Dominion Pathology Laboratories, P.C. v. Anthem Health Plans of Virginia, Inc.

Citations: 111 F. Supp. 3d 731; 2015 U.S. Dist. LEXIS 80002; 2015 WL 3830931Docket: Civil Action No. 2:15cv152

Court: District Court, E.D. Virginia; June 19, 2015; Federal District Court

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The court, led by Chief Judge Rebecca Beach Smith, granted the Motion to Remand filed by Plaintiff Dominion Pathology Laboratories, P.C. The Plaintiff, a three-physician practice providing diagnostic biopsy services, has been part of Defendant Anthem Health Plans of Virginia's provider network for twelve years. The Defendant unilaterally reduced reimbursement rates by approximately 18% on January 1, 2014, and later notified the Plaintiff of an additional reduction of nearly 60%, effective February 2, 2015. The Plaintiff initiated legal action in state court on March 10, 2015, alleging violations of federal law under the Patient Protection and Affordable Care Act (ACA) and state law, alongside breach of contract claims. After being served on March 16, 2015, the Defendant filed a Notice of Removal to federal court on April 10, asserting federal question jurisdiction. The Plaintiff subsequently filed a Motion to Remand on May 1, which the Defendant opposed. 

The analysis emphasized the limited subject matter jurisdiction of U.S. district courts, which can only exercise jurisdiction as authorized by the Constitution and federal statutes. The court noted that only state-court actions that could have originally been filed in federal court may be removed, and if jurisdiction is lacking at any time before final judgment, remand is required. The court also highlighted the significance of federalism concerns, asserting that any doubts about removal should favor remand. The burden of proving federal subject matter jurisdiction lies with the Defendant seeking removal.

The Defendant's Notice of Removal claims federal question jurisdiction under 28 U.S.C. § 1331 based on the Plaintiff's reliance on the Affordable Care Act (ACA). The Defendant contends that the Plaintiff's state claims involve federal issues justifying federal court adjudication. Federal question jurisdiction applies to civil actions arising under U.S. law, which occurs when a plaintiff's well-pleaded complaint raises federal law issues. A case can arise under federal law either when federal law creates the cause of action or when significant federal issues are implicated in state-law claims. For federal jurisdiction to apply to state law claims, four criteria must be met: (1) the federal issue must be necessarily raised, (2) it must be actually disputed, (3) it must be substantial, and (4) it must be resolvable in federal court without upsetting the federal-state balance. The mere presence of a federal issue is insufficient to confer federal jurisdiction. 

In this case, the Plaintiff's complaint primarily concerns a breach of contract and claims the Defendant has not complied with contract terms that include both federal and state law compliance. The parties agree that § 2706 of the ACA does not provide a private right of action, which is not necessary for federal question jurisdiction. However, federal jurisdiction exists only if the Plaintiff's claims hinge on a substantial federal law question. The removal fails to meet parts (1), (3), and (4) of the Gunn criteria, as the Plaintiff's claims do not necessarily raise a federal law issue. The Fourth Circuit has clarified that a claim only depends on a federal question if every legal theory supporting it requires resolving a federal issue.

A claim does not 'arise under' federal law for § 1331 purposes if the plaintiff can substantiate it with at least one theory that doesn't involve federal law interpretation. In this case, the Plaintiff alleges both federal and state liability for breach of contract, citing a contractual provision requiring compliance with both federal and state laws. The Defendant contends that resolving the federal breach-of-contract claim necessitates federal law interpretation, but the Plaintiff could prevail by demonstrating either a violation of § 2706 of the ACA or Virginia Code § 38.2-3407. Although the ACA is mentioned in the Complaint, the resolution of federal issues is not essential to the state claim. A court could rule on the ACA violation as 'unreasonable discrimination' under state law without needing to reference federal law. Therefore, the Defendant has not shown that addressing § 2706 is necessary to resolve the claim, indicating that the federal issue is not 'necessarily raised.' 

For a federal issue to be 'necessarily raised,' it must be a key element of the plaintiff's cause of action. The substantiality of the federal issue must also be assessed in terms of its importance to the federal system. Factors influencing substantiality include whether the issue is a 'nearly pure issue of law,' if its resolution is decisive for the case and influential in other cases, and the government’s interest in the federal forum. The Defendant claims the federal issue is substantial, arguing that the court must interpret 'discriminate' in § 2706, which would set a precedent for future cases.

The Defendant argues that the interpretation of the federal ACA provision is a significant federal issue appropriate for resolution in federal court, citing the Supreme Court’s ruling in Grable. Conversely, the Plaintiff contends that the federal issue is not substantial or important to the federal system, emphasizing that Congress has delegated enforcement of the ACA provision to the states. The Plaintiff asserts that, similar to the Gunn case, the contested federal issue does not have a substantial impact on the federal system as a whole, as it encompasses both legal and factual questions. Specifically, the definition of 'discrimination' under § 2706 of the ACA is disputed, along with the rates charged by the Defendant to other providers.

The Defendant fails to demonstrate that the federal issue will be decisive in the case or that the federal government has a specific interest in the matter. The Defendant claims the ACA's national significance justifies federal jurisdiction, yet the Plaintiff counters that not every ACA-related issue qualifies as a federal concern. The Plaintiff highlights that the federal interest in Grable was centered on the IRS's ability to collect taxes, which does not have a parallel in this case. 

Regarding the Gunn analysis, the Defendant argues that federal jurisdiction would not disturb the state-federal balance since the implementation of the ACA in Virginia is managed by the State Corporation Commission. However, the Plaintiff maintains that adjudicating the federal ACA issue in federal court would upset the balance established by Congress, which has reserved enforcement of the relevant ACA provisions to the states without creating a federal cause of action. The Plaintiff references a Seventh Circuit ruling that most insurance disputes are governed by state law, reinforcing the argument that federal question jurisdiction is not appropriate in this case.

The court concludes that the Defendant did not meet its burden to demonstrate the existence of a substantial federal question, leading to the granting of the Motion to Remand. Consequently, the case is remanded to the Circuit Court for the City of Norfolk, Virginia. The Defendant’s Motion to Dismiss is deemed moot in this court but may be reasserted in state court. The Clerk is instructed to send a copy of the Memorandum Order to all parties and facilitate the remand.

Additionally, Section 2706 of the Affordable Care Act (ACA), codified at 42 U.S.C. § 300gg-5(a), prohibits discrimination against healthcare providers acting within their licensed scope. It allows for varying reimbursement rates based on quality or performance but does not mandate contracting with all willing providers. Virginia Code § 38.2-3407 outlines that insurers must establish non-discriminatory terms for preferred providers and that price differences from negotiations or geographical variations are not inherently discriminatory. The Commission lacks jurisdiction over disputes arising from this subsection. 

A Consent Order was issued by United States Magistrate Judge Tommy E. Miller on May 15, 2015, permitting the Defendant an extension to respond to the Plaintiff's Motion to Remand. Despite the Plaintiff's request for a hearing on the Motion to Remand, the court determined that a hearing was unnecessary, as the existing briefs and records sufficiently addressed the issues. The Plaintiff acknowledged that the Defendant's alleged violation of the ACA would be a disputed matter. The court noted that Virginia’s delegation of ACA implementation to the State Corporation Commission does not alter the outcome, asserting that state regulatory frameworks do not significantly impact the broader federal system.