Promote growth or staunch it? What the noncompete ruling means for Columbus health care
Noncompete contracts could soon be void under a new ruling by the Federal Trade Commission, a move that could spark major changes in Columbus' rapidly growing health care industry.
The commission – a U.S. government agency that enforces laws protecting consumers from unfair business practices – announced a ban on noncompete contracts nationwide last week. While the ban won't take effect until 120 days after the ruling is officially registered, the commission estimated that it would reduce healthcare costs by $74-194 billion over the next decade nationwide.
A noncompete is typically a clause in a contract between an employer and a worker that prevents them from working for a competing employer or starting a competing business, usually within a geographical area or after a certain amount of time. Such clauses, the commission argues, hinder fair competition, suppress wages and stifle innovation.
This is especially relevant to the health care industry, argues Ruqaiijah Yearby, a professor of health law at The Ohio State University. Noncompete clauses can often apply to patents for medical devices or treatments, meaning health care workers may not be able to continue their work or collaborate with other experts if they're in a competing health system once they leave their jobs.
That's a big deal for a city like Columbus, with its four major health systems and nationally-acclaimed research facilities, like those at The Ohio State University and Nationwide Children's Hospital.
Exacerbate worker shortage or promote growth?
Different sectors of the healthcare field are divided on the ruling.
Opponents are criticizing the ruling as "bad policy" and an overreach of federal powers that will only further advance the healthcare workforce shortage that's rocked the U.S. since the COVID-19 pandemic. Banning noncompete language would exacerbate that struggle acutely felt in the Buckeye State the Ohio Hospital Association argues.
"The FTC’s rule will adversely impact hospitals across Ohio, including those in rural areas, which incur significant expense to recruit physicians and other caregivers to their communities and invest heavily to maintain their practices in those communities," the association said in an emailed statement.
If hospitals don't have a surefire way to hang onto their providers, it will aggravate workforce shortages and communities' access to care could be jeopardized, according to OHA.
Yearby said banning noncompete language would do the opposite. More people could return to the health care industry because workers' would have more power to negotiate wages and other benefits in a more competitive environment, and employers would be more incentivized to provide them.
"You need to try to compete to get the best workers," Yearby said. "Part of competing is to pay people, to give them benefits and resources to make them want to stay, as well as to have a healthy environment for them to stay in."
"It is a good day for healthcare," she said.
Where Columbus' major health systems stand
The commission's ruling already faces several legal challenges, including from the United States Chamber of Commerce, who argued that the FTC doesn't have the authority to enforce such a sweeping and overly-broad law.
Critics also point out that the ruling isn't clear how it would impact nonprofits, which the commission doesn't have jurisdiction over. But the FTC says it can evaluate using special criteria to see if nonprofits are or are not truly exempt.
All four of Columbus' major health systems operate as nonprofits or not-for-profits.
A spokesperson for Nationwide Children's Hospital told The Columbus Dispatch that it maintains contracts "with a limited group of administrators and medical staff that include non-compete language." The hospital is currently reviewing the ruling and "will comply with any and all guidelines as they apply to us," the spokesperson said.
Ohio Health, the healthcare system that includes Riverside Methodist Hospital and Dublin Methodist Hospital, said in a statement to The Columbus Dispatch that it "considers the terms of its employment agreements to be confidential" and did not confirm whether it uses noncompete language. They are reviewing the commission's ruling and "will comply with any applicable requirements."
Mount Carmel Health System said through a spokesperson that they are also reviewing the ruling and "evaluating its impact on our contracts." They declined to comment on whether they use noncompete language in those contracts.
The Ohio State University's Wexner Medical Center declined to comment on the ruling.
This article originally appeared on The Columbus Dispatch: What banning noncompetes could mean for Columbus health care
