For healthcare provider companies, a critical question about the FTC’s decision is whether it applies to nonprofit entities. I recently analyzed the impact on the healthcare industry of the vote by the Federal Trade Commission (FTC) to move forward with a final rule banning non-compete agreements for an article in Modern Healthcare.

The statute that created the FTC says an entity must be “organized to carry on business for its own profit or that of its members” to fall under the FTC’s jurisdiction. The impact of how applicable the non-compete ban is to nonprofit entities is particularly important in healthcare, with nearly 60% of the more than 5,100 community hospitals in the United States organized as nonprofit entities, according to figures from the American Hospital Association.

“It is clear, generally, that the concept of nonprofit entities are not covered by the FTC rules, but if you peer behind them and find they are driving profits to members or a for-profit entity, then the FTC will assert their jurisdiction,” I explained in the article.

The article cites an example the FTC included in the final rule of a nonprofit hospital that employed 100 physicians. The FTC contends that the rule would apply in this situation because the nonprofit organization was “engaged in business on behalf of for-profit physician members.”

Several lawsuits already have been filed against the FTC’s decision.

The full article, “How the FTC Noncompete Ban Affects Nonprofit Providers,” was published by Modern Healthcare on April 25 and is available online (subscription required).

Along with my fellow Bass, Berry & Sims attorneys Lymari Martinez Cromwell and Lucas Ross Smith, I examined the FTC’s decision in a webinar, “The FTC’s Non-Compete Ban: What Employers Need to Know,” on April 25. Watch a replay of the webinar here.