A small segment of physicians who enter hospital employment contracts are beginning to change their minds and return to private practice. In some parts of the country, however, broad noncompete agreements can severely limit physicians' practice mobility later in their careers.
From the health system perspective, the clauses--which bar doctors from leaving for a competing hospital or clinic and taking their patients with them--are in place to ensure they get a return on investment when they hire a doctor, explained a post from the Puget Sound Business Journal.
In states where noncompetes or restrictive covenants are legal, they're generally enforceable as long as the terms are reasonable. What constitutes "reasonable," however, is a matter of debate throughout various industries. Legislation has thus evolved in some states, especially in light of current and expected doctor shortages.
New Mexico, for example, just passed a law that limits restrictive covenants for employee physicians, but not non-solicitation agreements, JD Supra Business Advisor reported. Under the New Mexico law, effective July 1, physicians who have been employed by an organization for fewer than three years are allowed to separate from that entity and compete, but the organization can require the employee to repay incentives like loans, relocation expenses and signing bonuses. After three years of employment, a physician can leave with no strings attached.
But in Washington state, contracts with UW Medicine ban doctors from practicing medicine within a 30-mile radius of the UW facility where they practiced, according to an article in the Puget Sound Business Journal. Doctors can in some cases negotiate their way out of the noncompetes, but it's at no small expense.
One doctor wrote, in public testimony supporting a failed bill that would have eased restrictions, that she faced a fine of $427,150 if she were to leave, according to the newspaper, while another wrote that the restriction left her unable to perform psychiatric services that few others provide in the state.
To learn more:
- read the post
- read the article
- see the JD Supra overview of recent legislation