Legislative subcommittee hears split testimony on physician noncompetes; rural hospitals warn of access risks

A legislative subcommittee heard more than two hours of testimony on proposed limits to physician noncompete agreements, with hospital leaders saying the restrictions could threaten rural access and a constitutional litigator warning the legislation may be vulnerable to legal challenge.

"We don't believe in a noncompete because it takes the physician out of the game," said Montgomery, testifying for Prisma Health, who described Prisma's approach to recruiting and said the system generally avoids noncompetes while treating clinicians as partners. Montgomery said Prisma's recruiting expenses—marketing, relocation and loan repayment—are similar to other systems but that Prisma prefers contractual relationships that do not bar physicians from practicing in the market.

Matthew Logan, CEO of Secretional Healthcare, described his organization’s rural footprint and warned that restrictive covenants can allow larger systems to "poach" profitable service lines—orthopedics and vascular surgery, for example—that subsidize loss-making services such as behavioral health and emergency care. Logan said his system uses a 30-mile geographic limit and two-year duration in its agreements but cautioned that removing restrictions entirely could "destabilize the whole system." He told the panel his system is the largest employer in a seven-county region with about 3,500 employees and said recruiting specialists typically takes 12 to 24 months.

Dr. Matt Johnson, identifying himself as chief operating officer for a health system who filled in for a colleague, told members that noncompetes are part of how health systems preserve the payer mix that funds care for uninsured and Medicaid patients. "Eliminating noncompetes accelerates the fragmentation of care delivery," Johnson said, arguing that losing high-margin specialists would shift a disproportionate share of low-reimbursement patients onto remaining providers and could force closure or cutbacks of mission-critical services.

Committee members questioned witnesses on specific contract language and practical effects. Witnesses described common terms as county- or mile-based geographic limits (30 miles was cited several times) and two-year contractual terms; some said short one-year post-employment prohibitions (by county) are used. Panel members also focused on payer mix and margins: witnesses estimated roughly 8–10% of patients lack ability to pay (a witness said he did not have precise data) and said many systems target a roughly 3% operating margin to fund capital and labor.

Miles Fuller, a constitutional litigator who said he defends state laws and agencies, urged caution about the bill’s legal framing. Fuller argued that courts and common-law standards already police unreasonably broad covenants and warned the legislation could run into Contracts Clause issues—particularly where automatic renewals make an initially short-term covenant effectively long-term. He suggested the committee consider limiting the bill’s reach (for example, excluding renewals) to avoid impairing existing contractual expectations.

Members debated whether to make the bill prospective only or to include contract renewals; several lawmakers suggested removing 'renewals' from the bill's language to reduce legal risk. The chair closed the hearing by asking members to consider whether the subcommittee should advance the bill and indicated the panel may reconvene to decide whether to move forward.

No formal vote was recorded during the hearing.