DHHS issues letter to take over state-contracted managed care organization

Serving 850,000 NC Medicaid patients, Cardinal Innovations is again under fire for high payouts to executives.

RALEIGH — The N.C. Department of Health and Human Services announced on Monday that it has assumed leadership of Cardinal Innovations, a local management entity/managed care organization contracted to provide behavioral health services with millions in public money.

The takeover is temporary, according to a press release issued by the department, which also cited “serious mismanagement of funds” in the salaries of the executive leadership team and in the amount of executive severance payments. State law sets a $204,195 limit on behavioral health MCO’s top executive salaries.

“Despite explicit instructions to the Cardinal Board of Directors regarding lawful management of public funds, exorbitant severance was paid to the CEO and similar executive totaling $3.8 million,” N.C. DHHS Secretary Mandy Cohen said in a letter to lawmakers.

DHHS’ takeover follows three state audits and a report delivered by the state auditor to the General Assembly in May. Lawmakers from both sides of the aisle criticized the company saying that the executive salaries and severance packages were unusually generous. For example, Cardinal’s CEO Richard Topping, earned $517,000 plus bonus, more than twice the salary of heads of other MCO’s. Lawmakers also scrutinized other executive financial arrangements, parties, private jet charters and million-dollar severance packages.  Sen. Tamara Barringer (R-Wake) sat on the oversight committee and said she is glad that DHHS stepped in.

Sen. Tamara Barringer (R-Wake)

“The level and arrogance and avarice that have been demonstrated by Mr. Topping and the board of that organization just boggles my mind,” said Sen. Tamara Barringer in a phone interview on Wednesday.  “The money that has been distributed to those greedy people was meant for the most vulnerable people in the state – the ones who are living on so little, and with such great need, mental needs and physical needs. It just absolutely astounds me. The foster children, the aged, the people with disabilities, I am very angry that we even have to do this. “

“I’m also very proud of Senator Tommy Tucker who has not let this go. He has been after it and on it from the beginning and I’m very proud of his leadership on this,” she added.

According to the announcement, DHHS has taken over responsibility for Cardinal’s operations and will restructure the board with guidance from the chairs of the General Assembly’s Joint Legislative Oversight Committee on Health and Human Services, assuring the public that services will not be affected.

“I am deeply disappointed in the actions of Cardinal Innovations’ leadership and board,” said Cohen. “They are entrusted with the responsibility to care for some of our most vulnerable residents, but instead of living up to that obligation, they have lost the public’s trust by violating the law and mismanaging public funds. DHHS is temporarily taking control of Cardinal to stabilize the organization and return its focus to the consumers and families that Cardinal serves.”

Topping was terminated earlier in November after two years of service, reportedly taking $1.7 million in severance pay. His last day was supposed to be Dec. 1. However, according to DHHS on Monday, Topping is out immediately and not allowed on the company’s premises. He has been replaced by interim CEO Trey Sutten. Sutten just joined Cardinal last month as interim chief financial officer and prior to his employment there was the chief financial officer for N.C.’s $14 billion Medicaid program under former Gov. Pat McCrory.

Topping spoke with WFAE, Charlotte’s NPR radio station, earlier this week, questioning DHHS authority to take this action.

Richard Topping

“DHHS showed up at Cardinal offices with a letter stating that they are in control and certainly that is their opinion,” said Topping.

“Cardinal is not a part of state personnel. … We pay market-based compensation because we want our folks to have the same access that folks enrolled in Blue Cross have,” he added. “This argument that, because Cardinal accepts public money as a contractor that somehow the government gets to set salaries and compensation, is not accurate.”

The department says that DHHS staff is on site and working with Sutten and staff members to stabilize the organization, and hire new executives.

“DHHS has determined that the structure of the Cardinal Innovations Board of Directors is not in the best interest of consumers or the counties that Cardinal serves,” Cohen said in the letter to lawmakers who sit on the DHHS oversight committee on Monday. “DHHS has revoked approval of the current board composition effective immediately.”

Mandy Cohen, Secretary of N.C. Department of Health and Human Services

One of seven organizations across the state intended to deliver mental health, intellectual and developmental disability and substance use services, Cardinal Innovations serves approximately 850,000 Medicaid patients in Alamance, Cabarrus, Caswell, Chatham, Davidson, Davie, Forsyth, Franklin, Granville, Halifax, Mecklenburg, Orange, Rockingham, Person, Rowan, Stanly, Stokes, Union, Vance and Warren counties. Nearly 100,000 of the patients are in the Triad.

“I still raise the issue of fiduciary responsibility that the board members have to people that they serve,” said Barringer. “ I have real concerns about whether those fiduciary responsibilities have been breached, and frankly this is just beyond decency – to take that kind of money under these circumstances from the people who need it the most in this state.”