Category Archives: Medicaid Funds

NC State Auditor Finds Cardinal Expenditures Unreasonable!!(Finally) #Wastedtaxdollars

The NC State Auditor Beth Wood released an audit report on Cardinal Innovations yesterday, May 17, 2017. Here are the key findings. For the full report click here.

BACKGROUND

Cardinal is a Local Management Entity/Managed Care Organization (LME/MCO) created by North Carolina General Statute 122C. 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.

KEY FINDINGS

• Cardinal spent money exploring strategic opportunities outside of its core mission

• $1.2 million in CEO salaries paid without proper authorization

• Cardinal’s unreasonable spending could erode public trust

KEY RECOMMENDATIONS

• Cardinal should consult and collaborate with members of the General Assembly before taking any actions outside of its statutory boundaries

• The Office of State Human Resources should immediately begin reviewing and approving Cardinal CEO salary adjustments

• The Department of Health and Human Services should determine whether any Cardinal CEO salary expenditures should be disallowed and request reimbursement as appropriate

• Cardinal should implement procedures consistent with other LME/MCOs, state laws, and federal reimbursement policy to ensure its spending is appropriate for a local government entity

My favorite? Recoup CEO salaries. Maybe we should extrapolate.

Trump-caid: Medicaid Under the AHCA

It is still unclear whether the American Health Care Act (AHCA), or  H.R. 1628, will be signed into law. On March 6, 2017, the House Energy & Commerce Committee (E&C) and Ways & Means Committee (W&M) officially released the draft bill. The latest action was on April 6, 2017, H.Res.254 — 115th Congress (2017-2018) was placed on the House calendar. The rule provides for further consideration of H.R. 1628. The rule also provides that the further amendment printed Rules Committee Report 115-88 shall be considered as adopted.

So what exactly would AHCA change in relation to Medicaid?

For over fifty (50) years, states have created and implemented Medicaid programs entirely dependent on federal contributions. Medicaid is based on federal law. Although each individual state may have slight variances in the Medicaid program, because the state Medicaid programs must follow federal law, the state Medicaid programs are surprisingly similar. An example of a slight variance is that some Medicaid services are voluntary, like personal care services (PCS); some states offer PCS paid by Medicaid and others do not.

Currently, the federal government does not cap the federal contribution. However much a state spends – no matter how exorbitant – the federal government will match (at whatever percentage allotted for that state). For example, the federal government pays 66.2% of North Carolina’s Medicaid spending. Which means, BTW, that $264,800.00 of Cardinal’s CEO’s salary is funded by the federal government. These percentages are called Federal Medical Assistance Percentages (FMAP).

All this may change under the American Health Care Act (AHCA), or  H.R. 1628, as approved by the House Ways and Means, Energy and Commerce, Budget, and Rules Committees.

The AHCA proposes many changes from the Affordable Care Act (ACA) germane to Medicaid. In my humble opinion, some of the replacements are stellar; others are not. No one (sane and logical) could argue that the ACA was perfect legislation for providers, employers, or recipients. It was not. It mandated that employers pay for health care insurance for their employees, which caused the number of part-time workers to explode. The ACA mandated the states to suspend Medicaid reimbursements upon a credible allegation of fraud, which, basically, could be a disgruntled employee lying with an anonymous accusation. This provision put many providers out of business without due process (Remember New Mexico?). The ACA also put levers in place that meant younger policyholders were subsidizing older ones. Healthy, young adults were paying for older adults. The ACA reduced payments for Medicare Advantage plans, hospitals, and other providers to save money. There was also a provider shortage due to the low reimbursement rates and regulatory audits. The Affordable Care Act was anything but affordable. At least the American Health Care Act does not protest itself to be affordable.

Here are some of the most poignant “repeal and replace” items in Trump-caid:

1. Health Savings Accounts

The AHCA will encourage the use of Health Savings Accounts by increasing annual tax free contribution limits. It will also modify ACA premium tax credits for 2018-2019 to increase the amount for younger adults and to reduce the amount for older adults. In 2020, the AHCA will replace ACA income-based tax credits with flat tax credits adjusted for age. Eligibility for new tax credits phases out at income levels between $75,000 and $115,000.

2. Cap on federal contributions

Beginning in 2020, the AHCA would cap federal contributions to state Medicaid programs. This will result in huge federal savings, but cause severe shortages on the state level. The federal per-enrollee caps would be based on states’ Medicaid expenditures in 2016, trended forward to 2019. A uniform, federal capped system would provide fiscal security for the federal government and shift the risk of over spending on the states.

The following categories would be exempt from the per-capita allotments (i.e. paid for outside of the per-capita caps): DSH payments, administrative payments, individuals covered under CHIP Medicaid expansion program or who receive medical assistance from an IHS facility, breast and cervical cancer patients, and partial benefit-enrollees

With the risk on the states, there is a high probability that optional Medicaid services, such as PCS, may be cut from the budget. If PCS were eliminated, more patients would enter long-term care facilities and fewer patients would be able to remain in their homes. The House bill essentially eliminates the enhanced funding levels that made possible states’ expansion of Medicaid to their poorest working-age adult residents. In all, 31 states expanded Medicaid under the ACA. While the House Bill does not prohibit Medicaid expansion; expansion will be difficult to remain funded by the states.

medicaidexpansion2017

3. Presumptive eligibility program

The House bill would end the ACA’s special hospital presumptive eligibility program, under which hospitals can temporarily enroll patients who “appear” to be eligible and begin to get paid for their care while their full applications are pending. (What in the world does “appear to be eligible” mean. Is it similar to profiling?)

4. Home equity and eligibility

Under current law, states disregard the value of a home when determining Medicaid eligibility for an individual in need of long-term community-supported care.  The bill would take away this state flexibility, capping the equity value at $500,000.

5. Disproportionate Share Hospital Payments

The AHCA would repeal the Medicaid DSH reductions set in motion by the ACA in 2018 for non-expansion States, and 2020 for expansion states.

6. Section 1115 Waivers

States with Waivers will not be penalized for having a Waiver.  In other words, the expenses and payments under the Waiver will be treated in the same manner as if the state did not have a Waiver. However, if a state’s waiver contains payment limitations, the limitations in the new law, not the Waiver, apply.

Again, the future of the AHCA is uncertain. We all remain watchful. One change that I would like to see is that due process is afforded to providers prior to suspension of all funds when there is a credible allegation of fraud.

Darkness Surrounds MCO Mergers: Are Closed Meetings for MCOs Legal?

Recently, Eastpointe Human Services’ board voted unanimously to consolidate with Cardinal Innovations Healthcare, which would make the merged entity the managed care organization (MCO) overseeing 1/3 of NC’s Medicaid, behavioral health services – 32 counties, in all.

The Board’s decision is subject to the approval of the Secretary, but Eastpointe hopes to consolidate by July 1st.

Whether a consolidation between Eastpointe and Cardinal is good for Medicaid recipients and/or our community, I have no opinion.

But the reason that I have no opinion is because the negotiations, which all deal with public funds, have occurred behind closed doors.

Generally, it is our public policy that public bodies’ actions are to be conducted openly. This is why you can stroll on over to our courthouse and watch, virtually, any case be conducted.  There are rare cases in which the court will “seal” or close the record, such as to protect privileged health information or the identity of children.  Our public policy that strongly encourages open sessions for public entities exists for good reason.  As tax payers, we expect full disclosure and transparency as to how our tax dollars are being used.  In a way, all tax paying NC residents are shareholders of NC.  Those who spend our tax dollars owe us a fiduciary duty to manage our tax dollars in a reasonable and responsible manner, and we should be able to attend all board meetings and review all meeting minutes. The MCOs are the agents of the single state entity, Department of Health and Human Services (DHHS), charged with managing behavioral health care for the Medicaid and state-funded population suffering with mental health/developmentally disabled /substance abuse (MR/DD/SA) issues.  As an agent of the state, MCOs are public entities.

But, as I am researching the internet in search of Eastpointe and Cardinal board meeting minutes, I realize that the MCOs are initiating closed meetings and quoting N.C. Gen. Stat. § 143-318.11, ” Closed sessions” as the  basis for being able to conduct closed sessions.  And the number of closed sessions that I notice is not a small number.

The deliberations of a merger between two MCOs are highly important to the public. The public needs to know whether the board members are concerned about improving quality and quantity of care. Whether the deliberations surround a more inclusive provider network and providing more services to those in need. Whether the deliberations consider using public funds to create playgrounds or to fund more services for the developmentally disabled. Or are the board members more concerned with which executives will remain employed and what salaried are to be compensated?

You’ve heard of the saying, “Give him an inch and he’ll take a mile?”  This is what is going through my mind as I review the statute allowing public bodies to hold closed sessions.  Is the statute too open-ended? Is the closed session statute a legal mishandling that unintentionally, and against public policy, allows public meetings to act privately? Or are the MCOs misusing the closed session statute?

So I ask myself the following:

1. Is N.C. Gen. Stat. § 143-318.11 applicable to MCOs, or, in other words, can the MCOs conduct closed sessions? and, if the answer to #1 is yes, then

2. Are the MCOs overusing or misusing its ability to hold closed sessions? If the answer to #3 is yes, then

3. What can be done?

These are the three questions I will address in this blog.

Number one:

Is N.C. Gen. Stat. § 143-318.11 applicable to MCOs, or, in other words, can the MCOs conduct closed sessions?

According to the statute, “”public body” means any elected or appointed authority, board, commission, committee, council, or other body of the State, or of one or more counties, cities, school administrative units, constituent institutions of The University of North Carolina, or other political subdivisions or public corporations in the State that (i) is composed of two or more members and (ii) exercises or is authorized to exercise a legislative, policy-making, quasi-judicial, administrative, or advisory function.”

The MCOs are bodies or agents of the state that are composed of more than 2 members and exercises or is authorized to exercise administrative or advisory functions to the extent allowed by the Waivers.

I determine that, in my opinion, N.C. Gen. Stat. § 143-318.11 is applicable to the MCOs, so I move on to my next question…

Number two:

 Are the MCOs overusing or misusing its ability to hold closed sessions?

As public policy dictates that public bodies act openly, there are enumerated, statutory reasons that a public body may hold a closed session.

A public body may hold a closed session only when a closed session is required:

  1. “To prevent the disclosure of information that is privileged or confidential pursuant to the law of this State or of the United States, or not considered a public record within the meaning of Chapter 132 of the General Statutes.
  2. To prevent the premature disclosure of an honorary degree, scholarship, prize, or similar award.
  3. To consult with an attorney employed or retained by the public body in order to preserve the attorney-client privilege between the attorney and the public body, which privilege is hereby acknowledged. General policy matters may not be discussed in a closed session and nothing herein shall be construed to permit a public body to close a meeting that otherwise would be open merely because an attorney employed or retained by the public body is a participant. The public body may consider and give instructions to an attorney concerning the handling or settlement of a claim, judicial action, mediation, arbitration, or administrative procedure. If the public body has approved or considered a settlement, other than a malpractice settlement by or on behalf of a hospital, in closed session, the terms of that settlement shall be reported to the public body and entered into its minutes as soon as possible within a reasonable time after the settlement is concluded.
  4. To discuss matters relating to the location or expansion of industries or other businesses in the area served by the public body, including agreement on a tentative list of economic development incentives that may be offered by the public body in negotiations, or to discuss matters relating to military installation closure or realignment. Any action approving the signing of an economic development contract or commitment, or the action authorizing the payment of economic development expenditures, shall be taken in an open session.
  5. To establish, or to instruct the public body’s staff or negotiating agents concerning the position to be taken by or on behalf of the public body in negotiating (i) the price and other material terms of a contract or proposed contract for the acquisition of real property by purchase, option, exchange, or lease; or (ii) the amount of compensation and other material terms of an employment contract or proposed employment contract.
  6. To consider the qualifications, competence, performance, character, fitness, conditions of appointment, or conditions of initial employment of an individual public officer or employee or prospective public officer or employee; or to hear or investigate a complaint, charge, or grievance by or against an individual public officer or employee. General personnel policy issues may not be considered in a closed session. A public body may not consider the qualifications, competence, performance, character, fitness, appointment, or removal of a member of the public body or another body and may not consider or fill a vacancy among its own membership except in an open meeting. Final action making an appointment or discharge or removal by a public body having final authority for the appointment or discharge or removal shall be taken in an open meeting.
  7. To plan, conduct, or hear reports concerning investigations of alleged criminal misconduct.
  8. To formulate plans by a local board of education relating to emergency response to incidents of school violence or to formulate and adopt the school safety components of school improvement plans by a local board of education or a school improvement team.
  9. To discuss and take action regarding plans to protect public safety as it relates to existing or potential terrorist activity and to receive briefings by staff members, legal counsel, or law enforcement or emergency service officials concerning actions taken or to be taken to respond to such activity.”

Option 1 clearly applies, in part, to privileged health information (PHI) and such.  So I would not expect that little Jimmy’s Medicaid ID would be part of the board meeting issues, and, thus, not included in the minutes, unless his Medicaid ID was discussed in a closed session.

I cannot fathom that Option 2 would ever be applicable, but who knows?  Maybe Alliance will start giving out prizes…

I would assume that Option 3 is used most frequently.  But notice:

“General policy matters may not be discussed in a closed session and nothing herein shall be construed to permit a public body to close a meeting that otherwise would be open merely because an attorney employed or retained by the public body is a participant.”

Which means that: (1) the closed session may only be used to talk about specific legal strategies and not general policies.  For example, arguably, an MCO could hold a closed session to consult with its attorney whether to appeal a specific case, but not to discuss whether, generally, the MCO intends to appeal all unsuccessful cases.

and

(2) the MCO cannot call for a closed session “on the fly” and only because its attorney happens to be participating in the board meeting.

As I am rifling through random board meeting minutes, I notice the MCO’s attorney is always present.  Now, I say “always,” but did not review all MCO meeting minutes. There may very well be board meetings at which  the attorneys don’t attend. However, the attorney is present for the minutes that I reviewed.

Which begs the question…Are the MCOs properly using the closed sessions?

Then I look at Options 4, and 5, and 6, and 7, and 8, and 9…and I realize, Geez, according to one’s interpretation, the statute may or may not allow almost everything behind closed doors. (Well, maybe not 9).  But, seriously, depending on the way in which each Option is interpreted, there is an argument that almost anything can be a closed session.

Want to hold a closed session to discuss why the CEO should receive a salary of $400,000? N.C. Gen. Stat. § 143-318.11(5)(ii).

Want hold a closed session to discuss the anonymous tip claim that provider X is committing Medicaid fraud? N.C. Gen. Stat. § 143-318.11(7).

Want to hold a closed session to discuss how an MCO can position itself to take over the world? N.C. Gen. Stat. § 143-318.11(4).

In an atmosphere in which there is little to no supervision of the actions of the MCOs, who is monitoring whether the MCOs are overusing or misusing closed sessions?

Number three:

What can you do if you think that an MCO is holding closed sessions over and above what is allowed by N.C. Gen. Stat. § 143-318.11?

According to N.C. Gen. Stat. § 143-318.16A, “[a]ny person may institute a suit in the superior court requesting the entry of a judgment declaring that any action of a public body was taken, considered, discussed, or deliberated in violation of this Article. Upon such a finding, the court may declare any such action null and void. Any person may seek such a declaratory judgment, and the plaintiff need not allege or prove special damage different from that suffered by the public at large.”

Plus, according to N.C. Gen. Stat. § 143-318.16A, “[w]hen an action is brought pursuant to G.S. 143-318.16 or G.S. 143-318.16A, the court may make written findings specifying the prevailing party or parties, and may award the prevailing party or parties a reasonable attorney’s fee, to be taxed against the losing party or parties as part of the costs. The court may order that all or any portion of any fee as assessed be paid personally by any individual member or members of the public body found by the court to have knowingly or intentionally committed the violation; provided, that no order against any individual member shall issue in any case where the public body or that individual member seeks the advice of an attorney, and such advice is followed.”

 In sum, if you believe that an MCO is conducting a closed session for a reason not enumerated above, then you can institute a lawsuit and request attorneys’ fees if you are successful in showing that the MCO knowingly or intentionally committed the violation.

We should also appeal to the General Assembly to revise, statutorily, more narrowly drafted closed session exceptions.

NC DHHS’ New Secretary – Yay or Nay?

Our newly appointed DHHS Secretary comes with a fancy and distinguished curriculum vitae. Dr. Mandy Cohen, DHHS’ newly appointed Secretary by Gov. Roy Cooper, is trained as an internal medicine physician. She is 38 (younger than I am) and has no known ties to North Carolina. She grew up in New York; her mother was a nurse practitioner. She is also a sharp contrast from our former, appointed, DHHS Secretary Aldona Wos. See blog.

cohen

Prior to the appointment as our DHHS Secretary, Dr. Cohen was the Chief Operating Officer and Chief of Staff at the Centers for Medicare and Medicaid Services (CMS). Prior to acting as the COO of CMS, she was Principal Deputy Director of the Center for Consumer Information and Insurance Oversight (CCIIO) at CMS where she oversaw the Health Insurance Marketplace and private insurance market regulation. Prior to her work at CCIIO, she served as a Senior Advisor to the Administrator coordinating Affordable Care Act implementation activities.

Did she ever practice medicine?

Prior to acting as Senior Advisor to the Administrator, Dr. Cohen was the Director of Stakeholder Engagement for the CMS Innovation Center, where she investigated new payment and care delivery models.

Dr. Cohen received her Bachelor’s degree in policy analysis and management from Cornell University, 2000. She obtained her Master’s degree in health administration from Harvard University School of Public Health, 2004, and her Medical degree from Yale University School of Medicine, 2005.

She started as a resident physician at Massachusetts General Hospital from 2005 through 2008, then was deputy director for comprehensive women’s health services at the Department of Veterans Affairs from July 2008 through July 2009. From 2009 through 2011, she was executive director of the Doctors for America, a group that promoted the idea that any federal health reform proposal ought to include a government-run “public option” health insurance program for the uninsured.

Again, I was perplexed. Did she ever practice medicine? Does she even have a current medical license?

This is what I found:

physicianprofile

It appears that Dr. Cohen was issued a medical license in 2007, but allowed it to expire in 2012 – most likely, because she was no longer providing medical services and was climbing the regulatory and political ladder.

From what I could find, Dr. Cohen practiced medicine (with a fully-certified license) from June 20, 2007, through July 2009 (assuming that she practiced medicine while acting as the deputy director for comprehensive women’s health services at the Department of Veterans Affairs).

Let me be crystal clear: It is not my contention that Dr. Cohen is not qualified to act as our Secretary to DHHS because she seemingly only practiced medicine (fully-licensed) for two years. Her political and policy experience is impressive. I am only saying that, to the extent that Dr. Cohen is being touted as a perfect fit for our new Secretary because of her medical experience, let’s not make much ado of her practicing medicine for two years.

That said, regardless Dr. Cohen’s practical medical experience, anyone who has been the COO of CMS must have intricate knowledge of Medicare and Medicaid and the essential understanding of the relationship between NC DHHS and the federal government. In this regard, Cooper hit a homerun with this appointment.

Herein lies the conundrum with Dr. Cohen’s appointment as DHHS Secretary:

Is there a conflict of interest?

During Cooper’s first week in office, our new Governor sought permission, unilaterally, from the federal government to expand Medicaid as outlined in the Affordable Care Act. This was on January 6, 2017.

To which agency does Gov. Cooper’s request to expand Medicaid go? Answer: CMS. Who was the COO of CMS on January 6, 2017? Answer: Cohen. When did Cohen resign from CMS? January 12, 2017.

On January 14, 2017, a federal judge stayed any action to expand Medicaid pending a determination of Cooper’s legal authority to do so. But Gov. Cooper had already announced his appointment of Dr. Cohen as Secretary of DHHS, who is and has been a strong proponent of the ACA. You can read one of Dr. Cohen’s statements on the ACA here.

In fact, regardless your political stance on Medicaid expansion, Gov. Cooper’s unilateral request to expand Medicaid without the General Assembly is a violation of NC S.L. 2013-5, which states:

SECTION 3. The State will not expand the State’s Medicaid eligibility under the Medicaid expansion provided in the Affordable Care Act, P.L. 111-148, as amended, for which the enforcement was ruled unconstitutional by the U.S. Supreme Court in National Federation of Independent Business, et al. v. Sebelius, Secretary of Health and Human Services, et al., 132 S. Ct. 2566 (2012). No department, agency, or institution of this State shall attempt to expand the Medicaid eligibility standards provided in S.L. 2011-145, as amended, or elsewhere in State law, unless directed to do so by the General Assembly.

Obviously, if Gov. Cooper’s tactic were to somehow circumvent S.L. 2013-5 and reach CMS before January 20, 2017, when the Trump administration took over, the federal judge blockaded that from happening with its stay on  January 14, 2017.

But is it a bit sticky that Gov. Cooper appointed the COO of CMS, while she was still COO of CMS, to act as our Secretary of DHHS, and requested CMS for Medicaid expansion (in violation of NC law) while Cohen was acting COO?

You tell me.

I did find an uplifting quotation from Dr. Cohen from a 2009 interview with a National Journal reporter:

“There’s a lot of uncompensated work going on, so there has to be a component that goes beyond just fee-for service… But you don’t want a situation where doctors have to be the one to take on all the risk of taking care of a patient. Asking someone to take on financial risk in a small practice is very concerning.” -Dr. Mandy Cohen

Managed Care – Eight Reasons Why MCOs Smell Like Pre-Minced Garlic

When it comes to the managed care organizations (MCOs) in NC, something smells rancid, like pre-minced garlic. When I first met my husband, Scott, I cooked with pre-minced garlic that comes in a jar. I figured it was easier than buying fresh garlic and dicing it myself. Scott bought fresh garlic and diced it. Then he asked me to smell the fresh garlic versus the pre-minced garlic. There was no contest. Next to the fresh garlic, the pre-minced garlic smelled rancid. That is the same odor I smell when I read information about the MCOs – pre-minced garlic in a jar.

garlic minced-garlic

In NC, MCOs are charged with managing Medicaid funds for behavioral health care, developmentally disabled, and substance abuse services. When the MCOs were initially created, we had 13. These are geographically situated, so providers and recipients have no choice with which MCO to interact. If you live in Sandhills’ catchment area, then you must go through Sandhills. If you provide services in Cardinal’s catchment area, then you must contract with Cardinal – even though you already have a provider participation agreement with the State of NC to provide Medicaid services in the State of NC.

Over the years, there has been consolidation, and now we have 7 MCOs.

newestmco

From left to right: Smoky Mountain (Duke blue); Partners Behavioral Health (Wake Forest gold); Cardinal Innovations Healthcare (ECU purple); Sandhills (UNCC green); Alliance Behavioral Healthcare (mint green); Eastpointe (Gap Khaki); and Trillium (highlighter yellow/green).

Recently, Cardinal (ECU purple) and Eastpointe (Gap khaki) announced they will consolidate, pending authorization from the Secretary of DHHS. The 20-county Cardinal will morph into a 32-county, MCO giant.

Here is the source of the rancid, pre-minced, garlic smell (in my opinion):

One – MCOs are not private entities. MCOs are prepaid with our tax dollars. Therefore, unlike Blue Cross Blue Shield, the MCOs must answer to NC taxpayers. The MCOs owe a duty of financial responsibility to taxpayers, just like the state government, cities, and towns.

Two – Cardinal CEO, Richard Topping, is paid $635,000, plus he has a 0 to 30 percent bonus potential which could be roughly another $250,000, plus he has some sort of annuity or long-term package of $412,000 (with our tax dollars).

Three – Cardinal is selling or has sold the 26 properties it owns or owned (with our tax dollars) to lease office space in the NASCAR Plaza office tower in uptown Charlotte for $300 to $400 per square foot plus employee parking (with our tax dollars).

Four – Cardinal charges 8% of public funds for its administrative costs. (Does that include Topping’s salary and bonuses?) How many employees are salaried by Cardinal? (with our tax dollars).

Five – The MCOs are prepaid. Once the MCOs receive the funds, the funds are public funds and subject to fiscal scrutiny. However, the MCOs keep whatever funds that it has at the end of the fiscal year. In other words, the MCOs pocket any money that was NOT used to reimburse a provider for a service rendered to a Medicaid recipient. Cardinal – alone – handles around $2.8 billion in Medicaid funding per year for behavioral health services. The financial incentive for MCOs? Terminate providers and reduce/deny services.

Six – MCOs are terminating providers and limiting access to care. In my law practice, I am constantly defending behavioral health care providers that are terminated from an MCO catchment area without cause or with erroneous cause. For example, an agency was terminated from their MCO because the agency had switched administrative offices without telling the MCO. The agency continued to provide quality services to those in need. But, because of a technicality, not informing the MCO that the agency moved administrative offices, the MCO terminated the contract. Which,in turn, puts more money in the MCO’s pocket; one less provider to pay.  Is a change of address really a material breach of a contract? Regardless – it is an excuse.

Seven – Medicaid recipients are not receiving medically necessary services. Either the catchment areas do not have enough providers, the MCOs are denying and reducing medically necessary services, or both. Cardinal cut 11 of its state-funded services. Parents of disabled, adult children write to me, complaining that their services from their MCO have been slashed for no reason….But the MCOs are saving NC money!

Eight – The MCOs ended 2015 with a collective $842 million in the bank. Wonder how much money the MCOs have now…(with our tax dollars).

Rancid, I say. Rancid!

Another Win! 12 Million Dollar Recoupment Reduced to $896 – But There is a Twist

One of our clients in New Mexico had an alleged Medicaid recoupment of over $12 million!! Actually, $12,015,850.00 – to be exact. (See below). After we presented our evidence and testimony, the Judge found that we owe $896.35. I call that a win!

In this case, the Human Services Department (HSD) in New Mexico had reviewed 150 random claims. Initially, HSD claimed that 41 claims out of 150 were noncompliant.

fullsizerender-jpg

But, prior to the hearing, we saved over $10 million by pointing out HSD’s errors and/or by providing additional documentation.

And then the ALJ’s decision after we presented our evidence and testimony –

penultimatefullsizerender-jpg-3

Boom! Drop the mike…

…………………………….not so fast…

……………………………………………..picking the mike back up…

You see, in New Mexico, the administrative law judges (ALJs) cannot render decisions. Look in the above picture. You see where it reads, “Recommendation?” That is because the ALJs in New Mexico can only render recommendations.

Because Medicaid has a “single state agency” rule; i.e., that only one agency may render discretionary decisions regarding Medicaid, and HSD is the single state agency in New Mexico charged with managing Medicaid, only HSD may render a discretionary decision. So in NM, the ALJ makes a recommendation and then the Secretary of HSD has the choice to either accept or reject the decision.

Guess whether HSD accepted or rejected the ALJ’s recommendation?

reject

Now we will have to appeal the Agency’s Decision to overturn the ALJ recommendation.

Here, in NC, we obtained a waiver from the Centers of Medicare and Medicaid Services (CMS) to allow our ALJs to render Decisions. See blog.

I still consider this a win.

The Feds Criminally Investigating DHHS! Is Its Scope Too Narrow and What Are Possible Consequences?

DHHS is under criminal investigation by the federal government for allegedly overpaying employees without a bid process, and, simply, mismanaging and overspending our Medicaid tax dollars. See blog.

When I first started writing this blog, I opined that the federal investigation should be broadened. While I still believe so, the results of broadening the scope of a federal investigation could be catastrophic for our Medicaid providers and recipients. So I am metaphorically torn between wanting to shine light on tax payer waste and wanting to shield NC Medicaid providers and recipients from the consequences of penalties and sanctions on NC DHHS. Because, think about it, who would be harmed if NC lost federal funding for Medicaid?

[BTW, of note: These subpoenas were received July 28, 2015. Aldona Wos announced her resignation on August 5, 2015, after receipt of subpoenas. The Subpoenas demand an appearance on August 18, 2015, which, obviously, has already passed, yet we have no intel as to the occurrences on August 18, 2015. If anyone has information, let me know.]

Let’s explore:

Does this criminal investigation go far enough? Should the feds investigate more Medicaid mismanagement over and above the salaries of DHHS employees? What are the potential consequences if NC is sanctioned for violating Medicaid regulations? How could a sanction affect providers and recipients?

DHHS’ employees are not the only highly compensated parties when it comes to our Medicaid dollars! It is without question that the contracts with vendors with whom DHHS contracts contain astronomically high figures. For example, DHHS hired Computer Sciences Corporation (CSC) to implement the NCTracks software for $265 million. Furthermore, there is no mention of the lack of supervision of the managed care organizations (MCOs) and the compensation for executives of MCOs being equal to that of the President of the United States in the Subpoenas.

The subpoenas are limited in scope as to documents related to hiring and the employment terms surrounding DHHS employees. As I just said, there is no mention of violations of bid processes for vendors or contractors, except as to Alvarez & Marsal, and nothing as to the MCOs.

Specifically, the subpoena is requesting documents germane to the following:

  • Les Merritt, a former state auditor who stepped down from the North Carolina State Ethics Commission after WRAL News raised questions about potential conflicts of interest created by his service contract with DHHS;
  • Thomas Adams, a former chief of staff who received more than $37,000 as “severance” after he served just one month on the job;
  • Angie Sligh, the former director of the state’s upgraded Medicaid payment system who faced allegations of nepotism and the waste of $1.6 million in payments to under-qualified workers for wages, unjustified overtime and holiday pay in a 2015 state audit;
  • Joe Hauck, an employee of Wos’ husband who landed a lucrative contract that put him among the highest-paid workers at DHHS;
  • Alvarez & Marsal, a consulting firm overseeing agency budget forecasting under a no-bid contract that has nearly tripled in value, to at least $8 million;

See WRAL.com.

Possible penalties:

Most likely, the penalties imposed would be more civil in nature and encompass suspensions, recoupments, and/or reductions to the federal matching. Possibly a complete termination of all federal matching funds, at the worst.

42 CFR Part 430, Subpart C – of the Code of Federal Regulations (CFR) covers “Grants; Reviews and Audits; Withholding for Failure To Comply; Deferral and Disallowance of Claims; Reduction of Federal Medicaid Payments”

The Center for Medicare and Medicaid Services (CMS) is charged with the oversight of all 50 states’ management of Medicaid, which makes CMS very busy and with solid job security.

“The Department’s Office of Inspector General (OIG) periodically audits State operations in order to determine whether—(1) The program is being operated in a cost-efficient manner; and
(2) Funds are being properly expended for the purposes for which they were appropriated under Federal and State law and regulations.” 42 CFR 430.33.

CMS may withhold federal funding, although reasonable notice and opportunity for a hearing is required (unlike the reimbursement suspensions from providers upon “credible” (or not) allegations of fraud).

If the Administrator of a hearing finds North Carolina non compliant with federal regulations, CMS may withhold, in whole or in part, our reimbursements until we remedy such deficiency. Similar to health care providers’ appeals, if the State of North Carolina is dissatisfied with the result of the hearing, NC may file for Judicial Review. Theoretically, NC could go all the way to the U.S. Supreme Court.

Other penalties could include reductions of (1) the Federal Medical Assistance Percentage; (2) the amount of State expenditures subject to FFP; (3) the rates of FFP; and/or (4) the amount otherwise payable to the state.

As a reminder, the penalties listed above are civil penalties, and NC is under criminal investigation; however, I could not fathom that the criminal penalties would differ far from the civil allowable penalties. What are the feds going to do? Throw Wos in jail? Highly unlikely.

The subpoena was addressed to:

subpoena

NC DHHS, attention the Custodian of Records. In NC, public records requests go to Kevin V. Howell, Legal Communications Coordinator, DHHS.

But is the federal government’s criminal investigation of DHHS too narrow in scope?

If we are investigating DHHS employees’ salaries and bid processes, should we not also look into the salaries of DHHS’ agents, such as the salaries for employees of MCOs? And the contracts’ price tags for DHHS vendors?

Turning to the MCOs, who are the managers of a fire hose of Medicaid funds with little to no supervision, I liken the MCOs’ current stance on the tax dollars provided to the MCOs as the Lion, who hunted with the Fox and the Jackal from Aesop’s Fables.

The Lion went once a-hunting along with the Fox, the Jackal, and the Wolf. They hunted and they hunted till at last they surprised a Stag, and soon took its life. Then came the question how the spoil should be divided. “Quarter me this Stag,” roared the Lion; so the other animals skinned it and cut it into four parts. Then the Lion took his stand in front of the carcass and pronounced judgment: The first quarter is for me in my capacity as King of Beasts; the second is mine as arbiter; another share comes to me for my part in the chase; and as for the fourth quarter, well, as for that, I should like to see which of you will dare to lay a paw upon it.”

“Humph,” grumbled the Fox as he walked away with his tail between his legs; but he spoke in a low growl:

Moral of Aesop’s Fable: “You may share the labours of the great, but you will not share the spoil.”

At least as to DHHS employees’ salaries, the federal government is investigating any potential mismanagement of Medicaid funds due to exorbitant salaries, which were compensated with tax dollars.

Maybe this investigation is only the beginning of more forced accountability as to mismanaging tax dollars with Medicaid administrative costs.

One can hope…(but you do not always want what you wish for…because the consequences to our state could be dire if the investigation were broadened and non compliance found).

Possible Ramifications:

Let us quickly contemplate the possible consequences of any of the above-mentioned penalties, whether civil or criminal in nature, on Medicaid recipients.

To the extent that you believe that the reimbursement rates are already too low, that medically necessary services are not being authorized, that limitations to the amount services are being unduly enforced…Imagine that NC lost our federal funding completely. We would lose approximately 60% of our Medicaid budget.

All our “voluntary” Medicaid-covered services would, most likely, be terminated. Personal care services (PCS) is an optional Medicaid-covered service.

With only 40% of our Medicaid budget, I could not imagine that we would have much money left to pay providers for services rendered to Medicaid recipients after paying our hefty administrative costs, including overhead,payroll, vendor contracts, MCO disbursements, etc. We may even be forced to breach our contracts with our vendors for lack of funds, which would cause us to incur additional expenses.

All Medicaid providers could not be paid. Without payments to providers, Medicaid recipients would not receive medically necessary services.

Basically, it would be the next episode of “Fear the Walking Dead.”

Hopefully, because the ramifications of such penalties would be so drastic, the federal government will not impose such sanctions lightly. Sanctions of such magnitude would be a last resort if we simply refused to remedy whatever deficiencies are found.

Otherwise, it could be the zombie apocalypse, but the Lion’s would be forced to share.

State Auditor Finds Robeson County School NOT Using Medicaid Money

Our State Auditor Beth Wood’s most recent audit finds that The Public Schools of Robeson County failed to spend approximately $1 million in Medicaid dollars intended for special needs children in schools!!

See audit report.

“The Public Schools of Robeson County (School District) did not use approximately $1 million per year in Medicaid administrative reimbursements to provide required services to students with disabilities. The School District missed this opportunity to better serve students with disabilities because it was unaware of a contractual requirement to use the Medicaid reimbursements to provide required services.

Over the last three years, the School District reported that it used $26,780 out of $3.16 million in Medicaid administrative reimbursements to provide services to students with disabilities.

The amounts reportedly spent each year are as follows:

• $ 8,969 out of $1,010,397 (0.89%) in 2013

• $12,043 out of $872,299 (1.38%) in 2012

• $ 5,768 out of $1,278,519 (0.45%) in 2011”

The question that I have after reading the audit report is…WHERE IS THE MONEY?

Was this $1 million given to the school system and spent on items other than services for children? Is the school district sitting on a surplus of money that was unspent? Or was this amount budgeted to the school system and the remainder or unspent money is sitting in our state checking account?

To me, it is relatively unclear from the audit report which of the above scenarios is an accurate depiction of the facts.  If anyone knows, let me know.

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

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

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

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

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

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

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

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

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

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

Cardinals budget

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

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

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

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

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

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

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

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

Hence, Medicaid.

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

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

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

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

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

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

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

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

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

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

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

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

New Contact Information at Gordon & Rees

All, Here is my new contact information
 

Knicole C. Emanuel   | Partner
GORDON & REES LLP
3737 Glenwood Avenue, Suite 100
Raleigh, NC 27612 

D: 919-573-6037 |  P: 919-787-4555  |  C: 919-219-9319  |  F: 919-741-5840
 
Arizona • Alabama • California  • Colorado • Connecticut  •  Florida • Georgia • Illinois
Maryland • Missouri • Nevada • New Jersey • New York • North Carolina  • Oregon • Pennsylvania
South Carolina  •  South Dakota  •  Texas  •  Virginia  •  Washington  • Washington, D.C.