The U.S. Chamber of Commerce and other business groups filed suit Wednesday, hoping to block a recently finalized ban on noncompete clauses in employment agreements.
The Federal Trade Commission revealed the final rule Tuesday, estimating the law change would result in upward of $194 billion in reduced spending on physician services over the next decade. Radiologists and other physicians praised the FTC’s 3-2 decision and the impact it may have on their freedom to move between organizations.
However, hospital lobbying groups and others have slammed the rule, claiming it will disrupt patient care.
“The Federal Trade Commission’s decision to ban employer noncompete agreements across the economy is not only unlawful but also a blatant power grab that will undermine American businesses’ ability to remain competitive,” Chamber of Commerce President and CEO Suzanne P. Clark, MBA, said in a statement issued prior to filing the lawsuit.
Since its inception 100 years ago, the FTC has never been granted authority to write its own competition rules, Clark claimed. Noncompete agreements are upheld under “well-established state laws governing their use.” The chamber believes three unelected commissioners should not have the authority to declare “what’s a legitimate business decision and what’s not.”
“This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers and our economy,” Clark added. “The chamber will sue the FTC to block this unnecessary and unlawful rule and put other agencies on notice that such overreach will not go unchecked.”
Attorneys filed the complaint April 24 in a Texas federal court. Others joining as plaintiffs include the Business Roundtable, Texas Association of Business and the Longview (Texas) Chamber of Commerce. They claim such agreements are crucial to protecting their own proprietary business information.
The FTC downplayed allegations that it is overstepping regulatory boundaries.
“Our legal authority is crystal clear,” FTC spokesperson Douglas Farrar told CNBC. “Addressing noncompetes that curtail Americans’ economic freedom is at the very heart of our mandate, and we look forward to winning in court.”
Healthcare reacts
Healthcare organizations reacted to the news following the FTC vote. Both the American Hospital Association and the Federation of American Hospitals slammed the ruling while predicting it will be quashed in court.
“This final rule is a double whammy. The ban makes it more difficult to recruit and retain caregivers to care for patients, while at the same time creating an anticompetitive, unlevel playing field between taxpaying and tax-exempt hospitals—a result the FTC rule precisely intended to prevent,” FAH President and CEO Chip Kahn said in a statement. “In a time of constant healthcare workforce shortages, the FTC’s vote today threatens access to high-quality care for millions of patients.”
The AMGA—formerly the American Medical Group Association, which represents multispecialty medical groups and integrated systems of care employing 175,000 physicians—“strenuously objected” to the rule Wednesday. It echoed the FTC’s prediction that a noncompete ban will lead to lower spending on physician services.
“This rule will increase costs and limit investments in innovations and new technology,” AMGA President and CEO Jerry Penso, MD, MBA, said in a statement. “Such a new business environment will limit the ability of AMGA members to address a number of important needs, such as social drivers of health.”
“Carefully constructed” noncompete agreements “reflect local market conditions,” the AMGA noted, and “treat physicians fairly while also protecting the economic stability of the group practice model.” Such contracts help practices safeguard investment in capital expenditures, including new imaging centers.
“What medical group or facility is going to invest millions of dollars in a specialized surgical suite without reasonable assurances the care team will be there to use it?” Penso said.
What about radiology?
The Radiology Business Management Association said Wednesday that it does not have a definitive stance for or against the FTC ban. The American College of Radiology could not provide comment on the rule by late Wednesday.
Sources have indicated that many medical associations are grappling with divided memberships on this issue. Younger radiologists may desire the freedom to change jobs locally as they please, while older shareholders fear physicians jumping ship to the new private equity player in town, potentially plummeting practice valuations.
“This continues to be a difficult issue for all physician groups,” Executive Director Bob Still told Radiology Business.
The American College of Emergency Physicians—which, like radiology, has seen growing interest from private equity and has aligned with the specialty on previous issues—said it supports the ban. ACEP previously invited the FTC chair as a speaker at its annual meeting and said that it agrees with the agency that noncompete clauses are “unfair, exploitative and coercive.”
ACEP issued an announcement about the ban Tuesday, celebrating that its members can finally “practice EM freely.”
“Emergency physicians should not be subject to harmful noncompete agreements,” Christopher S. Kang, MD, president of ACEP, said last year after the initial rule was proposed. “Restricting an emergency physician’s ability to choose a job can stall or upend their career, contribute to workplace dissatisfaction, and accelerate currently high rates of burnout, especially in rural or underserved communities where it is already challenging to attract and retain physicians.”
Texas neuroradiologist and independent blogger Ben White, MD, also weighed in on the FTC ban, as did Nisha Mehta, MD, radiologist and founder of Physician Side Gigs.
“Obviously this is just the beginning of a lot of questions about nuances with different employer types and physician roles, not to mention impending legal challenges,” Mehta wrote in a social media post that had 54 comments as of late Wednesday. “On the whole, though, I do think this ruling will eventually have a huge impact on physicians and physician contracts.”
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.