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Pennsylvania mulls the end of medical non-compete agreements

Non-compete agreements are common in health care to limit competition. A bill slowly working its way through the General Assembly would ban those agreements, however, making Pennsylvania one of a handful of states abolishing them.

HB681 would prohibit non-compete agreements from being enforced, citing a shortage of health care workers, the commonwealth’s aging population, high medical school debt, and continuity of care needs for not enforcing the covenants.

However, the legislation does allow for exceptions. Non-compete agreements could still be enforced if the primary health care facility is in a county with 90,000 people or fewer; the geographic restriction is less than 45 miles; the agreement only holds for two years; and it only applies to a primary facility or office. A covenant could also still apply if an employer is an independent practice.

“Many of these non-compete agreements contain geographic limitations in which the health care practitioner may seek new employment,” Rep. Torren Ecker, R-Abbottstown, wrote in a legislative memo. “With the increase in health system consolidations across the commonwealth, this limitation may severely limit where a health care practitioner may go. These disruptions in care harm patients, stifles continuity of care by hampering patients’ abilities to continue to see the practitioners of their choosing, and results in more health care costs across the state.”

Non-compete agreements are used in many job fields – so many that they’ve attracted federal attention. President Joe Biden issued an executive order in 2021 prompting the Federal Trade Commission to limit or ban the covenants. California, North Dakota, Oklahoma, and Washington, D.C. have strong bans on the agreements, while Illinois, Oregon, Nevada, and Virginia have more-limited bans.

The agreements have also attracted the ire of medical groups.

The American Academy of Family Physicians calls non-compete agreements “lose-lose” and “particularly harmful” for medical practice, citing a 2018 survey that found non-compete agreements affected 45% of primary care physicians in group practices. The American Medical Association argued that “Physicians in training should not be asked to sign covenants not to compete as a condition of entry into any residency or fellowship program.”

It’s unclear, however, whether the law will change in Pennsylvania. Ecker introduced HB681 in February 2021 and reached second consideration by April, but has stalled since.

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