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When Shyam Thakkar was dismissed from Allegheny Health Network in 2020, he wasn’t able to get another job in Western Pennsylvania because of the noncompete agreement he’d signed years earlier.
Thakkar, a gastroenterologist, alleges in court filings that when AHN “abruptly” decided not to renew his contract, the noncompete interfered with his inability to take another job in the area.
He says this not only harmed his ability to make a living but interrupted patient care in potentially unsafe ways, and prevented him from resuming treatment for "patients with particularly difficult medical situations."
A new Pennsylvania law aims to preserve continuity of care for patients by loosening health systems’ grip on labor markets and increasing job competition. It limits the use of noncompetes for certain health care practitioners, who were previously forced to ghost patients when they left an employer.
Under the Fair Contracting for Health Care Practitioners Act, signed by Gov. Josh Shapiro last summer, a noncompete becomes invalid if a doctor is dismissed. That protection extends to certified registered nurse anesthetists, certified registered nurse practitioners, and physician assistants.
It also puts a time limit on noncompetes, and requires employers to notify patients of a doctor’s departure within 90 days.
But the law — which isn’t retroactive and took effect Jan. 1 — is not without its critics. It leaves out many types of health care workers and doesn’t limit the geographic scope of noncompetes.
On the other hand, hospitals and health systems say these new regulations might increase costs for patients and make it even harder for rural Pennsylvanians to get medical care.
As Thakkar’s situation shows, when a clinician loses their job, a noncompete can force them out of the community where they practice. That can leave practitioners who sign these agreements less likely to rock the boat, even if they feel that decisions by higher-ups hinder patient care.
This shift in power is important as large health systems buy up smaller ones and more private equity firms enter the market.
Many doctors increasingly find that their bosses prioritize financial goals before patients, said Lynn Lucas-Fehm, a radiologist in suburban Philadelphia and president of the Pennsylvania Medical Society, a statewide professional organization for physicians and medical students.
Lucas-Fehm told How We Care that last year she left her health system after private equity took over the management of her department. She said pressure to increase her workload left her unable to give some patients the attention they needed. It made her feel like she was on an “assembly line."
"I was trained to practice evidence-based medicine. Not financial-based medicine, and not administratively based medicine," she said.
Lucas-Fehm said after “a very complicated negotiation,” she was released from her noncompete. But many people aren’t so lucky.
A major reason medical systems use noncompetes is to safeguard their customer base. If a popular doctor leaves a medical practice for a job across the street, patients might do the same, resulting in lost revenue.
Through his attorney’s office, Thakkar declined a request for an interview with How We Care. The Allegheny County Court of Common Pleas ruled in favor of AHN last summer, and he’s appealing to the Superior Court of Pennsylvania.
In his initial complaint, Thakkar said he received an offer from a nearby UPMC hospital that he couldn’t accept because of the noncompete with AHN.
Some patients might have followed Thakkar to UPMC so they could continue treatment with him. Thakkar said in court filings that multiple patients, including the chair of the AHN board, called him to request care after AHN essentially fired him.
It’s unclear why Thakkar’s contract was not renewed.
He said in court filings that in his dismissal, AHN “misled and ambushed” him, and that he wasn’t able to make treatment recommendations or coordinate safe transitions of his patients to the care of other clinicians.
AHN told How We Care that it has no comment about Thakkar’s lawsuit.
But in an email, the health system said noncompetes have to be considered within the broader context of clinician contracts with employers, “which are evaluated and agreed upon by both parties.”
AHN also said that these agreements help prevent "bidding wars" in which specialists hop between practices in search of larger salaries. These ballooning sums can increase operational costs, AHN argued.
The biggest budget item for a medical system is often labor, said Hayden Rooke-Ley, a health law and policy fellow at the Brown University School of Public Health.
However, when systems have lower expenses, Rooke-Ley said, savings are not necessarily passed on to patients. He cited a large body of research that shows hospital networks exploit their market power to increase prices.
"The literature is really overwhelming about the degree to which they abuse their market power," Rooke-Ley said.
Jolene Calla — vice president of finance and legal affairs for the Hospital and Healthsystem Association of Pennsylvania, a lobbying organization founded in 1921 by hospital administrators — also raised concerns about bidding wars. In an email, Calla argued that inflated clinician compensation increases medical bills for patients.
She said noncompetes incentivize practitioners to remain in their current roles, which creates the stability that is essential to building trust between patients and clinicians. And hospitals can provide services only if the “right workforce is available,” Calla added.
"Sometimes hospitals build entire units and practices around one provider. If they leave, many times so does that service," Calla said.
Although the fair contracting law has somewhat leveled the playing field for clinicians, some critics argue it has gaps.
It does not place geographic restrictions on noncompetes, for instance, which lets medical systems and other health care employers continue to wield significant power through these contracts, said Rachel McElroy, a Pittsburgh-based attorney who primarily practices employment law.
Some noncompetes bar clinicians from working within a certain city or county. Or they prohibit former employees from accepting a new job that’s within a specific radius of any of its hospitals or clinics. Depending on the employer, that can be a big area.
Thakkar was unable to work for a competitor within 10 miles of AHN’s 14 hospitals for one year. He was also banned from taking any job with its main rival UPMC, which has 40 hospitals and 800 doctors’ offices and outpatient sites across the state.
He now practices about 75 miles south of AHN’s flagship hospital, working as a professor at West Virginia University and director of advanced therapeutic endoscopy at WVU Medicine.
The fair contracting law has also drawn scrutiny in its one-year limit for noncompetes.
On its face, this places an additional check on how health systems use these contracts. But McElroy said the one-year rule could embolden employers to significantly broaden the footprint of future noncompetes in their favor.
Previously, a noncompete could be struck down in court if its geographic scope was too extreme. The new law is silent on the matter of geography. In defending a widened noncompete area, a health system might now successfully argue that if lawmakers were concerned about this issue, they would have addressed it in the new law.
Another criticism of the law is that it only addresses the use of noncompetes for a handful of health care professionals. Therapists and registered nurses, for instance, are not covered.
At least one lawmaker is noting all this feedback on the new statute.
State Rep. Dan Frankel (D., Allegheny) was the prime sponsor of the legislation. He initially wanted to totally prohibit noncompetes for all health care workers, but that wasn't politically possible, he told How We Care.
"It's half a loaf, maybe," he said of the version that became law, adding that the influence of the state's hospital association made negotiations very difficult.
Legislators are scheduled to review the role of noncompetes down the line. The law mandates that the Pennsylvania Health Care Cost Containment Council, an independent state body, study the effects of the legislation within the next three years.
Frankel hopes to return to the issue when that research is complete.