Health plan takeover in D.C. eases concerns but doesn’t erase them

October 22, 2012

The District government’s takeover of its largest health contractor has eased concerns among care providers, but anxieties remain about the effects on the city’s half-billion-dollar system of providing health care to the needy.

Insurance regulators seized control of Chartered Health Plan on Friday, weeks after firm representatives notified city officials of serious “irregularities” in the company’s accounting. The company, owned by embattled businessman Jeffrey E. Thompson, manages the care of about 110,000 city residents eligible for federal Medicaid benefits and a local insurance program.

The move will allow Chartered to continue operating through April, when its contract is set to expire, easing concerns that a more rapid withdrawal would have thrown patients and providers into chaos.

“It would have totally destabilized the system,” said Vincent A. Keane, chief executive of Unity Health Care, which runs a network of 29 clinics for low-income residents and is one of Chartered’s largest providers. “Any time patients change, there can be bureaucratic problems. My hope is that it stays intact without any destabilization until the spring.”

The city’s top insurance and health-care finance officials have sought to assure doctors, clinics and hospitals that their bills will continue to be paid as a receiver takes over the company’s management and auditors work to straighten out the books.

Thompson, who is under investigation over allegations of campaign finance violations but has not been charged with a crime, may no longer exercise any control over the company he bought in 2000 at a bankruptcy sale and grew into the city’s largest contractor. A. Scott Bolden, an attorney for Chartered, said Friday that the mutual decision to enter receivership was “in the best interests of the company.”

The receiver, Kansas lawyer Daniel L. Watkins, will oversee efforts to rehabilitate and perhaps sell the company — a scenario complicated by the accounting issues, said to involve millions of dollars of missing funds, and the firm’s tenuous hold on its city contract, virtually its only source of business. Chartered could also be implicated in the Thompson criminal investigation; federal investigators earlier this year examined District records on the firm’s dealings, according to a city official who spoke on the condition of anonymity because of the ongoing investigation.

But Chartered has a significant asset in its familiar name and vast customer base, accounting for about two-thirds of all residents enrolled in government health-care programs.

Sharon Baskerville, executive director of the D.C. Primary Care Association, said the Chartered brand could be desirable to an outside managed-care firm looking to enter the D.C. market.

“This is not an easy town to break into,” she said, adding that the brand, in her view, has not been tarnished by its association with Thompson’s alleged campaign dealings: “People in the community . . . don’t know or care who Jeff Thompson is; they just know that when they go get their health care, it’s there.”

But David A. Catania, chairman of the D.C. Council’s health committee, said he did not expect Chartered to survive the government takeover as a city contractor. “This receivership is the epitaph for Chartered,” he said. “The time Chartered may have had to find a purchaser, that time has passed.”

Catania (I-At Large) said he thinks a new solicitation, expected to be issued by month’s end, will attract “larger, more established, better capitalized organizations” than Chartered, whose only client was the District.

Even though Chartered is the dominant player in the District’s Medicaid market, it has struggled to make money in recent years, fighting the city over what it says are subpar premiums. The firm has sued the city for $25 million alleging unfair rates; the takeover probably means the end of that suit.

The city contracts with two other health-care managers, subsidiaries of the MedStar and UnitedHealthcare companies. Had Chartered’s contract been abruptly canceled, as city officials had threatened last week, its members would have been divvied among them. The takeover will allow more time to notify residents about the potential changes and manage the transition to a new system.

Keane lamented that the new players might not have the deep community ties Chartered established over two decades.

“There’s a loss in not having a homegrown HMO,” he said. “To me, that’s a value, being in touch with the local community, with the providers, and making sure that that sensitivity to the unique needs of a very underserved population is attended to.”

Catania is holding a hearing on the takeover Thursday, when he is expected to press city officials for additional details on the receivership arrangement.

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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