Hospitals have historically used noncompete agreements to keep doctors from leaving their jobs. Unlike other industries, hospitals aren't trying to protect trade secrets. They argue the clauses help keep a level playing field for talent and keep doctors from leaving and taking patients with them.
The Federal Trade Commission (FTC) voted in April to ban most noncompete agreements, which prevent tens of millions of employees from leaving their jobs to work for competitors or start a competing business.
FTC Chair Lina Khan noted at the time that health care workers represented a "significant chunk" of the comments her agency received regarding the rule.
Chip Kahn, president and CEO of the Federation of American Hospitals, said U.S. District Judge Ada Brown, an appointee of former President Trump, made the "right call."
"We have been clear from the start that this rule would threaten patient access to care by making it more difficult for hospitals to recruit and retain physicians and invest in training and technology," Kahn said in a statement.
"In addition, this rule would create an unlevel playing field for tax-paying hospitals, an outcome completely at odds with FTC's mission to promote competition. Especially at a time of workforce shortages and other challenges, this was the right decision."
Brown ruled in favor of the Dallas-based tax firm Ryan LLC, the U.S. Chamber of Commerce, the Business Roundtable and other business groups, which had sued to block the rule from going into effect.
Chad Golder, general counsel and secretary for the American Hospital Association, said his group welcomed the decision.
"The rule was a breathtaking assertion of regulatory power by three unelected Commissioners, made worse by the fact that the Commissioners did not attempt to understand the disruptive impact it would have on hospitals, health systems, and the patients they serve."
Physicians' groups were not pleased.
Steven P. Furr, president of the American Academy of Family Physicians (AAFP), warned allowing noncompetes to continue would harm doctor-patient relationships.
"Noncompetes harm family physicians and their patients by jeopardizing long-term patient-physician relationships and creating an uneven playing field for physicians," Furr said.
"The AAFP will continue to support the FTC's mission to eliminate noncompetes in health care that prioritize the interests of organizations over those of patients and their physicians."
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