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June 17, 2025
A trend exists across the country promoting physician mobility. Indiana is continuing that trend with an amendment to its physician non-competition statute. Effective July 1, 2025, the amendment invalidates non-competition agreements entered into after June 30, 2025, between hospitals (or hospital-related entities) and all types of physicians. See Senate Enrolled Act No. 475.
Background
In 2020, Indiana enacted legislation requiring enforceable physician non-competition agreements to contain certain provisions, including, but not limited to, provisions regarding notice to the physician’s patients, access to patient medical records, and an option to purchase a release from the noncompetition agreement. You can read our article about the 2020 law here.
In 2023, Indiana banned non-competition agreements with primary care physicians and narrowed the enforceability of such agreements as to physicians practicing in other areas. Specifically, the 2023 amendment made physician non-competition agreements unenforceable if the employer terminates the physician’s employment without cause; the physician terminates the employment relationship for cause; or the physician’s employment contract expired and the physician and employer have fulfilled the obligations of the contract. The amendment also put additional parameters around the release option. You can read our article about the 2023 amendment here.
2025 Amendment
Now, in 2025, Indiana amended the statute again to render void and unenforceable any non-competition agreement originally entered into on or after July 1, 2025 between any physician and a hospital, the parent company of a hospital, an affiliated manager of a hospital, or a hospital system.
The 2025 amendment defines a non-competition agreement to mean:
a contract, or any part of a contract, to which a physician is a party that has the purpose or effect of restricting or penalizing a physician’s ability to engage in the practice of medicine in any geographic area, for any period of time, after the physician’s employment relationship with a hospital, a parent company of a hospital, an affiliated manager of a hospital, or a hospital system has ended.
In addition to banning provisions that prohibit a physician from engaging in the practice of medicine with a new employer, the 2025 amendment bans the imposition of financial penalties or repayment obligations and bans requirements to reimburse bonuses, training costs, or similar payments (1) if the physician has been employed with the entity for at least three years and (2) the financial obligations are based primarily on the physician’s decision to practice medicine with a new employer. The 2025 amendment further bans any requirement that the physician obtain the employer’s consent or submit to equitable relief to practice medicine with a new employer.
Importantly, the 2025 amendment does not apply to nondisclosure agreements that protect confidential business information or trade secrets; agreements prohibiting the solicitation of employees for a period not to exceed one year; and agreements made in connection with the bona fide sale of a business entity of which the physician owns more than 50 percent.
Employer Takeaways
When assessing the enforceability of a physician non-competition agreement, Indiana employers and physicians must be mindful of the date on which they executed the agreement, as this 2025 amendment creates a fourth grouping of agreements. Indiana common law will govern agreements executed prior to July 1, 2020. Indiana’s law from 2020 will govern agreements executed between July 1, 2020 and July 1, 2023. The 2023 amendment will govern agreements executed after July 1, 2023. And the 2025 amendment, addressed herein, will govern agreements executed after June 30, 2025.
Hospitals and hospital-related entities in Indiana should analyze their agreements with physicians and, in light of the 2025 amendment, ensure that they have enforceable methods to protect their businesses, including nondisclosure and employee non-solicitation agreements.
The author of this article, Patricia Tsipras, is a member of the Bar of Pennsylvania. This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice in Pennsylvania, Indiana, or any other jurisdiction, nor does it establish an attorney-client relationship with any reader of the article where one does not exist. Always consult an attorney with specific legal issues.
