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reform….On the one hand, we are being pressed to consolidate and integrate, and on the other we are being restrained by outdated laws regulating physician and hospital relationships.”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.