How Texas SB 1318 Changes Healthcare Non-Competes (and Reshapes Deals)

What Healthcare Practice Owners, Buyers, and Sellers Need to Know about Texas SB 1318

If you’re planning to buy or sell a healthcare practice in Texas, a new law just reshaped part of your deal.

Texas Senate Bill 1318 was signed by Governor Greg Abbott on June 20, 2025, and took effect September 1, 2025. It makes sweeping changes to how non-compete agreements work for healthcare providers in Texas. If you're in the middle of a transaction or considering one in the future, here's what changed and why it matters.

What SB 1318 Changes

Texas already had specific rules around non-competes for physicians. Texas SB 1318 significantly tightens those rules and, for the first time, extends similar restrictions to dentists, nurses, and physician assistants. The law amends Section 15.50 of the Texas Business and Commerce Code and adds a new Section 15.501.

The key changes for covered providers (physicians, dentists, nurses, and PAs) under agreements entered into or renewed on or after September 1, 2025:

Duration 

Non-competes are now capped at one year following termination. Previously, Texas required a "reasonable" duration, a vague standard that frequently led to litigation.

Geography

The restricted area cannot exceed a five-mile radius from the location where the provider primarily practiced at the time of termination. Same story: prior law required only a "reasonable" geographic scope, with courts left to define it case by case.

Buyout Cap 

Texas already required physician non-competes to include a buyout option. SB 1318 caps that buyout at the provider's total annual salary and wages at termination, for all covered practitioners. Previously, the amount only needed to be "reasonable" and disputes often ended in arbitration.

Automatic Voidance for Physicians 

If a physician is involuntarily terminated without "good cause," the non-compete is automatically void and unenforceable. Good cause means a reasonable basis for termination directly related to the physician's conduct, job performance, or employment record. This protection applies only to physicians, not the other covered practitioners.

Writing Requirement 

All non-compete terms must be clearly and conspicuously stated in writing, creating grounds to challenge agreements buried in boilerplate.

One important note on timing: SB 1318 applies only to agreements entered into or renewed on or after September 1, 2025. Agreements signed before that date remain under prior law unless renewed. Many employment agreements contain automatic renewal provisions, so if your contracts renew annually, they may already fall under the new rules.

What This Means for Practice Sellers and Buyers

The implications of SB 1318 extend well beyond employment agreements. For anyone buying or selling a healthcare practice in Texas, this law touches several central parts of the transaction.

Considerations for Sellers

If you're selling your practice to a DSO, the most common structure is that you stay on post-close under an employment agreement that includes a non-compete. Buyers pay for goodwill and patient relationships, and they want protection. SB 1318 now caps how long and how broadly that protection can extend when the non-compete relates to the clinical practice of medicine, dentistry, nursing, or practice as a PA. As a selling provider, your post-employment flexibility is now legally protected.

There is one important question left unanswered: SB 1318 does not explicitly clarify whether its restrictions apply to transaction-based non-competes (non-competes tied to practice acquisitions or sales), as opposed to those that are purely employment-based. The statutory language ties the buyout cap and one-year tail to termination of employment, which has led some practitioners to argue the law was intended for employment context only. Until courts resolve this, parties negotiating non-competes that arise from the sale of a practice rather than employment face some legal ambiguity worth addressing with counsel.

Considerations for Buyers

If you're buying a practice, a few things deserve attention. The one-year, five-mile limits are now a hard ceiling on clinical practice restrictions for covered providers. If you're accustomed to deal structures that include longer or broader non-competes for selling providers staying on in an employment capacity, those are no longer enforceable. The buyout cap also changes the calculus: a provider whose non-compete is no longer cost-prohibitive to exit may be more willing to do so.

Additionally, if you terminate a selling physician post-close for performance or conduct reasons, that termination needs to be well-documented and clearly tied to good cause. Without it, the non-compete becomes void.

Consider structuring clinical and business non-competes separately. SB 1318's restrictions apply specifically to non-competes that restrict the clinical practice of medicine, dentistry, nursing, or as a physician assistant. Non-competes related to business operations, administrative services, or ownership interests are likely outside the law's reach, and bifurcating them can reduce the risk of an entire agreement being challenged.

Don’t live in Texas? This is a national pattern worth watching.

Texas is part of a growing wave. In 2025 alone, Arkansas, Colorado, Illinois, Indiana, Montana, Oregon, and Utah all passed or amended legislation restricting healthcare non-competes. More than 35 states now have some form of healthcare non-compete legislation on the books.

The direction is clear: states are narrowing the scope of what's enforceable, expanding which practitioners are protected, and in some cases banning healthcare non-competes altogether. If you're operating or acquiring practices across state lines, the rules likely vary significantly depending on where you're doing business. It's worth knowing what applies in each state before you sign anything.

At Marti Law Group, we work with healthcare practice owners at every stage. If you have questions about how SB 1318 affects your deal or your agreements, reach out to our team.