AHA Comments on FTC Proposed Non-Compete Clause Rule

February 22, 2023

The Honorable Lina M. Khan
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, D.C. 20580

Re: Notice of Proposed Rulemaking, Federal Trade Commission; Non-Compete Clause Rule; 88 Fed. Reg. 3482 (RIN: 3084-AB74) (January 19, 2023)

Dear Chair Khan:

On behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, our clinical partners – including more than 270,000 affiliated physicians, 2 million nurses and other caregivers – and the 43,000 health care leaders who belong to our professional membership groups, the American Hospital Association (AHA) opposes the Federal Trade Commission’s (FTC) proposed Non-Compete Clause Rule in its current form.

The AHA respects the FTC’s efforts to address issues of genuine unequal bargaining power between certain employers and certain types of workers. Hospitals and health systems employ a wide variety of personnel, from food service employees in their cafeterias, to nurses, translators and social workers in their patient rooms, to surgeons in their operating rooms. Some hospital employees are highly-trained; some are lower-skilled. Some are highly-compensated; some are lower-wage. But many of these hospital employees, especially physicians and senior executives, do not present the same considerations with respect to non-compete agreements as other types of employees. The proposed regulation errs by seeking to create a one-size-fits-all rule for all employees across all industries, especially because Congress has not granted the FTC the authority to act in such a sweeping manner.

Even if the FTC had the legal authority to issue this proposed rule, now is not the time to upend the health care labor markets with a rule like this. The COVID-19 pandemic exacerbated existing shortages of skilled health care workers, and these shortages will persist well beyond the pandemic. Data shows, for example, that nearly one-quarter of health care workers say they are likely to leave the field soon.1 Similarly, the United States will face a physician shortage of as many as 124,000 by 2034.2 A sister federal agency – indeed, the federal agency with far more expertise with the health care workforce – has reached the same conclusion. Specifically, the Department of Health and Human Services (HHS) has observed that  “[s]hortages and maldistribution of health care workers … were a major concern even before the pandemic.”3 The COVID-19 pandemic “put extreme stress on the health care workforce in the United States,” causing many hospitals to report “critical staffing shortages.”4 And looking to the future, “many of the impacts the pandemic has had on the workforce are cumulative and may not resolve quickly,” and “the longer-term workforce challenges remain.”5

Despite these long-term workforce challenges, the proposed rule would profoundly transform the health care labor market – particularly for physicians and senior hospital executives. It would instantly invalidate millions of dollars of existing contracts, while exacerbating problems of health care labor scarcity, especially for medically underserved areas like rural communities. Perhaps most troubling, the FTC would take this monumental step on the apparent basis of economic research that does not actually support the proposed rule. It also would do so without a fulsome analysis of the benefits that these agreements bring to hospitals and health systems, and without any analysis of the consequences of applying the rule to only for-profit hospitals, as the law necessitates, when nearly 80% of for-profit hospitals operate in the same markets as non-profit hospitals with many of the same demands for highly-skilled labor and senior executives.

As noted, the proposed rule should be withdrawn because Congress has not given the FTC the power to promulgate it. But if the FTC chooses to proceed with a final rule, it cannot invalidate or ban non-compete agreements without far greater particularized study of the health care labor markets. At the very least, any rule that the FTC finalizes must specifically exempt physicians and senior hospital executives or, more generally, highly-skilled, highly-compensated employees using, for instance, categories that are already well-established in federal law under the exemptions from minimum wage and overtime pay provided by Section 13(a)(1) of the Fair Labor Standards Act.

View the full letter attachment below.