Non-Compete Clauses and the Nursing Shortage: Q&A with Matt Hollingsworth

Matt Hollingsworth
Co-founder
Carta Healthcare

The FTC recently ruled to ban non-compete clauses for all workers, including nurses. Matt Hollingsworth spoke with Pharmaceutical Executive about how this ruling might help reduce the impact of a coming nursing shortage.

Pharmaceutical Executive: What are the causes of the upcoming nursing shortage?
Matt Hollingsworth: The impending nursing shortage stems from multiple forces, including demographics, the pandemic, and a decline in new entrants to the field.

As the population of the general public increases and the number of nurses decreases, demographic shifts are creating a growing demand for healthcare services with less resources. The number of nurses is dwindling due to retirements and transitions into administrative roles, and the number of elderly patients needing care is increasing, creating a significant gap over the past decade.

COVID-19 only made the nursing shortage worse. Predictably, the pandemic intensified the strains on nurses and drove an increased proportion to leave the field. This exodus increased burnout and resignations, and perpetuated and compounded the negative cycle of burnouts and thus, shortages.

Furthermore, fewer are entering the nursing profession. Many are finding other career paths to be more appealing and less stressful, and there is a decrease in the supply of nursing educators. This decrease in new entrants to the field also contributes to the shortage.

PE: How do non-compete clauses negatively impact nurses?
Hollingsworth: Non-compete clauses make the nursing shortage worse by presenting an additional barrier for nurses seeking employment opportunities. Removing these clauses can help alleviate the shortage by making it easier for nurses to transition between healthcare systems, with one less hoop to jump through.

PE: How will the FTC’s new non-compete mandate improve healthcare costs for patients?
Hollingsworth: While the FTC's mandate may not directly lower healthcare costs for patients, it can indirectly help. By making the nursing profession more attractive and accessible, the mandate may help mitigate the nursing shortage, thus potentially decreasing patient costs to some extent. The primary driver of cost reduction, however, remains the supply-demand disparity in the nursing workforce, with the shortage of nurses in the U.S. being over 300,000. Although the FTC’s rule banning non-competes enables nurses to transfer more easily between systems, the lack of supply of nurses overall is more of a driving factor. The wage impact of the non-compete mandate won’t be as strong as the impact on the overall appeal of the job to attract more to the profession. So, it will probably decrease patient costs slightly, but there's definitely not a direct, easy-to-understand link between the non-compete mandate and healthcare costs since you can argue one way or the other.

PE: Will this have any impact on the healthcare industry beyond how it affects nurses?
Hollingsworth: The FTC's rule banning non-competes will significantly impact not only nurses but physicians and healthcare administrators.

For physicians, the ability to move between healthcare systems without non-compete restrictions will reshape recruitment and retention dynamics. Hospitals will worry a lot more, for example, about things like a specific doctor at a specific hospital who brings in, say, close to $1 million a year. If he or she leaves their post, it’s a big deal for the health system they’re leaving. If a doctor leaves a job without a non-compete agreement in place, the organization the doctor left will probably try to plug a hole in their balance sheet for economic reasons that they're going to have for the next three years while they recruit someone and have them build out their practice there. So, I think for physicians, it will have a huge impact.

Moreover, there are some instances where non-competes are enforced for the executive administration; organizations have chased executive administrators over non-competes, trying to make it harder for mobility between systems. Generally, relieving some of the pressure for people who want to leave and go somewhere else with less fear will help improve job satisfaction and help mitigate the shortage. The effects of the FTC’s rule banning non-competes are going to be stronger for physicians and C-suite executives than for nurses, because nurses probably would not be sued over non-competes. A surgeon or a C-suite executive, however, probably would be sued.