Health Law Daily Wrap Up, MEDICAID—D. Md.: Federal court remands Medicaid payment dispute, rejects federal jurisdiction arguments, (Mar 23, 2026)

By Elena Eyber, J.D.

A federal court remanded a $15 million healthcare payment dispute to state court, finding no federal question jurisdiction despite references to federal law.

The federal district court for the District of Maryland granted the University of Maryland Medical System Corporation’s (UMMS) motion to remand its contract dispute with a Medicaid managed care organization to state court, finding that the case does not arise under federal law. Although the complaint referenced federal statutes such as EMTALA and Medicaid provisions, the court held that the claims are grounded in state law, primarily breach of contract and unjust enrichment. The court also denied the Medicaid managed care organization’s motion to dismiss as moot and declined to award attorney’s fees, finding that removal was not objectively unreasonable (Univ. of Md. Med. Sys. Corp. v. Md. Care, Inc., No. 1:25-cv-02319-BAH, slip op. (D. Md. Mar. 18, 2026)).

Background and claims. UMMS alleged that a Medicaid managed care organization systematically underpaid or denied reimbursement for emergency medical services provided to its members, resulting in losses exceeding $15 million. The dispute arises from a provider agreement requiring the Medicaid managed care organization to pay UMMS at specified rates for covered services. UMMS claimed the Medicaid managed care organization improperly denied claims, particularly for emergency and behavioral health services, by applying incorrect standards instead of the “prudent layperson” standard, allegedly breaching contractual and regulatory obligations.

No federal question on the face of the complaint. The court found that UMMS’s complaint asserts only state law causes of action—breach of contract, unjust enrichment, and related requests for declaratory and injunctive relief. References to federal laws like EMTALA and Medicaid did not transform these claims into federal causes of action. Applying the well-pleaded complaint rule, the court emphasized that federal jurisdiction exists only when a federal issue appears on the face of the complaint, which was not the case here.

No Grable jurisdiction (embedded federal issue). The court also rejected the Medicaid management care organization’s argument that federal jurisdiction existed under the “substantial federal question” doctrine. The court held that resolving UMMS’s claims does not necessarily require interpreting federal law, as the dispute centers on contractual obligations defined by agreements between the parties. References to federal standards were deemed incidental and insufficient to meet the strict requirements for Grable jurisdiction, particularly where the Medicaid managed care organization failed to establish all required elements.

Relief requests and attorney’s fees. UMMS’s requests for declaratory and injunctive relief did not independently confer federal jurisdiction because they were tied to underlying state law claims. The court further denied UMMS’s request for attorney’s fees, holding that the Medicaid managed care organization had an objectively reasonable basis for removal given the complaint’s references to federal law, even though jurisdiction was ultimately lacking.

The case is No. 1:25-cv-02319-BAH.

Judge: Hurson, B.

Attorneys: Brett Ingerman (DLA Piper LLP) for University of Maryland Medical System Corp. Marie Celeste Bruce (Rifkin, Weiner, Livingston, LLC) for Maryland Care, Inc.

Companies: University of Maryland Medical System Corp.; Maryland Care, Inc.

Cases: CaseDecisions GCNNews MedicaidNews MedicaidPaymentNews MarylandNews