Independence Day for Employed MD's: FTC bans Non-Competes

[drusso]

Free at last, free at last! Thank God almighty, you're free at last!

FTC votes to ban noncompete agreements

The Federal Trade Commission (FTC) voted 3-2 Tuesday to ban noncompete agreements that prevent tens of millions of employees from working for competitors or starting a competing business after they…

thehill.com

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[RoloTomassi]

Existing contracts may still be enforced if doctors are considered senior executives:


"For existing noncompetes, the final rule adopts a different approach for senior executives than for other workers. For senior executives, existing noncompetes can remain in force. Existing noncompetes with workers other than senior executives are not enforceable after the effective date of the final rule.
Fewer than 1% of workers are estimated to be senior executives under the final rule.
Specifically, the final rule defines the term “senior executive” to refer to workers earning more than $151,164 annually who are in a “policy-making position.”

 

[drusso]

Existing contracts may still be enforced if doctors are considered senior executives:


"For existing noncompetes, the final rule adopts a different approach for senior executives than for other workers. For senior executives, existing noncompetes can remain in force. Existing noncompetes with workers other than senior executives are not enforceable after the effective date of the final rule.
Fewer than 1% of workers are estimated to be senior executives under the final rule.
Specifically, the final rule defines the term “senior executive” to refer to workers earning more than $151,164 annually who are in a “policy-making position.”

No one thinks regular doctors are senior executives. Most are not telling people what to do.

 

[Status Sciaticus]

Existing contracts may still be enforced if doctors are considered senior executives:


"For existing noncompetes, the final rule adopts a different approach for senior executives than for other workers. For senior executives, existing noncompetes can remain in force. Existing noncompetes with workers other than senior executives are not enforceable after the effective date of the final rule.
Fewer than 1% of workers are estimated to be senior executives under the final rule.
Specifically, the final rule defines the term “senior executive” to refer to workers earning more than $151,164 annually who are in a “policy-making position.”

No one thinks regular doctors are senior executives. Most are not telling people what to do.

this would only apply to chairs, vice-chairs and C-suites

 

[RoloTomassi]

In my PP, we're all partners, have noncompetes, make more than 151k and are in policy making position. I know you're thinking HOPD employed perspective. I was thinking of my situation.

 

[Status Sciaticus]

In my PP, we're all partners, have noncompetes, make more than 151k and are in policy making position. I know you're thinking HOPD employed perspective. I was thinking of my situation.

Is there a super partner? say.. president or managing partner?

 

[RoloTomassi]

Is there a super partner? say.. president or managing partner?

No all equal. Just using my practice as an example, I have no issues

 

[PinchandBurn]

Free at last, free at last! Thank God almighty, you're free at last!

FTC votes to ban noncompete agreements

The Federal Trade Commission (FTC) voted 3-2 Tuesday to ban noncompete agreements that prevent tens of millions of employees from working for competitors or starting a competing business after they…

thehill.com

Is there a $ amount k like under 150k or anything. Or just anyone that's not an executive..wow

 

[PMROralBoards]

Only impacts for profit practices/hospitals I believe. Non-profit hospitals can still have non-competes

 

[DOctorJay]

Only impacts for profit practices/hospitals I believe. Non-profit hospitals can still have non-competes

 

[SSdoc33]

I wonder if this will have any affect on MGMA numbers

 

[drusso]

I wonder if this will have any affect on MGMA numbers

Doctors will walk with their feet and open up their owns businesses once the shackles come off.

 

[SSdoc33]

Doctors will walk with their feet and open up their owns businesses once the shackles come off.

You are like a private practice prophet. Preach away!

 

[PinchandBurn]

Doctors will walk with their feet and open up their owns businesses once the shackles come off.

i hope so

Dr Ken Candido's article in Beckers was great. Let PCPs be free and let them send their patients to the right doc vs 'who the man' tells them to.

 

[jwalker12]

What if you're an employee at a private practice. Are you free to leave and practice? That employee is making >150k but not involved in "policy making" for the practice. Would you still need a lawyer to review contract you guys think?

 

[Agast]

What if you're an employee at a private practice. Are you free to leave and practice? That employee is making >150k but not involved in "policy making" for the practice. Would you still need a lawyer to review contract you guys think?

It’s not worth the time and money for a group to try to argue their employed physician is a senior executive. I wouldn’t sweat it. And they would lose.

 

[lobelsteve]

It’s not worth the time and money for a group to try to argue their employed physician is a senior executive. I wouldn’t sweat it. And they would lose.

Naivete. Winning and losing are not the game. It is draining someone's resources and impeding future employment. The side with the most money for lawyers will win.

 

[Status Sciaticus]

Naivete. Winning and losing are not the game. It is draining someone's resources and impeding future employment. The side with the most money for lawyers will win.

Lawyers do take cases on contingencies. You do have to pay the retainer though.

 

[lobelsteve]

Lawyers do take cases on contingencies. You do have to pay the retainer though.

And the other side is a multi-billion dollar company.

 

[RoloTomassi]

Lawyers do take cases on contingencies. You do have to pay the retainer though.

Not a case like this. The win is freedom from contract. No damages in that to make it worthwhile

 

[Orin]

About 50% of hospitals at non-profit, so for those it doesn't matter. VC-backed/corporate pain practices may struggle to keep physicians locked down. They'll likely be making them all physicians automatically part of the wellness policy committee to make them policy making executives...

 

[drusso]

About 50% of hospitals at non-profit, so for those it doesn't matter. VC-backed/corporate pain practices may struggle to keep physicians locked down. They'll likely be making them all physicians automatically part of the wellness policy committee to make them policy making executives...

The nonprofit are covered by the ban per the FTC. They will have to sue the government if they think otherwise.

 

[Status Sciaticus]

And the other side is a multi-billion dollar company.

what are you talking about? The guy was talking about a private practice employee leaving the private practice. I've never come across a billion dollar private practice before, but feel free to point those out.

. The win is freedom from contract. No damages in that to make it worthwhile

Several states allow remuneration and recovery of legal expenses.

About 50% of hospitals at non-profit, so for those it doesn't matter. VC-backed/corporate pain practices may struggle to keep physicians locked down. They'll likely be making them all physicians automatically part of the wellness policy committee to make them policy making executives...

Being part of a committee doesnt make one an executive, unless you start titling everyone as chief and chair.
My past residency had BS like this.
Director of PACU
Director of Research
Director of Board Running (WTF)
and so on

 

[Orin]

The nonprofit are covered by the ban per the FTC. They will have to sue the government if they think otherwise.

I think the FTC interprets it to cover all, but the lawyers think they are wrong. The hospitals will fight it full heartedly. The FTC may fight it in spirit, but I don't think they're really establishing this rule for the higher paid white collar healthcare folks. I'm not betting on the hospital's losing this fight.

 

[drusso]

I think the FTC interprets it to cover all, but the lawyers think they are wrong. The hospitals will fight it full heartedly. The FTC may fight it in spirit, but I don't think they're really establishing this rule for the higher paid white collar healthcare folks. I'm not betting on the hospital's losing this fight.

That's right. The unions are not going to like that their members are not covered by the ban.

 

[Ferrismonk]

Doctors will walk with their feet and open up their owns businesses once the shackles come off.

Not until there is pay parity unfortunately.

 

[Ducttape]

Lawyers do take cases on contingencies. You do have to pay the retainer though.

be the first.

and posit this as a possible Supreme court case.


the FTC reviewed 26,000 comments, of which 25,000 were against noncompetes. in their statement, they quoted these comments:

I am a physician in a rural underserved area of Appalachia. . . . “[N]on-compete” clauseshave become ubiquitous in the healthcare industry. With hospital systems merging,providers with aggressive non compete clauses must abandon the community that theyserve if they chose to leave their employer. . . . Healthcare providers feel trapped in theircurrent employment situation, leading to significant burnout that can shorten their careerlongevity. Many are forced to retire early or take a prolonged pause in their career when they have no other recourse to combat their employer.54

I am a practicing physician who signed an employment contract containing a noncompete agreement in 2012, entering into this agreement with an organization that no longer exists. My original employer merged with, and was made subsidiary to, a new organization that is run under religious principles in conflict with my own. . . . I would have never signed such an agreement with my new employer, yet I am bound to this organization under threat of legal coercion. To be clear, the forced compromise of my religious principles does direct harm to me. My only recourse to this coercion is to give up medical practice anywhere covered by my current medical license, which is injurioust o the patients in my care, and to myself.5

I was terminated by a large hospital organization suddenly with a thriving, full Pediatricpractice. . . . My lawyer and I believe the non-compete does not apply in mycircumstances and that the noncompete is overly broad, restrictive and harmful to thepublic (my patients). I started seeing my patients mostly gratuitously in their homes sothey would not go without the care they wanted and needed. . . The judge awarded theorder and I was told I cannot talk to patients on the phone, text patients, zoom visits orprovide any pediatric care within my non-compete area. Patients are angry and panicked.I’m worried every day about my patients and how I can continue to care for them. . . .Patients have a right to choose and keep their doctor. The trust built between a patientand his doctor is crucial to keeping a patient healthy. It’s not a relationship that can orshould be replaced. . . . Patients should always come first and that is not happening.5

and then they quoted statistics regarding physicians and noncompetes:

For example, commenters reported that 33% of practitioners in the applied behavioralanalysis field reported being subject to a non-compete,88 along with 68% of cardiologists,89 42%of colorectal surgeons,90 72% of members of the American Association of Hip and Knee Surgeons,91 and 31% of wireless telecommunications retail workers.92

so clearly physicians were a concern of the commission.

https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule.pdf

 

[Ducttape]

specifically with regards to hospitals and non-profits:

page 51:

The final rule applies to the full scope of the Commission’s jurisdiction. Many of the comments about nonprofits erroneously assume that the FTC’s jurisdiction does not capture any entity claiming tax-exempt status as a nonprofit. Given these comments, the Commission summarizes Commission precedent and judicial decisions construing the scope of the Commission’s jurisdiction as it relates to entities that claim tax-exempt status as nonprofits and to other entities that may or may not be organized to carry on business for their own profit or the profit of their members. Congress empowered the Commission to “prevent persons, partnerships, or corporations” from engaging in unfair methods of competition.265 To fall within the definition of “corporation” under the FTC Act, an entity must be “organized to carry on business for its own profit or that of its members.”266 These FTC Act provisions, taken together, have been interpreted in Commission precedent267 and judicial decisions268 to mean that the Commission lacks jurisdiction to prevent section 5 violations by a corporation not organized to carry on business for its own profit or that of its members.

The Commission stresses, however, that both judicial decisions and Commission precedent recognize that not all entities claiming tax-exempt status as nonprofits fall outside the Commission’s jurisdiction. As the Eighth Circuit has explained, “Congress took pains in drafting§ 4 [15 U.S.C. 44] to authorize the Commission to regulate so-called nonprofit corporations, associations and all other entities if they are in fact profit-making enterprises.”269

For instance, the Commission has exercised jurisdiction in a section 5 enforcement action over a physician hospital organization because the organization engaged in business on behalf of for-profit physician members.275 That organization, which consisted of over 100 private physicians and one non-profit hospital, claimed tax-exempt status as a nonprofit.276

Similarly, the Commission has exercised jurisdiction over an independent physician association claiming tax-exempt status as a nonprofit. The association consisted of private, independent physicians and private, small grouppractices.277 That association was organized for the pecuniary benefit of its for-profit members because it “contract[ed] with payers, on behalf of its [for-profit] physician members, for the273 In the Matter of the Am. Med. Assoc., 94 F.T.C. 701, 1979 WL 199033, at *221 (FTC Oct. 12, 1979). provision of physician services for a fee.”278 Under IRS precedent in the context of purportedly tax-exempt nonprofit hospitals and other related entities that partner with for-profit entities, where the purportedly nonprofit entity “has ceded effective control” to a for-profit partner,“ conferring impermissible private benefit,” the entity loses tax-exempt status.279

The IRS has also rejected claims of nonprofit tax-exempt status for entities that pay unreasonable compensation, including percentage-based compensation, to founders, board members, their families, or other insiders.280

and finally, when it comes to discussing non-competes, the examples that the FTC gives regarding physicians is placed in the non-senior executive part of the discussion (page 119).

===
of note, the FTC believes that there will be a decrease in consumer spending due to an increase in competition with the rule and specifically mentioned physician practices. page 476.

The Commission finds that consumer prices may fall under the final rule because ofincreased competition. The only empirical study of this effect concerns physician practice prices.Based on this study, the Commission estimates the ten-year present value reduction in spendingfor physician and clinical services from the decrease in prices is $74-$194 billion.

 

[SSdoc33]

there is too much gray area in the ruling. unfortunately, this will need to be litigated. prepare for a good 5-10 years before there are any discernable changes

 

[drrosenrosen]

there is too much gray area in the ruling. unfortunately, this will need to be litigated. prepare for a good 5-10 years before there are any discernable changes

So what happens to people who separate from their practice or hospital during this period of injunction, only for the order to be stricken down in two years? I imagine there may be some employers coming after former employees years down the road, which would certainly scare me away from acting on this now

 

[drrosenrosen]

give up medical practice anywhere covered by my current medical license,.

If that's not the definition of an overly broad non-compete clause I don't know what is. How can they prevent you from practicing in the same state?

 

[SSdoc33]

So what happens to people who separate from their practice or hospital during this period of injunction, only for the order to be stricken down in two years? I imagine there may be some employers coming after former employees years down the road, which would certainly scare me away from acting on this now

somehow i got on this lawyer's email list. take it for what its worth:

HEALTHCARE NEWSLETTER 4/25/2024 Provided by: Jennifer Kirschenbaum, Esq. FTC Rule Banning Non-Competes, Where We Are At Question: Jennifer, I saw the news that the IRS voted 3 to 2 to ban noncompetes. Does this mean I’m finally free to leave my hospital job without a restriction? Appreciate your insight. Dr. J Answer: Let’s not get too excited. The rule (https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes) was passed by a vote of five people, 2 dissenting and 3 approving and is sure to be challenged in the next 120 days prior to implementation by many groups, and directly by large employers, looking to maintain an economic edge on the competition. Of note, the rule as presented has certain exceptions, including excluding not-for-profit employers, which your hospital may qualify as. Other exclusions are for executive employees who have authority to command change in policy at a high-level of the organization (likely will not implicate treating doctor), and also exclusions for non-employment restrictions, such as related to purchases and sales of practices. I have a high level of confidence that this rule will either not go into effect, or will be substantially modified prior to implementation. My advice at this time is to adhere to your contractual restrictions until further notice that an applicable rule has taken effect. We will be following developments closely and updating you here. Any questions in the interim, please let Jennifer know.

 

[RoloTomassi]

It will be interesting to see what's in the contracts that are being offered this summer and how organizations will respond during negotiations if they still include restrictions

 

[drusso]

there is too much gray area in the ruling. unfortunately, this will need to be litigated. prepare for a good 5-10 years before there are any discernable changes

If the hospital lobby litigates, it will open up ALL kinds of questions to scrutiny: What is a non-profit? What is community benefit? Why is SOS legal? What does "direct and control" mean? What is the corporate practice of medicine? Who does a physician employed by a hospital group practice REALLY work for?

I wonder if they want to risk those conversations in front of a public audience.

 

[Ducttape]

a lot of noncompete is addressed in the FTC statement. there is discussion on "nonprofit" status and how these entities are mostly covered by FTC Act.

your singular concerns regarding SOS are not because that is a completely different topic and not apropos to their concerns regarding non-competes.

however, i read a bit of it, but of course not all 570 pages. you might be able to glean out details i missed. maybe there is some discussion on SOS in there.

 

[drusso]

a lot of noncompete is addressed in the FTC statement. there is discussion on "nonprofit" status and how these entities are mostly covered by FTC Act.

your singular concerns regarding SOS are not because that is a completely different topic and not apropos to their concerns regarding non-competes.

however, i read a bit of it, but of course not all 570 pages. you might be able to glean out details i missed. maybe there is some discussion on SOS in there.

Their financial incentive to restrict competition is SOS.