How a non-compete ban could shake up the healthcare landscape

The Federal Trade Commission's (FTC) decision to ban non-compete agreements is expected to have an outsized impact on the healthcare industry, empowering physicians and increasing anxiety among private practices who worry it will exacerbate staffing problems.

The FTC voted 3-2 last month to ban all current and future agreements that prevent employees from moving to competitors or starting a competing business after leaving their jobs. The rule will go into effect on September 4, although the U.S. Chamber of Commerce has already filed a lawsuit to stop it.

Shortly before the rule came out, FTC Chair Lina Khan told reporters that of the 26,000 comments her agency received on the proposed rule, “a pretty significant portion came primarily from health care professionals.”

“Even for workers who are, you know, making a decent living, their view was that at the time of signing these contracts, they didn't really have bargaining power,” she said.

In its announcement, the FTC said eliminating non-compete agreements is expected to reduce health care costs by $194 billion over the next decade.

Lisa Stand, director of policy and regulation at the American Nurses Association, said her group was pleased with the rule and surprised by “how strong it is.”

“It will definitely make labor mobility easier,” Stand said. “We are nurses, and we think this will ultimately be good for patients as well, as there will be more robust competition for clinical talent and expanded access to more choices of providers and providers.”

But some private practices are concerned that not enough thought has been given to how a change like this will affect the care they provide to patients.

Jack Feltz is a practicing gynecologist and president and CEO of Lifeline Medical Associates, a practice of approximately 200 physicians providing care to patients in New Jersey and Delaware.

Employees of Feltz's practice, including himself, are asked to sign a non-compete agreement. He acknowledges that non-competition can be burdensome on employees, but argues that without it, private practices will be less able to compete with larger hospital systems.

“It really throws off balance the ability of those organizations, especially private practices that are already under siege and decimated by hospital employment, to be able to maintain hospitals and compete with hospitals that have no restrictions on non- competitors,” Feltz said.

He warned that major health care systems will soon be able to poach not only doctors but also patients from their private practices.

According to the American Medical Association, 37 to 45 percent of physicians have non-compete agreements. Although common, Feltz noted that non-compete agreements are not always enforced. He said his own practice has let former employees out of their contracts because of external issues.

Lynn Rapsilber is co-founder and CEO of the National Nurse Practitioner Entrepreneur Network, a nonprofit organization that helps nurses start their own businesses. According to Rapsilber, everyone from large healthcare systems to small practices are competing for that patient, who she believes is the biggest beneficiary of this rule.

From a business perspective, Rapsilber agrees that there is value in contractual agreements that former employees will not take patients or mailing lists from a practice. The main “problematic” issue she sees with enforcing non-compete agreements is the geographic provisions they impose on healthcare professionals, which limit where they can practice after leaving their jobs.

“For consumers, this is great news because there will be more choices with their healthcare provider as there are more opportunities for people to open their own practices and be able to serve the community,” she said. “That will increase competition, which will actually lead to lower prices and higher quality in the long run.”

Labor experts argue that getting rid of non-competitors will also free doctors from an additional challenge in an increasingly monopolized industry.

According to John August, director of healthcare and partnership programs at Cornell University's Scheinman Institute, non-competitors have become “a major problem” in healthcare as physicians' practices are acquired by large healthcare systems.

“Many physicians are thinking about leaving the practice they have spent many years building, only to see it acquired by larger and larger companies. They feel very, very dissatisfied with their employment situation and want to leave and find these uncompetitive companies doing their job. clauses,” said August.

The new rule would allow many of these doctors to leave after their practice is taken over — with some caveats, depending on what type of entity it is.

Some larger hospital systems may gain an advantage by being excluded from this rule. The FTC has limited jurisdiction over nonprofits, and according to the American Hospital Association, about half of all community hospitals in the U.S. are nonprofits.

As Fierce Healthcare recently reportedFTC Commissioner Rebecca Slaughter acknowledged that there would be health care workers who would be “difficult to reach” because of their work at nonprofit hospitals.

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