BY Blinn E. Combs, Esq. and Michael Alexander, Esq., Brown & Fortunato, P.C.
A trial in Eugene, Oregon, is shining a national spotlight on the state’s new first-in-nation restrictive corporate practice of medicine law. In Stapleton v. PeaceHealth, Eugene Emergency Physicians (“EEP”) sued PeaceHealth, ApolloMD, and Lane Emergency Physicians, alleging violations of Oregon’s new restrictive 2025 statute (SB 951) prohibiting the corporate practice of medicine and placing direct restrictions on the control of management services organizations over medical practices.
For 35 years, EEP had contracted to provide emergency physicians to PeaceHealth’s three Eugene-area hospitals. On February 3, PeaceHealth notified EEP that it would allow its contract with EEP to expire and form a new contract with ApolloMD, a company based in Atlanta. According to the complaint, ApolloMD had no history of conducting business in 
Oregon. On February 9, ApolloMD incorporated Lane Emergency Physicians, LLC (“LEP”). LEP’s registration indicates that the business is located in Atlanta and owned by Johne Philip Chapman, a physician licensed to practice medicine and residing in Illinois. As of the time of the trial, no written contract exists between LEP and ApolloMD or its affiliates.
Thirty-three states, plus the District of Columbia, currently have in place some version of the Corporate Practice of Medicine Prohibition (“CPMP”). Although there are many different forms of CPMP, all restrict the ability of corporations to employ physicians (and sometimes other licensed medical providers) or to charge directly for professional physician services.
The variety of CPMPs all address conflicts that can arise between the corporate imperative to maximize profitability and the physician’s imperative to exercise independent medical judgment. Critics allege that these restrictions impede medical business efficiency and fail to account for the complexity of modern medical practices.
One way that companies have sought to balance these conflicting imperatives is through the Management Services Organization (“MSO”) Model. Under the MSO Model, a medical practice contracts with a MSO to obtain non-clinical, back-of-office administrative services and support for the practice. While the basics are simple, in practice, the boundaries between clinical and non-clinical matters often get fuzzy.
EEP physician Chris Poulson testified to how this conflict can play out in an emergency room setting:
“The emergency department is very busy. Ambulances are bringing patients in. There aren’t enough beds for all the patients immediately in the emergency department…. [T]he pressure was to say that ‘the patients weren’t very sick, so they could go to the lobby and wait….It’s extremely dangerous to [send] patients that come in by ambulance and receive advanced life support, and are in pain and have potentially life-threatening illness…to the lobby without evaluation. The implication is, if it was a different group than us (EEP), and the physicians didn’t feel empowered to do the right thing, that it would be much harder to resist that, because you know that you would potentially have a repercussion of losing a job.’”
Recent years have seen a large decline in independent medical practices. As of 2024, nearly 80% of physicians are employed by hospitals and corporations. Recent years have seen the share of private practice ownership by corporations exceed the share of practices owned by hospitals for the first time.
In part to address concerns over this trend, Oregon lawmakers passed SB 951, a first-in-nation reform of the MSO Model. SB 951 prohibits MSO owners, directors, executives, or employees from gaining majority ownership or control of a physician practice managed by the MSO. It also prohibits MSO officers or employees from receiving compensation from the managed practice for managing it. Other provisions, such as restrictions on stock transfer agreements, put limits on certain forms of indirect corporate control. In addition, the new law restricts certain itemized MSO management activities, including:
- Controlling employment, termination, schedules, or conditions of employment for doctors, nurses, physician assistants, or naturopaths at the practice;
- Controlling staffing levels or setting time restrictions on patient visits;
- Making any coding decisions;
- Setting clinical standards or policies;
- Setting policies for billing and collections;
- Marketing the practices services under any name other than the practice’s legal name;
- Setting prices for medical services; or
- Negotiating, entering into, or controlling the performance of contracts with third parties on behalf of the practice.
Further recognizing that the practices of MSOs are often shielded from scrutiny by nondisclosure, noncompetition, and nondisparagement agreements, the bill prohibits practices and MSOs from taking adverse action against licensees for good faith reports of violations of the act to the MSO, hospital, or federal or state authorities.
In the Oregon trial, EEP has alleged that ApolloMD has violated Oregon’s new CMPM law in a variety of ways, including: effectively owning and controlling LEM; hiring a de facto employee to “own” the practice; using the sham medical practice for Apollo to hire emergency medical personnel; advertising on behalf of the practice; and effectively controlling various billing and practice policies and procedures.
At trial, Apollo has been unable to produce written contracts between any physician and LEM, or Management Services Agreement between ApolloMD or any of its affiliates and PeaceHealth. When asked about the relationship between ApolloMD and its related medical practices, CEO Yogin Patel frequently struggled to explain the various companies and contractual arrangements at issue, or even his own contractual relationship with ApolloMD, frequently deferring to legal counsel.
U.S. District Judge Mustafa Kasubhai, presiding over testimony, offered rare rebukes from the bench, saying at one point, “What all of you are doing now is not helping me understand the actual relationship any better than it being perhaps more of a shell game.” When Chapman—LEP’s putative owner—was asked about the new practice, he struggled to answer, prompting Kasubhai’s retort: “The idea that … he has no idea how this organizational structure is set up defies logic and credibility.”
Although Texas has a weaker CPMP, it does place strict limits on non-physician ownership or control over medical practices. Particularly with the expansion of telehealth options, practitioners must carefully consider not only the medical laws in operation at the site of the practitioner, but also related restrictions at the state in which the patient resides. Importantly, the new Oregon law exempts telehealth from its new MSO restrictions. However, given the background concerns about corporate control over clinical decisions, the new Oregon statute may be a harbinger of increased state-level restrictions on the MSO model.