The right approach to this issue will vary from one place to the next. In the current environment, with more hospitalist positions than there are doctors to fill them, many practices may need to agree to pay tail coverage for departing doctors.
Non-Compete Clauses
Non-compete clauses are common in physician contracts. They generally specify that a doctor who leaves a practice may not practice the same specialty of medicine within a defined geographic region for a specified period of time. The rationale for their inclusion in any specialty of medicine is complex but can be illustrated by an example that I watched play out while I was a resident.
With much fanfare, the hospital where I did my residency training in the 1980s recruited its first cardiac transplant surgeon, then bought new equipment and hired new staff to support the program. After about two years, the surgeon decided to move his practice to a hospital about 30 miles away, and the teaching hospital had made a big investment in a transplant program that it could no longer operate. Even if the hospital could have found a new transplant surgeon quickly, the original surgeon had developed relationships and referral sources from around the state, and most of these referrals would follow him to his new hospital.
I was only a resident and don’t know anything about why the doctor left or whether his contract had a non-compete provision. But it was clear to me that the hospital had made a big investment building the program around him and would now need to start over, working to recapture the referral relationships the departing doctor had taken with him. The hospital would have been smart to have a non-compete clause in place that would prohibit the surgeon from practicing in its market. It wouldn’t be fair to prevent the surgeon from leaving or practicing transplant surgery elsewhere, but it seems reasonable for the hospital to require that he not practice in a place that would be geographically close enough to interfere with its referrals.
There are better sources for the overall rationale of non-competes than this column, but some of the principal reasons they’re written into contracts include:
- To prevent a doctor from developing referral relationships—with the help of the employer practice—and then taking them across town to a competing group;
- To prevent a departing doctor from taking trade secrets about the way business is conducted—or future business plans—and using that information to benefit a competing practice; and
- To provide a means to reduce the chance that a practice incurs the expense of recruiting and getting the doctor established in practice, only to have the doctor quickly “jump ship” to a competing practice.
In most, but not all, cases, it is hard to argue that hospitalists can redirect referral sources or steal trade secrets when they leave a practice. Accordingly, these issues are rarely a good reason to include a non-compete.
Including a non-compete simply to prevent a doctor from jumping ship to a new practice has always struck me as the least legitimate reason; your practice should keep doctors from leaving because they like it there rather than because of a contractual provision that makes it difficult to switch to a different practice in the area. And including a non-compete clause comes at a cost of potentially scaring off the people you are trying to recruit, which could mean that it is hurting the practice more than helping it.
I’m not suggesting that non-competes have no place in hospitalist practice; they may be important and appropriate in some situations. But each hospitalist practice should take the time to think critically about whether to include one or not. Simply including it because it is common practice in other physician contracts may do more harm than good.