The FTC on April 23 issued a final rule that would effectively ban noncompete agreements — something spine surgeons have been anticipating for a while.
Under the new rule, which will take effect 120 days after being published in the Federal Register, most existing noncompete agreements won't be enforceable and employers won't be able to create new noncompete clauses.
Some hospitals criticized the FTC's move, and the American Hospital Association expects courts to weigh in on the rule.
Several spine surgeons shared their reactions to the move and how they think it will affect their work.
Note: Responses were lightly edited for clarity and length.
Chester Donnally, MD. Texas Spine Consultants (Dallas): I have so many mixed opinions (just pertaining to spine surgeons) on this matter! As a private practice surgeon, I see the benefits to a noncompete. Hospitals use income guarantees to help medical groups fund and recruit new physicians into the area, which is extremely helpful. Without a noncompete, a hospital system may not have much incentive to assist groups and new recruits starting their careers. Similarly, spine and orthopedic groups that float this one to two year salary could be on the hook if their new recruit simply leaves for [another practice] after a year before they became more productive locally.
On the other hand, some of these restricted covenants are terrible. People may hate a changed practice situation and are now stuck! The process of uprooting your family, finding new schools, or maybe having to commute two hours outside of your noncompete zone is not necessarily the American dream.
An interesting loophole I see keeping this policy, is that this rule doesn’t apply to "Senior executives." It is a term that could be used for spine surgeons in a group! It is defined as workers earning more than $151,164 annually, who are in a "policy-making position." Unfortunately, I’d bet all the industry higher-ups are going to be making sure their local field reps are now considered "senior executives" also!
Either way nothing will happen for a while because the Final Rule received approval from only 3 of 5 FTC Commissioners. Also, the U.S. Chamber and others will challenge the FTC's authority to even enact the Rule. Given these circumstances, with the anticipated rulings of certain federal courts and based on where the chamber may bring the case, spine surgeons should expect the "Final Rule" to take many more months, if not years, to be decided.
Thomas Errico, MD. Nicklaus Children's Hospital (Miami): Overall, I am firmly in favor of the FTC's vote on non-competes today. Speaking as a physician, I can understand a hospital employer not wishing to foot the bill for transporting a physician to an area and helping them get started only to see them leave and set up shop next door. From the physician's perspective, however, the innate talent and practice experience he brings to the table should not be "owned" by the hospital and prevent patient access because he leaves an employment contract. At the end of the day, noncompetes were hard to enforce and brought unnecessary litigation with the legal system benefiting rather than patients or the physicians. Although it is a complex issue, I remain in favor of the FTC ruling today and hope it becomes the law of the land.
Joseph Ferguson, MD. MedStar Health (Washington, D.C.): Noncompetes do exist in a lot of big cities, and I wonder if people will move around a little bit more. But with that said with what we do, it's really about developing a practice. It takes a long time for elective surgeons to develop a strong practice. So it may change the way contracts work. But I'm not sure we're going to see a huge change in the way people move around. I don't think it's going to be anything like we've seen in college football or basketball with the contracts and everything else where people are moving regularly.
Michael Gallizzi, MD. The Steadman Clinic (Vail, Colo.): Especially for physicians, noncompetes are a massive barrier to being able to be part of a care system and move within the state and not have to switch complete regions. Sometimes physicians are locked into certain jobs and basically can't ever leave with their kids in school or communities they develop despite an organization not performing well. I think being able to get rid of the noncompete clause is just a total game changer.
I was involved in a noncompete issue very early in my career, and that set me back years. It cost a lot of money despite noncompetes not being enforceable in Colorado. A lot of physicians have spent a lot of money fighting those things over the years, and that ultimately just creates a lot of burnout and dissatisfaction when your paycheck is going to fight to work.
Brian Gantwerker, MD. The Craniospinal Center of Los Angeles: It's very good. There is an exception for the non-for-profits. So a lot of the hospitals that either are legally or operate as a non-profit will be accepted, but I think it sends a good warning shot across the bow of employers. A lot of times people leave their jobs not because they're ready to move on, but because they simply can't tolerate the working conditions anymore. I think, especially with the high degree of physician burnout, which is exceeding 50% in some studies, is egregious. While the not for profits are exempted from these restrictions, I think it sends a proper message to them that it could potentially be expanded at some point.
I would have liked the AMA to come out harder in favor of this but they were a little bit soft pedaled, I think. And I think that's just there's a lot of relationships that go beneath the surface. But I think it really bolsters physician confidence that there will be more motivation for employers to treat their staff well. With over 80% of physicians being employed now this is going to set a precedent, if not immediately, certainly in the near future. At the end of the day, you know, employers have to treat their staff like human beings.
Granted there could always be unreasonable demands, and things can go awry on both sides of the employment coin. However people will be able to start up more small businesses, and have more control over their autonomy. So I think for physicians if this does in fact translate to some sort of messaging it's the right messaging because they will be able to join or start a practice near their former employer and maybe do things better. If you're talking about access, that will increase people's access to health care.
I think a lot of the spin messaging will be coming from the for-profit or venture capital or other facilities and hospitals that will cry foul that it will make things so much harder for patients when in fact we have seen a tremendous amount of consolidation right now, not just in healthcare, but in general.
It's not fair that there's no competition, and this translates to healthcare. Although many people will try to have you believe physics doesn't apply and basic economic principles are implying that even water flows uphill. But if you have more competition to drive prices down, and so you have more people who can do a service, those people are going to compete in the marketplace. And I think it's anti-competitive to restrictive covenants …So I think this is a good moment. This is a moment that I think hospitals will need to consider very carefully because it may be coming for them fairly soon.
Zoher Ghogawala, MD. Lahey Hospital and Medical Center (Burlington, Mass.) and President of NASS: Noncompete clauses in contracts prevent patients from having access to their doctor of choice in many cases. A doctor should be allowed to practice in an environment that allows them to be productive and have access to his/her patients regardless of whether or not the doctor was previously working in another practice in the community. The action by the FTC is in service of patients and provides greater access to doctors.
Richard Kube II, MD. Prairie Spine & Pain Institute (Peoria, Ill.): Banning noncompete language in contracts is overstepping. When you sign a contract, you do so freely. If restrictive covenant is a problem, negotiate it out of your contract. This decision adversely affects small medical practices. Bringing a spine surgeon into a practice is a several hundred thousand to million dollar investment that takes a few years to recover. If that individual can simply cross the street or be poached by the local hospital system, it is hard to justify the hire. Hospitals or institutions that have multiple downstream revenue verticals unavailable to private practice have a competitive advantage in hiring as they recover investment faster and can therefore weather an early departure of a physician. The bottom line is without a way to protect an investment in new employees, there is no incentive to hire them. There is zero chance we will hire new docs if we cannot protect our investment. This will cause small practices to go extinct over time.
Morgan Lorio, MD, of Advanced Orthopaedics and Pain Management (Orlando, Fla.) and ISASS president-elect: It's huge, because when folks encounter a bad scenario within the group or hospital setting they can't leave or they have to put themselves at risk by going some extreme distance to be economically feasible. Then that diminishes the work they've done in that community. I don't see any downside to [the ban]. Frankly, this is long overdue.
What I've encountered in the past was when you leave a practice, you immediately find that the hospital or the group shuts its doors, and they don't know where you went even though you're still in the same community. So you have patients that are seeking to follow up with you that are in the middle of their care regardless of how you left with or without a noncompete. In retrospect, this still provides a better opportunity to maintain a better relationship with those patients and therefore better outcomes. Previously when you left, you had to depart and nobody knew anything about anything. Then all of a sudden the follow up of those patients was assimilated into the prior practice or lost.
Vijay Yanamadala, MD. Hartford (Conn.) HealthCare: While physician non-compete clauses have been touted to limit physician mobility, in general they are confined to short periods of time (generally about one year) and also in limited geographic scope (15 mile radius from the primary site).
As the new rule is being implemented, one of the biggest questions remains whether it will apply to most physicians, spine surgeons included. Specifically, the final rule states that senior executives will be excluded from the new rule. The final rule defines senior executives as workers earning more than $151,164 annually and who are in policy-making positions. Most physicians will be earning more than this cap and are going to be in policy making positions to the extent that they will contribute to defining clinical policy.
Should the rule apply to physicians, it will certainly free physicians to become more mobile than they are currently. However, I do not believe that non-compete clauses are the major source of physicians remaining employed in a particular position or with a particular employer. Physicians in general are inherently much more mobile than most other vocations.
Christian Zimmerman, MD. St. Alphonsus Medical Group and SAHS Neuroscience Institute (Boise, Idaho): The FTC's ruling on removing and non-mandating noncompete clauses assuredly allows physicians to work for many
institutions and systems if one desires. Arguably this assists in competitive marketplace recruiting and may actually lessen the restrictive practice of relocation when issues such as termination or non-rehiring arise. This has its merits and is claimant to save healthcare delivery dollars which is ever so necessary.