‘Watershed moment for Oregon’: State’s landmark corporate medicine law passes first major test

By KRISTINE DE LEON/The Oregonian/OregonLive

A bitter courtroom battle that put corporate control of medicine under an unforgiving spotlight in Oregon ended in a tentative settlement Wednesday, short‑circuiting what could have been a landmark ruling.

The case, brought by a local emergency physicians group against PeaceHealth, provided the first major test of Oregon’s toughest‑in‑the‑nation law banning corporations from exerting authority over a physician’s medical judgment and clinical practices.

U.S. District Judge Mustafa Kasubhai said the statute “changed the landscape” for health care staffing in Oregon as he raised serious reservations about PeaceHealth’s plan to use a national contractor to help provide and oversee ER doctors at its three hospitals in Oregon.

Attorneys told the judge before scheduled final arguments that they had reached an agreement, ending several tense days in court when Kasubhai repeatedly questioned the structure of the deal and sharply criticized the testimony of ApolloMD’s executives.

Kasubhai said he was “grateful” the dispute appeared to have been resolved in a way that would keep emergency care services available at the PeaceHealth hospitals in Lane County, but he noted that his deep skepticism about ApolloMD could help clarify a still-evolving legal framework for the law.

Rep. Ben Bowman, D-Tigard, who led the legislative effort to strengthen the long-standing prohibition on corporations making medical decisions in Oregon, hailed the outcome.

“Today’s decision is a watershed moment for Oregon,” he said.

“Less than a year after it passed, Oregon’s law worked,” Bowman said. “After a decades-long trend of corporatization in health care, we are now moving in the opposite direction – back to physician-directed, patient centered health care.”

Emergency staffing stays same for now 

Under the settlement, Eugene Emergency Physicians will keep staffing the emergency departments at PeaceHealth Sacred Heart Medical Center at RiverBend in Springfield and PeaceHealth Cottage Grove Community Medical Center for at least three years. PeaceHealth’s hospital in Florence will continue operating under its existing staffing, which involves directly hiring its own doctors.

The deal removes the ApolloMD and its newly formed physician group, Lane Emergency Physicians, from the proposed arrangement altogether.

Georgia-based ApolloMD staffs more than 100 emergency departments nationwide and had been poised to enter Oregon for the first time through the local subsidiary it formed. It was set to take over two of the hospitals on June 1 and the third on July 1.

Dr. Bradley Anderson, president of Eugene Emergency Physicians, said small local doctor groups have increasingly lost ground to large health care corporations.

The local doctors have held the PeaceHealth contract for the three hospitals for more than 35 years before PeaceHealth decided last year not to renew it. It sued PeaceHealth and ApolloMD in late March, arguing the move could put patients at risk.

“I think this potentially gives some, not only inspiration, but a way to help protect their contracts in the future,” Anderson said. “I feel like the law did what it was supposed to do.”

He said Eugene Emergency Physicians lost some doctors when the dispute began and currently has roughly 30 physicians and six physician assistants. He said the group has “a lot of work to do to get our numbers back up.”

‘No light between those 2 groups’

On Monday, the judge delivered a lengthy and candid overview of how he was analyzing the case under Oregon’s law and suggested the company exercised far more operational control than it acknowledged publicly or in testimony.

“The fact that Apollo does not have a written agreement with the organization that it has created tells me that there is no light between those two groups,” Kasubhai said. “Either Apollo is not subject to the regulatory framework of Senate Bill 951, which frankly sounds pretty ridiculous, or… an organization that purports to be (a management service organization) may not do business in the state of Oregon.”

Throughout the trial hearings, Kasubhai said SB 951 – which became law last year – closing loopholes that previously allowed nonmedical corporations to exert influence over physician practices through management services organizations.

He said many industry players — including ApolloMD and PeaceHealth — appeared to underestimate the breadth of the law when it took effect, adding that “this is how it was always done” is no defense after the law’s passage.

At one point Wednesday, Kasubhai suggested ApolloMD executives had tried to obscure the reality of the company’s role in the proposed Oregon plan. The judge said he considered referring them for contempt or perjury charges, but chose not to do so at this point.

Dr. Yogin Patel, ApolloMD’s CEO, had testified that the company would provide administrative services only – such as billing support, scheduling infrastructure and operational guidance – but acknowledged under questioning that ApolloMD had already hired many of the staff who would work at the Oregon ERs.

Dr. Johne Phil Chapman, a Chicago-based doctor who was hired to lead ApolloMD’s newly created doctors group in Lane County, said he didn’t plan to work in Oregon, had no signed contract to do so and couldn’t define his authority and responsibilities. Kasubhai later cited that testimony as evidence that ApolloMD’s structure masked who actually held power, concluding that the witnesses’ accounts didn’t square with the documentary record.

“Sometimes the cover-ups are always worse than just simply ‘fessing up to what’s really going on,’” Kasubhai said.

He agreed to put the case on hold for 14 days so the parties could finalize formal agreements, while keeping jurisdiction in the event disputes arose over remaining terms.

Agreement to create path forward

In a joint statement issued after the hearing, officials with PeaceHealth and Eugene Emergency Physicians said they had agreed to “reset the approach to Emergency Department physician services in Oregon” after months of uncertainty.

“We have re-engaged in constructive discussions and are working jointly to define a path forward that best supports high‑quality, reliable care for patients across Lane County,” they wrote, adding that their shared priority is keeping emergency departments fully staffed while improving patient flow.

Gov. Tina Kotek, who had publicly urged PeaceHealth to reconsider its outsourcing plan, praised the decision Wednesday and called it “an important and necessary step to rebuilding trust.”

Kotek’s office said the governor and Rep. Julie Fahey, D-Eugene, recently met with PeaceHealth leaders and pressed them to reverse course amid concerns about emergency department staffing and disruption to local care.

The agreement includes compensation rates and commitments to jointly track patient experience, length of stay and staffing data, as well as regular leadership meetings between hospital officials and physicians.

PeaceHealth will retain authority over hospital operations, including the appointment of emergency department medical directors.

Kasubhai insisted that the terms of the settlement be public, at times directing attorneys to read provisions aloud in court. He said transparency was necessary given the public interest in the case and the extensive evidentiary record already developed.

“You dragged me into this,” he told lawyers for both parties. “Now we’re going through it together.”

Even as the parties moved toward settlement, Kasubhai made clear he was not withdrawing comments or credibility findings he had already made during the hearings. He said the proceedings would not be sealed and emphasized that his oral findings remain part of the public court record.

As Kasubhai closed the hearing, he delivered a defense of SB 951, describing it as a necessary safeguard against corporate takeovers of medicine.

“I think it is a wise, far‑reaching decision that Oregon took in adopting (Senate Bill) 951 to protect patients and the medical profession from exactly what’s happened in this case,” he said, adding that the law “doesn’t disappear because there’s a settlement.”

The lawsuit raised broader questions about how hospitals can contract for emergency physician staffing under the law and whether management companies can exert operational influence without crossing legal lines.

By settling before a final ruling, the parties avoided what could have become a precedent-setting judicial interpretation of SB 951 for hospitals and physician staffing groups statewide.

Kasubhai said that if the settlement unravels, he is prepared to resume work on a written opinion. For now, he urged the parties to finalize the deal and move forward.