Restrictive Covenants in Surgical Care: Time to Reconsider

In April 2024, more than a year after its initial proposal, the Federal Trade Commission (FTC) voted in favor of passing the final Non-Compete Clause (NCC) Rule, which will restrict for-profit employers from entering into NCCs with new employees and require existing NCCs to be dissolved.1 NCCs are included in physician contracts to prohibit the contractee from practicing in a specified geographic area for a set amount of time after termination of an employment agreement (eg, a 20-mile radius surrounding the previous employer for 2–3 years). Once it goes into effect, this FTC rule will represent a welcome policy change, as NCCs restrict practice opportunities for plastic surgeons and erect barriers to care for patients.2 More than ever before, plastic surgeons should become familiar with NCCs. In the United States, we all bear witness as small hospitals and surgical facilities are increasingly swallowed up by behemoth healthcare systems. The case of Renown Health in 2012 illustrates the consequences of this trend, where the conglomerate's acquisition of two practices "eliminated competition" in northern Nevada, giving Renown uncapped market control on cardiology service pricing; the FTC ultimately ruled to suspend Renown's NCCs, thereby allowing physicians to find new employers in the region without relocating.3 Surgeons are becoming increasingly vulnerable to such consequences of NCCs. From 2019 to 2022, there was a 22% increase in employed surgical subspecialists overall, and the proportion of independently employed plastic surgeons decreased by more than 15%.4 As the paradigm of a surgeon's practice shifts from proprietor to employee, the ratification of the FTC's proposal may ensure greater surgeon autonomy. While achieving success in a discipline as competitive as plastic surgery often involves strategy and market analysis, our field is fundamentally more collaborative than those on Wall Street or Silicon Valley as we regularly inform our colleagues on best clinical practices for patients, regardless of the implications for individual or professional gain. The penalties associated with breaching an NCC further oppose a core tenet of plastic surgery: innovation. Employed surgeons often face constraints in the development of intellectual property and may consider terminating their contract to develop their ideas. If bound by an NCC, they are faced with geographical challenges to bring those ideas to life. With no previous federal standard, NCC policies vary widely across state lines,5 making navigating this landscape even more difficult if faced with relocation (Fig. 1). As a community, we should seek to eliminate any limitations on innovation.Fig. 1.: Variation in noncompete clause enforceability in the United States for physicians in 2024. Blue: States with a complete ban on noncompete clauses (CA, ND, MN, OK). Green: States where noncompete clauses may be enforceable, but physicians are exempt (AL, AR, CO, DE, IL, MA, NH, RI, SD, NM, MT). Yellow: States where noncompete clauses are enforced, but there are limitations to their use in physician contracts (CT, FL, IN, NC, TN, TX). Red: States where noncompete clauses are allowed and enforceable without explicit physician exemption or limitation (AK, AZ, GA, HI, ID, IA, KS, KY, LA, ME, MD, MI, MS, MO, NE, NV, NJ, NY, OH, OR, PA, SC, UT, VT, VA, WA, WV, WI, WY). Enforceable noncompete clauses are still subject to reasonableness standards by their local courts.Unlike NCCs, nonsolicitation agreements only prohibit an employee from directly soliciting former customers (ie, patients) or current employees to join a new competing practice. Similarly, confidentiality agreements act to protect proprietary processes and trade secrets and prevent their use in the public sphere or at competing practices. These alternatives to NCCs offer plastic surgeon proprietors protection for the significant investments made to establish and sustain their practice and against marketplace competition, without unduly restricting a patient's ability to continue care with their surgeon or stifling a surgeon's ability to practice freely after contract termination. As the FTC moves ahead with disallowing NCCs, it is time for plastic surgeons to recognize that these agreements have little merit in our field. There are better methods that afford employers a reasonable degree of protection without forsaking patients and surgeons. DISCLOSURES JMB serves on the scientific advisory board for Healshape LLC, receives consulting support from The Agency for Healthcare Research and Quality, and serves on the Medical Device Advisory Board for the Food and Drug Administration. All the other authors have no financial interests to declare in relation to the content of this article.