PeaceHealth ER transition goes to court; judge is asked to block switch

QuickTake:

The existing doctors group that staffs emergency departments at RiverBend and in Cottage Grove and Florence argues that PeaceHealth’s arrangement with a new staffing group violates an Oregon law on corporate influence in health care.

This story will be updated with testimony from the Monday afternoon court session.

The first lawsuit involving Oregon’s new corporate medicine law came to U.S. District Court in Eugene Monday, April 27, as attorneys representing local doctors argued that an illegal business model is emerging at PeaceHealth, while hospital attorneys said PeaceHealth will show evidence that it is a “responsible, conscientious steward.”

Nearly 50 people sat in the courtroom gallery, some in scrubs, others in their Oregon Nurses Association T-shirts, to listen during the first of at least two days of oral arguments and evidentiary hearings scheduled for this week. More time may be scheduled in the coming week if needed, the judge told attorneys.

The background

The legal battle involving Eugene Emergency Physicians, PeaceHealth and ApolloMD is complicated. Here’s what you need to know as two — and possibly more — days of testimony and arguments play out in the courtroom.

How did we get here?

PeaceHealth executives are working with Georgia-based ApolloMD to launch Lane Emergency Physicians, a new practice that will be owned by an Illinois physician, Dr. Johne Philip Chapman. Called Lane Emergency Physicians, it is scheduled to start staffing doctors at PeaceHealth’s ERs in Cottage Grove and Florence on June 1 and at Sacred Heart Medical Center at RiverBend in Springfield on July 1.

This switch ends a 35-year contracting relationship with the existing local doctors group, Eugene Emergency Physicians, which is asking a federal judge to temporarily block the transition, contending PeaceHealth and ApolloMD are creating an illegal business model.

What is the law in question?

Senate Bill 951, signed into law June 2025, closes a loophole in Oregon’s corporate practice of medicine doctrine that allowed private equity firms and corporations to appear compliant by naming physicians as practice owners while maintaining control behind the scenes. Where the 11-page law comes into play in the emergency department contract switch is how a management services organization, or MSO, works with a medical practice like PeaceHealth. The law defines an MSO as an entity that provides administrative or management services not clinical services.

What is being argued?

Plaintiffs

Who: Parent Karen Stapleton, whose child may use local emergency rooms in the near future; a Lane County doctor, Dan McGee, concerned about disruptions to his own practice and patients; and Eugene Emergency Physicians.

Argument in summary: Plaintiffs believe that ApolloMD has created Lane Emergency Physician as a falsified practice to disguise ApolloMD’s “de facto control” in clinical decision-making.

Defendants

Who: PeaceHealth, ApolloMD and Lane Emergency Physicians

Argument in summary: Attorneys for PeaceHealth and ApolloMD want the lawsuit dismissed, arguing that the plaintiffs lack standing and the suit fails to state a claim. And it is speculative.

Eugene Emergency Physicians is asking U.S. District Judge Mustafa Kasubhai to block a transition in the hospital’s three emergency departments in Lane County until PeaceHealth and incoming Georgia-based ApolloMD can prove they are in compliance with the law.

The morning started with both sides giving opening statements. Then the plaintiffs’ attorneys were to call witnesses. The defendants will have the opportunity to do the same Tuesday.

While the case centers around state law, it is in federal court at the request of PeaceHealth attorneys, after Eugene Emergency Physicians’ attorneys initially filed it in Lane County Circuit Court.

Arguments Monday morning largely reflected complaints, declarations, and exhibits filed by plaintiffs and defendants over the last two weeks since filings began in the case on April 8.

Here are key takeaways from the morning session:

Opening statements

Attorney Todd Johnston, arguing on behalf of plaintiffs, opened by explaining his clients’ concerns with the relationship between ApolloMD and Lane Emergency Physicians. Johnston said that, according to a deposition, Dr. Johne Philip Chapman is a sole employee with limited information about the transition.

“Apollo is going to need to convince you that LEP (Lane Emergency Physicians) is real and it’s not just a proxy for Apollo. And conversely, PeaceHealth should explain to you straight-faced why it decided to replace 41 resident emergency physicians with one guy (Dr. Chapman) from Illinois who has no plans to live here or move here.”

Johnston said that PeaceHealth still doesn’t have a contract with ApolloMD that clarifies rates, terms or commitments from new doctors, whether they are permanent or temporary traveling physicians.

“There’s no commitments on the amount of money. There is not even a draft agreement between PeaceHealth and anybody to provide medical services,” Johnston said.

In response, attorney Misha Isaak, arguing on behalf of PeaceHealth, said the lack of a contract between the hospital and ApolloMD shouldn’t be considered as evidence that the two entities are in violation of SB 951.

“Mr. Johnston told you that Dr. Chapman has no plans to live here,” Isaak said. “Does that prove a violation of SB 951? The only evidence that you will hear that indicates how decisions will be made is the testimony you will hear tomorrow and from Dr. Chapman and Dr. (Yogin) Patel,” ApolloMD’s chief executive officer. “PeaceHealth will present evidence that it is a responsible, conscientious steward of its Lane County hospitals.”

Isaak repeatedly asked the judge to “listen carefully” into whether the plaintiff’s evidence is relevant to the case, questioning whether the testimonies of parents, nurses and firefighters should be considered experts in the case.”

Kasubhai appeared to acknowledge early on the complexity of the case.

“There are many lenses, which in this case, this relationship can and appropriately be looked at, look through,” he said. “There’s some community concern, interest. There’s the concern of business entities to be able to really engage in relationships with one another. All of that is certainly bearing and intense and weighty within our community.”

“All of this is to say, I want to simply express to all of you that I appreciate that there’s many different vectors at play here, and meaningful and valuable and necessary and important considerations. But I want all of you (attorneys) to focus on the legal question, because I’m not a policymaker. I’m not a legislator. … I have to apply the law in Senate Bill 951.”