The Federal Trade Commission (FTC), led by Chairman Andrew Ferguson, issued warning letters on September 10, 2025, to health care employers and staffing companies, urging these companies to review any noncompete provisions in their employment agreements.

Alongside the warning, the FTC has circulated a template noncompete letter to guide employers, and issued a request for information (RFI) to collect data on prevalence, effects, and practices related to noncompete agreements. It comes on the heels of a complaint and final consent order the agency lodged last week against one of the largest pet cremation businesses in the U.S., as we detailed in a previous client alert. That was a significant example of the FTC under the Trump Administration targeting an employer’s use of post-employment restrictions as an "unfair method of competition."

Why the FTC is Paying Special Attention to Health Care

The FTC has made it plain that enforcement against unlawful noncompete provisions in the health care industry is a priority because:

• Prevalence of Physician and Clinician Noncompetes: Noncompetes are especially common in physician contracts. These agreements often restrict where a clinician can practice after leaving a contract, sometimes covering large geographic areas for significant durations. 
   
• Effects on Consumers and Labor: The FTC previously has found or cited evidence that noncompetes in health care may reduce worker mobility, suppress wages, hamper competition among providers, and in some cases limit patient access to care. For example:
   
  • Health care markets with high concentration of providers such as multi-site medical groups and large hospital systems often use physician noncompetes to lock in referral streams and restrict competitive entry. 
     
  • Last year, the agency estimated that banning noncompetes could reduce health care costs by anywhere between $74 billion and $194 billion over 10 years. 
     
• Impacts on Patients and Market Dynamics: Because many patients follow physicians rather than institutions, noncompetes that force physicians to leave a community or curtail their practice can disrupt continuity of care. Also, the use of noncompetes by dominant provider systems can increase bargaining leverage against payors, potentially driving up prices. 
   
• Consideration Over Nonprofit Hospital Jurisdiction and Broader Reach: Although the FTC’s jurisdiction nominally does not include nonprofit firms, some nonprofit hospitals or health care entities that are tax exempt may still fall under the agency’s reach if, for instance, they engage in commercial activity or have relationships (joint ventures, partnerships) with for profit entities. That means health care organizations can’t assume nonprofit status offers blanket protection. 

Suggested Action Items for Health Care Entities

To manage risk, health care employers should consider:

• Conducting an audit of noncompete clauses in all employment contracts.
   
• Evaluating whether noncompete restrictions are narrowly tailored (in duration, geography, scope) and confirming they are reasonably necessary to protect legitimate business interests such as patient panels, trade secrets, and referral relationships. As part of this evaluation, health care employers should consider whether alternative restrictive provisions (e.g., non-solicitation, confidentiality) would be sufficient to protect their legitimate business interests.
   
• Reviewing whether nonprofit status or other structures accurately reflect the nature of your business and thereby provide legal insulation or whether relationships with for-profit or commercial activities might expose you to FTC jurisdiction.
   
• Staying abreast of developments in litigation and FTC guidance, especially any updated statements from the FTC in response to the RFI.

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