Do Physician Contracts Include Non-Compete Agreements?

A non-compete agreement prohibits physicians from practicing at a competing practice or hospital in a particular geographic area and for a specified period after leaving their job. This prevents physicians from stealing patients if they move to a different practice or plan to open up a practice of their own.

While components help prevent turnover and the continuity of care for patients, it can be upsetting for patients to find out that their physician who has treated them for years no longer works at the practice. Not all states enforce non-compete agreements, however, Pennsylvania is one of several states. If your physician employment contract includes a non-compete agreement, you are urged to contact a lawyer as soon as possible.

What Are the Components of a Non-Compete Agreement?

A non-compete agreement must include the following elements for it to be enforceable:

• Within a particular region: The geographic limitations vary from state to state and can range from within five miles to 100 miles of practice.
• For a certain period: The non-compete agreement also specifies the period when the restriction will last. Most non-compete agreements last between one and three years.
• Interest: The court will consider whether the employer needs to enforce the non-compete agreement against the physician.

What Are the Benefits of Non-Compete Agreements?

There are several positive aspects of non-compete agreements that impact both employers and physicians. For example, employers appreciate non-compete agreements because they can prevent practices from losing patients after a physician leaves. In addition, if the practice invests a significant amount of time, money, and resources into a physician’s training, a non-compete agreement helps protect that investment.

Some practices may have developed proprietary techniques that they do not want physicians to take with them if they leave. Physicians who have dedicated years of hard work to the practice and have developed relationships with their patients may appreciate the benefits of a non-compete agreement.

What Are the Drawbacks of a Non-Compete Agreement?

There are some drawbacks for employers regarding non-compete agreements, but that is not always the case for physicians. For example, to remain in compliance with the non-compete agreement, the physician may need to move outside of the restricted geographical area. This can disrupt their family life and require the physician to work in a location that is not ideal. In addition, physicians who are newly trained and have limited experience may not want to commit to a particular city or town on a long-term basis. They may also have difficulty navigating the complexities of a non-compete agreement, which may result in more severe restrictions on future opportunities.

Before signing an employment contract, there may be elements of the non-compete agreement that can be negotiated or compromises that can be made that may make the contract less restrictive.

How Do Non-Compete Agreements Impact Telemedicine?

Throughout the coronavirus pandemic, a significant percentage of patient care was and continues to be delivered via telemedicine. Patients could consult with their physicians and receive the necessary care without going into the office in person and risk exposing themselves or others to the COVID-19 virus. However, telemedicine companies generally do not place non-compete agreements in their contracts.

How Are Non-Compete Agreements Enforced?

Non-compete agreements are generally enforced by state law. In some states, non-compete agreements are unenforceable. In the states that allow non-compete agreements, enforcement depends on the state where the agreement was made, the business’s unique circumstances, how the employee fits into the practice, and other conditions. In Pennsylvania, when presented with enforcing non-compete agreements, the courts will ask the following questions when determining whether to enforce the agreement:

• Is the restriction reasonably limited in time, geographical area, and scope? Agreements of up to three years following the termination of a professional relationship are a reasonable amount of time to enforce a non-compete agreement. In addition, agreements that cover only a certain mile radius from the employer’s location are reasonable. However, the reasonableness may vary based on the circumstances of the case. For example, a 30-mile restriction for a physician practicing in a large city may not be considered reasonable since it would likely exceed the distance necessary to protect the employer’s business interests. Regarding scope, it is unlikely that a broad restriction on any practice of medicine would be considered reasonable. However, agreements may be enforced if the scope of the agreement is limited to the former employee’s sub-specialty.
• Is the restriction necessary to protect the employer’s interests? If an employer wishes to enforce a non-compete agreement, they must be able to show that they have legitimate business interests that they want to protect and that they are not simply enforcing the agreement to avoid competition. Often, medical groups invest a significant amount of money in recruiting physicians to their practices. If the physician would not have had the opportunity to obtain certain medical privileges if not for the medical group’s assistance, the medical group may receive a preliminary injunction that would prohibit the physician from performing services at that hospital.
• Is the restriction harmful to the public? Non-compete agreements can limit the rights of patients to be treated by the physician of their choice, which means that there may be situations where a non-compete agreement may be harmful to the public. In some cases, enforcing a non-compete agreement could result in a shortage of physicians in a particular geographical area or specialty. It could also hurt the continuity of care for patients who require a continued course of treatment without any disruption.
• Is the restriction unduly burdensome? The court may not enforce a non-compete agreement if it is considered unduly burdensome on the employee. The restriction is so broad that the physicians would have difficulty making a living. However, the courts do not consider this unduly burdensome if the rule only applies to a specialty or subspecialty and the physician is not restrained from practicing general medicine.

Are There Legislative Changes That Could Impact Non-Compete Agreements?

House Bill 681, also known as the Health Care Practitioner Non-Compete Agreement Act, is a bipartisan bill proposed to the Pennsylvania House of Representatives. It would prevent using non-compete agreements in health care practitioners’ employment contracts if passed.

According to the bill, physicians would be allowed to notify patients of their new affiliation and give them the option of following their doctor to their new location. The bill would not apply to any trade secrets that the physician learned during their employment at the previous practice or to additional services outside the scope of the physician’s practice.

While the bill has garnered support from physicians and medical groups, there has been significant opposition from the Hospital and Healthsystem Association of Pennsylvania (HAP) and other groups. These organizations make substantial investments to attract exceptional health care providers. These investments include competitive compensations, liability coverage, medical school loan forgiveness, credentialing with insurers, onboarding, and training. Eliminating non-compete agreements could create bidding wars between hospitals and make it difficult for hospitals to retain quality health care professionals. This could also result in increased health care costs for everyone.

Philadelphia Physician Lawyers at Sidney L. Gold & Associates, P.C. Protect the Employment Rights of Physicians

If you have questions or concerns about a non-compete agreement in your physician contract, do not hesitate to contact one of our Philadelphia physician lawyers at Sidney L. Gold & Associates, P.C. Call us at 215-569-1999 or contact us online to schedule a free consultation. Located in Philadelphia, we serve clients throughout Southeastern Pennsylvania, including Wilkes-Barre, Scranton, Northeast Philadelphia, Bucks County, Chester County, Delaware County, and Montgomery County.