Ideas and information in the world of non-compete and trade secrets law.
Thursday, December 12, 2013
The Doctor Is In (or Out)? Physician Non-Compete Agreements
"Only those who regard healing as the ultimate
goal of their efforts can, therefore, be designated as physicians.” — Rudolf
He was a 19th century physician widely
regarded as one of the most influential doctors of his time, but Rudolf Virchow
clearly did not foresee that medicine would be big business one day.It’s such big business that physician
practices – and in some cases hospitals – work like crazy to make sure that patients
don’t follow good doctors when those doctors seek employment elsewhere.
But even if the profession is forgetting about patients, state laws are not. Citing patient care and protection as the reason, some states prohibit
physician non-compete agreements.Colorado,
Delaware and Massachusetts do so by statute.Pennsylvania hopes to follow suit with
legislation sponsored by the Pennsylvania Medical Society, which would oppose
the use of non-competes in physician employment contracts.
Other states have simply prohibited the use of
non-competition agreements among professionals, a category in which physicians
clearly fall.Alabama is one example,
which not only disallows non-competes for physicians, but
also for physical therapists.
But in the great State of Michigan, where I
practice, non-competes are routinely enforced against physicians.In the last year, I’ve handled three cases involving
non-compete clauses in physician employment agreements – all of which were
enforced.In this post, I described the
perilous hearing in which a court ordered my cardiologist clients to refrain
from practicing at several different hospitals.Six months ago, I obtained an order on behalf of a physician practice
group against three doctors who violated their non-compete agreements.Last spring, I settled a case in which my
opponent represented a podiatry practice and sought patient records to support
his non-compete claim.The
enforceability of the non-compete provision in that case was never at issue.
But does this mean that Michigan doesn't care about patients? Hardly. In the case
I mentioned above involving patient records, Isidore Steiner, D.P.M. v. Bonanni, the
Michigan Court of Appeals upheld the sanctity of the Michigan physician-patient
privilege and ruled that non-party patient records may not be disclosed in a
business dispute involving physicians.
Unlike HIPAA, which allows for the disclosure of
patient records in a lawsuit upon the entry of a qualified protective order,
Michigan’s physician-patient privilege provides greater protection of patient information, allowing
for disclosure only with the patient's consent.In my case, this meant the only way the plaintiff
could prove a violation by my client was if my client admitted it.The only way the plaintiff could prove
damages was through an affidavit by my client stating the amount of revenue he
had earned as a result of any breach.
Therein lies the rub: on the one hand, Michigan
courts will enforce non-compete agreements against doctors.Of course, there must be proof of a violation.But if a main source of that proof cannot be
disclosed by the physician accused of the violation, how do plaintiffs enforce
their contractual rights?
The court in the Steiner
case recognized this problem, but instead of addressing it, punted:
[W]e say that
it is not our role to address either the wisdom of a physician's efforts to
restrict with whom a patient may consult or the appropriate business or legal
means by which a corporation can effectively protect its practice. Instead, our
limited role is to decide whether the names, addresses, and telephone numbers
of nonparty patients are protected from disclosure by law.
It seems nearly all states – their courts and their lawmakers – have recognized
the importance of the patients in the medical process (and thank goodness for
that).But it begs the question: what is
the future of non-compete agreements in the medical profession? How do we balance patient care and protection with the profession's business interests? Is a uniform act the answer?Or should the ad-hoc approach that being
taken in each state the better way to go?
I’m interested in your feedback.Sound off!I’ll share your
comments in a future post.
* Disclaimer: The ideas and opinions shared on this site are
my own and are not attributable to my employer. No amount of interaction on
this site will create an attorney-client relationship. If you have a legal
question and you ask it here, I will also answer it here (if I can), but such
answers do not guarantee results and do not create an attorney-client
relationship. If you wish to contact me directly, you may do so at
 COLO. REV. STAT.
§ 8-2-113(3); DEL. CODE ANN. tit. 6, § 2707 (2005); MASS. ANN. LAWS. ch. 112 §
Benchmark Med. Holdings, Inc. v. Barnes,
328 F. Supp. 2d 1236 (M.D. Ala. 2004). 807 N.W.2d 902 (Mich. Ct. App. 2011).  45 CFR
164.512(e) (providing for disclosure of “protected health information in the
course of any judicial or administrative proceeding” if it is subject to a
“qualified protective order”).A
qualified protective order is one that prohibits the parties from “using or
disclosing protected health information for any purpose other than the
litigation or proceeding for which such information is requested” and “requires
the return to the covered entity or destruction of the protected health
information (including all copies made) at the end of the litigation or
proceeding.”45 CFR 164.512(e)(1)(v). Steiner, supra; Mich. Com. Laws 600.2157
otherwise provided by law, a person duly authorized to practice medicine  or surgery shall not disclose
any information that the person has acquired in attending a patient in a
professional character, if the information was necessary to enable the person
to prescribe for the patient as a physician, or to do any act for the patient
as a surgeon”). Steiner, supra, at 276.