees to stretch their creative muscles with a new approach to care delivery or payment.

No matter what the strategy, it will be essential for established companies to assess their talent assets, align their policies to the changing market, and ensure that they have a strong enough fundamental value proposition to keep their employees right where they are.