What You Need to Know About the Fair Contracting for Health Care Practitioners Act
On July 17, 2024, Pennsylvania Governor Josh Shapiro signed the Fair Contracting for Health Care Practitioners Act (“Act”) into law, marking a significant shift in employment agreements for healthcare practitioners across the state. This Act, which will take effect on January 1, 2025, prohibits the enforcement of certain noncompete covenants and agreements that restrict patient solicitation for healthcare practitioners and their employers. The Act introduces limited, yet notable, exceptions and is expected to have broad implications for both employers and practitioners.
Below, we break down the key takeaways of this new law and what it means for employers in the healthcare space.
Key Highlights of the Act
1. Noncompete Covenants Are Largely Prohibited
The Act defines noncompete covenants as agreements that impede a healthcare practitioner’s ability to continue treating or accepting for treatment any individuals to whom they have previously rendered professional services for compensation. This broad definition also appears to include agreements restricting patient solicitation.
While the Act places significant limits on noncompete clauses, it does allow some exceptions, which are detailed below.
2. Who Is Covered?
The Act applies to the following healthcare practitioners:
- Medical Doctors (MDs)
- Doctors of Osteopathy (DOs)
- Certified Registered Nurse Anesthetists (CRNAs)
- Certified Registered Nurse Practitioners (CRNPs)
- Physician Assistants (PAs)
Notably, registered nurses (RNs) and other medical professionals not listed above are excluded from the Act’s coverage.
3. Limited Exceptions to the Ban
Employers may still enforce noncompete agreements in the following scenarios:
- Short-Term Covenants: Noncompete agreements with a duration of one year or less are enforceable, provided the healthcare practitioner was not dismissed by the employer.
- Business Transactions: Noncompete covenants entered into as part of a business acquisition or transaction involving a healthcare practitioner with an ownership interest in a business entity remain enforceable.
- Reasonable Expense Recovery: Employers may include contract provisions that allow them to recover reasonable expenses from a healthcare practitioner, as long as those provisions meet specific requirements under the Act.
These exceptions provide limited flexibility for employers to protect their business interests under certain circumstances.
4. Patient-Notification Requirements
When a healthcare practitioner leaves an employer, the Act requires the employer to notify the healthcare practitioner’s patients under specific conditions:
- The practitioner must have had an ongoing outpatient relationship with the patient for two or more years; and
- The practitioner must have seen the patient within the past year.
Employers must provide this notice within 90 days of the practitioner’s departure. The notice must include:
- A statement that the healthcare practitioner has left the practice.
- Instructions for patients on how to transfer their medical records to another practitioner.
- A statement informing patients of the option to be assigned to a new practitioner within the employer’s organization, if they choose to do so.
This provision ensures continuity of care for patients while promoting transparency in practitioner changes.
5. Effective Date
The Act takes effect on January 1, 2025, giving employers time to review and update their employment agreements to align with the new requirements.
What Does This Mean for Employers?
The Act introduces significant changes for healthcare employers in Pennsylvania. Unlike the FTC Noncompete Rule, which remains uncertain due to ongoing litigation, this Act is set to take effect as scheduled.
Key Steps for Employers:
- Review Existing Contracts: Employers should immediately review current noncompete agreements or provisions as well as nonsolicitation agreements and provisions, and any related provisions for healthcare practitioners to determine compliance with the new law.
- Revise Employment Agreements: Moving forward, employment agreements must comply with the Act’s restrictions, particularly regarding noncompete durations and notification requirements.
- Evaluate Business Transactions: Employers engaged in business acquisitions or transactions involving healthcare practitioners with ownership interests should ensure compliance with the Act’s exceptions.
- Prepare for Patient Notification: Develop internal processes to meet the patient-notification requirements when a healthcare practitioner leaves the organization.
Looking Ahead
As the January 1, 2025 effective date approaches, healthcare employers in Pennsylvania must take proactive steps to ensure compliance with the Act. This law represents a significant shift in balancing employer protections with healthcare practitioners’ freedom to treat patients and maintain professional relationships.
We will continue to monitor developments related to the Act and provide updates on its business and legal implications. For tailored guidance on reviewing and updating your employment agreements, reach out to Lengea. Our team specializes in healthcare compliance and employment law, and we will make sure you are in compliance for 2025.
Stay informed, stay compliant, and protect your practice.