Oregon Emergency Physicians Claim Win Against For-Profit Replacements

A group of independent emergency physicians in Oregon who sued their own hospital system are celebrating after the employer agreed to scrap its original plan to replace the group with an out-of-state corporate staffing firm.

Eugene Emergency Physicians (EEP) sued PeaceHealth in late March, arguing that the health system violated the state’s corporate medicine law. The parties reached a preliminary settlement last week, which the physicians involved called a major win.

“It was David versus Goliath … and you know something, we ripped them to shreds,” Daniel McGee, MD, of EEP and a plaintiff in the lawsuit, told MedPage Today.

In February, after more than 3 decades of staffing with the EEP team, executives at PeaceHealth Sacred Heart Medical Center at RiverBend announced they had chosen to partner with the Atlanta-based ApolloMD instead. Within weeks, EEP sued PeaceHealth and ApolloMD.

Even without a ruling, the case represents a “major victory” in the battle against the corporate practice of medicine, said Robert McNamara, MD, chief medical officer of the American Academy of Emergency Medicine (AAEM), which helped fund the litigation.

He called the physicians involved courageous for saying, “No, we don’t think this is right,” and putting their jobs on the line by declining offers of employment with ApolloMD.

Sarah Coleman, MD, a partner at EEP who had contracted with PeaceHealth for 24 years, said she and her colleagues rejected job offers from ApolloMD, because they understood they would be “losing the community, part of their ‘community physician'” group. Outside corporations promise to improve community health, but that’s not been proven, Coleman said, citing a recent study in JAMA that found no significant benefit from management consulting firms engaged by non-profit hospitals.

In its lawsuit, EEP argued PeaceHealth and ApolloMD were in violation of Oregon’s Senate Bill 951, made law in June 2025, which prohibits non-clinician ownership of medical practices and specifically bars practices from being controlled by management service organizations.

Under Oregon law, “a professional corporation organized for the purpose of practicing medicine must be majority owned and governed by physicians who are licensed to practice medicine in the State,” noted EEP’s lawsuit.

“Despite — or because of — this majority-ownership requirement for medical practices, corporations in the State have begun to engineer sophisticated corporate and contractual structures to circumvent the state’s practice of medicine laws,” the lawsuit argued.

One such arrangement is the “friendly physician” or “captive physician” contracting model, an “illegal business model” that the court came to realize is exactly what ApolloMD was operating, according to Hayden Rooke-Ley, an attorney representing EEP and a senior fellow at the Brown University School of Public Health in Providence, Rhode Island.

ApolloMD identified a “friendly physician” practicing in another state and installed him as the “paper owner” for Lane Emergency Physicians, a newly formed physician group, while always intending to maintain control over day-to-day decisions, explained Rooke-Ley.

After several hearings, the U.S. District Court judge for the case, Mustafa Kasubhai, concluded that ApolloMD lied under oath. Without a contract, its arrangement with the newly formed Lane Emergency Physicians was little more than “a handshake and a wink” — a sign ApolloMD wanted to conceal its control of the group, while publicly claiming Lane’s independence, according to KVAL13.

One reason for EEP’s success was the solidarity among the group, according to plaintiff Dan McGee, MD. “When they gave our contract to ApolloMD, it felt like the worst betrayal … because we had been working our hearts out,” he said.

Doctors “are very capable people, especially when they’re angry,” McGee told MedPage Today.

In 2023, PeaceHealth closed University District hospital in Eugene, without preparing the medical center in RiverBend for an influx of new patients. In late February, 98% of the 367 medical staff at the hospital voted to keep EEP on board, and 93% cast a vote of “no confidence” in the hospital’s leadership.

Coleman said she was relieved when PeaceHealth offered to settle the case. “We came to a resolution with PeaceHealth. We did not come to a resolution with Apollo. We did not say that corporate medicine is okay,” Coleman stressed.

“Our shared responsibility is clear: to ensure a well-staffed emergency department that delivers safe, reliable care for every patient,” said Heather Wall, RN, interim chief executive of PeaceHealth Oregon region. “That remains unchanged, and we will take the steps necessary to meet that responsibility.”

AAEM, which helped fund and provide support for the lawsuit, is working to get similar bills passed in other states, with a federal law being the “holy grail,” for their advocacy, according to McNamara.

Even without an Oregon-like law, most states ban the corporate practice of medicine, so “this ‘friendly physician’ scheme may well be ripe for challenge,” Rooke-Ley said.