In federal court in Eugene on Monday, lawyers squared off over PeaceHealth’s plan to overhaul emergency services at its Lane County hospitals.
The change would replace Eugene Emergency Physicians — a local group that has staffed PeaceHealth’s three Oregon ERs for over 35 years — with a new setup involving out-of-state ApolloMD. The move has drawn pushback from many of the hospital’s current doctors, lawmakers and others in the community.
At the center of the fight is Senate Bill 951, Oregon’s recently enacted law that strengthens the state’s long-standing ban on the corporate practice of medicine. The law is meant to keep medical decisions in the hands of licensed professionals, not corporations or outside management companies.
Lawmakers passed SB 951 last year to shut down a common workaround where companies put a physician’s name on a practice but still pull the strings behind the scenes. In these arrangements, the doctor appears to be in charge, but key decisions are often driven by the company.
The new law draws a clearer line by limiting how outside management companies can influence things such as hiring, staffing, billing and anything that could shape a doctor’s medical judgment.
Supporters say it is a necessary step to protect patients. Critics argue it could make it harder to run large healthcare systems that rely on administrative partners.
Now, for the first time in Oregon, a federal court is being asked to decide exactly where that line is.
Monday’s opening arguments made clear this case goes well beyond a simple contract dispute. The outcome could shape how Oregon enforces its new limits on corporate involvement in healthcare and how closely it will scrutinize these kinds of management-company arrangements going forward.
U.S. District Judge Mustafa Kasubhai acknowledged as much, saying the court is dealing with a new law and will have to carefully sort out what the “legislation is intended, or not intended, to accomplish.”
He repeatedly pressed both sides to focus on the core legal question — whether the new arrangement violates SB 951.
Doctors Warn of Rushed Transition
Eugene Emergency Physicians, along with one of its doctors, Dr. Dan McGee, and a Lane County parent whose child has received emergency care locally filed a complaint earlier this month asking a judge to block PeaceHealth from moving forward with Atlanta-based staffing firm ApolloMD.
They argue the planned transition is not only illegal under state law, but also being pushed through too quickly by PeaceHealth to be safe. ApolloMD would provide ER doctors at Sacred Heart Medical Center at RiverBend in Springfield, Peace Harbor Medical Center in Florence and Cottage Grove Community Medical Center.
Todd Johnston, an attorney for the doctors, told the court that with a June 1 transition date approaching, PeaceHealth still does not have a finalized contract in place, has not clearly identified who will staff its emergency departments and has not shown those doctors have been fully vetted or approved to work in its hospitals.
“There’s no commitment on how many doctors, commitment on what qualifications those doctors need to have,” Johnston said. “There is not even a draft agreement between PeaceHealth and anybody to provide medical services.”
At the center of the dispute is how ApolloMD plans to operate in Oregon. Instead of directly staffing the hospitals, the company set up a new entity — Lane Emergency Physicians LLC — that would formally employ those doctors and provide the care, according to court filings. ApolloMD officials said the Atlanta-based company would provide only administrative support, such as scheduling, billing and other back-office functions.
Johnston argued the structure itself is the problem, saying the proposal would put ApolloMD in a position to run key aspects of emergency care — from managing the physician group to shaping pay and staffing — despite Oregon law barring corporate control of medical decisions.
Johnston also argued that Lane Emergency Physicians is essentially a shell company that did not exist during the bidding process and has no experience running an emergency department. He cited a deposition of the company’s sole physician-owner, Dr. Johne Philip Chapman, who currently practices in Chicago and, according to those challenging the transition, could not answer basic questions about how the company is structured, funded or operated.
The plaintiffs’ core legal claim is that ApolloMD — through its administrative role — is effectively controlling medical decisions behind the scenes. If that’s happening, they argued, that would violate SB 951, which is meant to make sure that licensed clinicians — not corporations — control patient care.
They also warned that replacing more than 40 local emergency physicians all at once could disrupt care regardless of who replaces them. They are asking the court to pause the transition and keep current doctors in place while the case moves forward.
“You’re going to hear from every single care provider, who will say the quality of care is going to go down, even if it’s the best ER staff on the planet,” Johnston said, arguing that even experienced doctors need time to adjust to a new hospital system.
Plan Follows the Law, Backers Say
Lawyers for PeaceHealth and ApolloMD have argued that the concerns raised by the local doctors and patients are based on speculative or worst‑case scenarios, not evidence that the law is actually being violated.
Their argument comes down to a key point: SB 951 does not ban companies from supporting medical practices — it bans them only from controlling patient care. And, they said, there’s no proof that is happening here.
ApolloMD runs emergency departments and other hospital-based services at more than 100 hospitals across the country, but it doesn’t currently operate in Oregon.
Jason Popp, an attorney for ApolloMD, said the company’s role will be limited to administrative support, while the physician-led group — Lane Emergency Physicians — will make all clinical decisions.
He also disputed claims that the transition will leave hospitals short-staffed, saying the new group has already lined up more clinicians than Eugene Emergency Physicians had at its peak.
More than 50 licensed physicians and advanced practitioners have signed contracts, he said, and are now going through the hospital vetting and credentialing process ahead of the start date. He did not break down how those clinicians would be staffed across the hospitals.
“There is no concern about patient risk,” Popp said.
Misha Isaak, representing PeaceHealth, argued that even if PeaceHealth’s decision-making process was flawed — or unpopular — that alone doesn’t make it illegal under SB 951.
He told the court that the only question that matters is whether “a management service organization is exercising de facto control over processes and decisions affecting medical care.”
Both attorneys also suggested the case may be premature. Because no final contract has been signed and the new system has not taken effect, they argued there is no concrete evidence of a legal violation — only speculation about what might happen.
Judge Zeroes In
The judge made clear he’s looking at the bigger picture as the case unfolds.
Oregon’s updated law comes at a time when states across the country are taking a closer look at corporate influence in healthcare and it is widely seen as the most sweeping.
“This statute seems to embody the Legislature’s concern about the corporate practice of medicine,” Kasubhai said, pointing to lawmakers’ intent to keep control of patient care in the hands of doctors.
But he also underscored that his job is narrower than the policy and public debates surrounding the case.
“I’m not a policymaker, I’m not a legislator,” he said. “I have to apply the law and statute in (SB) 951.”
That leaves the case hinging on a specific — and still unsettled — question: whether the relationship between ApolloMD and Lane Emergency Physicians is truly just administrative support or crosses the line into controlling how medical care is delivered.
The answer would set the ground rules for how hospitals and staffing companies operate across Oregon going forward.
The hearing continued Tuesday with no decision.
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