Show Original

New Law Voids Some Hospital-Imposed Noncompetes on Physicians

Published: August 7th, 2019

By: Claudia Haines Jones

  • Share:

A law went into effect on July 1 that takes a first step in correcting the negative impact of noncompete agreements that force doctors to abandon patients in order to preserve a hospital’s (or medical practice’s) monopoly in a medical specialty. The change is good news for patients in rural counties who have been abruptly losing access to physicians who have treated them for years, says Claudia Haines Jones, a Dean Mead attorney whose clients include physician practices, hospital medical staffs and individual physicians. The law is a move in the right direction to protect physicians’ freedom to practice in their communities and patients’ right to continuity of care with their physicians, she says. Jones, the managing shareholder of Dean Mead’s Brevard County office, represents the interests of more than 1,000 physicians on issues related to hospital-based medical practices. 

Noncompetes Run Doctors Out of Communities

Due to reimbursement rules that favor large health care providers, in the past decade many doctors migrated to work for hospitals, says Jones. Few doctors are striking out to form new medical practices in the present reimbursement environment, and this is unlikely to change. Doctors employed by hospitals (mostly through hospital-affiliated medical groups) are usually required to sign sweeping noncompete agreements that forbid them from practicing in the same geographic area for two years after leaving the provider’s employment. That applies even when contracts are not renewed by the employer. The result is that doctors have to pack up and move to another community if their employment with a hospital ends, upending their families and ties to the community. Making matters worse, says Jones, these noncompetes may forbid doctors from treating or contacting any of their former patients, who suddenly find that a physician who has been treating them for years has just disappeared.

While noncompetes often level the playing field by protecting physician-owned practices from the unfair competition of employed doctors who break away, solicit former patients and siphon off revenues from their former practice, their use by hospitals has tilted the playing field in health care, robbing communities of doctors in the specialties, causing havoc in the lives of physicians and leaving patients in the lurch. Doctors often are let go by the hospitals not because their clinical skills are found wanting, but because hospitals are willing to abandon more seasoned doctors if they balk at pay cuts or if lower-cost recruits can be found. Physician compensation has been a go-to line item for hospitals’ cost-cutting, even while hospital administrators’ own compensation has marched steadily higher.

Jones says she has seen doctors uproot their families and move to another county or move off the local grid by working as temporary doctors out of state for two years until their noncompetes expire. More than half of Florida physicians are over 50 years old, according to a 2017 state government report on the physician workforce, and a forced move can be devastating to them, their families and their patients. This is easiest to understand in the world of cancer treatment, where patients have long-term, intimate relationships with their doctors. One day a patient goes to a clinic and discovers the doctor who has overseen treatment for years is gone.

Doctors and Patients in Rural Counties Will Benefit

Fortunately, the Legislature has passed a law that begins to address this imbalance in power between doctors and their hospital employers. Under Florida Statute 542.336, a restrictive covenant entered into with a physician is void and unenforceable in a county where one health care entity contracts, directly or indirectly, with all physicians in that physician’s specialty. While this won’t help physicians in urban areas who are locked into noncompetes, Jones says that a number of counties in Florida have only one hospital group and will fall under the law.

Doctors Will Still Be Required to Sign Noncompetes, but Such Agreements May Be Void

Jones has found that many physicians don’t read their employment agreements. Hospitals frequently tell physician recruits that the hospital will not change a single word in an employment contract, and they discourage doctors from getting legal advice or even engaging in any negotiation over the terms of their employment. Discouraged but in need of a place to practice medicine, doctors sign.

Despite the new law, Jones expects hospitals to continue to require doctors to sign noncompetes as a condition of employment. The noncompetes may or may not be enforceable, depending on the state of the local labor market during the term of the agreement and when it terminates. Jones says that she hopes the Legislature continues to loosen the grip hospitals have over doctors – and, by extension, patients’ access to their doctors. In the meantime, she advises any doctor who is presented with an employment agreement to consult an attorney.