Physician noncompete contracts are a common but sometimes contentious issue in the healthcare industry as they have the potential to disrupt the physician-patient relationship and remove physicians — who are already in short supply — from the workforce.
President Joe Biden on July 9 signed an executive order encouraging the Federal Trade Commission to limit or ban noncompete agreements. For the healthcare industry, the move would likely facilitate physicians leaving hospital employment for ASC ownership in the same community, but could increase competition between ASCs to attract and retain talent as they wouldn't be able to enforce their own noncompete agreements.
Here are four key noncompete disputes that made headlines this year:
1. Washington State vs. Bellingham Anesthesia Associates: The state of Washington filed an antitrust consent decree in August against Bellingham (Wa.) Anesthesia Associates, urging the group to end allegedly illegal noncompete contracts and pay $110,000 to the state. The state claims that the 50-physician group used illegal noncompete clauses and exclusive contracts with local providers to take about 90 percent of the market share for physician-administered anesthesia services in two Washington counties, allegedly in violation of the Washington Consumer Protection Act. If approved, the consent decree would require Bellingham Anesthesia Associates to stop illegally requiring physicians to sign three-year noncompete contracts. The group would be able to keep exclusive contracts with hospitals that need anesthesiologists on constant standby, but it would be required to cancel contracts with providers that do not need emergency coverage, such as ASCs and medical clinics.
2. St. Louis Heart and Vascular vs. SSM Health (St. Louis): St. Louis Heart and Vascular is seeking $50 million in damages from SSM Health after it sued the St. Louis-based system to prevent it from entering into an exclusive contract with another cardiology provider. The lawsuit argues that the contract would limit St. Louis Heart and Vascular's ability "to compete for and treat adult cardiac patients" because it would no longer have privileges at SSM hospitals. SSM said the contract would improve care and business practices.
3. Gastroenterologists vs. TriHealth (Cincinnati): TriHealth sued to enforce a noncompete clause for 18 gastroenterologists aiming to leave the Cincinnati-based system in June. The noncompete clauses prevent the physicians from practicing in the area for one year after leaving TriHealth, unless 75 percent (18 physicians) of the department exits together, among other provisions. Seventeen gastroenterologists told TriHealth of plans to exit contracts on June 28, and another gastroenterologist changed his retirement date from June 30 to June 28. TriHealth sued the physicians to enact the noncompete clause, and argues that the 18th gastroenterologist's retirement date should not be included in the number of gastroenterologists required to avoid the clause.
4. Family practice physicians vs. CaroMont Health (Gastonia, N.C.): Seven physicians who sued CaroMont Health in 2019 over a noncompete clause in their employment contracts voluntarily dismissed their suit in May. The physicians left CaroMont's South Point Family Practice in 2019 to join Tryon Medical Partners, a physician practice launched in 2018 by nearly 100 physicians formerly employed by Charlotte, N.C.-based Atrium Health. CaroMont requested the seven physicians pay $1.8 million to be released from their noncompetes. The physicians sued to avoid payment, arguing that their noncompetes only prevented them from joining a competing health system within 20 miles of CaroMont, and Tryon is not a hospital or health system. The two parties reached a settlement to resolve the dispute.