Health Law Daily Wrap Up, MEDICARE PART C / MEDICARE ADVANTAGE—D.P.R.: Contract dispute over Medicare fee schedule remanded to state court, (May 7, 2026)

By Donielle Tigay Stutland, J.D.

The suit was a state law contract dispute and the federal issues only arose as a potential defense.

The federal district court in the District of Puerto Rico granted a motion to remand a dispute between the Asociación de Laboratorios Clinicos, Inc. and insurers Triple-S Advantage, Inc. and Triple-S Salud, Inc. over Medicare fee schedules. The court determined that the insurance companies failed to show that the case falls under the federal ingredient doctrine. The court found that suit was a state contract dispute over the interpretation and enforceability of a private agreement under Puerto Rico law and any federal issues arise only as a potential defense (Asociación de Laboratorios Clinicos, Inc. v. Triple-S Advantage, Inc., No. 26-01013 (MAJ) (D.P.R. May 4, 2026)).

Background. Asociación de Laboratorios Clinicos, Inc. is a non-profit entity that represents an association of clinical laboratories in Puerto Rico. Defendants Triple-S Advantage, Inc. and Triple-S Salud, Inc. are affiliated insurance companies that provide health care insurance under the federal Medicare Advantage program.

On May 23, 2025, the insurers notified the association's members that the fee schedule governing their agreement would be adjusted to a fixed percentage of the prices set by the 2025 Medicare Fee Schedule. The resulting fee schedule established reimbursement rates less than those set under the previously applicable Medicare Fee Schedule.

The association filed a suit in the Court of First Instance of Puerto Rico against the insurers alleging that the reduced rates they are paying are not sufficient to cover the costs of the medical services performed by its members under the new Fee Schedule. The Complaint invokes Article 1249 of the Puerto Rico Civil Code, which renders voidable any contractual clause that authorizes unilateral modifications to the terms of a contract of adhesion.

On January 9, 2026, the insurers filed a Notice of Removal, and the case was removed to federal court. The association filed a motion to remand this case to local court, arguing that the federal court lacks jurisdiction.

Federal Ingredient Doctrine. The insurers oppose the motion to remand, arguing that the case falls under so-called “federal ingredient” doctrine, which “permits removal of a well pleaded claim sounding in state law which necessarily requires resolution of a substantial question of federal law.” Federal jurisdiction may be established “where, regardless of whether federal or state law creates the claim, a well pleaded complaint necessarily requires resolution of a substantial question of federal law.” The insurers argued that this case presents a substantial, actually disputed, and necessarily raised “federal ingredient” that may be litigated in federal court without disrupting the federal-state balance created by Congress because “Medicare Advantage standards expressly preempt state law[.]” and “any state-law rule that would prohibit [Medicare Advantage Organizations] from applying current... fee schedules” set by the CMS “would directly conflict with and be preempted by federal Medicare Advantage law.” The association argues that this case as a “garden variety” state law contract dispute and the court lacks jurisdiction.

Here, the court found that although Medicare Part C contains a broad preemption clause and the insurers may have a defense based on federal law, a federal preemption defense does not create removal jurisdiction unless the doctrine of complete preemption applies. For the doctrine of complete preemption to apply, the “preemptive force” of a “federal cause of action” must be “so powerful as to displace entirely any state cause of action” that “comes within the scope of the federal cause of action.” The court determined that the insurers could not find complete preemption. First, the court noted that the insurers did not identify any federal cause of action arising from the Medicare Fee Schedule promulgated by the CMS. Additionally, the court found that the preemptive clause in Medicare Part C creates express exceptions to the preemptive effects of the statute, necessarily rendering Medicare Part C not entirely preemptive of state law. The court stressed that “this District has previously explained that Medicare Part C does not broadly preempt contractual claims between Medicare Advantage organizations and health care providers,” since “the Medicare Act does not provide a procedure for resolving [those] disputes[.]”

The court granted the Motion to Remand after concluding that the case presents an ordinary state contract law claim, against which the insurers have raised a potential federal defense.

The Case is No. 26-01013 (MAJ).

Judge: Antongiorgi-Jordán, M.

Attorneys: Francisco J. Mercado-Olivero (Colon, Colon & Martinez P.S.C.) for Asociacion de Laboratorios Clinicos, Inc. Diego Murgia-Diaz (Pietrantoni Mendez & Alvarez LLC) for Triple-S Advantage, Inc.

Companies: Asociacion de Laboratorios Clinicos, Inc.; Triple-S Advantage, Inc.

Cases: CaseDecisions CMSNews PartCNews PuertoRicoNews