Indiana University (IU) Health will eliminate non-compete clauses for primary care physicians under a new policy that takes effect Dec. 15.
The move will affect about 400 physicians, according to IU Health, following recent rulings by the Federal Trade Commission and state laws banning clauses specifically targeted at primary care physicians.
“This proactive step goes beyond recent legal requirements and underscores IU Health’s commitment to fostering an environment of professional growth and patient-centered care,” the health system said in an emailed press release.
IU Health’s policy allows for the removal of non-compete clauses in current contracts as well as for new hires. Indiana Law The law, which took effect in July 2023, prevents employers from entering into new non-compete agreements with treating physicians and, under certain circumstances, from enforcing such agreements.
“Although the law does not require any amendments to existing contracts, IU Health has decided to extend this benefit to currently employed physicians,” the press release stated.
The change comes with new employment agreements for IU Health Medical Group. IU Health says that while it hasn’t yet expanded beyond primary care physicians, it is “aware of ongoing discussions regarding non-compete clauses regarding other medical specialties.”
Non-compete clauses typically stipulate how long after employment ends that employees cannot work for a rival company. Some contracts also limit them to certain geographies. But strict requirements can prevent doctors from leaving jobs for better opportunities in their field or starting their own practices, and policymakers argue this keeps wages low and stifles competition and innovation.
Supporters say banning non-compete clauses would allow more doctors to practice independently and give employers more freedom in hiring.
Meanwhile, hospital groups are opposed to the FTC’s new rules, which were announced in April.
“We are pleased to be working with such a diverse group of people, including our community, to bring this community together,” said Chip Kahn, M.P.H., president and CEO of the American Hospital Federation. Becker Hospital Review At the time, the FTC warned that the ban would “make it more difficult to recruit and retain caregivers to care for patients, while creating an anti-competitive and unfair playing field between tax-paying and tax-exempt hospitals, exactly the outcome the FTC’s rules were intended to prevent.”
The FTC’s final rule All non-competition clauseswhich goes into effect Sept. 4. Commenters on the proposed rule during the public comment period emphasized that “non-compete clauses restrict physicians from leaving practices and increase the risk of retaliation if physicians object to practice operations, poor quality care or services, workload demands, or company interference with their clinical judgment.” Text of the Final Rule.
FTC Chair Lina Khan Said The new national rule will “guarantee the freedom for Americans to seek new jobs, start new businesses and bring new ideas to market” and is estimated to increase the average worker’s income by $524 per year over the next decade and reduce health care costs by up to $194 billion.
