The recent FTC proposed rule to prohibit employers from using noncompete clauses has sparked a lot of debate within the healthcare space, where noncompetes are a standard part of most physician contracts, and routinely enforced.  The issues with noncompete agreements have been brought up by physicians for years, and it is important to highlight the grassroots physician voice in this debate, as major players such as the hospital system lobbies are speaking on their own behalf, and not that of their employed physicians.  

The vast majority of physicians would agree that noncompete clauses in the healthcare field are on the whole bad for both physicians and for patients.  They discourage market forces that allow physicians to vote with their feet if they don’t agree with decisions being made by hospital systems that are to the detriment of quality medical care or clinician career longevity.  According to one report, 117,000 physicians left the workforce in 2021, which is roughly 10% of the physician population.  In an era where profits are continuously being put above patient care and the physician shortage is amplifying dramatically as physicians leave the field in droves secondary to widespread frustration and burnout, it is important for physicians to be able to speak out about these issues or leave their jobs without fear of retribution or the inability to provide for themselves and their families.  

Given the growth of large hospital systems, a noncompete clause for a physician often means that leaving a job would require a physician to leave the geographic area in which they practice.  This raises several issues of the downstream effects of noncompetes in coercing physicians to accept conditions they are not comfortable with, eliminating checkpoints that market forces allow that ultimately would have led to better systems that served clinicians and patients, and contributing to the physician shortage.

1. Physicians with noncompetes in their contracts are forced with the choice of uprooting themselves and their families each time they want to switch practice environments, and the daunting challenging of reestablishing a reputation and practice in a new location.  Employers know this, and use it as leverage when physicians speak out against situations that are detrimental to patient care, inappropriate or illegal actions by their employers, or unreasonable/unsustainable working conditions.  This can effectively hold physicians hostage at unfavorable working conditions for decades, while employers evade market forces that would necessitate change.
2. It is hard to make the argument that a single physician leaving a large hospital system would significantly threaten the hospital system’s business model.  If many physicians want to leave simultaneously, this could affect a hospital system; however one would be forced to examine what the hospital system was doing wrong that so many physicians wanted to leave en block and not be a part of that hospital’s mission. Arguably, this is exactly where market forces should come to play, and ultimately lead to hospital systems that better serve the needs of clinicians and patients.  
3. In a situation where physicians can’t relocate geographically due to personal reasons, they are prevented from pursuing opportunities that are a better fit for them personally within their geographic locations (better pay, more flexibility, better hours, etc).  When physicians are forced to work at jobs that aren’t good fit, disillusionment with the field is growing at a time where clinician burnout is at an all time high.  Therefore, many physicians are now electing to stop practicing medicine altogether rather than work at a job they don’t enjoy, thus exacerbating the physician shortage and access to care nationally at a time where this is already a public health emergency.

To be clear, there are nuances to this discussion and a blanket endorsement of the FTC proposal.  

1. As it is currently written, many lawyers have stated that the FTC proposal would not apply to nonprofit organizations.  Given that the majority of the hospital systems in the country are classified as nonprofit in name despite the business model being the same as other healthcare entities, this would actively give nonprofit hospital systems an unfair advantage over independent physician practices and for-profit health systems. It is important to note that several of the hospital systems that produce the most in profits and pay their CEOs many millions a year are ‘not for profit’ in name.  Therefore, this rule seems arbitrary, and if the FTC proposal was to have its intended consequence, noncompetes should to be eliminated for both not for profit and for profit hospital systems.
2. While it is hard to argue that a single physician leaving a hospital system would significantly affect the bottom line for a large hospital system, it is quite true that a single physician employed by a small independent physician practice could significantly hurt that independent practice by using the practice’s resources to build a patient base and reputation, and then opening their own practice across the street.  Given that the footprint of an individual practice is smaller than a hospital system, the argument that a physician wanting to leave that practice could still practice in the area without having to uproot their families is much more reasonable. Independent practices are a valuable player in the healthcare ecosystem, and preferred by many patients.  Therefore, if a carveout in the FTC proposal is created in healthcare, it should be for independent practices, not for ‘not for profit’ healthcare systems, and be aimed at keeping independent physician practices viable.

Therefore, as grassroots physicians and our supporters, we respectfully submit that noncompete clauses are detrimental to both physicians employed by hospital systems (both for profit and not for profit) as well as patients.  Ultimately, noncompete clauses at large healthcare employers are detrimental to our nation’s long term ability to maintain access to quality care, and should be outlawed.  

For those willing to take further action on this, the FTC is seeking public comment until March 20, 2023.  We ask that you submit comments with the talking points above (or any of your own) here.