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Report of Examination of the DC Chartered Health Plan, Inc.
Department of Insurance and Securities Regulation
December 8, 2000

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Government of the District of Columbia
Department of Insurance and Securities Regulation

Anthony A. Williams Mayor Lawrence H. Mire! Commissioner

March 07, 2001

I, Lawrence H. Mirel, Commissioner of Insurance and Securities Regulation of the District of Columbia, hereby certify that I have compared the annexed copy of the

REPORT OF EXAMINATION
OF THE
D.C. CHARTERED HEALTH PLAN, INC.
AS OF DECEMBER 31, 1999

With the original on file in this Department and the same is a correct transcript therefrom, and of the whole of said original.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of this Department, at the City of Washington, the day and year first written.

Lawrence H. Mirel
Commissioner of Insurance and Securities Regulation

810 First Street. NE. #701 .Washington, DC.20002.Tel: (202) 442-7776.Fax: (202) 535-1196 lhmirel-dcia@dcgov.org 

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Washington, DC
December 8, 2000

Honorable Lawrence H. Mirel
Commission of Insurance
Department of Insurance and Securities Regulation
Government of the District of Columbia
810 First Street, NE
Washington, DC 20003

Dear Commissioner:

In compliance with instructions and pursuant to statutory provisions of D.C. Code, Section 35-4518, (1997 Repl.), an examination has been made of the financial condition and affairs of the 

DC Chartered Health Plan, Inc.
Washington, DC 20002

hereinafter referred to as the "Company". The examination was conducted at the principal office of the Company, located at 820 First Street, NE, Washington, D.C. The report of examination thereon is respectfully submitted.

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TABLE OF CONTENTS

Salutation 
Scope of Examination 
Compliance with Previous Examination Recommendations
History 
Net Worth
Management & Control

Board of Directors
Officers

Conflict of Interest 
Corporate Records 
Fidelity Bond and Other Insurance.
Custodial Deposit
Territory and Plan of Operation 
Contracts and Agreements 

Medicaid Contract
Health Care Provider Agreements
Reinsurance Contract 
Motivational Education Entertainment Agreement 
Health Cost Consultants.

Accounts and Records
Financial Statements

Statement of Assets
Statement of Liabilities and Net Worth
Statement of Revenue, Expenses and Net Worth
Schedule of Examination Adjustments Affecting Net Worth

Notes to the Financial Statements 
Comments and Recommendations
Subsequent Events
Conclusion

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SCOPE OF EXAMINATION

This comprehensive financial examination of the Company was conducted pursuant to District of Columbia Code §35-4518, coveting the period from January 1, 1999 through December 31, 1999, including any material transactions and/or -events occurring subsequent to the examination date and noted during the examination. During this examination, assets were verified and valued and liabilities were determined, or estimated as necessary for the period ending December 31, 1999.

A review was made of the Company's income and disbursements, as well as its operations and business practices. This review encompassed such test checks of reported income and disbursement items as were considered necessary under the circumstances, including verification of posting, extensions and footings.

The examination utilized guidelines and procedures outlined in the National Association of Insurance Commissioners (NAIC). In performing this examination, no reliance was placed on IRIS reports from the NAIC because very limited NAIC documentation was available. Limited reliance was placed on the external auditors' work and their work product was used to supplement the examination procedures where it was deemed appropriate.

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COMPLIANCE WITH PREVIOUS EXAMINATION RECOMMENDATIONS

The Company has not had any previous examinations.

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HISTORY

The Company was established on December 31, 1986 under the laws of the District of Columbia. The Company operates as a Health Maintenance Organization (HMO) in the District of Columbia. On August 31, 1993, the Company became a wholly owned subsidiary of PHP Healthcare Corporation (PHP). PHP exchanged 118,024 shares of common stock for 100 percent of the common stock of the Company. On November 19, 1998, PHP filed with the United States Bankruptcy Court, a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. In October 1999, the United States Bankruptcy Court confirmed the Second Amended Joint Plan of Liquidation of PHP Healthcare Corporation, whereby PHP's ownership interest in the Company and certain other assets were transferred to the Collateral Trust awaiting their sale and/or liquidation. The Company remained unaffected by the transfer of stock and continued to provide healthcare - services to its members outside of the parents' bankruptcy. The Company was sold May 2000, to DC Healthcare Systems, Inc.

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Net Worth

The Company did not maintain a stock certificate ledger. The current stock certificate was not reviewed. The current stock certificate is presently held at the bank. The Company's authorized 1,000 shares of common stock, par value $.10, were issued and outstanding as of December 31, 1999.

The Company paid out $6.4 million that was due to parent before the parent's bankruptcy proceedings. All of the transactions for the parent and its affiliates were handled through paid in surplus. The remaining $3.5 million due to the parent has been forgiven by the Collateral Trustee and accepts the purchase price of $4,000,000.

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MANAGEMENT AND CONTROL

At examination date the Company's Board of Directors were:

Board of Directors

Robert L. Bowles, Jr.
Jeff D. Benton
Anthony Picini

Officers

Name
Robert L. Bowles Jr.
James H. Murray, Jr.
Anthony M. Picini
Title
President
Secretary
Chief Financial Officer

The By-Laws were amended and approved to change the number of directors of the corporation to consist of no less than one (1) and no more than (7) or such other number as may be designated from time to time by amendment of the Bylaws.

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Conflict of Interest

For the examination period, the Company had an established Code of Conduct, which required disclosure of any conflict of interest by employees. The Company had reported in the General Interrogatories of the annual statement that there was an established procedure for annual disclosure to the board of directors of any conflict of interest by officers, directors or responsible employees. The Company could not provide signed conflict of interest statements by the directors and officers listed on the jurat page of the 1999 annual statement.

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Corporate Records

The Company's Articles of Incorporation, By-Laws and minutes of Directors' meetings
were reviewed for the period under examination. The Company did not amend the Articles of Incorporation during the examination period. The By-Laws were amended as previously noted. 

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FIDELITY BOND AND OTHER INSURANCE

The Company has a Fidelity Bond for $1,000,000 with Chubb - Federal Insurance Co. The NAIC recommended coverage for the Company was $350,000. Therefore, the Company is in compliance. The Company's other insurance consists of but not limited to Workers' Compensations, D & O and Medical Malpractice.

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CUSTODIAL DEPOSITS

The Company is required to maintain a deposit with the D.C. Commissioner, as trustee, in trust for the subscribers and creditors of the Company, for the purposes of paying the obligations related to the Company in the District of Columbia. At December 31, 1999, $300,000 was held in a Certificate of Deposit pursuant to District of Columbia requirements relating to HMOs.

The Company is required to maintain a deposit in connection with the D.C. Medicaid Program. As of December 31, 1999, the Company had an escrow account for $200,000 per the requirement relating to the Medicaid Program.

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TERRITORY AND PLAN OF OPERATION

The Company is licensed to write business only in the District of Columbia. The Company writes comprehensive (medical and health) insurance for a small percentage of commercial business. The majority of the business is through a Medicaid Contract with the Department of Health (DOH).

The Company has no agents.

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CONTRACTS AND AGREEMENTS

Medicaid Contract

The Company entered into the Medicaid contract in July 1997. This is an indefinite quantity contract with payment based on fixed capitation rates. The Company shall maintain an adequate network of health services providers and agencies, accurate and current information regarding the membership of its provider network and the capacity of each primary care provider, complete, accurate member enrollment, and arrange for services as stated in the terms of the contract.

The Company shall not hold the District or enrollees liable in the event of insolvency. The Company shall maintain a positive equity balance equal at all times to no less than $50.00 (fifty dollars) per Medicaid manage care enrollee.

The Company is to have an escrow account held in a trust in a financial institution for the sole purpose of holding the escrow. The amount held in the escrow account shall be greater of (1) five percent of the Company's estimated annual expenditures for health care services furnished to Medicaid enrollees; (2) one hundred thousand dollars ($100,000).

The Company must also maintain reinsurance in the form of stop loss protection, a fiduciary relationship with officers, directors and certain providers and employees, fidelity bonds, liability and malpractice insurance, unemployment and workers compensation coverage and cessation of operations coverage in the event of cancellation.

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Health Care Provider Agreements

Primary care physicians (PCP) or group providers are compensated on a capitated basis for certain services provided by the PCP at an agreed upon rate per covered member per month. The Company will compensate providers on a fee-for-service basis for allowable services rendered that are not covered by the capitation or not rendered by the PCP subject to a maximum allowable cost. Fee-for-service compensation is reduced by copayment or coinsurance that is to be paid by the member.

Hospitals are compensated for certain covered services at agreed upon rates or percentages of medical costs based on the type of service rendered covered members.

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Reinsurance Agreement

The Company entered into a stop loss reinsurance agreement with Relistar. The contract provides reinsurance coverage for both the Company's commercial and Medicaid enrollee claims. This contract provide coverage for 80 percent of certain hospital claims in excess of $70,000, subject to certain limitations and an annual limit of $1,000,000 per enrollee, and a lifetime limit of $2,000,000 per enrollee.

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Motivational Educational Entertainment Agreement (MEE)

This agreement was entered into for MEE to perform a qualitative research to determine the views of low income African American women living in Ward 7 and 8 of Washington, DC with respect to prenatal and preventive care and Chartered service delivery. The term of this agreement is from December 1, 1999 through February 29, 2000.

Health Cost Consultants (HCC)

This agreement is a payment schedule for the billing of MedAdvice 2001 (Utilization Management Software).

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ACCOUNTS AND RECORDS

The Company uses ACCPAC software for the general ledger, Freedom for the Annual Statement filing and Medical Health Care (MHC) system for claims.

The Company's external auditor is KPMG CPA firm. They have been doing the external audits since 1997.

The Company stock certificate did not state the par value, reported to be $.10. The canceled stock certificate of PHP Corporation stated par value to be $.10.

The Company does not perform bank reconciliation on two depository accounts. The Company uses reports from the bank to determine the cash balance for the bank at the end of the month not the cash reported in the general ledger.

The Company has an Accounts Receivable - Other set up to receive monies from vendors (providers) that have been over paid by a claim that was processed as a Chartered claim and reversed because of eligibility issues. This claim should have been processed as a Medicaid claim. The overpayment causes a negative balance. The Company is now waiting on refunds from the vendors for the overpayment or manually apply the overpayment to a present claim. The reversal of claims and offsets against claims is an ongoing process, depending on the volume of transactions with vendors the balance is always changing. The Company is working on a process to eliminate negative balances.

The Company did not have a management agreement or a tax allocation agreement, as of the examination date.

A review of the Company's annual statements for the examination period revealed the following exceptions per the NAIC Annual Statement Instructions for HMOs:

  • The Company reported that the amended 1999 annual statement was the original filing.

  • The annual statement page numbers were blacked out.

  • The required officers did not sign the jurat page, the jurat page did not have the corporate seal affixed, nor was the annual statement properly notarized.

  • The Company filed the 1999 Annual Statement on a consolidated basis with Rapidtrans, a wholly owned subsidiary. The District of Columbia Department of Insurance and Securities Regulation has requested that in the future the Company not file consolidated annual statements.

  • General Interrogatory number 19.c was not completed in the 1999 annual statement.

  • General Interrogatory number 26 states that the prior year's annual statement was not amended. The information that is with - DISR does not agree to the NAIC database.

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FINANCIAL STATEMENTS

The Company's financial position at December 31, 1999 and the results of its operations during 1999 are presented in the following financial statements:

  1. Statement of Assets as of December 31, 1999

  2. Statement of Liabilities and Net Worth as of December 31, 1999

  3. Statement of Revenue, Expenses and Net Worth as of December  31, 1999

  4. Schedule of Examination Adjustments Affecting Net Worth

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STATEMENT OF ASSETS AS OF DECEMBER 31, 1999

Assets Assets Not Admitted Net Admitted Assets
Current Assets
Cash $4,383,637 $28,420 $4,412,057
Premium Receivable 52,693 (3,842) 48,851
Health Care Receivables 558,155 (405,130) 153,025
Reinsurance Recoverable 250,484 250,484
Aggregate Write-Ins for Current Assets 562.158 (552,157) 10,000
Total Current Assets 5,807,125 (932,709) 4,874,417
Other Assets
Aggregate Write-Ins for Other Assets 2,238,626 (1,738,205) 500,421
Total Other Assets 2,238,626 (1,738,205) 500,421
Property and Equipment
Furniture and Equipment 507,322 (140,656) 366,666
Leasehold Improvements 1,744,101 (438,787) 1,305,314
EDP Equipment 2,285,253 (13,709) 2,271,544
Total Property and Equipment 4,536,676 (593,152) 3,943,524
TOTAL ASSETS $12,582,427 $3,264,066 $9,318,361

The accompanying Notes are an integral part of the Financial Statement.

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STATEMENT OF LIABILITIES AND NET WORTH AS OF DECEMBER 31, 1999

Covered Uncovered Total
Current Liabilities
Accounts Payable $0 $647,117 $647,117
Claims Payable 3,827,715 724,955 4,552,670
Aggregate Write-Ins for Current Liabilities 0 461,921 461,921
Total Current Liabilities 3,827,715 1,833,993 5,661,708
TOTAL LIABILITIES 3,827,715 1,833,993 5,661,708
Net Worth
Common Stock 100
Paid in Surplus 4,690,419
Retained Earnings/Fund Balance (1,033,866)
Total Net Worth 3,656,653
TOTAL LIABILITIES AND NET WORTH $9,318,361

The accompanying Notes are an integral part of the Financial Statement.

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STATEMENT OF REVENUE, EXPENSES AND NET WORTH YEAR ENDED DECEMBER 31, 1999

Uncovered Total
Revenues
Premium XXX $41,098,616
Net Investment Income XXX 175,309
Aggregate Write-Ins for Other Revenues XXX 21,930
Total Revenues XXX 41,295,856
Expenses
Medical and Hospital
  Physician Services $- 8,084,256
  Other Professional Services 548,582 8,714,152
  Outside Referrals 304,534 304,534
  Emergency Room and Out-of-area 1,196,468 1,196,468
  Inpatient 2,715,995 11,007,779
  Occupancy, Depreciation and Amortization 573,780
  Less:
  Net Reinsurance Recoveries Incurred - 408,375
  Coordination of Benefits and Subrogation - 14,400
    Total Medical and Hospital 4,765,579 29,458,194
Administration
  Administration Expenses 12,888,993 13,361,364
    Total Expenses 17,645,572 42,819,558
NET LOSS XXX $(1,523,703)
Net Worth
Net Worth Beginning of Year $12,529,568
Decrease in Paid in Surplus $(6,461,228)
Net Loss (1,523,703)
Change in non-admitted assets 389,446
  Net change in Net Worth (7,595,485
Statutory Adjustments as of 12/31/99 (1,277,431)
  Net Worth, December 31, 1999 $3,656,653

The accompanying Notes are an integral part of the Financial Statement.

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SCHEDULE OF EXAMINATION ADJUSTMENTS AFFECTING NET WORTH

Notes
Company Net Worth, December 31, 1999 $4,934,084
Adjustments:
  Cash $28,420 1
  Premium Receivable (3,842) 2
  Healthcare Receivable (405,130) 3
  Furniture and Equipment (140,656) 4
  Leasehold Improvements (438,787) 5
  EDP Equipment (13,709) 6
  Accounts Receivable - Other (40,348) 7
  Prepaid Expenses (84,184) 8
  Deposits (76,162) 9
  Prepaid Expense - PCS (106,000) 10
  Accounts Payable 6,500 11
  Claims Payable (21,702) 12
  Garnishment 2,386 13
  Payroll Taxes 15,784 14
    Total adjustments 1,277,431
    Examination Net Worth as of December 31,1999 $3,656,653

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NOTES TO THE FINANCIAL STATEMENTS

Note 1 Cash

The Company reported cash in the amended 1999 Annual Statement as $4,383,637. The Company filed a consolidated Annual Statement with Rapidtrans, a wholly owned subsidiary. The Company's cash was understated by $28,420.

Note 2 Premiums Receivable

The Company writes a small amount of commercial business. The Company has not written-off the amount of premiums that have not been collected beyond 90-days. An adjustment of $3,842 is being made to non-admit balances over 90-days.

Note 3 Health Care Receivables

The Company's primary source of income is from DC Medicaid Contracts. The Company receives payments for the Medicaid program. Included in the payments are retroactive payments for members enrolled in previous months for which payments have not been made. This generally occurs for newborn babies of Medicaid members when Medicaid has not been notified of newborn. The Company was carrying a 1998 balance and a 1999 balance for newborn babies. The Company had not received payment for all of the babies born in 1998 and 1999. An examination adjustment of $405,130 was made to non-admit the balance 90-days past due.

Note 4 Furniture and Equipment

The Company included administrative cost of furniture and equipment. Only furniture and equipment for health care delivery is admissible. An examination adjustment of $140,656 was made to non-admit administrative furniture and equipment.

Note 5 Leasehold Improvements

The Company included administrative cost for leasehold improvements. Only leasehold improvements for health care delivery are admissible. An examination adjustment of $438,787 was made to non-admitted the administrative leasehold improvements and other items that were not considered for health care delivery.

Note 6 EDP Equipment

The Company included items in EDP that did not pertain to the hardware or the admissible software. An adjustment of $13,709 was made to non-admit those items that did not pertain to the hardware or admissible software of the Company. The Company was in compliance with District Columbia Title 26.

Note 7 Accounts Receivable - Other

This account was set up as a receivable for overpayments to vendors such as providers, hospitals or medical centers. The insured makes a claim. The claim is paid. However, the claim is sometimes overpaid to the vendor. The Company is now due a reimbursement for the overpayment or a manual offset against subsequent claims. The Company is working on a process to eliminate negative balances. Thus far, the Company has not collected any monies for overpayment.

The Company provided a report that calculated a total of $61,657.65 for the receivables over 90 days past due. Also included in the account was $216.00 of Rapidtrans balances and a collection for $177.50. An adjustment was made to decrease surplus by $62,051 that was made up of a decrease from $40,348 to zero for Accounts Receivable - Other and a corresponding increase to Claims Payable of $21,702.

Note 8 Prepaid Expenses

The Company prepaid insurance that included Rapidtraris. Per the NAIC guidelines, prepaid expenses are not admissible. An adjustment of $84,184 is nonadmitted for prepaid insurance, which also included Rapidtrans.

Note 9 Deposits

The Company has included Rapidtrans in the Deposits. The deposits are security deposits for automobiles for Rapidtrans and a security deposit for the leased building space of the Company. Per the NAIC guidelines, prepaid expenses are not admissible. An amount of $76,162 is non-admitted.

Note 10 Prepaid PCS

The Company prepaid for pharmacy cards. Per the NAIC guidelines, prepaid expenses are not admissible. An examination adjustment of $106,000 was made to non-admit the prepaid expense.

Note 11 Accounts Payable

The Company included Rapidtrans general ledger balance at December 31, 1999, which increased the accounts payable. This amount should not have been included, therefore an adjustment was made for $6,500.

Note 12 Claims Payable

An increase of $21,702 was made to Claims Payable as a result of adjustments made to Accounts Receivable - Other (Note 7) relating to net vendor balances.

Note 13 Garnishment

The Company included Rapidtrans general ledger balance when reporting garnishments for the Company. An examination adjustment of $2,386 was made to take out Rapidtrans balance.

Note 14 Payroll Taxes

The Company accrued payroll taxes for employees that were to be terminated January 2000. The CPA's made the adjustment for salaries however, they did not make the adjustment for payroll taxes therefore, an examination adjustment for $14,756 was made for over accrual of payroll taxes for the terminated employees.

In addition, the Company included the general ledger balance for Rapidtrans. The Company should not have included Rapidtrans general ledger balance. Therefore an examination adjustment for $1,028 was made to decrease the Company's payroll taxes.

Note 15 Retained Earnings

The Company included Rapidtrans' general ledger balance when reporting retained earnings as of December 31, 1999. However, since the Company filed the annual statement on a consolidated basis, an amount could not be determined to properly account for the wholly owned subsidiary.

The Company must refile a correct and proper annual statement and follow the NAIC Instructions and Guidelines for reporting the value of the wholly owned subsidiary.

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COMMENTS AND RECOMMENDATIONS

1. Perform reconciliations on cash bank accounts

The Company has two bank accounts, in which reconciliations are not performed. It is recommended that the Company reconcile the bank account to the general ledger to make sure that all items are posted and reconciling items can be identified.

2. Maintaining Company records

The Company did not have signed conflict of interest statements for the Directors and Officers on the 1999 Annual Statement jurat page. It is recommended that the Company have all directors, officers and key employees sign a conflict of interest statement each year and maintain the statements for subsequent examinations.

The Company did not maintain a copy of the management agreement or the tax allocation agreement that was effective at December 31, 1999 with the parent. It is recommended that the Company keep signed and executed copies of all agreements that have been entered into.

3. Separate Annual Statement Filings and Investment in Subsidiary

The Company filed a consolidated annual statement and audited financial statements with Rapidtrans, a wholly owned subsidiary. It is recommended that the Company file separate statements for each entity. Also, it is recommended the Company follow the NAIC Instructions and Guidelines for reporting the value of the wholly owned subsidiary.

4. Premium Receivables and Health Care Receivables

It is recommended that the Company review the aged reports for premium receivables and health care receivables and write-off uncollected premiums that are over 90 days past due.

Due to the fact that the Health Care Receivables represent premiums to be paid by a District Government Agency, the Company disagrees with the examination adjustment and recommendation to non-admit the amounts -over 90 days past due. Also, the Company stated such receivables are considered admitted assets by the NAIL and the amounts were subsequently collected. The Company was given an opportunity to provide us with the District of Columbia Law, Regulation or NAIC authority that serves as the basis for its position, however, the requested documentation was not received.

Also, the Company classifies amounts due under the D.C. Medicaid Program as "Health Care Receivables" and the amounts due from its commercial business as "Premiums Receivable." It is further recommended that the Company follow the HMO Annual Statement Instructions and in the future classify amounts due under the D.C. Medicaid Program as "Premiums Receivable."

5. Furniture and Equipment

The Company is allowed to admit the furniture and equipment that pertain to the health care delivery and the other administrative furniture and equipment are not admissible. It is recommended that the Company review the Depreciation Expense Report and only admit the furniture and equipment that pertains to the health care delivery.

6. Leasehold Improvements

The Company is allowed to admit the leasehold improvements that pertain to the health care delivery and the other administrative leasehold improvements are not admissible. It is recommended that the Company review the Depreciation Expense Report and only admit the leasehold improvements for the delivery of health care services.

7. EDP Equipment

The Company should review the Depreciation Expense report thoroughly and write-off those items that are not considered as computer hardware or applicable software. It is recommended that the Company review the NAIC HMO Practices and Procedures Manual and determine items that are admissible by the NAIC.

8. Accounts Receivable - Other overpayment of claims

As of December 31, 1999, the balance was $40,049, which was the amount overpaid. The balance over 90 days was reported at $61,658, which was due from the vendors. Review of subsequent documentation identified that the balances were increasing each time claim checks were being processed. It is recommended that the Company take immediate action to resolve this matter of overpayment to the vendors.

9. Non-admissible prepaid expenses

The Company admitted many of their prepaid expenses. The NAIC suggests that prepaid expenses are non-admitted because of either an uncertainty as to the collectibility or an insufficient basis for determining the valuation of the asset.

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SUBSEQUENT EVENTS

On March 29, 2000, the Collateral Trustee entered into a Stock Sale and Transfer Agreement pursuant to which the stock of Chartered will be sold to DC Healthcare Systems, Inc. for $4,000,000 in cash (purchase price). The agreement was subject to certain closing requirements, approved by the Insurance Commissioner of the District of Columbia. The DC Department of Insurance and Securities Regulation approved the acquisition of DC Chartered Health Plan, Inc. by DC Healthcare Systems, Inc. on May 16, 2000.

As of May 17, 2000, the directors and officers were as follows:

Directors: 

Name
Jeffrey E. Thompson, CPA
Robert L. Bowles, Jr., DBA
Johnnie B. Booker, MSW
Myrtle R. Gomez, RN, MA
William J. Strudwick, MD, FACEP
Title
Chairman
Vice-Chairman
Director
Director
Director
 

Officers

Name
Glendia R. Hatton
Joshua Holloway
Title
Chief Operating Office 
Chief Medical Officer

The Company had filed the March 2000 Quarterly statement, however, this statement is to be amended subsequent to this examination.

The Company will request from the Department an extension for the June 2000 Quarterly Statement.

On May 15, 2000 effective as of December 31, 1999, the Collateral Trustee accepts the transfer for the amount due from Dr. Bowles as a reduction of amounts due to parent PHP. In addition, Collateral Trustee agrees to capitalize the due to parent equity and will be combined with additional paid in capital. The Collateral Trustee accepts the purchase price with no exceptions of future payments.

Subsequent to the examination, DISR requested additional information for the amended 1999 Annual Statement. All inquires by DISR were to be responded to by August 18, 2000.

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CONCLUSION

We conclude that the Company met the minimum net worth requirements of $1,000,000 pursuant to DC Code §35-4512 as of December 31, 1999.

In addition to the undersigned, representatives of Huff Thomas & Company and National Actuary Network, Inc., appointed by the Commissioner to represent the District of Columbia, participated in this examination.

Respectfully Submitted,
Sharon D. Lawrence
Examiner-In-Charge
Representing the District of Columbia
Department of Insurance and Securities Regulation

Nathaniel Kevin Brown, CFE, CPA
Supervising Examiner
District of Columbia Department of
Insurance and Securities Regulation

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