Understanding Texas Senate Bill 1318: Implications for Direct Primary Care and Membership Medicine Clinics
By: Drew Duffy, MHA, FACHE, Founder & Managing Director, ClearPath Compliance
As of September 1, 2025, Texas will implement significant legislative changes affecting non-compete agreements for healthcare providers. Senate Bill 1318 (SB 1318) introduces comprehensive reforms that will reshape how Direct Primary Care (DPC) and membership medicine clinics structure employment and contractor agreements with physicians, advanced practice providers, and other clinical staff. These changes warrant close attention from clinic leadership and compliance professionals to ensure contractual arrangements remain enforceable and aligned with evolving legal standards.
Key Provisions of SB 1318 Affecting Healthcare Provider Agreements
Limitations on Non-Compete Duration and Geographic Scope
SB 1318 establishes a maximum duration of twelve months for non-compete agreements executed by physicians and other healthcare practitioners. This is a significant restriction compared to prior arrangements, which often included longer or indefinite terms. The statute further limits enforceable geographic restrictions to a radius of five miles from the location where the provider primarily practiced during their tenure. These constraints aim to balance protection of legitimate business interests with the provider’s ability to maintain professional mobility within reasonable bounds.
Caps on Buyout Clauses and Compensation
The legislation imposes a cap on buyout provisions associated with non-compete clauses, limiting these amounts to no more than the total annual compensation the provider received in the preceding twelve months. This measure is designed to prevent disproportionate financial penalties that might otherwise restrict provider mobility. Clinics will need to revisit existing contracts to confirm that buyout amounts adhere to this new threshold.
Enforcement and “Good Cause” Termination Protections
Importantly, SB 1318 stipulates that non-compete agreements are unenforceable if the provider’s termination was without “good cause.” While the statute does not exhaustively define “good cause,” it generally refers to justifiable reasons such as documented misconduct or failure to perform contractual obligations. This provision protects healthcare providers from punitive restrictions following termination absent legitimate cause, thereby fostering fairer employment practices.
Expanded Scope of Applicability
Unlike previous laws that primarily addressed physicians, SB 1318 extends these restrictions to include dentists, nurse practitioners (including Advanced Practice Registered Nurses), and physician assistants. This broadening of scope reflects recognition of the evolving multidisciplinary nature of healthcare delivery in membership medicine and DPC models, where such providers constitute vital components of clinical teams.
Administrative Roles Exemption
Providers who function solely in administrative, leadership, or managerial capacities are exempted from the statute’s new limitations. Non-compete agreements involving such roles remain governed by prior statutes and are subject to more flexible enforcement standards.
Practical Implications for DPC and Membership Medicine Clinics
Contract Review and Revision
Given these statutory changes, clinics must prioritize thorough review of all existing non-compete agreements, particularly those set to renew or newly executed on or after September 1, 2025. Contracts exceeding the new temporal or geographic limits, or containing buyout provisions above the statutory cap, risk unenforceability. Timely revisions will help avoid costly legal disputes and uncertainty.
Impact on Staffing and Provider Retention
The restrictions on non-compete terms may influence retention strategies. Clinics will need to develop alternative approaches to encourage provider loyalty and minimize turnover, including competitive compensation, professional development opportunities, and positive workplace culture. Non-compete clauses will no longer serve as the primary mechanism to restrict movement, especially given the unenforceability clauses tied to terminations lacking “good cause.”
Recruitment and Competitive Landscape
With reduced enforceability of expansive non-compete provisions, providers may experience greater flexibility in pursuing opportunities with competing clinics or establishing independent practices. This dynamic may increase competition among membership medicine providers and necessitate innovative recruitment and retention efforts.
Compliance and Risk Management
Non-compliance with SB 1318 can expose clinics to legal challenges and damages. Therefore, integrating statutory requirements into compliance programs and ongoing risk management frameworks is essential. Clear documentation, transparent contract language, and regular policy updates will be critical components.
Additional Considerations: Telehealth and Membership Medicine
While SB 1318 primarily addresses non-compete agreements, Texas continues to refine other areas impacting membership medicine and DPC, particularly telehealth regulations. With the expansion of telehealth services accelerated by recent public health developments, providers should remain attentive to state licensing, prescribing, and reimbursement policies. Ensuring compliance in these domains complements contractual adherence and supports sustainable clinic operations. We will dive deeper on this topic in our next blog.
Conclusion: Preparing for SB 1318 Compliance
The enactment of Senate Bill 1318 marks a significant shift in Texas healthcare employment law, with direct implications for membership medicine and DPC clinics. Leadership should undertake proactive measures to review and amend agreements, update retention policies, and reinforce compliance infrastructure. While the law imposes new constraints, it also encourages fairer practices and enhanced provider autonomy.
ClearPath Compliance is positioned to assist clinics navigating these transitions. Through comprehensive contract audits, template development aligned with SB 1318 requirements, and strategic advisory services, ClearPath supports clinics in minimizing legal risk while fostering a stable, compliant practice environment.
For clinics seeking guidance tailored to Texas’s evolving regulatory landscape, ClearPath offers expert consultation and practical solutions designed to maintain operational resilience and provider satisfaction. We offer a free initial consultation. Feel free to reach out to us at: info@clearpathcompliance.org, or give us a call at 1-888-996-8376.
About the Author
Drew Duffy, MD, MHA, CPCO, CRCMP, CHCO, CIPP/M, FACHE, is Founder & Managing Director of ClearPath Compliance. With over 20 years in healthcare operations and compliance, Drew draws on his clinical background and extensive expertise, supported by a network of experienced healthcare leaders—to deliver practical, ethical solutions for providers navigating today’s complex regulatory landscape.