Last month we reported on physician and healthcare noncompete laws enacted in 2025. Shortly after the article was posted, another state joined the ranks: Indiana.
Indiana recently enacted Senate Enrolled Act No. 475 (the "Act"), which amended Indiana's preexisting physician noncompete statute. The amendment prohibits certain physicians from entering noncompete agreements with hospitals, parent companies of hospitals, affiliated managers of hospitals, or hospital systems. The Act is Indiana's third law restricting physician noncompetes, building upon existing legislation passed in 2020 and 2023.
Backdrop: Indiana's 2020 and 2023 Physician Noncompete Restrictions
In 2020, Indiana took its first step toward restricting physician noncompete agreements with the passage of Indiana Code section 25-22.5-5.5. Under the 2020 law, a physician noncompete agreement is only enforceable if it satisfies certain requirements, such as ensuring patient notification of the physician's contact information, ensuring the physicians' access to medical records, and giving the physician the option to purchase a release from the terms of the noncompete covenant at a "reasonable price."
In May 2023, Indiana took a second step toward restricting physician noncompete agreements with the passage of Senate Enrolled Act No. 7 ("SEA 7"). Most notably, SEA 7 prohibits noncompete agreements between an employer and a primary care physician. SEA 7 also renders noncompete agreements with all other types of physicians unenforceable where (1) the employer terminates the physician's employment without cause, (2) the physician terminates their employment for cause, or (3) the physician's employment contract expires, and the physician and employer have fulfilled their obligations under the employment contract. SEA 7 also clarified the "reasonable price" buyout provision in the 2020 law by specifying a process for negotiating a reasonable buyout price.
Senate Enrolled Act No. 475
This year, on May 6, 2025, Governor Mike Braun signed into law Senate Enrolled Act No. 475. Effective July 1, 2025, the Act prohibits noncompete agreements between a physician and a hospital, parent company of a hospital, affiliated manager of a hospital, or hospital system. The Act does not repeal, replace, or reduce any aspect of the 2020 or 2023 laws. It only applies to agreements entered into on or after July 1, 2025.
The Act defines a "noncompete" as any contract or contractual provision that restricts or penalizes a physician's ability to practice medicine in any geographic area for any period of time after a physician's employment ends. The Act provides further illustration: the definition explicitly includes restrictive covenants that impose financial penalties or repayment obligations pursuant to practicing medicine with a new employer, provisions requiring employer consent to practice medicine with a new employer, and provisions that impose indirect restrictions that limit or deter a physician from practicing medicine with a new employer.
The Act does not apply to:
- Agreements in the sale-of-business context where the physician owns more than 50% of the business entity at the time of sale;
- Nondisclosure agreements protecting confidential business information and trade secrets; or
- Non-solicitation agreements, so long as the non-solicitation agreement only lasts for a one-year term post-employment and does not restrict patient interactions, patient referrals, clinical collaboration, or a physician's professional relationships.
Importantly, the Act's definition of "hospital" does not include freestanding health facilities, rural emergency hospitals, and institutions specifically intended to diagnose and treat mental illness and developmental disabilities.
In light of these new restrictions, employers expecting to enter noncompete agreements with physicians in Indiana should work with counsel to make sure their agreements meet these new standards. We will continue to monitor and report on developments in this highly dynamic area of law. This article was prepared with the assistance of 2025 summer associate Ally Anderson.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
