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by Antonio Arias, MBA, CHBME

Could Non-Compete Agreements Help Your Practice Compete?


Brace yourselves: The physician shortage is coming for your practice. According to a recent report from the Association of American Medical Colleges (AAMC), the U.S. will face a shortage of as many as 90,000 physicians by 2025 as the ‘boomer’ generation ages.

If you operate in a lucrative specialty, you may think the doctor shortage won’t impact you... but you may be wrong. Despite the attention often lobbed at our nation’s need for more primary care physicians, the greatest shortfall of practitioners will likely be for surgeons and other providers whose services are critical to elder care.

How exactly you should shield yourself from the impact of the doctor shortage is hard to say, as the right strategy differs for every medical office, clinic, or hospital. One approach being taken by a great number of practices is the use of “non-competes.”

Whether a standalone signed agreement or a clause in a doc’s employment contract, a non-compete (or restrictive covenant) is designed to bar a physician from leaving his or her employer for a competing medical establishment (or going into private practice) in the same geographic area. If the doctor disregards the non-compete and jumps ship, he or she can face hefty fines or legal ramifications from the original employer.

Practices are using non-compete agreements to hedge against the doctor shortage, earn ROI on new-doctor training, and keep their patients from following rogue doctors to their new gigs. But non-competes are not without their drawbacks. If your medical office has yet to add them to your onboarding paperwork, keep the following considerations in mind before doing so.

Non-competes are not enforceable everywhere. Non-competes are illegal or highly restricted in eight states: Alabama, California, Colorado, Delaware, Massachusetts, North Dakota, Tennessee, and Texas.

Where they are enforceable, they must be “reasonable.” What constitutes reasonable, however, is rarely black-and-white. Only a few states have passed laws placing limits on non-competes. (In New Mexico, for example, a doctor can leave a medical establishment after three years of employment and face zero legal or financial consequences. Should he leave before then, the organization can only require him to repay any financial incentives such as relocation and signing bonuses - no fines.)

They can lead to legal battles. If a physician expresses intent to leave your practice in violation of a signed non-compete, it may be to your advantage to let him or her negotiate out. Why? Because if a physician challenges the agreement in court, his or her legal team will likely come looking for any reason to call it null – meaning that any flaws in your agreement, or your adherence to it, will come to light.

And their flaws can be many. Common reasons that courts throw out non-competes are that they’re too broad (encompassing too large a geographic region or too long a time horizon); they’re ‘selectively enforced’ by the medical group (i.e. some docs get fined when leaving, not others); or that they fail to consider the employer’s responsibility to the physician (to provide quality working conditions, to deliver on financial incentives, etc.).

Has your practice used non-competes to keep recruited physicians on staff?

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by Antonio Arias, MBA, CHBME

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