The Act allows the use of noncompetes in business agreements related to certain sales or mergers of a business entity and certain transactions resulting in a change of control of the business entity where the healthcare practitioner receives an ownership interest in the business entity.

On July 17, 2024, Pennsylvania Governor Josh Shapiro signed into law the Fair Contracting for Health Care Practitioners Act. The Act, which will go into effect on January 1, 2025, will limit the use of noncompete covenants for healthcare practitioners in the commonwealth and require employers to provide notice to patients of a healthcare practitioner’s departure.

According to the Pennsylvania Legislature, the Act is intended to limit what it views as the negative impacts of noncompetition provisions in the employment of covered healthcare practitioners and improve the attraction and retention of those healthcare practitioners in Pennsylvania.

How Does the Act Limit Noncompetes with Healthcare Practitioners?

Under the Act, any noncompete covenant with a healthcare practitioner signed after the effective date is void unless:

• The covenant lasts no longer than one year; and
• The healthcare practitioner was not dismissed by the employer.

What Types of Agreements Are Covered by the Act?

A “noncompete covenant” under the Act is an agreement with a covered healthcare practitioner that “has the effect of impeding the ability of the health care practitioner to continue treating patients or accepting new patients, either practicing independently or in the employment of a competing employer after the term of employment.”

Covered healthcare practitioners include:

• Medical doctors;
• Doctors of osteopathy;
• Certified registered nurse practitioners;
• Certified nurse anesthetists; and
• Physician assistants.

The Act allows the use of noncompetes in business agreements related to certain sales or mergers of a business entity and certain transactions resulting in a change of control of the business entity where the healthcare practitioner receives an ownership interest in the business entity. The statute does not precisely define how these requirements might apply in various contractual arrangements once the Act goes into effect.

The Act, however, does not affect any existing contracts.

What Notice Must Employers Provide to Patients of a Healthcare Practitioner’s Departure?

Under the Act, within 90 days of a healthcare practitioner’s departure, the employer must notify patients seen within the last year and with whom the practitioner had an “ongoing outpatient relationship” of two years or more:

• Of the practitioner’s departure;
• That the patient may be assigned a new practitioner in the employer’s practice if the patient chooses to continue receiving care from the employer; and
• How the patient may transfer health records if the patient chooses to receive care from the departing practitioner or another practice.

The notice is not required to include any details related to the departing practitioner’s future services.

Can Employers Recover Expenses Related to the Healthcare Practitioner?

Once the law takes effect, employers will be prohibited from recovering expenses related to relocation, training and establishment of a patient base if the employer terminates or dismisses the healthcare practitioner. Employers will be permitted, however, to recover such reasonable expenses from a healthcare practitioner who elects to terminate his or her employment with that employer, provided those relocation, training and patient-base establishment expenses incurred by the employer can be directly attributed to the separating healthcare practitioner.

What Should Employers of Healthcare Practitioners Do Now?

Well in advance of the scheduled January 1, 2025, effective date, employers should work with counsel to review and assess potential changes to their current healthcare practitioner agreements and forms, as well as their notices to patients of practitioner departures.

For More Information

If you have any questions about this Alert, please contact Lawrence H. Pockers, Shannon Hampton Sutherland, any of the attorneys in our Non-Compete and Trade Secrets Group, Erin M. Duffy, Sean S. Zabaneh, Samantha Dalmass, any of the attorneys in our Health Law Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.