Chartered could owe D.C. health providers $85 million

April 19, 2013
Accountants are poring over the corporate records of Chartered, headquartered at 15th and L streets NW. (Mike DeBonis/The Washington Post)
Chartered, headquartered at 15th and L streets NW, could have assets ranging from $13 million to $93 million. (Mike DeBonis/The Washington Post)

The city’s doctors, clinics and hospitals could be owed a combined $85 million from the soon-to-be-defunct Chartered Health Plan, and it remains unclear how the once-dominant city health contractor will be able to pay the vast majority of those claims.

Chartered receiver Daniel L. Watkins said Friday that the company was suspending payment to care providers effective immediately while he gathers all outstanding claims and marshals the company’s assets. He declined to give a timeframe for when providers can expect payment.

The $85 million figure, which is about double previous estimates of Chartered’s potential liabilities to providers, represents about $60 million in Medicaid claims that have been incurred but have yet to be paid. Another $25 million could be owed to providers due to litigation — likely related to a pending battle between Chartered and the MedStar hospital chain.

Is there blood to be squeezed from the Chartered turnip? To be determined.

The company has liquid assets of $13 million to $16 million, representing $8 million in cash, an anticipated $5 million in proceeds from the sale of its most valuable capital assets to AmeriHealth Caritas, plus an additional $3 million in expected premium adjustments from the city.

What remains to be seen is whether the company will be successful in a $60 million claim against the city alleging that it was underpaid for services rendered and whether it will be able to seize $13 million in loan collateral being held by Cardinal Bank. Also up in the air is whether the company’s titular owner, Jeffrey E. Thompson, can be compelled to reimburse Chartered for a $4 million income tax refund that, according to Watkins, was kept on the books of Thompson’s parent company rather than properly being passed on to Chartered.

Do note that one influential D.C. Council member, David A. Catania (I-At Large), has suggested that Watkins and the city seek to hold Thompson personally liable for any of Chartered’s unpaid liabilities. Attorney General Irvin B. Nathan said this week that it remains a possibility.

Also note this: Whatever assets there are, they first go to pay the expenses of the receivership itself, which are not inconsiderable. Watkins estimated that, since his appointment in October, costs have run roughly $400,000 per month, paying for lawyers, accountants, actuaries and other consultants. Those costs could double in the coming months, Watkins said, with the closing of the AmeriHealth sale.

The upshot for health-care providers is that they might be seeing a hole in their accounts receivable for months, if not longer, and the hole might never be completely filled.

K. Edward Shanbacker, executive vice president of the Medical Society of the District of Columbia, said he has not heard explicit concerns about Chartered from the society’s member practices. But he noted that doctors in the city can operate on thin margins.

When the city last year sought an $11 million Medicaid reimbursement from health providers, Shanbacker said, doctors responded fiercely to beat back the proposal.  “If $11 million was going to cause that severe a disruption, one has to believe that $85 million is going to cause that times X,” he said.

William P. White, the city’s insurance commissioner, urged forbearance from providers Friday. “We would like for them to be patient and give us time to work through this,” he said. “I would say that patience is kind of a watchword right now.”

Mike DeBonis covers local politics and government for The Washington Post. He also writes a blog and a political analysis column that runs on Fridays.
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Mike DeBonis · April 19, 2013