In a major victory for Louisiana hospitals who compete with the giant Ochsner Health System, the state Legislature on Tuesday approved a bill restricting “noncompete” agreements for physicians — a step supporters say will keep more doctors in the state and improve health care.

The legislation, Senate Bill 165, says physician contracts can only contain the so-called noncompete clauses for up to five years depending on doctors’ specialties. If they leave a job while their contracts contain such a clause, doctors would be subject to those agreements for up to two extra years and would be barred from practicing medicine in as many as three parishes that surround their employer.

Under current law, hospitals can put noncompete clauses into contracts for as long as they wish. And there’s no restriction on the number of parishes the deals can cover, which can bar doctors from moving freely between jobs in Louisiana, supporters of regulation say.

The bill, carried by Sen. Patrick McMath, R-Covington, passed the state House 100-0 Tuesday after initially passing the Senate unanimously, too. It’s the culmination of a years-long battle between Ochsner and its competitors.

“This has been a long time coming,” said Rep. Stephanie Berault, R-Slidell, who presented the bill for McMath in the House. “It’s an important piece of legislation (not just) for our physicians, but for patients and the people of Louisiana.”

In a statement on the vote provided by a spokesperson, Ochsner Chief Physician Executive Dr. Robert Hart said the health system makes “significant investments in our care teams and specialty programs so we can continue to attract and retain top talent.”

“We will continue to work with our physicians, the Louisiana Department of Health and the state legislature to ensure access to high-quality care in our communities,” Hart said.

The hospital system is a staunch believer in noncompete agreements, deploying them regularly with physicians they employ. Ochsner and other defenders of the practice say it lets hospitals limit risk, ensuring they aren’t investing big money into training and supporting doctors only to see them leave and take their patients to another nearby clinic.

Supporters of rolling back noncompete agreements counter that they force doctors out of the state, especially as Ochsner has grown its footprint to include a wide swath of Louisiana. Many agreement provisions say that once an Ochsner doctor leaves, they can’t work for two years in any parish where Ochsner has a presence.

The outcome of McMath’s legislation, which heads now to the desk of Gov. Jeff Landry, was cheered by some of Ochsner’s main competitors. Ryan Cross, a lobbyist with Franciscan Missionaries of Our Lady Health System, which runs Our Lady of the Lake Health, called the vote “a big win for patients and physicians across Louisiana,” and said the legislation will keep strong physicians in the state. 

The bill now heads to the governor for his signature or veto. A Landry spokesperson did not immediately respond to a question about the governor’s position on the bill. But McMath, the bill’s sponsor, said that Landry’s appointed health secretary, Dr. Ralph Abraham, was pivotal in marshaling support for the bill.

The debate over hospital noncompete clauses last surfaced in 2021 when a bill by Rep. Mark Wright, R-Covington, proposed similar restrictions on the practice. Wright’s House Bill 483 laid out a time limit and a buyout provision for certain doctors and sought to exempt rural hospitals that use noncompete clauses from the limits.

After passing the House, that bill died in a Senate committee.

McMath cast it as a means to bolster care in rural and underserved parts of Louisiana where hospitals already struggle to hire and retain physicians. He said he personally knew of three physicians who’ve left Louisiana rather than violate the terms of noncompetes.

Separately from the legislation approved in Louisiana, the Federal Trade Commission voted several weeks ago to enact a total ban on noncompete agreements. According to the FTC, 30 million people — roughly one in five workers — are now subject to such restrictions.

The rule, which doesn’t apply to workers at non-profits, is to take effect in three months but is expected to face in legal challenges. The FTC rule also doesn’t apply to not-for-profit employers. Ochsner is a not-for-profit health system.