Non-competes were originally created to prevent employees from joining competitors and sharing IP from their current employer. Typically non-competes have been regulated by the states, but in 2023 the FTC proposed a ban on non-competes, and the FTC vote on the ban is tentatively scheduled for April 2024.
Our business of recruiting physicians is extremely unique and challenging, and non-competes are definitely a major factor when recruiting physicians. The FTC estimates that around 45% of primary care physicians in group practices are bound by non-competes, and this generally prevents physicians from changing jobs and staying in the local area. As a result if a physician wants to change jobs, they typically have to plan on relocating to a new area.
From the employers point of view, they make the case that they have invested time and money in the physician. In addition hospitals say that eliminating non-competes would increase healthcare costs as they will be forced to pay higher salaries. But at the same time, the non-compete can actually work as a deterrent when a hospital needs to fill a position fast. Non-competes without a doubt make it much more difficult to recruit physicians and place them in a reasonable amount of time.
From our perspective in the healthcare recruiting industry, we believe a ban on non-competes would make it easier to recruit positions in large and medium-sized cities where there is a population of physicians working and living nearby. However we also believe it would make it more difficult to recruit physicians in small towns because a physician would not be required to move from their current location. In addition a ban on non-competes will have an effect on patients who can be loyal to their physicians.
If the FTC votes to ban non-competes, there will most certainly be legal challenges, and there is also the question of whether or not a ban would even apply to the non-profit sector. Either way though some states have already banned non-competes, and further change is likely coming so the healthcare industry needs to prepare accordingly for what this change in non-competes could mean.