A group of physicians in Lane County has filed a lawsuit trying to block the nonprofit PeaceHealth from switching to an out-of-state management company to staff its emergency departments.
It’s the first civil suit filed under a 2023 Oregon law that gave physicians the power to sue over management agreements that impinge on their power to run medical practices and direct patient care.
Lawmakers enacted it in an effort to prevent independent clinics and practices in the state from being purchased by larger national corporations and private equity firms.
Corporations with established health care businesses in Oregon have until 2029 to comply with the law. For newly-formed corporations, it went into effect earlier this year.
PeaceHealth has said that the company it is working with, Georgia-based ApolloMD, will start staffing its emergency departments in Springfield, Cottage Grove and Florence in June and July.
The nonprofit has defended its decision to work with a national staffing company, saying ApolloMD won the contract in a fair, competitive process.
The lawsuit asks the court to void the deal between PeaceHealth and ApolloMD, and block the company from operating in Oregon. They’re also asking that the judge allow the contract with the current providers to stay in place as the litigation moves forward.
This civil suit follows weeks of pushback against the deal from local doctors and nurses and the state’s Democratic political leadership. All 41 doctors and physician assistants who work in the emergency department at PeaceHealth Sacred Heart Medical Center in Springfield have pledged not to work with ApolloMD. That agreement lasts for at least three months.
The ousted local physicians’ group, Eugene Emergency Physicians, had contracted with Peacehealth since 1991 to staff its emergency departments. They filed their complaint on Friday in the state circuit court in Lane County. The plaintiffs also include a recent emergency department patient and her mother.
They filed suit against Peacehealth and its business partners: ApolloMD INC, ApolloMD Business Services LLC, and a new Oregon corporation — Lane Emergency Physicians LLC — that was registered in Oregon on Feb. 9.
The lawsuit alleges that ApolloMD is using what’s known as the “friendly physician” model, where a management services company that is purportedly just providing administrative support actually exerts much more control over a medical practice.
It’s a type of business arrangement that has become common in states like Oregon that require that doctors licensed in the state hold a majority stake.
The friendly physician model can allow non-physicians to get around those laws and invest in medical practices.
In a March 6 letter to state lawmakers, ApolloMD CEO Yogin Patel said his company is committed to full compliance with the Oregon law, and answered some questions about how the deal is structured.
Patel said that a newly formed local corporation, Lane Emergency Physicians LLC, holds the emergency department staffing contract with PeaceHealth. That LLC is fully owned by a single physician, Dr. Johne Philip Chapman. Chapman, Patel said, will be in charge of running the emergency departments and making all relevant clinical decisions, like how many patients a doctor sees on a shift.
ApolloMD, meanwhile, will only provide “non-clinical administrative support” to Chapman and the LLC. Those support services include billing and collections, HR and legal, recruiting and data analysis, according to Patel’s letter.
According to the lawsuit, that arrangement “is exactly the business model that Oregon’s corporate practice of medicine laws prohibit.”
The lawsuit notes that while ApolloMD describes Chapman as the “sole owner” of Lane Emergency Physicians LLC, the company appears to exercise a considerable degree of control over him.
Chapman, it alleges, is a resident of Illinois who has worked with ApolloMD. Records show Chapman received a license to practice in Oregon on March 17.
The lawsuit also points to the fact that ApolloMD – and not Chapman – has been actively recruiting and hiring physicians to work in Lane County.
“Notably not in control is Dr. Chapman,” the plaintiffs’ attorneys write. The lawsuit alleges that the “de facto” control that ApolloMD is exercising over operations in Oregon violates the state’s restrictions.
A PeaceHealth spokesman said the health system had not yet received the lawsuit and consequently could not comment on it. Chapman also said he’d only just learned of the suit and was not yet ready to comment.
ApolloMD did not immediately respond to a request for comment. But Patel has pushed back against some characterizations of the company and its motives. ApolloMD, he wrote in the letter, is a private company owned by physicians, clinicians and employees, and not investment funds. The company’s owners “share concerns about private equity influence in healthcare,” he wrote, and are dedicated to ensuring clinical decisions serve the best interests of patients.
