Indiana’s House Enrolled Act No. 1004—Two Key Developments That Will Affect Every Physician Employer in Indiana (Part I Of II)

Earlier this spring and shortly before Indiana began to feel the brunt of the COVID-19 pandemic, the Indiana legislature passed, and Governor Eric Holcomb signed, House Enrolled Act 1004 (“HEA 1004“). HEA 1004 contains a number of sweeping health law changes in Indiana. Importantly, the law goes into effect on July 1, 2020.

Two Key Developments That You Will be Required to Follow

There are two specific provisions in HEA 1004 that need to be on the radar of every health care entity in Indiana that employs physicians or utilizes the services of physicians.

1. HEA 1004 creates a new law—I.C. § 25-22.5-5.5—that “applies to physician noncompete agreements originally entered into on or after July 1, 2020.”
2. HEA 1004 creates an additional new law—I.C. § 25-22.5-17—that requires employers of physicians to comply with certain patient information protocols upon the physician’s departure from the organization; these requirements apply regardless of whether or not a physician noncompete exists.

Part I of this blog article analyzes the physician noncompete legislation in HEA 1004. Part II of this article, which will be published as a separate installment, analyzes HEA 1004’s patient information protocol requirements.

Public Policy Considerations

Before passing HEA 1004, ample testimony was heard by committees of both the House and the Senate to discuss and debate the underlying public policy considerations; Hall Render, on behalf of the Indiana Hospital Association, was heavily involved in the legislative process.

The underlying public policy was couched in terms of providing the highest quality health care for Indiana. Supporters of HEA 1004 argued that physician noncompetes were bad for health care because i) they made it more difficult to attract top physician talent to Indiana; ii) they drove up health care costs; and iii) they forced physicians under noncompete agreements to leave the community or the state upon separation of employment.

Supporters of HEA 1004 also argued that physician noncompetes were bad for patients because they prevented or interfered with continuity of care and restricted the patient’s access to certain information regarding the departing physician.

New Requirements for Physician Noncompetes—I.C. § 25-22.5-5.5

As noted above, HEA 1004 includes a new law—I.C. § 25-22.5-5.5—that significantly impacts physician noncompete agreements “originally entered into on or after July 1, 2020” (the “Physician Noncompete Law”).

Under the Physician Noncompete Law, an enforceable physician noncompete agreement must include the following provisions:

1. Patient notification letter to be provided to physician—A provision that, in the event of a physician’s separation of employment, requires the employer to provide the physician with a copy of any patient notification letter that (a) concerns the physician’s departure; and (b) was sent to any patient seen or treated by the physician in the two (2) years preceding the physician’s departure. Due, however, to patient privacy and confidentiality considerations, patient names and contact information have to be redacted from the patient notice that’s shared with the physician.
2. Contact information to be provided to patients—A provision that, in the event of a physician’s separation of employment, requires the employer to, in good faith, provide the physician’s last known contact and location information to a patient who (a) requests the physician’s updated contact and location information; and (b) was seen or treated by the physician in the two years preceding the physician’s departure.
3. Medical records to be provided to physician—A provision that, in the event of a physician’s separation of employment (and contingent on receipt of the patient’s consent), requires the employer to provide the physician with access to or copies of any medical record associated with the patients described above in numbered paragraphs (1) or (2). (Note that the Physician Noncompete Law permits the employer to charge a reasonable fee as permitted under state or federal law for creating, copying or transferring a patient medical record).
4. Buy-Out Option—A provision that, in the event of a physician’s separation of employment, provides the physician with an option to purchase a complete and final release from the terms and conditions of the noncompete agreement at a reasonable price.
5. Format of Medical Records—A provision that restricts the employer from providing medical records to a requesting physician in a format that materially differs from the format used during the employer’s usual and customary business practices, unless a different format is mutually agreed to by the parties. Note that paper or .pdf copies satisfy the formatting requirements of the Physician Noncompete Law.

Part II of this article, to be published as a separate installment, will address the “parallel” patient information protocol requirements in HEA 1004 (specifically, the requirements in I.C. § 25-22.5-17). As mentioned above, health care entities will be required to follow HEA 1004’s patient information protocols, regardless of whether or not a physician noncompete agreement exists. Stated differently, the requirements in I.C. § 25-22.5-17 apply more broadly than the Physician Noncompete Law.

Practical Takeaways

• The Physician Noncompete Law specifically applies to physician noncompete agreements originally entered into on or after July 1, 2020. Work with legal counsel to assess your options and strategies:
  • From a timing and implementation standpoint (e.g., entering into agreements prior to July 1, 2020); and
  • From a scope of coverage standpoint (e.g., original agreements vs. amended/renewed agreements; etc.).
• Physician practice groups should note that the Physician Noncompete Law applies to their organizations as well. There are, however, certain steps that you can take prior to July 1, 2020, especially with respect to ancillary physician noncompete agreements.
• The statutory buy-out requirement represents one of the most significant changes in this area of the law; there is no one-size-fits-all solution.
  • What constitutes a “reasonable” buy-out price will have to be fleshed out in the courts. It will likely take a couple of years before we have reported decisions on this issue.
  • Work with legal counsel to determine a reasonable buy-out amount based on the particular facts and circumstances associated with your organization and the physician in question.
  • Of particular importance to heath care entities is the clause in the Physician Noncompete Law that says “in the event the physician elects not to exercise the [buy-out] option, then the [buy-out] option [can’t] be used in any manner to restrict, bar, or otherwise limit the employer’s equitable remedies, including the employer’s enforcement of the physician noncompete agreement” (emphasis added).
• With respect to the medical records, copying charges and medical record formatting provisions of HEA 1004, tread very carefully.
  • The Office of Civil Rights, which is the federal agency with oversight responsibility over HIPAA, is laser-focused on patient access rights to medical records. Point being, federal privacy laws supersede state laws and can impose different requirements when it comes to patient medical records.
  • Hall Render’s HIPAA, Privacy & Security attorneys are readily available and uniquely positioned to help you navigate these waters.

Please stay tuned for Part II of this article and be on the lookout for details surrounding the upcoming Hall Render webinar on this topic.

If you have any questions on issues discussed in or related to this post, please contact Dana Stutzman at dstutzman@wp.hallrender.com or (317) 977-1425 or your regular Hall Render attorney.

For more information on Hall Render’s Labor & Employment services, click here.

Hall Render’s attorneys and professionals continue to maintain the most up-to-date information and resources, which are available at our COVID-19 Resource page, through our 24/7 COVID‑19 Hotline at (317) 429-3900 or by contacting your regular Hall Render attorney.

Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.