Physician Non-Compete Boogeymen   

Unmasking the Monster by Adam Habig

For many doctors, the dreaded physician non-compete clause stands as a barrier to breaking free and opening their dream practice. Most discover these clauses are often flimsier than they appear.

When applied to professionals, so-called non-compete clauses often have little to do with competition. Instead, they lock down talented employees. For this reason, these clauses are generally prohibited when they become harmful to innocent third-parties or the general public. For example, attorney non-compete clauses don’t exist because individuals must be free to access their attorney, regardless of his employment status.  

“Most discover these clauses are often flimsier than they appear.”

The same logic applies to doctors, and backlash to physician non-compete clauses is mounting. The American Medical Association (AMA) opposes non-compete clauses since they, “restrict competition, disrupt continuity of care, and potentially deprive the public of medical services.” Eight states have passed laws prohibiting physician non-compete clauses, while others curtail their reach.  In Indiana, a bill that would eliminate physician non-compete clauses (HB1235) is currently stalled in the legislature by hospital system lobbyists.

How to Fight the Boogeyman

So, until the medical profession wins treatment equal with its legal counterpart, what can physicians do to free themselves from non-compete clauses?  

– Read the non-compete clause. Courts disfavor them, so the employer typically bears the burden of proving the clause is reasonably justified in each of three critical measures: scope, time, and geography. For example, attempting to prohibit, “the practice of medicine, for two years, within 20 miles of any location of XYZ health system” would likely fail all three tests. Experts recommend reviewing contracts to answer several questions:

1. How long does the non-compete last?
2. Which geographic range does it cover?
3. What precisely does the agreement prohibit?
4. What is the contract’s monetary penalty for breach?
5. When is the contract up for renewal?

Courts have set strict limits for each, so physicians should let an attorney review his contract to see if the non-compete clause is even enforceable.  

– Don’t be afraid to ask. Many doctors have had success simply asking their employer to waive a non-compete clause. Health systems have been more likely to waive non-compete clauses for doctors moving to a different practice model which is not directly competitive with them (vs. jumping to a rival hospital). So if the goal is to practice independent, insurance-free direct care…a doctor may succeed simply by asking nicely.

– Draw a hard line. The AMA advises doctors to avoid signing any new contract containing a non-compete clause. Many doctors successfully insist that the so-called “standard” non-compete clauses are stripped from their employment contracts prior to signing, or at the time their existing contract comes up for renewal.  

Ending the Non-Compete

In summary, physician non-compete clauses are increasingly falling out of favor, since health systems use them to protect their turf. They restrain physicians’ flexibility to innovate and provide alternative care models, which reduces consumer choice and access to care. They lead to disproportionately high physician burnout, further eroding access and quality of care. Yet non-compete clauses are most effective when they intimidate physicians’ into foregoing close examination and challenge. Ultimately, they cannot stand for long between a physician and his dream practice.  

This is for informational purposes only and does not constitute legal advice. For more information please contact Freedom Healthworks.