What is a non-compete in a healthcare practice sale?
A non-compete (non-competition covenant) is a contractual restriction, negotiated as part of a practice sale, that limits where and when a selling physician can provide services after the transaction closes.
Quick answer
A non-compete in a healthcare practice sale restricts the selling physician from opening or joining a competing practice within a defined geography and time period, typically 15 to 50 miles and 3 to 5 years, though state law enforceability varies widely.
The detail
Non-competes tied to practice sales are treated differently from employment non-competes in most states. Courts generally enforce sale-based non-competes more strictly because the physician is being compensated for the restriction through the purchase price. Typical terms: 15 to 50 miles radius from each clinic location, 3 to 5 years duration, scope limited to the same specialty. But enforceability depends heavily on state law. California, Minnesota, Oklahoma, and North Dakota sharply limit non-competes even in sale contexts. Several states have active legislation restricting physician non-competes further. The FTC's April 2024 non-compete rule was struck down in federal court in August 2024, so there is no federal ban in effect as of 2026, but state-level restrictions have expanded steadily year over year. Sellers who plan to move to a non-compete-restrictive state or continue practicing part-time should negotiate carve-outs in the sale documents.
FTC non-compete rule (proposed April 2024) was struck down by federal court in August 2024 and is not in effect as of 2026.
Source: FTC
California, Minnesota, Oklahoma, and North Dakota have the most seller-friendly state laws restricting physician non-competes, even in sale contexts.
Source: AMA physician contract resources
What this means for clinic owners
From Sorso
The non-compete is where most practice sales disputes end up years after closing. Negotiate the geography and carve-outs before signing, not after, because courts will generally enforce what you agreed to unless a state law specifically says otherwise.
Related questions
How do PE firms value medical practices?
Private equity firms value medical practices primarily on a multiple of trailing twelve-month adjusted EBITDA, typically 5x to 12x, with the multiple driven by scale, growth, payer mix, and provider retention.
Should I sell my practice to private equity?
Selling to private equity makes sense if you want partial liquidity, want to grow with capital and infrastructure, and are willing to operate as a partner rather than sole owner; it is wrong if you want full retirement or full operational autonomy.
How do I evaluate a PE offer?
Evaluate a PE offer on six dimensions: enterprise value multiple, cash at close percentage, rollover equity terms, post-close compensation structure, earnout conditions, and platform exit timing assumptions.
What is an LOI in healthcare M&A?
A letter of intent (LOI) in healthcare M&A is a non-binding agreement that sets the proposed purchase price, structure, exclusivity period, and diligence timeline before a buyer commits the resources to close a deal.
Sources
Founder of Sorso. 19 years in corporate finance. Managed a $450M loan portfolio before building a fractional CFO firm exclusively for healthcare clinics.
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