Recent developments in Pennsylvania provide yet another compelling example of why non-compete agreements in the healthcare sector should be void as against public policy. In late December, five obstetricians who were affiliated with the University of Pittsburgh Medical Center (UPMC) gave notice that they intended to leave the system to go work for rival Highmark and West Penn Allegheny Health System Hospitals (WPAHS). The obstetricians sought to give six months’ advance notice. They had no intention of making an abrupt departure, leaving their patients stranded. Unfortunately, UPMC did not share those concerns. UPMC immediately severed ties with all five doctors and revoked their hospital privileges. Because of non-compete clauses in their respective contracts with UPMC, four of these doctors will be prevented from practicing medicine in Allegheny County for the next year.
To be clear, we are dealing with doctors and their patients, not just contracts and dollar figures. And in this situation, we are dealing with pregnant women, childbirth and infant children. A number of expecting mothers in Allegheny County, Pennsylvania may suddenly find that their obstetricians – doctors with whom they had developed a relationship – can no longer provide them with care during this critically important time. There is something disconcerting about attempting to justify this outcome based on the sanctity of contract.
After all, there is nothing inherently good or sacred about contracts. Some contracts are enforceable and others are not. After all, one cannot contract to engage in illegal conduct. And although it rarely happens, contracts can be deemed void as against public policy (not illegal, but still against public policy).
The UPMC situation in western Pennsylvania is yet another example of why more states should join the likes of Delaware, Massachusetts, Alabama and Tennessee in holding that physician non-compete agreements are per se unenforceable. But states should go beyond medical doctors: The rule should also include nurses and other providers of medical services. In short, a private bargain between two parties (employer and employee) should not be allowed to trump the public good. In such instances, the relationship between doctor and patient (and the patient’s health) must take precedence over the supposed sanctity of any contract.
Of course, such reform will take time and necessarily will come at the state level. In the meantime, there may be other grounds for pushing back against non-compete agreements in the healthcare sector. Putting aside arguments of pure public policy (good or bad) and turning to something slightly more concrete, some of these cases give rise to concerns about market concentration and possibly even antitrust exposure. This is not idle speculation.
Last year, when the Reno, Nevada market for cardiologists became too concentrated, the Federal Trade Commission stepped in. Renown Health, the dominant player, had nearly 90% of the cardiologists in Reno. Nearly all of those doctors had non-compete agreements. This did not sit well with the FTC, which launched an investigation of Renown. Eventually, the FTC agreed to drop its investigation and Renown agreed to let ten cardiologists out of their non-compete agreements. Where the facts warrant it, physicians defending non-compete cases – or faced with non-compete dilemmas – should consider alerting the FTC to their plight. And at the very least, lawyers defending these cases should consider the possible utility of bringing in evidence of market concentration where that concentration is particularly high.
Jonathan Pollard is a trial lawyer and litigator based in Fort Lauderdale, Florida. He focuses his practice on cases involving employment disputes, antitrust and business torts. He has a particular interest in non-compete cases. He represents clients in Miami, Fort Lauderdale, Boca Raton, West Palm Beach, Jupiter, Fort Myers, Tampa, and Orlando.
I totally agree. And, while you are on the topic of contracts and their “sanctity,” what about the contract between physician and patient? Is this health system is simply disregarding the continuity of care for these patients in order to protect itself from competition. I would encourage healthcare professionals to notify the FTC and state AG’s whenever a non-compete is enforced in a way that denies the patient their choice of caregiver, regardless of market concentration. (By the way, even if these non-competes are to be considered enforceable, isn’t a 12 moth period per se unreasonable as applied to an obstetrician? The 6 month’s notice makes a lot of sense in the contexts of an OB / patient relationship.) We are not talking about fungible goods, these are relationships between patient and professional health care provider. Patients should not be left without care from their chosen provider so that a healthcare system can protect itself from economic competition. A patient is not a trade secret, a secret formula for a soft drink, a price list, or a patent.
I agree with your concerns about the doctor patient relationship, but would like to hear the story behind the story.
What was the hospital’s version of what happened? Why was it so adamant about cutting off their privileges right away? Why couldn’t the patients follow the doctors to their new hospitals?
You say they were planning to give six months notice, but then state the non-compete lasted for a year, so wouldn’t they have had the non-compete problem anyway?
Finally, for purposes of this Group, how did they come to be parties to these agreements? Did they seek legal counsel about the scope and impact of the agreements before they signed them or at the time they were considering leaving? What is Pennsylvania’s general position on non-competes?
First, many of these details are not available. There is no actual case pending. All we know is that the doctors gave their notice, as required by the contract, and the hospital immediately kicked them out and revoked their privileges.
Your next comment – about whether or not the doctors had legal counsel when they signed their contracts – goes to the heart of my point. I’m sure they had attorneys. But, in my view, that is irrelevant. This is (or should be) a situation that is controlled by public policy concerns, not private contract.
These are good questions. But, none of them squarely addressed the public policy point raised by Jonathan, with which I strongly agree. I can speculate that the 6 month notice was designed and intended to ensure that the obstetricians will generally not begin regularly seeing a pregnant patient until she is at or around the end of the first trimester, assuming there are no high risk factors counseling more frequent visits. In the course of the six month notice period, these 5 OBs will likely have delivered these babies and no disruption in care will have occurred. Most of the post natal care is given by the neonatologist or pediatrician.
I have to say that it would be very unlikely that the patients would be able to follow the docs to the new hospital system. It could only happen if the patient’s insurance networks include both health systems, and that’s possible, but unlikely. But, most employer-sponsored health coverage use the narrowest network of hospital systems available. And, when it comes to delivering babies, hospitals are no more fungible than doctors. Just look at the rates of nosocomial infections, unecessary C-sections, etc.