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Healthcare Industry E-Flash End of Physician Covenants Not to Compete?A June 29, 2005 opinion issued by the Tennessee Supreme Court ruled that a covenant not to compete between a physician and medical provider may not be enforceable. The opinion was issued in the case of Murfreesboro Medical Clinic, P.A. v. David Udom. The Tennessee Supreme Court stated, “We hold that except for those specifically prescribed by statute, physicians' covenants not to compete are unenforceable and void.” Healthcare organizations often depend upon covenants not to compete to protect their investments in recruiting and retaining skilled physicians. Therefore, the ruling could have a significant impact on the value of physician groups and other medical providers. For example, more risk may be associated with revenue projections due to the possibility of additional competition from physicians that are currently employees of the organization. From a valuation standpoint, this decision can have a significant impact on the volume projections and discount rates used in valuing physician practices. For additional details regarding the above ruling or our healthcare valuation services, please email or call Carol Carden at ccarden@valuepointconsulting.net or (865) 558-8118. For more information about ValuePoint, please visit our website at www.valuepointconsulting.com . ValuePoint Consulting Group, LLC
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