Coos Bay and Coquille hospitals battle in court over new nonprofit’s expansion into larger organization’s territory

By NICK BUDNICK/The Lund Report

Already fighting to survive unique fiscal challenges, Bay Area Hospital in Coos Bay has filed a lawsuit contending that a neighboring public hospital district has begun illegally invading its territory — in effect siphoning off patients and undermining Bay Area’s finances.

The allegations against Coquille Valley Hospital District filed in Coos County circuit court portray a new threat to Bay Area’s beleaguered financial situation, which has already sparked legislation and widespread concern. The hospital is the largest on the Oregon coast and is a major regional employer.

Coquille chief executive officer Jeff Lang, however, contends that his district is operating appropriately. In an email he sent a statement to The Lund Report saying “no violation of law has occurred.”

The litigation between the two public hospital entities shows how increasing financial pressures in health care are leading even government entities in Oregon to take unusual steps as they compete for patients with commercial health insurance who generate more revenue.

At the heart of the case is the Coquille district board’s plan to save money by shifting government assets owned by the public to a separate nonprofit that district officials created. The public district would largely control the new nonprofit, Coquille Valley Health, as it operates the district’s facilities. And the nonprofit has begun building clinics outside of the Coquille district, including in Coos Bay.

The dispute is already getting nasty. In its lawsuit, Bay Area notes that state law expressly prohibits public hospital districts from operating in each other’s territory without first obtaining permission. It contends that the new nonprofit formed by the Coquille district is an attempt to evade that law.

“Coquille Valley is actively and currently providing services in Bay Area’s district boundaries without Bay Area’s written permission,” the lawsuit claims. “Indeed, Coquille Valley is providing services less than a half mile from Bay Area Hospital. Coquille Valley has attempted to mask its violation of Oregon law by establishing a “separate” corporate entity, Coquille Valley Health. But Coquille Valley’s ploy to bypass the limitations imposed upon it by Oregon law is unlawful.”

Coquille Valley responded with a filing that calls Bay Area’s claims “legally and factually baseless. Bay Area has been in financial distress for several years and appears to have filed its suit against CV Health — a much smaller, new market entrant — as a scare tactic, fearing competition.”

Asked his take on the dispute, Sen. David Brock Smith, R-Port Orford, said it might well spill over into the 2026 Legislature.

“I continue to strongly support expanding quality care and services, especially in our rural communities,” Brock Smith said. “However, I struggle with learning a request for permission of expansion was sent to one health district, but not to the other. Changes in healthcare statutes will be needed in our upcoming legislative session next year to assist our providers across Oregon, and I suspect the intent within our laws regarding this issue will also be a topic of debate.”

Both districts struggling

Hospital financials overall are improving in Oregon, but that varies significantly between hospitals.

Bay Area Hospital continues to struggle. After reporting more than $30 million in profits in 2021, the 172-bed Bay Area Hospital has lost money every year since, according to its reports to the state. So far in 2025 it’s reported nearly $15 million in losses.

A bill introduced by Brock Smith to appropriate funding for the hospital went nowhere earlier this year, and in August a proposed takeover of operations by Tennessee-based for-profit Quorum Health fell apart.

“Bay Area Hospital is not only a lifeline to our residents and their communities on the south coast, it is a vital resource to all regional healthcare providers as well,” Brock Smith added. “Our rural healthcare providers struggle with a payer mix that has a higher than average Medicare population, which leads to lower reimbursement rates. I drafted SB 1214 to address this for Bay Area and two other rural hospitals last session that unfortunately did not move forward either.”

With just 16 beds, Coquille Valley Hospital in Coquille is much smaller and similarly has lost money every year since 2022.

In April 2023, the Coquille board started considering a legal maneuver intended to cut costs and build revenue in addition to expanding what are known as “service lines” of care.

Board created nonprofit

In August 2023 Coquille’s publicly elected board voted to approve formation of the new nonprofit and named itself the interim governing board of the new nonprofit, which it called the hospital’s new “operating entity” — one that would pay rent to the district.

Lang incorporated Coquille Valley Health in September 2023 as a new, private nonprofit, listing himself as president and registered agent, with an identical address to that of the hospital in Coquille.

The new nonprofit did not populate a website until this year, calling itself an “independent, local nonprofit organization that provides comprehensive healthcare services to patients in Oregon’s south coast communities.”

The nonprofit has recruited new providers and embarked on an expansion in primary care and orthopedics while billing itself as providing increased access to care to the community. It obtained permission from nearby Myrtle Point Health District to open a clinic there.

It also opened a clinic in Coos Bay, the home territory of Bay Area Hospital, apparently without seeking permission.

That’s what triggered the suit.

CEO explains shift

Lang sent The Lund Report a statement largely declining to comment on the suit, saying “we are confident that once the underlying facts become known it will be determined that no violation of law has occurred and Coquille Valley Health will be able to continue to meet the health care needs of the patients in Coos County.”

As far as the district’s transfer of assets and operations to a nonprofit, Lang’s statement echoed a document the district sent to the Oregon Health Authority earlier this year that described the transaction:

“In a marketplace in which smaller community providers are increasingly being acquired by larger, often multi-state health systems, the District believes this transaction will strategically position the Hospital for continued independence and local control by adopting a more flexible, adaptable and inclusive governance model. The District anticipates many procompetitive benefits from the transaction that will benefit the local community and patient care, including but not limited to increased operating efficiencies, providing a more diverse and inclusive governance structure, and enhancing opportunities to partner with other providers to improve access and increase the quality of health care services available in our local market.”

• The Lund Report is an independent, nonpartisan, nonprofit, online news source covering health care issues in Oregon and southwest Washington. Nick Budnick can be reached at [email protected].