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| Dear Friend,
Competition from within.
On January 5, 2023, the U.S. Federal Trade Commission (“FTC”) proposed a new rule banning employers from imposing noncompete provisions on their workers. The rule would supersede all state laws, except to the extent that a state’s law gives workers greater rights.
Whether one chooses to see it as a pretext or as a context, the FTC maintains that non-competes are a form of unfair competition and that banning them is within its purview.
It's highly likely that there will be legal challenges to the FTC’s authority to adopt such a rule.
As framed in the proposed rule, “employer” and “worker” are not limited to the true employer-employee relationship, and include subcontractor and independent contractor relationships as well.
Interestingly, the proposed federal rule goes beyond what certain states, for example, California, have enacted in terms of covenant not to compete prohibitions. For example:
- It requires an “employer” that has entered into a noncompete with a worker to give notice to the worker that his or her noncompete is no longer in effect and is unenforceable.
- The notice must be given both to current and former workers subject to such covenants.
- It defines prohibited noncompetes much more broadly commonly seen. It would include other contractual terms that amount to de facto noncompete clauses because they have the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the “employer”.
- The proposed rule incorporates an exception for noncompetes in connection with the sale of a business, but only as to a “substantial” owner, defined as someone with at least a 25% ownership interest in the business.
At this point, the rule is simply proposed rule, and the FTC is seeking public comments which will be due within 60 days after the proposed role is published in the Federal Register.
In addition to drawing legal challenges related to the FTC’s authority, one can imagine the various unintended (or perhaps they are intended?) consequences of the rule.
Certainly, covenants not to compete have always been a creature of state law and federalizing the issue raises constitutional concerns.
Additionally, although some states have prohibited covenants not to compete in regard to workers, making it illegal to bind selling business owners who hold less than a 25% interest (think, for example, of a medical group with 25 shareholders, each owning 4%) to a covenant not to compete in connection with the sale of the business, could gut a significant portion of the value that a purchaser might be willing to pay for the business. Whether or not this proposed rule becomes final, the push to restrict noncompetes and to broaden their definition underscores the need for “employers” to seriously consider other alternatives to protect against the theft of trade secrets and the disclosure of confidential information in the context that they are not merely proxies for what might become impermissible covenants not to compete. |
| | Tuesday - Has Another Hospital CEO Been Killed Off by the Flea? - Success in Motion
Watch the video here, or just keep reading below for a slightly polished transcript:
I saw a story out of Arkansas about a unanimous vote by a hospital’s medical staff, a vote of no confidence, in connection with the hospital's relatively new CEO. (The hospital is a CHS facility called the Medical Center of South Arkansas.)
Apparently, the new guy came in, shook things up, and now the medical staff wants to shake things up for him by having him fired. I don’t really want to talk about the Medical Center of South Arkansas; what I want to talk about is the power of leverage.
Here we have what is normally, in the context of a hospital, a group without power. It might seems strange, but a medical staff, in terms of exercising control over the hospital’s administration, especially in a time of hospital-centric healthcare, doesn't usually have much clout.
Yet what we see in the Arkansas story is another example of what Robert Taber, the author of The War of the Flea, the seminal work on guerrilla warfare, described.
That's the notion that a very small and organized group (the flea) can sometimes topple a large enemy (the dog) by being too quick and ubiquitous for the enemy to defend against. It’s an issue of leverage.
I’m not suggesting that you go and hold a vote of no confidence.
I’m suggesting that what often appears to be a very powerful and intractable enemy can be toppled by applying the right kind of leverage. Think about that concept and how leverage can work for you.
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| Wednesday - Opting Out to Opt-In For Yourself - Medical Group Minute
Watch the video here, or just keep reading below for a slightly polished transcript:
I stood there with the other workers, a large rotating table separating us. As the parts moved by we each glued on another piece until Mary took them and put them in a box.
Summer 1972. College was a few months and thousands of parts away.
There was a lot of movement, but it was all happening in front of me. I was standing still. Sure I was dreaming. But mainly I was gluing parts.
Substitute parts for patients and you have the plight of most medical groups. Standing still, the movement happening outside. Outside in terms of patient flow, outside in terms of deal flow. And outside in terms of the changes to the business of medicine.
Some others think of building a larger table or multiple tables.
Few others revel in the notion of finding profit in the entire supply chain to patients as through-put.
Even fewer others see a future in which there are no tables.
For medical groups, simply engaging in tactics addresses making the table more efficient. Planning is taking the notion of the table as it is and projecting incremental improvement. Strategy is imagining a future without a required tethering to a table at all and then mapping backwards to the present.
Like I learned in the heat of August 1972, movement, as in the table, as in something that happens to you, isn't really movement at all. It's standing still.
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| | | Listen to the podcast here, or just keep reading for the transcript.
In the U.S., it seems that lots of people expect a tip, from the person who simply hands you your coffee at Starbucks to, I’d expect, hospital administrators (but only at for-profit facilities). Okay, just kidding, but you get the idea.
But what’s a tip for? And, what can medical groups learn from it?
It seems that no one knows where tipping really started. Some say it began in Tudor England. Others say it began in the Middle Ages. It doesn’t really matter.
As ingrained in our culture, the point of tipping is to encourage and reward good service.
Of course, when a tip is expected, it does neither. As in, "Sure I gave you crummy service but where in heck is my 20%!” At that point it’s just an entitlement. It provides no motivation.
Medical groups generally compensate their physicians on a production basis, whether it’s expressed on an actual unit basis or as a salary based on projected productivity. If there’s a bonus, it’s generally calculated along the same lines.
But what about paying for good service? That’s usually left out of the calculation. Maybe the thought is that it doesn’t matter. Maybe the thought is that it’s too difficult to figure out.
The problem is that paying only for productivity ignores the opportunity to use compensation to drive behavior within the group and as to third parties: patients, hospital staff, and referral sources.
Sure, these are subjective factors. That’s the point.
The ability to deliver great medical care is simply the "price of admission" for physicians and for medical groups. The “soft” attributes like customer service and proper behavior are factors that help distinguish your group in creating an Experience Monopoly™.
If your group's compensation plan doesn’t address encouraging behavior and good service, you’re missing an important opportunity to shape your group’s overall future.
This tip is free. No tip expected.
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| | | Calibrate Your Compass
Read our exclusive RedPaper to guide you through this evolving situation.
The coronavirus crisis caused a short-term economic crisis for many medical groups. Our RedPaper shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
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| | Help Us Help You With Helpful Content
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| | | | We all hear, and most of us say, that the pace of change in healthcare is quickening. That means that the pace of required decision-making is increasing, too. Unless, that is, you want to take the “default” route. That’s the one is which you let someone else make the decisions that impact you; you’re just along for the ride. Of course, playing a bit part in scripting your own future isn’t the smart route to stardom. But despite your own best intentions, perhaps it’s your medical group’s governance structure that’s holding you back.
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| In fact, it’s very likely that the problem is systemic. The Medical Group Governance Matrix introduces a simple four-quadrant diagnostic tool to help you find out. It then shows you how to use that tool to build your better, more profitable future. Get your free copy Free.
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| | | | Whenever you're ready, here are 4 ways I can help you and your business:
1. Download a copy of The Success Prescription. My book, The Success Prescription provides you with a framework for thinking about your success. Download a copy of The Success Prescription here.
2. Be a guest on “Wisdom. Applied. Podcast.” Although most of my podcasts involve me addressing an important point for your success, I’m always looking for guests who’d like to be interviewed about their personal and professional achievements and the lessons learned. Email me if you’re interested in participating.
3. Book me to speak to your group or organization. I’ve spoken at dozens of medical group, healthcare organization, university-sponsored, and private events on many topics such as The Impending Death of Hospitals, the strategic use of OIG Advisory Opinions, medical group governance, and succeeding at negotiations. For more information about a custom presentation for you, drop us a line.
4. If You’re Not Yet a Client, Engage Me to Represent You. If you’re interested in increasing your profit and managing your risk of loss, email me to connect directly. |
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