The litigation tying up the Federal Trade Commission’s new rule prohibiting for-profit companies from requiring noncompete clauses gives everyone in healthcare time to consider the unique needs of our industry in crafting a policy that works for patients, physicians and provider organizations.
Many feel that noncompete policies too often disrupt the patient-physician relationship and may also force a physician to move and re-establish their practice elsewhere.
That said, there are legitimate investments that many hospitals, health systems and larger physician practices make in helping a physician establish a practice in a new market. There are better ways to acknowledge those investments than an inflexible noncompete clause. A more measured approach to noncompete clauses can be fair to physicians and provider organizations, and also serve patients better.
Here are four elements for a policy on noncompetes that works for healthcare:
First, a new policy on noncompete clauses must apply to all entities that employ physicians, for-profit and not-for-profit alike. There are legitimate questions about whether the FTC could enforce its original noncompete ban on not-for-profit hospitals, because the jurisdiction of the FTC generally is limited to for-profit companies. This fact uniquely impacts healthcare, given the prevalence of not-for-profit hospitals and health systems.
While some legal ambiguity exists about the FTC’s jurisdiction over physicians employed by not-for-profit hospitals (e.g., a not-for-profit can own a for-profit subsidiary that employs physicians), an ideal noncompete rule would ensure a level playing field.
Second, a new noncompete policy should provide a way for employees to buy their way out of their contract. Hospitals that invest in helping a physician build their practice have a fair point in wanting to recoup that investment. At the same time, employed physicians make a substantial investment of their time in building relationships with patients in order to deliver the best possible care.
Should a provider wish to sever their contractual relationship they should be able to buy their way out of that commitment at a fair and established amount. This balance of rights and responsibilities provides the right incentives for both hospitals and physicians.
A third element of a sound policy is related: Noncompete clauses should have a time limit. For example, let’s say the income support in a physician agreement lasts three years. Another three years beyond seems a reasonable time for the noncompete clause to time out, giving the employer the opportunity to recoup the initial investment. If the employer has not recouped its investment in that time, the problem is not the physician, but rather the management and support of that physician, and the physician should not be penalized.
Finally, noncompete policy should require a provider organization to allow communication to patients about a provider moving on to a new practice or health system. This element would be effective only if the physician satisfied the buyout or time provisions.
Provider organizations could be required to allow a moving physician to contact their patients through the provider organization’s communication systems once at the outset of the physician’s departure. Then for a period of time, perhaps a year, the provider organization would be required to give the physician’s new contact details to patients who request the information. Patients should not be penalized or held captive.
Perhaps this is an element that should apply only in healthcare, a recognition of the unique harm of disrupting the patient-physician relationship. This requirement would go a long way toward minimizing that disruption.
A federal policy on noncompete agreements that recognized the unique nature of healthcare would not be unprecedented. Maintaining the sanctity of the patient-physician relationship is the rationale for other laws, such as the Anti-Kickback Statute, which criminalizes conduct in steering referrals that is routine in many other industries.
Healthcare leaders should press this case with federal lawmakers and policymakers while we have this pause in the FTC’s rulemaking. No matter what happens in court, this is one genie that isn’t going back in the bottle any time soon.
Photo: FG Trade, Getty Images
Jasen Gundersen, MD, is CEO of CardioOne, a cardiology-focused care delivery enablement company, and is a member of the board of the American Independent Medical Practice Association.
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