Startups, Payers

Federal judge sides with Amazon-Berkshire-JPMorgan healthcare venture in legal dispute with Optum

In a ruling Friday, U.S. District Court Judge Mark Wolf denied Optum’s request for a temporary restraining order that would have stopped ex-executive Dave Smith from joining the healthcare venture.

A federal judge has ruled in favor of allowing ex-Optum executive Dave Smith to join the healthcare venture started by Amazon, Berkshire Hathaway, J.P. Morgan (ABJ), putting the case in arbitration.

The dispute started after Smith was hired by ABJ as a director of product strategy and research and Optum (a division of UnitedHealth Group) decided to sue in response to prevent him from taking trade secrets he allegedly obtained while working for the company to his new employer.

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In a ruling Friday, U.S. District Court Judge Mark Wolf denied Optum’s request for a temporary restraining order that would have stopped Smith from joining the healthcare venture.

The case will now move to arbitration where the parties will work on a resolution to their dispute in private, with the option of appealing the arbitrator’s decision back to the court at the end of the process.

Since the launch of the ABJ healthcare venture last year, healthcare companies have been wary about the secretive initiative’s plans to disrupt traditional business models in the industry.

This case has been one prominent example of this concern and has had the effect of revealing some of the inner workings and priorities of ABJ to the public.

Jack Stoddard, the venture’s chief operating officer, testified that the initial mission of the company is to make the healthcare system less expensive and easier to navigate for the company’s combined workforce of more than 1 million people.

A few particular areas of focus mentioned by Stoddard were more effectively utilizing primary care, determining better ways to route patients to higher performing and less expensive clinicians and looking at new ways to lower prescription medication prices.

The collaborative – led by prominent surgeon and writer Atul Gawande – is still early on in its development and has yet to announce a name or major specific initiatives.

In response to Optum’s claims that the ABJ is a direct competitor to the company, Smith filed a document with the court characterizing the collaborative as a potential partner or customer of Optum.

While Stoddard could not definitively promise that ABJ that would not create products in competition with Optum, he said that have yet to do so and the venture would first be looking at existing vendors to provide healthcare solutions.

Photo: Chris Ryan, Getty Images