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Analysis

What's a 'Competitor'? Optum Sues VP Who Left for Amazon-Backed Initiative

By Steven Porter  
   January 24, 2019

The dispute highlights uncertainty over how incumbents should view the initiative's potentially disruptive role in the healthcare industry.

United Health Group's Optum Inc. filed suit last week against a former vice president who left the company for a job with the Amazon-backed healthcare venture being helmed by CEO Atul Gawande.

At the center of the dispute is a debate over whether the venture—which Amazon is developing in partnership with Berkshire Hathaway and J.P. Morgan Chase—is a "competitor" to Optum.

The disagreement highlights uncertainty over how incumbents should view the initiative's potentially disruptive role in the healthcare industry. While some may welcome the tech-enabled retail giant as a catalyst and innovative partner, others sense a need to defend their turf. That certainly seems to be the case for Optum, which accuses its former vice president of corporate strategy and product, David Smith, of breaching his Optum contract by taking trade secrets to his new employer.

Smith had been working for Optum about two years when he emailed his resume directly to Gawande on June 24, 2018, Smith said in an affidavit filed Tuesday with the court. That was just four days after Gawande was named CEO of the venture. Although he never heard back from Gawande, he was later contacted by a recruiter who arranged interviews in October and November, followed by a job offer in December, Smith said.

Optum alleges that Smith printed a confidential Optum document "just one minute before printing his résumé" on a day when he had contact with representatives of the Amazon-backed venture, according to the complaint filed in the U.S. District Court for Massachusetts. Smith also solicited confidential information "unrelated to his own job duties at Optum and for which he had no legitimate business need," the complaint alleges.

The suit, which was first reported Wednesday by STAT's Kate Sheridan and Casey Ross, describes Smith as "a senior executive at Optum" and the Amazon-backed venture as "Optum's competitor." Smith, however, contested both of those characterizations. His affidavit states that he was not a member of Optum's executive team or part of its senior leadership. And his attorneys wrote in a separate filing Tuesday that Smith had already given Optum an explanation of the Amazon-backed venture's business "and why it does not compete with Optum."

Optum attorneys had been in talks with attorneys for the Amazon-backed venture to see about delaying Smith's start date, but those talks stalled, as CNBC's Bertha Coombs reported. Optum contends that Smith was among fewer than 50 people with access to the company's detailed profit and loss statements, Coombs reported.

The new venture hasn't even announced a name, let alone a detailed strategy. Without dispelling much mystery about the venture, J.P. Morgan CEO Jamie Dimon told CNBC's "Squawk Box" during an interview at the World Economic Forum in Davos, Switzerland, on Wednesday that the venture is still focused on building its team.

"It's a long-term view. We don't expect any announcement anytime soon," Dimon said. "We will share if we come up with anything good, but we want to start small. Test a bunch of different things."

Steven Porter is editor at HealthLeaders.

Photo credit: Editorial credit: Sundry Photography / Shutterstock.com


KEY TAKEAWAYS

Optum accuses a former employee of collecting confidential information and documents as he prepared to leave the company for a job with Amazon's healthcare venture.

Optum calls the defendant a 'senior executive' and calls the Amazon-backed venture a 'competitor.' The defendant, however, disagrees on both counts.

The defendant, who was ultimately hired to work under Atul Gawande, emailed his resume directly to Gawande last June.


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