HMO founder sues judge after state puts firm in receivership


The founder of a health-care firm seized by the state Insurance Department is suing Judge Joseph H. H. Kaplan, contending that the Baltimore City Circuit Court judge acted illegally in approving a highly critical financial review of the company.

Christian Chinwuba, a Lanham radiologist and majority owner of PrimeHealth Corp., has filed the suit against Kaplan seeking $150 million in compensatory and punitive damages. Through his secretary, Kaplan declined to comment yesterday.

The suit, filed late last week in Kaplan's court, comes as the state Insurance Administration is moving to sell the health maintenance organization to Universal Health Plan, a new company. PrimeHealth serves some 15,500 patients, many of them in the Baltimore area.

Universal was one of two firms to submit a proposal to take over PrimeHealth. The second came from Maryland Physicians Care, an HMO serving some 29,430 state Medicaid patients.

Don Blandon, chief financial officer for Maryland Physicians, said his firm was disappointed by the recent announcement that Prime-Health would be sold to Universal. "We believe our bid would have provided more money to the creditors," Blandon said, noting that the state has not made public the details of the Universal bid, making comparisons difficult.

Tori Leonard, a spokeswoman for the insurance department, said the planned sale to Universal was "moving forward" and is expected to be final by the end of the month. It will then be subject to review and approval by Kaplan.

Chinwuba also has sued state Insurance Commissioner Steven B. Larsen, saying PrimeHealth was not insolvent when the state seized the company. Chinwuba contends the state failed to take into account some $4.2 million in state payments due the firm. With that additional revenue on its balance sheets, he contends, the company would have met solvency requirements.

J. B. Hanson, spokesman for the state Department of Health and Mental Hygiene, said yesterday that additional state payments were owed to the company.

"We discovered that PrimeHealth was not billing properly for some of their clients," Hanson said, adding that the claims for additional payments for newborns, AIDS patients and other specialized categories were being processed and paid. He stressed, however, that those claims and payments came after the company had been seized. He said it was too soon to estimate the total payments.

Attorneys for the state insurance department have denied Chinwuba's claims and stated that the agency has complied with all the legal requirements for a receivership.

PrimeHealth's problems began in the wake of a state probe of former state Sen. Larry Young, who was expelled from the General Assembly on ethics charges. Young was charged with using his office to run a consulting business for firms seeking state business. Prime-Health was one of those firms. Young was acquitted of criminal charges.

In the latest suit filed by Chinwuba, the radiologist contends that Kaplan acted illegally when he approved a draft report on PrimeHealth's finances without giving Chinwuba and other owners an opportunity to respond. The suit says that under state law, Kaplan did not have the authority to approve the examination report.

The report, Chinwuba said in the suit, permanently damaged his reputation and could bar him from having an ownership in any HMO licensed in the state.

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