Covenants forbidding competition with a physician’s former employer and restricting the solicitation of patients have become commonplace in physician employment agreements. These days, such provisions appear in all sorts of employment contracts, including those of physicians. The policy supporting these provisions protects the business interests of the employer – mainly preventing the loss of customers/patients to competing businesses.

Physician Non-Competes Conflict with AMA Code of Medical Ethics

Non-compete/non-solicitation provisions can vary widely in scope and duration. As Jonathan Pollard’s Non-Compete Blog explains, there is a very strong argument that these provisions should not be enforced at all, since they do not protect a legitimate business interest and are merely “naked restraints of trade.” Nevertheless, restrictive covenants are widely applied and enforced even though their enforceability is somewhat inconsistent and depends primarily upon the state in which enforcement litigation occurs.

On the other side of the equation stands the American Medical Association’s Code of Medical Ethics. The policies cited in support of restrictive covenants directly conflict with the policy set forth by the AMA in its Code of Medical Ethics, Opinion 9.02:

Covenants-not-to-compete restrict competition, disrupt continuity of care, and potentially deprive the public of medical services. The Council on Ethical and Judicial Affairs discourages any agreement which restricts the right of a physician to practice medicine for a specified period of time or in a specified area upon termination of an employment, partnership, or corporate agreement. Restrictive covenants are unethical if they are excessive in geographic scope or duration in the circumstances presented, or if they fail to make reasonable accommodation of patients’ choice of physician.

Non-solicitation provisions that try to prevent physicians from notifying their patients that they are joining a new practice also run afoul of the AMA Code of Medical Ethics, Opinion 7.03:

The patients of a physician who leaves a group practice should be notified that the physician is leaving the group. Patients of the physician should also be informed of the physician’s new address and offered the opportunity to have their medical records forwarded to the departing physician at his or her new practice location. It is unethical to withhold such information upon request of a patient. If the responsibility for notifying patients falls to the departing physician rather than to the group, the group should not interfere with the discharge of these duties by withholding patient lists or other necessary information.

Do Not Presume That Your Restrictive Covenant Will Not Be Enforced

Unfortunately, unlike the similar legal ethics rules and opinions for attorneys, which have been used uniformly to prevent the enforcement of non-compete provisions for attorneys, physicians have not been so fortunate. For a discussion of the distinction between the application of restrictive covenants to doctors and lawyers, as well as the state of the law in Illinois, see Mohanty v. St. John Heart Clinic, 225 Ill.2d 52, 866 N.E.2d 85 (2006), as discussed in Restrictive Covenants in the Medical Profession, Johnson & Bell Health Care Law Alert. In that case, the court upheld non-compete agreements between two cardiologists and a heart clinic: the first restricting practice of medicine for three years within a two-mile radius of the clinic’s offices and the second restricting practice for five years within a five-mile radius of the clinic’s offices.

Even so, the policies underlying these AMA’s Ethical Opinions remain forceful. Physician groups typically are run by physicians, who might be persuaded to scale back a proposed harsh restrictive covenant to one with a more reasonable scope, geographic area and/or duration. Some restrictive covenants ultimately are not enforced, because they are too broad, too long, or cover too large a geographic area. It is very risky, however, to sign such an agreement with such a provision in hopes that it will not ultimately be enforced. Accordingly, this issue must be addressed at the very beginning of the relationship between the physician and the practice group with a careful and thorough review of the proposed employment agreement.