Opinion ID: 1058272
Heading Depth: 2
Heading Rank: 2

Heading: Public Policy Considerations in Restrictions on the Practice of Medicine

Text: Much like restrictive covenants in the practice of law, restrictive covenants in the medical profession raise concerns regarding the public good. Having a greater number of physicians practicing in a community benefits the public by providing greater access to health care. Increased competition for patients tends to improve quality of care and keep costs affordable. Furthermore, a person has a right to choose his or her physician and to continue an on-going professional relationship with that physician. See Med. Educ. Assistance Corp., 19 S.W.3d at 816; see also AMA Code of Medical Ethics § E-9.06 (1977). Enforcing covenants not to compete against physicians could impair or even deny this right altogether. Since 1980 the American Medical Association (AMA) [3] has taken the position that physicians' non-compete agreements impact negatively on health care and are not in the public interest. See AMA Code of Medical Ethics § E-9.02 (1998). Although stopping short of completely prohibiting covenants not to compete, the AMA strongly discourages them. Id. The AMA has maintained the view for the past twenty-five years that non-compete agreements restrict competition, disrupt continuity of care, and potentially deprive the public of medical services. Id. The AMA has also found that a person's right to choose a physician and free competition among physicians are prerequisites of ethical practice. Id. at § E-9.06. It is important to note that prior to 1980 the AMA took a more lenient stance towards physicians' non-compete agreements. The official AMA position from 1960 until 1980 stated there was no ethical proscription against a reasonable agreement not to practice within a certain area for a certain time, if it is knowingly made and understood. AMA, Principles of Medical Ethics, Opinions and Reports of the Judicial Council 25 (1960). Despite the AMA's stated position that non-compete agreements among physicians are not in the public interest, we find it curious that a majority of states continue to apply a reasonableness standard in evaluating non-compete agreements between physicians, similar to the evaluation of covenants in commercial contexts. See, e.g., Canfield v. Spear, 44 Ill.2d 49, 254 N.E.2d 433 (1969) (enforcing a covenant which prohibited a dermatologist from practicing within twenty-five miles of former employer); Duneland Emergency Physician's Med. Group, P.C. v. Brunk, 723 N.E.2d 963 (Ind.Ct.App.2000) (holding a covenant unenforceable upon concluding that employer had failed to show a protectable business interest); Weber v. Tillman 259 Kan. 457, 913 P.2d 84 (1996) (enforcing a covenant not to compete upon concluding its restrictions were reasonable); Cmty. Hosp. Group, Inc. v. More, 183 N.J. 36, 869 A.2d 884 (2005) (enforcing with modifications a non-compete agreement upon determining that employer had a protectable business interest and restrictions were reasonable); Karlin v. Weinberg, 77 N.J. 480, 390 A.2d 1161 (1978) (enforcing a covenant not to compete against a physician upon finding that the employer had a legitimate business interest in protecting patient relationships). We note that the largest number of cases dealing with physician's covenants not to compete were decided prior to the AMA's adoption of its current ethical guidelines in 1980. See, e.g., Odess v. Taylor, 282 Ala. 389, 211 So.2d 805 (1968); Canfield v. Spear, 44 Ill.2d 49, 254 N.E.2d 433 (1969); Cogley Clinic v. Martini, 253 Iowa 541, 112 N.W.2d 678 (Iowa 1962); Lareau v. O'Nan, 355 S.W.2d 679 (Ky.1962); Willman v. Beheler, 499 S.W.2d 770 (Mo.1973); Ellis v. McDaniel, 95 Nev. 455, 596 P.2d 222 (1979); Karlin v. Weinberg, 77 N.J. 408, 390 A.2d 1161 (1978); Lovelace Clinic v. Murphy, 76 N.M. 645, 417 P.2d 450 (1966); Gelder Med. Group v. Webber, 41 N.Y.2d 680, 394 N.Y.S.2d 867, 363 N.E.2d 573 (1977); New Castle Orthopedic Assoc. v. Burns, 481 Pa. 460, 392 A.2d 1383, (1978); Oudenhoven v. Nishioka, 52 Wis.2d 503, 190 N.W.2d 920 (1971). We further find it most surprising that several of the jurisdictions to have addressed this issue since 1980 have placed little emphasis on the general ethical concerns cited by the AMA in discouraging physicians' non-compete agreements. See Raymundo v. Hammond Clinic Ass'n, 449 N.E.2d 276, 280-81 (Ind.1983) (dismissing as merely self-serving the argument that ethical considerations should prohibit enforcement of such covenants and offering no discussion of the AMA's stance on the issue.); see also Rash v. Toccoa Clinic Med. Assocs., 253 Ga. 322, 320 S.E.2d 170 (1984); Duneland Emergency Physician's Med. Group, P.C. v. Brunk, 723 N.E.2d 963 (Ind.Ct.App.2000); Weber v. Tillman 259 Kan. 457, 913 P.2d 84 (1996); Gant v. Hygeia Facilities Found. Inc., 181 W.Va. 805, 384 S.E.2d 842 (1989). Nevertheless, several states, emphasizing public policy concerns, have subjected these covenants to closer scrutiny than non-compete agreements in other contexts. See Valley Med. Specialists v. Farber, 194 Ariz. 363, 982 P.2d 1277 (1999) (stating that the physician/patient relationship is special and entitled to unique protection); Iredell Digestive Disease Clinic v. Petrozza, 92 N.C.App. 21, 373 S.E.2d 449, 455 (1988) (stating that with respect to the doctor/patient relationship, the court was extremely hesitant to deny the patient-consumer any choice whatsoever); Ohio Urology, Inc. v. Poll, 72 Ohio App.3d 446, 594 N.E.2d 1027 (1991) (stating that the physician/patient relationship is entitled to unique protection, therefore physician's non-compete agreements will be strictly construed for reasonableness); see also Ellis v. McDaniel, 95 Nev. 455, 596 P.2d 222 (1979); Statesville Med. Group, P.A. v. Dickey, 106 N.C.App. 669, 418 S.E.2d 256 (1992). Also, three states have in recent years enacted statutes totally prohibiting non-compete clauses in physicians contracts. See Colo.Rev.Stat. Ann. § 8-2-113(3) (2003); Del.Code Ann. tit. 6, § 2707 (1993); Mass. Gen. Laws Ann. ch. 112, § 12X (1991). Additionally, antitrust statutes in several states, although not enacted specifically for this purpose, have been interpreted as prohibiting non-compete clauses between physicians. See Odess v. Taylor, 282 Ala. 389, 211 So.2d 805 (1968); Bosley Med. Group v. Abramson, 161 Cal.App.3d 284, 207 Cal.Rptr. 477 (1984); Bergh v. Stephens, 175 So.2d 787 (Fla.Dist.Ct.App.1965); Gauthier v. Magee, 141 So.2d 837 (La.Ct.App.1962); W. Montana Clinic v. Jacobson, 169 Mont. 44, 544 P.2d 807 (1976); Spectrum Emergency Care, Inc. v. St. Joseph's Hosp. & Health Ctr., 479 N.W.2d 848 (N.D.1992). [4]