Officials negotiate sale of D.C. health plan’s assets

December 3, 2012

City officials said Monday they are in final negotiations to sell Chartered Health Plan, a longtime provider of government-paid health care for the needy that became entangled in investigations of political corruption, to a Philadelphia firm.

The prospective buyer, AmeriHealth Mercy, confirmed the talks. D.C. Insurance Commissioner William P. White, who has control of Chartered as a court-appointed receiver, said a “letter of intent” has been signed between the parties.

White declined to discuss specific terms of the deal, which has not yet been sealed. AmeriHealth spokeswoman Michelle Davidson said the firm is interested in buying only “certain assets” from Chartered, indicating the deal is unlikely to be a wholesale purchase.

In any case, a sale of key assets — such as the 25-year-old Chartered name and its extensive provider network — would mean the end of embattled businessman Jeffrey E. Thompson’s days as a health-care mogul.

Chartered’s viability has been in serious question since October, when city officials disclosed irregularities totaling millions of dollars in the company’s financial statements and announced it was placing the firm into receivership. Yet the company remains the city’s dominant health-care contractor, managing the care of about 110,000 District residents.

In the spring, the city’s health-care finance director said that Chartered would be unlikely to see its contract renewed as long as Thompson, implicated in a straw campaign donation scheme and the financing of an illicit “shadow campaign” for Mayor Vincent C. Gray (D), remained its owner.

Chartered’s contract, worth about $350 million yearly, expires in May. Bids on new contracts were due to the city Monday, and White said AmeriHealth Mercy had submitted a proposal.

Since federal agents raided his home and offices in March, Thompson has gradually withdrawn from the company he purchased at a bankruptcy sale in 1999. He stepped down as chairman of its board in April, and since October, day-to-day company management has been in the hands of a city-appointed receiver, Daniel L. Watkins of Lawrence, Kan.

Until the raids, Chartered had been a frequent conduit of campaign donations to city officials, directly and through its employees and related companies. The firm was also a donor to a nonprofit group headed by Vernon E. Hawkins, a key figure in the shadow campaign allegations.

As for Thompson’s role in the sale, there is none: “There are no agreements with the holding company or its shareholder regarding any potential transaction or proceeds from such a transaction,” Watkins said in a statement.

It’s unclear what Thompson might reap from the sale. Chartered’s balance sheet is in question as an audit of its books, expected to detail the alleged irregularities, continues. A report is expected by Dec. 20, White said.

AmeriHealth Mercy had explored a purchase of Chartered earlier this year, before the receivership, but was unable to come to terms with Thompson. Any sale would have to be approved by a D.C. Superior Court judge. A. Scott Bolden, an attorney for the current ownership, did not return calls for comment.

White said he chose to enter negotiations with AmeriHealth Mercy because it “has the potential to best achieve value for Chartered and to best serve its members and providers and the District.”

He also cited the firm’s “deep and successful experience” serving Medicaid enrollees elsewhere and its “substantial financial strength.” It runs Medicaid plans in Pennsylvania, Louisiana, Nebraska, Indiana and South Carolina.

At least one other group had pursued a purchase. District investor Eric Broyles said Monday he had assembled a local group that included several current and former health-care executives.

Broyles said he was “disappointed” with the city’s handling of the sale process. “I felt as a local team we should have been given more consideration than we received,” he said, adding that his group intended to expand the business into other states, with the District as a base.

News of the impending sale came a day after Chartered celebrated its 25th anniversary with a gala event at THEARC in Southeast Washington.

Thompson, who once assiduously courted politicians, was not there, according to Eugene D. Kinlow, a political activist who attended the event. D.C. Council member Marion Barry (D-Ward 8) was the only elected official to appear, and the only person to mention Thompson’s name during the program, he said.

“It was clear many politicos were going to avoid that place like the plague,” Kinlow said.

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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