The District of Columbia has reached a settlement with a health-care company that was once the city’s largest contractor and whose former owner is at the center of a federal investigation into political corruption.
District officials have agreed to pay $48 million to settle the accounts of D.C. Chartered Health Plan, the Medicaid contracting firm that unraveled over the past year amid financial stresses and allegations concerning its owner’s involvement in the 2010 mayoral election.
The settlement, between the company’s receiver and city health-care finance officials, awaits the approval of federal Medicaid officials. But when a Superior Court judge signed off on the deal Wednesday, it marked a significant step toward releasing funds to health-care providers who say they have not been paid for $56.5 million in services delivered to Chartered members.
“We’re very, very, very happy,” said Maria Gomez, the president and chief executive of Mary’s Center. Chartered owes the family-focused nonprofit group more than $300,000, Gomez said, and the center is behind on its rent and payments to vendors as a result.
Gomez added: “It’s money that has been due to us for so long now. . . . If we don’t get paid, we can’t continue to see these patients.”
Chartered’s founder and former owner, Jeffrey E. Thompson, is under investigation by a federal grand jury because of allegations that he financed a “shadow campaign” of unreported expenditures on behalf of Democrat Vincent C. Gray’s successful run for mayor three years ago.
Thompson’s attorney, Brendan V. Sullivan, has repeatedly declined to comment on the campaign allegations, and Gray has denied any wrongdoing.
Much was at stake in the election for Thompson and Chartered, which did more than $300 million a year in city business at its peak.
The company, which served more than 100,000 low-income District residents, came under increasing scrutiny in the years leading up to 2010. An audit found that Chartered had overpaid firms owned in whole or part by Thompson, identifying $7.7 million in payments to Thompson-owned companies as “excessive.” The city sued, and Thompson paid $12 million to settle.
After Gray’s election, Chartered’s position improved, with the new administration agreeing to pay Chartered $7.5 million to settle another contract dispute.
Wednesday’s ruling by Superior Court Judge Melvin Wright brings Chartered’s business dealings with the District — and the company’s existence — closer to an end. Less clear is whether Chartered’s problems and the disruptions they caused will have a chilling effect on providers’ willingness to serve lower-income District residents.
“This sends a clear message to our providers that they are not only important to the beneficiaries they serve but that they are considered an integral part in the system that contributes to the health and well-being of the District’s most vulnerable population,” said Wayne Turnage, director of the city’s Department of Health Care Finance.
Gomez, of Mary’s Center, said that letting the obligations go unmet for so long hurt the city’s entire health-care system. “We always get a bad rap in the city, that people don’t want to do business in the city because they don’t get paid,” she said. “So this is very smart, to get this money out.”
Chartered came under the scrutiny of insurance regulators last year as prosecutors investigated Thompson’s alleged campaign activities and fought a legal battle with him over materials seized from his home and office.
According to Wednesday’s agreement, providers will be paid in two installments: first from a portion of the settlement to be distributed by Chartered; and second from a portion to be distributed directly by the District. The receiver in charge of Chartered anticipated that providers will receive 90 percent of what they are owed; money recovered from Chartered’s parent company could make possible further payments.
“We’re in the home stretch,” said William P. White, commissioner of the District’s Department of Insurance, Securities and Banking and Chartered’s court-appointed rehabilitator, to whom the receiver reports. “We still have a lot of work, but at least the providers will know they’ll be paid the lion’s share of what they’re owed. We’ve come a long way since October.”
Some city officials, including D.C. Council member David A. Catania (I-At Large), have pushed for the city to hold Thompson personally liable for unpaid claims.
Wednesday’s settlement could be politically risky for Gray because of his association with Thompson and the investigation of his mayoral campaign.
The settlement does not eliminate all of Thompson’s potential liabilities. Receiver Daniel L. Watkins is suing Thompson for $17 million, alleging that he siphoned cash out of the business, which could help fill the gap between the settlement and the money owed.
Attorneys for D.C. Healthcare Systems, Chartered’s corporate parent, wanted to delay the settlement and introduced evidence that they said would show that the District owes the company far more money. Thompson has contended in contract appeals that the city underpaid Chartered by more than $60 million.
“Our argument is that they’re paying pennies when they owe hundreds,” said David Killalea, an attorney for the parent company.
The judge rejected that argument, ruling that the parent company did not have standing in the dispute. Even if it did, Wright said, “I would have overruled your objection anyway.”
Meanwhile, city officials continued to deny all Chartered’s claims of underpayment, saying Thompson bore the risk that the per-member rates paid by the city might not cover Chartered’s costs. Although the settlement provides some compensation for such underpayments, the city admits no liability.
A status hearing on the distribution of settlement funds is scheduled for Oct. 17.
Mike DeBonis contributed to this report.