Texas Noncompete

[mille125]

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Well not a big fan of Abbott but he just signed a texas non-compete law that is a long time coming. In a nutshell

1) Law applies to Physicians, PAs, NPs, and Dentists (later three categories are new to non compete laws)
2) Non-compete can only by 5 miles
3) It must have a buyout and it can only be one year's salary.
4) If organization fires physician without cause, non-compete is void.
5) It is effective on 9/1/25 but all contracts with evergreen clauses must follow new rules when renewing. For instance if contract says one year contract that authomatically renews, it must be reformed at the renewal date to follow these new rules. Old contracts that do not authomatically renewed are not subject to the new laws.

This is really a game changer especially now that our field is infiltrated with hospitals and private equity. In 2016 we had zero PE backed pain practices in Texas. Today they are too numerous to count and number at least 6-10 in the state. But that is a topic for another day......

 

[Agast]

The cynical part of me suspects it’s because hospitals are going to be shedding staff as the Medicaid and other funding cuts take place and the noncompetes prevent professionals from finding new jobs after they get fired.

 

[K-hole]

As a Texan with a 50 mile non-compete this is nice 🙂

 

[SpineandWine]

The cynical part of me suspects it’s because hospitals are going to be shedding staff as the Medicaid and other funding cuts take place and the noncompetes prevent professionals from finding new jobs after they get fired.

I thought they added 50Billion to BBB for rural hospital support to counteract Medicaid cuts

 

[Baron Samedi]

Wonderful. Is there an article I can share? Was having trouble finding one.

 

[SpineandWine]

Not sure if this is outdated but episode from July date

 

[Agast]

Wonderful. Is there an article I can share? Was having trouble finding one.

I asked Chat GPT

Yes — the final version of the “One Big, Beautiful Bill” (also called the “Big Beautiful Bill”) did include a dedicated funding program to help rural hospitals, though industry analysts say it falls far short of fully mitigating the damage from Medicaid reductions.

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🏥 Was additional funding included for rural hospitals?​

Yes. The final bill includes a $50 billion Rural Health Transformation or Stabilization Fund, intended to offset anticipated federal Medicaid cuts to rural hospitals over the coming decade (Politico, CBS News).

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💰 How much funding and what provisions?​

• Total amount: $50 billion in total, allocated as roughly $10 billion per year from fiscal years 2026 through 2030via CMS-administered state grants (Holland & Knight).
• Distribution: Half is distributed equally among states with approved rural transformation plans; the other half is allocated based on CMS‑determined factors (e.g. rural population, provider need) (KFF).
• Use case: States must apply and submit approved Rural Health Transformation Plans outlining how funds will improve rural provider access, workforce, and system resilience (Holland & Knight).

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📉 Scope vs. Medicaid cuts​

• The bill enacts Medicaid spending reductions of approximately $1 trillion to $1.02 trillion over the next ten-year budget window, depending on the estimate (Kiplinger, Vox, Center for American Progress).
• Rural hospitals alone face about $50.4 billion in Medicaid funding reductions over ten years (American Hospital Association).
• The $50 billion fund covers only a portion, offsetting maybe one‑third (~37%) of rural Medicaid losses or up to ~43% according to some estimates, depending on methodology (KFF).
• Analysts emphasize that the fund is temporary (five years), while most Medicaid cuts are long‑term or permanent, meaning rural provider financial gaps will persist beyond 2030 (KFF, Politico).

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✅ Summary​

Feature	Detail
Rural hospital funding included?	Yes
Amount	$50 billion total; $10B/year for 2026‑2030
Intended goal	Offset Medicaid funding reductions for rural providers
Coverage vs. projected cuts	Covers roughly one-third to 40% of projected rural Medicaid cuts
Duration	Fund is temporary – Medicaid cuts last longer

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⚠️ Why this funding may not be enough:​

1. One-time, short‑term relief: The fund runs from 2026 to 2030 with money allowed to be spent by 2032, while Medicaid cuts continue beyond that.
2. Partial offset only: Even if fully used for rural hospitals, it covers far less than the projected funding lost (~$50 billion vs. ~$58B to rural hospitals, or over $1 trillion overall) (National Rural Health, Center for American Progress, National Rural Health, KFF).
3. Distribution limitations: Some funds may go to non-hospital providers in rural areas, and state plans vary widely in effectiveness and pace of deployment.

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In summary: Yes, the final bill included a $50 billion rural fund to help rural hospitals—but experts agree it is insufficient relative to the magnitude and permanence of Medicaid cuts those hospitals will face.

• Kiplinger
• Big Rapids Pioneer
• theguardian.com

 

[Baron Samedi]

Sorry I meant an article about TX non-competes

 

[Agast]

Sorry I meant an article about TX non-competes

SB 1318 - 89th Legislature

Relating to restrictions on covenants not to compete for physicians and certain health care practitioners.

www.texaspolicyresearch.com

Here’s the actual verbiage of the bill

 

[Status Sciaticus]

Well not a big fan of Abbott but he just signed a texas non-compete law that is a long time coming. In a nutshell

1) Law applies to Physicians, PAs, NPs, and Dentists (later three categories are new to non compete laws)
2) Non-compete can only by 5 miles
3) It must have a buyout and it can only be one year's salary.
4) If organization fires physician without cause, non-compete is void.
5) It is effective on 9/1/25 but all contracts with evergreen clauses must follow new rules when renewing. For instance if contract says one year contract that authomatically renews, it must be reformed at the renewal date to follow these new rules. Old contracts that do not authomatically renewed are not subject to the new laws.

This is really a game changer especially now that our field is infiltrated with hospitals and private equity. In 2016 we had zero PE backed pain practices in Texas. Today they are too numerous to count and number at least 6-10 in the state. But that is a topic for another day......

How do you think this addresses the situation if youre on a production compensation or base + bonus?

A key point to mention is that the 5 miles also only applies from where you do the majority of your work. So if you work at multiple sites or the practice has multiple locations, you only get non-competed out of the one where you work most of your time. No restriction from other locations.

 

[mille125]

How do you think this addresses the situation if youre on a production compensation or base + bonus?

A key point to mention is that the 5 miles also only applies from where you do the majority of your work. So if you work at multiple sites or the practice has multiple locations, you only get non-competed out of the one where you work most of your time. No restriction from other locations.

I read it to say that you can only be non-competed at your primary site. Any non-compete outside of the primary site is void. That is my read but obviously if this affects someone they should ask an attorney.

Concerning the buyout they really left that up for interpretation. If you are straight salary, its easy. If you have base, bonus, and stock options its harder. I am not an attorney or judge but in most cases I would imagine that they would look at the compensation of everything that you made in a year. If you base is 300K and your bonus was 300K you would have to pay 600K. Question is would most people really do this if they can simply just move 5.1 miles away from their primary site? Seems in most situations just moving 5.1 miles makes all of it moot.. However, if you buyout you can fully solicit, etc. That might be the only compelling reason but you need to ask if its worth 600K or whatever you made.

 

[mille125]

What can happen especially in the private equity/big practice settings is that they make you buy in to an ASC or into the practice. If you leave, they can't noncompete you but they can keep you hundreds of thousands/millions that you put in as a buy-in.

If I was advising those groups, that would be my recommendation.

 

[mille125]

SB 1318 - 89th Legislature

Relating to restrictions on covenants not to compete for physicians and certain health care practitioners.

www.texaspolicyresearch.com

Here’s the actual verbiage of the bill

Yeah....it isnt speculation it is a signed bill effective 9/1

 

[mille125]

As a Texan with a 50 mile non-compete this is nice 🙂

You should read your contract language. If it says that it automatically renews (like many contracts do), at the renewal date they will need to reform it to the current language.

For instance if you signed on jan1st and your contract says that it automatically renews yearly, on 1/1/26 your contract will adopt the new rules.

If your contract doesn't say that, they you are bound by the original terms.

 

[mille125]

The cynical part of me suspects it’s because hospitals are going to be shedding staff as the Medicaid and other funding cuts take place and the noncompetes prevent professionals from finding new jobs after they get fired.

I am a cynic too especially when it comes to Republican lawmakers who seem to do anything that Trump wants (ie Texas redistricting). However in this case, it was reported that Abbott started looking at this soon after the FTC banned non-competes during the Biden administration so I think it predates to Big Ugly Bill.

The interesting thing though is that there was very little discussion about this (or at least I didnt hear any) and many physicians were surprised to even see that this happened.

 

[Agast]

I am a cynic too especially when it comes to Republican lawmakers who seem to do anything that Trump wants (ie Texas redistricting). However in this case, it was reported that Abbott started looking at this soon after the FTC banned non-competes during the Biden administration so I think it predates to Big Ugly Bill.

The interesting thing though is that there was very little discussion about this (or at least I didnt hear any) and many physicians were surprised to even see that this happened.

I did see that the TMA took it up last year as one of their key lobbying measures, but I’m surprised they were so quiet about it because it is quite the success story

 

[mille125]

I did see that the TMA took it up last year as one of their key lobbying measures, but I’m surprised they were so quiet about it because it is quite the success story

agreed

 

[K-hole]

You should read your contract language. If it says that it automatically renews (like many contracts do), at the renewal date they will need to reform it to the current language.

For instance if you signed on jan1st and your contract says that it automatically renews yearly, on 1/1/26 your contract will adopt the new rules.

If your contract doesn't say that, they you are bound by the original terms.

My contract just renewed so I guess the new rules will apply for me starting next year

 

[mille125]

My contract just renewed so I guess the new rules will apply for me starting next year

Yes....it will need to fulfill new requirements when it renews one year from when you signed it assuming it is in annual renew.

 

[Status Sciaticus]

What can happen especially in the private equity/big practice settings is that they make you buy in to an ASC or into the practice. If you leave, they can't noncompete you but they can keep you hundreds of thousands/millions that you put in as a buy-in.

If I was advising those groups, that would be my recommendation.

I dont think they can do that.
You can sell it prior to leaving as one option.
However, most ASCs are separate legal entities from the practices. So leaving the practice doesnt trigger any issues with the ASC side.

 

[mille125]

I dont think they can do that.
You can sell it prior to leaving as one option.
However, most ASCs are separate legal entities from the practices. So leaving the practice doesnt trigger any issues with the ASC side.

You can do anything with an investment. If I am the group, I can see that if you leave without cause, you trigger a penalty clause whose penalty is 100% of your investment. They can't stop you from practicing medicine within the new parameters but they can do a 50 mile radius from any other ASC investments.

I am not saying that they will do this but all of it is possible and is a way to "persuade" someone not to leave.

 

[Status Sciaticus]

You can do anything with an investment. If I am the group, I can see that if you leave without cause, you trigger a penalty clause whose penalty is 100% of your investment. They can't stop you from practicing medicine within the new parameters but they can do a 50 mile radius from any other ASC investments.

I am not saying that they will do this but all of it is possible and is a way to "persuade" someone not to leave.

It wouldn’t hold up.
How would an investment in one LLC be affected by a separate LLC?

Only way you could get penalized is if both the practice and the ASC is under one LLC or if the practice owns the LLC and you own part of the practice.

 

[mille125]

ASC can have a penalty clause for "early withdrawal" and drastically reduce your payout.

 

[Status Sciaticus]

ASC can have a penalty clause for "early withdrawal" and drastically reduce your payout.

I agree that they can have a penalty for early withdrawal from the ASC entity, but not from another entity. That could be seen as some sort of quid pro quo that you need to see and bring a particular groups patients to get paid out at the ASC.

 

[mille125]

I agree that they can have a penalty for early withdrawal from the ASC entity, but not from another entity. That could be seen as some sort of quid pro quo that you need to see and bring a particular groups patients to get paid out at the ASC.

If you have a million dollars tied into an ASC and there is an early termination penalty plus a 50 mile non-compete (for buying into another center but not practicing medicine), this has teeth....

 

[Status Sciaticus]

If you have a million dollars tied into an ASC and there is an early termination penalty plus a 50 mile non-compete (for buying into another center but not practicing medicine), this has teeth....

dude what are you talking about? Early termination from one entity (private practice) has no bearing on your ownership in another entity (ASC).
If you have a million dollars invested in an ASC but leave your practice, as long as you satisfy your 1/3 test in that ASC, they cant divest you out of your shares.

They only way in which your situation will play out is if the ASC and the practice are owned under 1 LLC or the practice terminates you before renewal and before 9/1/25.
In both those instances, you can buy out your noncompete and still practice and bring cases to the ASC.

 

[mille125]

dude what are you talking about? Early termination from one entity (private practice) has no bearing on your ownership in another entity (ASC).
If you have a million dollars invested in an ASC but leave your practice, as long as you satisfy your 1/3 test in that ASC, they cant divest you out of your shares.

They only way in which your situation will play out is if the ASC and the practice are owned under 1 LLC or the practice terminates you before renewal and before 9/1/25.
In both those instances, you can buy out your noncompete and still practice and bring cases to the ASC.

Redemption agreements are very common in ASC agreements. Cannot speak to yours because I haven't seen it.

If the language specifies it, you can be removed for cause and then can be subject to an early termination penalty. It is hypothetical but it is possible.

We can talk about hypotheticals all day long. The real point that I was trying to make is the ownership in an ASC or in a practice is not subject to the new Texas noncompete rules as long as the non-competes connected to these entities do not prevent one from seeing patients.