Pennsylvania has a new law limiting noncompete agreements for doctors and others to one year

Pennsylvania has a new law effective Jan. 1 that for the first time limits to one year the noncompete agreements that prevent doctors and other medical professionals from leaving an employer to work for a competitor.

But the legislation isn’t expected to change much on the ground, experts said.

That’s because it still allows health systems and other employers to bar doctors, physician assistants, nurse practitioners, and nurse anesthetists from taking jobs with competitors for up to a year.

The Fair Contracting for Health Care Practitioners Act, signed by Gov. Josh Shapiro in July, also does not limit the geographic reach of noncompetes, which makes it hard for doctors to change employers without a major relocation. And the law leaves existing restrictions in place from contracts signed in prior years.

That means the law doesn’t help Lorraine Rosamilia, a central Pennsylvania dermatologist. Rosamilia drives an hour one way from State College to DuBois, Pa., for her new job, because she had a two-year, 30-mile noncompete with her former employer.

“I’m driving 50 miles, which is about an hour, to a smaller town, so that I can live in my community still where my kids are in school and where my husband owns a business,” Rosamilia said.

She left her old job because she didn’t like how big the system had gotten. “It got to the point where their main concern was how many people you were seeing a day, not the quality of the care you were giving,” said Rosamilia, who is vice chair of the Pennsylvania Medical Society.

Now, some of the 5,000 patients she had in the State College area are dealing with the consequences of her inability to keep practicing there.

“I can’t go to the grocery store without someone telling me that their melanoma skin check was canceled and never rescheduled, or that they were supposed to have a surgery that was never booked, or that they’re three months behind on getting their injectable medicine that they need, because no one will get back to them about refills,” Rosamilia said.

Pennsylvania’s adoption of a law limiting noncompetes happened as the U.S. Federal Trade Commission was trying to ban the use of such restrictions nationwide in all industries, arguing that they are especially harmful to low-wage workers because the agreements prevent them from taking higher-paying jobs.

The FTC adopted the ban in April, but it faced fierce business opposition, and a federal judge in Texas in August blocked the federal government from enforcing it.

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 written comments submitted to the FTC by doctors in Pennsylvania and New Jersey made it plain that the stakes are high.

One physician said he left an underserved area in rural Pennsylvania for New Jersey to escape a noncompete.

It’s particularly irksome to doctors that employers also impose noncompetes on specialists who don’t bring their own patients into health systems, such as hospitalists and intensive care physicians who only provide hospital-based care. Radiologists work under similar circumstances.

In a region with a high concentration of hospitals, 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.

The path to Pennsylvania’s new law started before the FTC tried to ban noncompetes nationwide.

Dan Frankel, a Democratic representative from Allegheny County, introduced a bill in August 2023 that banned all noncompete agreements for health-care practitioners. A subsequent version of the bill this year allowed them for two years and up to 45 miles.

A lawyer who represents the interests of health systems said it’s important to allow some version of noncompetes.

The purpose “is to allow the health systems to protect their investment, such that you don’t have employees, practitioners just jumping back and forth for more money,” said Erin J. McLaughlin, a lawyer who works in the Pittsburgh and Newark, N.J., offices of Buchanan Ingersoll & Rooney.

The law says employers can’t enforce a noncompete against a physician who was dismissed, but it doesn’t define “dismissed.”

That creates uncertainty regarding how to handle dismissals for different reasons, such as whether a doctor was fired for cause or not, Karen Davidson, an independent lawyer who represents doctors, said in a newsletter for the Philadelphia County Medical Society.

The law allows the enforcement of noncompetes against physician owners when a practice is sold. This is to protect buyers of practices from losing physicians after a sale closes.

The law is not clear, however, on what happens when doctors sell their equity interest back to a practice when they want to leave. Can those sale documents include a noncompete even if the doctor has a very small stake? “That’s not clear,” McLaughlin said.

Rosamilia, the central Pennsylvania dermatologist, described the law as a stepping-stone. She likes that it called for a study by the Pennsylvania Health Care Cost Containment Council on the impact of noncompetes on patients and doctors.

“That will hopefully look at how noncompetes affect access to health care, quality of care, doctors staying in Pennsylvania or not staying in Pennsylvania,” she said.