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The FTC wants to end noncompete agreements. Here's how it'll impact Pittsburgh-area physicians

Keith Srakocic

Many health care systems require physicians to sign noncompete agreements prohibiting doctors from taking jobs with nearby competitors. But these contracts soon may be a thing of the past as the Federal Trade Commission is considering a ban on what it calls an often exploitative practice.

"The freedom to change jobs is core to economic liberty and to a competitive, thriving economy," said FTC chair Lina M. Khan when the proposal was announced in early January. "Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand."

Lobbyist organizations, such as the American Hospital Association, contend that nonprofits should be exempt from the proposal because the FTC has limited jurisdiction over 501c3 organizations. That would mean UPMC and Allegheny Health Network could continue to require physicians to sign these agreements. But some experts speculate that the rule's broad language would include nonprofit organizations.

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Nonprofits comprise a significant part of the economy, explains Barak Richman, a professor who specializes in competition, law and health policy at Duke University School of Law. When determining the FTC's statutory authority, a 501c3's profit-seeking or wealth-maximizing enterprises must be considered.

"The basic idea is that, is the nonprofit truly a social enterprise that is trying to provide a community service without any profit motive at all? Or are there some kind of intermingling activities that, very much, are profit-seeking?" said Richman.

Richman said the size of UPMC, Pennsylvania's largest nongovernmental employer, and AHN would likely play a role in that determination. Questions around whether AHN and especially UPMC exploit their nonprofit statuses have circulated for years. The latter has been criticized for ignoring the health needs of Pittsburghers for services such as diabetes or addiction treatment, and instead investing in high-prestige, money-generating projects. UPMC's former CEO once said he wanted the health system to be theAmazon of health care.

AHN did not respond to a request for comment from WESA. A UPMC spokesperson declined to comment.

As things stand right now, physicians have little choice in whether to sign noncompete agreements because so many health systems require them. Two Pittsburgh-area doctors who spoke to WESA, but did not want their names published for fear of retaliation, said these contracts trap people in jobs they don't like and prevent them from earning more money by applying for a better-paying position.

There are instances when AHN or UPMC might want to hire a highly specialized surgeon and then agree to pay that person's salary for a year, even though the employee may not work or practice in only a limited capacity at a satellite facility. Smaller health care providers in Pittsburgh with more modest budgets have limited capacity to do this, essentially boxing them out from much of the region’s talent. Even if a physician were to be laid off or fired, the noncompete is still in effect.

Jolene Calla, vice president of health care finance and insurance for the Hospital and Healthsystem Association of Pennsylvania, said she was unable to comment on specific situations, but that employers could not create noncompete agreements with overly broad terms.

“It won’t withstand judicial scrutiny, and it will be found to be invalid,” said Calla. “So if it’s challenged, the employees do in fact have some protections.”

And she said she sees these contracts as a way to protect patients, particularly in underserved and rural communities, when departure of a physician can leave people without medical care.

"Significant time and investment goes into recruiting and onboarding these professionals. And hospitals can't always find replacements quickly," said Calla.

The opposite is true, according to otolaryngologist Dr. Matt Straka, the president of the Allegheny County Medical Society's board of directors.

"You have patients that have been seeing their physician for many years, and when you have a physician that chooses to leave," said Straka, "the non compete policy … will then force them to relocate or practice outside of where the patient is able to travel to."

Public comment for the FTC’s noncompete rule starts later this month.

Sarah Boden covers health and science for 90.5 WESA. Before coming to Pittsburgh in November 2017, she was a reporter for Iowa Public Radio. As a contributor to the NPR-Kaiser Health News Member Station Reporting Project on Health Care in the States, Sarah's print and audio reporting frequently appears on NPR and KFF Health News.