Physician noncompete agreements must be carefully tailored

When covenants not to compete are used, care must also be taken that they are not viewed as a violation of the Medicare anti-kickback statute, 42 U.S.C. Section 1320a-7b(b). Some government officials have asserted that, when physicians selling their practices continue to be affiliated with the buyers of those practices, payments to physicians for intangibles (including covenants not to compete) could be disguised payments for future referrals. See Dec. 22, 1992 letter from D. McCarty Thornton, General Counsel to the Office of Inspector General, to T. J. Sullivan at the Internal Revenue Service. Although the anti-kickback statute is beyond the scope of this article, it must be considered in this context, and care should be taken in any event to assure that purchase prices for physician practices in no event exceed fair market value.