Health care employers with noncompetes: ‘They have physicians over a barrel’

Noncompete agreements between doctors and health systems are a tool to control physicians’ careers and ultimately hurt patient access to care, said two physicians who described their experiences to federal regulators.

The physicians were among four workers who described difficult choices as noncompete agreements threw their careers into turmoil. Jennifer Kendall, D.O., and Selvam Mascarenhas, M.D., MBA, FACP, spoke as part of “Moving Forward: Protecting Workers from Anticompetitive Noncompete Agreements,” an online webinar hosted by the Federal Trade Commission (FTC) on Jan. 27.

Kendall was blunt in her assessment: “I think with having these noncompete classes for physicians, it really puts a lot of power in the hands of the employers. They have physicians essentially over a barrel. They control the physician salaries, they control their work hours and they can force physicians to practice in unsafe conditions for patients. They know that they can do these things because physicians are hesitant to leave when there [are] very restrictive noncompete clauses.”

Eliminate noncompetes

Noncompete agreements need to be completely eliminated to protect patients and maintain high-quality health care, Kendall said. She is a physical medicine and rehabilitation physician who subspecializes in interventional spine care, using a holistic approach with nonsurgical options for pain management. She performs osteopathic manipulative treatment (OMT), a hands-on treatment that can be effective for patients with pain.

In 14 years of practice around the Minneapolis-St. Paul area, Kendall said she had two noncompete agreements. One was not overly restrictive, barring her from practicing within three miles of any of the three hospitals in the relevant health system.

That did not stop her from finding another job, but the second noncompete was “extremely restrictive,” barring her from practicing in the 11-county greater metropolitan area of the Twin Cities, approximately a 55-mile radius, Kendall said. Another restriction effectively barred her from practicing in western Wisconsin because of the location of a hospital.

She said she researched fighting the contract — and facing $50,000 or more in legal fees, along with stress and time. Finding another job entailed taking a pay cut of up to $150,000.

“My husband and I weren’t happy about that, but we were grateful that we didn’t have to move,” Kendall said. “He didn’t have to find a new job. We didn’t have to pull our daughter out of the school where she was driving, and we didn’t have to leave our support system of family and friends that we had built up over the years. We were grateful for that. But I know a lot of my colleagues … don’t have that option. They have to completely uproot their lives in order to continue practicing under the restraints of their noncompete.”

Effects on patients

As difficult as the situation was, the effect on patients was worse. Even if they could find another physician who performed OMT, some cried at the prospect of losing their physician and didn’t want to start with another doctor, Kendall said.

“For patients who lose their primary care physician, it can be even more devastating,” Kendall said. “Those physicians know the intricate details of a patient's health history, and we know the finer details of their life that impact their care. Many of these patients have been with their primary care physicians for years, and they've developed that trusting relationship that seems almost impossible to replace. If that physician leaves, for patients who have complex health issues or multiple medical diagnoses, having a disruption in their care can have grave consequences.”

Where are there no noncompetes?

Mascarenhas, an internal medicine physician, began looking for work as he was finishing his residency. When he was seeking positions in Connecticut, Massachusetts, New York, Indiana, Ohio and Virginia, employers all had strict noncompete agreements that would require a significant relocation.

Delaware law will not uphold a noncompete if litigation is involved, largely because it is a small state and would push physicians to Maryland, Pennsylvania or New Jersey, Mascarenhas said. But Delaware allows work contracts to include a damages clause that functions like a de facto noncompete cause. The principle behind it is reasonable, he noted, because newly hired physicians must be credentialed and may need staff, and it takes time for insurance reimbursement to begin.

In his situation, a contract lawyer was savvy enough to recognize it as a de facto noncompete, so his own agreement was capped at two years and would not be effective if the practice was acquired, Mascarenhas said.

Back-door noncompetes

Delaware also allows nonsolicitation agreements, some of which are very reasonable, but others are very aggressive, to the point that physicians could face litigation if a patient changes practices based on their own decision, Mascarenhas said. His situation is not unique — he described the work agreement of his wife, also a physician, and scores of others he communicates with as Delaware chapter governor of the American College of Physicians. The damages clause seeking up to $100,000 from physicians forces some to move to neighboring states, he said.

“But at the same time, oftentimes that is someone who has 2000 [to] 3000 patients in the practice panel, and there isn’t someone that you can quickly go and see,” Mascarenhas said. “That creates a massive access issue, and particularly if you’re in specialties of internal medicine, you’re dealing with older adults or aging of chronic medical issues, and if these issues are not addressed in a timely manner, on a good cadence, these patients will unfortunately end up in the hospital, and that is not a good outcome to sort of keep running into. So it really can … cause fragmented care, loss of access, loss of coverage, and then also cause a lot of stress for the physician and sort of contribute to burnout, moral injury and mental health issues that can develop along the way as well.”

‘Never sign a noncompete’

Physicians aren’t the only ones whose careers — and families — can be disrupted by noncompetes. Kendall and Mascarenhas were joined by two other speakers who described the prospect of finding a job, or not being able to find one, due to noncompete clauses.

Noncompetes are pervasive in veterinary medicine, causing tremendous hardships on veterinarians, their families, their patients and the people who care for them, said C.J. Caniglia, D.V.M., DACVS-LA, a veterinarian and large animal surgeon from Maryland. When his job situation forced him to choose between ethical practice and providing for his family, “eventually, the struggle became too much, and so I was forced to leave,” Caniglia said.

Thus began struggles with noncompetes, he continued, describing distance requirements that hindered emergency care, additional noncompetes to do relief work for understaffed veterinary practices, clauses that allow noncompetes to transfer between employers, and driving two hours one way to work at a facility outside the noncompete radius.

Caniglia worked with a Maryland legislator to change Maryland law to prohibit noncompetes for veterinary and medical professionals. He said he still ended up getting sued for alleged noncompete violations before the law was changed.

“I can only hope that my story is a message to all veterinarians out there to never sign a noncompete,” Caniglia said. “The irony in this is that with a tremendous shortage of large animal veterinarians, there are literally not enough doctors to see all the patients. There is no competition.”

‘Devastating to my livelihood’

Cindy Holbrook described her difficulties with noncompetes as a career hairstylist in Michigan for years. When she moved to northwest Ohio and took a job, within three months, she was earning poverty-level wages due to a tiered pay system that favored owners and hurt stylists.

Holbrook said she knew she had to return to independent business, a daunting prospect with a small clientele. She found a new salon 14 miles away in a different county, and four months later, she received a cease-and-desist letter due to landing within the noncompete radius. That 15-mile clause essentially stopped her from working in the greater Toledo area.

Proceeds from a home sale and working other jobs have helped Holbrook make ends meet since 2021, but her professional life has been disrupted.

“It has been my experience that noncompetes have been devastating to my professional advancement,” she said. “They have caused me more financial stress, time missed with my family and, at times, an unbearable amount of hurt. It has been devastating to my livelihood.”