Rory Bellina (00:06):
Hello everyone, and welcome to Health Law Talk presented by Chehardy Sherman Williams. Before we get started, please be sure to subscribe to our podcast and follow us on Facebook, Twitter, LinkedIn, and YouTube – links in the description below.

Conrad Meyer (00:34):
Hello everyone. This is Conrad Meyer and Rory Bellina. And on this episode of Health Law Talk, we’re gonna be talking about restrictive covenants and non-competes, uh, in healthcare and how it affects providers and employers alike. And that could be hospitals or group practices, but basically employers versus providers on restrictive covenants, specifically on non-competes. So, Rory, what do you think? Non-compete, What is that? What does that mean?

Rory Bellina (01:01):
So, non-compete in summary, is a provision in most contracts for physicians or allied health professionals, predominantly physicians that allows the, their employer or their proposed employer to put in their restrictions on where they can go to practice for a certain amount of years or where they better, where they can’t go to practice a certain amount of years after their employment terminates. Sometimes with calls, sometimes without calls, it all varies, but basically it’s, it’s language in there. Contract that says when this contract is up, you, you cannot practice anywhere in this parish since we’re in Louisiana or in other states, diff various counties around where you’re currently practicing. So,

Conrad Meyer (01:37):
But what, but what’s the purpose? I mean, why, why, if I’m an employer and I am spending all this money to bring in a provider into my hospital or my practice, what, what’s the basis? What am I thinking? Why do I need a non-compete for this person I’m bringing in?

Rory Bellina (01:54):
Sure. So most providers or, or their proposed employers when they’re arguing for the non-compete will say, Look, we’re bringing in this physician. We’re going to have to train them on ehr. We’re gonna have to hire up midlevels and nurses and staff for them. We’re gonna have to expend significant time, money, resources, bringing this doctor on, and we don’t want to teach him our whole system, get him set up, get, get a flow of patients in, and then he abruptly leaves and goes and opens up his own practice or goes to a competitor right next door and takes that whole patient flow with him after we’ve, you know, expended all these resources on him. That’s the biggest argument, or the biggest reason why employers want these not beats to stay in place, because they feel that they are expending significant resources to get these doctors in over just the generic salary that they’re paying them.

(02:46):
And once they get them in, they want to keep them. And if they leave, they want them to be forced to go far enough to where really the patients don’t go with them. A lot of these non-competes that we see in Louisiana will prevent you from practicing in certain parishes. And the way that our parishes are kind of laid out and, and just travel-wise, it forces the doctor to go so far away that your average patient is gonna say, I’m not moving with him. I’m just gonna stick here and go see the person not to hire after him or someone else in his

Conrad Meyer (03:18):
Group. So, and, and basic, I I get where you’re going. And I, and I don’t disagree with that. I think, I think there is an employer that has a right to protect their business, whether that’s a hospital or another group practice. They don’t want, uh, they don’t want someone to sit up shop right across the street from them. And suddenly now you have a competitor, right. And this person, this is the same person you just brought in kind of into your house, and they’ve learned all these new techniques, They learned all kinda the way to do it. Right, Right. And then suddenly you’re looking across the street and they have a shop across the street. So, So would you agree that there is some benefit to having a non-compete from the employer perspective? Absolutely.

Rory Bellina (03:56):
I mean, if, if I put on my employer hat where I’m representing the employer or the practice and, and not the individual physician, I would, I would make all those arguments and more, I would say, like we discussed, we’re bringing on support staff to help you, we’re teaching you and adding you onto our ehr, we’re giving you keys to the kingdom wait

Conrad Meyer (04:14):
Minute for the benefit of the public, uh, ehr.

Rory Bellina (04:17):
Oh, electronic health records. That’s

Conrad Meyer (04:19):
Right. We gotta, So the, the, the, the, uh, the various, uh, you know, acronyms for healthcare, you could have a list of them, so, Sure. But yeah, so, so I agree with you bringing them in, showing them the ropes, giving them access to this various, uh, proprietary information. A lot of times, you know,

Rory Bellina (04:33):
Absolutely. And all this information that these doctors are giving is all about, they, they’re giving a lot of patient metrics, they’re giving different forms, procedures, manuals, and as the employer, you don’t want them to all of a sudden take their patient list, take a copy of all the forms, figure out all the, the correct pricings, and where that sweet spot is on what to charge for things, and then literally go open up next door or, or a few streets down at one of your biggest competitors and suck all those patients

Conrad Meyer (05:01):
Out. Now let’s take the flip side. Sure. So now I’m, I’m the, I’m the physician, I’m the provider. So I’m, I’m the one contracting with the employer. What are the advantages, disadvantages, in your opinion, with respect to the non-competes or restrictive covenants from that standpoint?

Rory Bellina (05:15):
Sure. I, I typically struggle to see advantages of a non-compete. If I’m on the individual physician side or the provider side, I’d typically tend to say that I would wanna advocate for no noncompete at all. Or if we’re gonna do it, we have to find something that the provider’s comfortable with. Because a lot of times in these employment agreements, you’re getting physicians that are coming from outta state, or that are coming straight out of residency mm-hmm. , and they might feel comfortable signing up with a big system. Right. And these big systems tend to have multiple practice locations, you know, out outpatient office here, ancillary services there. And when they get this employment agreement, everything looks great. Mm-hmm. , their compensation is great, there’s loan forgiveness, there’s moving costs, allocations.

Conrad Meyer (06:00):
So basically the big employer’s rolling out the red carpet, absolutely saying, Here’s everything that you can possibly dream of, and I’m gonna give it to you,

Rory Bellina (06:07):
But there’s a non-compete. And so if and when you decide to leave, right, you cannot work in any six parishes around here. So what that forces the physician to do is they think, Okay, well, I’ll worry about that down the road. Well, down the road typically always comes. And that’s when we get the phone calls and we say, Can you look at my employment agreement? I think I have a non-compete. And we look at it, and pretty much when they say who they’re working for, we know, okay, it’s gonna be this non-compete, or it’s gonna be that noncompete based on the length of time and parishes. And the issue, and, and the hard part explaining to these physicians is, you know, they’ve purchased a house, they’ve gotten married, they’re having kids, they’re established in an area, but they hate the place that they work, or they’re ready to leave, or they’re ready to move on or open their own practice. And they, and they remember, Oh, right outta residency, when I signed this employment agreement, someone did tell me about the non-compete.

Conrad Meyer (07:00):
It’s sort of the gotcha moment, right? Yes, yes. And you, and you realize that, uh, that you know, Hey, this is, uh, this is gonna happen.

Rory Bellina (07:09):
That’s when, that’s when you, that’s when they run into the issue. Conrad, what do you typically do when a doctor comes to you with their employment agreement and it has a pretty standard noncom beat, whether it be one parish, two parishes, all 64 parishes. Where do you typically start the conversation with them?

Conrad Meyer (07:27):
Well, usually, I mean, that’s a, it’s a very good question. Uh, and it, and it happens frequently. I mean, frequently, I, I, I get the contract and I look at it, and usually when I, when I start with a contract, I look at it and the first thing I’m looking at Rory, is how do I get out of this? I mean, we’re signing a new contract, Everyone’s all happy, you know, we’re starting the marriage, right?

Rory Bellina (07:47):
Everything’s

Conrad Meyer (07:48):
Great. I’m looking about what happens when we get divorced, How do we get out of it? So the first thing I’m looking at, in addition to the termination provisions is, is I’m focusing on the noncompete, right? Looking at the restrictive covenants. And I go back to the, uh, to the doctor, and I usually say, Look, uh, this is where the statute is. It’s, it’s entitled 23 section 9 21. And, uh, basically we’re, we’re looking at the, the provision, I think it’s under section C. It talks about, Hey, this is the geographic area. It’s gonna be two years. It’s, you know, spec, uh, specify the parishes. So let’s see if that non-compete actually does that. And a lot of times, and I gotta tell you, well, the big systems we know, uh, have done this so many times that, that it’s sort of evolved and, and you look at it and it looks compliant on its face.

(08:36):
Right? However, some of the group practices are smaller employers. A lot of times when we get the non-compete, I look at it and it’s defunct on its face. It doesn’t comply. So some in those situations, I’ll just tell the doctor or, or the provider, do nothing. Right. Do absolutely nothing. Let it fail. Let it fail. Fail on its face, and, and that way you’ll have no non-compete. And of course, they wanna back up. They say, Well, how do you know it’s gonna fail? How do you know it’s defunct? And we go back to the statute mm-hmm. , and we look at 9 21 and, and we go over that and I say, This is why it’s gonna fail. Here’s a jurisprudence. And they didn’t mention this. So they added,

Rory Bellina (09:12):
And what are some reasons that you’ve seen it fail? Because I know I’ve seen it as well, and given doctors that exact device that this would not hold up. So let’s wait and see if, if you’d decide to leave, and then if they decide to infer it, and then we can have this information in our back pocket.

Conrad Meyer (09:27):
So let’s look at that. So, so some of the reasons that it fails would be because, uh, they listed parishes in the non-compete that they have zero offices. So how can you restrain a physician or provider from providing services in parishes where you have no business? Right. Any judge would look at that and say, Absolutely not. Right? Okay. So that’s the first thing. The second thing is the, uh, and I think this debate on this about using a mile radius Absolutely. Versus par. So I’ve,

Rory Bellina (09:58):
And the, the courts have been split on this from what I’ve seen. Some courts are okay with it in the more rural areas, some Right. Some are not. So it, there’s a split on

Conrad Meyer (10:06):
That. So, and that, and that’s sort of a risk. So we’ll say, look, in this case they say 40 miles, 25 miles from the place of business. But then again, what, what’s the restriction? So in other words, how many miles do you need to be from the practice or from the business, right, in order to be safe? Correct. Is it five miles, is it 10 miles? And and I don’t think there’s any jurisprudence that that speaks to that. There’s nothing that says that. But what, uh, what interestingly the restrictive covenants do is they have that provision, and there’s some provision usually if it’s good, that says that should a court find this unenforceable that the diameter of the geographic location, if it’s a mile radius, be reduced until the court says, Well, then this would be enforceable. So in other words, if it’s a 40 mile and the court says, No, it’s not enforceable, and the court says, Well, we think a five mile would be, Well, then that would what the, the contract would say, Correct. You insert the five miles. So those are the, usually the instances I see that immediately I say, Hey, we’re we’re good. Let it go. Um, I even seen one on a big system, uh, a big system on you. And I think that’s changed recently. I think you know what I’m talking about, that had 30 something parishes on it mm-hmm. at one time. Right, Right. Which is just mind boggling.

Rory Bellina (11:19):
And they’ll put in there 30 parishes plus any parish in which we open a future office.

Conrad Meyer (11:24):
Right, right. Which, which, who knows when that would be. Right. So it’s basically covering the entire state

Rory Bellina (11:29):
And getting back to the language of the actual restriction. It, it’s more than just you’re a surgeon. You can’t go practice surgery in the parish next to us. It’s everything they want you to have. Uh, for some of these bigger systems, the non-compete is not just you practicing your specialty, it’s you having a direct ownership and indirect ownership. You being on a advisory panel panel, you being a, a part of a board, like it’s a very broad restriction. They basically want you to have no access to any form of medicine, whether it be active or even passive ownership.

Conrad Meyer (12:08):
And I don’t even know if that can be done. That’s a restraint of trade. I don’t know. Absolutely. And, and sadly enough, the problem is, is that when a provider wants to get out and they want to challenge, like, like say the employer issues a cease and desist letter and says, Hey, you’re, you’re practicing within the restrictive covenant, you need to cease and desist immediately. A lot of times they don’t have the, the providers don’t have the month. Correct. They don’t wanna challenge it, they don’t wanna have the money. Correct. They don’t wanna spend it. And I totally understand that. Mm-hmm. . And so a lot of times they just capitulate and say, Okay, we’ll, we’ll stop and we’ll leave or we’ll do whatever. Right. Right. And that’s, and that’s, and that’s really the issue.

Rory Bellina (12:44):
Or it gets settled. And a lot of these don’t get challenged because unless you’re going to a big system or a big practice that’s willing to really fight your former non-compete, a lot of times it just gets settled. So we don’t have clear guidance on where these goes. And it also kind of handicaps these providers when they’re, they get a great offer from somewhere else, but their future employer says, Do you have a non-compete? And they say, Well, yes I do. And they turn over a copy of it and then their future employer rescinds the offer and they say, Oh no, we don’t want to be involved in that at all. Right. Because we know that your current employer is going to sue you and they’re gonna name us and we’re gonna get brought into this. We don’t want you anymore.

Conrad Meyer (13:24):
We want nothing to do with it.

Rory Bellina (13:26):
Right. Right. So, I, I think that, you know, a big goal of this episode of the podcast, we’ve kind of talked about the history and the current status of the non-competes for physician providers. Right. And interesting enough, we have this new house bill presented by Representative Wright out of the Covington, Mandeville area. And I think it, it’s really interesting, it’s currently, uh, we’re gonna talk a little bit about where it is right now, but, but I think it could ease some of these issues that we’re having. So Connor, can you give us a little brief introduction on house Bill 4 83?

Conrad Meyer (14:00):
Sure. So Representative Mark Wright in the house has, uh, has introduced a bill, uh, bill, house bill 40 83, which basically is going to eviscerate non-competes, uh, for providers, which is very interesting. So it’s going to take the non-competes and it’s still gonna allow, provide large, large providers or large employers to issue non-competes with respect to specialists, but not primary care. Correct. So they’re no longer, according to the bill, It, it’s very specific that, uh, the, the primary care physicians, which includes family practice, medicine, general internal meds mm-hmm. , general psych, uh, general Peds, and, um, and obstetric gynecology, those practices are gonna be considered primary care. And that, uh, the, the, the, the bill would allow, uh, a primary care physician basically to not have a non-compete at all.

Rory Bellina (14:58):
Sure. Why do you think he carved out this specialty versus primary

Conrad Meyer (15:01):
Care? Well, I think, I think primary care is the frontline medicine. So they, they’re the ones in the frontline trenches that are seeing sort of the gatekeepers for more patients that are gonna fe uh, funnel patients to specialists. So in order to, you know, free the, the, the bond, the ties that bind them and allow people greater access to care mm-hmm. , they have come up with the idea of carving out the primary care specialists to allow them basically free, free, no restrain of trade. So, so that’s why I, I think he purposely did that. And I can’t, I can’t speak for, for Representative Wright, but that’s how I read the

Rory Bellina (15:36):
Bill. And another thing that I really like that he put in here is this section B one, which basically allows the non-compete to automatically end if you have been practicing at a, uh, or practicing for an entity for three years or greater. So let’s say under this language,

Conrad Meyer (15:53):
Under the

Rory Bellina (15:54):
Specialist. Correct. Under this specialist.

Conrad Meyer (15:55):
Correct. So now we’re looking at what specialist

Rory Bellina (15:57):
Going forward, right? If you make it three years and they give you a non-compete, but you get past those first three years, it

Conrad Meyer (16:04):
Ends, it’s sunsets,

Rory Bellina (16:05):
The non-compete sunsets and goes away. And I think the intent behind that is, okay, at that point, the employer has probably recouped their money and is making money on you now. And they’re not worried about you put

Conrad Meyer (16:17):
In your time, Right. You put in your time, it’s time. Now it’s time to move forward and allow that specialist right, to be able to refrain him, you know, re free him from any restraints of trade, which

Rory Bellina (16:27):
I think is very fair for both the physician and for the, the practice or the employer. Because at that point, like you said, the employers probably gotten their money back and their biggest risk is, like you said, giving these, these physicians that are coming to them, they’re giving them loan repayments, uh, they’re giving them moving expenses. They’re giving them a sign on bonus, a hefty first year salary. Cuz a lot of these physicians that move over, they get a base salary their first year. So, and then they switch over to a production or WVU model. I think the, the goal behind this is that at this point they’re past that, you’re probably not expending as much money on them anymore. You’ve recouped, you’ve recouped your money, and right now is now’s a time to where it, like you said, it can sunset and there’s not so much a concern of they’ve made it three years, they can leave

Conrad Meyer (17:15):
Now. So, so when, let me ask you this. So in, in the, in the bill in 4 83 house Bill 4 83, there’s also a provision about payouts. And I’m curious, when, when you have done contracts for providers and you’ve reviewed them, uh, how often do you see these buyout provisions in, in the non-competes?

Rory Bellina (17:33):
I see the, almost all of them will have buyout language. Now, a lot of the time, the buyout language for the non-compete, it’s either very vague or it’s very high or both. So the buyout provision can be, it is two years of your salary and all attorneys’ fees, all court costs, if we have to enforce it, there’s always language in there saying that they’re allowed to get a temporary restraining order and the injunction without having to post a bond. Right. So it could become very onerous for a doctor that’s trying to leave and they see this language that if I even attempt to leave, my employer’s gonna get a restraining order against me. They don’t have to post a bond. They can get an immediately, I waive any rights that I have in regards to fighting the restraining order. Oh. And my buyout is two or three times my annual salary.

(18:17):
So what I really like, what Representative Wright did in this is he said that the buyout is no more than one year’s salary, and then it goes down or diminishes pro rata over three years. So mm-hmm. , let’s say you’ve got that three year agreement, or you decide to leave in year one, they take your one year salary, but then it goes down by thirds and after three years, your buyouts are reduced to zero. Now the only question I would have on this is defining salary because I, the employer’s goal is to get that salary number as high as possible. They’re gonna include, they’re probably gonna wanna include your base salary, your benefits, bonus benefits, how much it costs for them to pay for your parking spot and your lunch pass and your gym membership. They’re gonna want all that in what’s defined as a, a salary because they want your buyout to be as high as possible.

(19:05):
So I could see this becoming, if and when this bill goes through, Right. This, this language on salary becoming a point of contention. Another thing that I really like you put in here, going down the bill is section C, which is something that you and I in all of ours, we always argue and advocate for this, is that if you’re terminated without, cause if your employer doesn’t like the tie, you wear that day and they terminate you, the non compete goes away. And that’s something that you and I have always want, or, you know, advocated for putting in our provider agreements or our employer agreement employment agreements for our physicians. Mm-hmm. that exact language. And that’s very important. Um,

Conrad Meyer (19:43):
But not only that though is, is, is without cause that not only does the noncompete not apply, but all of the things you mentioned earlier, some of the moving expenses, some of the expenses that were incurred by the hospital or the employer, for example, all those get wiped away. Absolutely. Because you, why should you be burdened with the expense of all of the, the gus, if you will Correct. Of getting, getting the, the provider into the uh, uh, hospital or the group practice, and then suddenly they terminate you and now all of a sudden you’re asked to recoup, uh, or to, uh, repay all of this. Uh, so I agree. If it’s a non, if it’s terminated without, uh, without cause by the employer, then everything should be

Rory Bellina (20:21):
Wiped away. I, I agree. And I, I love that. That’s in here. The, you know, going down the bill, I also am a fan of, you know, we talk about the restricted travel geographic region for no greater than two years.

Conrad Meyer (20:34):
So you’re talking about section D one section on the, on their geographic.

Rory Bellina (20:37):
And I know you had some comments on, you know, kind of defining what is their primary office and, and what issues have you seen with defining their primary office? Because if we’re, we’re,

Conrad Meyer (20:47):
That’s, that’s a tough

Rory Bellina (20:48):
One. Now, putting on our employer slash hospital hat, you’re gonna wanna say, well, they don’t have a primary office. They travel around, they do rounds at this hospital, they do, you know, they do visits at this outpatient center. They’re gonna want that primary office to be multiple offices to make the biggest non-compete area.

Conrad Meyer (21:07):
Well, I think, and that’s, that, that’s true. And a lot of times, especially in large system employers, right, they always have that provision in there that you will, uh, you’ll be, uh, and I, and I advocate for this, you primarily will be located at this facility, for example, however, you know, come A, but they always say, We can move you around to wherever we might need you. But usually what we try to do is, is put some sort of a radius limitation, like within 25 miles, within 20 miles so that your, your provider’s not driving all the way across the state. Right. So the, the only way I could think of would be their primary location and, and, and the parishes that surround that radius, I guess, you know. But again, though the bill is, is pretty specific, it’s like two contiguous parishes. Right. So, so even if the mile radius falls in a third parish, it wouldn’t qualify.

Rory Bellina (21:55):
Right. And, and the, the, the last part before, you know, we’re gonna wrap this up and talk about the status of the bill and where it is as of today is section E kind of the, a little carve out. What do you think about this, this carve out for rural

Conrad Meyer (22:07):
Hospitals? I think it, I think it’s interesting because it seems to me that what they’ve done is, is they’ve basically given rural hospitals a pass because it’s so difficult for them to, to, to retain specialists that there’s no way, uh, you know, once they have ’em in the rural area, uh, you’re gonna wanna keep ’em because, you know, as you know, access to care is a very, is I think what’s driving this. Yes. So especially rural access to care. So if you’re a rural hospital and you have a specialist in your facility, then I can see why they did a carve out for that. I mean, to me it’s, it’s a, it’s a, no, it’s a, it’s a, it’s a no-brainer from that standpoint. Um, I think the rural hospital system would love this, uh, but I can understand why they did it. Yeah.

Rory Bellina (22:47):
So I, you know, briefly let, let’s wrap this up and talk about, you know, where this bill started, where it is now, where we hope it goes. Obviously it be passed and, and signed by the governor. And, um, and, and then closing thoughts. So, you know, as of now, the bill is it, it made it through the house. Made it through the house on a vote of 56 to 39. It’s now in the Senate committee on Commerce, Consumer Protection International Affairs. So that committee is reviewing it. I believe they’re running out of time to review it, but, uh, hopefully they get it and they get it back to the full Senate for a vote. And then hopefully it passes the full Senate and then goes to the governor for his, for his signature.

Conrad Meyer (23:24):
So, wait, lemme play devil’s advocate. Say, it doesn’t say it’s stuck a committee. Are we gonna see this next year? Are we gonna see it come back?

Rory Bellina (23:32):
I think we’re gonna see this come back and come back and come back until something is there to protect the physicians. I really do. There’s a large advocate and lobbying group for the, the big hospital systems here that don’t want this Sure. For the reasons we talked about in the beginning. But I think that you’re gonna continue to get senate in house representatives that are getting pressure and getting comments from their constituents, specifically physician constituents that want these protections in place. Because what’s happening is you’re getting a great physician that comes here, that goes to work for a big system or a practice that has a pretty onerous non-compete, and they can’t get out of it. So what are they gonna do? They go over to Houston or they go over to Biloxi or Golf Board, and we’re losing our talent pool of physician providers and we’re losing them in the rural health areas. And it’s becoming an issue where we don’t want our good providers to leave because of this legal issue that, that, you know, we advocate on behalf of our physicians, we don’t think should be there.

Conrad Meyer (24:32):
No. We reached out to, to Representative Wright for, uh, you know, to talk to us. They authored the bill Yes. Representative Wright to see if he would come on the show and, and talked to us a little bit about the basis for his bill and, and, and an maybe answer a few questions about it. So, uh, if we have a chance to hear from him, uh, that would be great. And if not, you know, we’ll, we’ll reach out to him maybe subsequently to see if he’ll, uh, come on and talk to us about the bill. But I think I agree with you. If it, if it doesn’t happen now, it’s gonna, it’s not na it’s not a matter of if, it’s a matter of when. Right. Correct.

Rory Bellina (25:03):
I mean, if you look at Louisiana provides statute 23,921, there’s protections in there for other type of employees with different

Conrad Meyer (25:13):
Relationships. Yeah. It’s not, it’s not related just to physicians. I mean, that’s just the simple non-compete law for employers.

Rory Bellina (25:19):
Yeah, exactly. I mean, there’s provisions in there that prevent, um, car salesmen that are not allowed to have non-compete. So if, if we’re gonna start protecting different industries, we shouldn’t be not protecting our, our healthcare providers, especially, you know, during this time of our life.

Conrad Meyer (25:34):
That’s excellent. That’s excellent. Well, again, uh, everyone thank you very much Rory. Good commentary. We appreciate it. Thank you. And, uh, and that will wrap up another episode of Health Law Talk. That’s Chehardy Sherman Williams.

Rory Bellina (25:49):
Thanks for listening to this episode of Health Law Talk, presented by Chehardy Sherman Williams. For more information or to contact us, please visit our website, LinkedIn in the description below. Also, please be sure to subscribe to our podcast and follow us on Facebook, Twitter, LinkedIn, and YouTube.