President Joe Biden’s campaign to outlaw noncompete agreements that restrict a worker’s ability to leave their job for a competitor might cause a big upheaval in the health care business, where these agreements have become widespread among physicians and nurses.
As per a report by NBC News, the Biden administration is in the final stages of issuing a rule that would prohibit employers in all industries from including clauses in employment contracts that prohibit workers from joining a competitor or starting their own business, a move he highlighted in last week’s State of the Union address.
The Biden administration estimates that one in five American workers is bound by a noncompete agreement, as the practice has become widespread. According to conversations with doctors, nurses, and medical groups, huge health systems and private equity firms have increasingly acquired group doctor practices and hospital staffing agencies, asking their new employees to sign wide noncompete agreements.
According to Jonah Mainzer, a senior policy adviser for the American Nurses Association, it is common practice for many health systems across the nation to require all of their nurses to sign these documents. It appears to be more prevalent among younger nurses who are just entering the field than it is nationwide.
For doctors and nurses, the agreements typically provide a one- to two-year period during which they cannot practice medicine within a certain geographical area after leaving or being fired from a position. In certain cases, these geographical limits might be so extensive that they preclude a physician or nurse from operating in an entire region, compelling them to relocate to a different city or state or temporarily cease practicing medicine.
Supporters of the agreements argue that they are vital to safeguard hospitals and medical practices that invest in recruiting, relocating, and educating a physician, as well as in marketing their work to assist them increase their patient base. Opponents, however, contend that the agreements reduce wages, contribute to rural doctor shortages, and stifle competition.
Jonathan Jones, president of the American Academy of Emergency Medicine, estimated that approximately 50 percent of emergency department physicians are bound by noncompete agreements. “We feel that the only purpose they exist is to reduce competition,” Jones said.
“In most major cities, there are numerous hospitals within a few miles of one another.” “Jones noted. “If I am dissatisfied with the hospital’s administration, it may be because I believe they are not delivering the greatest care for patients, they are offering me less compensation, and the hospital next door wants to hire me. I cannot do that due to the noncompete clause.”
Last year, a poll of 558 doctors across specialties conducted by the physician-oriented news website Medscape revealed that more than 90% of respondents currently or formerly had a noncompete agreement. Separate research conducted by Ohio State economist Kurt Lavetti revealed that nearly half of primary care physicians in group practices and 37% of physicians employed by hospitals or independent care facilities had noncompete agreements.
According to Jones, who practices emergency medicine in Mississippi, the agreements, which frequently apply even if a doctor is fired, may also prevent doctors from speaking out against unsafe medical practices or unfair working conditions for fear of being fired and having to relocate their families in order to find another job.
“When you include a noncompete clause stating that if I’m fired, I can’t work within a 100-mile radius, that means I’ll have to pull my children out of school, move my entire family, or live in a hotel and not see my family while I’m working,” he added. It has a chilling impact on the willingness of physicians to speak out against unethical or unfair practices.
As part of a larger attempt to increase worker competitiveness, Biden asked the Federal Trade Commission to eliminate or restrict noncompete agreements in 2021. Last month, the FTC proposed a rule to prohibit the agreements across all businesses, and it will accept public comments until March 20 before making a final conclusion.
“By restricting workers from seeking better options that offer higher compensation or better working circumstances and by blocking employers from employing suitable individuals bound by these contracts, noncompetes harm workers and hinder competition,” the FTC said in announcing the proposed rule.
In scores of letters sent to the FTC over the past month, doctors detailed the negative effects of noncompete agreements, including having to relocate themselves and their families in order to find work after quitting a position, and urged the agency to outlaw them.
According to Mainzer of the American Nurses Association, the elimination of the agreements might have a substantial influence on the capacity of workers to negotiate salaries and switch jobs. “If you’re stuck with an employer, htheycan reduce your pay. It is not a fully free market,” Mainzer stated. “If you can market yourself freely, you can try to find the highest bidder wherever you are most qualified, but they cannot do so at the moment.”
The FTC’s action is anticipated to elicit pushback from businesses in a variety of industries. Given the potential economic and legal ramifications of the FTC’s plan, the American Hospital Association and one hundred other industry groups have requested extra time to draft a response.
Hospitals argue that the FTC proposal is too broad and would prevent exceptions where they may be warranted, such as when a hospital spends a significant amount of money recruiting and relocating a physician and assisting them in building a patient base, according to a hospital industry representative. In addition, nonprofit hospitals, which make up more than half of hospitals, would not be covered by the FTC rule, giving them an unfair advantage, according to the spokesman.
“The proposed regulation errs by attempting to create a one-size-fits-all rule for all employees across all industries, without studying the unique effects that this rule will have on the health care field, and hospitals and health systems in particular, particularly as they continue to face serious workforce shortages that can threaten patient access to care,” said Chad Golder, deputy general counsel for the American Hospital Association.
The American Medical Association, the largest organization representing physicians, has stated that its ethics policy prohibits “unreasonable noncompete” agreements but opposes the FTC rule’s sweeping character. The AMA stated in a statement that “several states have implemented negotiated health care-specific noncompete statutes that take into consideration their unique health care markets and that balance competing stakeholder interests.” “A proposed federal ban on all noncompete agreements must be weighed against the balanced approach of these states.”
Susan Kressly, a physician who spent the majority of her career in the Philadelphia area, stated that she had been on both sides of the issue, having been bound by a noncompete agreement when working for a group practice and then asking doctors to sign one when she opened her own practice. She acknowledged that noncompete clauses can assist medical practices in protecting their investment in physicians and nurses.
She stated, however, that the agreements have become excessively broad in many cases, with some large hospitals not only prohibiting physicians from working near their former employer but also any facilities that the hospital owns, requiring physicians to move out of state or cease practicing medicine for more than a year.
Kressly stated, “It seems obvious that you need a means to preserve that investment so that individuals don’t open up shop next door and compete with you after you’ve given them a chance.” “Noncompete agreements safeguard individuals ready to invest in the expansion of their business. But it has grown out of hand and become unfair due to all the mergers.”
