On Tuesday, August 20, Judge Ada Brown of the U.S. District Court for the Northern District of Texas set aside the Federal Trade Commission's Non-Compete Clause Rule in Ryan LLC v. FTC. The rule, which the FTC adopted by a 3 to 2 vote on April 23, would have banned most new noncompete agreements nationwide and made most existing ones unenforceable starting September 4. The court held that the FTC exceeded its statutory authority and that the rule was arbitrary and capricious, and its judgment applies nationwide, not only to the parties in the case. The FTC has said it is considering an appeal.
Since April, practice owners have been asking us what the rule meant for their physician contracts, and physicians have been asking what it meant for their ability to leave. We are not lawyers and this is not legal advice; what follows is what the ruling changes operationally, what it does not, and what we think a practice should review with counsel in the next month. The second half of the article is about the part we actually do: what has to happen in the revenue cycle when a physician leaves, whatever the contract says.
Key takeaways
- The FTC rule will not take effect on September 4; noncompetes are governed by state law, as they were before April.
- State law has been moving on its own: several states have banned or limited physician noncompetes since 2023, and those laws are unaffected by the ruling.
- If you changed agreements or sent notices this spring in anticipation of the rule, those documents need a second look with counsel.
- Nonsolicitation and confidentiality clauses were never the rule's target and do more operational work than most noncompetes.
- A physician departure is a revenue cycle event with a checklist and deadlines: reassignment terminations, unsigned notes, open denials, patient notice and quality reporting.
What changed on August 20
| Question | Before the ruling | After the ruling |
|---|---|---|
| Would existing physician noncompetes become unenforceable on September 4? | Yes, for most workers under the rule (with an exception for certain senior executives) | No. The rule is set aside and will not take effect |
| Did employers have to send notices to workers by September 4 that noncompetes were void? | Yes, the rule required it | No notice requirement |
| Are noncompetes governed by federal law? | They would have been | State law governs, as it did before April |
| Can the FTC still challenge a noncompete? | Yes | Yes, case by case under its existing authority, which it has said it will continue to do |
What did not change
State law. Several states already prohibit or sharply limit physician noncompetes, several more limit them by duration, geography or income level, and some enforce them readily. Nothing in the ruling affects any of that. The state picture has been moving quickly on its own: Minnesota banned new noncompetes for nearly all employees as of July 1, 2023; Indiana barred new noncompetes for primary care physicians from the same date; and Pennsylvania enacted a law in July of this year, effective January 1, 2025, that limits most health care practitioner noncompetes to one year and bars enforcement against practitioners who are dismissed. Several other states have bills pending. If your practice is in a state that changed its own law in 2023 or 2024, that law is what applies, and it is the one your template needs to reflect. Nonprofit health systems were largely outside the FTC's jurisdiction under the rule anyway, so their agreements were never going to be affected in the same way, and that has not changed either.
The economics also did not change. A physician who wants to leave will find a way, noncompete or not, and a practice that relies on a restrictive covenant instead of on a working relationship is going to have a bad year eventually. We have watched practices spend more on litigation over a noncompete than the departing physician's patients would have generated.
What to review with counsel this month
- Existing agreements. If you drafted or amended physician agreements this spring expecting the rule to take effect, revisit them. Some practices removed noncompetes; some replaced them with nonsolicitation and confidentiality clauses; some did nothing. Know which you did.
- Notices already sent. Some employers sent the required notice early. If you did, ask counsel what that notice means now; a written statement that a covenant is unenforceable may be hard to walk back.
- Templates for new hires. Recruiting season for 2025 starts is under way. Make sure the template counsel gives you reflects your state's current law, not a draft prepared for the federal rule.
- Nonsolicitation and confidentiality provisions. These were never covered by the FTC rule in the same way, and they do more operational work than most noncompetes: they address patient lists, staff recruitment and referral relationships directly.
- Notice periods and tail coverage. The two contract terms that determine how orderly a departure is have nothing to do with competition. A 90-day notice period and a clear answer on who pays for the malpractice tail matter more, in our experience, than a 10-mile radius.
The operational side of a physician departure
This is where our work actually touches the question. Whatever the contract says, a physician leaving a practice sets off a list of revenue cycle tasks that most practices handle badly, and each has a clock.
| Task | When | Why it matters |
|---|---|---|
| Terminate the Medicare reassignment (CMS-855R through PECOS) and notify each commercial payer and Medicaid plan | Effective on the last date of service; file promptly, Medicare expects enrollment changes reported within 30 to 90 days depending on the type | Otherwise the physician's claims keep routing to your TIN, and the new practice's enrollment is delayed because the old link is still active |
| Close unsigned notes, unbilled charges and open denials for the departing provider | Before system access ends | A provider who leaves with 60 unsigned notes leaves 60 unbillable visits |
| Notify patients that the physician is leaving and how to obtain records | Per your state medical board's rules, often 30 days before departure | A board and continuity of care matter, separate from any covenant |
| Settle tail coverage | The day notice is given | A contract term that becomes urgent immediately |
| Decide who reports MIPS data for the year | Before the physician leaves | A physician who leaves mid-year may have data under your TIN for part of the year |
| Reassign the panel and call every patient with a future appointment | Weeks before the last day | The best protection for the practice's relationships, contract or not |
Our credentialing and provider enrollment team handles the reassignment terminations as part of the service, and we would put that line first on any departure checklist because it is the one with the longest tail of consequences when it is missed. We have seen a departed physician's claims still routing to a former practice's remittances a year later, creating credit balances the practice had to refund and a reconciliation nobody wanted.
Our opinion
We think most independent practices should treat the ruling as a return to the status quo and not as a victory. The rule was going to force a conversation about why physicians stay, and that conversation is still worth having. Practices with clear compensation, real partnership tracks and a functioning operation lose fewer physicians than practices with tight covenants. The revenue cycle side of that is a practice where physicians are not spending their evenings on denials and unsigned charts, and where a departure, when it comes, is a checklist rather than a crisis.
Questions we hear
Is this final?
No. The FTC may appeal to the Fifth Circuit, and there are related cases in other courts. For planning purposes, the rule is not in effect and will not be on September 4. Watch for appeal news, and do not restructure agreements again until counsel tells you the ground has moved.
Do we need to do anything for our non-physician staff?
The rule would have covered all workers, so any covenants in staff agreements are also back under state law. Many states treat lower-wage workers differently, and several prohibit noncompetes below an income threshold. Ask counsel, and in the meantime do not rely on a covenant in a medical assistant's agreement that a court in your state would not enforce.
Can a departing physician take their patients?
Patients choose their physician, and records must be made available on request regardless of the contract. What a practice can address contractually is solicitation and the use of the practice's patient list. Operationally, the best protection is a smooth hand-off: a named physician for each departing panel, and a call to every patient with an appointment on the books. If your team needs help closing the departing provider's open claims and enrollments, book a call.
What to do this month
- List every physician and staff agreement that was drafted, amended or noticed between April 23 and August 20 and send the list to counsel.
- Ask counsel for a one-page summary of your state's current noncompete law for physicians and for staff below any income threshold.
- Replace any new-hire template that was prepared for the federal rule with one that reflects state law.
- Write the departure checklist in the table above into your practice's procedures, with an owner for each line.
- Check that every current physician's Medicare reassignment and commercial enrollments are correct now, so a future departure starts from clean records.
- Put the FTC appeal on a watch list and agree to revisit the agreements only if counsel says the ground has moved.
