When physicians at Aspirus St Luke’s Hospital in Duluth, Minnesota, were given an ultimatum to sign amendments to their contracts after a merger or lose their jobs, they called their employer’s bluff.

Now, the state’s attorney general is investigating the Duluth-area hospital system and its parent company after some of the doctors filed antitrust complaints.

The health system says the amendment does not change the terms of physicians’ noncompete agreements included in their original contracts. But doctors argue they are protected by Minnesota’s ban on noncompete agreements, which lawmakers passed in 2023.

The investigation comes amid an ongoing national debate over the widespread use of noncompete agreements in medicine and highlights the complexities of hospital consolidation across states with varying laws on those agreements. 

Four states have near-total bans on noncompetes, and 34 states plus the District of Columbia restrict their use. Aspirus is based in Wisconsin, which does not limit noncompete agreements.

The Federal Trade Commission in September issued letters to HCA Healthcare, Tenet Healthcare Corporation, and other large health systems warning them to avoid contract conditions that restrict competition or patient access to healthcare, Modern Healthcare reported.

A Multistate Hospital Merger

When Aspirus merged with St Luke’s Hospital in May 2024, the newly formed, 19-hospital system promised to honor the latter’s physician contracts.

But four physicians who spoke with Medscape Medical News for this story said the amendment they were asked to sign would change working conditions so significantly that it would be tantamount to an entirely new contract.

Initially, doctors say they were told in September by Aspirus St Luke’s management that they had until November 17 to sign the amendment. Supervisors said refusal to do so would be considered a voluntary resignation, and they’d be held to the terms of their original noncompete agreements, the physicians told Medscape Medical News. 

That meant doctors could be barred from working within 10-25 miles of any St Luke’s location for up to 2 years.

Because population centers are sparse across northern Minnesota and Wisconsin, physicians say their noncompetes have a broad reach.

The strategy of amending an existing contract to circumvent a new law from applying isn’t new, but it’s not a guaranteed success, said Boston-based attorney Russell Beck, a nationally recognized expert on noncompete agreements.

Aspirus St Luke’s suspended the November deadline after the state attorney general initiated its investigation.

In an email statement, a spokesperson said the attorney general is concerned about “overly broad or improperly maintained” noncompetes, but that the office can’t comment on an ongoing investigation. He said, however, that the office has issued a subpoena to Aspirus St Luke’s requesting that it share more information on the noncompetes. 

Doctors Upset With Proposed Changes

Doctors who spoke to Medscape Medical News said the amendment gives Aspirus St Luke’s more power over their working conditions but offers nothing in return.

Medscape Medical News agreed not to name any of the physicians it spoke to for this story because they feared retaliation from their employer.

Medscape Medical News reviewed a current contract and amendment of a primary care physician, which included several changes. One is that the health system would have more control over scheduling, which physicians say could include mandatory nights and weekends without additional compensation.

Unlike the original contract, the portion of the amendment that addresses physician duties did not specify the locations where they would practice. Doctors say this change allows management to reassign them to different clinics and hospitals. Based on the document’s wording, they are unsure whether that provision only applies to St Luke’s locations or the entire Aspirus network. The network’s website lists 310 locations, which stretch nearly 300 miles from northern Minnesota’s Iron Range to Michigan’s Upper Peninsula, and then another 300 miles south into central Wisconsin.

“In protecting our legal rights, Aspirus St Luke’s is acting in the best interest of our organization, and more importantly, in the best interest of our patients and community,” the health system said in an emailed statement. 

It added that it’s confident the amendment is legal and the preexisting physician noncompetes are enforceable under Minnesota law, but that it will continue to collaborate with the attorney general.

A Legal Gray Zone

In the past few years, at least a half dozen states have passed legislation to ban or limit the use of noncompetes specifically for doctors and other clinicians. Minnesota’s ban extended to all industries, outlawing these agreements in most instances.

But the law was not retroactive, meaning it only applies to contracts signed after June 30, 2023. Therefore, if the Attorney General deems the amendment invalid, it limits Aspirus St Luke’s leverage over its physician employees. 

Several doctors said they contacted the attorney general after management dismissed their concerns and questions about the amendments. 

“I think they were counting on the employees not being willing to fund their own legal battle,” said one emergency physician. “I don’t think they saw the attorney general stepping in.”

Because Minnesota’s noncompete ban is relatively new, the state’s courts have not weighed in on the issue, noted Bert Black, an attorney with the Minneapolis-based law firm Schaefer Halleen, which specializes in representing employees.

However, given the attorney general’s interest in other employee rights issues, such as wage theft, Black believes the physicians have a pretty good shot at coming out on top.