Noncompete agreements have become a controversial issue within physician recruitment, retention and contracting, as some states implement their own noncompete regulations and others continue to call for a national noncompete ban.
Three physicians recently joined Becker’s to share their thoughts on noncompete agreements and whether they would support a national ban on the practice.
Editor’s note: Responses have been lightly edited for clarity and length.
Question: What are your thoughts on the use of noncompete agreements in physician contracts? What restrictions, if any, should be in place?
Carl Dettwiler, MD. Gastroenterologist and Founder of Clearwater Gastroneterology (Lewiston, Idaho): Whether the recruiting entity is a single physician or small group, or a large group or a hospital, the cost to recruit and onboard a physician is large. Sometimes the recruiting entity may have hired new nurses or other help to assist the new physician. At first, patients will come to the new physician primarily based on the recruiting organization’s reputation. Later, the new physician will establish his/her own reputation that may supersede the organization’s reputation. The prospective or new physician should evaluate the area for any other alternative practice opportunities, so there are no surprises when the new physician comes.
The recruiting entity should be able to have some reassurance of some return on investment of recruiting a new physician. Therefore the covenant not to compete is only fair. However, the covenant not to compete should be time limited — for example, no longer than four years.
There should be agreement before coming to the new practice as to the penalty for breaking the noncompete agreement. That could be a fixed-dollar amount — $100,000 to $500,000 or perhaps the first year salary. By prior agreement on the penalty amount if the noncompete clause is broken, there is less time and money wasted on court costs and attorneys. There should also be a distance limitation on the noncomplete clause. It should be shorter than the radius of the “service area” of the recruiting entity.
Sadly, some have abused the noncomplete clauses. I have heard some hospitals effectively have a noncompete clause in each two- or three-year contract. That is effectively a perpetual noncompete or indentured servitude. Those long-term noncompete clauses are unethical and wrong. Once you have been practicing medicine for a few years and have established your own longer term reputation you should have freedom to move. The entity that recruited you should make the work experience so nice you want to stay rather than be chained because of an oppressive noncompete clause.
Alan Falkoff, MD. Hartford (Conn.) Healthcare Medical Group: Bad, if used by large organizations, blanketly and with large radiuses. [They] should be small, 5 miles at most, and should not be used by large groups and organizations. Good [or] OK if used by solo or small groups, as they have much more to lose by a physician leaving and setting up their own shop next door. Two to three years would be reasonable, with 15 to 20 miles — but these are often regulated by state agencies.
Sheldon Taub, MD. Gastroenterologist at Jupiter (Fla.) Medical Center: I’m a practicing physician in Florida, and noncompete contracts have been around since I started my practice. Even though they are enforceable in Florida, I think there’s some leeway in certain situations. With the current shortage of healthcare providers, I think enforcing them can harm patient access. Also, a young physician starting in practice who leaves the situation they are in is often forced to move a distance away with their family to try to reestablish another practice.
Q: Would you support a national ban on noncompete agreements? Why or why not?
Dr. Carl Dettwiler: I would not support a national ban on noncompete clauses in physician contracts, but I would support time limits — such as not longer than four years. I would support some distance limitation to the noncompete so that one could move outside the major service area with freedom even in the first four years.
Dr. Alan Falkoff: Yes, for large groups and organizations — for reasons above, because they can harass, intimidate and monopolize the physician market and physician opportunities get limited. No for solo or small group — but should have a reasonable and fair agreement that protects the significant investments these practices make, on very slim margins to begin with, and there are far, far fewer solo and small group independents now.
Dr. Sheldon Taub: In the past, they had talked about a nationwide ban for noncompetes. That never happened. With a shortage of physicians, they have become very unpopular. Also, physicians just out of training are hesitant in signing non-competes. I think the time has come that there should be a national ban on noncompete in the healthcare industry.
