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Curbside Consult with Dr. Jayne 1/23/23

January 23, 2023 Dr. Jayne 3 Comments

Non-compete clauses have been a hot topic around the virtual physician water cooler. I was glad to see Mr. H’s newest poll looking at the issue and am eager to see the results. Physicians are used to being stuck with non-compete clauses in their employment agreements, although they can be highly variable. Having been in the clinical trenches for a couple of decades now and having advised plenty of other physicians, I’ve seen quite a few variations on the non-compete.

In a solo practice where I was employed by a health system, the restriction prevented me from practicing with any corporate competitor within a 20-mile radius of the practice. However, it didn’t prevent me from staying in my same location and creating my own private practice entity. It also specified that if I wanted to do this, I would have to pay 50 cents for each chart, which seemed ridiculously cheap.

Many of my colleagues had similar clauses, and after establishing their practices, they went out on their own. Given the non-punitive nature of the exit agreement, they continued to remain on staff at the sponsoring hospital and referring patients for services. Overall, this arrangement seems like a win-win.

As an emergency department physician contracted with a physician staffing agency, I didn’t have a non-compete at all. At a given facility, those contracts often change every few years, which often results in the physicians remaining with the facility but being employed by or contracted by a different firm. This also happens quite a bit with anesthesia groups and critical care groups if the hospital outsources those services. In that situation, when the hospital’s contract changed and I was left in the lurch because the new agency didn’t want to employ part-time physicians, my group even worked to help me find a new placement at a competing health system.

As an urgent care physician working for a local practice with two locations, the non-compete clause only specified that I could not go on to own or have a management role at an urgent care center within 30 miles of either location. Since I knew there was no way I would want to do either of those things, I had no problem signing it. In fact, that employer’s contract was only three pages long, and was one of the smoothest contract negotiations I ever experienced. When I was ready to quit (which was quickly, once I realized that there were some interesting financial practices), it was also the easiest practice I ever left. I simply wrote a letter and said I was no longer available to be scheduled for clinical shifts. They acknowledged via email and I literally never heard from them again.

My most recent urgent care employer also had the prohibition against owning or managing a competing urgent care within a set mileage radius. However, it included a clause that specifically said employees were able to work elsewhere during their employment period, provided that scheduling didn’t interfere with their responsibilities. I thought this was unusual until I realized that a good chunk of the workforce was actually employed at multiple places – perhaps with an EMS agency and with the urgent care, or with an emergency department as well as the urgent care. It made for some interesting transitions as employees would try out other employers to determine whether the grass was greener elsewhere before giving notice.

As a consultant, I refused to do business with any organizations that tried to include anti-competitive clauses in their agreements. I was constantly amazed at the number of organizations that didn’t understand what it meant to be an independent contractor and that when you’re not an employee, it’s much more difficult to try to place restrictions on you. That doesn’t mean they didn’t try, however. I have no problem signing agreements around intellectual property and not using it elsewhere, but I wasn’t about to sign a contract that tried to block me from working with other organizations that might remotely be considered competitors. Engagements like I did as a consultant have to be based on trust, and if a health system trusts me enough to give me access to the information I need to do my job, they need to trust that I’m not going to use it inappropriately.

Among my physician peers, however, I still see some pretty terrible non-compete clauses. The worst are those that still apply even when a physician is downsized. A local health system had a “reduction in force” following COVID and terminated 10% of employed physicians. Those impacted included well-regarded physicians, a beloved pediatrician, and the health system’s only pediatric gynecologist. The latter had a packed schedule with a nine-month wait for appointments, so it didn’t seem to make a lot of sense. Rumor has it that the health system included reminders about non-compete language in the termination notices, but they immediately backed down when confronted with legal action. Honestly, I think that if someone is laid off due to a reduction in force, non-competes should never apply.

A friend of mine was recently impacted by a draconian non-compete that did not allow for any practice of medicine within 30 miles of any location where any employees of the health system practice. When she originally signed the contract, the health system was concentrated in a major metropolitan area and centered on its academic medical center, which didn’t seem like such a bad deal. However, during the intervening decades, the health system acquired hospitals across a 90-mile radius and opened satellite clinics up to 120 miles away. She never thought to renegotiate that non-compete, and when she wanted to open her own private practice, she was out of luck. Instead, as an empty nester, she has entered the world of locum tenens physicians, and practices all across the US. I have to say, I’m jealous of the side trips she has made from some of her assignments, including such national parks as Badlands, Acadia, and Theodore Roosevelt.

Health systems argue in favor of such restrictions because it’s expensive to recruit and retain physicians. I don’t disagree that it’s expensive. However, over the 20-year course of her employment, the health system certainly made enough money off of my colleague and her referrals as to make up for any expense of recruiting her and starting her practice. Even if a non-compete was limited to a certain period of time, perhaps five years, to allow an employer to recoup those startup costs, they could have the unintended consequence of forcing employees to stay who might not be a good fit for the practice. I’ve also seen physicians leave medicine entirely due to a non-compete, which is its own special kind of tragedy.

The real answer here is to eliminate non-compete clauses and other restrictions on clinical practice. There’s already a shortage of certain kinds of clinicians, such as primary care physicians, and that shortage isn’t going to improve any time soon. Forcing clinicians to stay in a situation where they’re burned out and unable to serve patients effectively because of a non-compete doesn’t help anyone. Unfortunately, corporate healthcare employers aren’t going to see it this way anytime soon.

What do you think about non-competes for clinical employees? Leave a comment or email me.

Email Dr. Jayne.

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Currently there are "3 comments" on this Article:

  1. It seems with medical practices, especially major academic centers, actively opening clinics in traditionally underserved communities a non compete would shoot them in the foot if one decided to to stay in the area to practice. Most underserved areas could use more than one clinic, especially specialities.
    Another downside to hospitals owning practices is when after an emergency the patient discovers the anesthesia and emergency department docs don’t accept the insurance the hospital accepts resulting in patients receiving large unexpected bills.

  2. One of the key problems with non-compete agreements is that they place no obligations, whatsoever, on the employer. Employers ask for them even when there’s no justification for the non-competes. Employers ask for them when there’s no plausible IP issues to disclose. Employers ask for them like they ask for “Business Casual” dress codes.

    Look at your friend, the one from the academic medical center. The employer’s business activities expanded, and thus the non-compete agreement implicitly expanded, due to no action of the employee. The employer should have to (at minimum) revisit that non-compete agreement.

    As for the cost of recruitment, I say Boo-Hoo! Recruitment is a cost of doing business. If you don’t want to pay the costs of doing business, then it’s your right to stop doing business. Non-competes are supposed to protect IP and and protect a business against crippling their business model. They are not supposed to protect a business from the discomfort of having to be competitive.

    Instead, the employee is placed in the position of having to prove a negative, or trying to get a potential new employer comfortable that no legal action will ensue. These are not reasonable asks.

    The issue isn’t non-compete agreements. The issue is that they have been so devalued by over-use, that they have become an anti-competitive weapon in the marketplace. Non-competes have become unmoored from their intended purpose and role.

  3. Ties in nicely with Mr. H’s current survey question about non-competes. I posted 4 suggestions you can use to assuage the possible impact, but they do require some ability to negotiate.
    Now there’s a thought – why not add a course in Med School on negotiation? Bet it would be over subscribed. Seriously though there are some excellent books and web resources available today. people facing issues like these should investigate.

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