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…
As if South Carolina didn’t have enough issues with the recent flooding, let’s throw in some allegations of Medicaid fraud against the health care providers. I’m imagining a provider under water, trying to defend themselves against fraud allegations, while treading water. It’s not a pretty picture.
Flash floods happen fast, as those in SC can attest.
So, too, do the consequences of allegations.
Shakespeare is no stranger to false accusations. In Othello, Othello is convinced that his wife is unfaithful, yet she was virtuous. In Much Ado About Nothing, Claudio believes Hero to be unfaithful and slanders her until her death. Interestingly, neither Othello and Claudio came to their respective opinions on their own. Both had a persuader. Both had a tempter. Both had someone else whisper the allegations of unfaithfulness in their ears and both chose to believe the accusation with no independent investigation. So too are accusations of Medicaid/care fraud so easily accepted without independent investigation.
With the inception of the Affordable Care Act (ACA), We have seen a sharp uptick on accusations of credible allegations of fraud. See blog for the definition of credible allegation of fraud.
The threshold for credible allegation of fraud incredibly low. A mere accusation from a disgruntled employee, a mere indicia of credibility, and/or even a computer data mining program can incite an allegation of fraud. Hero was, most likely, committing Medicare/acid fraud too.
The consequences of being accused of fraud is catastrophic for a health care provider regardless whether the accusation is accurate. You are guilty before proving your innocence! Your reimbursements are immediately suspended! Your entire livelihood is immediately crumbled! You are forced to terminate staff! Assets can be seized, preventing you even the ability to hire an attorney to defend yourself!
I have seen providers be accused of credible allegations of fraud and the devastation that follows. In New Mexico. In North Carolina. See documentary. Many NC providers serve SC’s population as well. The Medicaid reimbursement rates are higher in SC.
Obviously, The ACA is nationwide, federal law. Hence, the increase in allegations/accusations of health care fraud is nationwide.
Recently, South Carolina health care providers have been on the chopping block. Othello and Claudio are in the house of Gamecocks!
South Carolina’s single state agency, DHHS, required Medicaid recipients to get a 2nd prior approval before receiving health care services for “rehabilitative behavioral health” services, such as behavioral health care services for substance abuse and mental illness (could you imagine the burden if this were required here in NC?).
Then, last year, SC DHHS eliminated such 2nd prior approval requirement.
With fewer regulations and red tape in which to maneuver, SC saw a drastic uptick of behavioral health care services. Othello and Claudio said, “Fraud! More services with only one prior approval must be prima fracie fraud!”
Hence, behavioral health care providers in SC are getting investigated. But, mind you, during investigations reimbursements are suspended. You say, “Well, Knicole, how will these health care provider agencies afford to defend themselves without getting paid?” “Good question,” I say. “They cannot unless they have a stack of cash on hand for this exact reason.”
“What should these providers do?” You ask.
Hire an attorney and seek an injunction lifting the suspension of payments during the investigation.
Turn a Shakespearean tragedy into a comedy! Toss in a dingy!
Judges have lifted the suspensions. Read the case excerpt below:
As you can read in the above-referenced case, despite 42 455.23(a) mandating a suspension of payments upon credible allegations of fraud, this Judge found that the state failed to carefully weigh the evidence before suspending all payments.
There are legal remedies!!
Our Medicaid Budget Does More Than Allocate Money; It Places the Burden of Proof on Medicaid Providers!!!
Are you a health care provider in NC? Are you wonderful enough to help Medicaid patients but accept low Medicaid reimbursements? Are you dedicated to helping our most needy? Well, guess what???? YOU now have the burden of proof if you disagree with an adverse determination by the State.
That’s right. The newly-enacted state budget quietly changes the statutes and shifts the burden of proof from the Department to YOU. I am reminded of my Grandpa Carson. Whenever he couldn’t believe what he just heard, he would bellow, “Wooooo weee.” Growing up in the south, we have certain sayings, such as “Bless your heart,” “Y’all come back now, ya hear?” and “That food is so good I could slap my momma.” My Grandpa Carson, God rest his soul, was as southern as southern can get. If he were here and heard about the burden shift onto the providers, he would say, “Wooo weeeee.”
Last week while I was on my first week-long vacation in 2 years, the North Carolina state budget, known as Session Law 2014-100, was signed into law by Governor McCrory. (Which is why I missed a week of blogging…my vacation, not McCrory’s signature). Since I was at my family reunion started by my Grandpa, I am dedicating this blog to my grandpa, Nat Carson, who created a family tradition that has lasted for over 40 years. Our (huge) extended family vacation together once a year at Emerald Isle for a family reunion. FOUR generations attend!
Going back to the budget…
An “adverse determination” in this case includes decisions by North Carolina’s Department of Health and Human Services (DHHS) under the Medicaid program such as the Department’s termination of a contract with the provider, a Managed Care Organization’s (MCO) termination of a provider contract, or the Department or one its many vendors determines that the providers owes an overpayment back to the state.
Not only does the state budget shift the burden of proof onto providers when they contest an adverse determination by the State, which we will discuss more below, but it also takes a lot of DHHS decision-making power away. It is apparent that the General Assembly does NOT think DHHS can do its job of managing Medicaid and creating Medicaid reform competently. The General Assembly (GA) has decided that, for whatever reason, it will be more hands-on regarding Medicaid decisions in the future.
Here are a few examples of the GA’s hands-on attitude found in the Session Law 2014-100 (with some emphasis I have made by putting some words in bold-faced type)
- “Until the General Assembly enacts legislation authorizing a plan to reform Medicaid, the Department of Health and Human Services (i) shall continue to consult with stakeholder groups, study, and recommend options for Medicaid reform that will provide greater budget predictability for the Medicaid program and (ii) shall not commit the State to any particular course on Medicaid reform and shall not submit any reform-related State plan amendments, waivers, or grant applications nor enter into any contracts related to implementing Medicaid reform.”
- “The Department may submit drafts of the waiver to the Centers for Medicare and Medicaid Services (CMS) to solicit feedback but shall not submit the waiver for CMS approval until authorized by the General Assembly.”
- “The Department of Health and Human Services shall make payments to the contractor hired by the Joint Legislative Oversight Committee on Health and Human Services from funds appropriated elsewhere in this budget for this contract…”
- “The Department of Health and Human Services shall not make any other modifications to the portion of the Medicaid State Plan referenced in this section, except as provided herein.”
- “The Department may submit drafts of the waivers to the Centers for Medicare and Medicaid Services (CMS) to solicit feedback but shall not submit the waivers for CMS approval until authorized by the General Assembly.”
- “[T]he Division of Medical Assistance shall ensure that any Medicaid-related or NC Health Choice-related State contract entered into after the effective date of this section contains a clause that allows the Department or the Division to terminate the contract without cause upon 30 days’ notice.”
- “No fewer than 10 days prior to submitting an amendment to the State Plan to the federal government, the Department shall post the amendment on its Web site and notify the members of the Joint Legislative Oversight Committee on Health and Human Services and the Fiscal Research Division that the amendment has been posted.”
Basically, the GA has estopped DHHS from reforming Medicaid without the consent of the General Assembly.
Then, stuck in the middle of the state budget is the amendment to N.C. Gen. Stat. 108C…. “Woooo weeee!”
MODIFY MEDICAID APPEALS SECTION 12H.27.
(a) G.S. 108C-12(d) reads as rewritten: “(d) Burden of Proof. – The
Department petitioner shall have the burden of proof in appeals of Medicaid providers or applicants concerning an adverse determination.”
Does anyone else understand what this teeny, tiny clause within Session Law 2014-100 means????
What is the importance of burden of proof? Enormous! And this clause changes the playing field for Medicaid providers. It may not have been a level field prior to Session Law 2014-100, but now it’s even more slanted.
The easiest way to explain “burden of proof” is that when a petitioning Medicaid provider challenges some adverse determination by DHHS, for example, the Department’s termination of a contract with the provider, the “burden of proof” decides which party must persuade the reviewing tribunal that the party’s assertions are correct. Up until this amendment of G.S.108C-12(d), the Department has had the burden to present evidence showing that its adverse determination was correct. The petitioner could then respond to that evidence, to try to show the contrary, but the burden of proving the correctness of the adverse determination still rested on the Department in cases filed by Medicaid providers under Chapter 108C.
In court, one of the first questions a judge will ask is, “Who carries the burden of proof?” Because the legal burden of proof is just that…a burden…that must be satisfactorily carried in order to win.
Health care providers who accept Medicaid have notoriously been given the short-end of the stick, i.e., low reimbursement rates, undergoing burdensome audits, but, at least, in NC, historically, the Department has had to prove the correctness of its allegations, whether it be an alleged overpayment, a termination of a Medicaid contract, or other allegations.
But now? DHHS’ allegations against a health care provider are true…unless the provider can prove DHHS wrong. The uphill fight of a provider seeking to correct a DHHS adverse determination, just became much steeper, and it was done with little or no fanfare.
So can you do? Only options as far as I see it:
- Call and email your state representatives.
- Hire a lobbyist.
- Bring a lawsuit to change it.
- Do nothing.
Per L. Warren’s comment, I am adding #5.
5. Stop taking Medicaid clients.
NC Medicaid: Are New Mexico and NC Medicaid Providers Fraternal Twins? At Least, When It Comes to PCG!
North Carolina and New Mexico? Fraternal twins? Remember Arnold Schwarzenegger and Danny Devito?
I don’t know about you, but I imagine New Mexico is as identical to North Carolina as chicharrones are to grits. And I can only imagine what New Mexicans think of us. The words “redneck,” “chewing tobacco,” and “backward” come to mind, although being born and raised in NC, I would take vehement objection to those stereotypes. Regardless, as polar opposite as New Mexico and North Carolina may or may not be, we have at least one commonality. Public Consulting Group (PCG).
Since I posted my blog: “Even New Mexico Identifies PCG Audits as “Unreliable!”” I have had the pleasure of speaking to a number of New Mexicans (although one sounded, surprisingly, British).
Here is what I have learned:
1. PCG is equally as inept in New Mexico as here. No explanation needed.
2. NM has no administrative remedy for providers. Whereas, we can request a reconsideration review with the Department of Health and Human Services (DHHS) when providers receive an outrageous Tentative Notice of Overpayment (TNO) from PCG, and, ultimately, appeal the DHHS decision to the Office of Administrative Hearings (OAH), apparently (remember I have never taken the Bar in NM, so if a NM lawyer would like to explain, I would be much obliged) there is no administrative process in NM. So, it seems, that the NM providers have to file an injunction in state or federal court to cease PCG’s erroneous auditing. Ugh!
3. In NM, PCG is freezing funding. So, in NM, PCG is acting similar to what may occur if you squished PCG and CCME together. Could you imagine? PCG and CCME merging? I shudder at the thought.
4. The suffering of Medicaid providers is not limited to state lines. New Mexican providers who accept Medicaid are suffering as much as NC providers who accept Medicaid are suffering.
As I informed my blog readers a couple of days ago, 15 behavioral health providers in NM filed an injunction against the State and PCG staying the providers’ frozen Medicaid funds. Now the NM State Auditor (our Beth Wood) will be reviewing the “special audit” that, supposedly, contains evidence of alleged overcharging, etc. by the 15 providers. (The special audit is the basis for the providers’ frozen funds….kinda like being on prepayment review, huh?).
Here is the article:
[New Mexico] State Human Services Secretary Sidonie Squier has refused to give State Auditor Hector Balderas a copy of the special audit that she says found evidence of alleged overcharging and possible fraud on the part of 15 behavioral-health providers. But on Tuesday, Balderas got a state district judge to subpoena the audit.
Meanwhile, on Wednesday a federal judge in Albuquerque heard arguments by lawyers for Human Services and eight of the providers whose Medicaid funding was frozen because of the special audit. The eight firms are seeking an injunction to force Human Services to resume payments to the providers. However, U.S. District Judge Christina Armijo took no immediate action on the request.
“It is necessary that my auditors fully review the report issued by Public Consulting Group Inc. in order to assess the risks to public funds and the potential impact on the Human Services Department’s financial affairs,” Balderas said in a written statement. “I formally requested the report from Secretary Squier pursuant to state law, but unfortunately the Department refused to comply with my lawful request. I am disappointed that I have been forced to take legal action to prevent the obstruction of a thorough audit of these taxpayer dollars.”
Public Consulting Group, a Boston company, was paid more than $3 million to audit the providers.
In a July 11 letter to Squier, James Noel, lawyer for the State Auditor’s Office, said the State Audit Act requires his office to “thoroughly examine and audit the financial affairs of every state agency.”
Noting that Human Services has said the special audit showed credible evidence of fraud, Noel said the department is required to “report immediately, in writing, to the state auditor any violation of a criminal statute in connection with financial affairs.”
Squier on July 12 responded in a letter to Balderas saying she was declining to release the audit to him.
“At this time no determination has been made that any individual or entity violated federal or state criminal statue, nor does [Human Services] have the authority to make such a determination,” the letter states.
Of the federal laws and regulations that require the department to turn “credible evidence of fraud” over to the state attorney general for investigation, Squier said, “Such a referral is not a finding of fraud by this agency.” She said she had to decline Balderas’ request because it could jeopardize the state attorney general’s investigation.
State District Judge Sarah Singleton of Santa Fe on Tuesday signed a subpoena requiring Squier to permit the state auditor to inspect the Public Consulting Group audit at 10 a.m. Monday.
Department spokesman Matt Kennicott said Wednesday that Squier and department lawyers will have to look over the subpoena before deciding on their course of action.
Earlier in the week, Rep. Stephen Easley, D-Santa Fe, and Sen. Benny Shendo, D-Jemez Pueblo, chairmen of a legislative subcommittee on behavioral health, delivered a five-page letter to Balderas requesting his office examine the Public Consulting Group audit. The letter raised issues including the role of OptumHealth, the company in charge of overseeing the behavioral health providers, and how the five Arizona companies — with which the state is contracting to take up the slack of the providers under investigation — were chosen.
On Tuesday, Gov. Susana Martinez told reporters that the Arizona companies were chosen because they have done similar work before. “They’ve been able to pick up services when there have been problems in other states, where there have been other allegations of fraud or misuse or mismanagement,” she said. “We want to make sure those patients have quick access.”
Does it matter to you, my reader, that all this hullaballoo is occurring on taxpayer money? And Medicaid state and federal money. Our tax dollars are paying PCG.