FTC's Final Rule on Noncompetes: Recent Developments

Health Affairs has posted a new article by Erin C. Fuse Brown, Megha Reddy, and Christopher M. Whaley: "The FTC's Noncompete Rule: Legal Challenges And Potential Solutions For Physician Markets." It's a welcome comprehensive review of what the rule does and doesn't do and its current legal status. (My summary of the rule is here. (4/24/24)) It's well worth reading.

The article does a nice job of summarizing the August decision out of the Northern District of Texas, holding that the FTC's rule exceeds its statutory rulemaking authority and is arbitrary and capricious. Unlike another district court, which found the rule to be invalid but enjoined its enforcement only against the plaintiff in the case, the order in the Northern District case entered a nationwide injunction against the rule's enforcement. 

Although the trial court didn't cite the Supreme Court's Loper Bright decision (discussed here and here), the authors point out that the decision represents a Loper Bright-like refusal to accord any deference to the FTC's interpretation of its rulemaking authority. The FTC is "considering" an appeal. I hate to predict, but I'd be surprised if there's no appeal, although its appeal would be to the ultra-conservative Fifth Circuit Court of Appeals, where an affirmance would be likely, imho.

Hall Render on the Latest Ruling Against the FTC in Challenge to Its Noncompete Rule

The good folks at Hall Render have posted an alert concerning last Thursday's injunction against enforcement of the FTC's final rule banning almost all noncompete clauses. The injunction came out of the Middle District of Florida and favors only the named plaintiff in the suit, not the entire country. Other district courts earlier disagreed over similar requests for injunctions:

• Ryan, LLC v. FTC (Northern District of Texas): injunction granted against FTC's enforcement of the final rule.
• ATS Tree Services, LLC v. FTC (Eastern District of Pennsylvania): injunction denied (plaintiff failed to show both irreparable harm and the likelihood of prevailing on the merits).

As for the long-running debate over whether the politics of the appointing president makes a difference to the outcomes in specific cases, Hall Render notes: "The presiding judge in the Ryan, LLC lawsuit in Texas was appointed by then-President Trump in 2019. The presiding judge in the ATS Tree Services, LLC lawsuit in Philadelphia was appointed by President Biden in 2022."

The most recent Hall Render post includes this reminder: "Limits on FTC Jurisdiction: Don’t lose sight that the FTC lacks jurisdiction over nonprofit entities." That means the FTC's final rule doesn't apply to the 49.2 percent "of the 4,644 Medicare-enrolled hospitals [that] are non-profit" (HHS Office of Health Policy, August 2023).

Texas Governor Abbott Weaponizes Charity Care

Uncompensated care is a serious issue that requires a serious response from serious politicians. On Thursday, rather than doing something to alleviate the crisis in Texas, Governor Greg Abbott chose to weaponize the issue in his ongoing battle with the Biden Administration over control of the Texas-Mexico border.

Texas's nonprofit and for-profit hospitals alike can be challenged by the volume of uncompensated care they provide. The federal Emergency Treatment and Active Labor Act (EMTALA) requires all hospitals that receive Medicare funds to provide emergency care without regard to the patient's ability to pay. Added to that, if the patient needs to be admitted as an in-patient in order to stabilize their emergency medical condition, the cost of the hospital's EMTALA obligation can really sky-rocket.

Add to that Texas's requirement that nonprofit hospitals must provide a certain amount of uncompensated care in order to maintain their nonprofit status as well as their state tax-exempt status. 

Beginning in 1954 a hospital's federal tax-exempt status required the provision of charity care to the extent of its financial ability, but that requirement ended in 1969. The Affordable Care Act (ACA) does require hospitals to provide charity care, though it does require tax-exempt hospitals to report on community needs, including uncompensated care, and on the hospital's own level of uncompensated care (26 USC § 501(r)). My hope is that the hospital reports, as well as the IRS summaries that the ACA required be sent to Congress, will result in the reinstatement of a charity-care requirement. Time will tell.

As a result of these state and federal rules, the distribution of uncompensated care is spread unevenly among hospitals across the state. There are some for-profit hospitals that report higher levels of uncompensated care than nonprofit providers. And among the nonprofit hospitals, the cost of charity care as a percentage of net revenues varies wildly. This is often a function of location. Residents of wealthier communities tend to have decent health insurance (and other assets to pay for care that is not covered by their insurance policies), while poorer communities have a higher percentage of uninsured and under-insured residents. 

The Affordable Care Act expanded insurance coverage, to be sure, but the uninsured rate in the U.S. is still hovering around 9%, slightly better than our poverty rate of around 11%. Texas's numbers aren't just higher than the national average; they are alarmingly, embarrassingly so. Poverty: 14% (33% higher than the national rate). Uninsured: 16.6% (about twice the national rate). If Texas cared about doing something to improve the health of our poorest residents, it could expand Medicaid eligibility (with matching federal dollars picking up the lion's share of the cost) with the stroke of a pen. 

For that to happen, we would need leaders who are serious about helping our uninsured poor population to get the health care they need. This past week, however, Gov. Abbott demonstrated his lack of seriousness and instead chose to turn uncompensated care into a political football in his on-going battle with the federal government over control of our border with Mexico. On Thursday (Aug. 8) the governor issued an executive order calling upon hospitals to report their costs of providing uncompensated care to patients who are in the country illegally. Abbott's plan is clear: 

"Texans should not have to shoulder the burden of financially supporting medical care for illegal immigrants," Mr. Abbott said in an Aug. 8 news release. "Texas will hold the Biden-Harris Administration accountable for the consequences of their open border policies, and we will fight to ensure that they pay back Texas for their costly and dangerous policies."

Political point: scored. Human suffering: unchanged. 

U.S. DOJ Closes Gun Show Loophole; Judge Kacsmaryk (Of Course) Blocks Rule (Of Course) in 4 States

As I have noted before, firearm violence is a public-health disaster. The Justice Department has taken a major step in the effort to keep firearms out of the hands of high-risk individuals. As reported by the Washington Post and Kaiser Family Foundation (emphasis added):

In a move that officials touted as the most significant increase in American gun regulation in decades, the Justice Department has finalized rules to close a loophole that allowed people to sell firearms online, at gun shows and at other informal venues without conducting background checks on those who purchase them. Vice President Harris and U.S. Attorney General Merrick Garland celebrated the rules and said they would keep firearms out of the hands of potentially violent people who are not legally allowed to own guns. (Stein, 4/11)

I'm a little late to the party on this development, but this is a big enough deal to warrant paying some attention.

That's the good news. 

Then there's the bad news (from The Hill (6/12/24):

A federal judge in Texas blocked the Biden administration’s attempt to close the so-called gun show loophole on Wednesday, expanding a prior temporary ruling to impact Texas, Louisiana, Utah and Mississippi.

Judge Matthew Kacsmaryk ruled last month that the requirement to run a background check before purchasing a firearm could not go into effect in Texas. His final ruling Wednesday expands that injunction to the three other states.

The judge is the ever-ready, go-to federal jurist in Amarillo for conservative litigants from around the country who are keen to block the Biden Administration's reforms. (Bloomberg Law, May 9, 2024)

Members of Congress have expressed concern about the steady stream of anti-Administration rulings coming out of Amarillo in favor of far-flung litigants, usually with the flimsiest of connections to the Northern District of Texas. But so far, the Northern District judges have rebuffed suggestions to reform their procedures for assigning cases.