November 2, 2023

This doctor's lawsuit puts Indiana's physician noncompete law to the test. Here's what's at stake


Article origination Side Effects Public Media
Dr. David Lankford spent extra years of training to become a specialized pediatric intensivist who takes care of the sickest children at the hospital. He's spent years in Fort Wayne, Ind. Now, he is relying on a new state law to fight a noncompete clause that may push him out of the community. - Christopher Pack / Side Effects Public Media

Dr. David Lankford spent extra years of training to become a specialized pediatric intensivist who takes care of the sickest children at the hospital. He's spent years in Fort Wayne, Ind. Now, he is relying on a new state law to fight a noncompete clause that may push him out of the community.

Christopher Pack / Side Effects Public Media

The noncompete agreement in Dr. David Lankford’s contract wasn’t really a concern as he began working at Lutheran Hospital in Fort Wayne, Ind. about five years ago.

“Noncompetes are usually non-negotiable. It's one of those things that they tell you the system has in place,” Lankford, a pediatric intensivist, said. “And it's kind of take it or leave it.”

He liked working at the hospital because its location allowed him to serve a diverse array of patients from urban, suburban and rural communities. His wife, also a doctor, got a good job nearby. They bought a home in the city and their three pre-teen kids have mostly grown up in its schools.

“We thought it was a great place to raise a family that's got everything you need for kids without being too overwhelming, like a big city,” he said.

But the situation changed. And Lankford is now suing to get out of his noncompete.

There is a looming doctor shortage in the Midwest, according to federal estimates. By 2025, many of the region's states, particularly Indiana, Missouri and Ohio, are expected to have more demand for primary care doctors than supply. Some advocates argue noncompete agreements might be one of several reasons for that shortage.

This has led to bipartisan efforts in some states –– and federally –– to limit those agreements over the objections of health employers, who argue noncompetes protect businesses and prevent staff shortages. Lankford’s case is likely the first real test to a new law in Indiana that aims to limit physician noncompetes.

Lankford’s contract prohibits him from working within 30 miles of Lutheran Hospital for a year after ending employment there, according to court documents.

The noncompete’s geographic restriction puts all of Fort Wayne and several surrounding communities, including a few just over the border in Ohio, out of bounds. The nearest hospitals outside of the circle are almost an hour away.

“I didn't think it was an issue until they changed my job and breached my contract,” he said.

When kids come to the hospital for care, as an intensivist, Lankford would see the “sickest of the sick” children – those who go to the intensive care unit.

The less critical cases were mostly handled by other doctors on the team. But in October 2022, Lutheran’s own court filings say the hospital got rid of those other doctors “without cause” and shifted their workload to intensivists like Lankford.

“Which meant more patients to see, more phone calls to make, more consults to make, more notes to write, more discharges, more admissions,” he said. “It makes it harder to give the attention that you want to those critically ill patients.”

Court documents show Lankford handled 282 visits in the three months after the change — slightly more than he saw across the 12 months before. That drove him to quit.

“It meant that the patients that were kind of not as critically ill started [getting] seen later in the day,” he said. “And I got concerned that that wasn't the standard of care that I wanted to provide.”

He alleges the change violated his contract. But now, to keep practicing in Fort Wayne, he has to get out of his noncompete.

Lutheran has not responded to requests for comment. But in court filings,Lutheran argues the pediatric care changes never violated his contract. They say the contract never specified the kind of pediatric care he would provide and required him to perform “all other duties as reasonably specified” by Lutheran and “within the scope of [Dr. Lankford’s] training and/or capabilities.”

A new Indiana law might help him do that. It bans health employers from using noncompetes, but only for primary care physicians whose contracts start after July 2023.

All other specialty physicians can still be placed under a noncompete agreement. However, those doctors were given three escape routes.

The first two escape routes have to do with the reason a physician is separating from an employer. If they are let go by the employer “without cause” or quit “for cause,” their noncompete can be nullified. However, the law doesn’t define “cause” in any way.

Yet, Lankford and his legal team say they are confident his reason for quitting will be sufficient to convince a judge that it counts as “cause.”

This case is bigger than just one doctor, Kathleen DeLaney, one of Lankford’s attorneys, said. As it stands now, the outcome of this case wouldn’t set precedent for the whole state because it’s playing out at a county court level. But if either side appeals the final ruling to a higher court, that may change.

“I hope that other doctors will be encouraged and emboldened to advocate for access to patient care for their patients as well,” DeLaney said.

If Lankford loses this case, he may have to either buy out his agreement or practice outside of the 30 mile radius. DeLaney said they can’t disclose details of his buyout provision, including how much it may cost.

“In general, I represent a lot of doctors and I've seen a lot of physician contracts,” she said. “It seems that the prevailing buyout price that the hospital systems around Indiana have landed on is 100%of their prior year's compensation.”

Health employers say they need noncompetes

Lutheran is also suing Lankford back, because he has already begun work at another Fort Wayne hospital operated by Parkview Health System, one of Lutheran’s “biggest” direct competitors. Lutheran alleges that violated his noncompete and damaged the hospital’s business.

“As a direct, proximate, foreseeable and consequential result of Dr. Lankford’s breaches, Lutheran has suffered the loss of business and healthcare good will in [Fort Wayne] and Allen County,” Lutheran’s attorneys wrote in the countersuit. Parkview is also listed as a defendant in that legal action.

They also argue that the hospital has incurred added costs for hiring temporary physicians and lost their initial investment in hiring Dr. Lankford. Other health employers have made similar arguments against letting doctors escape noncompetes.

Health employers are typically most worried about losing patients who might follow a doctor that quits, according to Kurt Lavetti, an economist at Ohio State University.

“When physician practices are sold, a big part of the sales price is tied to the number of patients that they have,” Lavetti said. “And the likelihood that those patients will continue returning to that practice. So, it is a valuable part of a physician business.”

Employers argue that noncompete protects their investment in hiring and training physicians.

Small rural hospitals say noncompetes help them because they limit the chances of their doctors being poached by big health systems with deep pockets.

“If they are unable to keep their physicians that they've invested in, that they've spent money to train, that they've recruited, we do think that this problem of physician shortages may be exacerbated,” said Chad Golder, an attorney with the American Hospital Association.

Cara Veale of the Indiana Rural Health Association told state lawmakers earlier this year that a ban on non-competes would drive up costs.

“Without noncompete agreements, the competition to hire physicians will turn into a bidding war. In most instances, this leads to a losing outcome for rural providers,” Veal said.

Courts balance technicalities and community needs as policies shift

Doctors and some policy makers say noncompetes make physician shortages and health care costs worse because they force doctors out of their communities when they just want to switch employers.

Dr. Jonathan Jones, president of the American Academy of Emergency Medicine, argues noncompetes can have a “chilling effect” on physicians who care about their communities — and feel their employer fails to do the same.

“If I speak up against a potential injustice, one, I might lose my job, but to get a new job, I'm going to have to physically move,” he said. “It just basically silences the physician’s voice … especially in emergency medicine, because we see everybody, we don't pick and choose our patients, we see the insured, the uninsured, we see the rich, the poor ... And often, we speak up for the people that aren't getting the resources they need.”

Indiana is not the only state trying to reign in noncompetes based on similar arguments. In 2022, Iowa passed a law prohibiting healthcare employment agencies from restricting “the employment opportunities of an agency worker by including a noncompete clause in any contract with an agency worker or health care entity.” But doctors were excluded from that.

Republican lawmakers in Ohio introduced a bill this year to limit physician noncompetes in that state. That bill has sat in committee since June without a vote.

Six other states including Alabama and Delaware already have full bans on noncompetes for physicians.

States with no limits or partial limits on noncompetes, like Indiana, leave cases like Dr. David Lankford’s to the courts.

In September, Allen County Superior Court Judge Craig J. Bobay ruled in the doctor’s favor by granting him a preliminary injunction that prohibits Lutheran from enforcing or threatening to enforce his noncompete while the larger case is ongoing.

In the ruling, Bobay said he found Lutheran’s arguments that it had not violated Lankford’s contract by changing his job duties unconvincing because the language in the contract was “ambiguous.”

The judge said he also based his decision on the “substantial and urgent need for pediatric physicians to serve critically ill children in Allen County.”

“There is substantial evidence that Lutheran is no longer addressing the needs of

its critically ill pediatric patients as it had in the past,” Bobay wrote. “From a practical viewpoint, the most medically vulnerable children of Allen County and northeast lndiana, as well as their families, will be served by Dr. Lankford returning to work immediately.”

But soon, the federal government may take the issue out of the hands of the states and the courts. The Federal Trade Commission is considering a ban on all noncompetes in medicine and beyond. If the proposed rule becomes official, experts say it will likely face legal challenges.

This story is a collaboration between Side Effects Public Media and Indiana Public Broadcasting. 

Side Effects Public Media is a health reporting collaboration based at WFYI in Indianapolis. We partner with NPR stations across the Midwest and surrounding areas — including KBIA and KCUR in Missouri, Iowa Public Radio, Ideastream in Ohio, WFPL in Kentucky and KOSU in Oklahoma.

Copyright 2023 Side Effects Public Media. To see more, visit Side Effects Public Media.
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