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

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.

1 big thing: Noncompete ban's health care impact

Illustration of a healthcare worker with an ID that says "BYE".

Alaffia, a medical billing company, raised a $10m Series A, CEO TJ Ademiluyi tells Aaron exclusively.

Why it's the BFD: The U.S. health care system loses up to $935 million a week because of medical billing errors.

How it works: NYC-based Alaffia's software seeks to detect billing and code errors and fraud in medical billing.

The software reviews claims using a combination of in-house LLM and foundational models like GPT-4.

"That is how the majority of health care data looks like and to generate value, we digitize, normalize and then process that data," Ademiluyi says.

The current customer base consists of health plans, third-party administrators and health care enterprise customers.

Zoom in: FirstMark Capital led the round with participation from GingerBread Capital and existing investors including Anthemis, Aperture Venture Capital, 1984 Ventures, Remarkable Ventures and Tau Ventures.

The funds will be used for customer expansion, building out tools across other use cases, business development and expanding the stack and engineering team.

What's next: "We have seen rampant growth, increasing revenue 4x over the last 12 months," he says.

Ademiluyi said the company is generating seven figures in revenue, and added, "We are focused on top line growth and have a clear path to being profitable."

👦👧 Fun fact: Ademiluyi is a co-founder along with his sister, Adun Akanni.

State of play: Lots of funding has gone into the medical billing and coding space, including a big Series F.

ClarisHealth got $57.5 million of growth funding in January.

Rialtic raised $37 million of Series B funding in January.

Codoxo raised $22 million of venture funding through a combination of debt and equity in May 2022.

Codametrix pulled together a $55 million Series A.

2. The BFD: Alaffia gets $10M Series A for medical billing

Illustration of a red pen held by a robot hand marking up a medical bill.

Want more health tech deals? Check out the Axios Pro Deals Tracker.

• Midi Health, a Menlo Park, Calif.-based virtual menopause care provider, raised $60m led by Emerson Collective with participation from GV. joinmidi.com

• Proov, a Boulder, Colo.-based provider of home fertility tests, sold an equity share of the company to musicians Ashanti and Nelly. proovtest.com

• TVM Capital Healthcare invested €16m in Neurocare, a German mental health company. neurocaregroup.com

• Alcanza Clinical Research, a Lake Mary, Fla.-based portfolio company of Martis Capital and Alpha Leonis Partners, acquired Puerto Rico-based FDI Clinical Research. axios.link/44cDQAk

• CVC Capital Partners is weighing options for its control stake in Italian drugmaker Recordati (Milan: REC), per Bloomberg. axios.link/4aPpMPH

• Sanofi (Nasdaq: SNY) is seeking to sell its consumer health business, which could fetch more than $20b, per Bloomberg. axios.link/4aZIHHk

3. Deals o' the day

• Kate O'Donnell, AVP of legal affairs for Northwell Health, joined Northwell Holdings as managing director. axios.link/4aQusVy

• Tyler Jung, former chief medical officer for senior health at One Medical, joined Greater Good Health as chief medical officer. axios.link/3xNAtDL

• Divya Bhat, former chief product officer at Virta Health, joined Memora Health as CPO. Also at Memora, Herman Ng, former SVP at Branch Metrics, joined as CFO, and Nathan Leong was promoted from from VP of legal to general counsel while James Colbert was promoted from SVP of care delivery to chief medical officer. axios.link/3JAnCY8

• Zain Kassam, former chief medical officer at Finch Therapeutics Group, joined Seed Health as chief medical officer. seedhealth.com

• Miles Snowden, chief growth officer at Navvis, joined DeepScribe's advisory board. axios.link/3Qc5pny

• Paula Cobb, previously VP of enterprise marketing at Blackbaud, joined AvaSure as VP of marketing. axios.link/3w6Df6y

4. It's Personnel

👀 Marc Tessier-Lavigne on resigning from Stanford and joining biotech's new AI mega-startup — Endpoints

✋ Kaiser nurses protest AI they say may risk patient safety — SF Chronicle

💊 Thune says 340B legislation could come in May — Axios

🏠 FDA launches health care at home initiative — FDA

5. Your daily dose

illustration of a digital thermometer that reads "daily dose" 

🏠 Situational awareness: The FDA is working with an architecture firm to design an AR/VR-enabled home care prototype expected to be finished this year.

🎰 Aaron is looking forward to dinner tomorrow night with friends before heading to Vegas for DealMax this weekend. 

Thanks for reading, and extra thanks to newsletter editor George Moriarty and copy editor Egan Millard. Please ask your colleagues, friends and family to sign up.

April 24, 2024

1 big thing: Noncompete ban's health care impact