How noncompete ban could shake up health care landscape

The Federal Trade Commission’s (FTC) ban on non-competition agreements will have a profound impact on the medical field, empowering clinicians and raising concerns among medical practitioners that it will further exacerbate staffing problems. This will increase anxiety.

The FTC voted 3-2 last month to ban all current and future agreements that prevent workers from leaving their jobs to join a competitor or start a competing business. The rule is set to take effect on September 4, but the U.S. Chamber of Commerce has already filed a lawsuit seeking to block it.

Shortly before the rule was announced, FTC Chairman Lina Khan told reporters that of the 26,000 comments the commission had received on the proposed rule, “comments from health care professionals in particular There were quite a lot of them.”

“Their view was that even workers who were making a decent living didn’t actually have any negotiating power when they signed the contract,” she says.

In its announcement, the FTC said that eliminating non-compete clauses is expected to reduce health care costs by $194 billion over the next decade.

Lisa Stand, director of policy and regulatory advocacy for the American Nurses Association, said the association is pleased with the rules and surprised by “how stringent they are.”

“It definitely makes it easier to change jobs,” Stand says. “We’re nurses, but we think this is ultimately a good thing for patients because it increases competition for clinical talent and gives you more choice in providers and delivery settings.”

However, some private practices are concerned that not enough consideration has been given to how these changes will affect the care they provide to patients.

Jack Felts is a practicing obstetrician-gynecologist and president and CEO of Lifeline Medical Associates, a practice of approximately 200 physicians serving patients throughout New Jersey and Delaware.

Employees at Dr. Feltz’s practice, including himself, are required to sign non-compete agreements. Dr. Feltz acknowledges that non-compete agreements can be burdensome for employees, but argues that without them, private practices are less able to compete with large hospital systems.

“This really disproportionates the ability of entities such as private practices, especially those that are already under siege and being decimated by hospital employment, to compete and sustain themselves against hospitals that don’t have the restrictions of non-compete clauses,” Feltz said.

He warned that large health systems will soon find it easier to poach not only doctors but also private practice patients.

According to the American Medical Association, 37 to 45 percent of physicians have non-compete agreements. Although non-compete agreements are common, they’re not always enforced, said Feltz, who said his own practice has terminated contracts with former employees due to outside issues.

Lynn Rapsilber is co-founder and CEO of the National Nurse Practitioner Entrepreneur Network, a nonprofit that helps nurse practitioners start their own businesses. Rapsilber said everyone from large health systems to small clinics are “competing for patients,” who she believes are the primary beneficiaries of the rule.

From a business perspective, Lapsilver agrees that there is value in contractual agreements for former employees not to take patients or mailing lists out of the practice. The main thing she sees as a “problem” in enforcing non-compete agreements is the geographic restrictions they place on practitioners, limiting where they can practice after they leave.

“For consumers, this is great news because the more opportunities there are for people to open their own practices and serve their communities, the more choices they have in their health care providers,” she said. “It increases competition, which will actually lower prices and improve quality in the long run.”

Labor experts argue that eliminating non-competing companies would also free doctors from further challenges in an increasingly monopolized industry.

Non-compete clauses have become a “big problem” in health care as doctors’ practices are handed over to larger health systems, said John August, director of the Health Care and Partnership Program at Cornell University’s Scheinman Institute.

“Many doctors are thinking about leaving the practice they have spent years building, but the practice is being acquired by larger and larger companies, and even if they are so dissatisfied with their employment situation that they want to leave, You realize there’s a non-compete clause,” August said.

The new rules will allow many doctors to leave the practice after the entity is absorbed, but there are some conditions imposed depending on the type of entity.

Some large hospital systems may benefit from an exemption from the rule: The FTC has limited jurisdiction over nonprofits, and about half of the U.S. community hospitals are nonprofits, according to the American Hospital Association.

As Fierce Healthcare recently reportedFTC Commissioner Rebecca Slaughter acknowledged that the rule would be “less likely to apply” to health care workers at nonprofit hospitals.