Two physicians in my family relocated to small towns after they were recruited to join a practice. Both uprooted their family for a move hundreds of miles away. Neither practice worked out long term. My uncle is deceased, so I know little about the time he moved to practice medicine in the small town where he grew up. I talked to my brother-in-law about his experience. Once settled into the new practice, his schedule was quickly inundated with Medicare patients. Many of his elderly patients had multiple chronic conditions, requiring 30-minute or longer office visits to address their health concerns. He soon realized he either had to work twice as many hours or accept an income only about half the norm for his training. He resigned from the practice and found a job a few miles away in a nearby town. That was years ago when noncompete agreements in health care were uncommon. Nowadays nearly three-quarters of physicians are hospital employees or employed by investor-owned group practices. Many are bound by employment agreements that limit their ability to easily leave a job for a new one.
A physician named Jacqui O’Kane had a similar experience. She took a job working for a hospital in a small Georgia town. Her patient roster quickly shot up to 3,000 patients, about the maximum doctors can treat in a full-time practice without working overtime. When physicians can no longer squeeze more patient exams into a workday, many close their practice to new patients. Dr. O’Kane’s hospital employer would not allow that. The hospital wanted her to expand office hours, working evenings and weekends if needed. Dr. O’Kane wanted to quit but she had signed a three-year contract that contained a noncompete agreement. She was not allowed to work within 50 miles for a period of two years after her contract ended.
It is not just doctors who face noncompete agreements while working for hospitals. It also includes employees who have no way to take away business or carry off trade secrets. Hospitals often require nurses to sign training repayment agreement provisions (aptly called TRAPs) which lock nurses into jobs. Nurses leaving within two years are expected to repay hospitals for training expenses, which is little more than job orientation. These supposed training fees can sometimes reach as much as $20,000.
The Federal Trade Commission (FTC) just announced plans to ban noncompete agreements for most employees other than senior executives. The U.S. Chamber of Commerce is suing. When the FTC first began accepting comments on the proposed Final Rule, the agency was surprised when it began hearing from people in the medical field. The following is from Beckers Hospital Review:
About 18% of the U.S. workforce, or 30 million people, is covered by noncompete agreements, from senior executives to fast-food workers, according to the FTC. The American Medical Association estimates that between 35% and 45% of physicians are bound by noncompete clauses. Existing noncompetes for most workers will no longer be enforceable once the rule takes effect, but there are exemptions.
Noncompete agreements have always been common in high-tech industries, with significant intellectual property. However, the federal agency is increasingly alarmed that more employers were using noncompete agreements to restrain competition for workers who have no access to trade secrets. For instance, a cosmetologist working in a salon reported being asked to sign a noncompete agreement restricting her right to change jobs.
There are now discussions that nonprofit hospitals may be beyond the authority of the FTC and still engage in noncompete agreements with nurses and doctors. Claiming the FTC lacks the authority to regulate entities other than for-profit companies:
Though the FTC recognized that it does not have jurisdiction over nonprofit entities, it reserved the right to evaluate an entity’s nonprofit status, which would include a significant portion of the 6,120 hospitals in the U.S.
Specifically, the agency said that “some portion of the 58% of hospitals that claim tax-exempt status as nonprofits and the 19% of hospitals that are identified as state or local government hospitals in the data cited by [American Hospital Association] likely fall under the commission’s jurisdiction the final rule’s purview.”
The ruling is expected to result in lawsuits that may take years to resolve. An underappreciated problem with noncompete agreements between doctors and hospitals is they further strain the doctor/patient relationship.