Indiana bans physician non-compete agreements with hospitals

Indiana Governor Mike Braun signed Senate Enrolled Act No. 475 on May 6, 2025, invalidating non-compete agreements between physicians and hospitals entered into after June 30, 2025.

What happened

The Indiana legislature passed another amendment to the state's 2020 Physician Non-Compete Statute (Ind. Code § 25-22.5-5.5). This 2025 amendment specifically targets agreements between physicians and hospitals or hospital-related entities, making any non-compete agreements originally entered into on or after July 1, 2025, between physicians and a hospital, parent company of a hospital, affiliated manager of a hospital, or hospital system void and unenforceable. The amendment applies to physicians of all types, regardless of practice specialty, joining previous restrictions established in 2020 and 2023.

The backstory

Indiana implemented its original Physician Non-Compete Statute in 2020, establishing specific requirements for physician non-compete agreements. Before 2020, physician non-compete agreements followed the same legal analysis as other occupations, requiring a reasonable scope. The 2023 amendment then banned non-compete agreements for primary care physicians entered into after July 1, 2023, and made restrictions unenforceable for other physicians under certain termination conditions.

Going deeper

The 2025 amendment defines several terms, including "noncompete agreement," which includes:

• Provisions prohibiting physicians from practicing medicine with new employers
• Financial penalties or repayment obligations if a physician has been employed by a hospital entity for at least three years
• Requirements for employer consent to practice medicine with a new employer

The amendment exempts:

• Nondisclosure agreements protecting confidential information
• Non-solicitation agreements restricting the recruitment of employees for up to one year
• Agreements connected to business sales where the physician owns more than 50% of the entity

What was said

In a January statement, Governor Mike Braun emphasized that, “We are going to be constantly out there encouraging our own providers to get with us, to start embracing competition and transparency to make healthcare more affordable and especially transparent.”

Why it matters

The 2025 amendment creates a fourth separate framework for determining whether a physician's non-compete agreement is enforceable in Indiana. Portions of the four frameworks overlap, potentially causing courts to borrow defined terms across different portions of the statute. Employers must now consider the agreement's original execution date, the physician's practice specialty, and whether the employer is a hospital entity to determine which framework controls.

The bottom line

Hospitals and hospital-related entities employing physicians in Indiana should immediately assess how this new amendment affects their protections against unfair competition. These employers need to develop new plans for employment contracts and employee retention strategies before the law takes effect on July 1, 2025.