Cardinal Sues State to Keep Paying CEO $635,000 – With Our Tax Dollars!

On September 18, Cardinal filed a Petition at the Office of Administrative Hearings (OAH) challenging the State’s authority to set executive compensation limits. In other words, Cardinal is suing the State of NC to keep paying Toppings $635,000.00 with our tax dollars. See below:

petition

On Tuesday (October 10, 2017) legislators blasted Cardinal Healthcare and strongly urged DHHS Secretary Mandy Cohen to terminate its contract with Cardinal. The legislators challenged the impressive and questionably-needed administrative costs of the managed care organizations (MCOs), including exorbitant salaries, office parties, and private jets. Cardinal’s CEO Richard Topping, who became CEO in July 2015, was compensated at $635,000.00 this year. His total compensation was over $1.2 million in 2016 and 2017 (for a government job; i.e., our tax dollars. So we all may own a portion of his home). See blog. and blog. The State Auditor also reported excessive spending and mismanagement of funds. Let’s keep in mind, people, these funds are earmarked to provide medically necessary services to our most needy population suffering from mental illness, substance abuse, and developmentally disabilities. But Toppings wants a Porsche. (Disclaimer – my opinion).

And if we weren’t enraged enough about the obscene salary of Cardinal’s CEO, Cardinal decided to spend more tax dollars…on attorneys’ fees to litigate maintaining its CEO’s salary. When I heard this, I hoped that Cardinal, with our tax dollars, paid an internal general counsel, who would litigate the case. I mean, an in-house counsel gets a salary, so it wouldn’t cost the taxpayers extra money (over and beyond his/her salary) to sue the State. But, no. I was woefully disappointed. Cardinal hired one of the biggest law firms in the State of NC – Womble Carlyle – the only firm downtown Raleigh with its signage on the outside of the skyscraper. I am sure that costs a pretty penny. Please understand – this is nothing against Womble Carlyle. It is a reputable firm with solid lawyers, which is why Cardinal hired them. But they ain’t cheap.

BACKGROUND

Cardinal is a Local Management Entity/Managed Care Organization (LME/MCO) created by North Carolina General Statute 122C. IT IS NOT A PRIVATE COMPANY, LIKE BCBS. Cardinal is responsible for managing, coordinating, facilitating and monitoring the provision of mental health, developmental disabilities, and substance abuse services in 20 counties across North Carolina. Cardinal is the largest of the state’s seven LME/MCOs, serving more than 850,000 members. Cardinal has contracted with DHHS to operate the managed behavioral healthcare services under the Medicaid waiver through a network of licensed practitioners and provider agencies.  State law explicitly states Cardinal’s core mission as a government
entity.

CARDINAL’S FUNDING

Cardinal’s most significant funding is provided by Medicaid (85%). Funding from Medicaid totaled $567 million and $587 million for state fiscal years 2015 and 2016, respectively. Medicaid is a combination of federal and state tax dollars. If you pay taxes, you are paying for Toppings’ salary and the attorneys’ fees to keep that salary.

North Carolina General Statute 122C-123.1 states: “Any funds or part thereof of an area authority that are transferred by the area authority to any entity including a firm, partnership, corporation, company, association, joint stock association, agency, or nonprofit private foundation shall be subject to reimbursement by the area authority to the State when expenditures of the area authority are disallowed pursuant to a State or federal audit.” (Emphasis Added).

Our State Auditor, in its audit of Cardinal, already found that Cardinal’s spending of its funds is disallowed:

cardinals salary

Not only has the State Auditor called Cardinal out for excessive salaries, in a letter, dated August 10, 2017, the Office of State Human Resources told Cardinal that “Based on the information you submitted, the salary of your Area Director/CEO is above this new rate and, therefore, out of compliance. Please work to adjust the Area  Director/CEO salary accordingly and notify us of how you have remedied this situation. In the future, please ensure that any salary adjustment complies with the
provisions of G.S. 122C-121- the Mental Health, Developmental Disabilities, and Substance Abuse Act of 1985.” (emphasis added). In other words – follow the law! What did Cardinal do? Sued the Office of State Human Resources.

Concurrently, Cardinal is terminating provider contracts in its closed network (which keeps Cardinal from having to pay those providers), decreasing and denying behavioral health care services to Medicaid recipients (which keeps Cardinal from having to pay for those services). — And now, paying attorneys to litigate in court to keep the CEO’s salary of $635,000.00. Because of my blog, I receive emails from parents who are distraught because Cardinal is decreasing or terminating their child’s services. Just look at some of the comments people have written on my blog. Because of my job, I see firsthand the providers that are getting terminated or struck with alleged overpayments by Cardinal (and all the MCOs).

My questions are – if Cardinal has enough money to pay its CEO $635,000.00, why doesn’t Cardinal increase reimbursement rates to providers? Provide more services to those in need? Isn’t that exactly why it exists? Oh, and, let’s not forget Cardinal’s savings account. The State Auditor found that “For FY 2015 and 2016, Cardinal accumulated approximately $30 million and $40 million, respectively, in Medicaid savings.” Cardinal, and all the MCOs, sit in a position that these government entities could actually improve mental health in NC. They certainly have the funds to do so.

According to a blog follower, Cardinal pays lower reimbursement rates than other MCOs:

Psychiatric Diagnostic Eval. (Non-Medical) 90791
Cardinal MCO Pays $94.04
Partners MCO Pays 185.90
Medicare Pays 129.60
SC Medicaid Pays 153.94

Psychotherapy 60 minutes (in-home) 90837
Cardinal MCO Pays $74.57
Partners MCO Pays 112.00
Medicare Pays 125.93
SC Medicaid Pays 111.90

According to the Petition, Cardinal’s argument is that it is not a government entity. That its employees, including Toppings, does not receive state government benefits and are not part of the state retirement program. It also states in its Petition that Cardinal hires external consultants (with our tax dollars) to conduct a market compensation study every two years. (cough!). Cardinal complains, in the Petition, that “If forced to reduce its CEO’s salary to a level well below market rate for the leader of an organization of Cardinal Innovations’ size and complexity, Cardinal Innovations would be likely to immediately lose its current CEO and would be at a significant market disadvantage when trying to replace its current CEO with one of similar experience and expertise in the industry, as is necessary to lead Cardinal Innovations. This would result in immediate and irreparable harm to Cardinal Innovations and reduce the organization’s ability to fulfill its mission.” Wow – Toppings must be unbelievable…a prodigy…the picture of utopia…

The State has informed Cardinal that a salary is more appropriate at $194,471.00 with the possibility of a 5% exception up to $204,195.00.

In its Petition, Cardinal calls the statutorily required salary cap “an irrationally low salary range.” If I take out 50% for taxes, which is high, Toppings is paid $26,458.33 per month. In comparison, the Medicaid recipients he serves get the following per month (at the most):

eligibility

Disgusted? Angry? Contact your local representative. Don’t know who your representative is? Click here. I wonder how the IRS would react if I protested by refusing to pay taxes… Don’t worry. I’m not going to go all Martha Stewart on you.

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on October 12, 2017, in "Single State Agency", Access to Care, Administrative code, Administrative Law Judge, Alliance, Behavioral health, Beth Wood, Cardinal Innovations, CenterPoint, DHHS, EastPointe, General Assembly, Gordon & Rees, Health Care Providers and Services, Increase in Medicaid Rates, Increase in Medicaid Spending, Knicole Emanuel, Lawsuit, Legal Analysis, Legislation, Managed Care, Medicaid, Medicaid Advocate, Medicaid Appeals, Medicaid Attorney, Medicaid Contracts, Medicaid Providers, NC, North Carolina, OAH, Office of Administrative Hearings, Office of State Auditor, Petitions for Contested Cases, State Auditor Report, State Plan, Tax Dollars, Taxes, Taxpayers, Trillium and tagged , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. 8 Comments.

  1. I cant believe Cardinal feels they are above the state. As a private citizen I am outraged. As an employee of a provider of behavior health services I have seen first hand how providers have been treated by Cardinal as well as how consumers are being treated when it comes to getting services in a timely manner. They need to be cut as an MCO and the state should take over and govern and manage Behavior Health like most states do. We are the only state that treats providers as their employees, under minds their ability to do their jobs, and places hardships on them.

  2. This company gets more appalling every day.

  3. Ever wonder how Cardinal funds outlandish pay packages for executive staff?
    In addition to denying authorizations for needed services, Cardinal pays the lowest rates for services compare to other publicly funded organizations.

    For Example:
    Psychiatric Diagnostic Eval. (Non-Medical) 90791
    Cardinal MCO Pays $94.04
    Partners MCO Pays 185.90
    Medicare Pays 129.60
    SC Medicaid Pays 153.94

    Psychotherapy 60 minutes (in-home) 90837
    Cardinal MCO Pays $74.57
    Partners MCO Pays 112.00
    Medicare Pays 125.93
    SC Medicaid Pays 111.90

    • Very interesting. How can a statewide program, such as Medicaid, be implemented so disparately? I venture that no one has litigated whether this is allowed.

      • The Wavier gave the MCOs the ability to set their own rates (+/- from the std.) based on ‘community needs’. I think a few MCOs have increased the ACTT rates as those rates do not reflect the cost to provide the services. However ACTT rate increase is driven more by the DOJ Consent agreement that requires greater ACTT utilization.

  4. Well now…..this man must be JESUS IN THE FLESH !!! YIPPPEEE! ! ! Why has the state of NC allowed this for so long now??must be time to dust the shelves, clean out the closets, and pack their bags for them!!! I can spell as well as Read!! The sign reads….EVICTION !! HIT THE BRICKS !!

  5. Kristin Rogentine-Lee, PhD

    I’ve been a Medicaid provider for years until Cardinal came along and I voluntarily relinquished my contract. I can handle being underpaid but NOT being asked to pay Cardinal due to “overpayments” of an already laughably under reimbursed service. For example, on one clinical note I omitted commenting on the patient’s ” progress to goals ” and was asked to give back total payment for that session. And to hear that the CEO makes that much and they fly first class to business meetings etc. is appalling but not surprising.

  1. Pingback: Cardinal Board Slashes CEO’s Salary and CEO Cannot Accept! | medicaidlaw-nc

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