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When a Doctor Disappears-Covenants not To Compete

Contracts with restrictive covenants, or covenants not to compete are common in health care. These clauses aim to stop physicians and other health care professionals from taking patients with them if they move to a competing practice nearby or start their own practice. But what may be good for business might be bad for patient care.


Continuity of care is important, some doctors say, especially for patients with continuing medical issues. Interrupting patient care with a provider can be harmful to patient care. Other doctors say that noncompetes are good for patients because they can help promote stability within medical practices, and insure continuity of care.


Courts will weigh these two competing views when deciding whether to enforce a restrictive covenant. However, the guiding principle is patient care and patient choice. The American Medical Association does not oppose restrictive covenants, but its policy acknowledges that they can limit patients choices.


One Illinois appellate court has held that a hospital was not considered a "medical practice" as the term was used in a covenant not to compete, allowing a former physician to retain staff privileges at a hospital within a restrictive covenant's geographic scope (Joliet Med. Grp., Inc. v. Ensminger, 787 N.E.2d 879, 882 (Ill. App. Ct. 2003)). Whereas "practicing medicine" is engaging in the provision of medical services, a "medical practice" is a physician's business (Joliet, 787 N.E.2d at 881).

In Joliet Medical Group v. Ensminger, the non-compete prohibited the physician from establishing a medical practice within the geographic scope of the restrictive covenant but did not restrict him from practicing medicine within that same region. While hospitals are exempt from the prohibition against corporations practicing medicine, they do not constitute a medical practice under Illinois law. (787 N.E.2d at 881.)


Restrictive Covenants are much more complicated when they are applied to hea