SECURITIES AND EXCHANGE COMMISSION

                     Washington, D.C. 20549

                            FORM 8-K
                         CURRENT REPORT

             PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934



Date of Report (Date of earliest event reported) MARCH 27,
1998(March 18, 1998)



                  COASTAL PHYSICIAN GROUP, INC.
     (Exact name of registrant as specified in its charter)


DELAWARE                 001-13460                56-1379244
(State or other          (Commission              (IRS Employer
jurisdiction of           File Number)        Identification No.)
incorporation)



   2828 CROASDAILE DRIVE, DURHAM, NC                     27705
(Address of principal executive offices)               (Zip Code)


Registrant's telephone number including area code  (919)383-0355


                               N/A
(Former name or former address, if changed since last report)


ITEM 2. - ACQUISITION OR DISPOSITION OF ASSETS

On  March 18, 1998, Coastal Physician Group, Inc. (the "Company")
completed  the sale of Doctors Health Plan, Inc.("Doctors  Health
Plan") to DHP Holdings, LLC (the "Purchaser"). The Purchaser is a
privately  held limited liability company which is controlled  by
Steven  M. Scott, M.D., the Chairman and Chief Executive  Officer
of  the  Company.  The Purchaser acquired all of the  outstanding
stock  of Doctors Health Plan in a transaction which is effective
as of January 1, 1998 for financial reporting purposes.

Doctors   Health   Plan  is  a  commercial   Health   Maintenance
Organization  licensed to operate in the State of North  Carolina
and  certain counties in South Carolina with approximately 41,000
members.  Doctors Health Plan experienced substantial  growth  in
membership in 1997 and reported revenues of $32,872,000 for 1997,
but  also  reported losses of $11,125,000 for the  1997  calendar
year  in  its  annual  statement filed with  the  North  Carolina
Department  of  Insurance.  In  addition,  Doctors  Health   Plan
reported a loss of $994,000 on revenues of $5,045,000 for January
1998  in  its  monthly statement filed with  the  North  Carolina
Department of Insurance. As a result of these losses, the Company
was required to make significant capital contributions to Doctors
Health  Plan  in  1997 and in 1998 prior to  its  sale,  and  the
Company   anticipated   that   substantial   additional   capital
contributions would be required during the balance of 1998.

Doctors  Health  Plan  was  the subject  of  a  Market  Practices
Examination  as  of October 22, 1997 conducted by representatives
of  the North Carolina Department of Insurance that was finalized
in   February  1998.  The  examination  disclosed  51  regulatory
violations and resulted in a fine of $500,000 and the requirement
that  Doctors Health Plan make an additional capital  deposit  of
One  Million  Dollars  with  the North Carolina  Commissioner  of
Insurance.  The obligation to pay the fine has been  deferred  by
the  North  Carolina Commissoner of Insurance  and  will  be  the
responsibility  of  Doctors Health Plan and the  Purchaser  after
closing.

After a thorough review of the operations of Doctors Health  Plan
and  the anticipated funding that would likely be required in the
balance  of 1998, the Company determined that the best course  of
action  was  to  divest  the  asset.  The  Company  retained  the
investment banking firm of Advest, Inc. to advise the Company, to
assist  in  completing the sale and to render a fairness  opinion
regarding the financial aspects of the transaction. The  purchase
price  was  determined  by negotiation between  the  Company  and
Purchaser,  and Advest, Inc. advised the Company on the  fairness
of financial aspects of the transaction.

The  North  Carolina Commissioner of Insurance  issued  an  order
dated  March 11, 1998 exempting the transfer from the  provisions
of North Carolina law that pertain to acquisition of control of a
domestic insurer. This order required the Company to complete the
transaction  within  thirty  days and  to  convert  to  equity  a
$1,100,000  loan made by the Company to Doctors  Health  Plan  on
March 2, 1998.

Immediately  prior  to  the  transaction  the  Company  made   an
additional equity contribution required by regulatory authorities
in  the amount of Nine Hundred Ninety-Three Thousand Five Hundred
Thirty-Two  Dollars  ($993,532)  to  Doctors  Health  Plan.   The
Purchase Price of Five Million ($5,000,000) was increased to Five
Million  Nine Hundred Ninety Three Thousand Five Hundred  Thirty-
Two  Dollars  ($5,993,532)  to  take  into  account  this  equity
contribution.  This Purchase Price was paid Nine Hundred  Ninety-
three  Thousand  Five  Hundred Thirty-Two Dollars  ($993,532)  in
cash,  with  the  balance paid pursuant to a Five Million  Dollar
($5,000,000)  promissory note (the "Note")  due  and  payable  by
March  28,  1998. If the Note is not paid by March 28, 1998,  the
Note  will  bear  interest after March 28, 1998 at  the  rate  of
twelve  percent (12%) per annum until paid. If the  Note  is  not
paid  in  full  within the earlier of (i) ninety (90)  days  from
March  18,  1998 or (ii) forty-five (45) days after  the  Company
gives  Purchaser notice that it intends to accept a Strike  Price
(as defined below), Purchaser has agreed to provide collateral to
secure the Note.

For  a period of twelve (12) months from the closing, the Company
has the right to market and sell Doctors Health Plan to potential
third  party  purchasers. If the Company locates  a  third  party
purchaser  during the twelve(12) month period who is  willing  to
purchase  Doctors Health Plan at a price that exceeds the  Strike
Price, then Coastal may elect to have the sale take place. If the
Company elects to sell to the third party, the Purchaser has  the
right  to  either (i) pay to the Company an amount equal  to  the
amount  that would have been received by the Company as a  result
of  the  sale  to the third party or (ii) agree to  consummate  a
closing  and sale to the third party purchaser. The Strike  Price
is  a  price  that  will yield net proceeds of  the  sale  (after
payment of the costs to market and sell to a third party)  in  an
amount  equal to the Purchaser's net investment in Doctors Health
Plan  plus  a twelve percent (12%) annualized return on  the  net
investment.  Purchaser's  net  investment  shall  be   equal   to
Purchaser's  purchase  price  plus Purchaser's  contributions  to
Doctors  Health  Plan  plus Purchaser's  out-of-pocket  costs  to
acquire,  finance  and  operate Doctors  Health  Plan  minus  any
distributions or dividends Purchaser receives from Doctors Health
Plan.

If the Company enters into a definitive agreement to sell Doctors
Heath  Plan  at a price greater than the Strike Price before  the
earlier of (i) April 17, 1998 or (ii) the date the Purchaser  has
contributed  Two Million Dollars ($2,000,000) to  Doctors  Health
Plan,  the  net proceeds (after payment of marketing expenses  of
the  sale to the third party) of the sale will be divided between
Purchaser and the Company. In such event, Purchaser will  receive
an  amount  equal  to Purchaser's net investment  plus  a  twelve
percent  (12%) annualized return on the net investment,  and  the
Company will receive the balance of the net proceeds. If the sale
is  subsequent to the earlier of the above events, the  Purchaser
will  be entitled to receive from net proceeds (after payment  of
marketing expenses of the sale to the third party) the greater of
(i)  Purchaser's  net  investment plus  a  twelve  percent  (12%)
annualized  return  on such amounts or (ii) an  amount  equal  to
Purchaser's  net  investment  plus fifty  percent  (50%)  of  the
difference  between (x) the amount of the net proceeds  less  the
Company's investment banker fees and expenses in selling  Doctors
Health  Plan  to  the  Purchaser minus (y)  the  Purchaser's  net
investment. In all potential sales to third party purchasers, the
Purchaser  has  the right to retain ownership of  Doctors  Health
Plan  and  pay  the  Company an amount equal to  the  amount  the
Company would have received as a result of the sale to the  third
party.

As  part  of  the transaction, the Company agreed to continue  to
offer  the employees of the Company and its affiliates the option
to  use  Doctors Health Plan under the Company's health  benefits
program  for  one  year following the closing and  to  not  offer
employees   an  option  to  use  any  other  health   maintenance
organization,  preferred provider organization or similar  health
plan  during that one year period in the State of North  Carolina
or  in  any area of South Carolina where Doctors Health  Plan  is
licensed.

As  part  of  the transaction, the Company agreed  to  a  partial
release  of its non-compete agreement with Steven M. Scott,  M.D.
This  partial  release  allows Steven  M.  Scott,  M.D.  and  his
affiliates  to  operate  health  maintenance  organizations   and
similar  organizations in all areas, other than  those  areas  in
Florida  and  Georgia  where the Company  and/or  its  affiliates
operate  health  maintenance  organizations.  In  addition,   the
Company  agreed that for a one year period following the  closing
date, neither the Company or its subsidiaries will engage in  the
business of providing health maintenance organization or  similar
services  in the State of North Carolina and those service  areas
in the State of South Carolina served by Doctors Health Plan.


ITEM 5. - OTHER EVENTS

I.  On  March  9,  1998, the Company entered  into  a  definitive
written Stipulation of Settlement with counsel for the plaintiffs
in  the  matter of In re Coastal Physician Group, Inc. Securities
Litigation, Case No. 1:95CV00306, a class action lawsuit filed in
the United States District Court for the Middle District of North
Carolina.  Named  as Defendants in the suit in  addition  to  the
Company, were Steve M. Scott, M.D., David W. Singley and David H.
Fater  (collectively "Individual Defendants"). Dr. Scott  is  the
Chairman,  President and Chief Executive Officer of the  Company.
Mr. Singley  and Mr. Fater are former officers of the Company.

The  case  arises out of a consolidation of four actions  against
the  Company and certain former officers of the Company filed  in
April 1995. The Third Consolidated Amended Class Action Complaint
filed  on  April  11, 1997 alleged claims for violations  of  the
Securities  Exchange  Act  of  1934 and  Rule  10b-5  promulgated
thereunder by the Securities and Exchange Commission, as well  as
common  law  negligent misrepresentations. The  Company  and  the
individual  Defendants denied and continue to deny any  liability
to  Plaintiffs or to the Class, and have asserted defenses to the
claims.

The class members consist of all persons who purchased the common
stock  of  the  Company during the period from  August  11,  1994
through  and  including April 27, 1995, excluding the Defendants;
members of the families of the Individual Defendants; any  person
or  entity in which any Defendant has a controlling interest; any
subsidiary or affiliate of the Company; the directors,  officers,
employees  and  controlling  persons  of  the  Company   or   any
subsidiary   or   affiliate  of  the  Company;  and   the   legal
representatives, heirs, executors, ancestors and assigns  of  any
excluded person or entity.

The  settlement was negotiated through the services of a mediator
appointed by the Court. The Company and the Individual Defendants
did  not admit or concede any liability with regard to the merits
of  the  claims asserted, but concluded that it was desirable  to
settle  in  order  to  avoid  the  expenses,  inconvenience   and
distraction of further legal proceedings. The settlement requires
the  funding  of $8,150,000 into an Escrow Account pending  final
court  approval  of  the  Stipulation of Settlement.  The  Escrow
Account  has  been  fully funded as of this date.  The  Company's
insurers funded $7,150,000 and the Company funded the balance  of
the Escrow Account.

II.  Pursuant to a letter to the Company dated January 19,  1998,
Deborah  L.  Redd ("Redd") resigned as a member of the  Board  of
Directors  of  the Company and as an officer of  several  of  the
Company's  subsidiaries, effective as of February 18, 1998.  Redd
indicated  in her letter to the Company that her resignation  was
based  on her desire to permanently reside in Maryland and reduce
her traveling.


ITEM 7. - FINANCIAL STATEMENTS AND EXHIBITS

(a) NOT APPLICABLE.

(b) THE PRO FORMA FINANCIAL INFORMATION REQUIRED IS ATTACHED
    HERETO.

(c) NOT APPLICABLE.




                  COASTAL PHYSICIAN GROUP, INC.
           UNAUDITED CONDENSED CONSOLIDATED PRO FORMA
                      FINANCIAL INFORMATION


The following unaudited condensed consolidated pro forma balance
sheet as of September 30, 1997, and the unaudited condensed
consolidated pro forma statements of operations for the nine
month period ended September 30, 1997 and the year ended December
31, 1996 have been prepared to give effect to the sale of certain
assets of DHP.  The adjustments to the unaudited condensed
consolidated pro forma balance sheet have been prepared as if the
transaction was consummated on September 30, 1997, while the
adjustments to the unaudited condensed consolidated pro forma
statements of operations have been prepared as if the transaction
was consummated as of the beginning of the respective periods
presented.  The unaudited condensed consolidated pro forma
financial information has been adjusted to reflect the effect of
the pro forma adjustments described in the accompanying notes and
is not necessarily indicative of the consolidated financial
position or results of operations had the sale transaction
actually been effected as of the assumed dates.  The unaudited
condensed consolidated pro forma financial information should be
read in conjunction with the Company's unaudited condensed
consolidated financial statements and notes thereto as of
September 30, 1997 and for the nine months then ended included in
the Company's Quarterly Report on Form 10-Q filed on November 21,
1997.


                  COASTAL PHYSICIAN GROUP, INC.
     UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
                        September 30, 1997
                          (IN THOUSANDS)

                                         PRO FORMA
                               HISTORIC  ADJUSTMEN           PRO
                                  AL         TS             FORMA

            ASSETS
Current assets:
 Cash and cash equivalents          5,717    (1,980)  (a)     3,737
 Marketable securities              7,723    (5,240)  (a)     2,483
 Trade accounts receivable, net    33,916         63  (a)    33,979
 Accounts receivable, other        14,302      4,577  (a,b   18,879
                                                     ,c)
 Other current assets              11,783       (65)  (a)    11,718
      Total current assets         73,441    (2,645)         70,796
Property and equipment, at
cost,                             12,236      (422)  (a)    11,814
    less accumulated
 depreciation
Excess of cost over fair value
of                                 8,408    (1,012)  (a)     8,408
      net assets acquired,
 net
Other assets                       11,716                    10,704
      Total assets                105,801    (4,079)        101,722

LIABILITIES AND SHAREHOLDERS'
            EQUITY
          (DEFICIT)
Current liabilities:
 Current maturities and other
      short-term borrowings        2,481                     2,481
 Accounts payable                  33,765        942  (a,c   34,707
                                                     )
  Deferred revenue                 53,379                    53,379
  Accrued expenses                 18,141      (300)  (a)    17,841
 Accrued physician fees
      and medical costs           24,253    (7,071)  (a)    17,182
     Total current liabilities   132,019    (6,429)        125,590
Long-term debt, excluding
  current maturities               3,215                     3,215
      Total liabilities           135,234    (6,429)        128,805
Shareholders' equity (deficit):
 Preferred stock                       12                        12
 Common stock                         244                       244
 Additional paid-in capital       158,095                   158,095
Common stock warrants              2,828                     2,828
 Accumulated deficit             (190,693      2,350  (d)   (188,34
                                       )                        3)
 Unrealized appreciation of
     available-for-sale               81                        81
 securities
      Total shareholders'
equity                          (29,433)      2,350        (27,083
           (deficit)                                              )
      Total liabilities and
share-                           105,801    (4,079)        101,722
       holders' equity
 (deficit)


                  COASTAL PHYSICIAN GROUP, INC.
            NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                     PRO FORMA BALANCE SHEET
                       September 30, 1997



DETAILS OF PRO FORMA ADJUSTMENTS

(a)  To record the disposition of the assets and liabilities of
DHP.

(b)  To record a receivable for $5.0 million Promissory Note
payable within 10 days from the closing date.

(c)  To record the additional March capital infusion, applied to
the purchase price.

(d)  To record the retained earnings impact of the sale.


                     COASTAL PHYSICIAN GROUP, INC.
  UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
                 NINE MONTHS ENDED SEPTEMBER 30, 1997
                 (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                             PRO FORMA
                                   HISTORICA ADJUSTMENT          PRO
                                       L         S              FORMA

Operating revenue, net                335,805   (21,708)  (a)    314,097

Costs and expenses:
 Physician and other provider         267,824   (21,522)  (a)    246,302
services
 Medical support services              33,048       (88)  (a)     32,960
  Selling, general and                 72,144    (5,379)  (a,     66,765
administrative
      Total costs and expenses        373,016   (26,989)         346,027

Operating loss                       (37,211)      5,281         (31,930
                                                                      )

Other income (expense):
   Interest income (expense), net     (8,614)                    (8,614)
  Other, net                          (4,337)       (86)  (a)    (4,423)
     Total other expense             (12,951)      5,195         (13,037
                                                                      )

     Loss before income taxes        (50,162)        ---         (44,967
                                                                      )

   Benefit for income taxes           (1,400)                    (1,400)

     Net loss                        (48,762)      5,195         (43,567
                                                                      )

     Net loss per share                (2.01)                     (1.79)

Weighted average number of shares
 outstanding                          24,311                     24,311



                    COASTAL PHYSICIAN GROUP, INC.
 UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
                    YEAR ENDED DECEMBER 31, 1996
                (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                              PRO FORMA
                                    HISTORIC  ADJUSTMEN          PRO
                                       AL         TS            FORMA

Operating revenue, net                 552,109    (9,787)  (a)   542,322

Costs and expenses:
 Physician and other provider          450,526    (8,759)  (a)   441,767
services
 Medical support services               92,460       (73)  (a)    92,387
 Selling, general and administrative   171,903    (5,658)  (a)   166,245

      Total costs and expenses         714,889   (14,490)        700,399

Gain on divested assets, net            37,751                    37,751

Operating loss                        (125,029      4,703        (120,32
                                            )                        6)

Other income (expense):
 Interest income (expense), net       (12,274)        ---        (12,274
                                                                      )
 Other, net                            (5,982)        ---        (5,982)
     Total other expense              (18,256)        ---        (18,256
                                                                      )

     Loss before income taxes and
        extraordinary item           (143,285      4,703        (138,58
                                            )                        2)

  Income tax provision                 (4,136)                   (4,136)

     Loss before extraordinary item   (147,421      4,703        (142,71
                                            )                        8)

  Extraordinary item - gain on
pooled
     portion of south Florida           1,864                     1,864
 divestiture,
     net of income taxes of 647

     Net loss                         (145,557      4,703        (140,85
                                            )                        4)

Loss per common share:
     Loss before extraordinary item     (6.18)                    (5.99)
  Extraordinary gain                      0.08                      0.08
     Net loss                           (6.10)                    (5.91)

Weighted average number of shares
 outstanding                           23,844                    23,844


                  COASTAL PHYSICIAN GROUP, INC.
            NOTES TO UNAUDITED CONDENSED CONSOLIDATED
               PRO FORMA STATEMENTS OF OPERATIONS
          FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
              AND THE YEAR ENDED DECEMBER 31, 1996



DETAILS OF PRO FORMA ADJUSTMENTS

(a)  To record the direct reduction in operating revenue, net,
costs and expenses and other income/expense directly related
to DHP for the periods presented.





                           SIGNATURES

Pursuant  to the requirements of the Securities Exchange  Act  of
1934, the Registrant has duly caused this report to be signed  on
its behalf by the undersigned thereunto duly authorized.


                                   COASTAL PHYSICIAN GROUP, INC.
                                   (Registrant)


Date:  March 27, 1998              By: /S/ STEVEN M. SCOTT, M.D.
                                       Steven M. Scott, M.D.
                                        President and Chief
Executive Officer


Date:  March 27, 1998              By: /S/ CHARLES F. KUONI, III
                                       Charles F. Kuoni, III
                                        Executive Vice President
                                        and Chief Financial
                                        Officer
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SECURITIES AND EXCHANGE COMMISSION

                     Washington, D.C. 20549

                            FORM 8-K
                         CURRENT REPORT

             PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) MARCH 27,
1998(March 18, 1998)

                  COASTAL PHYSICIAN GROUP, INC.
     (Exact name of registrant as specified in its charter)

DELAWARE                 001-13460                56-1379244
(State or other          (Commission              (IRS Employer
jurisdiction of           File Number)        Identification No.)
incorporation)

   2828 CROASDAILE DRIVE, DURHAM, NC                     27705
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number including area code  (919)383-0355

                               N/A
(Former name or former address, if changed since last report)

ITEM 2. - ACQUISITION OR DISPOSITION OF ASSETS

On  March 18, 1998, Coastal Physician Group, Inc. (the "Company")
completed  the sale of Doctors Health Plan, Inc.("Doctors  Health
Plan") to DHP Holdings, LLC (the "Purchaser"). The Purchaser is a
privately  held limited liability company which is controlled  by
Steven  M. Scott, M.D., the Chairman and Chief Executive  Officer
of  the  Company.  The Purchaser acquired all of the  outstanding
stock  of Doctors Health Plan in a transaction which is effective
as of January 1, 1998 for financial reporting purposes.

Doctors   Health   Plan  is  a  commercial   Health   Maintenance
Organization  licensed to operate in the State of North  Carolina
and  certain counties in South Carolina with approximately 41,000
members.  Doctors Health Plan experienced substantial  growth  in
membership in 1997 and reported revenues of $32,872,000 for 1997,
but  also  reported losses of $11,125,000 for the  1997  calendar
year  in  its  annual  statement filed with  the  North  Carolina
Department  of  Insurance.  In  addition,  Doctors  Health   Plan
reported a loss of $994,000 on revenues of $5,045,000 for January
1998  in  its  monthly statement filed with  the  North  Carolina
Department of Insurance. As a result of these losses, the Company
was required to make significant capital contributions to Doctors
Health  Plan  in  1997 and in 1998 prior to  its  sale,  and  the
Company   anticipated   that   substantial   additional   capital
contributions would be required during the balance of 1998.

Doctors  Health  Plan  was  the subject  of  a  Market  Practices
Examination  as  of October 22, 1997 conducted by representatives
of  the North Carolina Department of Insurance that was finalized
in   February  1998.  The  examination  disclosed  51  regulatory
violations and resulted in a fine of $500,000 and the requirement
that  Doctors Health Plan make an additional capital  deposit  of
One  Million  Dollars  with  the North Carolina  Commissioner  of
Insurance.  The obligation to pay the fine has been  deferred  by
the  North  Carolina Commissoner of Insurance  and  will  be  the
responsibility  of  Doctors Health Plan and the  Purchaser  after
closing.

After a thorough review of the operations of Doctors Health  Plan
and  the anticipated funding that would likely be required in the
balance  of 1998, the Company determined that the best course  of
action  was  to  divest  the  asset.  The  Company  retained  the
investment banking firm of Advest, Inc. to advise the Company, to
assist  in  completing the sale and to render a fairness  opinion
regarding the financial aspects of the transaction. The  purchase
price  was  determined  by negotiation between  the  Company  and
Purchaser,  and Advest, Inc. advised the Company on the  fairness
of financial aspects of the transaction.

The  North  Carolina Commissioner of Insurance  issued  an  order
dated  March 11, 1998 exempting the transfer from the  provisions
of North Carolina law that pertain to acquisition of control of a
domestic insurer. This order required the Company to complete the
transaction  within  thirty  days and  to  convert  to  equity  a
$1,100,000  loan made by the Company to Doctors  Health  Plan  on
March 2, 1998.

Immediately  prior  to  the  transaction  the  Company  made   an
additional equity contribution required by regulatory authorities
in  the amount of Nine Hundred Ninety-Three Thousand Five Hundred
Thirty-Two  Dollars  ($993,532)  to  Doctors  Health  Plan.   The
Purchase Price of Five Million ($5,000,000) was increased to Five
Million  Nine Hundred Ninety Three Thousand Five Hundred  Thirty-
Two  Dollars  ($5,993,532)  to  take  into  account  this  equity
contribution.  This Purchase Price was paid Nine Hundred  Ninety-
three  Thousand  Five  Hundred Thirty-Two Dollars  ($993,532)  in
cash,  with  the  balance paid pursuant to a Five Million  Dollar
($5,000,000)  promissory note (the "Note")  due  and  payable  by
March  28,  1998. If the Note is not paid by March 28, 1998,  the
Note  will  bear  interest after March 28, 1998 at  the  rate  of
twelve  percent (12%) per annum until paid. If the  Note  is  not
paid  in  full  within the earlier of (i) ninety (90)  days  from
March  18,  1998 or (ii) forty-five (45) days after  the  Company
gives  Purchaser notice that it intends to accept a Strike  Price
(as defined below), Purchaser has agreed to provide collateral to
secure the Note.

For  a period of twelve (12) months from the closing, the Company
has the right to market and sell Doctors Health Plan to potential
third  party  purchasers. If the Company locates  a  third  party
purchaser  during the twelve(12) month period who is  willing  to
purchase  Doctors Health Plan at a price that exceeds the  Strike
Price, then Coastal may elect to have the sale take place. If the
Company elects to sell to the third party, the Purchaser has  the
right  to  either (i) pay to the Company an amount equal  to  the
amount  that would have been received by the Company as a  result
of  the  sale  to the third party or (ii) agree to  consummate  a
closing  and sale to the third party purchaser. The Strike  Price
is  a  price  that  will yield net proceeds of  the  sale  (after
payment of the costs to market and sell to a third party)  in  an
amount  equal to the Purchaser's net investment in Doctors Health
Plan  plus  a twelve percent (12%) annualized return on  the  net
investment.  Purchaser's  net  investment  shall  be   equal   to
Purchaser's  purchase  price  plus Purchaser's  contributions  to
Doctors  Health  Plan  plus Purchaser's  out-of-pocket  costs  to
acquire,  finance  and  operate Doctors  Health  Plan  minus  any
distributions or dividends Purchaser receives from Doctors Health
Plan.

If the Company enters into a definitive agreement to sell Doctors
Heath  Plan  at a price greater than the Strike Price before  the
earlier of (i) April 17, 1998 or (ii) the date the Purchaser  has
contributed  Two Million Dollars ($2,000,000) to  Doctors  Health
Plan,  the  net proceeds (after payment of marketing expenses  of
the  sale to the third party) of the sale will be divided between
Purchaser and the Company. In such event, Purchaser will  receive
an  amount  equal  to Purchaser's net investment  plus  a  twelve
percent  (12%) annualized return on the net investment,  and  the
Company will receive the balance of the net proceeds. If the sale
is  subsequent to the earlier of the above events, the  Purchaser
will  be entitled to receive from net proceeds (after payment  of
marketing expenses of the sale to the third party) the greater of
(i)  Purchaser's  net  investment plus  a  twelve  percent  (12%)
annualized  return  on such amounts or (ii) an  amount  equal  to
Purchaser's  net  investment  plus fifty  percent  (50%)  of  the
difference  between (x) the amount of the net proceeds  less  the
Company's investment banker fees and expenses in selling  Doctors
Health  Plan  to  the  Purchaser minus (y)  the  Purchaser's  net
investment. In all potential sales to third party purchasers, the
Purchaser  has  the right to retain ownership of  Doctors  Health
Plan  and  pay  the  Company an amount equal to  the  amount  the
Company would have received as a result of the sale to the  third
party.

As  part  of  the transaction, the Company agreed to continue  to
offer  the employees of the Company and its affiliates the option
to  use  Doctors Health Plan under the Company's health  benefits
program  for  one  year following the closing and  to  not  offer
employees   an  option  to  use  any  other  health   maintenance
organization,  preferred provider organization or similar  health
plan  during that one year period in the State of North  Carolina
or  in  any area of South Carolina where Doctors Health  Plan  is
licensed.

As  part  of  the transaction, the Company agreed  to  a  partial
release  of its non-compete agreement with Steven M. Scott,  M.D.
This  partial  release  allows Steven  M.  Scott,  M.D.  and  his
affiliates  to  operate  health  maintenance  organizations   and
similar  organizations in all areas, other than  those  areas  in
Florida  and  Georgia  where the Company  and/or  its  affiliates
operate  health  maintenance  organizations.  In  addition,   the
Company  agreed that for a one year period following the  closing
date, neither the Company or its subsidiaries will engage in  the
business of providing health maintenance organization or  similar
services  in the State of North Carolina and those service  areas
in the State of South Carolina served by Doctors Health Plan.

ITEM 5. - OTHER EVENTS

I.  On  March  9,  1998, the Company entered  into  a  definitive
written Stipulation of Settlement with counsel for the plaintiffs
in  the  matter of In re Coastal Physician Group, Inc. Securities
Litigation, Case No. 1:95CV00306, a class action lawsuit filed in
the United States District Court for the Middle District of North
Carolina.  Named  as Defendants in the suit in  addition  to  the
Company, were Steve M. Scott, M.D., David W. Singley and David H.
Fater  (collectively "Individual Defendants"). Dr. Scott  is  the
Chairman,  President and Chief Executive Officer of the  Company.
Mr. Singley  and Mr. Fater are former officers of the Company.

The  case  arises out of a consolidation of four actions  against
the  Company and certain former officers of the Company filed  in
April 1995. The Third Consolidated Amended Class Action Complaint
filed  on  April  11, 1997 alleged claims for violations  of  the
Securities  Exchange  Act  of  1934 and  Rule  10b-5  promulgated
thereunder by the Securities and Exchange Commission, as well  as
common  law  negligent misrepresentations. The  Company  and  the
individual  Defendants denied and continue to deny any  liability
to  Plaintiffs or to the Class, and have asserted defenses to the
claims.

The class members consist of all persons who purchased the common
stock  of  the  Company during the period from  August  11,  1994
through  and  including April 27, 1995, excluding the Defendants;
members of the families of the Individual Defendants; any  person
or  entity in which any Defendant has a controlling interest; any
subsidiary or affiliate of the Company; the directors,  officers,
employees  and  controlling  persons  of  the  Company   or   any
subsidiary   or   affiliate  of  the  Company;  and   the   legal
representatives, heirs, executors, ancestors and assigns  of  any
excluded person or entity.

The  settlement was negotiated through the services of a mediator
appointed by the Court. The Company and the Individual Defendants
did  not admit or concede any liability with regard to the merits
of  the  claims asserted, but concluded that it was desirable  to
settle  in  order  to  avoid  the  expenses,  inconvenience   and
distraction of further legal proceedings. The settlement requires
the  funding  of $8,150,000 into an Escrow Account pending  final
court  approval  of  the  Stipulation of Settlement.  The  Escrow
Account  has  been  fully funded as of this date.  The  Company's
insurers funded $7,150,000 and the Company funded the balance  of
the Escrow Account.

II.  Pursuant to a letter to the Company dated January 19,  1998,
Deborah  L.  Redd ("Redd") resigned as a member of the  Board  of
Directors  of  the Company and as an officer of  several  of  the
Company's  subsidiaries, effective as of February 18, 1998.  Redd
indicated  in her letter to the Company that her resignation  was
based  on her desire to permanently reside in Maryland and reduce
her traveling.

ITEM 7. - FINANCIAL STATEMENTS AND EXHIBITS

(a) NOT APPLICABLE.

(b) THE PRO FORMA FINANCIAL INFORMATION REQUIRED IS ATTACHED
    HERETO.

(c) NOT APPLICABLE.

                  COASTAL PHYSICIAN GROUP, INC.
           UNAUDITED CONDENSED CONSOLIDATED PRO FORMA
                      FINANCIAL INFORMATION

The following unaudited condensed consolidated pro forma balance
sheet as of September 30, 1997, and the unaudited condensed
consolidated pro forma statements of operations for the nine
month period ended September 30, 1997 and the year ended December
31, 1996 have been prepared to give effect to the sale of certain
assets of DHP.  The adjustments to the unaudited condensed
consolidated pro forma balance sheet have been prepared as if the
transaction was consummated on September 30, 1997, while the
adjustments to the unaudited condensed consolidated pro forma
statements of operations have been prepared as if the transaction
was consummated as of the beginning of the respective periods
presented.  The unaudited condensed consolidated pro forma
financial information has been adjusted to reflect the effect of
the pro forma adjustments described in the accompanying notes and
is not necessarily indicative of the consolidated financial
position or results of operations had the sale transaction
actually been effected as of the assumed dates.  The unaudited
condensed consolidated pro forma financial information should be
read in conjunction with the Company's unaudited condensed
consolidated financial statements and notes thereto as of
September 30, 1997 and for the nine months then ended included in
the Company's Quarterly Report on Form 10-Q filed on November 21,
1997.

                  COASTAL PHYSICIAN GROUP, INC.
     UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
                        September 30, 1997
                          (IN THOUSANDS)

                                         PRO FORMA
                               HISTORIC  ADJUSTMEN           PRO
                                  AL         TS             FORMA

            ASSETS
Current assets:
 Cash and cash equivalents          5,717    (1,980)  (a)     3,737
 Marketable securities              7,723    (5,240)  (a)     2,483
 Trade accounts receivable, net    33,916         63  (a)    33,979
 Accounts receivable, other        14,302      4,577  (a,b   18,879
                                                     ,c)
 Other current assets              11,783       (65)  (a)    11,718
      Total current assets         73,441    (2,645)         70,796
Property and equipment, at
cost,                             12,236      (422)  (a)    11,814
    less accumulated
 depreciation
Excess of cost over fair value
of                                 8,408    (1,012)  (a)     8,408
      net assets acquired,
 net
Other assets                       11,716                    10,704
      Total assets                105,801    (4,079)        101,722

LIABILITIES AND SHAREHOLDERS'
            EQUITY
          (DEFICIT)
Current liabilities:
 Current maturities and other
      short-term borrowings        2,481                     2,481
 Accounts payable                  33,765        942  (a,c   34,707
                                                     )
  Deferred revenue                 53,379                    53,379
  Accrued expenses                 18,141      (300)  (a)    17,841
 Accrued physician fees
      and medical costs           24,253    (7,071)  (a)    17,182
     Total current liabilities   132,019    (6,429)        125,590
Long-term debt, excluding
  current maturities               3,215                     3,215
      Total liabilities           135,234    (6,429)        128,805
Shareholders' equity (deficit):
 Preferred stock                       12                        12
 Common stock                         244                       244
 Additional paid-in capital       158,095                   158,095
Common stock warrants              2,828                     2,828
 Accumulated deficit             (190,693      2,350  (d)   (188,34
                                       )                        3)
 Unrealized appreciation of
     available-for-sale               81                        81
 securities
      Total shareholders'
equity                          (29,433)      2,350        (27,083
           (deficit)                                              )
      Total liabilities and
share-                           105,801    (4,079)        101,722
       holders' equity
 (deficit)

                  COASTAL PHYSICIAN GROUP, INC.
            NOTES TO UNAUDITED CONDENSED CONSOLIDATED
                     PRO FORMA BALANCE SHEET
                       September 30, 1997

DETAILS OF PRO FORMA ADJUSTMENTS

(a)  To record the disposition of the assets and liabilities of
DHP.

(b)  To record a receivable for $5.0 million Promissory Note
payable within 10 days from the closing date.

(c)  To record the additional March capital infusion, applied to
the purchase price.

(d)  To record the retained earnings impact of the sale.

                     COASTAL PHYSICIAN GROUP, INC.
  UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
                 NINE MONTHS ENDED SEPTEMBER 30, 1997
                 (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                             PRO FORMA
                                   HISTORICA ADJUSTMENT          PRO
                                       L         S              FORMA

Operating revenue, net                335,805   (21,708)  (a)    314,097

Costs and expenses:
 Physician and other provider         267,824   (21,522)  (a)    246,302
services
 Medical support services              33,048       (88)  (a)     32,960
  Selling, general and                 72,144    (5,379)  (a,     66,765
administrative
      Total costs and expenses        373,016   (26,989)         346,027

Operating loss                       (37,211)      5,281         (31,930
                                                                      )

Other income (expense):
   Interest income (expense), net     (8,614)                    (8,614)
  Other, net                          (4,337)       (86)  (a)    (4,423)
     Total other expense             (12,951)      5,195         (13,037
                                                                      )

     Loss before income taxes        (50,162)        ---         (44,967
                                                                      )

   Benefit for income taxes           (1,400)                    (1,400)

     Net loss                        (48,762)      5,195         (43,567
                                                                      )

     Net loss per share                (2.01)                     (1.79)

Weighted average number of shares
 outstanding                          24,311                     24,311

                    COASTAL PHYSICIAN GROUP, INC.
 UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
                    YEAR ENDED DECEMBER 31, 1996
                (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                              PRO FORMA
                                    HISTORIC  ADJUSTMEN          PRO
                                       AL         TS            FORMA

Operating revenue, net                 552,109    (9,787)  (a)   542,322

Costs and expenses:
 Physician and other provider          450,526    (8,759)  (a)   441,767
services
 Medical support services               92,460       (73)  (a)    92,387
 Selling, general and administrative   171,903    (5,658)  (a)   166,245

      Total costs and expenses         714,889   (14,490)        700,399

Gain on divested assets, net            37,751                    37,751

Operating loss                        (125,029      4,703        (120,32
                                            )                        6)

Other income (expense):
 Interest income (expense), net       (12,274)        ---        (12,274
                                                                      )
 Other, net                            (5,982)        ---        (5,982)
     Total other expense              (18,256)        ---        (18,256
                                                                      )

     Loss before income taxes and
        extraordinary item           (143,285      4,703        (138,58
                                            )                        2)

  Income tax provision                 (4,136)                   (4,136)

     Loss before extraordinary item   (147,421      4,703        (142,71
                                            )                        8)

  Extraordinary item - gain on
pooled
     portion of south Florida           1,864                     1,864
 divestiture,
     net of income taxes of 647

     Net loss                         (145,557      4,703        (140,85
                                            )                        4)

Loss per common share:
     Loss before extraordinary item     (6.18)                    (5.99)
  Extraordinary gain                      0.08                      0.08
     Net loss                           (6.10)                    (5.91)

Weighted average number of shares
 outstanding                           23,844                    23,844

                  COASTAL PHYSICIAN GROUP, INC.
            NOTES TO UNAUDITED CONDENSED CONSOLIDATED
               PRO FORMA STATEMENTS OF OPERATIONS
          FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
              AND THE YEAR ENDED DECEMBER 31, 1996

DETAILS OF PRO FORMA ADJUSTMENTS

(a)  To record the direct reduction in operating revenue, net,
costs and expenses and other income/expense directly related
to DHP for the periods presented.

                           SIGNATURES

Pursuant  to the requirements of the Securities Exchange  Act  of
1934, the Registrant has duly caused this report to be signed  on
its behalf by the undersigned thereunto duly authorized.

                                   COASTAL PHYSICIAN GROUP, INC.
                                   (Registrant)

Date:  March 27, 1998              By: /S/ STEVEN M. SCOTT, M.D.
                                       Steven M. Scott, M.D.
                                        President and Chief
Executive Officer

Date:  March 27, 1998              By: /S/ CHARLES F. KUONI, III
                                       Charles F. Kuoni, III
                                        Executive Vice President
                                        and Chief Financial
                                        Officer