DOCTOR DOCTOR; to Compete or Non-Compete, that is the question?

What would you do if you couldn’t leave a job that had changed extensively due to situations beyond your control? Dr. Larry Stover, of Hamilton County, Indiana, finds himself in this exact situation. Dr. Stover worked for a medical group called Northwest Radiology Network, PC as the lead interpreting physician of mammograms for one of their clients, Ascension St. Vincent. Recently, Northwest Radiology terminated their relationship with Ascension, leaving Dr. Stover wondering what his next step will be. Dr. Stover would like to continue working with Ascension but signed a non-compete agreement with Northwest Radiology. The non-compete won’t allow him to work with Ascension’s new radiology group.

Non-compete agreements are used in employment settings to ensure workers will not use information learned on the job to help competitors or otherwise compete with past employers. They can be used in almost any work setting, but usually prevent employees from working in the same community as their previous job for a set period of time. As things stand, the only way to get around a non-compete agreement is to take it to court. As such, Dr. Stover has asked a Hamilton County court to declare that Northwest Radiology has no “protectable” interest in its business relationship with Dr. Stover. Non-competes have a history of legal disputes across the country but historically are found favorable to employers.

However, the tide may be shifting from employers and toward employees. In 2022, lawmakers in 29 states proposed bills that would limit or entirely prohibit non-compete agreements. One-third of these bills specifically targeted healthcare professionals. Even more telling, in the first weeks of 2023, 25 different non-compete bills have been proposed in 13 states. Non-competes are facing scrutiny in a variety of states.

For others in Dr. Stover’s situation and location, Indiana has proposed a bill through the Indiana General Assembly that would prohibit physicians and employers from entering non-compete agreements. This proposed bill would go into effect on July 1, 2023. Indiana physicians believe that the elimination of non-compete agreements would improve patient care and access to physicians by allowing physicians to provide medical assistance to a variety of hospital groups and organizations. Physicians also point out that there’s a current shortage of doctors in Indiana, a problem that is only worsened by non-compete agreements and their inability to stay local when switching jobs.

Not all are in favor of the proposed bill. The Indiana Hospital Association, a lobbying group that represents over 160 hospitals in the state, supports non-compete agreements. They argue that non-compete agreements help protect an organization’s interest in a physician’s practice and the resources they put into improving that physician’s medical expertise. The Indiana Chamber of Commerce also opposes the bill, arguing that organizations often spend large amounts of money attracting and training medical talent.

On a larger scale, President Biden’s administration is in the process of issuing a rule that would ban non-compete agreements across industries. This rule was proposed by the Federal Trade Commission (“FTC”), and the FTC believes it could increase workers’ earnings by $300 billion per year and expand career options for 30 million Americans. Specifically, regarding healthcare, the FTC believes that a ban on non-competes could save patients $148 billion in healthcare costs.

Many Indiana and other state senators hope to reach a middle ground that would not eliminate non-competes in the health sector entirely but would allow for more physician freedom. As things are continuing to progress, Quarles will continue monitoring any new proposed and passed regulations.

For more information on and to stay up to speed with the ever-changing developments in healthcare (and other industry) non-competes please contact your local Quarles attorney or:

• Edward L. Holloran, III: (317) 399-2892 / ed.holloran@quarles.com
• Monica Wright: (317) 399-2836 / monica.wright@quarles.com