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.
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.
A recent State Auditor report found that DHHS “had approximately 2,500 non-competitively bid contracts with a value of approximately $2.4 billion between state fiscal year 2012 through 2014. The value of the no-bid contracts accounts for more than 32% of all contracts during the same period.”
No bid contracts are exactly that – the company awarded the contract received the contract without competition, or a bid process. Think of a no bid contract as a try out for a professional football team, but only one person is trying out. Generally, competition breeds better results because people try harder when they compete, rather than a solo act.
In contract bidding, rivalry also breeds a lower contract price. It’s only logical. If you know that other companies are submitting bids, you are going to submit the lowest number possible.
So how is DHHS allowed to award no bid contracts?
NC Statute dictates that the AG or the AG’s attorney shall review “all proposed contracts for supplies, materials, printing, equipment, and contractual services that exceed one million dollars…” as of June 27, 2011. See NCGS 114-8.3 as amended by Session Law 2011-326 and Session Law 2013-234.
But – Per 09 NCAC 06B .0901, “…competition may be limited or waived where a factual basis demonstrates support of one or more of the conditions set forth in Paragraph (b) of this Rule. If the procurement is within a purchasing agency’s general delegation, then the purchasing agency may waive competition in conformance with this Rule. If the procurement is greater than the agency’s delegation, requests for limited or waived competition shall be submitted to the State CIO for approval.”
Here are the exceptions found in 09 NCAC 06B.0901(b):
(b) Competition may be limited or waived under the following conditions:
- Competition is not available;
- A needed product or service is available from only one source of supply;
- Emergency action is indicated;
- Competition has been solicited but no responsive offers have been received;
- Standardization or compatibility is the overriding consideration;
- A donation stipulates the source of supply;
- Personal or particular professional services are required;
- A product or service is needed for a person with disabilities and there are overriding considerations for its use;
- Additional products or services are needed to complete an ongoing job or task;
- A particular product or service is desired for educational, training, experimental, developmental or research work;
- Equipment is already installed, connected and in service, and it is determined advantageous to purchase it;
- Items are subject to rapid price fluctuation or immediate acceptance;
- There is evidence of resale price maintenance or other control of prices or collusion on the part of persons or entities that thwarts normal competitive procedures unless otherwise prohibited by law;
- A purchase is being made and a price is available from a previous contract;
- The requirement is for an authorized cooperative project with another governmental unit(s) or a charitable non-profit organization(s); or
- A used item is available on short notice and subject to prior sale.
Did all the no bid contracts that DHHS procured between state fiscal year 2012 through 2014 to equal approximately $2.4 billion fit within 1 or more of the above referenced exceptions?
At least, according to the State Auditor – No.
Here are the key findings of the State Auditor’s Report:
- Many no-bid contracts lacked required review and approval to protect state interests
- Many no-bid contracts lacked documentation of negotiations to improve pricing or terms
- Many no-bid contracts lacked adequate written justification to waive competition, which increases the risk of favoritism, unfavorable terms, and poor performance
It appears that DHHS failed this audit. Should we extrapolate?
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.
Last week I traveled to Houston, Dallas, and Denver to meet with other health care attorneys of Gordon & Rees. It was a great trip and I met some wonderful colleagues. But I was happy to get home to my family, including our new addition of 9 peacock eggs.
Yes, 9 peacock eggs!!
Here is a pic:
(I know that there are 10 eggs in the picture, but we will not talk about the 10th. Just know that we have high hopes that the other 9 are viable and survive!! As of today, at 1:00 pm, all 9 eggs are chirping, but no cracks yet!!)
Oh, and, before I forget…Watch ABC news tonight. I was interviewed for a story about one of my clients.
Anyway, while I was gone, I was unable to post a blog regarding the State Auditor’s most recent audit report regarding Eastpointe. So here it is…
As the managed care organizations (MCOs) continue to accuse health care providers of fraud, waste, and abuse (FWA), it seems from a recent State Auditor report that, at least, one of the MCOs itself is guilty of the very accusation that they are alleging against providers. See blog. And blog.
There is an old story:
A wolf, passing by, saw some shepherds in a hut eating for their dinner a haunch of mutton. Approaching them, he said: What a clamor you would raise, if I were to do as you are doing!
Men are too apt to condemn in others the very things they practice themselves
The audit findings beg the questions…Is it only Eastpointe? Or all 9 MCOs? How much Medicaid money is lining the pockets of MCO executives, instead of paying for medically necessary services for Medicaid recipients? Beth Wood only audited Eastpointe. Is this only the tip of the iceberg?
According to our State Auditor, Eastpointe former executive has lined his pockets with $547,595+…
Here are the key findings from the NC State Auditor’s report regarding Eastpointe:
- Former CFO facilitated apparent kickbacks totaling $547,595 from two Eastpointe contractors
- Former CFO purchased three vehicles totaling $143,041 without a documented business purpose
- Former CFO purchased $18,600 of equipment for personal use
- Former CFO, Chief Executive Officer (CEO), and other employees used Eastpointe credit cards to make $157,565 of questionable purchases
- Inadequate CEO and area board oversight contributed to operational failures
Eastpointe is one of 9 MCOs in NC charged with managing and supervising Medicaid behavioral health care services. So what do we do when the entity IN CHARGE of managing Medicaid money is mismanaging tax dollars???
Where is the supervision??
Over the last few years, since the MCOs went live across the state, I have seen the MCOs terminate Medicaid providers for no cause, claim providers owed money, penalties, plans of corrections (POC), and/or refuse to contract with providers for reasons as silly as:
- Failing to put shoes on a paraplegic (no feet), because the assessment included that the patient required help dressing;
- Using green ink (a personal favorite) on a service note;
- Having signatures on service notes that are difficult to read (so the auditors assume that the person doesn’t have the correct licenses).
Here, we have the State Auditor finding that Eastpointe’s former CFO unilaterally hired two contractors to improve Eastpointe’s building (paid for with Eastpointe’s funding), but the former CFO accepting over half a million dollars. This is no green ink! This is no insignificant finding!!
What is Eastpointe’s funding?
As you can see, 72.7% of Eastpointe’s funding is pure Medicaid money. When Eastpointe’s former CFO received $547,595 in kickbacks, 72%, or $394,268.40, should have been used to provide Medicaid behavioral health care services.
These are our tax dollars, people!! These are our tax dollars budgeted to aid our most needy population with behavioral health care services!! These are our tax dollars budgeted to provide psychiatric services, substance abuse services, and services for those with developmental disabilities!!!!
Our State Auditor states in her report, “The former CFO may have violated several state laws including fraud, misrepresentation, and obtaining property by false pretenses.”
Let’s look at a couple of those statutes that may have been violated:
42 U.S. Code § 1320a–7b imposes criminal penalties for acts involving Federal health care programs, and federal dollars pay a portion of our Medicaid program.
North Carolina General Statute § 14-234 states: “No public officer or employee who is involved in making or administering a contract on behalf of a public agency may derive a direct benefit from the contract except as provided in this section, or as otherwise allowed by law.”
The question becomes was the former CFO of Eastpointe, at the time of the receipt of kickbacks a “public officer” or “employee who is involved in making or administrating a contract on behalf of a public agency?” I believe the answer is yes, at least as to the latter.
Here is the point in this blog that my personal views will be aired. I find the former CFO’s behavior significantly opprobrious and reprehensible.
Here we have an MCO which is in charge of behavioral health care for our most vulnerable and needy populations…not just those in poverty, but those in poverty suffering from mental illness, substance abuse, and/or developmental disabilities (MH/SA/DD). Obviously, those Medicaid recipients suffering from MH/SA/DD will not have the means to hire a private attorney to defend their interests. When they receive denials for authorizations or reductions in services, they are defenseless. Sure, some children have strong advocate parents, but, on the whole, those suffering from MH/SA/DD have little to no advocates.
Juxtapose someone sitting in the role of a CFO…a chief financial officer of a company. Think he or she can hire a private attorney?? Think he or she has advocates or means to hire advocates??
How can someone in power abuse that power to the detriment of the under-privileged and sleep at night? I find the State Auditor’s audit findings repugnant beyond comprehension.
We are left with a former CFO who may or may not have committed criminal activity, but, who, at least according to the State Auditor, has received kickbacks. We are left with questions.
Is it only Eastpointe? Or all 9 MCOs? How much Medicaid money is lining the pockets of MCO executives, instead of paying for medically necessary services for Medicaid recipients? Will there be justice?
We can only hope that this audit is a catalyst to consequences.
New State Auditor report investigates the Office of Medicaid Management Information Systems Services (OMMISS) within the North Carolina Department of Health and Human Services (DHHS).
With DHHS’ emphasis on detecting health care providers’ fraud, waste, and abuse (FWA) across the state, it seems ironic that its own agency is deemed guilty of wastefulness by our State Auditor. What’s that about glass houses……??
What exactly does OMMISS do? Well, for one, OMMISS works with Computer Sciences Corporation (CSC) regarding NCTracks. We all know how wonderfully NCTracks has operated since inception….See blog. And blog.
State Auditor Beth Wood finds:
At least $1.6 million wasted through excessive wages and commissions, unjustified overtime, and
holiday pay to ineligible employees
OMMISS Director engaged in or allowed nepotism
OMMISS Director received unauthorized compensatory time that may result in inflated retirement
Reports to General Assembly omitted at least $260,000 of overtime and compensatory time
Lack of adequate oversight of OMMISS despite findings in prior audit reports
Ok, so it took me a couple of days to free up some time to discuss the most recent Performance Audit by our State Auditor. This time of year is CRAZY! We had to get our daughter ready for the 4th grade, which entails buying an absurd amount of school supplies. Thank goodness we don’t have to do “back to school” clothes shopping, because she wears uniforms. Yesterday was her first day of school and, apparently, everything went well.
Now, I want to discuss the recent Performance Audit published by Beth Wood, our NC State Auditor, regarding provider eligibility. Prior to going any further, let me voice my opinion that Beth Wood as our State Auditor rocks. She is smart, courageous, and a force of nature. Any comment that may be negative in nature as to the most recent audit is NOT negative as to the audit itself, but to the possible consequences of such an audit. In other words, I do not believe that the Performance Audit as to Medicaid Provider Eligibility is incorrect; I am only concerned as to the possible consequences of such an audit on the Department of Health and Human Services (DHHS) and health care providers.
The Medicaid Provider Eligibility Performance Audit found that “deficiencies in the enrollment process increase the risk of unqualified providers participating in the Medicaid Program.”
And DHHS’ “enrollment review procedures do not provide reasonable assurance that only qualified providers are approved to participate in the NC Medicaid program.”
And “quality assurance reviews were not conducted or were ineffective.”
Basically, the Performance Audit (in layman’s terms) says that DHHS, again, has little to no oversight, lacks supervision over providers, has program deficiencies, and lacks the ability to manage Medicaid provider eligibility requirements adequately. Considering that DHHS is the single agency charged with managing Medicaid in North Carolina, the Performance Audit is yet another blow to the ability of DHHS to do its job.
Gov. McCrory appointed Sec. Aldona Wos as the head of DHHS, effective January 5, 2013. With Sec. Wos at its helm, DHHS has been riddled by the media with stories of management difficulties, high-level resignations, and mismanaged tax dollars. With the amount of media attention shining on DHHS, it is amazing that Sec. Wos has only been there almost a year and a half. Oh, how time flies.
While, again, I do not discount the accuracy of the Medicaid Provider Eligibility Performance Audit, I am fearful that it will spur DHHS to almost another “Salem witch hunt” extravaganza by pushing the already far-swung pendulum of attacks on providers, in the direction of more attacks. DHHS, through its contractors, agents and vendors, has increased its regulatory audits and heightened its standards to be compliant as a provider for a number of reasons:
1. The U. S. Supreme Court’s Olmstead case;
2. The DOJ settlement as to ACTT providers;
3. More oversight by CMS;
4. The ACA’s push for recovery audit contractors (RACs);
5. General need to decrease the Medicaid budget;
6. Increased fraud, waste, and abuse detection standards in the ACA;
7. Monetary incentives on managed care organizations (MCOs) to decrease the number of providers;
Imagine a pendulum swinging…or, better yet, imagine a child swinging on a swing. Before the child reaches the highest point of the swing, an adult runs behind the child and pushes the child even higher, in order to get a little more “umphf” on the swing. And the child goes even higher and squeals even more in excitement. But that’s not always a great idea. Sometimes the child goes flying off.
I am afraid that the Performance Audit will be that adult pushing the child on the swing. The extra little push…the extra little “umphf” to make the pendulum swing even higher.
As with any Performance Audit, DHHS is allowed to respond to Ms. Wood’s findings. One response is as follows:
“In September 2013, DMA established and implemented Management Monitoring Quality Controls (Monitoring Plan) for reviewing approval and denial decisions related to provider applications referred to it by the Contractor due to a potential concern. The Monitoring Plan established standardized policies and procedures and ensures that staff adheres to them in making enrollment determinations.”
In other words, recently DHHS has put forth a more aggressive oversight program as to health care providers and it will only get more aggressive.
In the last year or so, we have seen more aggressive oversight measures on health care provider that accept Medicaid. More audits, more desk reviews, more fraud investigation…and most (that I have seen) are overzealous and incorrect.
Believe me, I would be fine with increased oversight on health care providers, if the increased oversight was conducted correctly and in compliance with federal and state rules and regulations. But the audits and oversight to which I have been privy are over-bearing on providers, incorrect in the findings, and lacking much of due process for, much less respect to the providers.
I am concerned that the extra little “umphf” by this Performance Audit will impact health care providers’ decisions to accept or not to accept Medicaid patients. See my past blogs on the shortage of health care providers accepting Medicaid. “Shortage of Dentists Who Accept Medicaid: The Shortage Continues.” “Provider Shortage for Medicaid Recipients.” And “Prisons and Emergency Rooms: Our New Medicaid Mental Health Care Providers.”
Instead of increasing overzealous audits on health care providers, maybe we should require DHHS, through its contractors, agents, and vendors, to conduct compliant, considerate, and constitutionally-correct audits and oversight. Maybe the “umphf” should be applied more toward DHHS.
A new audit by the State Auditor shows ANOTHER problem at DHHS. This comes on the heels of another audit earlier this month finding that NCTracks is problematic.
Here is the link: State Audit
More commentary to come this evening when I have time to write about the tomfoolery occurring at DHHS