Course description

Restrictive covenants, commonly found in physician employment contracts, wield significant influence on employed physicians and the healthcare landscape. They are used in an estimated 40% of physician employment contracts to restrict employees from working in a specific geographic area or for a rival organization. Additionally, many hospitals, health systems, physician groups, insurance companies and pharmacy benefit managers enforce noncompete agreements to prevent former employees from sharing proprietary information with competitors.

In April 2024, the Federal Trade Commission (FTC) finalized a rule that bans most employers from issuing and enforcing noncompete clauses, or restrictive covenants, which could have a wide-ranging impact on the healthcare workforce. Under the FTC's final rule, employers are prevented from issuing noncompete agreements for new hires and from enforcing them in existing contracts, except for senior executives. Employment contracts carried over from the sale of a business are also exempted from the ban.

It's too soon to know what the broader implications are for medicine and healthcare delivery following this significant policy change. Will the absence of restrictive covenants reduce or exacerbate physician shortages in certain areas, contributing to increased healthcare disparities? What impact will this policy have on healthcare costs, including reimbursements for physicians and other healthcare professionals? Balancing the legitimate interests of employers, including physician-owned medical practices, with the professional freedoms of physicians remains a contentious issue, requiring careful consideration of both legal and ethical perspectives.

Learning objectives

At the conclusion of this learning activity, participants will be able to:

• Summarize state law and federal rules on restrictive covenants and non-compete provisions;    
• Identify how restrictive covenants affect physicians, medical practices and patients; and
• Discuss how the new FTC rules effect physicians employed in both for-profit and non-profit corporations, as well as their patients

Target audience

Physician and clinician policyholders

Disclosure

There are no relevant financial relationships with ACCME-defined commercial interests for anyone who was in control of the content of this activity.

CME information

The Illinois State Medical Society is accredited by the ACCME to provide continuing medical education for physicians.

The Illinois State Medical Society designates this live activity for a maximum of 1.00 AMA PRA Category 1 Credit^™. Physicians should claim only the credit commensurate with the extent of their participation in the activity.

The Illinois Nurse Practice Act rules deem CME credit provided by approved sponsors as acceptable to fulfill nursing continuing education requirements for licensure. Nurses may claim one contact hour per unit of CME in the state of Illinois.