- The Washington Times - Thursday, October 25, 2012

The embattled managed-care company owned by the man at the center of a federal probe into D.C. Mayor Vincent C. Gray’s 2010 campaign was carrying $3 million in unexplained revenue on its books and had transferred $1 million to an unknown recipient, city agency directors said Thursday.

D.C. Chartered Health Plan’s days as a city contractor are likely numbered as it reels from financial blemishes and months of turmoil surrounding its owner, Jeffrey E. Thompson, a prolific political donor widely thought to be the source of undocumented funds that flooded Mr. Gray’s campaign, according to federal prosecutors.

In addition, Chartered’s capital reserves have dwindled in recent years from $17.4 million in fiscal 2010 to $1.4 million fiscal 2011, said William P. White, commissioner of the D.C. Department of Insurance, Securities and Banking.

Mr. White and Wayne Turnage, director of the D.C. Department of Health Care Finance, laid out Chartered’s shaky fiscal footing and the parameters of their recent decision to take over the company during a public round-table discussion overseen by D.C. Council members David A. Catania, at-large independent, and Yvette M. Alexander, Ward 7 Democrat, who oversee health and insurance matters, respectively, in the city.

Chartered’s board and Mr. Thompson agreed this month not to contest the city’s petition to place the company into a court-approved receivership, the officials said. The company has sought a buyer for months, but earlier negotiations fell through.

Under the receivership, Mr. White controls the company and has final say over its action and the selection of a potential buyer.

“There’s a good bit of interest in the company, at this point, from a number of potential buyers,” Mr. White told council members.

Managed-care contractors such as Chartered are paid specified rates and direct patients to health care services within their provider networks. The popularity of managed-care systems in the United States has grown in recent decades because state officials think the organizations have a profit incentive to run efficiently and control costs.

Mr. Thompson took ownership of Chartered in 2000 by purchasing it out of bankruptcy, launching a lucrative run with the contract under the administration of then-Mayor Anthony A. Williams. He stepped down from his leadership role at the company in April, but remains the sole shareholder of its parent company, D.C. Healthcare Systems.

Chartered serves 110,000 customers on a monthly basis, Mr. Turnage said Thursday. It was paid $358 million in fiscal 2011 — most of it through Medicaid, but about $25 million through the city’s Healthcare Alliance program.

Mr. Turnage said the company is free to rebid for the contract when the city’s managed-care deals expire in April, yet it cannot win the award if it is still under receivership. A request for proposal is supposed to be issued by the end of the month so the city can obtain bids in November.

“It’s finished, as far as I’m concerned,” Mr. Catania said of Chartered. “There just is simply no way it resurrects itself from receivership.”

The contract, a vital yet arcane aspect of city governance, has taken on widespread interest in recent months as Mr. Thompson’s potential legal troubles mount. Over the summer, an aide to Mr. Gray’s 2010 campaign said she managed straw donations and at least $650,000 in undocumented funds that were supplied by an unnamed donor, yet widely thought to be Mr. Thompson.

It is unclear whether Mr. Gray knew about the scheme — he says he ran an honest campaign — and Mr. Thompson has not been charged with any crimes.

Council member Marion Barry, Ward 8 Democrat, told Thursday’s round table not to be distracted by “rumors” that swirl around Chartered’s owner.

“This is too serious to get sidetracked,” Mr. Barry said.

After the hearing, Mr. Catania said the company’s lack of capitalization was the main driver of the situation Chartered finds itself in, and not city officials’ personal views of Mr. Thompson.

Council members exhibited concern over financial irregularities at the company, which are still being examined. An auditing company has until Oct. 30 to finish its work.

“I wish I could be more specific, but I can’t until the auditor ties up all the loose ends and we have a completely accurate version of the company’s books, and how those books got into the shape they are in now,” Mr. White said, noting the scrutiny will have no effect on the continuity and quality of care for Chartered’s members.

Mr. Turnage said the recent discovery of $3 million in unsourced revenue, which company executives disclosed to city officials this month, can be viewed in two ways at this point. In the “benign” version, the money may not have been adequately documented. A “malignant” reading of the situation would indicate the revenue is fictitious and that someone was trying to inflate the books, he said.

If the latter scenario were the case, then the company’s capital would enter subzero territory, Mr. Catania noted.

“Then there really is no money — it’s upside-down,” he said.

A pair of employees were dismissed from the company after the problems came to light, officials said.

Mr. Catania also stressed the impact of the situation on Chartered’s 160 employees. He asked Mr. Turnage to encourage any purchaser of the company to hire some of the firm’s existing staff.

“Through no fault of their own,” Mr. Catania said, “they find themselves out of work.”

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