It’s been nearly four months since the Federal Trade Commission (FTC) issued a final rule on noncompete clauses, banning them as “unfair method(s) of competition” under Section 5 of the FTC Act (Skadden). Since the ruling, plaintiffs in multiple states have filed suits claiming the rule is unjust. The most recent opinion, issued by a federal judge in Texas, has struck down the rule nationally, stating the FTC lacks the authority to issue it (Reuters). It’s a significant victory for those who oppose the ban, but it’s likely the FTC will appeal. A spokeswoman for the FTC has said the ruling will not prevent them from addressing noncompetes on a case-by-case basis. Regardless of the eventual outcome, the debate about noncompetes has started a conversation in the healthcare industry — not just about the potential implications of a ban — but more importantly, a conversation about what we can do instead to make physicians want to stay.
Noncompete clauses, embedded in many physician contracts, prevent employed physicians from joining competing practices within a specified geographic area for a set period of time after leaving their jobs. Designed to protect employers’ interests, these agreements prevent physicians from taking sensitive information, skills, and, perhaps most importantly, patients to competitors. If the FTC were to successfully eliminate noncompetes, it could have lasting effects on healthcare organizations, providers, and patients.
Current Status of Noncompetes
The FTC’s rule would have invalidated existing noncompete clauses (with a few exceptions) and prohibited new noncompete clauses between employers and employees. As noted, the most recent ruling in Texas prevents the rule from taking effect nationwide. Earlier this month, however, in response to a different suit, a federal judge in Pennsylvania declined to block the FTC’s noncompete ban, saying the plaintiff failed to prove that a noncompete ban would cause irreparable harm to the business. These differing outcomes suggest more legal challenges ahead, with some speculating the case could reach the Supreme Court (Washington Post).
The FTC rule is the first attempt to ban noncompetes across the nation. However, several states already have bans in place and at least 23 others have imposed restrictions, most often related to noncompetes for lower-wage workers (Managed Healthcare Executive). State-level noncompetes are not impacted by the recent ruling.
Industry Responses to the Potential Ban
Predictably, many physicians were happy about the FTC’s ban as it would allow them to move more freely between employers. Leaders of healthcare organizations, however, have been understandably concerned. The American Hospital Association (AHA) opposed the ruling, citing its potential to upend healthcare labor markets and exacerbate the shortage. The American Medical Group Association (AMGA) also opposed the ban. In an article for RevCycleIntelligence, an AMGA representative explained that noncompetes protect the significant investment healthcare organizations make each time they bring on a physician. An article for Chief Healthcare Executive further explored the clash between physicians and healthcare organizations on the matter. Some healthcare leaders went so far as to say the ban would threaten access to care for millions of patients.
Those in favor of the FTC’s ruling due to its impact on physicians’ job mobility might have said these organizations were overreacting. However, organizations had reason to be concerned about some likely ripple effects. A ban on noncompetes in healthcare could very well cause increased competition for providers, rising recruitment costs, greater scrutiny of nonprofits, stalled mergers, and more. Perhaps the greatest fear surrounding the issue is the possibility of physicians leaving an employer and taking their patients with them. That said, nonsolicitation and/or nondisclosure agreements would continue to offer some protection (Holland & Knight, Morgan & Westfield).
The Importance of Physician Retention Plans
It’s easy to see why healthcare leaders have been concerned about the impact of a ban on noncompetes. However, if they are relying on noncompetes as a critical part of a retention strategy, they are doing so at their peril. Forcing physicians to stay in jobs where they are unhappy creates a negative culture where dissatisfaction is likely to spread.
So, instead of panicking about a potential noncompete ban, healthcare leaders should focus on creating an environment where physicians will be happy in their jobs and, therefore, more likely to stay. This means creating and committing to a formal physician retention plan. A good retention plan documents the organization’s commitment to fostering a positive work environment. By putting intentions in writing, the plan holds leaders accountable for following through on those promises. The retention plan should address the things that are most important to physicians, including:
Communication — In a 2022 report from Jackson Physician Search and Medical Group Management Association, two-way communication with management was cited as the most important factor in physician job satisfaction. This was also true in their 2021 report. A good retention plan should document expectations for regular one-on-one meetings between management and physicians.
Detailed Compensation Information — The retention plan should document exactly what physicians can expect in terms of how their paychecks will be calculated, how often base pay is increased, and how (and when) merit-based increases and bonuses are determined.
Workload Equity — Be transparent about how work is distributed in the practice. Document how things like new patient distribution, call schedules, and miscellaneous responsibilities are decided so there are no misunderstandings or misconceptions about the division of labor.
Administrative Burden — Document the specific ways leadership is committed to reducing administrative burdens and provide a process physicians should follow if they feel administrative duties are reaching unacceptable levels.
Physician Wellness — Document the availability of programs dedicated to promoting physician wellness and preventing burnout, such as support groups, on-site yoga or other fitness opportunities, healthy food options, etc.
Work-Life Balance — Commit to providing flexible scheduling options such as four-day work weeks, seven-on/seven-off, or administrative work-from-home days to encourage work-life balance for all providers.
Time Off — Provide details regarding the amount of time off physicians receive annually and the specifics of when their allotted time increases. Be generous.
Recruiting with Retention in Mind
Whatever the fate of the FTC’s ban on noncompetes, the possibility has both employers and providers reconsidering the fairness of current practices and exploring alternatives. I’d argue that the biggest takeaway for healthcare leaders is they need to look beyond noncompetes and find other ways to make physicians stay — starting with a solid retention plan.
At Jackson Physician Search, we always say that retention begins with recruitment. This means identifying candidates whose values align with your organization’s mission and culture. When the recruitment process is successful in this endeavor, the new hire will know exactly what to expect and is certain to fit in seamlessly with peers. Only then will you become an employer of choice where physicians want to work long-term. If your healthcare organization would like assistance in securing providers who meet these criteria, reach out today to discuss a dedicated physician recruitment partnership.
