The case for — and against — noncompetes

Noncompete clauses for physicians are a highly contested and evolving aspect of working in the healthcare industry and have been a point of contention for years — with no end in sight. 

A recent survey by the University of Chicago found that approximately 60% of employed physicians were required to sign a noncompete when starting their jobs, limiting the ability to practice at other facilities locally.

Increases in consolidation and acquisitions grow the geographic reach of large health systems while increasing the negative effects the agreements have on physicians, according to Marsha Haley, MD, a clinical assistant professor of radiation oncology at the University of Pittsburgh. 

"Many large health systems have a footprint that spans several states," Dr. Haley told Becker's. "If a physician is let go or leaves the practice, this requires the physician to move a long distance to meet the noncompete clause. Given the size and vertical integration of health systems, they are in no danger of losing a significant number of patients to the departing physician. The physician, however, is now required to move a great distance away from children's schools and extended family to make a living."

To counteract this, Dr. Haley suggested noncompete clauses could be tailored to smaller private practices but not be applicable to large health systems or private equity companies.

In December, New York Gov. Kathy Hochul vetoed a bill banning noncompetes. 

"New York has a highly competitive economic climate and is home to many different industries," Ms. Hochul said in her veto statement, according to The Wall Street Journal. "These companies have legitimate interests that cannot be met with the legislation's one-size-fits-all approach."

Ms. Hochul criticized the full ban's inflexible approach because it did not include an income cap and lacked exceptions for the sale of a business. 

The Federal Trade Commission, meanwhile, in January 2023 proposed banning noncompete contracts for full-time employees and independent contractors. However, developments in the year since have been scarce.

In a recent poll by Doximity, approximately 87% of physicians support the ban proposed by the FTC, though there are providers with dissenting opinions. 

​Practice owner and cardiologist Rishin Shah, MD, is opposed to the proposed FTC rule. 

"As a small practice owner, I am personally against this," Dr. Shah recently told Medscape. "The noncompete helps me take a risk and hire a physician. It typically takes two to three years for me to break even. I think this will further consolidate employment with large hospital systems unfortunately." 

Noncompetes have seemingly been perpetually in the crosshairs, leaving physicians to pick up the pieces.

"[Noncompetes] absolutely cause strife and stress in physicians' lives and limit fair market competition," John Nelson, MD, a pathologist at Merit Health Biloxi (Mo.), told Becker's. "Physicians are not versed enough coming out [of medical school] to realize these issues."

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