What will be the consequences if the ban on non-compete agreements sticks?  Here’s my assessment. 

Initially, the ban on non-competes will obviously increase competition for provider positions.  Fundamentally, prices tend to decrease when competition increases in a particular market. An increase in competition in most markets for products or services generally means there are new entrants into the market.  But that’s not necessarily the case with physician services.  We have a shortage of physicians, and according to a study conducted by the Association of American Medical Colleges (AAMC), the United States will continue to face a shortage of up to 86,000 physicians by 2036. As if the lack of supply of physicians wasn’t already concerning enough, the AAMC study also indicates that currently, over 20% of active physicians in the country are aged 65 years or older and are thus nearing retirement. Plus, now they will be free to jump around to different organizations as they wish.  A lack of competition amongst a shortage of physicians will undoubtedly put upward pressure on physician compensations.

Understanding that a healthcare organization looking to recruit a physician from a neighboring hospital will be constrained by the limits of FMV.  However, due to the shortage of physicians, the laws of supply and demand will tend to push market compensation up.  And by and large, FMV is primarily supported by a cohort group. 

Secondly, hospitals and health systems must find ways to retain their quality staff.  Staff retention, initially, is likely to come in the form of increased compensation through incentives and other forms of bonuses.  However, it’s not just about financial incentives. Physicians prefer to practice in facilities with the latest state-of-the-art equipment, machines, and resources.  This means healthcare organizations will need to invest more in their facilities and resources to retain and attract quality providers, a strategic move that could help mitigate the potential effects of the ban on non-competes.

In summary, I see upward pressure on compensation and increased spending on healthcare resources, both of which result in rising healthcare costs.