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Saturday, September 24, 2011

Physician non-compete clauses--another way to gut rural health care

Lately I have been dealing with the painful process of separating from my medical group. I have been part of this group since its inception, about 12 years ago. It serves two small towns in adjacent states and has about 30 employees and 12 providers, mostly located in the larger of our two clinics, in which I do not work.  We originally came together from 3 primary care practices in order to share resources and reduce overhead. Cultures and values were somewhat different, but we did all care about delivering good quality medicine, letting our physicians have autonomy in decision making, and about making sure that each one of us could have lives that were humane, valuing family time or outside interests and covering each others' patient's needs so that care would not suffer.

When we came together we wrote a contract which was longer and more formal than any I had signed before and had various elements that made me somewhat uncomfortable. One was the "buy-in". This was an amount of money that we all agreed to put in to essentially buy the practice. I balked at the size of this, since my location of practice was very inexpensive, and the physicians in the larger office were "buying in" to a large and brand new medical office building. My concerns were respected, and my buy-in was smaller, as was that of my two partners.  The other issue was a non-compete clause, which I was told was standard and non-negotiable. This clause in the contract stated that if my employment with the corporation ended, I would not practice medicine within 20 miles for 2 years.

Physician non-compete clauses are strongly disfavored by the American Medical Association and considered unethical. They restrict choice of practice and they penalize patients when a physician is at odds with his or her employer.  They are hard to enforce and void in some states, most prominently California. They have been viewed as restrictions on trade, though various interpretations of this have arisen from court cases. They remain a common component of physician contracts. They are particularly hard to enforce if it can be shown that the physician is needed in his or her community and that enforcement of the clause will harm patients.

In the case of me and my clinic partner, who are obliged to sever our connection to our parent organization because our clinic is no longer viable after loss of half of our provider staff, there are a multitude of reasons why a non-compete clause is going to be unenforceable. The most important of these involves the patients in the community. Our town of just over 20,000 people now will have 2 rather than 4 internal medicine physicians, which is inadequate for our aging population. In another practice in town which has an even more restrictive non-compete clause, physicians are unable to make changes that might be in everyone's best interest, since if they leave the practice they must also leave the community and most of them are strongly tied to it, with children in school and spouses with jobs.

If a non-compete clause is unenforceable, unethical and disfavored by our national organization, why do we even worry about it? It is very common for an organization to threaten to enforce a non-compete clause, and to have this happen would be painful or disastrous. Court cases such as these cost 10s of thousands of dollars to complete and result in frequent and unpredictable time commitments that make it difficult or impossible to concentrate on a medical practice.

I have chosen to do a 2 year sabbatical at the end of my association with my present group for many reasons, and mostly because I really want to and think that the experience and knowledge I will pick up will be positively transforming in ways that I can't predict. But I would like to be able to fill in here or there in my community if I am needed during those two years. I can do the exile thing, but it is hardly good for my patients or colleagues, including those at the corporation I am leaving. Nevertheless, sabers are rattling and threats being spoken. My colleague is experiencing the same constraints. It affects both the community and our families, who will be mightily disrupted by our departure or frequent absences.

I have learned an important lesson, which I will not have trouble remembering. I will NEVER sign another contract which contains a non-compete clause.  provides a lawyerly review of some of the issues. presents a bit more on the AMAs position. recognizes the power of the threat of enforcement.


Anonymous said...

thank you for your article, very good. had a frustating experience with non-compete clause and left the rural community, and have seen others do the same. Even if the contracts are "non-enforcable" which depends on the state and the court and etc who wants to put themselves at risk and go to court or for that matter go back on their word?

Vancouver Chiropractor said...

This is a GREAT post! I hope you not mind. I published an excerpt on the site and linked back to your own blog for people to read the full version. Thanks for your advice.

Vancouver Chiropractor