Wayne Turnage, pictured in 2011, leads the D.C. health care finance agency that sparked a controversy when it decided not to renew MedStar’s contract to manage Medicaid patients. (Bill O'Leary/WASHINGTON POST)

MedStar is set to lose a lucrative contract to manage care for Medicaid beneficiaries in the District, prompting a lobbying blitz in city hall and a bid protest to keep its business.

The D.C. Department of Health Care Finance in May announced plans to select three companies for a five-year managed care contract, renewing AmeriHealth Caritas and Trusted Health Plan but replacing MedStar with Amerigroup, one of the nation’s largest managers for patients on government health plans.

It was a blow for MedStar, which has been in the program since 2013 and is one of the region’s largest employers. It also operates the city’s largest hospital. Last year, MedStar Family Choice reported $16.2 million in profit for managing about 54,000 D.C. residents on Medicaid and the locally-funded Alliance program.

City insurance regulators say MedStar has been charging taxpayers more and has a higher rate of hospital admissions than the other two managed care organizations with Medicaid contracts.

“It raises questions about whether they can deliver management of beneficiaries in a way that provide same access to quality care, but at a lower cost,” said Wayne Turnage, the director of the D.C. Department of Health Care Finance.

In one year, MedStar incurred expenses that averaged $317 per-member, per-month, about 17 percent higher than AmeriHealth, which manages sicker patients, according to the city.

MedStar maintains it brought its costs under control, and argues that Amerigroup has a major blemish on its record — the company pulled out of a D.C. Medicaid contract in 2008 amid a lawsuit from the city attorney general’s office alleging fraud in how the company charges taxpayers. Amerigroup denied wrongdoing and ultimately settled the lawsuit.

Eric Wagner, MedStar’s executive vice president for insurance and diversified operations, questioned “how a bidder who has that kind of track record in the District” could get the contract, “particularly when you stack that up against MedStar Family Choice, a key piece of the District’s most-respected health care delivery system.”

The impact of the change in contractors on MedStar’s 58,000 enrollees is unclear, although the company says it could disrupt the delivery of care and that patients could lose access to their current doctors.

Amerigroup is still assembling its provider network, and a spokesman said the company hopes to include MedStar physicians and facilities, as it already does in Maryland. The two companies have not discussed such a partnership while the contract dispute continues.

MedStar lobbyists persuaded some members of the D.C. Council, which approves large contracts, to intervene. Six members of the 13-person body signed onto a resolution which temporarily blocked the city from awarding the contract while lawmakers received more information on the change.

“We are replacing a local company, MedStar, with a company I’ve never heard of and [that] has no local presence,” said Council member Jack Evans (D-Ward 2) at a Tuesday lawmaker breakfast.

But Council Chair Phil Mendelson (D) did not bring up a resolution blocking AmeriGroup’s contract for a vote, effectively allowing the process to proceed. Council members, who often debate whether to get involved in technical contracting decisions, showed little appetite to delve deeper into this one.

“We got lobbyists running around this building saying there are flaws. What are the flaws?” said Council member Vincent Gray (D-Ward 7), who chairs the health committee, at the Council breakfast. “This is an enormously complicated financial issue.”

MedStar has filed a formal protest with the city Contract Appeals Board, alleging the bidding process was unfair.

In a statement, Amerigroup said MedStar’s complaint had no merit.

“Through our innovative approach and customized services, we are confident that we will help improve health care services and reduce costs to Medicaid members throughout D.C,” the company said. “In addition, we remain committed to working collaboratively with the District and ensuring a successful launch in October of our comprehensive health care services.”

Turnage, the city insurance regulator, said he couldn’t comment on the details of the procurement decisions. His agency has sought permission to proceed with the new managed care contracts, set to take effect in October, while the appeal is pending.

Responding to concerns from Council members about dropping a well-known local company, Turnage said at least half of Amerigroup’s District workforce must be city residents.

Advocates for low-income people say the choice of Medicaid manager isn’t necessarily a big deal for patients, as long as the companies are competent and patients are alerted if they have to switch doctors.

“When we have a change in [managed care organizations], often times clients don’t find out until they come for a medical visit,” said George Jones, executive director of Bread for the City. “We are a little agnostic about [managed care organizations]. We want them to be good and functional.”

The District’s Medicaid program was embroiled in controversy in 2013, when MedStar joined.

Chartered Health Plan, the dominant player that managed 100,000 residents, was placed into receivership amid financial woes and stopped paying some of its claims. Its owner Jeffrey Thompson was at the heart of a federal corruption probe into illegal financing of Gray’s 2010 mayoral bid, and was eventually sentenced to three months in prison.