A North Carolina federal court’s recent order granting remand in the case Nash Hospitals, Inc. v. UnitedHealthcare of North Carolina, Inc., et al., No. 5:25-CV-28-FL underscores the limits of federal question jurisdiction in disputes arising from health care provider-payer agreements, particularly where the claims are grounded in state law and do not necessarily require resolution of a substantial federal issue.
The plaintiff hospital system brought claims against UnitedHealthcare and affiliated companies seeking alleged underpayments under a hospital participation agreement, specifically relating to reimbursement for pharmaceuticals purchased under the federal 340B drug program and provided to Medicare Advantage enrollees.
The plaintiff alleged that, during a specified period, the insurer improperly reimbursed claims for 340B drugs at a rate of average sales price (ASP) minus 22.5% rather than the contractually agreed-upon ASP plus 6%, resulting in significant underpayments. The insurer removed the case to federal court, asserting that the dispute necessarily raised substantial questions of federal law, given the connection to Medicare regulations and recent federal court decisions regarding the 340B program.
The court, however, found that none of the plaintiff’s legal claims — for breach of contract, specific performance, declaratory judgment, unfair and deceptive practices, breach of fiduciary duty, constructive fraud, and breach of the covenant of good faith and fair dealing — necessarily required resolution of a federal issue. The court emphasized that the core dispute centered on the parties’ intent and the interpretation of their provider-payer agreement, not on the application or validity of federal law. References to federal statutes, regulations, or agency actions within the complaint did not transform the claims into those requiring resolution of federal questions; rather, the claims could be resolved solely by reference to state law principles of contract and business relationships.
The court distinguished this case from others where federal jurisdiction was found, noting that here, the relationship was governed by a private contract rather than a federal regulatory scheme, and the relief sought did not implicate the administration or enforcement of federal law. The court declined to award the hospital system plaintiff costs or fees related to the removal, finding that the insurer’s removal arguments, while ultimately unsuccessful, were objectively reasonable.
For parties in health care reimbursement disputes, this decision highlights the importance of carefully assessing whether a basis for federal jurisdiction exists when federal statutes or regulations are implicated in the background of a contractual relationship. Unless the resolution of a federal issue is essential to support a claim, state law claims arising from provider-payer agreements will generally remain within the purview of state courts. The ruling reinforces the principle that the mere presence of a federal issue in the factual background of a dispute does not, by itself, confer federal jurisdiction, and that doubts regarding removal must be resolved in favor of remand.
[View source.]
