FTC Considers Proposals on Mergers and Noncompete Clauses

Changes may be in store for how physicians do business based on pending proposals from the Federal Trade Commission to ban noncompete clauses and monitor potential merger monopolies.

In January 2023, the Federal Trade Commission (FTC) announced a rule that would ban noncompete clauses, stating that such clauses reduce workers' wages and stifle new businesses. Simply put, the rule would ban employers from entering into noncompete clauses with workers, including independent contractors.

Aspects of the rule include whether it should pertain to franchisees, whether senior executives should be exempted, and whether low-wage and high-wage workers should be treated differently.

According to the FTC, banning noncompete clauses would increase workers' earnings by approximately $300 billion per year, save consumers as much as $148 billion in healthcare costs, and double the number of companies founded by former workers in the same field.

In June 2023, the FTC and the US Department of Justice proposed changes to rules governing mergers, including changes to prenotification forms that would promote more efficient screening of potential mergers. According to a press release from the FTC, the proposed changes include provision of details about investments or corporate relationships, product and services, projected revenue streams, and previous acquisitions.

The proposal also includes a waiting period during which agencies would assess the risk that a merger would lessen competition or tend to create a monopoly.

What the FTC Proposals Mean for Physicians

FTC Chair Lina M. Khan addressed attendees at the American College of Physicians (ACEP) at their annual meeting in October.

In March 2023, ACEP wrote to Khan in support of the banning of noncompete clauses. The ACEP also stated that the FTC should monitor the effect of a ban on the ability to recruit and maintain a stable physician workforce in rural and underserved areas "and should examine the potential impacts should non-profit health systems be exempt from a ban."

However, the American Medical Group Association (AMGA), a nonprofit trade organization that supports multispecialty medical groups, opposes the ban. In a press release issued in March 2023, AMGA noted that, "As employers, AMGA members rely in part on non-compete agreements to build strong, sustainable care teams that work together to coordinate care for their patients. These care teams emphasize the importance of the doctor-patient relationship, which reasonable non-compete agreements help support."

The American Medical Association (AMA) supports the ban on noncompete clauses, detailed in an official AMA policy statement as, "support[ing] policies, regulations, and legislation that prohibits covenants not-to-compete for all physicians in clinical practice who hold employment contracts with for-profit or non-profit hospital, hospital system, or staffing company employers."

In regard to the merger guidelines, ACEP wrote a separate letter to Khan identifying some of the unique aspects of emergency medicine practice. The ACEP stressed the need for caution as the consolidation of medical practices continues, many under the umbrella of private equity investment companies.

"Unchecked mergers that substantially lessen competition in the labor market for emergency physicians, in which the employer is the buyer and the physician is the seller, can impact physicians directly by lowering wages or slowing wage growth, worsening benefits or working conditions, or contributing to other degradations in workplace quality," according to ACEP.

The AMA also supports the FTC's draft merger guidelines as protective of physicians and their working environments.

In September 2023, the AMA sent a letter to the FTC commending the agency on the proposed guidelines: "It is our strong contention that the Agencies must have merger guidelines that protect physicians against health insurer mergers that may substantially lessen competition for the purchase of physician services and that degrade physician working conditions," according to the AMA letter.

According the FTC, the proposed changes represent an expansion and reorganization of information along with the addition of new document requirements and represents the first comprehensive review of the Hart-Scott-Rodino Antitrust Improvements Act (the HSR Act) since 1978.

After soliciting public comments, the FTC is reviewing the proposals, and no specific date for a final vote has been announced.

More specifics on the potential changes to premerger notification, reporting, and waiting period requirements are available on the FTC website.

Heidi Splete is a freelance medical journalist with 20 years of experience.