MCO CEO Compensated $400,000 Plus Bonuses with Our Tax Dollars!

On July 1, 2014, Cardinal Innovations, one of NC’s managed care organizations (MCOs) granted its former CEO, Ms. Pam Shipman, a 53% salary increase, raising her salary to $400,000/year. In addition to the raise, Cardinal issued Ms. Shipman a $65,000 bonus based on 2013-2014 performance.

$400,000 a year, plus bonuses.  Apparently, I got into the wrong career; the public sector seems to pay substantially more.

Then in July 2015, according to the article in the Charlotte Observer, Cardinals paid Ms. Shipman an additional $424,975, as severance. Within one year, Ms. Shipman was paid by Cardinal a whopping $889,975. Almost one million dollars!!!! To manage 16 counties’ behavioral health care services for Medicaid recipients.

For comparison purposes, the President of the United States earns $400,000/year (to run the entire country). Does the CEO of Cardinal equate to the President of the United States? Like the President, the CEO of Cardinal, along with all the other MCOs’ CEOs, are compensated with tax dollars.

Remember that the entire purpose of the MCO system is to decrease the risk of Medicaid budget overspending by placing the financial risk of overspending on the MCO instead of the State. In theory, the MCOs would be apt to conservatively spend funds and more carefully monitor the behavioral health care services provided to consumers within its catchment area to ensure medically necessity and not wasteful, unnecessary services.

Also, in theory, if the mission of the MCOs were to provide top-quality, medically necessary, behavioral health care services for all Medicaid recipients in need within its catchment area, as the MCOs often tout, then, theoretically, the MCOs would decrease administrative costs in order to provide higher quality, beefier services, increase reimbursement rates to incentivize health care providers to accept Medicaid, and maybe, even, not build a brand, new, stand-alone facility with top-notch technology and a cafeteria that looks how I would imagine Googles’ to look.

Here is how Cardinal’s building was described in 2010:

This new three-story, 79,000-square-foot facility is divided into two separate structures joined by a connecting bridge.  The 69,000-square-foot building houses the regional headquarters and includes Class A office space with conference rooms on each floor and a fully equipped corporate board room.  This building also houses a consumer gallery and a staff cafe offering an outdoor dining area on a cantilevered balcony overlooking a landscaped ravine.  The 10,000-square-foot connecting building houses a corporate training center. Computer access flooring is installed throughout the facility and is supported by a large server room to maintain redundancy of information flow.

The MCOs are not private companies. They do not sell products or services. Our tax dollars comprise the MCOs’ budget. Here is a breakdown of Cardinal’s budgetary sources from last year.

Cardinals budget

The so-called “revenues” are not revenues; they are tax dollars…our tax dollars.

78.1% of Cardinal’s budget, in 2014, came from our Medicaid budget. The remaining 21.7% came from state, federal, and county tax dollars, leaving .2% in the “other” category.

Because Cardinal’s budget is created with tax dollars, Cardinal is a public company working for all of us, tax paying, NC, residents.

When we hear that Tim Cook, Apple’s CEO, received $9.22 million in compensation last year, we only contributed to his salary if we bought Apple products. If I never bought an Apple product, then his extraordinarily high salary is irrelevant to me. If I did buy an Apple product, then my purchase was a voluntary choice to increase Apple’s profits, or revenues.

When we hear that Cardinal Innovations paid $424,975 to ousted CEO, Pam Shipman, over and above her normal salary of $400,000 a year, we all contributed to Shipman’s compensation involuntarily. Similarly, the new CEO, Richard Toppings, received a raise when he became CEO to increase his salary to $400,000 a year. Again, we contributed to his salary.

A private company must answer to its Board of Directors. But an MCO, such as Cardinal, must answer to tax payers.

I work very hard, and I expect that my dollars be used intelligently and for the betterment of society as a whole. Isn’t that the purpose of taxes? I do not pay taxes in order for Cardinal to pay its CEO $400,000.

For better or for worse, a large percentage of our tax dollars, here in NC, go to the Medicaid budget. I would venture that most people would agree that, as a society, we have a moral responsibility to ensure that our most vulnerable population…our poorest citizens…have adequate health care. No one should be denied medical coverage and our physicians cannot be expected to dole out charity beyond their means.

Hence, Medicaid.

We know that Medicaid recipients have a difficult time finding physicians who will accept Medicaid. We know that a Medicaid card is inferior to a private payor card and limits provider choice and allowable services. We know that certain services for which our private insurances pay, simply, are not covered by Medicaid. Why should a Medicaid-insured person receive sub-par medical services or have more difficulty finding willing providers, while privately insured persons receive high quality medical care with little effort?  See blog or blog.

Part of the trouble with Medicaid is the low reimbursements given to health care providers. Health-care consulting firm Merritt Hawkins conducted a study of Medicaid acceptance rates which found that just 45.7 percent of physicians are now accepting Medicaid patients in the U.S.’s largest 15 cities and the numbers worsen when you look at sub-specialties.

The reimbursement rates are so low for health care providers; the Medicaid services are inadequate, at best; and people in need of care have difficulty finding Medicaid physicians. Yet the CEO of Cardinal Innovations is compensated $400,000 per year.

Cardinal has 635 employees. Its five, top-paid executives are compensated $284,000-$400,000 with bonuses ranging $56,500-$122,000.

Richard Topping, Cardinal’s new CEO, told the Charlotte Observer that “it doesn’t cut into Medicaid services.”

He was also quoted as saying, “It’s a lot of money. It is. You’ve just got to look at the size and the scope and the scale.”

In contrast, Governor McCrory is compensated approximately $128,000.  Is McCrory’s “size, scope, and scale” smaller than the CEO’s of Cardinal?  Is the CEO of Cardinal “size and scope and scale,” more akin to the President of the US?

“We are a public entity that acts like a private company for a public purpose,” Toppings says.  Each MCO’s Board of Directors approve salaries and bonuses.

Cardinal is not the only MCO in NC compensating its CEO very well.  However, according to the Charlotte Observer, Cardinal’s CEO’s compensation takes the cake.

Smokey Mountain Center (SMC) pays its Chief Medical Officer Craig Martin $284,000 with a $6,789 longevity bonus.

Four years ago, before the initial 11 MCOs, the administrative cost of the MCOs was nonexistent (except for the pilot program, Piedmont Behavioral Health, which is Cardinal now).  Implementing the MCO system increased administrative costs, without question.  But by how much?  How much additional administrative costs are acceptable?

Is it acceptable to pay $400,000+ for a CEO of a public entity with our tax dollars?

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on July 20, 2015, in Access to Care, Accountability, Administrative Costs, Alliance, Barack Obama, Behavioral health, Budget, Cardinal Innovations, CenterPoint, DHHS, Division of Medical Assistance, EastPointe, ECBH, Federal Government, Gov. Pat McCrory, Health Care Providers and Services, Increase in Medicaid Rates, Increase in Medicaid Spending, Managed Care, McCrory, MCO, Medicaid, Medicaid Attorney, Medicaid Budget, Medicaid Costs, Medicaid Funds, Medicaid Reimbursements, Medicaid Services, Medicaid Spending, Medical Necessity, Mental Health, Mental Illness, NC, North Carolina, Partners, Provider Medicaid Contracts, Psychiatrists, Psychologists, Sandhills, Smokey Mountain Center, Tax Dollars, Taxes, Taxpayers and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. 15 Comments.

  1. elizabeth.lapierre@nm.com

    Boom.

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  2. With the medicaid money flowing, it doesn’t matter if you are a personal care aide for a Home Health agency or the CEO of what was the LME’s, in the eyes of those who are benefitting, “it’s all good”, unfortunately, it’s rarely the individual in need of mental health services who find themselves frequently living without supports as the menu of services change like the legistaltive winds.

  3. I have a question (or two) that might be slightly off topic. I cannot seem to get answers from the MCO regarding the waitlist. Why is there no transparency here? So much mystery seems to surround the process as well. Our family has an interesting set of circumstances that have led to requesting an emergency slot for our loved one, but no one knows the timeline for this decision, or who makes the decision. How do we get answers?

  4. There is not human justification for any CEO or employee of any MCO making the type of salary and bonuses as stated in your article. The administrative costs according to any agency that you speak with can be justified for the receivers benefit. I stated a long time ago that the individual weather they are Mental Health, Substance Abuse or IDD individuals are now standing at the back of these agencies with their hands risen saying “Hey do you remember us, do you remember who we are?” IF any CEO can justify with any answers for this type of greed and behavior then in my opinion they need the services of these agencies. To make as much as the President of this country is stooping to an all time low with tax dollars for the low income and the disabled and then to make excuses so that we lowly can buy into it should be criminal at the least.

  5. I have requested an “emergency waiver slot”. Is that the same thing? I am desperate and so very confused.

  6. Geoffrey Zeger

    The LME/MCO’s monitor – contract with – audit – and authorize services for the contract agencies that provide direct care……so who is monitoring and auditing the LME/MCO’s?

  7. Geoffrey Zeger

    Sorry for replying twice, but I have been wondering for quite some time if there is any outcome data now that all of NC has been covered by the LME/MCO structure since 2012.

    Does anyone have outcome data?

    Have there been costs savings? Are there less wait times in ER? Are there less hospitalizations? Do client’s report improved quality of life? There were a lot of eggs broken during the implementation of the Waiver and I have yet to hear about what the omelette is like?

    • Geoffrey,

      If you find the data, please forward to me. I cannot fathom that wait times in the ER have gone down. I would venture to guess that more mentally ill are being hospitalized when their providers go out of business or are not chosen for the catchment area.

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