CMO: 'FTC's Noncompete Ban Will Spark Bidding War for Physicians'

MaineGeneral Medical Center's CMO also says the noncompete ban will make healthcare organizations face higher physician recruitment costs.

A Federal Trade Commission (FTC) ruling last week that bans noncompete agreements will likely raise healthcare costs, the CMO of MaineGeneral Medical Center says.

The FTC estimates that about 18% of the nation's workforce—roughly 30 million people—are subjected to noncompete clauses. The American Hospital Association and other healthcare stakeholders claim the FTC overstepped its authority to approve what the AHA calls "a bad law, bad policy, and a clear sign of an agency run amok."

The noncompete agreement ban, which will take effect 120 days after it is published in the Federal Registry, will be challenging for healthcare organizations that employ physicians, says Dana "Dan" Vick, CMO of MaineGeneral Medical Center.

Vick does not agree with the FTC's assessment that the noncompete agreement ban will reduce healthcare costs by $194 billion over the next decade.

"I can see an increase in worker earnings," Vick says. "Without a noncompete agreement, a physician can easily move from one practice to another depending on who is the higher bidder, so I do not see how the ban will reduce healthcare costs. Banning noncompete clauses is going to force healthcare organizations to compete on price point for physicians. It also costs thousands of dollars to recruit physicians."

The noncompete agreement ban will spur bidding wars for physicians, Vick says. "If a physician who is employed gets a better offer across the street and decides to take that offer, then the initial employing organization may make a counter offer to keep that physician. If the counter offer is successful, the initial employing organization will have a higher cost for keeping that physician."

Dana "Dan" Vick is CMO of MaineGeneral Medical Center. Photo courtesy of MaineGeneral Health.

Vick, who has been a physician in private practice subject to a noncompete agreement and works at an organization where noncompete clauses are part of employment agreements, sees both sides of the issue.

"From the employee standpoint, if a job does not work out, the employee may want to move to another position and noncompete clauses can prevent them from doing so in a certain geographic area, which is typically how noncompete clauses are set up," Vick says. "These clauses can have a time limit that forces employees to wait to work in another part of the designated geographic area."

"From an organizational standpoint, noncompete agreements are a way to protect a business by reducing the risk of business loss," Vick says. "These agreements prevent clinicians from taking patients, staff, and organizational information with them if they go somewhere else. These agreements increase employers' incentives to provide training to healthcare workers that could be costly versus opting not to provide training if employers think workers are going to jump ship and go somewhere else. These agreements also help to decrease labor turnover."

About 40% of physicians are bound by noncompete agreements, according to the American Medical Association. That level of noncompete agreements among physicians is probably reasonable in terms of where the noncompete agreements are in effect, Vick says.

"In large metropolitan areas, where you have competitors overlapping with each other, you would tend to see noncompete agreements more prevalent than in rural areas where competitors are not located close to each other," Vick says.

Vick says the noncompete agreement ban will likely have a negative impact on MaineGeneral Health, which uses noncompete clauses in employment contracts with physicians. "It is going to increase the cost of employing physicians as well as increase the cost of recruiting physicians if people do leave."

It remains to be seen whether the noncompete agreement ban will be upheld in the courts, Vick says. "There are going to be some significant legal challenges to the ban. The U.S. Chamber of Commerce has already said that it plans to file suit to block the ban. We'll have to see exactly what happens."