There have been several lawsuits, policy moves and other updates related to noncompete agreements and their utilization in physician employment contracts.
While some argue that noncompete clauses are important tools to protect vulnerable businesses, others argue that they stifle competition and unfairly restrict physicians’ ability to seek new employment, straining patients’ access to quality care in the process.
Here are five notes on the state of noncompete agreements in healthcare:
1. In a Nov. 4 response to the Federal Trade Commission’s request for information on how noncompete clauses impact healthcare businesses, the Society of Cardiovascular Angiography and Interventions connects the negative effects of noncompete clauses to rising consolidation within the healthcare industry. It argues that due to the prevalence of healthcare conglomeration across regions, noncompete agreements — which often include geographic restrictions — only serve to inhibit physicians’ search for employment while limiting access to care.
2. In a recent noncompete lawsuit, Michael Holmes, former COO at Yale New Haven (Conn.) Hospital, is suing his former employer, alleging that it had breached a confidentiality and noncompete agreement. Mr. Holmes alleged that the hospital violated the terms of his employment contract by refusing to make agreed-upon covenant payments after his resignation, while YNHH contends that its non-payment was due to Mr. Holmes’ violation of a separate employment agreement.
3. North American Partners in Anesthesia reached an undisclosed settlement with two hospitals that filed lawsuits against the anesthesia provider earlier this year, claiming it unlawfully restricted its physicians from choosing their place of work. In the initial complaint, the hospitals allege that NAPA was leveraging noncompete and nonsolicitation clauses in its physician contracts to “severely restrict competition” and demand “exorbitant” payments for critical anesthesia services. In the complaint, Holy Cross claims that NAPA asked for a “multi-million payment to waive the noncompetes.”
4. There have been at least nine states in the last year to restrict the use of noncompete agreements within physicians’ employment contracts. Alaska and Wyoming banned noncompete agreements in all contexts, while Oregon, Maryland, Colorado, Louisiana, Connecticut, Pennsylvania and Texas have all passed updated legislation.
5. In September, the FTC voted to dismiss its appeal in two legal challenges to its 2024 rule banning noncompete agreements. While the FTC’s rule will not take effect, Mr. Ferguson said the commission under current leadership will continue to pursue enforcement actions against what it views as unlawful noncompete agreements through antitrust laws.
