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In January, the Federal Trade Commission (FTC) proposed a rule that would ban non-compete agreements nationwide. As the home care industry awaits on the finalized version of that rule, a lot hangs in the balance.
The chair of the FTC, Lina Khan, has been heralded as a champion of these sorts of causes, as well as antitrust causes.
“What we hear day-in, day-out is that people too often feel like they’re not getting a fair shake in the market,” she recently said. “There’s more and more public awareness about [how] decisions the FTC is making on antitrust or consumer protection are affecting people in their day-to-day lives.”
That attitude has resulted in higher scrutiny toward the large tech companies – namely Amazon (Nasdaq: AMZN) – as well as more momentum against large-scale home health care deals, such as UnitedHealth Group’s (NYSE: UNH) pending acquisition of Amedisys Inc. (Nasdaq: AMED).
Non-competes are used very regularly in the home health and home care sectors, but mostly at the executive level. What is of major concern for home care providers, however, is how a ban on non-competes could be applied to non-solicitation agreements.
In this week’s exclusive, HHCN+ Update, I dive into the likelihood of the rule being finalized and the effect it could have, as well as the residual effects that even just the proposed rule could have on the home care industry’s future.
Non-competes and non-solicitations
Non-solicitation agreements keep home care clients from poaching caregivers trained and supplied by agencies. In certain states with stricter rules against non-competes, the lines between non-solicitation and non-compete agreements are being blurred.
“In our industry, you see non-solicitation agreements, which are designed to protect the business of the provider, but not to restrict the caregiver,” Angelo Spinola, the home health, home care and hospice chair at the law firm Polsinelli, told me this week. “They work where they want to work; it’s just about not taking an agency’s clients with them, because the only reason they know them is because of the agency. I think that’s a fair position to take.”
The home care industry has been advocating against the non-compete ban, especially because of those concerns over non-solicitation or “direct-hire” agreements.
The Home Care Association of America (HCAOA) wrote in its comment that it has “a number of concerns with the proposed rule broadly,” but specifically is “most concerned that these
commonplace agreements would be prohibited under the broad ‘functional analysis’ in the proposed rule.”
Over 27,000 comments were submitted after the rule was proposed. While the home care industry and other health care sectors took issue with the proposal in those comments, the FTC – at least for now – is not backing down publicly.
“We’re looking at all those comments very closely and figuring out where to land,” Khan said at the American College of Emergency Physicians’ (ACEP) annual meeting last week. “But I’ll be honest, the overwhelming number of comments are firmly in support of the FTC proposal to ban non-competes across the board. And so, we take that very seriously.”
A non-compete ban would have a major effect on the home care industry, as I wrote in January. But even if the proposal wasn’t finalized, home care providers still have states to worry about, some of which have been emboldened by the FTC’s actions already.
Finalizing the rule
The vote on the final version of that proposal has now been delayed until April 2024. The FTC said that is due to the fact that it received so many comments.
As it’s currently structured, there are still no known carve outs for certain health care sectors.
But such a significant delay on the vote could also mean the commission is backing off the ban, even if Khan isn’t suggesting so publicly.
“I’ll be curious if they go through with it,” Spinola told me. “My read is that the FTC – as a result of all the comments, and how publicized it was that the U.S. Chamber of Commerce would be pursuing legal action [against it] – blinked and decided, ‘Let’s punt on this.’”
The legal arguments against not only the ban, but also the FTC’s ability to apply such a ban, would be “pretty strong,” in Spinola’s opinion.
Plus, the advocacy against the ban is not likely to let up between now and April, even if the comment period has closed.
“My sense is that the FTC got concerned about that, and recognized they were going to be in a legal battle that perhaps they couldn’t win,” Spinola said. “And I don’t anticipate that the advocacy is going to wane at all.”
By the time April comes around, too, primary races across the country will be underway, with a general election following those in November. The FTC is theoretically not supposed to be impacted by the change of presidential administrations, but priorities could shift.
Impact on providers
There’s a reason why non-competes are being examined. There’s likely plenty of home-based care veterans who feel they were negatively impacted by non-compete stipulations.
For the home care industry, it comes back to an issue it has been facing for decades. And that’s the outside world not understanding what exactly home care is – or how it works.
In states like Connecticut and California, home care providers are already dealing with non-compete restrictions that are affecting business.
“It’s only starting now,” Spinola said. “But that word hasn’t totally gotten out yet. So most companies still have that provision in their client service agreements, but I know some agencies have been notifying the client that those provisions won’t be enforced, and then are providing an updated version of the agreement.”
Without those agreements, the home care business could be adversely affected in those states.
And, if there becomes less home care access in those states, higher costs and worse health outcomes – in the health care system broadly – could materialize. But that’s still further along down the road.
For now, Spinola said he wouldn’t be surprised if providers in California come together to fight for a carve out that would allow them to keep these agreements in contracts.
“In our negotiations with the California Department of Justice, we haven’t been able to find that happy-medium on these issues,” Spinola said. “I think it’s a very restrictive and incorrect view. There’s a value associated with the work that the agency has done to vet and train caregivers and make that match. And they should be able to protect that business interest. … But as of right now, [California] has not been very receptive to that position.”
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