Noncompete clauses for physicians are hurting health care, AAFP says

A national ban on noncompete clauses should include work agreements for physicians and other clinicians.

The American Academy of Family Physicians (AAFP) has joined those calling for an end to contract language that restricts employees’ actions once they leave a job. AAFP sent a letter to the Federal Trade Commission (FTC), which has published a notice of proposed rulemaking to ban noncompetes because they “constitute an unfair method of competition,” violating federal law.

“Noncompete clauses can impede patient access to care, limit physicians’ ability to choose their employer, contribute to burnout and stifle competition,” AAFP President Tochi Iroku-Malize, MD, MPH, MBA, FAAFP, said in a statement. “The AAFP supports the FTC’s proposed rule to bolster physician wellbeing and ultimately support the foundation of family medicine – our relationships with our patients.”

Changes in physician employment

A significant shift in physician employment is a factor in barring noncompetes, according to the letter from AAFP Board Chair Sterling N. Ransone Jr., MD, FAAFP.

As of 2020, 49.1% of physicians delivered care in independent practices wholly owned by physicians, according to the 2020 American Medical Association (AMA) Physician Practice Benchmark Survey. Among AAFP members, 24% reported they were sole or partial owners of their practices, while 73% work working as employees. For physicians one to seven years post-residency, 91% were employed physicians, while in 2011, 59% of AAFP members reported being employed, according to the Academy.

Health care consolidation

Meanwhile, hospitals are consolidating, and restricting physician mobility and workforce participation leads to greater concentration and higher prices in health care, the AAFP letter said. As of 2022, 58% of hospitals and health systems were nonprofits, so those too should be covered by a ban on noncompete clauses because excluding them would undercut the positive effects of a ban for many physicians.

AAFP has a policy opposing restrictive covenants for physicians because those can disrupt doctor-patient relationships. The Academy noted the AMA and American College of Physicians also have policies against physician contract language that could limit patient access to care.

Meanwhile, the American Hospital Association has argued in favor of noncompetes that boost physician earnings while protecting health system investments to recruit and retain them.

De facto noncompetes

Contracts also may have de facto noncompete clauses that effectively block workers from seeking employment or going into business once they have left a job. Examples include sign-on bonuses, student loan reimbursement, moving expenses, or housing fees, that physicians or other workers must repay if they leave an employer, the AAFP letter said.

“By limiting the flexibility and mobility of health care workers, noncompete clauses can harm individual workers, patients, and the broader health care system,” the AAFP letter said. “Noncompete clauses in physician employment contracts lead to suboptimal working conditions, worsen clinician burnout and health care worker shortages, jeopardize patient safety, impede timely access to care, and accelerate consolidation in the health care industry.”

Public comment period open

The FTC will continue accepting public comments on the rule until April 19. The proposal had prompted 12,738 comments as of April 11.