How Physicians Can Protect Themselves from Burdensome Provisions

Panelists, from left: Randy Schultz; Charles Van Way III, MD; Jacy Hurst.

From Kansas City Medicine, Third Quarter 2020
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With more than half of physicians today employed by health systems or other practices, an important concern is the employment contract the physician enters into. These contracts typically contain non-compete provisions—also known as restrictive covenants or covenants- not-to-compete—that limit where and how the physician can practice for a period of time after leaving the employment arrangement.

“The worst thing we see is a physician who signs an employment contract without looking at it carefully, and then later realizes the conditions that would be imposed if he or she wants to leave the position,” said Charles W. Van Way, III, MD, professor emeritus of surgery at the University of Missouri-Kansas City and a Missouri delegate to the American Medical Association. The AMA has a policy on covenants-not-to-compete and a resource center on employment contracts.

“We tell all our residents, don’t sign anything without getting legal advice,” Dr. Van Way added.

Non-compete provisions were created to protect the business interests of the employer, explained Randy Schultz, partner with the law firm LathropGPM, LLP. “Covenants-not-to-compete are pervasive in every industry today. If a business has made an investment in people, they don’t want them to immediately go away and take all the goodwill and intellectual capital the employee has developed, and use it to hurt the business,” he said.

Jacy Hurst, partner with Kutak Rock LLP, described how it applies to medicine. “I see hospitals and physician groups working hard to find physicians they think are a good fit for their organizations and who will provide excellent care to their patients. If you lose the physician to a competitor, depending on the specialty, it could take a long time to replace them. Patient care could be disrupted.”

Schultz and Hurst serve clients who include employed physicians as well as the practices and systems that employ them.

ELEMENTS OF NON-COMPETES

In evaluating a non-compete provision, what should the physician look for?

“Scope and duration are the major items covered in non-compete arrangements,” Schultz said. “What is the nature of the medicine you’re prohibited from practicing? For how long? For how big of an area?”

A typical non-compete provision in Kansas City is for two years and within a 10-mile radius of the practice where the physician is employed, he added.

Elements of the contract should be reasonable and enforceable, both attorneys said.

Explained Hurst: “If you are considering entering into a restrictive covenant, you should identify whether the employer is just trying to prevent competition, or protecting something that’s actually protectable. The time and geographic restrictions should be reasonable in that the contract should not restrict the physician’s right to earn a living.”

Large health systems often use standard “template” contracts that seemingly afford less flexibility for negotiation.

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