Federal Court Limits Jurisdiction in 340B Reimbursement Dispute in North Carolina

A recent federal case in North Carolina, Nash Hospitals, Inc. v. UnitedHealthcare of North Carolina, Inc., clarifies the limits of federal question jurisdiction in health care provider-payer disputes. The hospital system alleged that UnitedHealthcare underpaid reimbursement claims related to pharmaceuticals acquired under the 340B drug program, specifically involving Medicare Advantage enrollees. The dispute arose over contract interpretation, specifically that the insurer reimbursed at average sales price (ASP) minus 22.5% instead of ASP plus 6%, as allegedly agreed upon.

UnitedHealthcare removed the case to federal court, arguing that federal law—particularly Medicare regulations and prior 340B-related federal rulings—necessitated federal jurisdiction. However, the court determined that none of the plaintiff’s claims required resolution of a federal legal issue. The claims, including breach of contract and unfair practices, were based on state contract law and did not implicate federal regulatory enforcement.

The court emphasized that although federal statutes or regulations were referenced in background facts, the core conflict was private contract interpretation under state law. This ruling underscores that claims grounded in the parties’ contractual relationship generally belong in state courts unless federal law must be directly interpreted or applied to sustain the claim.

Unlike cases governed by federal regulatory schemes, this dispute involved a private agreement where federal law’s role was incidental rather than essential. The court also declined to award legal costs to the hospital, indicating that the insurer’s removal was objectively reasonable, despite failing.

For stakeholders in health care reimbursement litigation, the decision highlights the importance of distinguishing when federal jurisdiction applies. Merely involving federal statutes in the factual framework does not justify federal court removal; the federal issue must be central to the claims’ resolution. This promotes clarity in jurisdictional boundaries in provider-payer contract disputes involving federal healthcare programs such as 340B and Medicare Advantage.