Will nonprofit hospitals be subject to this noncompete ban?
Further complicating the noncompete ban issue is how it might impact nonprofit institutions versus their for-profit peers. Most hospitals structured as nonprofits would be exempt from the rule because the FTC Act provides that it can enforce against “persons, partnerships, or corporations,” which are further defined as entities “organized to carry on business for their own profit or that of their members.”
The fallout from this, said Dr. Shah, is that it “would disproportionately affect health care providers, since many hospital systems are nonprofits. This is disconcerting because we know that many nonprofit systems make large profits anyway and can offer executive teams’ lucrative packages, while the nurses, assistants, and physicians providing the care are generally not well compensated.”
So far, about nine states plus Washington, D.C., have already put noncompete bans in place, and they may serve as a harbinger of things to come should the federal ban go into effect. Each varies in its specifics. Some, like Indiana, outright ban them, whereas others limit them based on variables like income and industry. “We’re seeing these states responding to local market conditions,” said Darryl Drevna, senior director of regulatory affairs at the American Medical Group Association. “Health care is a hyperlocal market. Depending on the situation, the bans adapt and respond specific to those states.”
Should the federal ban take hold, however, it will supersede whatever rules the individual states have in place.
Some opponents of the federal ban proposal question its authority to begin with, however, Mr. Glennon included. “Many people believe the FTC is overstepping,” he said. “Some people believe that Section 5 of the FTC Act does not give it the authority to police labor markets.”
Mr. Drevna noted that the FTC has taken an aggressive stance, one that will ultimately wind up in the courts. “How it works out is anyone’s guess,” he said. “Ideally, the FTC will consider the comments and concerns of groups like AMGA and realize that states are best suited to regulate in this area.”
In general, the ban’s supporters are employees/physicians; those who oppose it are their employers. Joining the AMGA in speaking out against the noncompete ban is the American Hospital Association, whereas the American College of Emergency Physicians has come out largely in support of the ban.
Still, doctors like Dr. Shah remain hopeful. “I am optimistic that perhaps my colleagues will not continue to be stuck in overrestrictive noncompetes, but I am also realistic,” he said. “Hospital systems are already coming out strongly against this and they have deep pockets, so I won’t be surprised if it does not come to pass.”
A version of this article first appeared on Medscape.com.