Deal’s af­ter­math gets per­sonal

Hori­zon al­leges raid on com­pany’s for­mer em­ploy­ees

Modern Healthcare - - THE WEEK IN HEALTHCARE - Beth Kutscher

Two years af­ter Joey Ja­cobs sold Psy­chi­atric So­lu­tions to ri­val Univer­sal Health Ser­vices, the for­mer CEO’s lat­est ven­ture, Aca­dia Health­care, is be­ing sued for al­legedly poach­ing tal­ent from his old com­pany.

As deal-mak­ing heats up in health­care, largely fu­eled by re­form and its fi­nan­cial in­cen­tives, the case il­lus­trates the chal­lenges com­pa­nies face in pre­serv­ing the tal­ent they worked so hard to ac­quire.

“It’s not un­usual in the case of a merger or ac­qui­si­tion for em­ploy­ees to be ner­vous about their fu­tures and look around for al­ter­na­tive op­por­tu­ni­ties,” said James McEl­lig­ott, a la­bor and em­ploy­ment at­tor­ney with McGuire­Woods in Rich­mond, Va. McEl­lig­ott is not in­volved in the case. “The ac­quir­ing en­tity usu­ally wants to do due dili­gence to see whether key tal­ent is con­trac­tu­ally bound (or at least in­cented to stay) to the ac­quired or­ga­ni­za­tion.”

Hori­zon Health Corp., a sub­sidiary of Psy­chi­atric So­lu­tions, filed suit in Oc­to­ber against Aca­dia and five for­mer Hori­zon em­ploy­ees, al­leg­ing that they vi­o­lated their non­com­pete agree­ments and mis­ap­pro­pri­ated con­fi­den­tial in­for­ma­tion. Ja­cobs is not a named de­fen­dant in the suit. UHS and Psy­chi­atric So­lu­tions are not plain­tiffs.

The suit charges the for­mer em­ploy­ees with breach­ing their fidu­ciary duty by di­vert­ing sales leads that they would later pur­sue for Aca­dia, re­cruit­ing Hori­zon em­ploy­ees to join Aca­dia, set­ting up an Aca­dia sub­sidiary, and sub­mit­ting fraud­u­lent ex­penses af­ter meet­ing with each other “to plan their de­fec­tions.”

Aca­dia, based in Franklin, Tenn., did not respond to a re­quest for com­ment. But Stephen Rop­polo, the at­tor­ney rep­re­sent­ing the de­fen­dants, said Aca­dia and the em­ploy- “UHS is dis­ap­pointed at the con­duct of Hori­zon’s for­mer em­ploy­ees in col­lu­sion with Aca­dia Health­care as al­leged in the law­suit to un­law­fully dam­age one of the very en­ti­ties they sold to UHS.” “These folks left the com­pany in great shape. There’s ab­so­lutely no in­ten­tion of raid­ing the mother-ship.” ees named in the suit deny any wrong­do­ing.

The em­ploy­ees named as de­fen­dants in the law­suit are: Michael Saul, Hori­zon’s for­mer pres­i­dent; Ti­mothy Palus, for­mer se­nior vice pres­i­dent of op­er­a­tions; Peter Ulasewicz, for­mer se­nior vice pres­i­dent of de­vel­op­ment; Bar­bara Bayma, for­mer se­nior vice pres­i­dent of clin­i­cal prac­tice; and John Piechocki, for­mer vice pres­i­dent of busi­ness de­vel­op­ment. They re­signed from Hori­zon within weeks of each other in Au­gust and Septem­ber to join Aca­dia, ac­cord­ing to Hori­zon’s com­plaint.

Vic­tor Vi­tal, the lead at­tor­ney rep­re­sent­ing Hori­zon, de­scribed Aca­dia as “tak­ing through the back door what they sold through the front.”

Psy­chi­atric So­lu­tions, also based in Franklin, Tenn., ac­quired Hori­zon in 2007 for $426 mil­lion. UHS, based in King of Prus­sia, Pa., bought Psy­chi­atric So­lu­tions three years later for $3.1 bil­lion.

Hori­zon, a Lewisville, Texas-based provider of in-hospi­tal men­tal health ser­vices, is work­ing with an out­side ex­pert to track dam­ages but ex­pects them to be “in the mil­lions,” Vi­tal said. “Ba­si­cally, we’re look­ing at a demon­strated loss of sales.”

He noted that the Aca­dia sub­sidiary that the for­mer em­ploy­ees formed—Psy­chi­atric Re­search Part­ners—does the same thing Hori­zon does: “The is­sue we have is them op­er­at­ing in the same space.”

“Typ­i­cally speak­ing, the law dis­fa­vors re­stric­tions on peo­ple’s em­ploy­ment, re­stric­tions that pre­vent them from work­ing where they want to work,” Rop­polo said.

He noted that sales were ac­tu­ally on-track for an above-av­er­age year at Hori­zon. “These folks left the com­pany in great shape,” he said. “There’s ab­so­lutely no in­ten­tion of raid­ing the mother-ship.”

Hori­zon filed suit in Oc­to­ber in the 16th Ju­di­cial Dis­trict Court in Den­ton County, Texas, seek­ing a tem­po­rary in­junc­tion that would pro­hibit Aca­dia from us­ing in­for­ma­tion al­leged to be pro­pri­etary to Hori­zon, re­quire the em­ploy­ees to re­turn any hard copies of those ma­te­ri­als, and pre­vent the for­mer Hori­zon em­ploy­ees from re­cruit­ing any­one else to Aca­dia. It also re­quested that the de­fen­dants cease em­ploy­ment with Aca­dia.

Later that month, dis­trict judge Car­men Rivera-Wor­ley or­dered the de­fen­dants to stop us­ing any con­fi­den­tial Hori­zon in­for­ma­tion, re­turn copies of those ma­te­ri­als to Hori­zon and pre­serve any net­works or de­vices where the in­for­ma­tion might have been stored. How­ever, it did not pro­hibit the de­fen­dants from work­ing at Aca­dia.

“None of these in­di­vid­u­als are pre­vented from do­ing what they were do­ing,” Rop­polo said, de­scrib­ing the PRP sub­sidiary as es­sen­tially a five-per­son out­fit. “There’s noth­ing from the court that or­dered the five em­ploy­ees to stop work­ing.”

Hori­zon is cur­rently sub­poe­naing a num­ber of hos­pi­tals that it de­scribes as sales leads di­verted to Aca­dia. Sub­poe­nas have al­ready been is­sued to Parkview Re­gional Hospi­tal, Mexia, Texas, and Cleve­land Re­gional Med­i­cal Cen­ter, Shelby, N.C., ac­cord­ing to court records. A trial has been set for Sept. 17.

“UHS is dis­ap­pointed at the con­duct of Hori­zon’s for­mer em­ploy­ees in col­lu­sion with Aca­dia Health­care as al­leged in the law­suit to un­law­fully dam­age one of the very en­ti­ties they sold to UHS,” a com­pany spokesper­son said in an e-mail. “Not­with­stand­ing, we’re pleased that Hori­zon con­tin­ues to be a mar­ket leader in the man­age­ment of psy­chi­atric units and we look for­ward to the up­com­ing trial.”

McEl­lig­ott noted that, gen­er­ally speak­ing, the abil­ity to get an in­junc­tion is of­ten key to these sorts of cases. “More of­ten than not, if you don’t get an in­junc­tion, you’ll set­tle.”

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