If Thompson doesn’t sell Chartered, it will likely lose D.C. health-care contract

April 19, 2012

It is “unlikely” a health-care firm owned by Jeffrey E. Thompson, the D.C. businessman at the center of a federal campaign finance investigation, would win a new contract with the District unless the firm is quickly sold, a top city official said Thursday.

Wayne Turnage, director of the District’s Department of Health Care Finance, told a D.C. Council committee that as long as D.C. Chartered Health Plan remains in Thompson’s hands, it should not expect to continue managing the health care of low-income city residents after its contract expires in May 2013.

“If a sale does not happen, it is unlikely we would allow Chartered to keep its current contract for a number of reasons,” Turnage said. He would not elaborate on the reasons, though the panel’s chairman, David A. Catania (I-At Large), referred to “a certain cloud ” being over the company.

Thompson’s home and offices were raided last month in connection with a federal probe of campaign finance in the city. He resigned last week from Chartered’s board of directors.

Chartered’s chief executive, Maynard G. McAlpin, has proposed buying the company from Thompson, the firm confirmed to The Washington Post on Monday.


Jeffrey E. Thompson (C-SPAN)

McAlpin, according to Turnage’s testimony Thursday, expects to finalize a sale in 60 to 90 days — in time to respond to a solicitation for the new health-care contract, expected to be issued in the coming weeks. Turnage said McAlpin indicated he was pursuing a partnership with two investors, including “one of the largest [health-care] plans in country.”

Chartered handles the health care of more than 110,000 District residents; its D.C. government contract, which generated $355 million in revenue last year, is its sole source of business.

In recent annual filings, both Chartered and the city’s other contractor, Unison Health Plan, reported significant operating losses. Chartered lost $14.9 million in 2011; Unison lost $15.1 million on $180 million of revenue.

But Catania questioned whether the financial risk was as great as the accounting statements made it appear.

“There’s losses, and then there’s losses,” he said. “It’s not real money, it’s not cash money they’re losing. . . . You can manipulate the books any way they want.”

Besides seeking new bidders on the new managed-care contract, the city is looking to engage a third contractor for the remaining year of the current contract. Turnage said at least three companies, including firms with a “national profile,” were interested in bidding.

McAlpin, in a Wednesday statement, said Chartered “will continue to provide a full range of much-needed health care services to the most vulnerable residents of the city, just as it has for the past 25 years.”

Explaining the company’s recent losses, McAlpin said premiums paid by the District do not fully cover the costs of claims, overhead and a new city tax that cost the company $7.2 million last year. He also cited increased prescription drug prices and a rising number of emergency room visits for driving up costs.

The discussion of Chartered came after Catania questioned the wisdom of continuing with the current managed-care contracting model, where for-profit companies such as Chartered are engaged to handle provider networks and billings for the Medicaid and D.C. HealthCare Alliance programs.

While most states have embraced managed-care contracts as a way to reduce costs and improve the quality of health care, Catania questioned whether the District’s program has produced results.

At Thursday’s hearing, mental-health advocates presented a report from a federally mandated oversight panel that found that fewer of those enrolled in managed-care programs obtained mental-health services in recent years. The Medical Care Advisory Committee found that companies, including Chartered, had done a poor job maintaining networks of mental-health providers.

Catania suggested returning to a “fee-for-service” model for public health-care programs, where providers would be paid directly by the government — a sea change for a program responsible for a half-billion-dollars worth of city spending every year.

He acknowledged the move would be controversial. “These are kind of dramatic actions against powerful players,” he said. “They are not going to like this.”

But Turnage did not dismiss the idea out of hand. “You can’t do it in the near term,” he said, “but it’s certainly worth looking at.”

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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