Regular Session 2023-2024 House Bill 1633 P.N. 3504

SENATE AMENDED

PRIOR PRINTER'S NOS. 1917, 1960, 2817,

2959, 3486

PRINTER'S NO. 3504

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

1633

Session of

2023

INTRODUCED BY FRANKEL, VENKAT, HILL-EVANS, MADDEN, DELLOSO,

PISCIOTTANO, SANCHEZ, KEEFER, FIEDLER, CIRESI, KRAJEWSKI,

FREEMAN, SHUSTERMAN, MALAGARI, N. NELSON, KHAN, INNAMORATO,

D. WILLIAMS, WEBSTER, HOWARD, O'MARA, BOROWSKI, SAMUELSON,

T. DAVIS AND KOSIEROWSKI, AUGUST 29, 2023

AS AMENDED ON THIRD CONSIDERATION, IN SENATE, JULY 10, 2024

AN ACT

Prohibiting the enforcement of certain noncompete covenants

entered into by health care practitioners and employers AND

PROVIDING FOR A STUDY BY THE HEALTH CARE COST CONTAINMENT

COUNCIL.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Short title.

This act shall be known and may be cited as the Fair

Contracting for Health Care Practitioners Act.

Section 2. Legislative intent.

The General Assembly finds and declares as follows:

(1) Patient access to health care in this Commonwealth

often depends on geography, transportation and availability

of practitioners.

(2) Seventy-five percent of physicians are employed by

hospitals, health care systems or corporate entities.

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(3) Consolidated hospital systems increasingly stretch

over broad geographic regions, meaning that a hospital

network's noncompete clause can prevent health care

practitioners from practicing in large areas of this

Commonwealth, well beyond their initial employment location.

(4) Noncompete covenants in health care inhibit

competition that benefits employees and patients and can

deter needed health care practitioners from wanting to

practice in Pennsylvania.

(5) Providers constrained by noncompete covenants have

less freedom of practice for fear of losing employment and

being unable to work in their profession.

(6) Most rural areas of Pennsylvania can be considered

health care deserts in which patients must travel two or

three hours for their basic health care needs.

(7) Continuity of care is a fundamental public policy

goal that can help patients achieve their health care goals

and build trust with their health care practitioners.

(8) This Commonwealth cannot afford to continue losing

health care practitioners to surrounding states and must do

more to attract and retain them.

Section 3. Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Employer." A person or group of persons that employ a

health care practitioner at a health care facility or office.

"Health care practitioner." As defined in section 103 of the

act of July 19, 1979 (P.L.130, No.48), known as the Health Care

Facilities Act. The term includes a licensed practical nurse.

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"HEALTH CARE PRACTITIONER." THE FOLLOWING:

(1) A MEDICAL DOCTOR AS DEFINED IN SECTION 2 OF THE ACT

OF DECEMBER 20, 1985 (P.L.457, NO.112), KNOWN AS THE MEDICAL

PRACTICE ACT OF 1985.

(2) A DOCTOR OF OSTEOPATHY UNDER THE ACT OF OCTOBER 5,

1978 (P.L.1109, NO.261), KNOWN AS THE OSTEOPATHIC MEDICAL

PRACTICE ACT, OR THE MEDICAL PRACTICE ACT OF 1985.

(3) A CERTIFIED REGISTERED NURSE ANESTHETIST AS DEFINED

IN SECTION 2(16) OF THE ACT OF MAY 22, 1951 (P.L.317, NO.69),

KNOWN AS THE PROFESSIONAL NURSING LAW.

(4) A CERTIFIED REGISTERED NURSE PRACTITIONER AS DEFINED

IN SECTION 2(12) OF THE PROFESSIONAL NURSING LAW.

(5) A PHYSICIAN ASSISTANT AS DEFINED IN SECTION 2 OF

THE OSTEOPATHIC MEDICAL PRACTICE ACT OR SECTION 2 OF THE

MEDICAL PRACTICE ACT OF 1985.

"Noncompete covenant." An agreement that is entered into

between an employer and a health care practitioner in this

Commonwealth and is designed to impede WHICH HAS THE EFFECT OF

IMPEDING the ability of the health care practitioner to practice

CONTINUE TREATING PATIENTS OR ACCEPTING NEW PATIENTS, EITHER

PRACTICING independently or in the employment of a competing

employer after the term of employment.

"Patient." An individual to whom a health care practitioner

rendered professional services in the health care practitioner's

scope of practice for which compensation has been received by

the health care practitioner, regardless of the source of the

compensation.

"Primary health care facility or office." The office,

facility or location where a majority of the revenue derived

from a health care practitioner's services are IS generated.

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Section 4. Noncompete covenants.

(a) Enforceability.--Except as provided under subsection

(b), the following shall apply:

(1) A noncompete covenant entered into or amended on or

after the effective date of this section is deemed contrary

to public policy and is void and unenforceable by an

employer.

(2) A noncompete covenant entered into or amended prior

to the effective date of this section is void and

unenforceable upon the renewal of a health care

practitioner's license, registration or certification within

this Commonwealth.

(b) Exception.--An employer may enforce a noncompete

covenant if all of the following apply:

(1) The primary health care facility or office where the

health care practitioner is employed is located in a county

of the sixth, seventh or eighth class.

(2) The geographic restriction is less than a 45-mile

radius from the primary health care facility or office.

(3) The length of the noncompete covenant is no more

than two years.

construed to prohibit the enforcement of a contract provision

that allows an employer to recover reasonable expenses from a

health care practitioner, if the expenses are:

(1) Directly attributable to the health care

practitioner and accrued within the three years prior to

separation, unless separation is caused by dismissal of the

health care practitioner.

(2) Related to relocation, training and establishment of

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a patient base.

(3) Amortized over a period of up to five years from the

date of separation by the health care practitioner.

(A) APPLICABILITY.--EXCEPT AS PROVIDED UNDER SUBSECTION (B),

A NONCOMPETE COVENANT ENTERED INTO AFTER THE EFFECTIVE DATE OF

THIS SUBSECTION IS DEEMED CONTRARY TO THE PUBLIC POLICY AND IS

VOID AND UNENFORCEABLE BY AN EMPLOYER.

(B) EXCEPTION.--AN EMPLOYER MAY ENFORCE A NONCOMPETE

COVENANT IF THE LENGTH OF THE NONCOMPETE COVENANT IS NO MORE

THAN ONE YEAR, PROVIDED THAT THE HEALTH CARE PRACTITIONER WAS

NOT DISMISSED BY THE EMPLOYER.

CONSTRUED TO:

(1) PROHIBIT THE ENFORCEMENT OF A CONTRACT PROVISION

THAT ALLOWS AN EMPLOYER TO RECOVER REASONABLE EXPENSES FROM A

HEALTH CARE PRACTITIONER, IF THE EXPENSES ARE:

(I) DIRECTLY ATTRIBUTABLE TO THE HEALTH CARE

PRACTITIONER AND ACCRUED WITHIN THE THREE YEARS PRIOR TO

SEPARATION, UNLESS SEPARATION IS CAUSED BY DISMISSAL OF

THE HEALTH CARE PRACTITIONER.

(II) RELATED TO RELOCATION, TRAINING AND

ESTABLISHMENT OF A PATIENT BASE.

(III) AMORTIZED OVER A PERIOD OF UP TO FIVE YEARS

FROM THE DATE OF SEPARATION BY THE HEALTH CARE

PRACTITIONER.

(2) (I) EXCEPT AS PROVIDED UNDER SUBPARAGRAPH (II),

VOID OR RENDER A NONCOMPETE COVENANT ENTERED INTO WITH A

HEALTH CARE PRACTITIONER WITH AN INTEREST IN A BUSINESS

ENTITY UNENFORCEABLE AS A DIRECT RESULT OF:

(A) THE SALE OF AN OWNERSHIP INTEREST OR ALL OR

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SUBSTANTIALLY ALL OF THE ASSETS OF THE BUSINESS

ENTITY;

(B) A TRANSACTION RESULTING IN THE SALE,

TRANSFER OR OTHER DISPOSITION OF THE CONTROL OF THE

BUSINESS ENTITY, INCLUDING BY MERGER OR

CONSOLIDATION. FOR PURPOSES OF THIS CLAUSE, THE TERM

"CONTROL" SHALL MEAN THE POSSESSION, DIRECTLY OR

INDIRECTLY, OF THE POWER TO DIRECT THE MANAGEMENT AND

POLICIES OF A BUSINESS ENTITY, WHETHER THROUGH THE

OWNERSHIP OF VOTING SECURITIES, BY CONTRACT OR

OTHERWISE; OR

PURCHASE, GRANT, AWARD, ISSUANCE OR OTHERWISE, OF AN

OWNERSHIP INTEREST IN THE BUSINESS ENTITY.

(II) A PREEXISTING NONCOMPETE COVENANT MAY BE

RENDERED VOID AND UNENFORCEABLE UNDER THIS ACT IF A

HEALTH CARE PRACTITIONER IS NOT A PARTY TO THE SALE,

TRANSFER OR OTHER DISPOSITION UNDER SUBPARAGRAPH (I).

Section 5. Notification.

(a) Patient notification.--Following the departure of a

health care practitioner from an employer, the employer shall

notify the health care practitioner's patients seen within the

past year of the following:

(1) Where the health care practitioner will be rendering

services in the future, if known.

(2) How the patient may:

(i) continue as a patient of the health care

practitioner; or

(ii) be assigned a new health care practitioner

within the existing employer.

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(1) THE HEALTH CARE PRACTITIONER'S DEPARTURE.

(2) IF THE PATIENT CHOOSES TO RECEIVE CARE FROM THE

DEPARTED HEALTH CARE PRACTITIONER OR ANOTHER HEALTH CARE

PRACTITIONER, HOW THE PATIENT MAY TRANSFER THE PATIENT'S

HEALTH RECORDS TO A HEALTH CARE PRACTITIONER OTHER THAN WITH

THE EMPLOYER.

(3) THAT THE PATIENT MAY BE ASSIGNED TO A NEW HEALTH

CARE PRACTITIONER WITHIN THE EXISTING EMPLOYER IF THE PATIENT

CHOOSES TO CONTINUE RECEIVING CARE FROM THE EMPLOYER.

(b) Time period.--The employer shall provide the notice

within 90 days of the health care practitioner's departure.

to a physician, certified registered nurse practitioner or

physician assistant HEALTH CARE PRACTITIONER with an ongoing

outpatient relationship with the patient OF TWO OR MORE YEARS.

Section 6. Effective date.

This act shall take effect as follows:

(1) Section 5 shall take effect in 30 days.

(2) The remainder of this act shall take effect

immediately.

SECTION 6. STUDY BY HEALTH CARE COST CONTAINMENT COUNCIL.

WITHIN THREE YEARS OF THE EFFECTIVE DATE OF THIS SECTION, THE

HEALTH CARE COST CONTAINMENT COUNCIL, AS AUTHORIZED UNDER 35

PA.C.S. § 3309 (RELATING TO SPECIAL STUDIES AND REPORTS), SHALL

PERFORM A STUDY ON THE EFFECTS OF THIS ACT AND SHALL REPORT ITS

FINDINGS TO THE CHAIRPERSON AND MINORITY CHAIRPERSON OF THE

HEALTH AND HUMAN SERVICES COMMITTEE OF THE SENATE AND THE

CHAIRPERSON AND MINORITY CHAIRPERSON OF THE HEALTH COMMITTEE OF

THE HOUSE OF REPRESENTATIVES.

SECTION 7. EFFECTIVE DATE.

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THIS ACT SHALL TAKE EFFECT JANUARY 1, 2025.

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