New Momentum on Eliminating Non-Compete Agreements in Physician Contracts
In 2023, South Carolina took a decisive leap in ensuring quality and affordable care for patients through the repeal of the South Carolina CON (Certificate of Need) statute. These laws required government permission slips to start or expand the services of a healthcare business. While the repeal of CON was an important step in the right direction, the work of reforming South Carolina’s health system is far from finished.
Another key reform, one that was originally a part of the CON repeal effort, is to eliminate non-compete clauses in physician contracts. Two new pieces of legislation offer a solution to this antiquated practice. After being introduced and read last week at the Statehouse, S.46 has been referred to the Senate Committee on Labor, Commerce and Industry. A complementary House bill H.4767 is currently being considered in the Medical Affairs sub-committee of the House Committee on Medical, Military, Public, and Municipal Affairs.
These bills address the non-compete agreements that can force patients to lose trusted providers, decrease access to healthcare, and have resounding negative economic impacts. The proposed amendments to the South Carolina Code are essential to improving quality of life for all South Carolinians.
What is a Non-Compete Agreement?
As we have written, non-compete clauses refer to a legal contract between an employer and an employee that restricts the employee from working for another employer upon departure (usually within a certain geographic radius). In the medical context, these agreements are designed to prohibit physicians from competing directly with their former employers, often hospital systems. This also discourages doctors from retaining their patients. South Carolinians would essentially have to move outside the radius of their physicians’ non-compete to receive continuity of care.
Title 41 of the SC Code doesn’t currently prohibit non-compete clauses for medical providers, and not all hospital systems employ non-compete agreements, but these agreements have become common practice in some instances.
Problems with Non-Compete Agreements for Physicians
1. Economic Consequences
It’s simple: unnecessary regulations increase costs and decrease efficiency. Banning non-competes would reduce the difficulty of creating independent physician practices. These can be less expensive than practices that are a part of larger hospital systems.
Furthermore, increasing options for patients would increase the competitiveness of the healthcare market. Allowing South Carolinians to choose would drive down costs and force providers to focus on healthcare quality. Physicians should have the ability to make decisions about their careers that are geared towards their patients, not what is best for a healthcare corporation.
2. Impact on Quality of Care
Patients deserve to keep their doctors. Continuity of care is an important metric in the success of a healthcare system. South Carolinians shouldn’t have to jump through hoops to obtain medical records and keep relationships with skilled providers.
Additionally, these non-competes could exacerbate the existing physician shortage. According to the Cicero Institute, 89% of our counties experience physician shortages, 23% worse than the national average. We are projected to be short 3,230 physicians by 2030 without further action. Forcing physicians to relocate to continue their practice prevents them from staying in areas where they’re needed most.
About the New Legislation
With some small differences, both S.46 and H.4767 resolve the aforementioned issues by altering SC Code Title 41, by banning non-compete language for physicians or medical practices. Specifically, they target:
- Any restriction on the ability of a physician to practice medicine in any geographic area;
- Any restriction on the ability of a physician to continue to provide treatment, advise, or consult with any current patient;
- Any restriction on the right of a physician to establish or seek to establish a physician-patient relationship with any patient upon his departure; and
- Any restriction on the obligation of a physician to notify patients of his departure.
Opposition to Non-Compete Reform
Opponents to this reform cite potential damage to healthcare businesses caused by the turnover of providers. Both bills allow for healthcare employers to protect their investments related to training, relocation, signing bonuses, and more. Businesses can recoup these costs if a physician departs after fewer than three years of employment, balancing the need to reform with the financial investments of businesses. It is a solution that puts South Carolinians first without causing unnecessary expense to our medical community.
Our Promise
The repeal of CON laws was just the beginning in the struggle for healthcare freedom. Policy makers and advocates now have a chance to finish what they started. After such historic progress, the nation is watching the Palmetto State and our ability to fulfill the commitment we made to our citizens. South Carolinians deserve a healthcare system rooted in access, affordability, and choice.
This non-compete issue is not just about protecting physicians and their livelihoods, nor is it intended to burden our local hospital systems. It is a needed reform to protect the quality of life of people in our state.
