Senate passes bill limiting doctor non-compete agreements

Sen. Len Fasano (file photo)

CTMirror.org file photo

Sen. Len Fasano (file photo)

The Senate passed a proposal Wednesday to limit non-compete clauses in physician contracts and broaden the types of organizations that can employ doctors, a measure intended to address concerns among Senate leaders about doctors’ ability to remain in independent practice or return to it after joining a hospital system.

“This is an effort to address the ever-changing medical field that we’re in now,” said Senate Minority Leader Len Fasano, R-North Haven, who developed the proposal with Senate President Pro Tem Martin M. Looney, D-New Haven.

The two leaders teamed up last year on another health care measure, resulting in a major new law that included requirements aimed at increasing transparency in patients’ health care costs, plans for a statewide system to share electronic medical records, and new restrictions on certain changes in hospital ownership. The bill that passed Wednesday is something of a sequel, focused on physician practice ownership and employment.

It has drawn opposition from hospitals, which characterized the proposal as an encroachment on business practices. Some have emphasized the costs they face when hiring physicians, and the potential losses they would face if doctors leave and take patients with them.

The measure, which now goes to the House for consideration, passed the Senate 35 to 1. Republican Sen. Henri Martin of Bristol cast the only no vote.

Many doctors in recent years have given up owning their own practices and entered arrangements with hospital systems or large physician groups, while many new physicians are opting to work for larger groups or systems, rather than opening or purchasing the small, independent practices that have long dominated Connecticut’s health care landscape.

Sen. Martin Looney (file photo)

Keith M. Phaneuf / CTMirror.org

Sen. Martin Looney (file photo)

Looney and Fasano have expressed concern about consolidation in health care, particularly the growth of large health systems that include multiple hospitals and physician practices, and about the use of non-compete clauses to limit doctors’ ability to practice independently. Fasano cited concerns that the agreements are being used by large health systems to limit competition, which could drive up costs.

The bill would restrict non-compete agreements entered into after July 1; they would be allowed to restrict a doctor’s competitive activities for no more than one year and within no more than 20 miles of his or her primary practice site. They could not be enforced if the doctor’s contract expires and is not renewed, or if his or her employment is terminated by the employer. And while they could apply if a doctor left to work for another hospital, health system or medical school, they would not apply if a doctor left for private practice.

Fasano noted that some states have prohibited all non-compete agreements in medical practice, and said the bill aims “to try to find a comfort zone somewhere in between all that.”

Looney said the restriction is necessary, citing a proposed contract for a physician group that would have included a non-compete agreement that would bar doctors from practicing in Fairfield, New Haven, Middlesex and New London counties.

“That’s the kind of overreach that we believe is really impermissible as a restraint on practice, a restraint on trade,” Looney said.

Hospital officials have taken issue with the proposal. In written testimony on an earlier version of the bill, Dr. Cynthia Heller, director of primary care for the Hartford HealthCare Medical Group, which is part of the parent company of five hospitals, said bringing on physicians required “a very large financial investment,” including salary, malpractice insurance and overhead for facilities.

“We’re talking about several hundred thousand dollars before any real income is produced,” she wrote, adding that it can take three to four years for a doctor to build a patient base big enough to generate revenue. And if a doctor leaves, she wrote, the medical group loses both revenue and its investment.

“When a physician decides to leave a practice and open up their own practice in the same town, which occurred in Enfield and New Britain last year, our two HHCMG offices almost had to close,” Heller wrote.

The bill also expands the types of entities that could operate “medical foundations,” the legal structure that currently allows hospitals to employ doctors while avoiding anti-kickback requirements. It would expand the ability to set up medical foundations to independent practice associations – groups of independent providers – and other business entities that are at least 60 percent owned by an independent practice association, a physician group or a doctor, chiropractor, optometrist or podiatrist.

Fasano said that change would allow a wider range of entities beyond hospitals to employ physicians and compete in the medical field.

The bill would also allow – but not require – the state’s health care cabinet to study the licensure of urgent care and retail health clinics, and report to legislators on whether the state should establish a licensing category for those facilities.

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