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Banning noncompete contracts for medical staff riles hospitals
Dr. Jacqui O’Kane took a job with a hospital in southern Georgia in 2020, as the lone doctor in a primary care clinic in a small town that’s a medically underserved area. She soon attracted nearly 3,000 patients.
But she said the hospital pressed her to take more new patients, so she had to work nights and weekends — not ideal for the mother of two young daughters. She thought about opening her own practice in town, which would give her more control over her schedule.
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The problem was that her threeyear contract included a noncompete clause barring her from practicing within 50 miles of the hospital for two years after it ended. So, she has decided to join a practice in South Carolina. That means she and her husband will sell their house, move hundreds of miles, and enroll their children in a new school.
“It sucks,” she said. “I know my patients very well, and I feel like I’m being forced to abandon them. But I can’t stay in this job because it’s unhealthy for me to work this much.”
In January, the Federal Trade Commission proposed to end predicaments like O’Kane’s by prohibiting noncompete clauses in employment contracts. “The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” said Lina Khan, the FTC chairperson.
The proposed rule would prohibit employment contract provisions that block employees or contractors from working for a competing employer when they move on, or from starting a com- peting business. Such contracts typically bar people from working within a certain geographic area for a period after the job ends.
The FTC estimates that 30 million workers are bound by noncompete clauses. It says ending those provisions would boost economic competition, reduce prices, and increase workers’ earnings overall by up to $296 billion a year.
Eliminating noncompete contracts would allow doctors to practice wherever their services are needed, which would improve patients’ access to care. They say it would free them to speak out about unsafe conditions for patients, since they wouldn’t have to worry about getting fired and not being able to continue working in their community.
But the FTC’s proposal faces resistance from employers in all industries, including hospitals and private equity-backed medical groups that employ thousands of physicians, nurse practitioners, and other medical professionals.
It’s about money for them, too. They say eliminating noncompetes would drive up the cost of hospital care because hospitals would have to pay physicians more to keep them. They also say noncompete clauses are necessary to protect proprietary information and investments in employee training, and to prevent employees from taking clients and patients with them when they leave.
Business and hospital groups are likely to sue to block the rule, arguing that Congress hasn’t authorized the commission to regulate noncompete clauses. While there is bipartisan support in Congress for legislation that would restrict noncompete clauses and authorize FTC action, the bill hasn’t advanced; similar legislation stalled in past years.
Health care industry groups hope to block any change with the argument that the FTC lacks statutory authority to regulate nonprofit, or tax-exempt, hospitals, which account for nearly 60% of all U.S. community hospitals. In the proposed rule, the FTC acknowledged that entities not conducting business for profit may not be subject to the rule because they are exempt from coverage under the Federal Trade Commission Act, the law that gives the agency its authority.
“The rule would create an unlevel playing field because we compete with nonprofit and public hospitals that wouldn’t be subject to it,” said Chip Kahn, CEO of the Federation of American Hospitals, which represents for-profit hospital systems.
But other experts aren’t sure the FTC lacks authority over nonprofits. While the FTC Act exempts nonprofits, the commission has acted many times under the Sherman Act and the Clayton Act, federal antitrust laws used to block anti-competitive conduct by nonprofit hospital systems. It’s not clear whether the FTC will clarify this issue before it finalizes the rule.
“We fully support having the noncompete ban apply to all hospitals,” said Dr. Jonathan Jones, president of the American Academy of Emergency Medicine, half of whose members are bound by noncompetes.
California, North Dakota, and Oklahoma already ban enforcement of noncompete clauses for all employees, while six other states prohibit enforcement of noncompete clauses for physicians. Even in states without bans, judges have
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