In recent years, state legislatures across the country have taken action to significantly reduce the scope and enforceability of non-competes in the healthcare industry. This creates a challenge for parties wishing to engage in healthcare transactions. Regardless of the industry, non-competes are often a material consideration for purchasers because they need assurances that selling principals won't establish a competing business that reduces the value of the business purchased. This concern is perhaps even more acute in healthcare transactions, where patients have a personal relationship with providers and may be easily inclined to follow their provider rather than stick with the acquired company. But healthcare services—unlike most other services—provide a critical public benefit. And state legislatures reasonably want to ensure that individuals who provide these services are not sidelined, and that patients have freedom of choice in their providers.
Parties to healthcare transactions need to keep a close eye on how states are regulating healthcare non-competes. If the applicable state does not permit the type of non-compete that makes the purchaser comfortable, the parties may need to address this risk elsewhere in the transaction. Of course, this issue is easier to address at a letter of intent stage rather than the night before closing.
Below is a general summary of how states are regulating healthcare non-competes. The summary is grouped into three categories: (1) states that have enacted laws scaling back restrictive non-compete terms; (2) states that have enacted laws that expand the medical professionals covered by non-competes that are scrutinized or prohibited; and (3) states that have adopted other creative approaches to addressing non-competes in the healthcare context. This summary includes only laws that have taken effect in 2025 and is not an exhaustive list of every law that impacts a company's ability to protect its patients or clients from competition.
Scaling Back Restrictive Non-Compete Terms
Maryland: House Bill 1388, effective July 1, 2025, limits non-competes for most healthcare professionals making under $350,000 per year to a one-year term and only within a 10-mile radius.
Texas: Senate Bill 1318, which became effective on September 1, 2025, (i) limits non-competes for physicians to a one-year term and only within a five-mile radius; and (ii) includes a buyout provision that requires employers to permit physicians to "buy out" of their non-compete at an amount that cannot exceed their annual salary at the time of termination.
Pennsylvania: House Bill 1633, which took effect on January 1, 2025, generally limits non-competes for many medical professionals to one year; however, such restriction does not apply in the context of business sales.
Increased Coverage Over Medical Professionals
Arkansas: Act 232, which took effect in Arkansas on August 5, 2025, bans physician non-competes in the employment context entirely and expands the term "physician" to include both persons licensed to practice medicine as well as those licensed to practice osteopathy.
Montana: House Bill 620, which was signed into law on May 13, 2025 and takes effect on January 1, 2026, amends Montana's existing non-compete statute to apply to all licensed physicians. This ban does not apply to certain non-competes, including those in purchase or sale of contracts.
Colorado: Senate Bill 25-083, which took effect on August 6, 2025, bans the use of non-competes relating to the practice of medicine, nursing and dentistry, even though 2022 Colorado legislation had previously set a monetary threshold—it was permissible to enter into non-competes with "highly compensated workers" whose salaries exceeded the threshold. Senate Bill 25-083 also bans certain employer practices (such as prohibiting a departing physician from providing patients with his/her contact information) that have traditionally been aimed at protecting patient departures.
Oregon: Senate Bill 951, which took effect on June 9, 2025 in Oregon, bans non-competes with "medical licensees," absent certain limited exceptions. Senate Bill 951 also creates significant limits on utilizing the "PC/MSO" or "friendly physician" model in Oregon.
Indiana: Senate Bill 475, which was signed into law on May 6, 2025 and became effective on July 1, 2025, expands prior limits on physician non-competes by banning non-competes between physicians and hospitals (or entities affiliated therewith). Non-competes executed in connection with the sale of business where the physician owns over 50% of the business are not covered by the new law's limits.
Illinois: The Illinois Freedom of Work Act has featured several recent amendments that prohibit non-competes with mental health professionals and other first responders in certain contexts.
Other Creative Approaches
Louisiana: Louisiana Senate Bill 165, which took effect January 1, 2025, prohibits non-competes (i) with primary care physicians who have been employed for three years, and (ii) any other physicians who have been employed for five years.
Utah: Senate Bill 228, which was signed into law on March 26, 2025 and took effect on May 7, 2025, bans "health care service platforms" from requiring that their employees sign non-competes and further limits the platforms' ability to restrict employees from seeking work elsewhere.
While states have taken different approaches, there is clearly a headwind blowing against expansive non-competes in the healthcare context. The landscape is constantly changing, and transacting parties should be aware of restrictions that exist in applicable states. Our Venable attorneys are standing by to assist your transactional needs. If you have any questions or would like to discuss healthcare transactions, please reach out to the authors of this article.