Digital health startup Dorsata sues Athenahealth alleging deceptive business practices and trade secret theft

Digital health startup Dorsata has filed a lawsuit against electronic medical records software company Athenahealth and women's health practice Unified Women's Healthcare.

Dorsata is a software-as-a-service company that provides a maternity management and clinical decision support solution for OB-GYN practices and integrates with Athenahealth's EHR.

In the lawsuit, filed last week in the civil court of Suffolk County, Massachusetts, Dorsata alleges Athenahealth engaged in deceptive business practices, stole trade secrets and breached its contract. The company also claims in the lawsuit that Unified Women's Healthcare, an Athenahealth customer, aided and abetted a breach of fiduciary duty.

In a statement, Athenahealth told Fierce Healthcare that the company believes the "suit is without merit" and plans to defend itself "vigorously." Unified Women's Healthcare did not respond to a request for comment.

On Friday, the EHR company moved to impound the complaint claiming that the lawsuit and several exhibits contain confidential information protected by non-disclosure and confidentiality agreements. Monday, the court temporarily granted the motion and impounded the documents until the court can conduct a hearing on the motion, but for no longer than five business days, according to court filings.

The lawsuit is no longer available for public viewing but Fierce Healthcare spoke with Dorsata CEO David Fairbrothers on Thursday and accessed the lawsuit prior to the impound going into effect.

Launched in 2013, Dorsata has been an Athenahealth marketplace partner since 2016 and provides its software to obstetricians who use Athenahealth's EHR. Dorsata pairs both evidence-based guidance with advanced care gap and outcomes analytics. Its advanced clinical rules engine was developed to help obstetricians in day-to-day practice by improving diagnosis, treatment and documentation, according to the company. About 700 OB-GYN practices use Dorsata's platform, according to Fairbrothers.

"Think of us as a marriage between a medical record and a sophisticated clinical decision support system for obstetrics," he said in an interview Thursday.

Dorsata has a licensing agreement with the American College of Obstetricians and Gynecologists (ACOG) which enables the company to present ACOG's best practices information to medical providers directly at the point of care. In the lawsuit, Dorsata claims it spent over 5,300 hours working with OB-GYNs to develop a point-of-care solution that provides clinical best practices based on the patient's pregnancy, physical condition of the mother and medical conditions.

"We have provided a solution that Athenahealth OB providers value and very much like due to our focus and quality of work in creating a great experience for OBs that they use day-to-day in the clinic to document and then decide what to do with their patients from an intervention perspective," Fairbothers said.

In the summer of 2021, Unified Women's Healthcare, one of the largest women’s health companies in the United States and an Athenahealth customer, acquired Women's Health USA, an existing customer of Dorsata. 

In the complaint, Dorsata alleges that in 2021, shortly after the Unified-Women's Health deal, Athenahealth approached the company and "proposed that they work together to pursue a broader relationship with Unified."

"In order to expand its relationship with Unified, Athena needed the features and functionality of the Dorsata solution," Dorsata claims in the complaint. Athena suggested the two companies should work together to provide the women's health provider with an integrated solution.

Dorsata then signed a non-disclosure agreement with Athenahealth and provided access to "trade secrets and other confidential information, including financial projections, material contracts, customer pricing, software architecture, designs workflow and dataflow," Dorsata alleges in the complaint.

There also were "substantive discussions" about Athenahealth acquiring Dorsata and the startup says its decision to provide proprietary and sensitive information was "heavily influenced" by the likelihood of an acquisition deal. Dorsata claims it devoted "significant time and financial resources" to build a new tool, called "vU," to present to Unified Women's Healthcare with the understanding that the product was being developed as part of the joint venture with Athenahealth.

At the same time, the startup needed a significant cash infusion to continue to build its business, finish its development work on the new product and expand its client base, Dorsata alleges in the complaint.

After considering several financing sources, the startup decided to borrow $6 million from Athenahealth. That financing deal included an exclusivity agreement with Athenahealth that prohibited Dorsata from providing new versions of its offerings to its existing customers other than customers who were also Athenahealth customers, according to the lawsuit.

"The terms of the Note were onerous," Dorsata claims in the lawsuit, noting that it only agreed to the terms because it believed that Athenahealth "would either purchase Dorsata or continue its joint venture to expand their relationship with Unified."

"Athena cultivated this perception," Dorsata wrote in the lawsuit. The company claims one company was interested in making a $50 million cash purchase of the startup but Dorsata believed the company's future value "would easily exceed $50 million as a result of the Dorsata/Athena joint venture."

The startup alleges in the lawsuit that the EHR company used the knowledge it gained about Dorsata's technology to work on its own vU tool that it planned to pitch to Unified.

"Had we followed through on the premise of that joint venture, it would have had material impact on the future growth of Dorsata," Fairbrothers said. "However, subsequently, we learned that Athena never intended to consummate that deal, that the terms of the note were such that they would put a pin in control of Dorsata's business and provide enough time for them to build a comparable solution without having Dorsata competing in the marketplace, such that they could eventually supplant our product used by our mutual customers."

Dorsata alleges that in January Athenahealth proposed to release the exclusivity provisions in its promissory note provided that the startup turn over the majority of its technology assets, its customer contracts, its license agreement with ACOG and key personnel, the company claims in the lawsuit—what Dorsata refers to as a "gun to the head" offer.

The startup alleges Athenahealth cut it out of the Unified deal, leaving it with "limited ability" to generate the revenue necessary to pay back the $6 million it borrowed. The company also alleges Unified Women's Healthcare committed a breach of contract by helping a third party to reverse-engineer Dorsata's product.

Dorsata is seeking damages in the amount of loss of expected profits, value of future lost business, loss of company valuation and damages for unlawfully gained commercial and marketplace advantage. Dorsata also is asking the court to prevent Athenahealth from collecting the $6 million it loaned by finding that its promissory note was a "fraudulent artifice intended to prevent Dorsata from competing in the marketplace."