The FTC banned non-compete agreements. Experts say Philly doctors should wait to shred their contracts.

Doctors should wait to rip up the employment contracts prohibiting them from going to work for competitors, experts are advising, even though the Federal Trade Commission voted last week to bar employers from imposing such restrictions on employees.

Some health-care workers employed by hospitals, nursing home, and home-care agencies are among the one in five American workers affected by the FTC’s 3-2 decision to ban noncompetes in a rule change that is already facing a court challenge.

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Between 37% and 45% of physicians are bound by noncompete arrangements, according to the American Medical Association. There is no precise accounting of their use in Philadelphia, though comments submitted to the FTC by local doctors make it plain that the stakes are high.

A family medicine physician said their noncompete prohibits them for two years from taking jobs in a five mile radius of the hospital, which is enough to discourage them from seeking another job. Another physician wrote about being unable to accept any job in Philadelphia for a year.

To assess how the new rule could impact Philadelphia-area physicians, The Inquirer looked at the concentration of hospitals in the region and asked local doctors to share information about their noncompetes, which several agreed to do under condition of anonymity, out of concern about their current employment.

Seven local health system either declined to provide details of their use of noncompetes or didn’t respond to request for comment in time for publication.

Despite the FTC’s decision, experts said noncompetes are likely to remain part of the physician workforce landscape for years, as it’s not clear that the rule will survive appeals by opponents. And if it does, some medical providers could for various reasons be considered exempt from it.

Here’s what you need to know about noncompetes:

An agreement that bars workers from taking a new job in a certain geographic area, professional field, or with specific competitors for a period of time.

Highly paid workers in banking and tech historically received contracts with restrictive noncompetes, said David Abrams, a professor of law and economics at the University of Pennsylvania.

“You’ve seen it expand to lots of different areas, including health care,” Abrams said.

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A typical noncompete clause for physicians includes a geographic distance — such as radius from a hospital — and restricts them from accepting a job within it for a certain time period.

About a half dozen local physicians told The Inquirer that their noncompetes limit them from going elsewhere to work within five or 10 miles from their current hospital for a year.

In a region with a high concentration of health-care facilities, a few miles can encompass many potential employers. For example, there are nearly 20 general hospitals in a 10-mile radius around Philadelphia’s City Hall, an analysis by The Inquirer found.

Some noncompetes in Pennsylvania can restrict physicians from moving 20 miles or further from their employer for a year or two, said Arvind Venkat, a Democratic state representative from the Pittsburgh area and a practicing emergency room physician. He is sponsoring a bill to ban noncompetes in Pennsylvania that passed the state house this month.

Noncompete agreements are a method of unfair competition, the FTC has ruled.

Once the rule goes into effect, it will generally ban employers from signing new noncompetes with workers.

The rule would also void most existing noncompete provisions, except for senior executives. The FTC said that only 1% of workers fall into that category.

The rule only goes into effect 120 days after it is added to the federal register.

Some doctors in private practice and nonprofits could be exempt.

This is because physicians who work in a small private practice might be considered senior executives by the FTC.

Some nonprofits also could fall outside of the FTC’s regulatory scope, said Larry Pockers, a partner at Duane Morris, a Philadelphia-based law firm. But this remains a gray area: The FTC has exercised its authority over some nonprofit hospitals in the past. An Internal Revenue Services nonprofit designation alone doesn’t mean the organization is exempt from FTC scrutiny.

“Each individual circumstance will have to be looked at on a case-by-case basis,” Pockers said.

Generally, doctor groups support restricting noncompetes, and hospital groups oppose the rule change.

The Pennsylvania Medical Society wants to ban noncompetes, with an exception for small medical practices. In a statement, the professional association, representing doctors statewide, said it “supports the end of these contracts by large hospitals and massive health systems.”

But the Hospital and Healthsystem Association of Pennsylvania warned that banning noncompetes could result in bidding wars over providers and leave smaller organizations unable to retain medical staff.

“Noncompetes help provide predictable access to care for patients,” Nicole Stallings, the association’s president said in a statement.

The FTC estimates that barring noncompetes would reduce the amount spent on physician services in the U.S. by $74 to $194 billion over the next decade. This is because noncompetes led to more consolidation of health care services and increased prices for consumers, according to studies cited by the FTC.

Probably not any time soon.

The U.S. Chamber of Commerce filed a lawsuit asking a federal judge in Texas to prevent the rule from taking effect. The complaint argues that the FTC overstepped its authority when it issued the rule.

Challenges by the Chamber and others could go all the way to the Supreme Court, where opponents of the FTC’s ban could find a receptive audience, some experts believe.

“This is a federal government agency that is approving and issuing a final rule in an area of law that has historically been regulated by the state,” Pockers said.

The Pennsylvania State House passed a ban on noncompetes in health care last week.

The bill specific to health care workers was cosponsored by Rep. Venkat. It now goes to the Senate, where its future is unknown. But the physician and elected official is “cautiously optimistic” following the bipartisan vote in favor of the bill in the House.

Fewer than a half-dozen states have fully banned noncompete agreements, including California.