An upstart firm that has undergone tough scrutiny from lawmakers and health-care providers appears set to receive a major chunk of the District’s $2.4 billion-a-year Medicaid business.
Thrive Health Plans, founded in 2011 and licensed in 2012, is one of three companies recently awarded contracts to manage the health care of low-income city residents starting July 1. The firm’s thin record, out-of-town ownership and surprising success in winning a contract against more established industry players have raised eyebrows, leading one D.C. Council member to call for the disapproval of its contract, worth as much as $542.5 million through September 2014.
“It’s very rare where a company that has only been existence for seven months with a very questionable track record can win a half-billion-dollar contract and be poised to get 50,000 clients,” said Vincent B. Orange Sr. (D-At Large).
But Mayor Vincent C. Gray’s administration and key council members are backing the firm, and the council is expected to vote Tuesday to approve the contract. The council has not raised issues with the other two proposed contractors, AmeriHealth Caritas and MedStar Family Choice.
The vote comes a day before the city’s largest Medicaid contractor, D.C. Chartered Health Plan, is set to stop doing business with the city, raising anxieties among health-care providers about a potentially messy transition for its more than 100,000 enrollees.
Thrive’s owners — Thomas M. Duncan II, a Detroit area businessman, and Dennis S. Ellis, a Los Angeles area lawyer — said in an interview Wednesday that they have been thoroughly vetted by city regulators, have amassed the necessary capital requirements and have an experienced team in place to make their business a success.
Duncan said he has explored starting a Medicaid managed-care business in the District for several years, using the proceeds from the 2007 sale of his previous health-care consulting business. He joined with Ellis, a prominent litigator and Howard Law School graduate, to capitalize the firm to the tune of nearly $2 million.
Thrive has engaged several prominent figures in District health care as executives or consultants, including Ivan C.A. Walks, a former city health director; Sharon Baskerville, a veteran community health advocate; and Edward Porcaro, a former high-ranking health-care finance official.
This year, a city procurement panel rated Thrive’s proposal the best of five it reviewed — outranking all others on technical merit, including AmeriHealth Caritas, which runs Medicaid plans in seven states, and UnitedHealthcare, the nation’s largest Medicaid managed-care provider.
Thrive’s top ranking surprised many in local health-care circles, and Orange in recent weeks has raised questions about the firm’s capitalization and the background of Duncan and several people listed as board members.
District insurance regulators, Ellis said, gave Thrive and its principals a thorough vetting, including criminal background checks, credit reports and an in-person meeting with official examiners.
“They treated us and subjected us to much more rigorous scrutiny than anyone else,” he said. “We’re being penalized for being a small start-up, but our agility in being a small start-up being run by essentially two people is what was our strength.”
Duncan, 33, said he duly disclosed legal history from his college years, including a 2000 arrest in the underage possession of alcohol and a 2004 bounced check.
“I feel like right now this stuff is going below the belt, and it’s trying to distract from the bottom line, which is we have the best ideas because we did the most homework to really improve health care in the District,” Duncan said.
Orange, who said he planned to discuss Duncan’s disclosures on the council dais Tuesday, also raised questions about Thrive’s ties to a Michigan managed-care firm that was placed in receivership in 2006. That firm, Ultimed HMO, was co-owned by Duncan’s mother, Robin Barclay, who has served as Thrive’s director of community development.
Kim Dickens, a former Chartered consultant, is introducing the firm to the community, clinics, hospitals and local elected officials, according to one person familiar with the outreach.
Dickens made news in 2009 when she donated a kidney to D.C. Council member and former mayor Marion Barry (D-Ward 8).
The chairman of the council’s health committee, Yvette M. Alexander (D-Ward 7), said Monday that concerns about Thrive’s licensure had been addressed to her satisfaction and that the contract would easily win approval Tuesday.
“A lot of his questions have already been answered,” she said of Orange. “I don’t know what else his concern is about.”
The District’s Department of Insurance, Securities and Banking said in a statement Monday that it “sees no reason to change its licensing decision” regarding Thrive and that many concerns raised by Orange “were raised and evaluated at the time of the application.”
Among health-care providers, the concern is less about Thrive’s qualifications and more about whether it will be ready to do business July 1, when it will be handed tens of thousands of enrollees.
The D.C. Primary Care Association, which represents health-care providers serving low-income residents, wrote to the council Friday urging members to delay the implementation of the new contract until Oct. 1, calling it “nearly impossible” for Thrive to have its provider network and other preparations in place.
“Our experience shows that taking additional time to get it right is always the prudent course of action,” wrote Jane E. Thompson, the group’s interim chief executive.
Tim Craig and Nikita Stewart contributed to this report.