https://mailchi.mp/c02a553c7cf6/the-weekly-gist-july-28-2023?e=d1e747d2d8

We recently spoke with a health system COO who wanted help playing out scenarios regarding the relationship between specialist physicians and their private equity (PE) partners. The system is located in one of the markets referenced in a recent study that has some of the highest levels of private equity ownership in the country. One physician group, whose doctors provide almost all the system’s coverage for a key specialty, has worked with PE partners for five years, and the relationship is not going well. “We’re hearing that many of the younger doctors want to leave. And many of the others are close to retirement,” he shared. 

“We’re really concerned about what could happen if the group implodes.” The key issue: the doctors signed very restrictive noncompete agreements when they sold their practice, which could prohibit them from working in the market. 

The health system would consider bringing some of the doctors into their employed medical group, but executives are worried this might be impossible for the duration of the noncompete agreements. “If these doctors can’t stay locally, we might have to rebuild that specialty from scratch. And I can’t imagine how disruptive that would be,” he worried.
 
When the FTC announced a proposed rule earlier this year that would ban employers from imposing noncompete agreements, many health systems reacted with alarm, fearing the that the freedom to move would lead to frequent bidding wars, ultimately driving up the cost of physician talent in the market.

But the situation shows how perspectives would change depending on who holds the noncompete.

Mid-sized markets like this one, where coverage for several specialties may come from single groups, are particularly vulnerable. Regardless, this situation highlights the need to diversify physician relationships to guard against getting caught in a “coverage crisis”.