Non-competes on primary care doctors will be banned. Other specialists get new potential routes out

Indiana primary care doctors will no longer be allowed to be subject to new non-compete agreements starting in July. Other physician specialties aren't fully left out of the bill signed into law by Gov. Eric Holcomb Thursday.

Some Republican legislators originally wanted to fully ban non-competes for any physician. That idea was supported in testimony by doctors and organizations concerned about health care costs, like the Employers Forum of Indiana. Those supporters say non-competes drive up costs by stifling competition. And, they argue, non-competes harm patients by forcing doctors to leave the community or state if they’re let go or choose to quit – exacerbating the state’s physician shortage.

But a few other lawmakers, mostly – but not exclusively – Democrats, and health care employers strongly opposed the bill. They argued the ban would drive up costs on patients because employers would be unable to ensure they’d recoup recruitment costs. Rural hospitals in particular, they said, would suffer financially if forced to compete with doctors they paid to bring into a community.

The author of Senate Bill 7, Sen. Justin Busch (R-Fort Wayne), said the middle-ground legislators reached in the new law is a good start.

“I still loved our original language. But when you have 149 other members, sometimes you got to compromise,” Busch said. “And I think we're going to help a lot of physicians and a lot of communities in Indiana with the bill that we just passed.”

The new law still partially bans employers from putting non-compete agreements on primary care doctors, specifically defined as a physician practicing family medicine, general pediatric medicine or internal medicine.

All other specialty physicians, like neurologists, gynecologists or podiatrists, would still be allowed to be subject to a non-compete agreement after the law takes effect in July. However, those would be subject to a set of restrictions that could nullify the agreements in certain cases. The restrictions would not apply to non-competes created before the law goes into effect.

The first two restrictions have to do with the reason a physician is separating from an employer. If they are let go by the employer “without cause” or quit “for cause,” their non-compete can be nullified. However, the law doesn’t define “cause” in any way.

“It's not anywhere in code, but yet it's cited in code quite a bit and exactly what it is. … I am not a lawyer, but I took the lawyers’ advice to add that language,” Busch said. “The lawyers told us the way to go is to be able to have this so if they need to fight it in court or something of that nature.”

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Legal experts say physicians and other workers under non-competes are typically unwilling to pay the money and time needed to go to court over their agreements, even if the non-compete is likely to be thrown out. It’s unclear whether these provisions will change the degree to which litigation is seen as a viable option.

The new law also nullifies a doctor’s non-compete if they complete the terms of their employment contract. That part, Busch said, will likely be a “game changer.”

“We have doctors that move from other areas of the country to Fort Wayne, Indiana. And when they fulfill their contract, let's say it was five years ... and they get a renewal contract, it’s either take it or leave it,” he said. “And if you leave it, a lot of times [the non-compete prohibits working within] five years, 50 miles from that hospital and they leave and never come back. So that practice that, I think, is especially egregious has been removed now.”

The final provision in the new law fixes a 2020 law that Busch and others say “didn’t really work.” The law required physician non-compete agreements to have a “reasonable buyout provision.” Buyouts allow people to purchase their way out of a non-compete agreement.

But, the law never clarified what “reasonable” meant and didn’t set up any method to decide whether a buyout met that standard. That means the primary way to challenge a buyout based on the reasonableness standard is by suing and letting a judge decide.

The new law still doesn’t define what “reasonable” means, but it gives physicians and their employers the ability to go to a mediator to determine whether a buyout meets that standard.

“I know a lot of them don't want to fight with the hospital lawyers,” Busch said. “So I think this gives everybody a chance to figure out what's fair, to have [the doctors] go ahead and move on or stay in their community.”

Busch said he’s looking forward to seeing how the partial ban plays out.

“We see legislation in the field, we have more data to come back and we can make some arrangements,” he said. “I wish that we could have [banned non-competes for] all health care professionals, but I didn't think that the Senate was there yet to do that. So I think there could be, in the future, some changes, but I'm happy that we got something.”

Busch may get his wish and more before the next session as Democrat-appointed federal officials consider a new rule that would ban new and old non-competes nationwide – not only for doctors or health care professionals, but all workers in all industries. The Federal Trade Commission is no longer accepting public comment on the proposed rule and there is no deadline for them to issue a final decision.

Though, any ban they create will likely be challenged in court.

Adam is our labor and employment reporter. Contact him at arayes@wvpe.org or follow him on Twitter at @arayesIPB.

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