Non Compete Clauses for Physicians Are Snuffing Out Competition and Innovation

Missouri’s Doctor Shortage is Self Inflicted

Missouri has a shortage of primary care physicians and mental health care all over our state, but your local not- for-profit hospitals might prefer the doctor leave town than let him or her establish a private practice in the area.

Most of the time a doctor who signs up with a hospital is told ‘take it or leave it’ when it comes  to  the  ‘non compete clause’.  This means if the doctor ever stops working for the hospital he or she is prevented from practicing within 15-20 miles of the hospital for 1-2 years.   Not-for-profit hospitals are exempt from most taxes by virtue of their IRS status as a 501 C 3 Corporation which they obtain by agreeing to look out for the welfare of their community in many ways.

IRS Designation as a Tax Exempt Organization

Below is the description of the criteria/obligations for qualifying to be tax exempt as a 501 C 3 organization.  To reap the tremendous benefits of tax exemption, a not-for-Profit hsopital is supposed to be looking out for the community, not forcing doctors out of the area.  This is especially counterproductive when the region served is a Health Profession Shortage Area which nearly all counties in our state are.  Does forcing a doctor to leave a health care in a shortage area “combat community deterioration?- No, it leads to deterioration and the practice should be prohibited.

Exempt Purposes – Internal Revenue Code Section
501(c)(3)
The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific,
literary, testing for public safety, fostering national or international amateur sports competition, and
preventing cruelty to children or animals. The term charitable is used in its generally accepted legal
sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion;
advancement of education or science; erecting or maintaining public buildings, monuments, or works;
lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and
discrimination; defending human and civil rights secured by law; and combating community
deterioration and juvenile delinquency.

 

The American Medical Association Code of Medical Ethics Opposes Non Compete Clauses Stating They Deprive the Public of Medical Services

Why do we continue to allow our tax exempt not for profit hospitals to kill the competition by forcing them out of town?  The AMA points out that these non compete clauses deprive the public of medical services.

AMA Code of Medical Ethics, Opinion 9.02:
Covenants-not-to-Compete restrict competition, disrupt continuity of
care, and potentially deprive the public of medical services. The Council
on Ethical and Judicial Affairs discourages any agreement which
restricts the right of a physician to practice medicine for a specified
period of time or in a specified area upon termination of an
employment, partnership, or corporate agreement.

 

The Missouri Supreme Court’s Rule Prohibiting Non Compete Agreements in Attorney Contracts

Clerk Handbooks

Supreme Court Rules

RULE 4-5.6: RESTRICTIONS ON RIGHT TO PRACTICE

A lawyer shall not participate in offering or making:

(a) a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement; or

(b) an agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a client controversy.

COMMENT
[1] An agreement restricting the right of lawyers to practice after leaving a firm not only limits their professional autonomy but also limits the freedom of clients to choose a lawyer. Rule 4-5.6(a) prohibits such agreements except for restrictions incident to provisions concerning retirement benefits for service with the firm.

[2] Rule 4-5.6(b) prohibits a lawyer from agreeing not to represent other persons in connection with settling a claim on behalf of a client.

[3] Rule 4-5.6 does not apply to prohibit restrictions that may be included in the terms of the sale of a law practice pursuant to Rule 4-1.17.

(Adopted September 28, 1993, eff. July 1, 1995, Rev. July 1, 2007)

 

The Missouri State Medical Association Opposes Non Compete Clauses Being Forced On Doctors by 501 C 3 Hospitals

The Missouri State Medical Association also believes Non Compete Clauses between doctors and Charitable Hospitals are not good public policy.

 

 

We Train Lots Of Doctors Compared to Other States In Missouri- But We Keep Comparatively Few of Them

Missouri Ranks Near the Top In the Number of Doctors Who Train In Our State
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But Missouri Ranks Near the Bottom In Attracting Doctors that Complete Their Training Here to Stay In Missouri

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Missouri only keeps about 37 % of the physicians that complete their training here in Missouri, while Alaska, California and Montana keep 61-75%  It is no coincidence that Non Compete Clauses  are prohibited in Montana and California and the courts frown on Non Compete agreements in Alaska.

New Mexico Moves to Prohibit Non Compete Clauses for Health Care Professionals

New law limits doctors’ non-compete clauses
By Rosalie Rayburn / Journal Staff Writer
Thursday, April 16th, 2015 at 3:15pm

ALBUQUERQUE, N.M. — A bill recently signed into law will limit non-compete clauses for doctors and certain other health-care providers, making it easier for them to change employers without having to leave town.

The law, to take effect on July 1, will limit the enforceability of such clauses, allowing physicians to remain in communities where they have developed relationships with patients, while protecting employers who have incurred hiring costs, said Randy Marshall, New Mexico Medical Society executive director.

Under SB 325, sponsored by Sen. Stuart Ingle, R-Portales, non-compete clauses in contracts for physicians, osteopathic physicians, podiatrists, dentists and certified nurse anesthetists will be enforceable only for the first three years of employment. After that, the health care professionals can seek other positions in the same city or community without restriction.

The law will, however, allow employers to require the employee to repay certain expenses such as signing bonuses and relocation costs related to recruitment.

It does not apply to health care professionals who are shareholders, owners, partners or directors of a health care practice.

Current law allows employers to include provisions in contracts that prevent a provider from leaving a position and going directly to another job in the same area. The provisions are typically used to limit the ability of employees to compete with their employer when they leave. The most common stipulations prohibit a provider from working for a competitor within 50 miles of the previous employer for one year.

“As more physicians are going toward employed positions,” Marshall said “the problem some doctors were having if they signed a non-compete clause, is if they did not like the practice they had to leave the community.”

Marshall said that disrupts patient care and causes hardships for the providers’ families. He cited the city of Hobbs’ loss of seven practitioners within a year because of non-compete clauses, leaving their patients scrambling to find care. He added that several lawsuits have been filed by practitioners in New Mexico over the non-compete issue.

Marshall said the Medical Society worked closely with the New Mexico Hospital Association, University of New Mexico Health Sciences Center and several other large medical groups to reach consensus on the bill’s provisions.

 

The Missouri Supreme Court is Against Them, The AMA Opposes Them and States That Keep A High Percent Of Doctors They Train Prohibit Them– So Why Do We Allow Our Tax Exempt Hospitals To Force Them On Doctors That We Train In Missouri At Taxpayer Expense?

Medical practices are increasingly owned by hospitals.  If a doctor doesn’t like the style of practice that a hospital requires, if there are short patient visits and long hours spent with the Electronic Health Record, and mountains of bureaucracy, the doctor is often trapped by the non compete clause.  When faced with the choice of selling the house and making the kids change schools,  often he’ll just try to tough it out for a while longer. Perhaps that is why a recent survey of over 16,000 doctors found that the prevalence of Burnout among Family Physicians is 55%.  If the doctor decides that hospital medicine is not for her, why is it better that the she leave the area instead of staying on and providing better access to health care in a shortage area?   It is time for Missouri to get rid of this competition and innovation killing provision in hospital contracts- time to get rid of the non compete clause like so many other states have done.