On August 20, 2024, a federal district court judge in Texas issued an order effectively blocking the Federal Trade Commission's (FTC’s) ban on noncompete agreements, which was set to take effect on September 4, 2024. This eleventh-hour ruling in the Ryan LLC v. FTC case, which has been closely watched by leaders in numerous industries beyond just healthcare, indicated that the FTC ultimately does not have the authority to ban noncompete agreements in such a broad manner.
Despite this finding, we believe this issue is far from settled.
The language in the FTC’s ban was conspicuously vague and therefore vulnerable to litigation. Although the dust is still settling, we believe we will see continued attempts to define a narrower ban at both the federal and state level, though the timing and breadth will depend heavily on the results of the upcoming presidential election given the party-line split on the topic (i.e., Democrats support the measure and Republicans disagree with it).
Currently, 13 states either have full or partial noncompete bans based on employees’ income levels, and other states with planned legislation have remained on standby while this federal ban moves through the legal process. With this temporary resolution, we now expect these states will continue moving forward with their own rules limiting the application of noncompete clauses.
With all the potential permutations of federal and state rules, health systems should begin proactively exploring avenues to engender provider loyalty beyond noncompete clauses. Subsequent legislation could have profound implications for how healthcare organizations structure their physician and advanced practice provider (APP) compensation and retention strategies. And as the laws surrounding noncompetes work their way through the legal process, it is important to note that both for-profit and not-for-profit systems have already started reacting to these market pressures by easing noncompete restrictions for physicians and APPs.
Despite the ongoing ambiguity of these clauses, below are five ways systems can continue to adapt to the changing landscape and retain critical providers.
1. Increased Wages and Greater Negotiation Power: Empowering Providers
Without noncompete agreements, physicians and APPs would have greater freedom to switch employers, leading to increased mobility across the industry. While we have seen steady wage growth across many subspecialties, this increased market fluidity would further drive up wages as employers compete to attract and retain top talent. The result could be bidding wars that strain the compliance parameters many systems have in place for their physicians.
Therefore, as groups look to recruit and retain providers, they will need to focus on establishing transparent and equitable compensation plans with clear work expectations and incentive structures, which is increasingly an expectation of younger providers. They may also compete on factors like their benefits packages and paid leave policies to show their commitment to achieving a healthy work-life balance among their providers.
And finally, organizations should work to illustrate the less tangible elements of their culture. While money matters to providers, we have found that engagement and long-term commitment is also driven by the sense that the group is investing in them through mentorship and has a clear vision for their future (often in the form of prospective leadership roles). If cash compensation is the only value proposition a group can offer, they may be in for a tough recruitment cycle.
2. Enhanced Benefits: Thinking Beyond the Paycheck
In response to the potential ban, healthcare employers have begun looking beyond salaries to retain their physicians and APPs. Enhanced benefits packages, including better healthcare coverage, retirement plans, and flexible working arrangements (e.g., patient-facing contact hours, inbox management support, support staff ratios), have already become more common. APPs stand to gain the most from this shift, as they may gain access to leadership roles and benefit categories that were previously limited to physicians.
3. Changes to Compensation Plans: Recognizing Experience
With the loss of noncompete agreements, healthcare employers will likely turn to other methods to recognize the value of a stable and experienced workforce. Expect to see an increase in compensation plans that reward years of service through retention bonuses or similar incentives designed to support long-term loyalty, including tiered salary increases, additional paid time off, reduced call obligations, sabbatical options, and other perks that grow with tenure. This approach could help mitigate turnover by offering employees clear and meaningful long-term benefits for staying with the organization.
4. Legal and Compliance Adjustments: Navigating a New Landscape
Any expanded bans on noncompetes would require healthcare employers to revisit their legal and compliance strategies. Without this retention tool, organizations may lean into other protective measures such as nonsolicitation agreements or longer employment contracts with penalties for early termination. Employers will need to carefully balance these strategies to avoid legal pitfalls while still protecting their business interests.
5. Private Medical Groups: Rethinking Vesting Options
Private medical groups will also need to adapt to the new reality. Instead of relying on a single vesting or buy-in event, these groups may implement time-based vesting options to incentivize long-term loyalty or higher guaranteed dollars to support initial recruitment and onboarding. While these more complex vesting timelines will require greater administrative support, they could prove effective in keeping key providers within the organization for longer periods. In addition, we have begun seeing private groups offer equity opportunities to tenured APPs in an effort to stabilize this increasingly critical provider cohort.
Preparing for the Future
The FTC's ban on noncompete agreements was poised to reshape the healthcare landscape, particularly in terms of physician and APP compensation. And despite the recent ruling, the possibility of a federal ban or additional state bans is still very real. As such, healthcare organizations should start planning now to adapt their strategies to ensure they remain competitive in attracting and retaining top talent. By focusing on enhanced benefits, creative compensation plans, and alternative legal protections, employers can navigate this new era successfully.
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Edited by Emily Johnson
Contributing Author Erika Schlosser
