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) JANUARY 21, 1997



                  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 5.  Other Events.

     Pursuant to a reimbursement agreement dated December 31,
1996 between Coastal Physician Group, Inc. (the "Company")  and
Steven M. Scott, M.D., a director, the Company's founder and
beneficial owner of approximately thirty-three percent (33%) of
the Company's outstanding Common Stock, the Company has issued
226,690 shares of Common Stock (the "Common Shares") and 32,482
shares of Series B Convertible Preferred Stock (the "Preferred B
Shares") to Dr. Scott in satisfaction of the Company's obligation
to reimburse $1,654,550 of proxy contest expenses incurred by Dr.
Scott.  The proxy expenses were incurred  in  Dr. Scott's
successful solicitation of proxies to (i) elect  two nominees to
the Company's  Board of Directors (the "Board") at the Company's
Annual Meeting of Shareholders on September 27, 1996 and (ii)
approve a resolution requesting the Board to form a committee of
independent non-management directors to consider and recommend to
the Board the best available means for maximizing shareholder
value.  On January 30, 1997, the Board authorized the issuance of
258 additional Preferred B Shares to satisfy $7,728 of additional
proxy expenses incurred by Dr. Scott.  For purposes of satisfying
the dollar amount of the proxy expenses, each Common Share was
valued at $3.00 per share, the closing price of the Common Stock
on the New York Stock Exchange on December 30, 1996, and each
Preferred B Share was valued at $30.00 per share.  At the option
of the Company or the holder, each Preferred B Share is
convertible into ten (10) shares of Common Stock (subject to
adjustment in certain events), provided that the Preferred B
Shares are not convertible without prior approval of their
convertibility by the Company's shareholders at an annual or
special meeting of shareholders. Because of the Company's need to
conserve cash, the Board and Dr. Scott agreed that, in lieu of
cash, the Company's reimbursement obligation would be satisfied
by the issuance of the Common Shares and the Preferred B Shares.

     The Company, Dr. Scott, Bertram E. Walls, M.D., a director,
and Joseph G. Piemont, the former president and chief executive
officer of the Company, entered into a Release and Settlement
Agreement on January 21, 1997 (the "Settlement Agreement") with
respect to the litigation styled Steven M. Scott, M.D. and
Bertram E. Walls, M.D. on their own behalf and on behalf of
Coastal Physician Group, Inc. v. Jacque Jenning Sokolov, Joseph
G. Piemont, Stephen D. Corman and Coastal Physician Group, Inc.,
No. 96 CvS 2748 (the "Lawsuit").  The Settlement Agreement was
approved by the court on January 21, 1997.  Pursuant to the
Settlement Agreement, the Company agreed to pay Mr. Piemont
$150,000 upon execution of the Agreement plus a total $250,000 to
be paid in monthly installments of $20,000 each for a period of
12 months beginning February 15, 1997 and a final payment of
$10,000 on February 15, 1998.  In addition, the Company granted
to Mr. Piemont stock appreciation rights for 50,000 shares of
Common Stock equal to the difference between $3.00 per share (the
closing price for shares of Common Stock on December 30, 1996)
and the average trading price for the 10 trading days prior to
the exercise of such rights, subject to a maximum of $4.00 per
share.  On January 24, 1997, Mr. Piemont exercised the stock
appreciation rights for the full 50,000 shares and the Company
has paid Mr. Piemont $75,000 in full satisfaction of its
obligations for stock appreciation rights.  The Settlement
Agreement provided for dismissal of Mr. Piemont from the Lawsuit
and mutual releases of Mr. Piemont and the Company for any claims
with respect to the Lawsuit or the employment agreement of Mr.
Piemont.

      The  Company,  Dr.  Scott and Dr.  Walls  entered  into  an
Agreement as of January 21, 1997 (the "Dismissal Agreement") with
respect  to  the  Lawsuit, which was approved  by  the  court  on
January 21, 1997.  Pursuant to the Dismissal Agreement, Dr. Scott
and  Dr. Walls, as plaintiffs, agreed to file a dismissal without
prejudice  of  all  remaining claims  asserted  by  them  in  the
litigation,  and  the Company agreed to file a dismissal  without
prejudice of all claims asserted by the Company against Dr. Scott
in  the litigation.  The Company also agreed not to seek a return
or  refund  of  any  moneys advanced to  Dr.  Sokolov  that  were
actually  incurred  for  legal expenses in  connection  with  the
litigation.   All  claims  against Mr.  Corman  were  settled  in
November, 1996.

      Under  the  Dismissal  Agreement,  the  Company  agreed  to
reimburse  Dr.  Scott and Dr. Walls for legal fees  and  expenses
incurred  by  them in the litigation.  Because of  the  Company's
need to conserve cash, the Company, Dr. Scott and Dr. Walls, with
the  approval  of the court, agreed that reimbursement  would  be
made  by  issuing shares of Series A Convertible Preferred  Stock
(the  "Preferred  A  Shares")  to Dr.  Scott  and  Dr.  Walls  in
satisfaction  of the Company's obligation.  For  the  purpose  of
satisfying  the  dollar  amount of the litigation  expenses,  the
court,   after   considering  several  factors,   including   the
illiquidity  of the Preferred A Shares and the trading  price  of
the  Company's Common Stock for fifteen days prior to January 10,
1997,  determined that  valuing the Preferred A Shares at  $36.00
per  share was reasonable and appropriate.  At the option of  the
Company or the holder, each Preferred A Share is convertible into
ten (10) shares of Common Stock (subject to adjustment in certain
events), provided that the Preferred A Shares are not convertible
without  prior approval of their convertibility by the  Company's
shareholders  at  an annual or special meeting  of  shareholders.
The  Company  anticipates that the aggregate amount of  fees  and
expenses  incurred by Dr. Scott and Dr. Walls  that  the  Company
will be obligated to reimburse under the Dismissal Agreement will
be  approximately $1,600,000, which would result in the  issuance
of approximately 44,500 Preferred A Shares.

      The Common Shares and Preferred B Shares were issued to Dr.
Scott and the Preferred A Shares will be issued to Dr. Scott  and
Dr.  Walls  in  transactions exempt from registration  under  the
Securities  Act  of  1933,  as  amended  (the  "Act"),  and  will
constitute  "restricted  securities"  as  defined  in  Rule   144
promulgated  under  the Act.  No registration  rights  have  been
granted by the Company to Dr. Scott or Dr. Walls with respect  to
the Common Shares, the Preferred B Shares, the Preferred A Shares
or  the  Common Stock underlying the Preferred B Shares  and  the
Preferred A Shares.

     Holders of the Preferred A Shares and the Preferred B Shares
vote  together with holders of the Company's Common Stock on  all
matters  submitted  to  a  vote  by the  Company's  shareholders,
including the election of directors, except that the Preferred  A
Shares  do not vote on the approval of the convertibility of  the
Preferred A Shares and the Preferred B Shares do not vote on  the
approval  of  the convertibility of the Preferred B Shares.   The
Preferred  A  Shares  and the Preferred B  Shares  have  dividend
rights  that are pari pasu with the Company's Common Stock.   The
Preferred  A Shares have a liquidation preference of  $36.00  per
share and the Preferred B Shares have a liquidation preference of
$30.00 per share.

     The Common Shares issued to Dr. Scott represent less than 1%
of  the Company's outstanding Common Stock.  The shares of Common
Stock  expected  to  be  issued to Dr.  Scott  after  shareholder
approval  of  the convertibility of the Preferred  B  Shares  and
Preferred  A Shares, represent approximately 3% of the  Company's
outstanding Common Stock.


                           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: February 5, 1997          By:________________________
                                    Timothy W. Trost
                                     Executive Vice President
                                     and Chief Financial Officer





Date: February 5, 1997          By:_________________________             
                                    W. Randall Dickerson
                                     Vice President, Corporate
                                     Controller and Chief
                                     Accounting Officer
[{"type": "8-K", "sequence": "1", "secsgml_size_bytes": 9910}]
{"company-data": {"conformed-name": "COASTAL PHYSICIAN GROUP INC", "cik": "0000874787", "assigned-sic": "7363", "irs-number": "561379244", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-13460", "film-number": "97518694"}, "business-address": {"street1": "2828 CROASDAILE DR", "city": "DURHAM", "state": "NC", "zip": "27705", "phone": "9193830355"}, "mail-address": {"street1": "2828 CROASDAILE DR", "city": "DURHAM", "state": "NC", "zip": "27704"}, "former-company": {"former-conformed-name": "COASTAL HEALTHCARE GROUP INC", "date-changed": "19930328"}}
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) JANUARY 21, 1997

                  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 5.  Other Events.

     Pursuant to a reimbursement agreement dated December 31,
1996 between Coastal Physician Group, Inc. (the "Company")  and
Steven M. Scott, M.D., a director, the Company's founder and
beneficial owner of approximately thirty-three percent (33%) of
the Company's outstanding Common Stock, the Company has issued
226,690 shares of Common Stock (the "Common Shares") and 32,482
shares of Series B Convertible Preferred Stock (the "Preferred B
Shares") to Dr. Scott in satisfaction of the Company's obligation
to reimburse $1,654,550 of proxy contest expenses incurred by Dr.
Scott.  The proxy expenses were incurred  in  Dr. Scott's
successful solicitation of proxies to (i) elect  two nominees to
the Company's  Board of Directors (the "Board") at the Company's
Annual Meeting of Shareholders on September 27, 1996 and (ii)
approve a resolution requesting the Board to form a committee of
independent non-management directors to consider and recommend to
the Board the best available means for maximizing shareholder
value.  On January 30, 1997, the Board authorized the issuance of
258 additional Preferred B Shares to satisfy $7,728 of additional
proxy expenses incurred by Dr. Scott.  For purposes of satisfying
the dollar amount of the proxy expenses, each Common Share was
valued at $3.00 per share, the closing price of the Common Stock
on the New York Stock Exchange on December 30, 1996, and each
Preferred B Share was valued at $30.00 per share.  At the option
of the Company or the holder, each Preferred B Share is
convertible into ten (10) shares of Common Stock (subject to
adjustment in certain events), provided that the Preferred B
Shares are not convertible without prior approval of their
convertibility by the Company's shareholders at an annual or
special meeting of shareholders. Because of the Company's need to
conserve cash, the Board and Dr. Scott agreed that, in lieu of
cash, the Company's reimbursement obligation would be satisfied
by the issuance of the Common Shares and the Preferred B Shares.

     The Company, Dr. Scott, Bertram E. Walls, M.D., a director,
and Joseph G. Piemont, the former president and chief executive
officer of the Company, entered into a Release and Settlement
Agreement on January 21, 1997 (the "Settlement Agreement") with
respect to the litigation styled Steven M. Scott, M.D. and
Bertram E. Walls, M.D. on their own behalf and on behalf of
Coastal Physician Group, Inc. v. Jacque Jenning Sokolov, Joseph
G. Piemont, Stephen D. Corman and Coastal Physician Group, Inc.,
No. 96 CvS 2748 (the "Lawsuit").  The Settlement Agreement was
approved by the court on January 21, 1997.  Pursuant to the
Settlement Agreement, the Company agreed to pay Mr. Piemont
$150,000 upon execution of the Agreement plus a total $250,000 to
be paid in monthly installments of $20,000 each for a period of
12 months beginning February 15, 1997 and a final payment of
$10,000 on February 15, 1998.  In addition, the Company granted
to Mr. Piemont stock appreciation rights for 50,000 shares of
Common Stock equal to the difference between $3.00 per share (the
closing price for shares of Common Stock on December 30, 1996)
and the average trading price for the 10 trading days prior to
the exercise of such rights, subject to a maximum of $4.00 per
share.  On January 24, 1997, Mr. Piemont exercised the stock
appreciation rights for the full 50,000 shares and the Company
has paid Mr. Piemont $75,000 in full satisfaction of its
obligations for stock appreciation rights.  The Settlement
Agreement provided for dismissal of Mr. Piemont from the Lawsuit
and mutual releases of Mr. Piemont and the Company for any claims
with respect to the Lawsuit or the employment agreement of Mr.
Piemont.

      The  Company,  Dr.  Scott and Dr.  Walls  entered  into  an
Agreement as of January 21, 1997 (the "Dismissal Agreement") with
respect  to  the  Lawsuit, which was approved  by  the  court  on
January 21, 1997.  Pursuant to the Dismissal Agreement, Dr. Scott
and  Dr. Walls, as plaintiffs, agreed to file a dismissal without
prejudice  of  all  remaining claims  asserted  by  them  in  the
litigation,  and  the Company agreed to file a dismissal  without
prejudice of all claims asserted by the Company against Dr. Scott
in  the litigation.  The Company also agreed not to seek a return
or  refund  of  any  moneys advanced to  Dr.  Sokolov  that  were
actually  incurred  for  legal expenses in  connection  with  the
litigation.   All  claims  against Mr.  Corman  were  settled  in
November, 1996.

      Under  the  Dismissal  Agreement,  the  Company  agreed  to
reimburse  Dr.  Scott and Dr. Walls for legal fees  and  expenses
incurred  by  them in the litigation.  Because of  the  Company's
need to conserve cash, the Company, Dr. Scott and Dr. Walls, with
the  approval  of the court, agreed that reimbursement  would  be
made  by  issuing shares of Series A Convertible Preferred  Stock
(the  "Preferred  A  Shares")  to Dr.  Scott  and  Dr.  Walls  in
satisfaction  of the Company's obligation.  For  the  purpose  of
satisfying  the  dollar  amount of the litigation  expenses,  the
court,   after   considering  several  factors,   including   the
illiquidity  of the Preferred A Shares and the trading  price  of
the  Company's Common Stock for fifteen days prior to January 10,
1997,  determined that  valuing the Preferred A Shares at  $36.00
per  share was reasonable and appropriate.  At the option of  the
Company or the holder, each Preferred A Share is convertible into
ten (10) shares of Common Stock (subject to adjustment in certain
events), provided that the Preferred A Shares are not convertible
without  prior approval of their convertibility by the  Company's
shareholders  at  an annual or special meeting  of  shareholders.
The  Company  anticipates that the aggregate amount of  fees  and
expenses  incurred by Dr. Scott and Dr. Walls  that  the  Company
will be obligated to reimburse under the Dismissal Agreement will
be  approximately $1,600,000, which would result in the  issuance
of approximately 44,500 Preferred A Shares.

      The Common Shares and Preferred B Shares were issued to Dr.
Scott and the Preferred A Shares will be issued to Dr. Scott  and
Dr.  Walls  in  transactions exempt from registration  under  the
Securities  Act  of  1933,  as  amended  (the  "Act"),  and  will
constitute  "restricted  securities"  as  defined  in  Rule   144
promulgated  under  the Act.  No registration  rights  have  been
granted by the Company to Dr. Scott or Dr. Walls with respect  to
the Common Shares, the Preferred B Shares, the Preferred A Shares
or  the  Common Stock underlying the Preferred B Shares  and  the
Preferred A Shares.

     Holders of the Preferred A Shares and the Preferred B Shares
vote  together with holders of the Company's Common Stock on  all
matters  submitted  to  a  vote  by the  Company's  shareholders,
including the election of directors, except that the Preferred  A
Shares  do not vote on the approval of the convertibility of  the
Preferred A Shares and the Preferred B Shares do not vote on  the
approval  of  the convertibility of the Preferred B Shares.   The
Preferred  A  Shares  and the Preferred B  Shares  have  dividend
rights  that are pari pasu with the Company's Common Stock.   The
Preferred  A Shares have a liquidation preference of  $36.00  per
share and the Preferred B Shares have a liquidation preference of
$30.00 per share.

     The Common Shares issued to Dr. Scott represent less than 1%
of  the Company's outstanding Common Stock.  The shares of Common
Stock  expected  to  be  issued to Dr.  Scott  after  shareholder
approval  of  the convertibility of the Preferred  B  Shares  and
Preferred  A Shares, represent approximately 3% of the  Company's
outstanding Common Stock.

                           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: February 5, 1997          By:________________________
                                    Timothy W. Trost
                                     Executive Vice President
                                     and Chief Financial Officer

Date: February 5, 1997          By:_________________________             
                                    W. Randall Dickerson
                                     Vice President, Corporate
                                     Controller and Chief
                                     Accounting Officer