Category Archives: Alliance
NC Medicaid Providers Lost Their Property Right in the Continued Participation in Medicaid, According to COA
According to the 4th Circuit Court of Appeals, health care providers possess a property right interest in the continued participation in Medicare and Medicaid. Nationally, the Circuits are split. The rule is, at least in the 4th Circuit, that termination for cause of a provider’s Medicaid contract is allowed, if the cause is correct and the provider was afforded due process. On October 5, 2023, the NC Court of Appeals deviated from legal precedent and ruled no property right exists in B&D Integrated Services v. NC DHHS and its agent Alliance. The COA held that Alliance, a managed care organization (“MCO”) could terminate any provider for any cause at any time for any reason. The 4th Circuit and I beg to differ. I read the Decision, and the Petitioner, unfortunately, according to the Decision, failed to argue that it has a property right in continued participation in Medicaid. I have no earthly idea why Petitioner argued what it did, which is that OAH has no jurisdiction over provider appeals and the OAH decision should be vacated. I have no idea why Petitioner thought that was a good argument. I don’t know if arguing the property right argument would have resulted in a victory, but, to me, it is the most compelling argument. Petitioner failed to argue that MCOs are paid by the tax payor; MCOs are not private companies, so MCOs are agents of the State and must follow pertinent regulations. Instead, Petitioner argues that OAH does not have jurisdiction???? Curiouser and curiouser.
That was not the right argument to make.
And now, unless the General Assembly changes the law, B&D Integrated Health Services v. NC DHHS and its agent Alliance Health, holds that “Alliance was contractually allowed to terminate the contract, with or without cause or for any reason, upon 30 days’ notice.” Which is precisely what I have argued against for the last 15 years or so. See blog. And blog. And blog.
These MCOs are bequeathed a fire hose of tax dollar money and whatever they don’t spend, they keep for bonuses for the executives. Therefore, it is in the MCOs’ financial best interest to terminate providers, which means all the terminated providers’ consumers are immediately cut-off from their Medicaid services, and the MCO saves money.
The following paragraphs are from a Decision from OAH holding that Medicaid contracts are NOT terminable at will:
“In determining whether a property interest exists a Court must first determine that there is an entitlement to that property. Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 (1985). Unlike liberty interests, property interests and entitlements are not created by the Constitution. Instead, property interests are created by federal or state law and can arise from statute, administrative regulations, or contract. Bowens v. N.C. Dept. of Human Res., 710 F.2d 1015, 1018 (4th Cir. 1983). Under North Carolina case law, the Fourth Circuit Court of Appeals has determined that North Carolina Medicaid providers have a property interest in continued provider status. Bowens, 710 F.2d 1018. In Bowens, the Fourth Circuit recognized that North Carolina provider appeals process created a due process property interest in a Medicaid provider’s continued provision of services, and could not be terminated “at the will of the state.” The court determined that these safeguards, which included a hearing and standards for review, indicated that the provider’s participation was not “terminable at will.” Id. The court held that these safeguards created an entitlement for the provider, because it limits the grounds for his termination such that the contract was not terminable “at will” but only for cause, and that such cause was reviewable. The Fourth Circuit reached the same result in Ram v. Heckler, 792 F.2d 444 (4th Cir. 1986) two years later. Since the Court’s decision in Bowen, a North Carolina Medicaid provider’s right to continued participation has been strengthened through the passage of Chapter 108C. Chapter 108C expressly creates a right for existing Medicaid providers to challenge a decision to terminate participation in the Medicaid program in the Office of Administrative Hearings. It also makes such reviews subject to the standards of Article 3 of the APA. Therefore, North Carolina law now contains a statutory process that confers an entitlement to Medicaid providers. Chapter 108C sets forth the procedure and substantive standards for which OAH is to operate and gives rise to the property right recognized in Bowens and Ram. Under Chapter 108C, providers have a statutory expectation that a decision to terminate participation will not violate the standards of Article 3 of the APA. The enactment of Chapter 108C gives a providers a right to not be terminated in a manner that (1) violates the law; (2) is in excess of the Department’s authority; (3) is erroneous; (4) is made without using proper procedures; or (5) is arbitrary and capricious. To conclude otherwise would nullify the General Assembly’s will by disregarding the rights conferred on providers by Chapter 108C. This expectation cannot be diminished by a regulation promulgated by the DMA which states that provider’s do not have a right to continued participation in the Medicaid program because under the analysis in Bowen the General Assembly created the property right through statutory enactment.” Carolina Comm. Support Serv, Inc., at 22.
Carolina Comm. Support Serv., Inc. v. Alliance Behavioral Healthcare, 14 DHR 1500, April 2, 2015.
ALJ Decisions determining a property right exists went on to be upheld by the 4th Circuit. However, this new NC COA decision, B&D Integrated Health v. NC DHHS, threatens all providers. The reason that termination at will does not work for Medicare and Medicaid versus a private companies’ right to terminate:
- These are our tax dollars, not private money.
- It allows discrimination.
- It allows subjectivity.
- It allows bias.
- It allows an entity to overnight prevent consumers from receiving medically necessary health care services.
- It allows for an entity to, overnight, cause hundreds of staff members to lose their jobs.
B&D Integrated Health v. NC DHHS is a bad decision for health care providers. The Petitioner lost its case because it made the wrong argument. Its argument that administrative courts have no jurisdiction was a losing argument. Now State and federal contractors have more power to be subjective and discriminatory.
Now we have NC case law in State Court that fails to follow federal case law in the 4th Circuit.
A Story of Three Medicaid Providers’ Erroneous Terminations
I have a story for you today that affected three, Medicaid, behavioral health care providers back in 2013. Instead of me spouting off legal jargon that no one understands, I am going to tell you a nonfictional story.
Since both stories occurred in NC, we will use DHHS, the Department of Health and Human Services, which is the acronym for NC’s Medicaid agency.
In 2013, a Residential Level IV facility was shut down overnight by the managed care organization (“MCO”), Alliance, which was one of many MCOs that managed all behavioral health care for NC Medicaid recipients within their respective, catchment areas. The facility, we will call Alpha, housed 5-6, at-risk, teenage, African American, males, who could not reside in their family’s home due to mental illness, substance abuse, legal trouble, and/or violence. The owners of Alpha, themselves were large, muscular, African American males, which, I can only imagine, was to their benefit.
Alliance terminated Alpha from its catchment area, but since Alpha only provided Medicaid services in Alliance’s catchment area, Alliance’s decision would close a business immediately, terminate all staff, cause the owners to lose their careers, and the residents would have no home.
Alpha hired me. We were successful in obtaining an injunction. Click on “injunction” to read my blog about this exact situation in 2013, written by me in 2013. I have written numerous blogs on the topic of erroneous terminations of Medicaid providers over the years. Here are a couple: blog and blog.
An Administrative Law Judge (“ALJ”) ruled in our favor that Alliance does not have the legal authority to terminate a provider for no reason or any erroneous reason. The ALJ Stayed the termination and Ordered Alliance to reverse the termination and continue to contract with Alpha.
Whew! We thought. Then, Alliance flat-out ignored the ALJ’s Order.
We brought a Motion for Contempt and/or Sanctions; however, we were instructed, at the time, that a Writ of Mandamus was the appropriate venue in Superior Court. This too was unsuccessful.
During our legal battle for Alpha, we were successful in obtaining injunctions for two other provider also terminated without cause.
Alpha did close. But the bright side of the story is what happened in the future. Those 3 injunctions, which were ignored by MCOs to the detriment of the three providers, were the last ones to be ignored. In the years that followed, OAH ALJs routinely held MCOs accountable for erroneous terminations and without cause terminations.
My team has witnessed successful injunctions across the country that protect providers from arbitrary and capricious terminations. We have litigated many of these successful injunctions.
NC Medicaid OVERHAULED!
NC Medicaid is getting a complete overhaul. Politically, everyone is lost and has no idea how this will work. Back in 2010-ish, when NC went to the MCO model, which we have now, hundreds of providers were not paid or had trouble getting paid until the “dust” settled, and the MCOs were familiar with their jobs. Providers continue to suffer nonpayment from MCOs.
The new model consists of two, separate models: (1) the Standard Plan; and (2) the Tailored Plan models.
What’s the difference?
The Tailored Plan
Applies to:
- People who get Innovations Waiver services
- People who get Traumatic Brain Injury (TBI) Waiver services
- People who may have a mental health disorder,substance use disorder, intellectual /developmental disability (I/DD) or traumatic brain injury (TBI).
The Standard Plan
Applies to everyone else. It is normal, physical Medicaid.
December 1, 2022, is the “go-live” date for the Tailored Plans.
Unlike the MCO model, the Tailored Plan offers physical health, pharmacy, care management and behavioral health services. It is for members who may have significant mental health needs, severe substance use disorders, intellectual/developmental disabilities (I/DDs) or traumatic brain injuries (TBIs). Tailored Plans offer added services for members who qualify. DHHS is trying to distance itself from any Medicaid administration by hiring all these private companies to manage Medicaid for DHHS. DHHS has to get federal Waivers to do this.
The MCOs are taking on a new function. Starting December 1, 2022, the MCOs will be managing physical care, as well as mental health and substance abuse.
I see this HUGE change as good and bad (isn’t everything?). The good side effect of this transition is that Medicaid recipients who suffer mental health and/or substance abuse will have their physical health taken care of by the same MCO that manage their mental health and/or substance abuse services. Despite, this positive side effect, we all know that whenever NC Medicaid is OVERHAULED, consumers fall between cracks on a large scale. Let’s just hope that this transition will be easier than past transitions.
Dave Richard, Deputy Secretary NC Medicaid, NCDHHS, gave a presentation today for the NCSHCA. He said that the transition to MCOs was rocky. What does he think will happen when we transfer to the Tailored Plan?
I think I may ask him whether he thinks whether the MCOs are doing a good job, presently.
He’s a great presenter.
He said that the hospitals have come together in the last 4 weeks. He said that we will see something in the media on Monday.
He wants to expand Medicaid because his agency DHHS would be awarded $1.5 Billion over the course of 2 years. Of course, he wants to expand. He has no idea that the MCOs are “terminating at will” providers within the catchment areas in a disproportionate and discriminatory way.
We are close to expansion, he said. 80%, he guessed. “Expansion is really important.”
Not if there are not enough providers.
I did not ask him my question.
Today Mr. Richard had to get a bunch of data from the “new plans.” We are 2 1/2 months away, and he said they are not prepared yet, but hopes to be prepared by December 1, 2022. They still have the discretion to “pull the plug.” He’s worried about a lot of providers who have invested a lot of money to get compliant and ready for the transformation – that they won’t get paid.
“We have 5 really, strong Standard Plans,” he said. Most Medicaid recipients will choose the 5 Standard Plans,
Attorney from the audience: “We have to raise reimbursement rates.” There is a staffing crisis, the attorney, emphasized.
Mr. Richard stated that there will be a raise, but no indication of how much.
Finally, I did ask him his opinion as to whether he thinks the MCOs are doing better now than when the transformation happened (back in 2010-ish).
He said, that nothing is perfect. And that other Medicaid Deputy Secretaries think very highly of NC’s program. I wonder if he’ll run for office. He would win.
The guy next to me asked, “What is the future of the Tailored Plans when they go out of business in 4 years?”
Mr. Richards said that there needed to be competition for being the “big dogs.”
NC Medicaid: Are MCOs Biased?
Since the inception of the Medicaid MCOs in North Carolina, we have discussed that the MCO terminations of providers’ Medicaid contracts have consistently and disproportionately been African American-owned, behavioral health care providers. Normally the MCOs terminate for “purported various reasons,” which was usually in error. However, these provider companies had one thing in common; they were all African American-owned. On this blog, I have generally reported that MCO terminations were just based on inaccurate allegations against the providers. The truth may be more bias. – Knicole Emanuel
- Written by Ryan Hargrave, associate at Practus.
George Floyd; Breyonna Taylor; Eric Garner; Tamir Rice; Jordan Davis, these are all names that we know, all-too-well, for such horrendous reasons. Not for the brilliance, that these young African-American men and women possessed; nor for the accolades they had accumulated throughout their short-lived experiences on this earth. We recognize these names through a disastrous realization that brought communities and our nation together for a singular purpose; to fight racism.
A global non-profit organization, United Way, recognizes four types of racism.
- Internalized Racism—a set of privately held beliefs, prejudices, and ideas about the superiority of whites and the inferiority of people of color.
- Interpersonal Racism—the expression of racism between individuals. Occurring when individuals interact and their private beliefs affecting their interactions.
- Institutional Racism—the discriminatory treatment, unfair policies and practices, and inequitable opportunities and impacts within organizations and institutions, all based on race, that routinely produce racially inequitable outcomes for people of color and advantages for white people.
- Structural Racism—a system in which public policies, institutional practices, cultural representations and other norms work in various, often reinforcing, ways to perpetuate racial group inequality.
These various types of racism can be witnessed in every state, city, county, suburb, and community, although it isn’t always facially obvious. Racism can even be witnessed in the health care community. Recently in 2020, NC Governor Roy Cooper signed executive order 143 to address the social, environmental, economic, and health disparities in communities of color that have been exacerbated by the COVID-19 Pandemic. Machelle Sanders, NC Department of Administration Secretary, was quoted stating that “Health inequities are the result of more than one individual choice or random occurrence—they are the result of the historic and ongoing interplay of inequitable structures, policies, and norms that shape lives.” Governor Cooper went on to include that there is a scarcity of African-American healthcare providers, namely behavioral healthcare providers, available to the public.
Noting this statement from the Governor of our great state, its troublesome to know that entities that provide federal funding to these healthcare providers have been doing their absolute best to rid the remaining African-American behavioral healthcare providers. For years, Managed Care Organizations (“MCOs”) have contracted with these providers to fund the expenses pursuant Medicaid billing. MCOs have repeatedly attempted to terminate these contracts with African-American providers without cause, unsuccessfully; until recently. In the past few years, Federal Administrative Law Judges (“ALJ’s”) have been upholding “termination without cause” contracts between MCOs and providers. This is nothing less of an escape route for MCOs, allowing them to keep the federal funds, that they receive each year based upon the number of contracts they have with providers, as profit. This is an obvious incentive to terminate contracts after receiving these funds. Some may refer to this as a business loophole, while most Americans would label this an unconstitutional form of structural racism. It has been estimated that 99% of behavioral healthcare providers in NC that have been terminated have ONE thing in common. You guessed it. They are African-American owned. Once terminated, most healthcare providers cannot operate without these Federal Medicaid Funds and, ultimately, are forced to close their respective practices.
Why is this not talked about? The answer is simple. Most Americans who are on Medicaid don’t even understand the processes and intricate considerations that go into Medicaid, let alone the general public. And what’s the craziest thing? The craziest thing is the fact that these Americans on Medicaid don’t know that the acts of racism instituted against their providers, trickle down and limit their ability to obtain healthcare services. Think about it. If I live in a rural town and have a healthcare provider that I know and love is terminated and forced to close, I lose access to said healthcare provider and must potentially go to an out-of-town provider. The unfortunate fact is that most healthcare providers who operate with a “specific” specialty, such as autistic therapy, can have waitlists up to 12 months! The ramifications of these financially-greedy, racist acts of the MCOs ultimately affect the general population.
Want to Drop Medicaid? (And I Don’t Blame You), But Here Are a Few Issues to Contemplate First
Low reimbursement rates make accepting Medicaid seem like drinking castor oil. You wrinkle your nose and swallow quickly to avoid tasting it. But if you are a provider that does accept Medicaid and you wish to stop accepting Medicaid – read this blog and checklist (below) before taking any action! Personally, if you do accept Medicaid, I say, “Thank you.” See blog. With more and more Medicaid recipients, the demand for providers who accept Medicaid has catapulted.
The United States has become a Medicaid nation. Medicaid is the nation’s largest health insurance program, covering 74 million, or more than 1 in 5 Americans.
Earlier this year, Kaiser published a report stating that 70% of office-based providers accept new patients covered by Medicaid. But this report does not mean that Medicaid recipients have access to quality health care. I will explain below.
The variation in the above chart is interesting. Reimbursement rates directly impact whether providers in the state accept Medicaid. The participation goes from a low of 38.7% in New Jersey (where primary care reimbursement rates are 48% of Medicare rates) to a high of 96.5% in Nebraska (where the primary care reimbursement is 75% of Medicare). Montana, with a 90% physician participation rate, pays the same rate as Medicare for primary care, while California, with a 54.2% participation rate, pays 42% of the Medicare reimbursement rate. We should all strive to be like Nebraska and Montana … granted the number of Medicaid recipients are fewer in those states. For September 2017, Nebraska ranked 45th out of the 50 states for Medicaid enrollment. Montana ranked 42nd. Wyoming came in dead last.
Statistically writing, Medicaid covers:
- 39% of all children.
- Nearly half of all births in the country.
- 60% of nursing home and other long-term care expenses.
- More than 1/4 of all spending on mental health services and over a fifth of all spending on substance abuse treatment.
However, even if the report is correct and 70% of health care providers do accept Medicaid, that is not indicative of quality access of care for Medicaid recipients. The number of Medicaid recipients is skyrocketing at a rate that cannot be covered by the number of providers who accept Medicaid. Kaiser estimates that by 2020, more than 25% (1 out of 4) of Americans will be dependent on Medicaid. Because of the low reimbursement rates, health care providers who do accept Medicaid are forced to increase the quantity of patients, which, logically, could decrease the quality … or the amount of time spent with each patient. Citing the percentage of providers who accept Medicaid, in this instance, 70%, is not indicative of quality of access of care; the ratio of Medicaid recipients to providers who accept Medicaid would be more germane to quality of access to care for Medicaid recipients. Even if 70% of health care providers accept Medicaid, but we have 74 million Medicaid recipients, then 70% is not enough. My opinion is what it is because based on years of experience with this blog and people reaching out to me. I have people contact me via this blog or email explaining that their mother, father, child, sister, or brother, has Medicaid and cannot find a provider for – dental, mental health, developmentally disabled services. So, maybe, just maybe, 70% is not good enough.
Before dropping Medicaid like a hot potato, ask yourself the following questions:
-
Will I have enough patients without Medicaid to keep my staff and I busy?
Location! Location! Location! Your location matters. If you provide health care services in areas that are predominantly Medicaid-populated, then you may need to reconsider dropping the ‘Caid. California, New York, and Texas were the top spenders in Medicaid for fiscal year 2016, totaling over a whopping $183 billion of America’s total expenditure on ‘Caid, which was $553 billion.
I am sure that I am preaching to the choir, but choosing to not accept Medicaid is not fiscally sound if you and your staff will be twiddling their thumbs all day. Even low reimbursement rates are better than no reimbursement rates. On the downside, if you choose to accept Medicaid, you need a “rainy-day” fund to pay for attorneys to defend any regulatory audits, termination of Medicaid contracts, accusations of fraud, prepayment review, and/or other adverse determinations by the state (and, if you accept Medicare, the federal government and all its vendors).
2. Have I attested for the Medicaid EHR meaningful use incentives?
If you attested and accepted the EHR incentive payments, you may need to continue seeing Medicaid patients in order to keep/maintain your EHR payments. (Please consult an attorney).
3. Will I still be subject to Medicaid audits in the future?
If avoiding Medicaid audits is your primary reason for dropping ‘Caid, ‘ho your horses. Refusing to accept ‘Caid going forward does not indemnify you from getting future audits. In fact, in cases of credible allegations of fraud, you may be subject to future Medicaid audits for another 6 years after you no longer accept Medicaid. You will also need to continue to maintain all your records for regulatory compliance. If you cease accepting Medicaid, those recipients will need to find new providers. Those medical records are the Medicaid recipients’ property and need to be forwarded to the new provider.
If you are currently under investigation for credible allegations of fraud, of which you may or may not be aware, then suddenly stop accepting Medicaid, it could be a red flag to an investigator. Not that ceasing to accept Medicaid is evidence of wrongdoing, but sometimes sudden change, regardless of the change, can spur curiosity in auditors. For example, in NC DHHS v. Parker Home Care, the Court of Appeals ruled that a tentative notice of overpayment by Public Consulting Group (PCG) does not constitute a final agency decision. The managed care organizations (MCOs) freaked out because the MCOs were frightened that a health care provider could argue, in Court, that Parker Home Care applies to MCOs, as well. They were so freaked out that they filed an Amicus Curiae Brief, which is a Brief on behalf of a person or organization that is not a party to a particular litigation but that is permitted by the court to advise it in respect to some matter of law that directly affects the case in question. The MCOs’ Brief states, “The Court of Appeals’ decision, if allowed to stand, could be construed to undermine the authority explicitly granted to managed care organizations, such as the LME/MCOs in North Carolina, by CMS.” Too bad our Waiver specifically states that DHS/DMA to CMS states, “[DMA] retains final decision-making authority on all waiver policies and requirements.” But I digress. In Parker Home Care, the MCOs filed the Brief to preserve their self-instilled authority over their catchments areas. However, despite the MCOs request that the NC Supreme Court take the issue under consideration, the Supreme Court denied certiorari, which means the Supreme Court refused to entertain the issue. While it is not “law” or “precedent” or “written in stone,” generally, attorneys argue that the Supreme Court’s refusal to entertain an issue means that it does not deem the issue to be a controversy … that the Court agrees with the lower court’s decision. Hence, the argument that the MCOs cannot render final agency decisions.
4. Will I be able to sleep at night?
Health care providers become health care providers, generally, with the intent to help people. This makes most health care providers nurturing people. You have to ask yourself whether you will be comfortable, ethically, with your decision to not accept Medicaid. I cannot tell you how many of my clients tell me, at some point, “I’m just not going to accept Medicaid anymore.” And, then continue to accept Medicaid … because they are good people. It infuriates me when I am in court arguing that terminating a provider’s Medicaid contract will put the provider out of business, and the attorney from the State makes a comment like, “It was the provider’s business decision to depend this heavily on Medicaid.” No, actually, many providers do feel an ethical duty to serve the Medicaid population.
Check your health care community and determine whether other providers with your specialty accept Medicaid. Are they accepting new Medicaid patients? Are they viable options for your patients? Are they as good as you are? Just like attorneys, there are good and bad; experienced and inexperienced; intelligent and not-so-much; capable and not-so-much.
5. Can I delegate Medicaid recipients to a mid-level practitioner?
Physician assistants and nurse practitioners are wonderful assets to have to devote to Medicaid recipients. This is not to say that Medicaid recipients deserve lesser-educated services because, quite frankly, some PAs and NPs are just as good as the MDs. But you get my point. If PAs and NPs have a lower billable rate, then it makes business financial sense to delegate the Medicaid recipients to them. Similarly, I have an amazing, qualified paralegal, Todd Yoho. He has background in medical coding, went to two years of law school, and is smarter than many attorneys. I am blessed to have him. But the reality is that his billable rate is lower than mine. I try to use his services whenever possible to try to keep the attorneys’ fees lower. Same with mid-level practitioner versus using the MD.
6. Instead of eliminating Medicaid patients, can I just decrease my Medicaid patients?
This could be a compromise with yourself and your business. Having the right balance between Medicaid recipients and private pay, or even Medicare patients, can be key in increasing income and maintaining quality of care. Caveat: In most states, you are allowed to cap your Medicaid recipients. However, there are guidelines that you muts follow. Even Medicaid HMOs or MCOs could have different requirements for caps on Medicaid recipients. Again, seek legal advice.
Hostile Takeover: Cardinal Usurped by DHHS! Any Possible Relief to Providers for Misconduct?
DHHS has ousted and taken over Cardinal Innovations!
And may I just say – Finally! Thank you, Sec. Cohen.
Cardinal is/was the largest of seven managed care organizations (MCOs) that was given the task to manage Medicaid funds for behavioral health care recipients. These are Medicaid recipients suffering from developmental disabilities, mental health issues, and substance abuse; these are our population’s most needy. These MCOs are given a firehose of Medicaid money; i.e., tax dollars, and were entrusted by the State of North Carolina, each individual taxpayer, Medicaid recipients, and the recipients’ families to maintain an adequate network of health care providers and authorize medically necessary behavioral health care services. Cardinal’s budget was just over $682 million in 2016. Instead, I have witnessed, as a Medicaid and Medicare regulatory compliance litigator, and have legally defended hundreds of health care providers who were unlawfully terminated from the MCOs’ catchment areas, refused a contract with the MCOs, accused of owing overpayments to the MCOs for services that were appropriately rendered. To the point that the provider catchment areas are woefully underrepresented (especially in Minority-owned companies), recipients are not receiving medically necessary services, and the MCOs are denying medically necessary services. The MCOs do so under the guise of their police power. For years, I have been blogging that this police power is overzealous, unsupervised, unchecked, and in violation of legal authority. I have blogged that the MCOs act as the judge, jury, and executioner. I have also stated that the actions of the MCOs are financially driven. Because when providers are terminated and services are not rendered, money is not spent, at least, on the Medicaid recipients’ services.
But, apparently, the money is spent on executives. This past May, State Auditor Beth Wood wrote a scathing performance audit regarding Cardinal’s lavish spending on CEO pay as well as on expensive Christmas parties and board retreats, charter flights for executives and “questionable” credit card purchases, including alcohol. All of that, her report said, threatened to “erode public trust.” Cardinal’s former CEO Richard Topping made more than $635,000 in salary this year. On Monday (November 21, 2017), DHHS escorted Topping and three other executives out the door. But they did not walk away empty handed. Topping walked away with a $1.7 million severance while three associates left with packages as high as $740,000 – of taxpayer money!
This overspending on salaries and administration is not new. Cardinal has been excessively spending on itself since inception. This has been a long term concern, and I congratulate Sec. Cohen for having the “cojones” to do something about it. (I know. Bad joke. I apologize for the French/Spanish).
In 2011, Cardinal spent millions of dollars constructing its administrative facility.
Break Room
Conference Room
According to Edifice, the company that built Cardinal Innovations’ grand headquarters, starting in 2011, Cardinal’s building is described as:
“[T[his 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.” How much did that cost the Medicaid recipients in Cardinal’s catchment area? Seem appropriate for an agent of the government spending tax money for luxurious office space? Shoot, my legal office is not even that nice. And I don’t get funded by tax dollars!
In 2015, I wrote:
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.
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!!!!
I have been blogging about MCO misconduct for YEARS. Seeblog, blog, blog, blog, and blog.
Now, finally, DHHS says Cardinal Innovations “acted unlawfully” in giving its ousted CEO $1.7 million in severance, and DHHS took over the Charlotte-based agency. It was a complete oust. One journalist quoted Cardinal as saying, “DHHS officials arrived at Cardinal “unexpectedly and informed the executive leadership team that the department is assuming control of Cardinal’s governance.”” Unexpected they say? Cardinal conducted unexpected audits all the time on their providers. But, the shoe hurts when it’s on the other foot.
The MCOs are charged with the HUGE fiscal and moral responsibility, on behalf of the taxpayers, to manage North Carolina and federal tax dollars and authorize medically necessary behavioral health care services for Medicaid recipients, our population’s most needy. The MCOs in NC are as follows:
- Vaya Health
- Partners Behavioral Health Management
- Cardinal Innovations (formerly)
- Trillium Health Resources
- Eastpointe
- Alliance Behavioral Health Care
- Sandhills Center
The 1915 (b)(c) Waiver Program was initially implemented at one pilot site in 2005 and evaluated for several years. Two expansion sites were then added in 2012. The State declared it an immediate success and requested and received the authority from CMS to implement the MCO project statewide. Full statewide implementation is expected by July 1, 2013. The MCO project was intended to save money in the Medicaid program. The thought was that if these MCO entities were prepaid on a capitated basis that the MCOs would have the incentive to be fiscally responsible, provide the medically necessary services to those in need, and reduce the dollars spent on prisons and hospitals for mentally ill.
Sadly, as we have seen, fire hoses of tax dollars catalyze greed.
Presumably, in the goal of financial wealth, Cardinal Innovations, and, maybe, expectantly the other MCOs, have sacrificed quality providers being in network and medically necessary services for Medicaid recipients, Cardinal has terminated provider contracts. And for what? Luxurious office space, high salaries, private jets, and a fat savings account.
I remember a former client from over 5 years ago, who owned and ran multiple residential facilities for at-risk, teen-age boys with violent tendencies and who suffered severe mental illness. Without cause, Alliance terminated the client’s Medicaid contract. There were no alternatives for the residents except for the street. We were able to secure a preliminary injunction preventing the termination. But for every one of those stories, there are providers who did not have the money to fight the terminations
Are there legal recourses for health care providers who suffered from Cardinal’s actions?
The million dollar question.
In light of the State Auditor’s report and DHHS’ actions and public comments that it was usurping Cardinal’s leadership based on “recent unlawful actions, including serious financial mismanagement by the leadership and Board of Directors at Cardinal Innovations,” I believe that the arrows point to yes, with a glaring caveat. It would be a massive and costly undertaking. David and Goliath does not even begin to express the undertaking. At one point, someone told me that Cardinal had $271 million in its bank account. I have no way to corroborate this, but I would not be surprised. In the past, Cardinal has hired private, steeply-priced attorney regardless that its funds are tax dollars. Granted, now DHHS may run things differently, but without question, any legal course of action against any MCO would be epically expensive.
Putting aside the money issue, potential claims could include (Disclaimer: this list is nonexhaustive and based on a cursory investigation for the purpose of my blog. Furthermore, research has not been conducted on possible bars to claims, such as immunity and/or exhaustion of administrative remedies.):
- Breach of fiduciary duty. Provider would need to demonstrate that a duty existed between providers and MCO (contractual or otherwise), that said MCO breached such duty, and that damages exist. Damages can include actual loss and if intent is proven, punitive damages may be sought.
- Unfair and Deceptive Trade Practices. Providers would have to prove three elements: (1) an unfair or deceptive act or practice; (2) in or affecting commerce; (3) which proximately caused the injury to the claimant. A court will first determine if the act or practice was “in or affecting commerce” before determining if the act or practice was unfair or deceptive. Damages allowed are actual damages, plus treble damages (three times the actual damages).
- Negligence. Providers would have to show (1) duty; (2) breach; (3) cause in fact; (4) proximate cause; and (5) damages. Actual damages are allowed for a negligence claim.
- Breach of Contract. The providers would have to demonstrate that there was a valid contract; that the providers performed as specified by the contract; that the said MCO failed to perform as specified by the contract; and that the providers suffered an economic loss as a result of the defendant’s breach of contract. Actual damages are recoverable in a breach of action claim.
- Declaratory Judgment. This would be a request to the Court to make a legal finding that the MCO failed to follow certain Medicaid procedures and regulations.
- Violation of Article I, NC Constitution (legal and contractual right to receive payments for reimbursement claims due and payable under the Medicaid regulations.
To name a few…
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:
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:
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):
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.
House Bill 403: A Potential Upheaval of Medicaid!
Is this the end of the managed care organizations (MCOs)?
If the Senate’s proposed committee substitute (PCS) to House Bill 403 (HB 403) passes the answer is yes. The Senate’s PCS to House Bill 403 was just favorably reported out of the Senate Health Care Committee on June 15, 2017. The next step for the bill to advance will be approval by the Senate Rules Committee. Click here to watch its progress.
As my readers are well aware, I am not a proponent for the MCOs. I think the MCOs are run by overpaid executives, who pay themselves too high of bonuses, hire charter flights, throw fancy holiday parties, and send themselves and their families on expensive retreats – to the detriment of Medicaid recipients’ services and Medicaid providers’ reimbursement rates. See blog. And blog.
Over the last couple days, my email has been inundated by people abhorred with HB 403 – urging the Senators to retain the original HB 403, instead of the PCS version. As with all legislation, there are good and bad components. I went back and re-read these emails, and I realized multiple authors sat on an MCO Board. Of course MCO Board members will be against HB 403! Instead of hopping up and down “for” or “against” HB 403, I propose a (somewhat) objective review of the proposed legislation in this blog.
While I do not agree with everything found in HB 403, I certainly believe it is a step in the right direction. The MCOs have not been successful. Medically necessary behavioral health care services have been reduced or terminated, quality health care providers have been terminated from catchment areas, and our tax dollars have been misused.
However, I do have concern about how quickly the MCOs would be dissolved and the new PHPs would be put into effect. There is no real transition period, which could provide safety nets to ensure continuity of services. We all remember when NCTracks was implemented in 2013 and MMIS was removed on the same day. There was no overlap – and the results were catastrophic.
The following bullet points are the main issues found in HB 403, as currently written.
- Effective date – MCOs dissolve immediately (This could be dangerous if not done properly)
Past legislation enacted a transition time to dissolve the MCOs. Session Law 2015-245, as amended by Session Law 2016-121, provided that the MCOs would be dissolved in four years, allowing the State to implement a new system slowly instead of yanking the tablecloth from the table with hopes of the plates, glasses, and silverware not tumbling to the ground.
According to HB 403, “on the date when Medicaid capitated contracts with Prepaid Health Plans (PHPs) begin, as required by S.L. 2015-245, all of the following shall occur:…(2) The LME/MCOs shall be dissolved.”
Session Law 2015-245 states the following timeline: “LME/MCOs shall continue to manage the behavioral health services currently covered for their enrollees under all existing waivers, including the 1915(b) and (c) waivers, for four years after the date capitated PHP contracts begin. During this four-year period, the Division of Health Benefits shall continue to negotiate actuarially sound capitation rates directly
with the LME/MCOs in the same manner as currently utilized.”
HB 403 revises Session Law 2015-245’s timeline by the following: “LME/MCOs shall continue to manage the behavioral health services currently covered for their enrollees under all existing waivers, including the 1915(b) and (c) waivers, for four years after the date capitated PHP contracts begin. During this four-year period, the Division of Health Benefits shall continue to negotiate actuarially sound capitation rates directly with the LME/MCOs in the same manner as currently utilized.”
Instead of a 4-year transition period, the day the PHP contracts are effective, the MCOs no longer exist. Poof!! Maybe Edward Bulwer-Lytton was right when he stated, “The pen is mightier than the sword.”
Again, I am not opposed to dissolving the MCOs for behavioral health care; I just want whatever transition to be reasonable and safe for Medicaid recipients and providers.
With the MCOs erased from existence, what system will be put in place? According to HB 403, PHPs shall manage all behavioral health care now managed by MCOs and all the remaining assets (i.e., all those millions sitting in the savings accounts of the MCOs) will be transferred to DHHS in order to fund the contracts with the PHPs and any liabilities of the MCOs. (And what prevents or does not prevent an MCO simply saying, “Well, now we will act as a PHP?”).
What is a PHP? HB 403 defines PHPs as an entity, which may be a commercial plan or provider-led entity with a PHP license from the Department of Insurance and will operate a capitated contract for the delivery of services. “Services covered by PHP:
- Physical health services
- Prescription drugs
- Long-term care services
- Behavioral health services
The capitated contracts shall not cover:
Behavioral healthDentist services- The fabrication of eyeglasses…”
It would appear that dentists will also be managed by PHPs. As currently written, HB 403 also sets no less than three and no more than five contracts between DHHS and the PHPs should be implemented.
Don’t we need a Waiver from the Center for Medicare and Medicaid Services (CMS)?
Yes. We need a Waiver. 42 CFR 410.10(e) states that “[t]he Medicaid agency may not delegate, to other than its own officials, the authority to supervise the plan or to develop or issue policies, rules, and regulations on program matters.” In order to “Waive” this clause, we must get permission from CMS. We had to get permission from CMS when we created the MCO model. The same is true for a new PHP model.
Technically, HB 403 is mandating DHHS to implement a PHP model before we have permission from the federal government. HB 403 does instruct DHHS to submit a demonstration waiver application. Still, there is always concern and hesitancy surrounding implementation of a Medicaid program without the blessing of CMS.
- The provider network (This is awesome)
HB 403 requires that all contracts between PHPs and DHHS have a clause that requires PHPs to not exclude providers from their networks except for failure to meet objective quality standards or refusal to accept network rates.
- PHPs use of money (Also good)
Clearly, the General Assembly drafted HB 403 out of anger toward the MCOs. HB 403 implements more supervision over the new entities. It also disallows use of money on alcohol, first-class airfare, charter flights, holiday parties or similar social gatherings, and retreats, which, we all know these are precisely the activities that State Auditor Beth Wood found occurring, at least, at Cardinal. See Audit Report.
HB 403 also mandates that the Office of State Human Resources revise and update the job descriptions for the area directors and set limitations on salaries. No more “$1.2 million in CEO salaries paid without proper authorization.”
- Provider contracts with the PHPs (No choice is never good)
It appears that HB 403 will not allow providers to choose which PHP to join. DHHS is to create the regions for the PHPs and every county must be assigned to a PHP. Depending on how these PHPs are created, we could be looking at a similar situation that we have now with the MCOs. If the State is going to force you to contract with a PHP to provide Medicaid services, I would want the ability to choose the PHP.
In conclusion, HB 403 will re-shape our entire Medicaid program, if passed. It will abolish the MCO system, apply to almost all Medicaid services (both physical and mental), open the provider network, limit spending on inappropriate items, and assign counties to a PHP.
Boy, what I would give to be a fly on the wall in all the MCO’s boardrooms (during the closed sessions).
Eastpointe Sues DHHS, Former Sec. Brajer, Nash County, and Trillium Claiming Conspiracy! (What It Means for Providers)
In HBO’s Game of Thrones, nine, noble, family houses of Westeros fight for the Iron Throne – either vying to claim the throne or fighting for independence from the throne.
Similarly, when NC moved to the managed care organizations for Medicaid behavioral health care services, we began with 12 MCOs (We actually started with 23 (39 if you count area authorities) LME/MCOs, but they quickly whittled down to 11). “The General Assembly enacted House Bill 916 (S.L. 2011-264) (“H.B. 916) to be effective June 23, 2011, which required the statewide expansion of the 1915(b)/(c) Medicaid Waiver Program to be completed within the State by July 1, 2013.” Compl. at 25. Now the General Assembly is pushing for more consolidation.
Now we have seven (7) MCOs remaining, and the future is uncertain. With a firehose of money at issue and the General Assembly’s push for consolidation, it has become a bloody battle to remain standing in the end, because, after all, only one may claim the Iron Throne. And we all know that “Winter is coming.”
Seemingly, as an attempt to remain financially viable, last week, on Thursday, June 8, 2017, Eastpointe, one of our current MCOs, sued the Department of Health and Human Services (DHHS), Nash County, Trillium Health Resources, another MCO, and former secretary Richard Brajer in his individual and former official capacity. Since the Complaint is a public record, you can find the Complaint filed in the Eastern District of NC, Western Division, Civil Action 5:17-CV-275. My citations within this blog correspond with the paragraphs in the Complaint, not page numbers.
Eastpointe’s Complaint wields a complex web of conspiracy, government interference, and questionable relationships that would even intrigue George R. R. Martin.
The core grievance in the lawsuit is Eastpointe alleges that DHHS, Trillium, Nash County, and Brajer unlawfully conspired and interfered with Eastpointe’s contract to manage behavioral health care services for its twelve (12) county catchment area, including Nash County. In 2012, Nash County, as part of the The Beacon Center, signed a contract and became part of a merger with Eastpointe being the sole survivor (Beacon Center and Southeastern Regional Mental Health were swallowed by Eastpointe). At the heart of Eastpointe’s Complaint, Eastpointe is alleging that Nash County, Trillium, DHHS, and Brajer conspired to breach the contract between Eastpointe and Nash County and unlawfully allowed Nash County to join Trillium’s catchment area.
In June 2013, the General Assembly, pursuant to Senate Bill 208 (S.L. 2013-85 s. 4.(b)), appended N.C.G.S. § 122C-115 to include subparagraph (a3), permitting a county to disengage from one LME/MCO and align with another with the approval of the Secretary of the NCDHHS, who was required by law to promulgate “rules to establish a process for county disengagement.” N.C.G.S. § 122C-115(a3) (“Rules”) (10A N.C.A.C. 26C .0701-03).
Why does it matter whether Medicaid recipients receive behavioral health care services from providers within Trillium or Eastpointe’s catchment area?? As long as the medically necessary services are rendered – that should be what is important – right?
Wrong. First, I give my reason as a cynic (realist), then as a philanthropist (wishful thinker).
Cynical answer – The MCOs are prepaid. In general and giving a purposely abbreviated explanation, the way in which the amount is determined to pre-pay an MCO is based on how many Medicaid recipients reside within the catchment area who need behavioral health care services. The more people in need of Medicaid behavioral health care services in a catchment area, the more money the MCO receives to manage such services. With the removal of Nash County from Eastpointe’s catchment area, Eastpointe will lose approximately $4 million annually and Trillium will gain approximately $4 million annually, according to the Complaint. This lawsuit is a brawl over the capitated amount of money that Nash County represents, but it also is about the Iron Throne. If Eastpointe becomes less financially secure and Trillium becomes more financially secure, then it is more likely that Eastpointe would be chewed up and swallowed in any merger.
Philanthropic answer – Allowing Nash County to disengage from Eastpointe’s catchment area would inevitably disrupt behavioral health care services to our most fragile and needy population. Medicaid recipients would be denied access to their chosen providers…providers that may have been treating them for years and created established trust. Allowing Nash County to disembark from Eastpointe would cause chaos for those least fortunate and in need of behavioral health care services.
Eastpointe also alleges that DHHS refused to approve a merger between Eastpointe and Cardinal purposefully and with the intent to sabotage Eastpointe’s financial viability.
Also in its Complaint, Eastpointe alleges a statewide, power-hungry, money-grubbing conspiracy in which Brajer and DHHS and Trillium are conspiring to pose Trillium as the final winner in the “MCO Scramble to Consolidate,” “Get Big or Die” MCO mentality arising out of the legislative push for MCO consolidation. Because, as with any consolidation, duplicate executives are cut.
Over the last couple years, Eastpointe has discussed merging with Cardinal, Trillium, and Sandhills – none of which occurred. Comparably, Joffrey Lannister and Sansa Stark discussed merging. As did Viserys and Illyrio wed Daenerys to Khal Drogo to form an alliance between the Targaryens.
Some of the most noteworthy and scandalous accusations:
Against Trillium:
Leza Wainwright, CEO of Trillium and director of the NC Council of Community MH/DD/SA Programs (“NCCCP”) (now I know why I’ve never been invited to speak at NCCCP). Wainwright “brazenly took actions adverse to the interest of Eastpointe in violation of the NCCCP mission, conflicts of interest policy of the organization, and her fiduciary duty to the NCCCP and its members.” Compl. at 44.
Robinson, Governing Board Chair of Trillium, “further informed Brajer that he intended for Trillium to be the surviving entity in any merger with Eastpointe and that “any plan predicated on Trillium and Eastpointe being coequal is fundamentally flawed.”” Compl. at 61.
“On or about May 11, 2016, Denauvo Robinson (“Robinson”), Governing Board Chair of Trillium wrote Brajer, without copying Eastpointe, defaming Eastpointe’s reputation in such a way that undermined the potential merger of Eastpointe and Trillium.” Compl. at 59.
“Robinson, among other false statements, alleged the failure to consummate a merger between Eastpointe, CoastalCare, and East Carolina Behavioral Health LMEs was the result of Eastpointe’s steadfast desire to maintain control, and Eastpointe’s actions led those entities to break discussions with Eastpointe and instead merge to form Trillium.” Compl. at 60.
“Trillium, not Nash County, wrote Brajer on November 28, 2016 requesting approval to disengage from Eastpointe and to align with Trillium.” Compl. at 69.
Against DHHS:
Dave Richards, Deputy Secretary for Medical Assistance, maintains a “strong relationship with Wainwright” and “displayed unusual personal animus toward Kenneth Jones, Eastpointe’s former CEO.” Compl. at 47.
Brajer made numerous statements to Eastpointe staff regarding his animus toward Jones and Eastpointe. “Brajer continued to push for a merger between Eastpointe and Trillium.” Compl. at 53.
“On December 5, 2016, the same day that former Governor McCrory conceded the election to Governor Cooper, Brajer wrote a letter to Trillium indicating that he approved the disengagement and realignment of Nash County.” Compl. at 72.
“On March 17, 2016, however, Brajer released a memorandum containing a plan for consolidation of the LME/MCOs, in which NCDHHS proposed Eastpointe being merged with Trillium.” Compl. at 55.
Brajer’s actions were “deliberately premature, arbitrary, and capricious and not in compliance with statute and Rule, and with the intent to destabilize Eastpointe as an LME/MCO).” Compl. at 73.
“Brajer conspired with Nash County to cause Nash County to breach the Merger Agreement.” Compl. at 86.
Brajer “deliberately sought to block any merger between Eastpointe and other LME/MCOs except Trillium.” Compl. at 96.
“Brajer and NCDHHS’s ultra vires and unilateral approval of the Nash County disengagement request effective April 1, 2017 materially breached the contract between Eastpointe and NCDHHS. Equally brazen was Brajer’s calculated failure to give Eastpointe proper notice of the agency action taken or provide Eastpointe with any rights of appeal.” Compl. at 101.
Against Nash County
“To date, Nash County is Six Hundred Fifty Three Thousand Nine Hundred Fifty Nine Thousand and 16/100 ($653,959.16) in arrears on its Maintenance of Efforts to Eastpointe.” Compl. at 84.
“While serving on Eastpointe’s area board, Nash County Commissioner Lisa Barnes, in her capacity as a member of the Nash County Board of Commissioners, voted to adopt a resolution requesting permission for Nash County to disengage from Eastpointe and realign with Trillium. In so doing, Barnes violated her sworn oath to the determent of Eastpointe.” Compl. at 85.
What Eastpointe’s lawsuit could potentially mean to providers:
Eastpointe is asking the Judge in the federal court of our eastern district for a Temporary Restraining Order and Preliminary Injunction prohibiting Nash County from withdrawing from Eastpointe’s catchment area and joining Trillium’s catchment area. It is important to note that the behavioral health care providers in Eastpointe’s catchment area may not be the same behavioral health care providers in Trillium’s catchment area. There may be some overlap, but without question there are behavioral health care providers in Trillium’s catchment area that are not in Eastpointe’s catchment area and vice versa.
If Eastpointe is not successful in stopping Nash County from switching to Trillium’s catchment area, those providers who provide services in Nash County need to inquire – if you do not currently have a contract with Trillium, will Trillium accept you into its catchment area, because Trillium runs a closed network?!?! If Trillium refuses to include Nash County’s behavioral health care providers in its catchment area, those Nash County providers risk no longer being able to provide services to their consumers. If this is the case, these Nash County, non-Trillium providers may want to consider joining Eastpointe’s lawsuit as a third-party intervenor, as an interested, aggrieved person. Obviously, you would, legally, be on Eastpointe’s side, hoping to stay Nash County’s jump from Eastpointe to Trillium.
Even if Eastpointe is successful in stopping Nash County’s Benedict Arnold, then, as a provider in Eastpointe’s catchment area, you need to think ahead. How viable is Eastpointe? Eastpointe’s lawsuit is a powerful indication that Eastpointe itself is concerned about the future, although this lawsuit could be its saving grace. How fair (yet realistic) is it that whichever providers happen to have a contract with the biggest, most powerful MCO in the end get to continue to provide services and those providers with contracts with smaller, less viable MCOs are put out of business based on closed networks?
If Nash County is allowed to defect from Eastpointe and unite with Trillium, all providers need to stress. Allowing a county to abscond from its MCO on the whim of county leadership could create absolute havoc. Switching MCOs effects health care providers and Medicaid recipients. Each time a county decides to choose a new MCO the provider network is upended. Recipients are wrenched from the provider of their choice and forced to re-invent the psychological wheel to their detriment. Imagine Cherokee County being managed by Eastpointe…Brunswick County being managed by Vaya Health…or Randolph County being managed by Partners. Location-wise, it would be an administrative mess. Every election of a county leadership could determine the fate of a county’s Medicaid recipients.
Here is a map of the current 7 MCOs:
All behavioral health care providers should be keeping a close watch on the MCO consolidations and this lawsuit. There is nothing that requires the merged entity to maintain or retain the swallowed up entities provider network. Make your alliances because…
“Winter is coming.”
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.
