How the FTC's noncompete ban will impact health care

The Federal Trade Commission's Tuesday vote to ban noncompete agreements could be a big deal for health care professionals.

Why it matters: Sizable shares of doctors and nurses face tight employer restrictions on job-switching — and the ban is already creating sharp divisions in the industry.

Driving the news: In a 3-2 vote, the FTC approved a final rule that would make it illegal for employers to enforce noncompetes for most workers.

• Between 37% and 45% of physicians are affected by noncompetes, according to the American Medical Association.

What's next: The FTC projects the ban could reduce health care costs by up to $194 billion in the next decade.

• It has cited evidence that noncompete agreements encourage consolidation and drive up health care prices.

What they're saying: Of the roughly 26,000 comments the FTC received on the rule, a "significant" number came from health care employees, especially doctors, agency chair Lina Khan said Tuesday.

• Particularly in rural areas, employers can force these agreements on doctors and nurses while offering lower wages because they know there are few other options for work, Khan said.
• Even health care workers making a "decent living" feel they do not have bargaining power, Khan told reporters Tuesday.

The other side: Hospitals offered scathing assessments of Tuesday's vote, saying noncompetes help recruit and retain workers.

• "The only saving grace is that this rule will likely be short-lived, with courts almost certain to stop it before it can do damage to hospitals' ability to care for their patients and communities," the American Hospital Association said in a statement.

Flashback: Health care lobbying organizations pushed last fall to carve out industry-specific exemptions in the noncompete ban, first proposed in January.

The intrigue: Nonprofits — which make up the majority of U.S. hospitals — don't appear to be bound to the rule, and for-profit hospitals complained that creates an uneven playing field.

Critics of noncompete agreements (and supporters of a ban) say the agreements create barriers for health care workers changing jobs, often requiring them to leave the field or relocate to do so.

• "Doctors are trapped in places where they may or may not feel good about the care that they are able to provide," says American Economic Liberties Project senior fellow Elizabeth Wilkins.
• This can cause bigger problems when existing shortages are acute, such as in rural areas, Wilkins says.

Between the lines: Noncompetes tied to the sale of a business, like a physician practice, would still be allowed under the FTC rule.

What we're watching: The FTC ban appears likely to face a legal challenge, and it could be years before it can take effect.

• Even if it gets tied up in courts, more states and cities could pursue similar restrictions, says Epstein Becker Green's Peter Steinmeyer.
• Four states already ban all noncompetes, and several states have specifically banned noncompetes for health care workers.
• There are also bipartisan proposals in Congress to ban the practice.