Category Archives: Physician Contracts

Healthcare winners and losers after FTC bans non-compete clauses

Posted on by • Posted in Competition, Federal Trade Commission (FTC), Health System, Hospital, Hospital Industry, Non-Compete Agreements, Operating Margin Drivers, Outpatient Care, Outpatient Clinic Model, Outpatient Revenue, Physician, Physician Compensation, Physician Contracts, Physician Employment, Primary Care • Leave a comment

https://www.linkedin.com/pulse/copy-healthcare-winners-losers-after-ftc-bans-clauses-pearl-m-d–lidic/

With a single ruling, the Federal Trade Commission removed the nation’s occupational handcuffs, freeing almost all U.S. workers from non-compete clauses. The medical profession will never be the same.

On April 23, the FTC issued a final rule, affecting not only new hires but also the 30 million Americans currently tethered to non-compete agreements. Scheduled to take effect in September—subject to the outcome of legal challenges by the U.S. Chamber of Commerce and other business groups—the ruling will dismantle longstanding barriers that have kept healthcare professionals from changing jobs.

The FTC projects that eliminating these clauses will boost medical wages, foster greater competition, stimulate job creation and reduce health expenditures by $74 billion to $194 billion over the next decade. This comes at a crucial moment for American healthcare, an industry in which 60% of physicians report burnout and 100 million people (41% of U.S. adults) are saddled with medical bills they cannot afford.

Like all major rulings, this one creates clear winners and losers—outcomes that will reshape careers and, potentially, alter the very structure of U.S. healthcare.

Winners: Newly Trained Clinicians

Undoubtedly, the FTC’s ruling is a win for younger doctors and nurses, many of whom join hospitals and health systems with the promise of future salary increases and more autonomy. However, by agreeing to stringent non-compete clauses, these newly trained clinicians have little choice but to place their trust in employers that, shielded by air-tight agreements, have no fear of breaking their promises.

Most newly trained clinicians enter the medical job market in their late 20s and early 30s, carrying significant student-loan debt—nearly $200,000 for the average doctor. Eager for stable, well-paying positions, these young professionals quickly settle into their careers and communities, forming strong relationships with friends and patients. Many start families.

But when these clinicians realize their jobs are falling short of the promises made early on, they face a tough decision: either endure subpar working conditions or uproot their lives. Taking a new job 25 or 50 miles away or moving to a different state are often are only options to avoid breaching a non-compete clause.

In a 570-page supplement to its ruling, the FTC published testimonials from dozens of healthcare professionals whose lives and careers were harmed by these clauses.

“Healthcare providers feel trapped in their current employment situation, leading to significant burnout that can shorten their career longevity,” said one physician working in rural Appalachia.

By banning non-competes, the FTC’s rule will boost career mobility for all clinicians within their own communities. This change will likely spur competition among employers—leading to improved pay and benefits to attract and, equally important, retain top talent. And with the reassurance that they can easily switch jobs if their current employer falls short of expectations, clinicians will enjoy greater professional satisfaction and less burnout.

Winners: Patients In Competitive Markets

Benefits that accrue to doctors and nurses from the FTC’s ban will translate directly to improved outcomes for patients. For example, we know that physicians who report symptoms of burnout are twice as likely to commit a serious medical error. Studies have shown the inverse is true, as well: healthcare providers who are satisfied with their jobs tend to have lower burnout rates, which is positively correlated with improved patient outcomes.

Once freed from restrictive non-compete clauses, many clinicians will practice elsewhere within the community. To attract patients, they will have to offer greater access, lower prices and more personalized service. Others with the freedom to choose will join outpatient centers that offer convenient and efficient alternatives for diagnostic tests, surgery and urgent medical care, often at a fraction of the cost of traditional hospital services. In both cases, increased competition will give patients improved medical care and added value.

Losers: Large Health Systems

Large health systems, which encompass several hospitals in a geographic area, have traditionally relied on non-compete agreements to maintain their market dominance. By barring high-demand medical professionals such as radiologists and anesthesiologists from joining competitors or starting independent practices, these systems have been able to suppress competition and force insurers to pay more for services.

Currently, these systems can demand high reimbursement rates from insurers while also maintaining relatively low wages for staff, creating a highly profitable model. Yale economist Zack Cooper’s research shows the consequence of the status quo: prices go up and quality declines in highly concentrated hospital markets.

The FTC’s ruling challenges those conditions, potentially dismantling monopolistic market controls. As a result, insurers will no longer be forced to contend with a single, dominant provider. And with health systems pushed to offer better wages and benefits to retain their top talent, bottom lines will shrink.

While nonprofit hospitals and health systems are not currently under the FTC’s jurisdiction, the agency has pointed out that these facilities might be at “a self-inflicted disadvantage in their ability to recruit workers.” Moreover, as Congress intensifies scrutiny on the nonprofit status of U.S. health systems, hospitals that do not voluntarily align with the FTC’s guidelines may find themselves compelled to do so through legislative actions.

Losers: Hospital Administrators

Individual hospitals have faced a unique challenge over the past decade. Across the country, inpatient numbers are falling, which makes it harder for hospital administrators to fill beds overnight. This trend has been driven by advancements in medical technology and new practices that enable more outpatient procedures, along with changes in insurance reimbursements favoring less costly outpatient care. As a result, hospital administrators have been compelled to adapt their financial strategies.

Nowadays, outpatient services account for about half of all hospital revenue. These range from physician consultations to specialized procedures like radiological and cardiac diagnostics, chemotherapy and surgeries.

Medicare and other insurers typically pay hospitals more for these outpatient services than they pay local doctors and other facilities. Knowing this, hospitals are hiring community doctors and acquiring diagnostic and procedural facilities, then boosting profitability by charging the higher hospital rates for the same services.

Hospital administrators know that this strategy only works if the newly hired clinicians are prohibited from quitting and returning to practice within the same community. If they do, their patients are likely to go with them. This is why the non-compete clauses are so essential to a hospital’s financial success.

As expected, the American Hospital Association opposes the FTC’s rule, arguing that non-compete clauses protect proprietary information. In practice, most of the doctors affected by the ban are providing standard medical care and have no proprietary knowledge that requires protection.

Looking Ahead

Today’s hospital systems are starkly divided between haves and have-nots. Facilities in affluent areas often enjoy high reimbursement rates from private insurers, boosting financial success and administrator salaries. In contrast, rural hospitals grapple with low patient volumes while facilities in economically disadvantaged, high-population areas face greater financial difficulties.

The current model is not working. The old ways of doing things—enforcing non-competes, charging higher fees for identical services and promoting market consolidation to hike prices—are not sustainable solutions.

The abolition of non-compete agreements will produce both winners and losers. In the healthcare sector, the ultimate measure of a policy’s impact should be its effect on patients—and the overwhelming evidence suggests that eliminating these clauses will benefit them greatly.

The state of state physician noncompete bans

Posted on by • Posted in Federal Trade Commission (FTC), Health System, Hospital, Hospital Industry, Noncompete Agreements, Physician, Physician Contracts, Tax Exempt Status • Leave a comment

https://www.kaufmanhall.com/insights/blog/gist-weekly-may-17-2024

With the Federal Trade Commission (FTC) issuing a final rule last month that bans noncompete agreements nationwide, the graphic above is our attempt to categorize the current status of complex state noncompete laws that affect physicians. 

Except in the event of a business sale, five states—California, North Dakota, Minnesota, Nebraska, and Oklahoma—ban all noncompete agreements for all employees, and at least 19 states either ban them for physicians or place varying limits on them for physicians. 

Examples of these limits include a narrow law in Florida that allows noncompetes to be voided if there is only one employer of a physician specialty in a county, and a Tennessee law that only permits physician noncompetes that bar a physician from practicing at facilities where their former employer provides services. 

As a noncompete agreement can restrict a physician’s ability to practice near a former employer for years, bans on physician noncompete agreements have been shown to improve community access to care. One study found that, compared to places that allow them, places that banned noncompetes for physicians saw increased physician employment, the opening of more physician practices, and a lower likelihood of practice closures. 

Should the new FTC ban survive the mounting legal challenges it faces, its effect on the physician labor market may be limited, as not-for-profit organizations fall outside the FTC’s traditional enforcement jurisdiction. However, the agency has indicated a willingness to reevaluate an entity’s not-for-profit status and stated that “some portion” of tax-exempt hospitals could fall under the final rule’s purview.

I’m Glad I’m not a California Hospital or Practice Administrator…

Posted on by • Posted in Competition, Health System, Hospital, Hospital Industry, Law, Non-Compete Agreements, Physician Compensation, Physician Contracts, Physician Employment, Retention, Talent Competition, Talent Management, Talent Pipelines • Leave a comment
https://www.linkedin.com/pulse/im-glad-california-hospital-practice-administrator-k-todd-phd-mha-f77ec/?midToken=AQHcpzuK5TbmJA&midSig=2Qnh-g7b4aiX41&trk=eml-email_series_follow_newsletter_01-newsletter_hero_banner-0-open_on_linkedin_cta&trkEmail=eml-email_series_follow_newsletter_01-newsletter_hero_banner-0-open_on_linkedin_cta-null-fll5j~lqpddslo~9-null-null&eid=fll5j-lqpddslo-9&otpToken=MTAwMzFjZTAxMzJhY2FjNWJlMmYwMmVhNDUxOWUwYjM4NmNjZDA0MDliYWM4NTZmNzJjZTAwNmI0NjUyNTlmNGZjYTY5NTg1NTFlNmNlZDk2Yzk2Yjc2N2RjZjM4MjA5ZGRjZjYzNTdiMWNlMDdiZmUyLDEsMQ%3D%3D

On January 1st, 2024 #AB1076 and #SB699, two draconian noncompete laws go into effect. It could put many #employedphysicians in a new position to walk away from #employeeremorse.

AB1076 voids non-compete contracts and require the employer to give written notice by February 14th, 2024 that their contract is void.

Is this a good or bad thing? It depends.

If the contract offers more protections and less risk to the employed physician, and the contract is void – does that mean the whole contract is void? Or is the non-compete voidable?

But for the hospital administrator or practice administrator, we’re about to witness the golden handcuffs come off and administrators will have to compete to retain talent that could be lured away more easily than in the past. But the effect of the non-compete is far more worrisome for an administrator because of the following:

The physicians many freely and fairly compete against the former employer by calling upon, soliciting, accepting, engaging in, servicing or performing business with former patients, business connections, and prospective patients of their former employer.

It could also give rise to tumult in executive positions and management and high value employees like managed care and revenue cycle experts who may have signed noncompete contracts.

If the employer does not follow through with the written notice by February 14th, the action or failure to notify will be “deemed by the statute to be an act of unfair competition that could give rise to other private litigation that is provided for in SB699.

The second law, SB699, provides a right of private action, permitting the former employees subject to SB699 the right to sue for injunctive relief, recovery of actual damages, and attorneys fees. It also makes it a civil violation to enter into or enforce a noncompete agreement. It further applies to employees who were hired outside California but now work in or through a California office.

What else goes away?

Employed physicians can immediately go to work for a competitor and any notice requirement or waiting period (time and distance provisions) are eliminated by the laws. So an administrator could be receiving “adios” messages on January 2nd, and watch market share slip through their fingers like a sieve starting January 3rd.

And what about the appointment book? Typically, appointments are set months in advance, especially for surgeons – along with surgery bookings, surgery block times, and follow up visits.

Hospitals may be forced to reckon with ASCs where the surgeons could not book cases under their non-compete terms and conditions. They could up and move their cases as quickly as they can be credentialed and privileged and their PECOS and NPPES files updated and a new 855R acknowledged as received.

Will your key physicians, surgeons and APPs leave on short notice?

APPs such as PAs and NPs could also walk off and bottleneck appointment schedules, surgical assists, and many office-based procedures that were assigned to them. They could also walk to a new practice or a different hospitals and also freely and fairly compete against the former employer by calling upon, soliciting, accepting, engaging in, servicing or performing business with former patients, business connections, and prospective patients of their former employer.

Next, let’s talk about nurses and CRNAs. If they walk off and are lured away to a nearby ASC or hospital, or home health agency, that will disrupt many touchpoints of the current employer.

Consultants’ contracts are another matter to be reckoned with. In all my California (and other) contracts, contained within them are anti-poaching provisions that state that I may not offer employment to one of their managed care, revenue cycle, credentialing, or business development superstars. Poof! Gone!

The time to conduct a risk assessment is right now! But many of the people who would be assigned this assessment are on holiday vacation and won’t be back until after January 1st. But then again, they too could be lured away or poached.

What else will be affected?

Credentialing and privileging experts should be ready for an onslaught of applications that have to be processed right away. They will not only be hit with new applications, but also verification of past employment for the departing medical staff.

Billing and Collections staff will need to mount appeals and defenses of denied claims without easy access they formerly had with departing employed physicians.

Medical Records staff will need to get all signature and missing documentation cleared up without easy access they formerly had with departing employed physicians.

Managed Care Network Development experts at health plans and PPOs and TPAs will be recredentialing and amending Tax IDs on profiles of former employed physicians who stand up their own practice or become employed or affiliated with another hospital or group practice. This comes at an already hectic time where federal regulations require accurate network provider directories.

The health plans will need to act swiftly on these modifications because NCQA-accredited health plans must offer network adequacy and formerly employed physicians who depart one group but cannot bill for patient visits and surgeries until the contracting mess is cleared up does not fall under “force majeure” exceptions. If patients can’t get appointments within the stated NCQA time frames, the health plan is liable for network inadequacy. I see that as “leverage” because the physician leaving and going “someplace else” (on their own, to a new group or hospital) can push negotiations on a “who needs whom the most?” basis. Raising a fee schedule a few notches is a paltry concern when weight against loss of NCQA accreditation (the Holy Grail of employer requirements when purchasing health plan benefits from a HMO) and state regulator-imposed fines. All it takes to attract the attention of regulators and NCQA are a few plan member complaints that they could not get appointments timely.

Health plans who operate staff model and network model plans that employ physicians, PAs and NPs (e.g., Kaiser and others who employ the participating practitioners and own the brick and mortar clinics where they work) are in for risk of losing the medical staff to “other opportunities.” These employment arrangements are at a huge risk of disruption across the state.

Workers Compensation Clinics that dot the state of California and already have wait times measured in hours as well as Freestanding ERs and Freestanding Urgent Care Clinics could witness a mass exodus of practitioners that disrupt operations and make their walk in model inoperative and unsustainable in a matter of a week.

FQHCs that employ physicians, psychotherapists, nurse practitioners and physician assistants could find themselves inadequately staffed to continue their mission and operations. Could this lead to claims of patient abandonment? Failed Duty of Care? Who would be liable? The departing physician or their employer?

And then, there are people like me – consultants who help stand up new independent and group practices, build new brands, rebrand the physicians under their own professional brands, launch new service lines like regenerative medicine and robotics, cardiac and vascular service lines, analyze managed care agreements, physician, CRNA, psychotherapist, and APP employment agreements. There aren’t many consultants with expertise in these niches. There are even fewer who are trained as paralegals, and have practical experience as advisors or former hospital and group practice administrators (I’ve done both) who are freelancers. I expect I will become very much in demand because of the scarcity and the experience. I am one of very few experts who are internationally-published and peer-reviewed on employment contracts for physicians.

Physician contracts are changing

Posted on by • Posted in Employee Compensation, Employee Incentive, Health System, Hospital, Hospital Industry, Physician, Physician Compensation, Physician Contracts, Physician Employment • Leave a comment
https://www.beckershospitalreview.com/compensation-issues/physician-contracts-are-changing.html?origin=RCME&utm_source=RCME&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Shorter contracts, noncompete agreements and increased emphasis on value-based components are among the shifts occurring in physician contracts as hospitals and medical groups build recruitment pipelines and offer incentives to retain physicians. 

Changes in how physician contracts are layered echoes a trend that has been occurring in the labor market itself. Physicians are increasingly opting for employed opportunities and contracts within those models are changing accordingly. 

From 2019 to 2021, more than 108,700 physicians left private practice for employment opportunities, with 58,200 physicians joining hospitals. About three in four physicians are now employed by hospitals, health systems, private-equity-owned groups, payers or other corporate entities. 

The rising costs of private practice, increasing administrative burdens and reimbursement hurdles are also making solo practice a challenging model for many physicians today.

Fewer large medical groups are offering salaries with production bonuses, according to an AMN Healthcare report on physician and advanced practitioner recruiting incentives. The company’s 2017 report found that 75 percent of contracts featured a salary with production bonus, while only 17 percent had a straight salary.

Some medical groups have stopped offering production bonuses because they found that the straight salary model has less ambiguity and is less likely to cause friction with physicians, according to the report. 

AMN also found that a relatively high percentage of academic medical centers do not offer the salary with production bonus model, which may account for the decline in the use of this compensation structure in its report. 

Income guarantees, which are essentially loans that must be repaid generally (but can be forgiven over time) are used to establish physicians in solo or small independent practices. Income guarantees were once the standard contract model, but as the number of private practices has declined, so has the use of income guarantees, according to the report..

Health systems continue to rethink physician contracts as healthcare continues its shift away from fee for service, but challenges remain when it comes to compensation in these models. Systems at the forefront of this shift are developing ways to incentivize physicians in value-based care as the trend towards team-based compensation gains traction and fosters collaboration among providers.