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Physician Non-Competition Agreements 2022

News Article

Contract provisions with restrictions on physicians practicing in the same area should they change employment have been around for decades. In Ohio, courts continue to state that while provisions are generally disfavored, non-competition provisions remain enforceable. Specifically, as to physician non-competes, the courts note that such agreements are further scrutinized regarding the adverse effect on the public interest to keep healthcare professionals in a community. Courts have continued in more cases than not to enforce restrictive covenants against physicians.

Two recent cases however provide some further guidance of newer views that may be of value to physicians considering a change of employment, particularly if they are employed by a hospital system and work in the hospital setting. In both cases, the court declined to enforce the non-competition provision under the facts and circumstances of the physicians in those cases.

The general standards for consideration by the Courts in the enforcement of non-compete provisions include:
1. Does the employer have a legitimate business interest that needs to be enforced to protect a business interest of the employer which would prevent unfair competition not just normal competition. In other words, did the employer share truly unique information with the employee such as financial information, business trade secrets and the like.
2. The court has to determine if enforcing the agreement would impose an undue hardship on the employee and if enforcing the agreement would be injurious to the public.
3. Is the restriction reasonable as to both geography and duration.

The first case involved a cardiothoracic surgeon in Cincinnati area who specialized in Mitral Valve and LVAD procedures as an employee of a hospital. In this case, the physician sued the hospital asking the court to determine that the agreement should not be enforced. The court analyzed the various factors and concluded that while a hospital valued the physician service of the physician, that alone was not a business interest of the hospital that permit the enforcement of the non-compete. Patients were referred to the physician by other cardiologists and after the procedure, the patient generally returned to the referring cardiologist. Everyone agreed that the physician in fact spent no time soliciting patients to refer cases to the physician.

The court further noted that when the physician went to the other hospital, he did not unfairly compete with his former employer as he did not take any patient information, any confidential business information with him, nor did he reach out to solicit any prior referral sources to send patients to him.

The court also found that the physician was one of a limited number of physicians who were able to perform minimally invasive mitral valve surgeries and the new employer had no physician who could do so. The court concluded that there was a compelling benefit to the public that the physician continue their new position. The court also discussed the impact on the physician himself, finding that the physician’s wife was also a physician who had her own practice, they had minor children, and that the physician would have to commute to Columbus staying away from his family in order to satisfy the restriction. Based on all of these factors, the court declined to enforce the restrictive covenant.

The second case decided in January, involved a physician who was the director of the burn unit at Metro Health. He left Metro and took a position as the director of the burn unit at the Akron Children’s Burn Institute. Metro Health sued seeking to enforce a two-year non-compete. The court likewise reviewed the same elements as in the Hamilton County case. The court concluded that in this circumstance, patients that need burn care generally are going to go to the closest burn center as opposed to making a conscious choice to select one physician over another to provide the care. The court further concluded that it is unlikely that a burn patient needing hospitalization would be out looking for a specific physician under the circumstances. Based on that factor, the court concluded that Metro did not have a business purpose for which the contract should be enforced.

The court further looked at the issue of undue hardship both as to the doctor and to the public. As to the physician, the facts in this case once again had a circumstance where the physician’s spouse was also a physician working as a trauma medical director at another hospital and that restrictive covenant if enforced, would require the physician to live apart from his family for a period of one year. The court further noted that there is a shortage of skilled burn surgeons in Northeast Ohio, and because of the specialty the public interest was best served by allowing the physician to continue to practice. The court however did note that the physician had previously served as the director of the burn unit at Metro and issued an injunction against the physician serving in any leadership capacity for the burn unit for Children’s and from sharing any business or financial information regarding Metro’s burn unit.

These cases do not hold that all non-competes for physician’s are improper or unenforceable. The court in both cases dealt with a physician employed by a hospital system with a subspecialty. In both cases, patients came to the physician by way of either referrals by other physicians or proximity of the hospital to the patient’s need (burn center). In these cases, both courts agree that the public interest of keeping a quality physician for the benefit of the public trumps the hospital’s interest to prevent the physician from practicing in the community.

These cases also have some other lessons. First, you should carefully read contracts before you sign and consider the ramifications of non-competition provisions, either as to their enforceability or the cost of litigation to fight about them. Second, these cases both involve physicians employed by hospital systems. The Courts seemed to be more inclined to enforce restrictive covenants for physicians in private practices. Third, if you have a restrictive covenant and are thinking about a job change get legal advice in advance and plan a fresh start with no patient or referral source contacts. The negative effect on families alone will rarely carry the day for you. This continues to be an evolving area of the law, stay tuned for future developments.

If you would like copies of the cases or have any questions, please contact Scott Sandrock at 330-253-4367, spsandrock@bmdllc.com.

originally published at Stark County Medical Society News Spring/Summer 2022


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