Let’s Unshackle South Carolina’s Physicians by Eliminating Non-Competes

In the 126th General Assembly, key South Carolina legislators are working to pass S.46, a bill that signals that physician non-compete agreements both interfere with physician-patient relationships and corporatize the practice of medicine. The bill is designed to put an end to medical non-competes. 

What is a noncompete agreement? 

A noncompete agreement is a legal contract between an employer and employee that restricts an employee from working for a competitor upon departure. Essentially, these contracts are designed to prohibit employees from directly competing with their former employers once they leave. In a medical context, these agreements are usually signed by physicians upon being hired by a particular hospital system, but this bill also applies to physician partnerships and other types of contractual arrangements.. 

Why get rid of non-compete agreements? 

S.46 references six reasons why non-compete agreements should be removed as restrictions for physicians, as these contractual provisions often restrict:   

• The ability of a physician to practice medicine in specific geographic areas for a period of time when changing practices. 
• The ability of a physician to continue to provide treatment, advise, or consult with any current patient after changing practices. 
• The right of a physician to establish or seek to establish a physician-patient relationship with a patient. 
• The independent judgement of the physician concerning the practice of medicine and/or the diagnoses and treatment of patients. 
• The direct or indirect allowing of a partnership, hospital, health system, or other corporate entity to be involved in the practice of medicine. 
• The obligation of a physician to notify patients of their departure and information on how the patient can obtain their medical records. 

DIGGING DEEPER 

Impact on Patient Care

Non-compete agreements can force physicians to leave their communities or cease practicing all together. With restrictions requiring physicians to relocate outside the restricted area, they could be forced to uproot their families and practice medicine in more remote areas, or even temporarily stopping practice. With state regulations currently in place through non-compete agreements, physicians are restricted to where they can practice. This severely disrupts continuity of care for patients. For example, a pediatrician bound by a non-complete clause may be unable to continue to serve the same underserved children in their area due to geographic restrictions.   

Physician Shortages 

South Carolina faces a growing shortage of primary care physicians, especially in rural areas. According to a recent report conducted on behalf of the South Carolina Department of Health and Human Services, 41 of the state’s 46 counties are health professional shortage areas, with a shortage of 1,800 physicians in 2021. That number is expected to grow to nearly 3,000 by 2026. South Carolina already ranks in the bottom half of states for primary care and general surgeon availability. Non-competes exacerbate this crisis by limiting doctors’ mobility and ability to fill these critical gaps in care. 

Suppression of Wages and Innovation 

Physician non-compete agreements suppress wages of physicians and hinder competition by preventing physicians from seeking better opportunities or starting their own practices. On the national level, the Federal Trade Commission (FTC) estimates that banning non-competes would have a yearly impact of up to 29,000 more patients being seen, growth of 2.7% per year in new business formation (resulting in more than 8,500 additional businesses a year), and a $524 pay increase for the average provider. According to the FTC, the ban would also lower heath care costs by up to $194 billion over the next decade. 

Broader Economic and Social Impact 

Removing non-compete clauses fosters a competitive healthcare landscape, driving innovation and improving service quality. Physicians would also have the mobility to make decisions based on their training, rather than corporate policies.  

This increased mobility would enable patients to follow their preferred doctors, even if they change employers, thus enhancing continuity of care and patient choice. Additionally, the ban on non-competes is expected to reduce healthcare costs, as increased competition among healthcare providers typically leads to lower prices and improved quality of services. This aligns with a patient’s right to shop for healthcare by creating a more diverse and competitive market, where patients have access to a wider range of providers and can make informed decisions based on quality, cost, and personal preferences. 

Why do hospitals oppose this bill? 

Opponents to restrictions on the use of non-compete agreements argue that these contracted provisions protect employers’ investments in recruiting and training physicians. While employers do make significant investments in recruiting and training physicians, with costs ranging from $180,000 to $250,000 per physician, these investments can be protected through other means.  

S.46 addresses this concern by allowing employers to recoup specific costs, such as relocation expenses, if a physician leaves within three years. This provision ensures fairness for employers without compromising patient access to care or limiting physicians’ career mobility. 

What now? 

The passage of non-compete legislation is not just about protecting physicians and their professional and personal lives; it is about safeguarding a patient’s fundamental right to receive consistent, high-quality care. It allows physicians to uphold the Hippocratic Oath which states, “I promise my patients competence, integrity, candor, personal commitment to their best interest, compassion, and absolute discretion, and confidentiality within the law.”