The impending sale of the District’s largest health-care manager for low-income residents could leave doctors and hospitals — and taxpayers — on the hook for $40 million in unpaid medical bills, city officials said.
On Friday, a city-appointed receiver asked a Superior Court judge to approve the sale of Chartered Health Plan’s most valuable assets — its name, provider contracts and client rolls — to the Philadelphia-based AmeriHealth Mercy Family of Companies for $5 million.
But AmeriHealth, which has been in talks with Chartered for months, will not assume the company’s major liabilities. Those include unpaid medical claims that are expected to total $45 million, according to two officials familiar with the transaction who requested to remain anonymous because they were not authorized to speak publicly.
Chartered, owned by businessman Jeffrey E. Thompson, was placed in receivership by insurance regulators in October and has been in the public eye since Thompson became embroiled in D.C. campaign-finance investigations nearly a year ago. It manages the health care of more than 100,000 D.C. residents eligible for Medicaid and other government health-care programs for the needy.
“We believe, with this deal, we’ve found by far the best way to ensure that [Chartered enrollees] continue to get health care with no interruptions and that doctors and hospitals continue to be paid,” said William P. White, the District’s insurance commissioner. “We have a very good chance of seeing this through, and certainly there is a great deal riding on this.”
But the proceeds from the sale to AmeriHealth will cover only a fraction of the full cost of the unpaid claims, officials said, leaving it unclear how Chartered clients’ clinics, hospitals and doctors will be paid for care they have provided.
Through a contract appeal, Chartered is hoping to recover as much as $60 million in retroactive payments from the city, mainly for pharmacy costs that it says were subject to unfairly low Medicaid reimbursement rates. But the city is fighting the appeal, and it is unclear how quickly the dispute might be settled.
Medical providers could lobby the District government to bail out Chartered or pay the outstanding bills directly, according to one city official familiar with the transaction who was also not authorized to comment.
Robert Malson, president of the D.C. Hospital Association, said there is a “great deal of concern” among his group’s members over Chartered’s future, but he declined to speculate about how they might respond.
“It is not a small amount of money,” he said. “It’s a very serious issue, and we’ll be looking at everything very carefully.”
The receiver, Daniel L. Watkins, said providers who serve Chartered customers “shouldn’t overreact” to financial implications of the sale. “We’re hopeful these claims can be reviewed and fair determinations made,” he said, referring to the contract appeal. “We’re going to work through it.”
The sale agreement is predicated on AmeriHealth winning a health-care management contract with the city similar to the one Chartered long enjoyed, according to the court filings.
The city official familiar with the transaction said AmeriHealth is among the vendors that have been preliminarily selected for contracts. The proposed awards are expected to be sent to the D.C. Council for final approval in coming weeks.
Wayne Turnage, the District’s health-care finance director, declined to comment Friday on the status of the procurement.
Should the sale proceed, Watkins said, Chartered would have few liquid assets available to pay outstanding bills, aside from the $5 million in sale proceeds.
The company continues to seek a $3.8 million tax refund it believes it is due from Thompson, Watkins said.
AmeriHealth is prepared to pump at least $30 million into the new company should the deal come to fruition, according to the court filing, and “substantially all of Chartered’s employees” would stay on under the new ownership.
District residents currently with Chartered would be transferred to the new entity, whose name is yet to be determined. “What they can look forward to is continued coverage and service from their providers,” Watkins said.