FTC bans noncompetes: What physicians need to know

The Federal Trade Commission voted 3-2 to ban noncompete clauses for most U.S. workers April 23. 

The rule will take effect in 120 days and makes it illegal to include noncompetes in contracts and requires employers with noncompetes to tell workers that they are void. Existing noncompetes are enforceable only for senior executives. 

The U.S. Chamber of Commerce and other parties have signaled they will challenge the ban in court. 

This move could shift the contracts of the employed physician workforce. Between 35% and 45% of physicians are bound by noncompete clauses, the American Medical Association estimates

Physicians at the state level have been fighting to get noncompete policy reformed or, in some cases, banned. After the FTC first proposed the rule in January 2023, around 87% of physicians said they supported the proposed rule, according to a March Doximity poll of 4,853 practicing physicians. 

"Banning noncompete clauses for physicians can significantly enhance community benefit," Ernest Braxton, MD, chief of neurosurgery at Vail- (Colo.) Summit Orthopaedics and Neurosurgery, told Becker's. "Such clauses restrict doctors from practicing within a certain radius of their former workplace for a specified period, hindering patients' access to healthcare services. By eliminating these constraints, physicians can freely relocate to areas with underserved populations, improving medical access and quality of care."

Dr. Braxton added that this move will foster competition among healthcare providers and "empowers physicians to serve where they are needed most, promoting a healthier and more equitable society."

Overall, the FTC estimates that banning noncompetes will lead to $74 billion to $194 billion in reduced spending on physician services over the next 10 years. 

But other physicians, particularly those in private practice in smaller markets, are less supportive. 

"Small private practices are having difficulties competing with big hospital systems that provide guaranteed subsidized salaries," Daniel Larose, MD, CEO of Advanced Surgery Center in Omaha, Neb., told Becker's. "Recruiting and hiring and training a new doctor is expensive and time consuming, and if a new doctor can easily be recruited by a hospital system that offers above market salaries and then competes with you, it is another threat to the survival of private orthopedic practice, especially in smaller markets."

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