PeaceHealth asks judge to toss out lawsuit over ER contract

Attorneys for PeaceHealth moved this week to dismiss a lawsuit filed by Eugene Emergency Physicians, alleging the health care system’s deal with Georgia-based ApolloMD violates Oregon’s law regulating the corporate practice of medicine. 

The legal challenge is part of broader fallout between PeaceHealth leadership and Eugene Emergency Physicians, or EEP, after a public split over a 35-year contract the hospital awarded to a new corporate staffing company to provide emergency department doctors in Cottage Grove, Florence, and RiverBend. 

The Monday, April 20, filing is the most detailed response so far from defendant PeaceHealth in the case. Along with plaintiffs Karen Stapleton and Dr. Dan McGee — citing concerns about care for their child and practice, respectively — EEP filed a motion for a preliminary injunction April 8 in the Eugene Division of the U.S. District Court. 

The plaintiffs asked the court to:

• Preserve the status quo with Eugene Emergency Physicians until PeaceHealth “will be able to legally provide adequate emergency medical services to the community and will not put the community at risk.”
• Prohibit ApolloMD from violating Oregon Senate Bill 951, a law passed last year that sets strict limits on corporate control of medical practices.
• Dissolve Lane Emergency Physicians, an emerging practice at PeaceHealth, which ApolloMD is supporting.

Senate Bill 951, also known as the Corporate Practice of Medicine law, builds on Oregon’s corporate practice of medicine doctrine, established in 1947 to ensure medical decisions are made by licensed professionals. The new law closes a loophole that allows private equity firms and corporations to appear compliant by naming physicians as practice owners — sometimes with little or no authority — while maintaining control behind the scenes. 

Specifically, SB 951 limits how a management services organization, or MSO, may contract with a medical practice. The law defines an MSO as an entity that provides administrative or management services to a professional medical entity. And the law bars MSOs from “de facto control” over “the professional medical entity’s clinical decision-making.” 

Plaintiffs argue the defendants’ arrangement reflects the model the law was designed to prevent. They say Lane Emergency Physicians — a new practice being established by PeaceHealth and ApolloMD — lists the same principal place of business as ApolloMD and note the group’s sole owner, Dr. Johne Philip Chapman, has worked at ApolloMD-affiliated locations elsewhere in the country.

However, in PeaceHealth’s April 20 motion to dismiss, attorneys argue that while Senate Bill 951 restricts an MSO, the law does not ban the business model outright. They also argue EPP’s claims are speculative. The motion reads: 

“EEP does not allege that Defendants are currently exercising ‘de facto control’ or ‘ultimate decision-making authority’ over clinical decision-making or any clinical function. Instead, EEP argues the CPM (Corporate Practice of Medicine) statute is implicated because PeaceHealth’s future emergency medical service provider might adopt a ‘business model’ that allegedly violates the statute.”

To be seen if case ties into McGovern allegations  

In recent weeks, top leadership placed Jim McGovern, chief hospital executive at Sacred Heart Medical Center at RiverBend, on leave April 9 following allegations he worked outside of his administrative scope and tried to influence the emergency care of patients.

It comes after the hospital’s Medical Executive Committee received more than 300 pages of emails allegedly showing McGovern actively trying to manage how patients were treated, according to documents and a recording of a Wednesday, April 8, meeting reviewed and authenticated by Lookout Eugene-Springfield. 

An administrative license, which is what McGovern holds in Oregon, does not permit him to make decisions that those with an active medical doctor license in the emergency department make.

Doctors with Eugene Emergency Physicians said they raised concerns with PeaceHealth CEO Sarah Ness and Chief Medical Officer Dr. Kim Ruscher in September. About two months later, PeaceHealth issued a new request for proposals (RFP) for emergency department staffing. Members of the hospital’s Medical Executive Committee said the sequence raises concerns about whether the process was retaliatory.

It is not clear at this time whether allegations related to McGovern’s conduct will become part of the arguments in the case. Oral arguments are set for April 27 and 28, with attorneys on both sides filing declarations ahead of the hearing. 

In a sworn declaration filed as part of PeaceHealth’s motions, Ruscher said the transition is about “ensuring the community will continue to receive high-quality emergency services.” She said that EEP has “refused to engage in meaningful dialogue” and “has hampered the planning for an efficient transition.” 

PeaceHealth statement 

A PeaceHealth spokesperson sent Lookout Eugene-Springfield the following statement: 

“PeaceHealth believes the claims in this case are without merit. As outlined in filings with the court, PeaceHealth conducted a structured and objective RFP process to evaluate a number of emergency services providers, given the pending conclusion of an existing contract. Our focus was on identifying the partner best positioned to uphold and optimize patient safety, staffing sufficiency, quality improvement, and transition readiness. The incumbent provider participated in that process, along with other organizations.”

“At the conclusion of this process, PeaceHealth selected a new partner to deliver safe, reliable, continuous emergency care.” 

“We are actively planning for this transition to ensure there is no disruption to patient care, and those efforts are well underway. As always, we continue to focus on supporting our patients, our caregivers, and the communities we serve.” 

EEP’s attorney did not immediately respond to a request for a statement.