What physicians need to know about Federal Trade Commission noncompete ban
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Key takeaways:
- The Federal Trade Commission noncompete ban may reshape the health care landscape for all physicians.
- The official legislation for the noncompete ban is still under review.
The Federal Trade Commission proposal to ban noncompete clauses for all workers has sent powerful ripples through the health care industry, prompting physicians of all specialties to reevaluate their career trajectories.
As we await the final rulings and legislative scope, it is crucial to understand the potential implications of this ban and how it may impact physicians in all stages of their careers.
Noncompete ban
Noncompete clauses have long been common in health care employment and partnership contracts, prohibiting physicians from practicing within a certain geographic area for a specified period after leaving an employer. The proposed ban by the FTC aims to do away with such clauses, arguing that noncompete bans stifle competition, reduce wages and limit innovation in both the workplace and respective industries. Despite the official FTC proposal, released in April 2024, the official legislation is still under review as courts and other legislative bodies develop a framework for its scope, final form and enforceability in a variety of employment situations.
As we look to the future, several scenarios could unfold from this FTC ban, some with profound implications for physicians and their value in various practice scenarios. Below are several possibilities with a discussion on what this could mean for a physician’s career.
Complete ban on noncompete clauses
Increased mobility: A complete ban on noncompete clauses could encompass hospital-employed physicians, doctors working for nonprofit employers that function similar to for-profit entities and those in partnership or shareholder arrangements. Such a ban would significantly enhance job mobility, allowing physicians to move between employers without geographic restrictions. In some situations, physicians currently working for one employer may also be able to work for a competitor in the same geography simultaneously, thereby providing patients with more access to care. As expected, a complete ban on noncompete clauses would result in a more dynamic job market with increased opportunities for career advancement and better work-life balance as physicians everywhere would be able to better realize the true value they provide their communities.
Competitive hiring practices: Employers likely would offer more attractive compensation packages and benefits to retain top talent, potentially leading to higher salaries and improved work conditions.
Practice expansion: Physicians interested in opening private practices or joint ventures with other health systems would have fewer barriers, fostering entrepreneurial growth and increased patient access to diverse care options. Cost of care may also come down if competition is significant.
Partial ban or restriction on scope
Geographic and temporal limits: The final ruling, as interpreted by courts, might impose limits or restrictions rather than a full ban. This could still enhance mobility of practices, but to a lesser extent.
State-specific regulations: Some states may choose to implement their own rules, which would lead to a patchwork of regulations to understand. Physicians would need to stay informed and follow rule changes.
Negotiation leverage: Even with partial restrictions, physicians would have more leverage to negotiate better terms and conditions in their contracts, given the tremendous value they provide to communities and the large patient following most surgeons have. Those physicians with niche specializations and highly sought-after skills that are difficult to replace may have even better bargaining power and job security.
Legal challenges, delays
Prolonged uncertainty: Legal challenges from business and industry groups could delay the implementation of the ban by the FTC. During this period of uncertainty, physicians should seek legal counsel when negotiating contracts to ensure they are protected under current and future bans.
Interim solutions: Employers might explore alternative restrictive covenants such as nonsolicitation and nondisclosure agreements, to retain some control of employee movements and their patient base. It is imperative for physicians to scrutinize these to avoid unintended limitations.
Forecast the practice landscape
Although it is difficult to predict the exact timeline for such a developing situation, below is a rough guide on the pace of change during the next few years and what physicians of all ages can expect:
Short-term (0 to 1 year): Expect ongoing legal debates and potential delays in the final ruling. Focus on staying informed and adaptable. If one is considering a new job or negotiating compensation or other contractual provisions, it would be wise to remain aware of possible future changes and the state of this legislation.
Midterm (1 year to 3 years): If the ban is enacted, we expect one would begin to see increased job mobility and competitive hiring practices to retain valued physicians. Physicians should be prepared to seize better job opportunities or renegotiate their existing contracts.
Long-term (3 or more years): The health care landscape may shift toward more flexible and innovative practice models, particularly as the U.S. demographic trends require increased access to surgical services in more cost-effective and time-efficient settings. If fewer job mobility restrictions are maintained, physicians will more easily realize better work-life balance and time-efficient practice patterns, leading to improved job satisfaction and patient care.
Conclusion
The FTC noncompete ban holds the potential to significantly reshape the health care practice landscape for physicians of all ages.
By staying informed, considering diverse practice options and maintaining a sense of flexibility, both young and seasoned physicians can navigate these changes effectively and position themselves for success in a dynamic health care environment.
Reference:
Mandell and OJM Group partners are pleased to announce the 2024 publication of our newest book, Wealth Strategies for Today’s Physician: A Multi-Media Playbook. The book’s innovative format features more than 90 links to videos and podcast episodes to enhance important financial topics for physicians. To receive a free print copy or ebook download, text HEALIO to 844-418-1212, or visit www.ojmbookstore.com and enter code HEALIO at checkout.
For more information:
Sanjeev Bhatia, MD, is an orthopedic sports medicine surgeon practicing at Northwestern Medicine in Warrenville, Illinois. He can be reached at sanjeevbhatia1@gmail.com or @DrBhatiaOrtho.
David B. Mandell, JD, MBA, is an attorney and founder of the wealth management firm OJM Group www.ojmgroup.com. He can be reached at 877-656-4362 or mandell@ojmgroup.com.
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