AMGA: FTC Non-Compete Agreement Ban Will Hurt Healthcare Workforce

The American Medical Group Association (AMGA) is urging the Federal Trade Commission (FTC) to withdraw its proposal to ban non-compete agreements, stating that the ban would hinder care coordination, raise healthcare costs, and hurt the healthcare workforce.

FTC proposed the ban in January 2023, which would prohibit employers from imposing non-compete agreements on their workers. Non-compete agreements prevent employees from working for a competitive employer or starting a competing business during or after their current employment.

According to FTC, the ban would increase wages by nearly $300 billion annually and expand career opportunities for 30 million Americans.

However, AMGA stressed that prohibiting non-compete agreements in the healthcare space would negatively impact local healthcare labor markets as the industry experiences ongoing workforce shortages.

The organization’s letter said that states should retain their authority to regulate non-compete provisions in employment agreements because they are most familiar with local market conditions. If the FTC ban is finalized, it would create a national standard that is not well-suited for the local healthcare market, AMGA said.

Additionally, the letter noted the lack of evidence indicating that states cannot effectively assess non-compete agreements in the healthcare setting. In fact, some states have enacted their own policies to regulate the agreements and address the problems the FTC ban aims to address.

Non-compete agreements in healthcare also help protect medical group investments to recruit and maintain physicians. Searching for candidates, providing a signing bonus and relocation pay, and guaranteeing a salary can lead to significant expenses for practices.

Non-compete agreements also help medical groups invest in physician training. Without reasonable agreements, physicians could benefit from professional development and then leave their practice for a higher salary based on their new skills and knowledge.

FTC said the proposed ban would lower costs, but AMGA contended it would increase healthcare costs.

“If a newly recruited physician is allowed to leave for another practice with no consequences, the initial practice will have to expend an additional half-million dollars to bring a new provider on board,” the letter stated. “All the while, patient care is disrupted and sometimes delayed. Non-compete arrangements allow multispecialty medical groups (MSMGs) and integrated delivery systems (IDSs) to protect their investments in recruiting physicians to help meet community healthcare needs.”

Higher costs and further consolidation of the healthcare market may lead to decreased competition—the opposite of the proposed ban’s goal.

AMGA also highlighted how non-compete agreements ensure access to patient care and allow for continuous patient-provider relationships. The ban would impact MSMGs’ and IDSs’ ability to provide coordinated care.

Non-compete agreements help MSMGs continue their model in which primary care physicians refer patients to appropriate specialists within the medical group, keeping patient care in a centralized location.

According to AMGA, the FTC proposal would impact care continuation if a primary care physician was recruited to another practice and patients followed the physician to the new practice. In this scenario, patients could lose their relationship with their specialists, as their primary care provider would likely not refer them to their former medical group.

“To avoid creating instability in the healthcare industry, AMGA recommends that the FTC withdraw its proposal to ban non-compete agreements and reconsider the healthcare industry’s unique challenges,” the organization concluded. “States already regulate the enforcement of non-compete agreements and are uniquely positioned to consider local healthcare market needs. Enforcing a national remedy to an issue already effectively handled by states would harm MSMGs and IDSs and the patients they serve.”