Last Thursday, the Federal Trade Commission (FTC) released a proposed rule that would ban employers from imposing noncompete agreements on their employees. Noncompetes affect roughly 20 percent of the American workforce, and healthcare providers would be particularly impacted by this change, as far greater shares of physicians—at least 45 percent of primary care physicians, according to one oft-cited study—are bound by such agreements.
The rulemaking process is expected to be contentious, as the US Chamber of Commerce has declared the proposal “blatantly unlawful”. While it is unclear whether the rule would apply to not-for-profit entities, the American Hospital Association has released a statement siding with the Chamber of Commerce and urging that the issue continue to be left to states to determine.
The Gist: Should this sweeping rule go into effect, it would significantly shift bargaining power in the healthcare sector in favor of doctors, allowing them the opportunity to move away from their current employers while retaining local patient relationships.
The competitive landscape for physician talent would change dramatically, particularly for revenue-driving specialists, who would have far greater flexibility to move from one organization to another, and to push aggressively for higher compensation and other benefits.
Given that the FTC cited suppressed competition in healthcare as an outcome of current noncomplete agreements, the burden will be on organizations that employ physicians—including health systems and insurers, as well as private equity-backed corporate entities—to prove that physician noncompetes are essential to their operations and do not raise prices, as the FTC has suggested.