Prerequisites
- The PC formed and able to employ
- State employment tax registrations complete
- Malpractice coverage arranged
- Counsel confirmation of current noncompete law in the state
Compensation models
The edge to watch is compensation tied to ancillary services the clinician orders. Paying a clinician based on their own personal services is generally workable. Paying them based on the imaging, labs, or therapy they refer to is where Stark and AKS exposure concentrates. See Stark and anti-kickback.
Malpractice coverage
The provision clinicians read first and administrators most often get wrong.
Tail coverage (an extended reporting endorsement) covers claims made after a claims-made policy ends for incidents that occurred while it was in force. It can cost a substantial multiple of the annual premium.
The agreement must state who pays for tail, and under what circumstances:
- The employer pays on termination without cause
- The clinician pays on voluntary resignation
- Split, or waived after a vesting period
- Some agreements have the employer pay in all cases
Restrictive covenants, the law moved
The federal picture: the FTC’s Non-Compete Rule was vacated in 2024, the FTC dropped its appeals on September 5, 2025, and the rule was formally removed from 16 C.F.R. Part 910 effective February 12, 2026. Noncompete regulation is now primarily a state matter, with the FTC pursuing case-by-case enforcement.1 State law is moving fast and in one direction:
Alternatives that generally survive where noncompetes don’t:
- Non-solicitation of patients and employees, reasonably limited
- Confidentiality and trade secret protection
- Notice periods — a genuine period of required notice is often more valuable than an unenforceable noncompete
- Repayment of signing bonuses or relocation on early departure, where lawful
Steps
1
Confirm the PC is the employer, and is registered as one
State withholding and unemployment insurance in the state of practice.
2
Choose and document the compensation model
Benchmark against specialty survey data. Confirm nothing varies with referrals.
3
Specify duties, schedule, and clinical authority
Including that clinical judgment rests with the clinician, consistent with the MSA’s carve-out.
4
Address malpractice explicitly
Carrier, limits, occurrence or claims-made, and who pays tail under which circumstances.
5
Check current noncompete law before drafting restrictive covenants
Then draft state-specific variants rather than one national form.
6
Set termination provisions
With and without cause, notice periods, and immediate termination for license loss or exclusion.
7
Cross-reference the transfer restriction for the friendly owner
Their employment agreement and their transfer restriction interact — termination of employment is typically a transfer trigger.
8
Have the clinician's own counsel review, for the owner at minimum
Verify it worked
- The PC is the employer on every clinician agreement
- Compensation benchmarked and documented
- Nothing varies with referral volume or value
- Malpractice coverage specified, with tail responsibility stated
- Restrictive covenants checked against current state law
- State-specific variants used for multi-state groups
- Termination for license loss or exclusion is immediate
- The friendly owner’s agreement cross-references the transfer restriction
- Annual review calendared
Common failure modes
Sources
- FTC, Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule (Sept. 5, 2025); removal of 16 C.F.R. pt. 910 effective Feb. 12, 2026, Federal Register. State status summarized from Katz Banks Kumin, Noncompete Agreements: What’s the Status of Laws Restricting Them Nationwide? (March 2026). Verify current state law before drafting.