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Wednesday Mar 03, 2021

Lose-Lose: Noncompete Agreements Hurt Doctors and Patients

A family doctor friend recently reached out to me wanting to talk about my job. I had shared with her in the past how much I love the work that I do, and she wanted to know if I still felt the same way. I could sense in her question that she was disgruntled with her employer, a large health system in the same region I work in. She shared with me that she was experiencing all the typical symptoms of burnout, and with good reason: She was spending up to four hours every day after work completing charts and managing tasks in her EHR inbox. On top of that, she was being asked to take on more new patients and work extra hours on the weekend.  

[paper non-compete agreement]

I heard her obvious exhaustion but had to confess that I felt nothing of the sort with my current employer. I asked whether her contract had a restrictive covenant, and, unfortunately, it did. So even though she wanted to leave her current challenging work environment and come work with me in a federally qualified health center, according to the terms of her contract, it would mean waiting two years before she could practice in our shared county. Her only other choice would be to find another employer outside of the geographical boundary and disrupt her life and family.

No wonder she felt stuck. She is hardly alone: A 2018 survey found that about 45% of primary care physicians in group practices(kurtlavetti.com) were bound by such covenants.

Restrictive covenants, also known as noncompete agreements, represent a unique piece of contract architecture that exists in many business fields and, to be fair, may have merit in certain circumstances. When applied to medical practice, however, these agreements can be particularly harmful. In the days when most practices were privately owned small businesses, noncompete agreements existed to protect an established practice from a partner or co-worker leaving and opening their own practice nearby. Now, however, as medical practices are increasingly owned by large hospital systems, the geographical boundary mapped out by these agreements makes it practically impossible for a physician to leave that system without completely uprooting their life or commuting long distances.

This happened to a colleague of mine who had a deep desire to care for the underserved population in our community through our FQHC but was bound by a noncompete agreement with the health system she had previously worked for. The noncompete stated that if she left that organization, she couldn’t practice family medicine in our county for two years. Her passion for our local underserved population was strong, however, and she decided to take on various administrative and consultative roles outside of patient care until those two years expired. Then she hit the ground running and helped establish a thriving substance abuse center within our FQHC. I can only imagine what she could have done if she had been able to practice family medicine during the two years the noncompete was in force.

What was most frustrating in this situation was that both our FQHC and her previous employer have strong commitments to help our underserved community. In fact, within the hospital system where she worked, a number of individuals recognized the needs of the community and pushed for my colleague’s noncompete to be modified or eliminated for the greater good. Those efforts went unheeded, however, for fear of setting a precedent.

If the goal is the same ― to give patients the best care possible ― why should it matter where patients receive that care? By restricting where a doctor can practice, health systems end up treating their physicians and, by extension, their patients, as commodities rather than as people.

Fortunately, I don’t have a restrictive covenant in my contract. When preparing to write this post, I asked my CEO why our organization doesn’t use noncompete clauses. Her response was simple and spoke to what our focus should be in medicine: These restrictive clauses don’t align with our principal goal of caring for patients.

Hospital systems may make the argument that health care professionals represent an investment on their part. They purchase equipment, hire staff and maintain buildings to support the practice of a physician, and, therefore, they need to protect their investment by limiting the possibility that the physician might leave. It can also be argued that if a physician leaves one facility for a neighboring competitor, that disadvantages the first entity and leads to a loss of revenue. Note that in both of these examples, we can easily see what noncompete agreements are really about: money. They have little to do with what’s in the best interest of the physician or patients and more to do with financial protection.

Ultimately, noncompete agreements are not good for physicians or for patients. Although it’s tough to say how many physicians feel they can’t leave their health systems, judging by the number of colleagues who have asked me about working in my FQHC but can’t join our group because of a restrictive covenant, I imagine there are many in this situation. Given that nearly 70% of FQHCs are seeking family physicians to fill vacancies, the fact that these agreements restrict the hiring of qualified candidates is especially frustrating.

Restrictive covenants create a specific challenge for us in family medicine, where continuity of care is critical. If one is able to leave an organization and venture outside of the restrictive boundary to practice, patients will likely follow. But this may not be feasible for many patients if the distance is too great, potentially severing long-term patient-physician relationships ― the foundation of our work as family physicians. In 2020, Indiana passed legislation(www.tradesecretsandemployeemobility.com) aimed at easing some of this burden on patients and physicians by enforcing the transfer of medical records and allowing physicians to buy their way out of the covenant. Unfortunately, the wording of such legislative measures is often vague, leading to legal challenges.

Overall, the language and level of enforcement of noncompete agreements in health care varies widely across the country. In California, for example, noncompete agreements in any industry are prohibited,(leginfo.legislature.ca.gov) whereas in Colorado, noncompete agreements for physicians are statutorily limited.(law.justia.com)

In Pennsylvania, where I practice, bills aimed at overturning health care-related restrictive covenants(www.legis.state.pa.us) have been introduced, but they rarely make their way out of the relevant committees. The Pennsylvania Medical Society discussed this issue during a recent board meeting,(www.pamedsoc.org) concluding that a balanced approach that protects small independent practices and promotes employed physicians’ interests is needed but also recognizing the need to educate lawmakers on how these rules can burden the patient-physician relationship.

In February 2020, the AMA sent a letter to the Federal Trade Commission(searchlf.ama-assn.org), calling for the agency to consider the complexity of these covenants and highlighting the evolving nature of this issue in different states. In the end, it recommended no federal involvement. Each state should enact its own rules and regulations regarding restrictive covenants, said the AMA, because any broad legislation enacted might have “limited usefulness” given that the case law related to these agreements is quite nuanced.

Because it seems unlikely that sweeping legislative change at the national level is going to prohibit these restrictive covenants any time soon ― despite efforts by federal lawmakers and state officials alike ― the best path forward for us physicians is to advocate to enact change at the state level.

In the meantime, our focus should be on

  1. educating ourselves about the culture of any practice or organization we’re thinking about joining to determine if it’s a good fit; and
  2. negotiating the size and scope of any noncompete clause ― along with all the other terms of our employment, including work hours and days ― when we enter into or renew our contracts.

For their part, hospital systems should focus more on creating an environment where physicians don’t want to leave rather than on creating contract rules that make it difficult for them to do so. Such an approach seems particularly prudent during the current public health emergency, when health care professionals are being pushed to their limits as they balance their own health and that of their families with caring for patients stricken by COVID-19.(www.cnn.com) After all, if we can agree that the patient should be the focus of our common mission in health care, should these noncompete agreements even still exist?

Luis Garcia, M.D., is a family physician in York, Pa., working at Family First Health, a federally qualified health center. He focuses on caring for the Spanish-speaking community and spending time with his wife and family. His hobbies include gardening and photography.

Read other posts by this blogger.

Posted at 06:30AM Mar 03, 2021 by Luis Garcia, M.D.

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