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A Primer on Non-Competition Agreements

What are Non-Competition Agreements, Anyway?

Most medical practices require new associates to sign a contract that prevents them from leaving and taking their patients with them for a set period of time, usually at least a few years.  Known as “non-competition agreements” or restrictive clauses, these contracts generally prohibit those who leave a specific practice from directly competing for patients during that time within a geographic area.

The American Medical Association opposes the use of non-competition agreements, and eight states severely restrict their use or do not allow them at all.  Courts have struck down non-competiton agreements that they found to be too broad, inconsistently applied, or that limited patient choice.

Courts have held that restrictions over a large geographic area or a long period of time are not reasonable, and have also overturned severe restrictions on what procedures a physician is allowed to perform.  In general, courts will not enforce a non-competition agreement when a practice is found not to have acted in good faith.  Courts in some states have ruled that physicians must be allowed to buy their way out of restrictive agreements.

As new physicians have become more aware of the potential challenges of non-competition agreements, and as legal issues have become more deeply embedded in health care decisions, the negotiation of restrictive clauses have become more challenging.

What Does This Mean for PAs?

Physician assistants are wise to become aware of non-competition agreements and the rules that govern them.  These contracts already affect the decisions and practices of physicians, including their ability to employ assistants.  As physician assistants take on even more responsibility for direct patient care, it is reasonable to foresee their own non-competition agreements becoming the focus of more intense negotiation and potential litigation.

Some Varying Opinions on Non-Competition Agreements Include:

1. Non-competition agreements are a wise way for honorable practices to protect their goodwill with patients.
2. Non-competition agreements are also an unfair weapon which forces innocent doctors, and physician assistants, to struggle to make a living.
3. Non-competition agreements are one more way for judges and lawyers to intrude into medical decision-making.

As a PA or MD, what are your thoughts on non-competition agreements?

 

[image by crobj]




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