Bills would limit use of restrictive covenants in physician contracts

State Rep. Edith H. Ajello speaks on the House floor. / COURTESY STATE HOUSE OF REPRESENTATIVES
State Rep. Edith H. Ajello speaks on the House floor. / COURTESY STATE HOUSE OF REPRESENTATIVES

PROVIDENCE – State Rep. Edith H. Ajello, D-Providence, and state Sen. Gayle L. Goldin, D-Providence, believe physicians should have the freedom to move freely from one employer to another and maintain their professional relationships with their patients, regardless of their place of employment. To that end, they have introduced legislation in the House and Senate, 2016-H 7586 and 2016-S 2578, respectively, to limit the use of restrictive covenants in physician employment contracts.

Physicians subject to restrictive covenants under an employment contract are often limited in their ability to practice medicine if they want to leave that practice and join another within the same geographic market.

Although businesses in many industry sectors may require their employees to sign restrictive covenants, such as non-competes and non-solicitations, Ajello and Goldin’s legislation only impacts the medical community.

If enacted, the legislation will nullify and make void any restrictions on a departing physician’s right to:

- Advertisement -
  • Practice elsewhere in Rhode Island
  • Treat, advise, consult with or establish a physician/patient relationship with any current patient of the employer
  • Solicit or seek to establish a physician/patient relationship with any current patient of the employer, but only after a period of five years from the time the physician leaves the practice

Steven DeToy, the Rhode Island Medical Society’s director of government and public affairs, said that advocates propose changing five years to three years.

“Massachusetts doesn’t allow [these restrictive covenants],” Ajello said in a recent phone conversation. “We can’t keep good doctors in Rhode Island if they want to change their place of practice. We are trying to develop a ‘meds and eds’ economy. … If a doctor is comparing offers and contracts [in] Massachusetts and Rhode Island and they see this difference … they’re not going to like it.”

After learning about this from a constituent who is a physician, Goldin recognized that, with some clinicians practicing both in Massachusetts and Rhode Island, it is an issue of regional competitiveness, she said in a phone conversation. The bill is a “benefit for some physicians and a real benefit to their patients. … Physicians have a very unique relationship [with their patients]. … Their trusted relationship is about someone’s health,” Goldin said. “It makes sense to maintain that relationship, regardless of where the physician works.”

The medical community’s response to the legislation

No one opposed the legislation at recent hearings before the House Corporations and the Senate Health and Human Services committees.

Lifespan officials are evaluating the bill and seeking clarifications from the sponsors, and Lifespan is not currently prepared to comment on the bill, said David Levesque, a Lifespan spokesman.

“We’re still in the process of reviewing the legislation but are always willing to work with the sponsors to determine where some common ground might exist,” wrote Jeremy Milner, Care New England Health System’s manager, corporate communications, in an email.

The Hospital Association of Rhode Island has yet to take a position on the legislation this year, said Amanda Barney, HARI’s vice president, communications and member services. HARI’s board, which meets Monday, will discuss and evaluate the legislation then.

Last year, HARI opposed similar legislation: In his March 3, 2015, letter to House Corporations Committee Chairman Brian Patrick Kennedy, D-Hopkinton, HARI President Michael Souza wrote, in part, “Passage of this bill would be detrimental to the hospitals and the health care delivery system of Rhode Island … to successfully recruit and retain these talented providers, it is necessary for our members to make significant additional investments in support staff, physical facilities, high-cost medical technology, information technology and teaching/research space, new programs and marketing among other things.”

Souza’s letter continued, “Restrictive covenants such as non-compete clauses that restrict physicians from quickly moving to another employer in the market region are part of the necessary and standard protections hospitals rely on to preserve their investments and maintain continuity of quality care. Without these protections, such investments, particularly in the highly competitive New England health care marketplace, will be adversely impacted.”

Recruiting doctors “is not an easy task in Rhode Island,” said DeToy, who acknowledged that a restrictive covenant is one of many factors a physician considers in deciding where to practice. While Massachusetts’ ban of these covenants hasn’t had any negative effects, the covenants are harmful to Rhode Island, he said. “I don’t know where this falls [in the decision-making hierarchy]. … Money plays a huge issue, especially with education debts … but if you’re subject to a restrictive covenant in Rhode Island, it might be a deal breaker.”

DeToy asked, rhetorically: When doctors here earn salaries 15 to 20 percent less than their counterparts in Massachusetts or Connecticut, why would they come here, even though Rhode Island is a beautiful state? Commercial insurance companies’ reimbursement rates differ from locale to locale, which causes salary disparities, he said.

The validity of these covenants has never been litigated here, though they are generally not enforceable, DeToy asserted. When a doctor subject to a covenant wants to leave the practice, the parties generally resolve the issue amicably – sometimes the practice bends, sometimes the physician bends, he said.

How widespread is the use of restrictive covenants in Rhode Island’s medical community?

While neither RIMS nor HARI would comment on which hospitals and practices impose the covenants on their physician employees, Providence Business News found a few businesses willing to talk on the record. The Care New England Health System – Care New England’s Wellness Center, The Providence Center, VNA of Care New England and Butler, Kent, Memorial and Women & Infants hospitals – routinely includes restrictive covenants in its physician agreements, Milner said. PBN’s efforts to get information from Lifespan were unsuccessful.

Coastal Medical, the state’s largest physician-owned primary care group, does not include any restrictive covenants in its physician contracts, according to Meryl Moss, Coastal Medical’s chief operating officer.

Physicians joining Anchor Medical Associates, whose 28 medical providers treats patients at facilities in Lincoln, Providence and Warwick, are bound by restrictive covenants. The practice’s outside financial supporters insist on it, as a condition of financial support, wrote Dr. Nathan B. Beraha, Anchor’s medical director.

“Medical practices have made significant investments in fixed overhead … those overhead costs don’t decline when a physician leaves the practice,” Beraha, a pediatrician in the Lincoln office, wrote in an email. “If the physician relocates out of town, at least the patient population remains – leaving a chance that a new provider could be recruited and would not have to build a practice from ‘scratch.’ If the physician relocates close to the original office, the equation changes.”

Other factors make Rhode Island non-competitive

In addition to Rhode Island physicians earning less, the state and the nation at large face a shortage of primary care physicians.

As baby boomers age and increase the burden on the health care system, the gulf will widen. “Projecting the Supply and Demand for Primary Care Practitioners Through 2020,” a 2013 study by the Health Resources and Services Administration, predicts a national shortage of 20,400 primary care physicians by 2020, based on current trends.

Specialists earn 45 percent more than do primary care doctors and work fewer hours, according to a 2015 survey released by Medscape, a Web-based resource for physicians and other health professionals. While not unique to Rhode Island, this problem may hit the state harder, given the lower reimbursement rates driving salaries down here.

Medical students with significant debt are likely to select a more lucrative specialty, said DeToy, who lauded the R.I. Office of the Health Insurance Commissioner for forcing insurance companies to put more resources into primary care. There’s still a large gap in income, he said, but there’s been some progress.

Given the challenges of recruiting physicians to Rhode Island, Beraha added, “Our preference is not to recruit a new physician, allow them to build up a practice and then see our ‘investment’ move to another location close to our office.”

Throughout March, Senate and House committees are expected to hear testimony on legislation and will begin voting on these and other bills in early April, said DeToy, whose organization supports the legislation.

Co-sponsors of the House and Senate bills, respectively, are Rep. Arthur Corvese, D-North Providence, Rep. Katherine Kazarian, D-East Providence, Rep. Eileen Naughton, D-Warwick, Rep. Mary Duffy Messier, D-Pawtucket, Sen. Adam Satchell, D-West Warwick, and Sen. Joshua Miller, D-Cranston.

“This is important as an economic development issue and important for us as patients,” said Ajello, in the release, while acknowledging that the chief competitive issue – salary disparities – is not a legislative matter.

No posts to display