Gregg v. Providence St. Joseph Health

Background

Andrea Gregg and Charlene Davidson filed a proposed class action against Providence St. Joseph Health and related defendants. They asserted claims under California’s Unfair Competition Law and for intentional interference with contractual relations. They alleged that, after receiving medical services for injuries from separate car accidents, the defendants asserted liens against their potential settlements or judgments instead of billing their health insurance plans. According to the complaint, the liens used inflated retail or customary charges that exceeded the California Hospital Lien Act’s limit to reasonable and necessary charges.

Gregg’s health plan was with United Healthcare. Davidson had Medicare and a Kaiser Permanente supplemental insurance plan. The plaintiffs alleged that the defendants did not submit bills to those plans and thereby deprived them of the benefit of their insurance contracts.

Removal and jurisdiction

The defendants removed the case from California state court to federal court. They argued that Davidson’s claims arose under federal Medicare law because the claims concerned whether the defendants should have billed Medicare and accepted Medicare-related payment rates. They also asserted supplemental jurisdiction over Gregg’s claims. In their opposition to remand, the defendants suggested that jurisdiction might exist under the Class Action Fairness Act, but the court found that the removal notice did not provide an adequate factual basis for that theory.

Federal courts have limited jurisdiction. The party removing a case must show, more likely than not, that federal jurisdiction exists. The court explained that a state-law claim can sometimes belong in federal court if it necessarily depends on a substantial and disputed federal issue, but a reference to federal law does not automatically create federal jurisdiction.

Court’s analysis

The court distinguished this case from decisions in which plaintiffs were effectively challenging the denial of Medicare benefits or seeking benefits under the Medicare Act. Davidson did not allege that she was denied Medicare benefits and did not seek to recover those benefits. Instead, she challenged the amount of the liens under California’s Hospital Lien Act.

The court noted that the Medicare Secondary Payer rules instruct providers to bill other primary payers before Medicare and recognize that state law governs whether a provider may assert a lien and the amount recoverable through that lien. The court concluded that the plaintiffs’ claims required application of California law concerning the Hospital Lien Act’s reasonable-and-necessary limitation. The mere reference to Medicare rates did not convert the claims into claims arising under federal Medicare law.

Disposition

The court held that the defendants had not shown federal-question jurisdiction. It granted the plaintiffs’ motion to remand and directed the Clerk to return the case to the Superior Court of California, County of San Francisco. The court denied the defendants’ motion to dismiss as moot because the federal court was remanding the case. The order terminated Docket Number 15.