Doctors frequently sign non-compete agreements. And every state treats them differently. In California, for example, most are unenforceable. In North Carolina, on the other hand, if the agreement is not unduly restrictive, it is upheld.
As doctors sells their practices to healthcare systems, this familiar piece of paper is becoming part of the process. The subtext is that if you are fired or leave, you will need to exit the community. You’ll have to sell your house. Uproot your children from their schools. And start over.
The Federal Trade Commission recently weighed-in and the ripple effect has yet to be understood.
On December 4th, FTC formally voted to approve a settlement of a complaint they brought against Renown Health, a healthcare system in Nevada. The complaint alleged that the three-hospital system established some type of illegal monopoly for heart-care services. Renown had bought two cardiology groups, whose 31 doctors gave Renown control over 88% of the market for cardiology, the FTC said.
That’s what I call market share.
Rather than ordering Renown to unwind the acquisitions, the FTC voted unanimously to allow up to 10 of its cardiologists to disregard non-compete language in employment contracts. The FTC said voiding 10 non-compete agreements would restore competition for cardiology in the Reno metro area.
Eight physicians have already notified Renown they intend to work for other area hospitals, and two others are planning to move into private practice.
The CEO of Renown Health said: “We understand the pressures the FTC is under, but it would be helpful to the industry if various government agencies would speak with one voice on whether or not consolidation is a good thing in the era of healthcare reform….On the one hand, we are being pressed to consolidate and integrate, and on the other we are being restrained by outdated laws regulating physician and hospital relationships.”
The enforceability of non-compete agreements will likely continue to evolve as healthcare evolves.
There are many other enforceable methods of restriction of competition that are legal and binding, and necessary especially to protect an existing practice from departure of an associate. Attach the monitory value of the position provided and it’s potential loses with loss of the associate to the termination clause. Example: $250,000 salary for the length of time in the practice plus lost proprietary methods of say $100,000.
If we were lawyers, noncompetes in medical employment contracts would be null and void.
Period.
Every single State Bar Association in the Union considers them unethical.
When will we raise our ethical standards UP to the leval of lawyers?
I agree with arf. There are ways to mitigate loss from deperting associate/partner and prevent discontinuation of care that are not “shoot’em outta town” style.
I couldn’t agree more with the concepts that health care organizations are approaching monopolies & that noncompete clauses would cause undue hardship. I currently work for a system that has health care establishments throughout the Western states. Perhaps, upon leaving them (should I do so) they would not enforce this clause. Nonetheless, I wouldn’t even want to leave this area, where I have settled, have a home &
my husband has established his business, etc.
Non-compete agreements used to be enforced because it was felt that the “patient-doctor” relationship was sacred. Or at least that was the ostensible reason. Underneath it was always the concern by the employing physician that their business would be damaged by a close-by specialist who already had met and treated many of their shared patients.
Balancing this concern is the likelihood that some employers treat their employed physicians as quasi-chattel. They always end up with the worst call hours, complaining patients, unwanted nursing home duty, very long hours and unwillingness to profit share or eventually sell their highly profitable practice.
But those situations are rapidly coming to an end. Recently graduated residents need immediate high income to start paying back their college loans. Statistically, large group practices are more able to provide that at will, as long as you are a team player and willing to pay your dues.
Paying your dues is by no means as punishing as it is for recent law graduates, where marriages are a common casualty of long hours and psychological abuse of associates.
When the new doctor gets sick of their associate relationship, they may very well consider opening new (and close by) on their own. They have a greater financial ability to take on that hurdle than they did on the day they graduated their residency, not to mention coding and practice management skills.
On balance, scrapping non-compete agreements tends to level the playing field for younger, inexperienced and financially fragile residency graduates. Employers on the other hand have much more money and power. Employers can tough it out just fine.
Michael M. Rosenblatt, DPM
The issue is very state specific. Virginia courts will enforce physician non-compete agreements in the right situation. My law firm has published a free book titled, “How to Beat Your Virginia Non-Compete” and include a chapter on physician non-compete agreements. We also have a very active blog (http://www.virginianoncompete.com/) on which we post current discussions and issues.
If you are a physician practicing in Virginia, email my my assistant, Mary Ann (mspencer@frithlawfirm.com), to request a free copy of our book.
Dan