Category Archives: Cardinal Innovations
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.
If you receive a letter from CMS or your State Department terminating your Medicare or Medicaid contract, would that affect you financially? I ask this rhetorical question because providers’ rights to a Medicare or Medicaid contract or to reimbursements for services rendered is a split in the Circuit Courts. Thankfully, I reside in the 4th Circuit, which has unambiguously held that providers and recipients have a property right in reimbursements for services rendered, a Medicare/caid contract and the right to the freedom of choice of provider. If you live in the 8th Circuit Court of Appeals, I am sorry. You have no rights.
Usually when there is split decision among the Circuit Courts, the Supreme Court weighs in. But, it has not. In fact, it declined to opine. Timing is everything. A 4th Circuit court of Decision giving providers property rights requested the Supreme Court to weigh in and finally end this rift amongst the Circuits. But, sadly, Justice Ginsburg died on September 18, 2020. The Supreme Court declined to review the Fourth Circuit decision on October 13, 2020. Justice Barrett was confirmed by the Senate on October 26, 2020 and was sworn in on October 27, 2020. So, the certiorari was denied – I assume – due to the vacant seat at the time.
In 40 States, managed care manages Medicaid. The contracts they write are Draconian, saying that either party may terminate at will for no cause but for convenience. Termination at will is all fine and good in the private sector. However, Medicare and Medicaid are highly regulated, and when tax dollars and access to care are at issue, property rights are created.
In NC State Court, against the judgment of the 4th Circuit, a November 5, 2021, unpublished case determined that providers have no property rights to a Medicaid contract and an MCO can terminate at whim. Family Innovations v. Cardinal Innovations Healthcare Solutions, No. COA20-681 (June 1, 2021). Unpublished decisions are supposed to carry no weight. Unpublished decisions are not supposed to be controlling. Citation is disfavored.
Yet, in a strange turn of events, our State administrative courts have rendered, in the last week and in violation of 4th Circuit and administrative case law, that the termination-at-will clause in the MCO contract that a provider is forced to sign stands and is enforceable. These were new Judges and obviously were not well-versed in Medicaid law. Both came from employment law backgrounds, which is completely different than the health care world. But their rash and uneducated decisions bankrupt companies and shut down access to care for medically necessary behavioral health care services.
The upshot? If you have managed care companies in charge of your Medicaid or Medicare contracts, review your contracts now. Is there a termination-at-will clause? Because if there is, you too could lose your contract at any time. Depending on where you reside, you may or may not have property rights in the Medicare Medicaid contract. This is an issue that the Supreme Court must decide. Too many providers are getting erroneously and discriminatorily terminated for no reason and given no due process.
We must bring litigation to thwart the Courts that uphold termination-at-will clauses. Especially, in the era of COVID, we need our health care providers. We certainly do not need the MCOs, which kill access to care.
Here are our tax dollars continuing to be used for such great purposes!!! I completely understand Cardinal’s desire to recoup our tax dollars that went into Topping’s pocket – noble, indeed. But I am stumped as how, supposedly, Topping had the executive authority to unilaterally name his salary?? Did he have such authority – or, like many companies, was Topping’s exorbitant salary a Board decision? And – if Topping’s salary were a Board decision – is Cardinal suing itself for past poor decisions???? Curiouser and curiouser.
Regardless, let’s give a “hat’s off” and a “thank you” to Richard Craver staying on top of this important and upsetting issue. #icantwaituntilwererich (see below for context).
By Richard Craver Winston-Salem Journal
The fired chief executive of Cardinal Innovations, Richard Topping Jr., filed Tuesday his countersuit to thwart the agency’s attempt to recover $1.68 million in paid severance.
A reconstituted board of directors for Cardinal, the state’s largest behavioral health managed care organization, has alleged that Topping used his post to enrich himself and three other executives. That board filed its lawsuit March 29.
Both lawsuits were filed in Mecklenburg Superior Court.
The agency oversees providers of mental, substance abuse and development disabilities services for 20 counties, including Forsyth County. It has responsibility for more than 850,000 Medicaid recipients and more than $675 million in federal and state Medicaid funding.
According to an investigation done by former federal prosecutor Kurt Meyers at the new board’s request, Topping convinced the former board leadership to pay him the severance before he was removed by state health Secretary Mandy Cohen on Nov. 27 as part of a N.C. Department of Health and Human Services takeover of Cardinal.
The current Cardinal board not only wants to recoup $3.8 million in overall executive severance, but also at least $125,000 in damages. The complaint called Topping’s severance “excessive and unlawful payments.”
Topping faces seven claims in the Cardinal lawsuit: breach of contract; breach of fiduciary duties; breach of implied duty of good faith and fair dealing (in his role as CEO); conversion (deleting data from Cardinal-owned devices and not returning Cardinal electronic property); unjust enrichment; constructive trust (knowingly accepting overpayments in severance); and constructive fraud (taking without permission highly confidential Cardinal financial and operational data).
“He inflated his salary without regard to the reputational, regulatory and legal damages it was going to cause,” Meyers said.
Topping claims his reputation has been “severely damaged” in the healthcare sector by the Cardinal lawsuit and investigation.
Topping called claims made in Meyers’ detailed presentation “misleading and false” even though it contained email and text exchanges between Topping, former Cardinal executives and former board chairwoman Lucy Drake about his post-Cardinal plans.
“Topping took these steps acknowledging he would never get another contract with Cardinal, nor likely with any other North Carolina healthcare provider,” Trey Sutten said March 29. Sutten was named as interim CEO by Cohen on Nov. 27 and full-time CEO on March 29.
The Charlotte Observer said among those named by Topping as defendants were Cardinal general counsel Chuck Hollowell, deputy general counsel Stephen Martin and board vice chairwoman Carmen Hooker Odom. DHHS said Tuesday it had no comment about Topping’s countersuit.
Topping was paid as much as $635,000 in annual salary, about 3½ times the maximum allowed under state law.
Topping has claimed the salary, which was raised twice by the former board during his term, was justified based on an independent market survey of Charlotte-area healthcare executives. The Charlotte Observer said Topping claims he and the other former executives were paid at the 50th percentile of market rates.
According to Meyers’ investigation, Topping pressured the former board not to fire him for several months by saying that if he was terminated, his entire management team would also leave with him. According to Meyers, Topping told the board that if that action occurred, it would “end Cardinal as they knew it.”
Topping claimed he did not create the severance platform in dispute.
“Cardinal Innovations Healthcare, Carmen Hooker Odom, Chuck Hollowell and Stephen Martin deny the false claims and baseless allegations brought by former CEO Richard Topping,” Cardinal spokeswoman Ashley Conger said in a statement.
Texts and emails between Topping and Pete Murphy, former chief information officer, epitomized their self-enrichment thinking, Meyers said.
The former board paid $1.7 million in severance to Topping, along with $740,000 to Murphy; $690,000 to Will Woodell, chief operating officer; and $684,000 to Dr. Ranota Hall, chief medical officer.
One exchange— sent Nov. 17 before Topping was fired by the former board — involved Murphy and Topping discussing Topping’s securing 1.5-gigabytes of highly confidential Cardinal management files, including personnel files, before leaving his post.
Murphy wrote that Topping “was smart to take files now.” Topping ended the text with an emoji with a finger over the lips. Meyers said he interpreted that emoji as saying “Shhh. Be quiet, and don’t tell anyone what I’m doing.”
An email exchange between the former executives took place after Topping’s termination by the former board. The board agreed to allow Topping to remain as CEO through Nov. 30.
The context, according to Meyers, was Topping’s work to secure venture capital or private equity for a private startup business, potentially to compete against Cardinal in the planned Medicaid reform marketplace with Cardinal’s confidential financial and operational information in hand.
“I can’t wait until we’re rich,” Murphy wrote. Topping answered, “I’ve made great progress on that front.” (emphasis added).
Topping’s lawsuit claims he was gathering information to create a healthcare smartphone app.
$1.68 million. That’s what company controlling millions in taxpayer dollars wants back from fired CEO
Article in the Winston Salem Journal today:
Cardinal Innovations filed a lawsuit Monday in Mecklenburg Superior Court against fired chief executive Richard Topping.
The state’s largest managed care organization – which controls hundreds of millions in taxpayer dollars – is suing to recoup $1.68 million in severance from Topping, as well as prevent him from collecting any further payments approved by the former board that was disbanded Nov. 27.
The lawsuit says Topping’s severance represents “excessive and unlawful payments.”
Cardinal oversees providers of services for mental health, developmental disabilities and substance abuse for more than 850,000 Medicaid enrollees in 20 counties, including Forsyth and five others in the Triad. It handles more than $675 million in annual federal and state Medicaid money.
An investigation by McGuireWoods LLP was requested by a reconstituted board, formed in January and approved by state health Secretary Mandy Cohen, along with interim chief executive Trey Sutten. It was conducted by McGuireWoods partner Kurt Meyers, a former federal prosecutor.
The lawsuit represents a new action by Cardinal, and is not in response to the previous board’s lawsuit against the state to allow for executive salaries, including for Topping, that exceeded those permitted by state law.
However, it does represent a follow-up on the temporary restraining order and then preliminary injunction won against Topping and the former board filed in the same court.
The injunction prevents Topping and the former board from interfering with N.C. Department of Health and Human Services’ regulatory actions versus Cardinal that began when Cohen ordered the takeover of the organization on Nov. 27.
The former board took action against Topping’s employment at its Nov. 17 meeting by terminating his contract without cause. The board, at Topping’s request, would have been allowed to stay on through Dec. 1.
Cardinal said in the lawsuit that “Topping’s motive in asking the board to allow him to remain CEO was so that he could use his position as CEO to ensure that Cardinal Innovations paid him the lump-sum severance before his departure.”
Now to my opinion:
Disclosure: I have not read the Complaint and would love someone to send it to me. But, on the face of this article, my experience in the legal world, and my limited knowledge about the whole Topping debacle:
While we can all agree that Topping’s salary, plus bonuses and perks, was absolutely repugnant and offensive to taxpayers (like me), Topping did not get there all by himself. The Board of Directors met, discussed Topping’s salary, and voted to give him that salary. The Board of Directors, essentially, is the heart and the brain of Cardinal Innovations.
Is Cardinal Innovations going to sue itself for bestowing such an outrageous salary, plus benefits, to Topping?
Because if I am Topping and I get sued for having a high salary, I am going to point at the Board of Directors and say, “I couldn’t have gotten paid without your votes, Board. So have fun and sue yourself.”
BTW: Isn’t this lawsuit a conflict of interest?? It was only last year that Cardinal filed a lawsuit asking the court to ALLOW TOPPING TO CONTINUE TO RECEIVE SUCH OUTRAGEOUS SALARY THAT NOW – SAME COMPANY – IS SUING BECAUSE IT GAVE THIS SALARY TO IT CEO…which is it, Cardinal? Or is it just a matter of following the wind of public opinion?
Not to mention – HOW IS CARDINAL FUNDING THE LAWSUIT (ATTORNEYS’ FEES) – WITH OUR TAX DOLLARS!!!!!!! I mean, good for Womble Carlyle, the law firm hired with our tax dollars to spend more money on a losing case (my opinion) because Cardinal mismanaged our tax dollars! Winner, winner, chicken dinner! Last year it got paid to file a lawsuit to keep Topping’s salary and perks. Five months later it’s hired to sue for giving Topping’s salary and perks. See blog.
Does anyone else not see how screwed up this is?????
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.
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.
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!!!!
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
- 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…
In the wake of bad press, Cardinal Innovation’s Board of Directors finally acted and cut Richard Topping’s, the CEO, obnoxiously high salary, which is paid with Medicaid fund tax dollars. It seems he received a salary decrease of over $400,000! According to the below article, Topping did not take the news well and stated that he cannot accept the massive decrease in salary. See blog.
Will Topping quit? Who will manage Cardinal?
See article below written by Richard Craver of the Winston Salem Journal:
The salary for the chief executive of Cardinal Innovations Healthcare Solutions has been cut by two-thirds — from $617,526 a year to $204,195 — reducing it to the maximum allowed by North Carolina law. Cardinal’s embattled board of directors passed a resolution on CEO Richard Topping’s salary after a four-hour closed special session that ended about 11 p.m. Tuesday, according to Charlotte radio station WFAE.
The vote was 5-3 in favor of the resolution with two members abstaining and two members absent. The eight members represented a quorum.
Bryan Thompson serves on the Cardinal board as the lone representative from Davie, Forsyth, Rockingham and Stokes counties. He was the chairman of CenterPoint Human Services of Winston-Salem until it was taken over by Cardinal in June 2016. Thompson confirmed Wednesday that he introduced the motion for the resolution. “I am very proud of the work Cardinal Innovations does and the seriousness I observed in the board members last night,” Thompson said. “I fully support the resolution adopted to bring the salary into range as provided by the state.” Ashley Conger, Cardinal’s vice president of communications and marketing, on Wednesday confirmed the board’s salary-reduction resolution. “Richard is still leading the company, and his priority is to ensure stability and continuity for our employees, members and communities as we continue work with the state to address their concerns,” Conger said.
Cardinal’s board chairwoman, Lucy Drake, voted against the resolution. “We brought him in and we offered (the reduced salary) to him. And he has said he cannot accept that,” Drake told WFAE.
It’s unclear if Topping qualifies for a severance package should he choose to resign because of the salary cut. “We have got to find out who on the team is going to stay,” Drake said. “We’ve got to find out who will be running Cardinal. Because this just completely overwhelmed me. I didn’t know this was going this way tonight.” Attending the meeting was Dave Richard, the state’s deputy health secretary for medical assistance and head of its Medicaid program. After the second of two scathing state audits, the N.C. Department of Health and Human Services issued a statement Oct. 2 saying, “Cardinal should immediately bring its salary/compensation package for its CEO in line with the other MCOs, and shed its excessive severance offerings. DHHS will continue to monitor Cardinal’s performance.” Richard told legislators on Oct. 11 that he would present to the Cardinal board a list of state compliance requirements for Cardinal, the largest of the state’s seven behavioral-health managed care organizations, or MCOs. On Wednesday, Richard said through a spokesman that Cardinal’s board is taking steps to comply with state law, “and we look forward to continuing to work with Cardinal to ensure North Carolinians receive excellent care and state resources are handled appropriately.”
The board’s decision represents a stunning about-face for the MCO. On Sept. 18, Cardinal sued the state to maintain what it claims is the authority to pay Topping up to 3½ times more than his peers. Drake issued a statement supporting the lawsuit, which challenges the state’s authority to set executive-compensation limits. Cardinal filed the lawsuit against the Office of State Human Resources with the State Office of Administrative Hearings. Cardinal’s predecessor was formed in part as a legislative experiment for using private sector methods to lower the cost of caring for Medicaid enrollees without sacrificing the quality of care.
Cardinal and Topping have viewed the agency as an independent contractor as part of state Medicaid reform, gaining financial and business flexibility beyond those of other MCOs. That included being able to retain about $70 million in Medicaid savings from fiscal years 2014-15 and 2015-16. Topping has said Cardinal is performing in accord with what legislators have asked it to do. However, Cardinal is considered a political subdivision of the state, with oversight contracts subject to approval by the state health secretary and executive compensation subject to Office of State Human Resources guidelines. Cardinal argues in its complaint that not being allowed to pay Topping up to $635,000 in annual salary could convince him to resign, thereby putting Cardinal “at a significant market disadvantage” recruiting a top executive in the Mecklenburg County business market. “This would result in immediate and irreparable harm to Cardinal Innovations and reduce the organization’s ability to fulfill its mission,” Cardinal said. Topping’s current three-year contract provides severance payments “for a broad range of reasons” beyond termination of employment without just cause. They include:
- If Cardinal is taken over or ceases to be an independent entity.
- If a majority of the board is replaced without the board’s approval.
- If the agency is “materially” affected by statutory or regulatory changes to its services, revenue, governance or employment practices.
About 96,300 Triad Medicaid enrollees may be along for the ride if a day of reckoning arrives for Cardinal. That’s how many individuals could be affected in Davie, Forsyth, Rockingham and Stokes counties involving services for mental health, developmental disorders and substance abuse. Cardinal oversees providers of those services and handles more than $675 million in annual federal and state Medicaid money.
The main issue at hand is executive compensation and severance packages that Cardinal has committed to Topping and 10 other executives, which legislators have called excessive and unacceptable. The Cardinal board approved two raises for Topping since he became chief executive in July 2015. Cardinal’s board minutes are not available on its website, and Cardinal officials have a pattern of responding slowly to public and media requests for those minutes, including a request made Friday that it referred to its legal team.
An internal DHHS audit, released Oct. 1, determined that the salary and severance packages Cardinal’s board approved “pose a substantial risk (to Cardinal) and may not be in the best interest of Cardinal, beneficiaries and/or the state.” “This is excessive and raises concerns about the entity’s solvency and ability to continue to provide services in the event of a significant change in its leadership team,” DHHS said in a statement. In May, the state auditor’s office cited in its audit of Cardinal unauthorized executive compensation and a combined $490,756 in high-end board retreats and “unreasonable spending (that) could erode public trust.”
N.C. Auditor Beth Wood said in May that Cardinal “is not independent of the state … and it is definitely responsible to the General Assembly.” “Its whole independent contractor claims have been taken out of context, and they are being misleading when they say they are,” Wood said. Wood also blamed the Office of State Human Resources for not doing a better job of monitoring Cardinal’s executive-compensation packages.
A bipartisan group of state legislators is urging the state health secretary, Dr. Mandy Cohen, to replace Topping and the board, and/or terminate Cardinal’s state Medicaid contracts, for noncompliance with state laws. State health officials and legislators say they are not ready to predict what steps Cohen might take, which could include splintering Cardinal’s 20-county territory and assigning parts to one or more of the state’s other six MCOs. Cardinal also covers Alamance and Davidson counties. “All of the options are possible,” state Sen. Joyce Krawiec, R-Forsyth, said last week. Krawiec is a member of the Joint Legislative Oversight Committee on Health and Human Services. However, it is not likely that Cohen would approve resurrecting CenterPoint. Since taking office, Cohen has tightened core performance requirements for the MCOs, including adding financial penalties for noncompliance. “These new contracts hold each organization accountable to meeting key performance measures to ensure high-quality care,” Cohen said.
State Rep. Donny Lambeth, R-Forsyth, a co-chairman of the health-care oversight committee, said last week that while it would be cumbersome to divvy up the Cardinal counties “to other MCO who would absorb these services … it can be done.” Counties can request, during a relatively brief period each year, to switch MCOs with the state health secretary’s permission. Three county managers — Dudley Watts of Forsyth, Lance Metzler of Rockingham and Rick Morris of Stokes — said last week that their respective boards of commissioner have not discussed contingency plans in preparation for any action by Cohen on Cardinal. Krawiec said the executive-compensation information about Cardinal is “very disappointing and disturbing.” “While Cardinal has obviously shown us how health services can be delivered at a cost savings, those savings have led to lavish expenditures by Cardinal,” she said. “Instead of returning the savings back into improving the system and providing for those in need, the funds have been spent in a very irresponsible manner.”
Oh, to have been a fly on the wall, during Tuesday’s Board of Directors meeting at Cardinal… We will definitely need to request the meeting minutes!
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.
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
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.
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 health Dentist 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).
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.