For spine and orthopedic surgeons, the full consequences of a noncompete agreement can extend well beyond earned salary. Restrictive covenants, compensation formulas and partnership terms can influence where physicians practice, how they are paid and how much control they retain over their businesses.
Recent Becker’s reporting highlights five contractual issues surgeons and practice leaders say deserve closer attention.
1. Geographic noncompetes: R. Michael Meneghini, MD, founder and CEO of Noblesville-based Indiana Orthopedic Institute, spent years commuting three hours daily to work outside the geographic restrictions of a noncompete agreement.
Dr. Meneghini told Becker’s that an agreement tied to a private practice position restricted him from practicing within 100 miles for two years after leaving. A subsequent agreement with Indianapolis-based Indiana University Health imposed a 50-mile restriction for two years.
He argued that such agreements can limit physician mobility and disrupt established patient relationships. “It interferes with the doctor-patient relationship,” he said.
2. Restrictive covenants tied to ASC transactions: Noncompetes can also become an issue when surgeons sell ownership interests in surgery centers.
Dr. Meneghini warned that restrictive covenants associated with ASC equity transactions may be structured differently from traditional employment noncompetes, potentially limiting physicians’ ability to practice or compete after a sale. He said some agreements tied to corporate transactions can last five to seven years, depending on their terms.
“Most physicians don’t realize that,” he told Becker’s.
3. Compensation formulas tied to factors outside surgeons’ control: Thomas Fondren, CEO of Tulsa-based Advanced Orthopedics of Oklahoma, said surgeons are increasingly scrutinizing compensation and governance provisions when considering partnerships with health systems and management services organizations.
Mr. Fondren told Becker’s that production-based compensation arrangements can become problematic when physicians lose control over clinic operations and expenses.
He said collections can rise while take-home pay falls if surgeons cannot influence overhead and other business decisions. Mr. Fondren also warned that changes to compensation metrics without sufficient transparency can undermine trust between physicians and their partners.
4. Employment agreements surgeons fail to negotiate
Paul Slozar, MD, an orthopedic spine surgeon and co-founder of Tulsa, Okla.-based Physicians Capital Fund, warned against failing to negotiate an initial employment contract.
“One mistake is being shy about negotiating your first contract,” he said during Becker’s 23rd Annual Spine, Orthopedic and Pain Management-Driven ASC + The Future of Spine Conference in Chicago.
Dr. Slozar argued that newly trained surgeons may underestimate their negotiating leverage because they are focused on securing their first attending position. He also encouraged physicians to look beyond their initial paycheck when evaluating the financial implications of an employment opportunity.
5. Payer contracts that no longer cover the cost of practice: Contract concerns extend beyond employment and ownership agreements.
Adam Bruggeman, MD, CEO and spine surgeon at Texas Spine Care Center in San Antonio, said his practice is reevaluating payer contracts as reimbursement pressures challenge its financial sustainability.
“The old way was to take every contract, see every patient, fight denials after the fact, and hope volume covered overhead,” he told Becker’s. “Unfortunately, that math doesn’t work anymore.”
Dr. Bruggeman said the practice is reviewing contracts and exploring direct relationships with employers as it reconsiders its reimbursement strategy.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
