Dive Brief:
- UHS of Delaware, a fully-owned subsidiary of Universal Health Services, and Pinnacle Management Group NV will pay approximately $4.7 million, after a court found the companies had interfered with Prime Healthcare physicians’ contracts.
- Saint Mary’s Health Network, an affiliate of Prime Healthcare, alleged UHS of Delaware acted improperly by soliciting physicians and senior leaders from the health system and encouraging them to breach contracts in order to leave.
- The total fallout for UHS is still an open question. The court ordered UHS of Delaware to pay $500 million in punitive damages, however, the system plans to challenge the verdict and damages on appeal. If such challenges are unsuccessful, the judgment could have a “material adverse effect on the financial condition” of UHS, according to a Monday securities filing.
Dive Insight:
The lawsuit centers around the departure of several physicians from St. Mary’s Medical Group in 2021 to join Pinnacle Medical Group NV. UHS owns a 50% interest in Pinnacle Management Group NV, according to Monday’s securities filing.
Executives from Prime Healthcare and Saint Mary’s say that UHS of Delaware had an improper hand in those physicians’ decision to leave. The systems argue that UHS of Delaware lured doctors away and “nearly destabilized” the hospital, triggering over $200 million in losses — and that UHS destroyed evidence of the scheme, including text messages.
Saint Mary’s further alleged UHS stole trade secrets and triggered a “mass resignation” to gain an economic advantage over Saint Mary’s.
The court sided with Saint Mary’s and ordered UHS of Delaware to pay half a billion in punitive damages, plus $4.7 million in compensatory damages, split with other defendants.
UHS said it hopes to see its punitive damages reduced to about $14 million in post-trial motions.
However, “if we are unsuccessful in reversing the verdict, or significantly reducing the level of damages, ... this matter could have a material adverse effect on the financial condition of the company,” UHS said in a securities filing.
Meanwhile, Saint Mary’s and Prime heralded the verdict as a win.
“This verdict affirms that the weaponization of corporate power, betrayal of physician trust, theft of proprietary information, and reckless endangerment of patients will not be tolerated,” said Derrick Glum, CEO of Saint Mary’s Health Network, in a statement Monday.
UHS has been hit with significant damages in recent history that have required disclosure to shareholders, including in a case about child sexual abuse last year.
