Could the ban bring potential downsides?
Most physicians view the potential to break free of a noncompete agreement as a victory. Peter Glennon, an employment litigation attorney with The Glennon Law Firm in Rochester, N.Y., says not so fast. “If you ask anyone if they’d prefer a noncompete agreement, of course they’re going to say no,” he said in an interview. “It sounds like a restriction, one that can hold you back.”
Mr. Glennon believes that there are actually upsides to physician noncompetes. For instance, many noncompetes come with sign-on bonuses that could potentially disappear without the agreements. There’s also the fact that when some physicians sign a noncompete agreement, they then receive pro bono training and continuing education along with marketing and promotion of their skills. Without signing a noncompete, employers may be less incentivized to provide all those benefits to their physician employers.
Those benefits – and the noncompetes – also vary by specialty, Mr. Glennon said. “In 2021, Washington, DC, banned noncompetes for doctors making less than $250,000. So, most generalists there can walk across the street and get a new job. For specialists like cardiologists or neurosurgeons, however, advanced training and marketing benefits matter, so many of them don’t want to lose noncompetes.”
Still, most physicians hope that the FTC’s ban takes hold. Manan Shah, MD, founder, and chief medical officer at Wyndly, an allergy relief startup practice, is one of them.
“Initially, it might disincentivize hospital systems from helping new physicians build up their name and practice because they might be concerned about a physician leaving and starting anew,” he said. “But in the long term, hospitals require physicians to bring their patients to them for care, so the best hospitals will always compete for the best physicians and support them as they build up their practice.”
Dr. Shah views noncompetes as overly prohibitive to physicians. “Right now, if a physician starts a job at a large hospital system and realizes they want to switch jobs, the noncompete distances are so wide they often have to move cities to continue practicing,” he said. “Picking up and starting over in a new city isn’t an option for everyone and can be especially difficult for someone with a family.”
Where Mr. Glennon argued that a physician leaving a team-based practice might harm patients, Shah takes a different perspective. “Imagine you have a doctor whom you trust and have been working with,” he said. “If something changes at their hospital and they decide to move, you literally have to find a new doctor instead of just being able to see them at another location down the street.”
Another potential burden of the noncompete agreements is that they could possibly squelch doctor’s desires to hang up their own shingle. According to Dr. Shah, the agreements make it so that if a physician wants to work independently, it’s nearly impossible to fly solo. “This is frustrating because independent practices have been shown to be more cost effective and allow patients to build better relationships with their doctors,” he claimed.
A 2016 study from Annals of Family Medicine supports that claim, at least for small general practices. Another study appearing in JAMA concurred. It does point out, however, that the cost equation is nuanced and that benefits of larger systems include more resilience to economic downturns and can provide more specialized care.