Merger of Cardinal and Eastpointe: Will [Should] It Go Through?

What if, right before your wedding day, you discover a secret about your betrothed that changes the very fabric of your relationship. For example, you find out your spouse-to-be is actually gay or a heroin addict. Not that there is anything bad about being gay or a heroin addict, but these are important facts to know and accept [or reject] about your future mate prior to the ringing of the wedding bells. The same is true with two companies that are merging to become one. The merged entity will be liable for any secrets either company is keeping. In this hypothetical, Eastpointe just found out that Cardinal has been cheating – and the wedding is set for July 1!

Cardinal Innovations and Eastpointe, two of our managed care organizations (MCO) charged with managing Medicaid behavioral health care funds plan to merge, effective July 1, 2017. Together the monstrous entity would manage Medicaid behavioral funds for 32 counties.

Last week the State Auditor published a scathing Performance Audit on Cardinal. State Auditor Beth Wood found more than $400,000 in “unreasonable” expenses, including corporate retreats at a luxury hotel in Charleston, S.C.; chartering planes to fly to Greenville, Rocky Mount and Smithfield; providing monthly detailing service for the CEO’s car; and purchasing alcohol, private and first-class airline tickets and other items with company credit cards.

Cardinal’s most significant funding is provided by Medicaid. Funding from Medicaid totaled $567 million and $587 million for state fiscal years 2015 and 2016, respectively. In other words, the State Auditor found that Cardinal is using our tax dollars – public money obtained by you and me – for entertainment, while concurrently, denying behavioral health care services and terminating providers from its catchment area. Over 30% of my salary goes to taxes. I do not accept Cardinal mismanaging my hard earned money – or anyone else’s. It is unacceptable!

“The unreasonable spending on board retreats, meetings, Christmas parties and travel goes against legislative intent for Cardinal’s operations, potentially resulting in the erosion of public trust,” the audit states.

Eastpointe, however, is not squeaky clean.

A June 2015 Performance Audit by the State Auditor found that its former chief financial officer Bob Canupp was alleged to have received kickbacks worth a combined $547,595. It was also alleged that he spent $143,041 on three agency vehicles without a documented business purpose. Canupp, chief executive Ken Jones and other employees also were determined to have used Eastpointe credit cards to make $157,565 in “questionable purchases.” There has not been an audit, thus far, on Eastpointe’s management of public funds. One can only hope that the results of the Cardinal audit spurs on Beth Wood to metaphorically lift the skirts of all the MCOs.

Given the recent audit on Cardinal, I would like to think that Eastpointe is hesitant to merge with such an entity. If a provider had mismanaged Medicaid funds like the State Auditor found that Cardinal did, without question, the authorities would be investigating the provider for Medicaid fraud, waste, and abuse. Will Eastpointe continue with the merger despite the potential liability that may arise from Cardinal’s mismanagement of funds? Remember, according to our State Auditor, “Cardinal could be required to reimburse the State for any payroll expenditures that are later disallowed because they were unauthorized.” – Post-payment review!!

Essentially, this is a question of contract.

We learned about the potential merger of Cardinal and Eastpointe back in January 2017, when Sarah Stroud, Eastpointe’s chief executive, announced in a statement that the agency plans to negotiate a binding agreement within weeks. The question is – how binding is binding?

Every contract is breakable, but there will be a penalty involved in breaching the contract, usually monetary. So – fantastic – if Eastpointe does back out of the merger, maybe our tax dollars that are earmarked for behavioral health care services for Medicaid recipients can pay the penalty for breaching the contract.

Another extremely troubling finding in Cardinal’s State Audit Report is that Cardinal is sitting on over $70 million in its savings account. The audit states that “[b]ased on Cardinal’s accumulated savings, the Department of Health and Human Services (DHHS) should consider whether Cardinal is overcompensated. For FY 2015 and 2016, Cardinal accumulated approximately $30 million and $40 million, respectively, in Medicaid savings. According to the Center for Medicaid and Medicare Services (CMS), Cardinal can use the Medicaid savings as they see fit.”

As Cardinal sees fit??!!?! These are our tax dollars. Cardinal is not Blue Cross Blue Shield. Cardinal is not a private company. Who in the world thought it a good idea to allow any MCO to use saved money (money not spent on behavioral health care services for Medicaid recipients) to use as it sees fit. It is unconscionable!

Because of my blog, I receive emails almost daily from mothers and fathers of developmentally disabled or mentally handicapped children complaining about Cardinal’s denials or reductions in services. I am also told that there are not enough providers within the catchment area. One mother’s child was approved to receive 16 hours of service, but received zero services because there was no available provider. Another family was told by an MCO that the family’s limit on the amount of services was drastically lower than the actual limit. Families contact me about reduced services when the recipient’s condition has not changed. Providers contact me about MCO recoupments and low reimbursement rates.

Cardinal, and all the MCOs, should be required to use our tax dollars to ensure that enough providers are within the catchment areas to provide the medically necessary services. Increase the reimbursement rates. Increase necessary services.

According to the report, “Cardinal paid about $1.9 million in FY 2015 employee bonuses and $2.4 million in FY 2016 employee bonuses. The average bonus per employee was about $3,000 in FY 2015, and $4,000 in FY 2016. The bonuses were coded to Cardinal’s administrative portion of Medicaid funding source in both years.” Cardinal employs approximately 635 employees.

Good to know that Cardinal is thriving. Employees are overpaid and receive hefty bonuses. Executives are buying alcohol, private and first-class airline tickets and other items with company credit cards. It hosts lavish Christmas parties and retreats. It sits on a $70 million savings account. While I receive reports from families and providers that Medicaid recipients are not receiving medically necessary services, that there are not enough providers within the catchment area to render the approved services, that the reimbursement rates for the services are too low to attract quality providers, that more expensive services are denied for incorrect reasons, and that all the MCOs are recouping money from providers that should not be recouped.

If I were Eastpointe, I would run, regardless the cost.

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on May 24, 2017, in "Single State Agency", 1915 b/c Waiver, Access to Care, Administrative Costs, Alleged Overpayment, Alliance, Behavioral health, Cardinal Innovations, Certification of MCOs, Denials of Claims, Denials of Medicaid Services, EastPointe, Health Care Providers and Services, Knicole Emanuel, Managed Care, MCO, Medicaid, Medicaid Advocate, Medicaid Attorney, Medicaid Audits, Medicaid Contracts, Medicaid Costs, Medicaid Providers, Medicaid Recipients, Medicaid Recoupment, Medicaid Reimbursements, Medicaid Services, Medicaid Spending, Medical Necessity, Medicare and Medicaid Provider Audits, NC DHHS, North Carolina, Performance audit, Post-Payment Reviews, Psychiatrists, Psychologists, Regulatory Audits, Tax Dollars, Taxes, Taxpayers, Tentative Notices of Overpayment, Termination of Medicaid Contract, Trillium and tagged , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. 4 Comments.

  1. Graham Barden

    Now our legislature wants to do this again with the entire Medicaid Budget. Did not work out so well for Mental Health, unlikely to work out for Medicaid! 70% of whom are pediatric patients. Cannot wait….
    -Graham Barden

  2. Yes, Cardinal is wasting taxpayer money on themselves while denying needed services for their clients. It infuriates me that they are seemingly getting away with it!!! Time to contact our state legislators and give them specific examples of what Cardinal is doing to the people they supposedly serve. Squeaky wheel and all that! Get to the phones……Eastpointe get out now! Others, take note.

  3. Jane Lindsey

    One question, where was the State the whole time this has been going on? The State is trying to shut down the “Single Stream Funding” because of the cost of Medicaid. Where have they been while all this waste is going on., Why is it that the “Big Guys” get away with actions such as this while the individuals who so desperately need services get hurt. To knowingly do this should be considered criminal but it won’t be. It is always the innocent who get hurt while the Big Guys get away with this type of behavior. Believe me there are good agencies out there but no one is looking at them. The answer is always let them get away with whatever they want. Make them pay back a little and hurt the individuals in this State who would in some cases die without the care they need. Maybe some really strong actions would begin to stop this waste and not make it look as if the individuals and programs were the ones who are wasting and running up the Medicaid costs.

  4. WeNeedBetterCareNow!!

    Some other things that may interest you about Eastpointe:

    According to reports from their own Rights committee, Eastpointe has the worst authorization approval rating in the state, the worst customer satisfaction in the state, and is an increasingly hostile MCO with whom to do business. Their Kinston IDD care coordination office is currently four employees short because of what I can only view as extreme incompetence by the office lead, and although it is well known that she is the problem Eastpointe administration seems to have done nothing to correct it. In the meantime, this particular IDD care coordination office has lost almost ALL of its veteran case managers (read: the people who know this population and community best) and most new hires seem to run screaming just a few weeks or months in. Care coordinators in this office are so stressed I’ve seen them cry, one had severe heart issues due to stress, one had hair falling out, and I’ve even heard of some being punished for helping a sick or busy co-worker. I could go on and on, but the bottom line is that it’s unreal that Eastpointe is allowing their employees to be treated this way by one woman on a power trip, and if I were Cardinal, I wouldn’t want to merge with an MCO that can’t even keep their positions filled with competent staff.

    For the IDD care coordinators who have stayed…it’s hit or miss. One showed up unannounced at a school-aged client’s house in the middle of the day to meet them for the very first time after he had the case for over 6 months. It’s not uncommon for direly needed revisions to take months or more, and then once the deadline is approaching they will harrass you constantly because they waited until the last minute. There doesn’t seem to be any uniformity in the information that is passed along from office to office, so that care coordinators from the Kinston office may have been given info completely different than those in the Beulaville office. And if Eastpointe makes a mistake? Well, if you think they’re going to admit it, don’t hold your breath. They’ll do anything they can to cut services and strong arm families and agencies into not doing anything about it, using scare tactics and intimidation to confuse and deter. They are even told that they are not allowed to be advocates for their clients. Think about that…they are supposed to coordinator a client’s care so that there is continuity and security, but they are not allowed to advocate. There are some really good IDD care coordinators, but it does seem that the good ones are being run off by BS just like this.

    Eastpointe also just lost Nash County to Trillium (Eastpointe is suing but it looks like it’s going to happen no matter how much they cry about it) and looks like they’re going to lose Colombus County too. Can’t blame either of them…I wish our county would move as well.

    So yeah, Cardinal has some skeletons too…but it’s like bringing skeletons to a graveyard. I’d rather have higher approval and satisfaction ratings, which means more people getting the services they need. As far as not having enough providers…Eastpointe is no better. For several years they required us to provide a Community Guide service to some clients, but there were no providers of that service in our county at all. The clients who did hear from agencies providing the service were just called on the phone…never any face-to-face contact. Eastpointe has put a complete block on new providers and existing providers applying to provide more services (with a few exceptions). So if Cardinal clients think that Eastpointe is going to help expand the provider network, they can probably think again. Eastpointe is all about saving a penny, even if it costs them a dollar to do it.

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