Florida Federal Judge Rules Physician Non-competes Must Go

13 October 2019 - Ci Magazine
Florida Federal Judge Rules Physician Noncompetes Must Go
Image courtesy of  Tallahassee Democrat

Non-compete contracts are prevalent in many industries, but their use in the health field drew significant attention over recent years. Also known as a physician restrictive covenant, reports Jordan Fensterman via MD Magazine, non-compete contracts prevent a physician from practicing in a state where the contracted employer operates. The goal is simple; keep physicians within the company. In response to strong backlash, physicians in all specialties, including radiology, have sought to break free from these contracts, and a recent ruling in Florida dealt a strong blow to those that would keep non-compete contracts in place. Radiologists need to understand the state of non-compete contracts and how the new ruling will affect employment options.

Why Do Physicians Disapprove of Non-compete Contracts?

Non-compete contracts do always apply to an entire state. They may apply to any area, even down to a square block. The terms within the contract rely on the reasonable expectations that the care provider would not be able to successfully operate a practice and provide care to the public without the services, i.e. referrals, of an employer. In radiology, non-compete contracts consolidate referrals for specialty services, and in rural areas, such contracts appear to promise better, cheaper service. Unfortunately, these contracts often create a monopoly in the industry, and for areas with limited health resources in the first place, contracts may leave patients with only one choice for their care. Actions that force a patient to see a specific care provider open the door to lost competition in the industry and fail to provide patients with a real-world choice.

The problem with non-compete contracts also affects physicians and their quality of life. The contract may force physicians to accept lower rates, work extreme hours and effectively prevent them from earning a living wage. As a result, more physicians have explored and filed legal claims to get out of these contracts. Unfortunately, courts vary on their opinion of the enforceability of such contracts. In general, the more specific contracts that encompass a narrower land area are more likely to be enforced, says Fensterman.

What Did the Florida Legislature Do?

The Florida Legislature passed a law in June that would limit the use of physician non-compete agreements in the state. According to Modern Healthcare, the law voids existing non-compete contracts among specialists and any employer that contracts the services of all physicians within a specific county. It is important to note this law applies to specialty physicians, so radiologists fall under its umbrella. The covenants in question will remain unenforceable for at least three years after the period at which a second employer or even private practice begins offering the same specialty services within the state.

For example, the law would void non-compete contracts between a single entity and all radiologists within a county. As individual practices begin to take root, the law effectively means no entity may implement a non-compete policy until three years pass. As a result, patients would see an increase in their options for obtaining care, and with the high cost of radiology remaining a key concern for millions of patients, eliminating non-compete contracts creates competition within radiology. Thus, patients are more likely to see a reduction in costs of care.

Employers File Motions to Block Enforcement, But a Federal Judge Declines It.

The law gives freedom back to specialty physicians and provides a path toward competition in the industry. Such actions would lower the revenue gained by a single entity or employer. Instead of keeping a county’s residents locked into the specific employer’s system and account, patients could go to a third-party practice for service. To protect their investments, health organizations and hospitals have expressed outrage over the law. A cancer care company filed a motion to block the law in its entirety. However, a federal judge had other plans.

On August 21, 2019, U.S. District Judge Mark Walker denied the plaintiff’s request. His ruling was even more scathing than meets the eye, comparing the company to the monsters of classic horror films. Although the plaintiff claimed the law would inhibit ability to provide specialty services in rural areas, Judge Walker disagreed, citing five cases in which oncologists had successfully ended their contracts and launched independent practices. He went on to describe his belief that the state legislature passed the law to tackle the negative effects of consolidation in the health industry. Such effort may have been responsible for increasing costs, decreasing access to healthcare and limiting the right of consumer choice in receiving care. In addition, he noted that while law does impede employers’ Constitutional contract rights, the benefits and purpose of the law outweigh the restriction placed on employers.

Summary: The Ruling and Its Effects on Radiologists in Florida and Across the U.S.

The law voided all contracts in which the employer held a monopoly over all specialties within a given county. As a result, any specialty physician could immediately leave the company and begin a private practice. For those that have already taken the steps to launch a private practice, the judge’s ruling reaffirms their right to start and maintain an independent practice. For radiologists across Florida, the ruling heralds an end to the practice of using non-compete contracts to limit how, where and when radiology services can be obtained or provided. Now is the time of opportunity, and the ruling in Florida sets the stage for what could be a showdown between non-compete employers and specialty physicians across the country. Radiologists and specialty physicians currently in a non-compete contract should pay close attention. The era of competition in the health profession has returned, and physicians could make an even bigger difference in the lives of their patients.