Physician non-compete bill passes Indiana Senate committee, could be softened by amendments

Dr. Neal Agee testifies before the Senate Health and Provider Services committee about physician non-competes.
*Screenshot of iga.in.gov livestream*

A bill to prohibit new physician non-compete agreements passed the Senate Health and Provider Services Committee Wednesday with nine voting for and three against.

Non-compete agreements often prohibit workers from leaving a job and taking another in the same industry, usually within a certain time frame, geographic area or both. Proponents argue these agreements help protect trade secrets, prevent employees from stealing clients as well as increase employers’ willingness to invest time and money to train and develop workers’ skills.

Sen. Justin Busch (R-Fort Wayne) is the author of Senate Bill 7.

“Can we afford to have physicians sitting on the sidelines waiting out non-competes that can sometimes last more than a year?” Busch said. “Agreements also limit competition which has contributed to Indiana's record high cost of care. These agreements slow innovation and constantly disrupt doctor-patient relationships, which are already strained by existing shortages.”

Indiana has a shortage of physicians and an unusually high cost of care compared to other states.

Committee members on both sides of the aisle expressed unease with the proposed total ban on physician non-competes. Several of those who voted to advance the bill said future “yes” votes on the Senate floor would hinge on whether the bill is amended to soften its impact on employers' ability to use the agreements in certain instances or settings, like rural hospitals. Sen. Jean Breaux (D-Indianapolis) voted against the legislation alongside two Republicans.

“There's some problems with restricting movement once the contract has been fulfilled,” Breaux said. “[But] I think this is an extreme piece of legislation. This outright prohibition is bothersome. I think there should be some way for us to find middle ground.”

As debate fires up at the Statehouse, the Federal Trade Commission has proposed banning non-competes across all industries coast-to-coast. The FTC estimates it would bring annual health care costs down by almost $150 billion nationwide.

Testimony began with Dr. Neal Agee, an oncologist who detailed his experience with a non-compete in northeast Indiana. He told lawmakers his non-compete forced him to stop practicing in Fort Wayne after he quit working for a major health care company because they reduced staffing and support to the cancer surgery team Agee said he helped build from the ground up.

“There was no other surgical oncologist within that area of northeast Indiana. So now we've gone, after nine years, we've gone back to square one,” Agee said. “We now have a lot of Hoosiers who are in the middle of care, who were seeking care, who needed these types of services that weren't able to get them and now have to be referred out to other types of institutions.”

Opponents of the total physician non-compete ban say the agreements protect investments employers make to recruit doctors, like signing bonuses and equipment. Cara Veale of the Indiana Rural Health Association argued a ban would drive up costs, particularly in rural settings.

“A new physician hired on with one of our providers could decide within a short period of time to leave employment and open a new practice literally across the street. The financial hit from this situation could be catastrophic,” Veal said. “Without non-compete agreements, the competition to hire physicians will turn into a bidding war. … In most instances, this leads to a losing outcome for rural providers.”

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But the bill’s supporters argue the agreements increase costs by preventing competition and making doctors leave the state.

“Do we make them go across the line into Illinois, if they're not happy in West Lafayette? What Hoosier patient is served well by that policy?” said Matt Bell, a former state lawmaker who spoke as a representative of Hoosiers for Affordable Healthcare. “I think it's important that we provide that opportunity for freedom and flexibility. I think it will lower prices and increase accessibility for users.”

Bell and other proponents argue healthcare employers should focus on making doctors want to stay, rather than forcing them to pay a buyout or leave the community if they decide to quit.

Sen. Mike Bohacek (R-Michiana Shores) questioned why this bill was necessary since the legislature passed a law in 2020 that required physician buyouts be set at a “reasonable” price and ensured doctors get “continuing access to their patients’ medical records.”

“For the physician, [the 2020 law] seems like it’s pretty fluid and allows them to continue to practice if they want to leave,” Bohacek said. “And now we're gonna give docs more freedom of movement and disincentivize the hospitals from investing.”

But the 2020 law never defined what a “reasonable” buyout price was and a separate bill that would have required disputes about agreements to be resolved through arbitration failed after the Indiana Hospital Association opposed it. That means any dispute about whether a buyout is “reasonable” would likely have to be determined in individual cases through a lawsuit.

“I would point to [Dr. Agee’s] testimony earlier, and say that the 2020 language did not allow a cancer surgeon to continue practicing in northeast Indiana,” said Bell, responding to Sen. Bohacek. “Those patients were left without anything. So what I would suggest to you is perhaps the 2020 language didn't accomplish fully the goal.”

Sen. Liz Brown (R-Fort Wayne) pointed out to employers who opposed this bill that the knife cuts both ways – the same rules that allow them to keep doctors they recruit away from their competitors via non-competes allow their competitors to do the same to them.

“If they're willing to be wooed away from your small hospital, then they don't like it where they are. And they can literally go anywhere, because you can't prohibit them except in your area, and then you're left with no one,” Brown said. “You don't get to keep them in your community in perpetuity. But when you do this, and they leave, then you have hurt the health care system in your community and access to all the patients there.”

Contact reporter Adam at arayes@wvpe.org or follow him on Twitter at @arayesIPB.