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First Substitute H.B. 92

Representative Rosalind J. McGee proposes the following substitute bill:


             1     
LIMITATION OF PHYSICIAN

             2     
NONCOMPETITION AGREEMENTS

             3     
2006 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Rosalind J. McGee

             6     
Senate Sponsor: ____________

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill amends the Utah Medical Practices Act and the Utah Osteopathic Medical
             11      Practice Act to establish limitations on the use of noncompetition clauses in physician
             12      contracts.
             13      Highlighted Provisions:
             14          This bill:
             15          .    beginning with contracts signed after July 1, 2006, invalidates contracts to the
             16      extent that the contract:
             17              .    imposes a restriction on the right of a physician to practice medicine within a
             18      particular geographic area, unless the contract is for the sale of the physician's
             19      practice; or
             20              .    imposes financial penalties on a physician for terminating a professional
             21      relationship;
             22          .    permits certain financial penalties when a physician leaves a practice; and
             23          .    permits a contract to limit a departing physician's ability to solicit patients from an
             24      existing practice.
             25      Monies Appropriated in this Bill:


             26          None
             27      Other Special Clauses:
             28          None
             29      Utah Code Sections Affected:
             30      ENACTS:
             31          58-67-804, Utah Code Annotated 1953
             32          58-68-804, Utah Code Annotated 1953
             33     
             34      Be it enacted by the Legislature of the state of Utah:
             35          Section 1. Section 58-67-804 is enacted to read:
             36          58-67-804. Limitation of noncompetition agreements.
             37          (1) A contract shall be invalid to the extent that it:
             38          (a) imposes any form of restriction on the right of a physician licensed under this
             39      chapter to practice medicine within a particular geographic area of this state unless:
             40          (i) (A) the contract is for the sale of the physician's practice;
             41          (B) the physician or group of physicians selling their interest in the practice hold at
             42      least 51% interest in the ownership and control of the practice; and
             43          (C) the goodwill and all or substantially all of the practice's assets are included in the
             44      sale;
             45          (ii) the restriction, if permissible under Subsection (1)(a)(i), is only as broad in
             46      geographic scope and duration as is necessary to reasonably advance the legitimate purposes
             47      for that restriction; and
             48          (b) (i) imposes any form of financial penalty on a physician for terminating an
             49      employment, partnership, independent contractor, or any other form of a professional
             50      relationship; and
             51          (ii) for purposes of this Subsection (1)(b), "financial penalty" does not include:
             52          (A) the costs of recruiting the physician as detailed in the contract which may include:
             53          (I) startup costs of the practice such as relocation expenses and recruiter fees;
             54          (II) salary bonuses;
             55          (III) marketing costs;
             56          (IV) malpractice insurance costs;


             57          (V) student loan pay offs; or
             58          (VI) other costs detailed in the contract;
             59          (B) stipulated damages of up to any earned portion of the physician's first year salary if
             60      termination occurs within 24 months from the initial date of service unless:
             61          (I) termination is for cause by the physician; or
             62          (II) without cause by the person contracting with the physician;
             63          (C) the actual, reasonable, and quantifiable costs to the practice that are directly related
             64      to the physician's termination, including the cost of copying and forwarding patient records; or
             65          (D) the departing physician's responsibility for shared liabilities of the practice after
             66      taking into account the status and distribution of shared assets in those instances where the
             67      physician has an ownership interest in the practice.
             68          (2) Notwithstanding Subsection (1), a contract may restrict the right of a physician to
             69      directly and affirmatively solicit the patients of a practice to which the physician is no longer
             70      affiliated.
             71          (3) If a contract includes a nonsolicitation clause as permitted in Subsection (2), a
             72      patient may request information regarding the departing physician, and upon request by the
             73      patient, written notice shall be sent to the patient that includes:
             74          (a) a statement regarding the physician's departure;
             75          (b) the departing physician's new contact information;
             76          (c) an offer to forward a copy of the patient's medical records to the departing
             77      physician's new practice location upon request and the cost, if any, to the patient for such
             78      request, which shall be reasonable and based on actual costs and shall be waived if paid for by
             79      the departing physician; and
             80          (d) a statement, if applicable, of the practice's desire to continue the relationship with
             81      the patient.
             82          (3) This section only applies to contracts entered into after July 1, 2006.
             83          Section 2. Section 58-68-804 is enacted to read:
             84          58-68-804. Limitation of noncompetition agreements.
             85          (1) A contract shall be invalid to the extent that it:
             86          (a) imposes any form of restriction on the right of a physician licensed under this
             87      chapter to practice medicine within a particular geographic area of this state unless:


             88          (i) (A) the contract is for the sale of the physician's practice;
             89          (B) the physician or group of physicians selling their interest in the practice hold at
             90      least 51% interest in the ownership and control of the practice; and
             91          (C) the goodwill and all or substantially all of the practice's assets are included in the
             92      sale;
             93          (ii) the restriction, if permissible under Subsection (1)(a)(i), is only as broad in
             94      geographic scope and duration as is necessary to reasonably advance the legitimate purposes
             95      for that restriction; and
             96          (b) (i) imposes any form of financial penalty on a physician for terminating an
             97      employment, partnership, independent contractor, or any other form of a professional
             98      relationship; and
             99          (ii) for purposes of this Subsection (1)(b), "financial penalty" does not include:
             100          (A) the costs of recruiting the physician as detailed in the contract which may include:
             101          (I) startup costs of the practice such as relocation expenses and recruiter fees;
             102          (II) salary bonuses;
             103          (III) marketing costs;
             104          (IV) malpractice insurance costs;
             105          (V) student loan pay offs; or
             106          (VI) other costs detailed in the contract;
             107          (B) stipulated damages of up to any earned portion of the physician's first year salary if
             108      termination occurs within 24 months from the initial date of service unless:
             109          (I) termination is for cause by the physician; or
             110          (II) without cause by the person contracting with the physician;
             111          (C) the actual, reasonable, and quantifiable costs to the practice that are directly related
             112      to the physician's termination, including the cost of copying and forwarding patient records; or
             113          (D) the departing physician's responsibility for shared liabilities of the practice after
             114      taking into account the status and distribution of shared assets in those instances where the
             115      physician has an ownership interest in the practice.
             116          (2) Notwithstanding Subsection (1), a contract may restrict the right of a physician to
             117      directly and affirmatively solicit the patients of a practice to which the physician is no longer
             118      affiliated.


             119          (3) If a contract includes a nonsolicitation clause as permitted in Subsection (2), a
             120      patient may request information regarding the departing physician, and upon request by the
             121      patient, written notice shall be sent to the patient that includes:
             122          (a) a statement regarding the physician's departure;
             123          (b) the departing physician's new contact information;
             124          (c) an offer to forward a copy of the patient's medical records to the departing
             125      physician's new practice location upon request and the cost, if any, to the patient for such
             126      request, which shall be reasonable and based on actual costs and shall be waived if paid for by
             127      the departing physician; and
             128          (d) a statement, if applicable, of the practice's desire to continue the relationship with
             129      the patient.
             130          (4) This section only applies to contracts entered into after July 1, 2006.


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