Spine surgeons lauded the FTC's vote to ban noncompetes in April, but a new preliminary injunction has stalled the move from going into effect.
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Editor's note: Responses were lightly edited for clarity and length.
Question: How are you thinking about the latest developments with the FTC's noncompete ban?
Rachel Bratescu, MD. Weill Cornell (New York City): There are numerous lawsuits challenging the FTC's noncompete ban. If the ban ultimately survives it will be interesting to see how it will be enforced for non-profits, given that over half of hospitals claim tax-exempt status. It appears the FTC may employ a two-prong test to determine which non-profits would have to comply with the rule and which would not.
As a hospital-employed spine surgeon, it would be favorable for the FTC rule to be allowed and broadly applied. Noncompete clauses decrease patient access to physicians and force physicians to remain in below-market contracts due to ties to a specific geographic area. It is important, however, to also recognize the business realities in terms of the amount of investment that some employers put into building their physician workforce.
One potential compromise that warrants more attention would be for a narrow and limited noncompete for the initial years in practice, and as you spend increasing time and develop a patient base in a specific geographic region, for the noncompete area to also expand.
Jeffrey Carlson, MD. Orthopaedic & Spine Center (Newport News, Va.): The FTC proposal had given hope to physicians who have a noncompete clause in their contracts. The clauses generally prevent physicians from joining a competing practice and force them to look outside of their current area for a new position if they are dissatisfied. This can be a big hurdle to overcome when making the decision to leave a current practice and move their family, buy and sell homes and create new referral patterns for their practice. That hope of relief has been dashed with the hold and possibly permanent block on this FTC action.
I think the noncompete clause is more relevant to employed practitioners. In private practice, the physician owners have little need to look for a new job. The physician owners are the ones making the decisions about how the practice is run and managed. If they aren't happy they can make decisions that will improve the situation. For this reason, the proposed ban and then blocking of the ban, has highlighted the stark differences between employed practice and private practice.
Brian Gantwerker, MD. The Craniospinal Center of Los Angeles: I still believe the ban on noncompetes benefits physicians greatly. Now with over 70% of physicians employed, it will, if upheld, reinforce the negotiating power physicians will have in their vocations. In my mind, a ban on noncompetes puts the onus on the employers to create a productive growth environment and to maintain employee satisfaction. Anything that empowers physicians to maintain agency in their job is a good thing.
Alex Vaccaro, MD, PhD. Rothman Orthopaedic Institute (Philadelphia): The FTC rule bans noncompetes with very limited exceptions for existing senior executives and bans entering into or enforcing new noncompetes with senior executives. A "senior executive" is defined as a worker (physician or non-physician) who: (1) was in a policy-making position; and (2) received from a person for the employment: (i) total annual compensation of at least $151,164 in the preceding year; or (ii) total compensation of at least $151,164 when annualized if the worker was employed during only part of the preceding year; or (iii) total compensation of at least $151,164 when annualized in the preceding year prior to the worker’s departure if the worker departed from employment prior to the preceding year and the worker is subject to a noncompete clause.
The U.S. Supreme Court further empowered federal judges to interpret ambiguous language in laws by striking the "Chevron deference" (Loper Bright Enterprises v. Raimondo). Federal judges now have the authority to decide what a law means rather than defer to federal agencies interpretation and application of the law. Federal judges will now be able to conduct judicial policymaking without accountability to voters (federal judges are given lifetime appointments, not elected). On July 3, 2024, a federal judge in Texas (Ryan v. FTC) enjoined the FTC noncompete ban on the plaintiff but the court is not globally keeping the FTC from enforcing the ban on all other employers, for now.
As applied in the healthcare sector, the FTC rule at this time may not cover employment with not-for-profit hospitals but this is unclear and related more to the tax-exempt nature of the institution and the methods of how profit dollars are distributed. Outside of this gray area, the FTC ruling can cut both ways for physicians and health care costs in general. If the noncompete ban remains in place it can bring down barriers limiting where physicians can practice and create a greater ability for physicians to move between health systems/group practices. The other side of that scenario is such freedom of movement can drive up costs by creating a bidding war for physicians and the wealthiest health systems will outcompete those health systems/areas in greater need of medical professionals/support. Those health systems in need of support will inevitably seek support from federal and state agencies, thus overall driving up the cost of healthcare.
Vijay Yanamadala, MD. Hartford (Conn.) HealthCare: While physician noncompete clauses have been touted to limit physician mobility, in general, they are confined to short periods of time (generally about 1 year) and also in limited geographic scope (15-mile radius from the primary site).
As the new rule is being implemented, one of the biggest questions remains whether it will apply to most physicians, spine surgeons included. Specifically, the final rule states that senior executives will be excluded from the new rule. The final rule defines senior executives as workers earning more than $151,164 annually and who are in policy-making positions. Most physicians will be earning more than this cap and are going to be in policy-making positions to the extent that they will contribute to defining clinical policy.
Should the rule apply to physicians, it will certainly free physicians to become more mobile than they are currently. However, I do not believe that noncompete clauses are the major source of physicians remaining employed in a particular position or with a particular employer. Physicians in general are inherently much more mobile than most other vocations.
Christian Zimmerman, MD. St. Alphonsus Medical Group and SAHS Neuroscience Institute (Boise, Idaho): It appears and has been notably reported that this ruling may be somewhat arbitrary because the FTC lacked sufficient evidence as to why they chose to impose/uphold a potentially sweeping forbiddance on all noncompete contractual agreement. This will certainly prohibit entering or even enforcing virtually all noncompete contracts, instead of targeting specific or overly restrictive noncompetes, which in healthcare, mandate relocation and pursuance of employment within a geographic boundary. This capricious ruling also seems to obviate the question, by the commission, to consider adequate alternatives for right-to-work states and demonstrated community needs. In so doing, the court issued a preliminary injunction while further legal challenges are currently being levied against the ruling.