The health care industry has changed dramatically over the past several decades. One change is an increasing prevalence of noncompete agreements (NCAs) for providers. NCAs are a common legal covenant that restrict employees from working for a competitor or starting a competing business for a certain period of time and/or within a specified geographic boundary after leaving their current employer. In the health care industry, NCAs are generally structured to prevent a departing practitioner from working within the footprint of the practice they are leaving for a specified period of time (two to three years is average). While NCAs have become commonplace across all sectors, with terrible consequences for workers, their wide and growing use in the health care workforce is particularly damaging as they can negatively impact health outcomes nationwide.
Concern about the adverse impacts of NCAs on patients has led to heated national debate over their use in health care, with many patients and providers calling for a nationwide ban, and medical employers lobbying aggressively to prevent one. Currently, there is no federal legislation regarding NCAs. The lack of federal legislation has prompted several states to pass their own bans to protect health care workers and patients, including New Hampshire, Delaware, Massachusetts, and Rhode Island. In January, Federal Trade Commission proposed a ban on NCAs, including in health care settings. The FTC and states should finalize a ban on noncompete agreements in all hospitals because NCAs make it harder for providers to establish trusted relationships with their patients and to advance health equity in the system.
Noncompete agreements (NCAs) are a common industry practice and have become pervasive in the health care industry
In health care, industry consolidation is suspected by industry observers to be a driving force in the increasing use of NCAs: large health care practices that have invested heavily in expanding their service area leverage these covenants to suppress competition within the market by making it difficult for doctors to leave and launch or join a rival practice. A 2018 study found that approximately 45 percent of doctors are bound by NCAs. The researchers also concluded that these agreements are common across every specialty, practice type, demographic group, and geographic market. While more recent information is not yet available (and further research is needed), it is likely that the predominance of NCAs is now even greater than 45 percent, with physicians reporting that these types of agreements are so common that they don’t have a choice about signing them.
Health care employers, including hospitals, indicate that they use these restrictive covenants to protect their investment in recruiting and training new providers, and to ensure that their patient base is loyal to them and not the doctors they employ. Employers say new physicians will not operate at a productivity level that covers their salary for two to three years. However, as we see in regions where NCAs are banned, in their absence, employers turn to carrots rather than sticks, incentivizing retention instead of punishing defection. Strategies such as employer-sponsored training, supportive workplace culture, and cultivation of belonging in the workplace can prove just as effective as legal constraints at retaining workers.
With FTC’s proposed ban on NCAs, key health care industry stakeholders have already weighed in on whether a ban should be instituted. For example, the American Medical Association, which represents physicians and medical students, has come out in favor of the FTC proposed rule, while the American Hospital Association, which represents hospitals, one of the biggest health care employers, opposes it.
NCAs can strain the provider–patient relationship, a relationship that is critical to providing equitable care
Patient trust in their health care provider is a critical component of ensuring people get the care they need and is directly related to health outcomes. Trust between providers and their patients takes time to grow, especially for patients who have been most marginalized for reasons of structural discrimination in our health care system. NCAs interfere with this relationship. According to standard protocol under a typical NCA, patients are not informed about provider relocation decisions and are not provided with updated contact information for their provider, which means that NCAs basically encourage a disappearing act by physicians that only serves to interfere with trust and continuity of care. The American Society of Nephrology, for example, said the following in their comment letter to the FTC supporting a ban on NCAs:
Patients reserve the fundamental right to choose their health professional, which includes the maintenance of an on-going professional relationship with the physician of their choice. Through the maintenance of that relationship, continuity of care is improved and that continuity is known to improve outcomes, particularly for patients with complex chronic conditions.
Also, because of increasing consolidation in health care, which results in larger and larger health care organizations, a provider switching to a new employer will likely have to move far outside the footprint of the area they are leaving, making continuity challenging even if the patient were informed, especially for patients who do not have easy access to transportation, flexibility in their schedules, child care availability, and so on. This disappearing act manufactured by NCAs erodes patient trust in the health care system by essentially barring providers who change employers from preserving any relationship with and loyalty to their patients.
NCAs make it harder for providers to prioritize addressing overall workforce needs and shortages
NCAs further exacerbate workforce shortages and care deserts by limiting health care providers’ ability to move into or continue serving in populations that needed them most. These shortages were exacerbated the most in rural areas and other regions (such as communities of color), which already were being underserved due to systemic inequities.
The pandemic both illustrated and intensified health care workforce shortages across the nation as NCA-bound physicians were unable to assist at neighboring hospitals experiencing COVID flares and staffing shortages. Although the public health emergency of the pandemic is officially over, staffing shortages persist, particularly within specialty health care, where there are generally a limited number of practitioners even in the nation’s best-served markets. As stated by American Medical Association Board of Trustees member Ilse Levin, “Allowing physicians to work for multiple hospitals can enhance the availability of specialist coverage in a community, improving patient access to care and reducing care disparities.”
NCAs contribute to stress and moral injury for physicians
NCAs help to drive burnout and moral injury among physicians as doctors are forced to prioritize corporate profit models above patient care and wellbeing (even doctors at private, nonprofit hospitals). These restrictive agreements remove physician agency and autonomy, compromising doctors’ ability to focus on providing quality care and advocate for their patients’ needs and to providing equitable, relationship-based care with patients. These factors are contributing to distressing trends in the health care workforce, including increasing physician stress and frustration, mounting job dissatisfaction, and rising exit rates.
NCAs can trap providers in inequitable and potentially harmful workplaces
The ability to move between employers is a key source of worker power, and physicians without this leverage are not positioned to negotiate successfully for personal needs and those that relate to patient care, such as increased personal protective equipment (PPE) or more flexible work hours. This lack of bargaining power also drives inequities within the health care workforce itself: by trapping physicians in ill-matched or unsuitable employment situations and eroding negotiation leverage, NCAs uphold discriminatory practices in employer settings, including significant pay differentials between female and male physicians.
NCAs are particularly damaging for recently graduated physicians, who are less likely to have the resources and awareness to negotiate contracts as compared to older generations of physicians. Since these incoming cohorts of physicians have higher percentages of women and doctors of color, the trap that NCAs set for them in particular has huge equity implications. As described by the Wisconsin Medical Society’s letter to the FTC supporting a ban on NCAs:
Emerging from medical school with hundreds of thousands of dollars in debt and having spent years focusing almost exclusively on learning their medical skills, new physicians can find the prospect of hiring legal representation to counter a well-established team of hospital/health system attorneys too daunting. Grateful to finally embark on their active medical career, physicians sign contracts loaded with restrictive provisions that can lie dormant for years, emerging only after important patient–physician relationships have been established.
More research is needed to understand the prevalence and impact of NCAs in health care
There is much we still do not know about the prevalence of NCAs and their impact on advancing health equity. Of particular importance would be data on the relationship between job satisfaction and NCAs for physicians, especially by sociodemographic group. Also, very little work has been done to measure the impact of NCAs on rising health care costs, although a recent Florida lawsuit between four oncologists and their former employer alleged that NCAs create monopoly-like conditions that “enable (the company) to charge significantly inflated prices.” The FTC has also estimated that the proposed ban on NCAs would reduce health care costs by $148 billion annually because of its relationship to consolidation and unnecessary costs in the industry.
Furthermore, there are no significant data on the prevalence or impact of NCAs for health care providers other than physicians—a large, diverse, and essential part of the workforce that includes nurses, physician assistants, physical and occupational therapists, emergency room technicians, and other critical roles.
The FTC should finalize its rule to ban NCAs in health care to help make it easier, not harder, for physicians to provide equitable care for their patients. And since there is some ambiguity whether the FTC rule will apply to nonprofit hospitals—which comprise the majority of hospitals in the United States—states should also pass their own bans to ensure that NCAs are removed from the entire health care workforce.