As a Medicare/caid health care provider, you have a property right to your reimbursements for services rendered that were medically necessary.
Why does it matter if your Medicare/caid reimbursements constitute property rights? If you have a property right to something it cannot be taken from you without due process of law. Due process equals a fair hearing and notice. If you have a property right in something then it cannot be usurped from you. For example, since I own my house, you cannot come to my house and claim ownership, even as a squatter. I am afforded due process for my right to my property. Similarly, when you provide Medicare services that are medically necessary and properly completed, your reimbursements for such services cannot be withheld without due process. This means that many rules and regulations across the nation may be unconstitutional.
One of the questionable laws comes into light under many managed care catchment area’s (MCOs) closed network system, which comprises the majority of managed care in America, as well as Medicare Administrative Companies (MACs). MCOs and MACs act as if it are the judge, jury, and executioner when it comes to payments. But, according to the constitution and property rights, Medicare/caid reimbursements are not based on a subjective review by a government contractor.
The ultimate victims in unfair, premature, or erroneous terminations from Medicare or Medicaid programs are the recipients. Often there are too few providers who accept Medicare and Medicaid in certain areas. The other victims in a wrongful termination is the provider and its staff. While the adverse consequences of an unjust termination has minimal to no unfavorable results to the government.
Under numerous Supreme Court holdings, most notably the Court’s holding in Board of Regents v. Roth the right to due process under the law only arises when a person has a property or liberty interest at stake. See also Bowens v. N.C. Dept. of Human Res.
In determining whether a property interest exists a Court must first determine that there is an entitlement to that property. Cleveland Bd. of Educ. v. Loudermill. Unlike liberty interests, property interests and entitlements are not created by the Constitution. Instead, property interests are created by federal or state law and can arise from statute, administrative regulations, or contract. Bowens.
Specifically, the Fourth Circuit Court of Appeals has determined that North Carolina Medicaid providers have a property interest in continued provider status. Bowens, 710 F.2d 1018. In Bowens, the Fourth Circuit recognized that North Carolina provider appeals process created a due process property interest in a Medicaid provider’s continued provision of services and could not be terminated “at the will of the state.” The Court determined that these due process safeguards, which included a hearing and standards for review, indicated that the provider’s participation was not “terminable at will.” The Court held that these safeguards created an entitlement for the provider, because it limits the grounds for his/her termination such that the contract was not terminable “at will” but only for cause, and that such cause was reviewable. The Fourth Circuit reached the same result in Ram v. Heckler, two years later. I foresee the same results in other Court of Appeals’ jurisdiction.
Since Ram, North Carolina Medicaid provider’s right to continued participation has been strengthened through the passage of Chapter 108C. Chapter 108C expressly creates a right for existing Medicaid providers to challenge a decision to terminate participation in the Medicaid program in the Office of Administrative Hearings (OAH). It also makes such reviews subject to the standards of Article 3 of the APA. Therefore, North Carolina law now contains a statutory process that confers an entitlement to Medicaid providers. Chapter 108C sets forth the procedure and substantive standards for which OAH is to operate and gives rise to the property right recognized in Bowens and Ram.
In another particular case, a MAC terminated a provider’s ability to deliver four CPT codes, which comprised of over 80% of the provider’s bailiwick and severely decreased the provider’s financial income, not to mention Medicare recipients lost their access to care and choice of provider.
The MAC’s contention was that the provider was not really terminated since they could still participate in the network in ways. But the company was being terminated from providing certain services.
The Court found that the MAC’s contention that providers have no right to challenge a termination was without merit. And, rightfully so, the Court stated that if the MAC’s position were correct, the appeals process provided by law would be meaningless. This was certainly not the case.
The MAC’s contention that it operates a “closed network” and thus can terminate a provider at its sole discretion was also not supported by the law. No MAC or MCO can cite to any statute, regulation or contract provision that gives it such authority. The statutory definition of “closed network” simply delineates those providers that have contracted with the LME-MCOs to furnish services to Medicaid enrollees. The MAC was relying on its own definition of “closed network” to exercise complete and sole control and discretion which is without foundation and/or any merit. Nothing in the definition of “closed network” indicates that MACs or MCOs have absolute discretion to determine which existing providers can remain in the closed network.
It is well settled law that there is a single state agency responsible for Medicare and Medicaid, which equals the Center for Medicare and Medicaid Services (CMS). Case law dictates that the responsibility cannot be delegated away. A supervisory role, at the very least, must be maintained.
On the Medicaid level, 42 CFR § 438.214 entitled “Provider Selection” requires the State to ensure, through a contract, that each MCO/PIHP “implements written policies and procedures for selection and retention of providers.”). A plain reading of the law makes clear that MCOs that operate a PIHP are required to have written policies and procedures for retention of providers. Requiring policies and procedures would be pointless if they are not followed.
To the extent that a MAC or MCO’s policy states that it can decide not to retain a provider for any reason at its sole discretion, such a policy does not conform with Federal law and the State requirements.
On the Medicare level, 42 U.S.C. § 405(h) spells out the judicial review available to providers, which is made applicable to Medicare by 42 U.S.C. § 1395ii. Section 405(h) aims to lay out the sole means by which a court may review decisions to terminate a provider agreement in compliance with the process available in § 405(g). Section 405(g) lays out the sole process of judicial review available in this type of dispute. The Supreme Court has endorsed the process, for nearly two decades, since its decision in Shalala v. Illinois Council on Long Term Care, Inc., holding that providers are required to abide by the provisions of § 405(g) providing for judicial review only after the administrative appeal process is complete.
The MACs and the MCOs cannot circumvent federal law and State requirements regarding provider retention by creating a policy that allows it to make the determination for any reason in its sole discretion. Such a provision is tantamount to having no policies and procedures at all.
We have had parity laws between mental and physical health care services on the books for years. Regardless of the black letter law, mental health health care services have been treated with stigma, embarrassment, and of lesser importance than physical health care services. A broken leg is easily proven by an X-Ray; whereas a broken mind is less obvious.
In an unprecedented Decision ripe with scathing remarks against Optum/United Behavioral Health’s (UBH) actions, a Court recently ruled that UBH improperly denied mental health services to insureds and that those improper denials were financially-driven. A slap-on-the-wrist, this Decision was not. More of a public whipping.
In a 106-page opinion, the US District Court, Northern District of California, slammed UBH in a blistering decision finding that UBH purposely and improperly denied behavioral health care benefits to thousands of mentally ill insureds by utilizing overly restrictive guidelines. This is a HUGE win for the mental health community, which often does not receive the parity of services (of physical health) that it is legally is entitled. U.S. Chief Magistrate Judge Joseph Spero spared no political correctness in his mordacious written opinion, which is rarity in today’s vitriolic world.
The Plaintiffs filed a lawsuit under the Employee Retirement Income Security Act of 1974 (ERISA), saying the insurer denied benefits in violation of the terms of their insurance plans and state law. The Plaintiffs consisted of participants in UBH health care plans and who were denied mental health care services.
Judge Spero found United Behavioral’s guidelines were influenced by financial incentives concerning fully-funded and self-funded ERISA plans:
“While the incentives related to fully insured and self-funded plans are not identical, with respect to both types of plan UBH has a financial interest in keeping benefit expense down … [A]ny resulting shortcomings in its Guideline development process taints its decision-making as to both categories of plan because UBH maintains a uniform set of Guidelines for fully insured and self-funded plans … Instead of insulating its Guideline developers from these financial pressures, UBH has placed representatives of its Finance and Affordability Departments in key roles in the Guidelines development process throughout the class period.”
Surprisingly, this decision came out of California, which is notoriously socially-driven. Attorneys generally avert their eyes when opinions come from the 9th District.
Judge Spero found that UBH violated “generally accepted standards of care” to administer requests for benefits.
The Court found that “many mental health and substance use disorders are long-term and chronic.” It also found that, in questionable instances, the insurance company should err on the caution of placing the patient in a higher level of care. The Court basically cited the old adage – “Better safe than sorry,” which seems a pretty darn good idea when you are talking about mental health. Just ask Ted Bundy.
Even though the Wit Decision involved private pay insurance, the Court repeatedly cited to the Center for Medicare and Medicaid Services’ (CMS) Manual. For example, the Court stated that “the CMS Manual explains, [f]or many . . . psychiatric patients, particularly those with long-term, chronic conditions, control of symptoms and maintenance of a functional level to avoid further deterioration or hospitalization is an acceptable expectation of improvement.” It also quoted ASAM criteria as generally accepted standards, as well as LOCUS, which tells me that the law interprets the CMS Manual, ASAM criteria, and LOCUS as “generally accepted standards,” and not UBH’s or any other private pay insurance’s arbitrary standards. In fact, the Court actually stated that its decision was influenced by the fact that UBH’s adopted many portions of CMS’ Manual, but drafted the language in a more narrow way to ensure more denials of mental health benefits.
The Court emphasized the importance of ongoing care instead of acute care that ceases upon the end of the acute crisis. The denial of ongoing care was categorized as a financial decision. The Court found that UBH’s health care policy “drove members to lower levels of care even when treatment of the member’s overall and/or co-occurring conditions would have been more effective at the higher level of care.”
The Wit decision will impact us in so many ways. For one, if a State Medicaid program limits mental health services beyond what the CMS Manual, ASAM criteria, or LOCUS determines, then providers (and beneficiaries) have a strong legal argument that the State Medicaid criteria do not meet generally accepted standards. Even more importantly, if the State Medicaid policies do NOT limit mental health care services beyond what the CMS Manual, ASAM criteria, and LOCUS defines, but an agent of the State Medicaid Division; i.e, a managed care organization (MCO) deny mental health care services that would be considered appropriate under the generally accepted standards, then, again, both providers and beneficiaries would have strong legal arguments overturning those denials.
I, for one, hope this is a slippery slope…in the right direction.
Here are our tax dollars continuing to be used for such great purposes!!! I completely understand Cardinal’s desire to recoup our tax dollars that went into Topping’s pocket – noble, indeed. But I am stumped as how, supposedly, Topping had the executive authority to unilaterally name his salary?? Did he have such authority – or, like many companies, was Topping’s exorbitant salary a Board decision? And – if Topping’s salary were a Board decision – is Cardinal suing itself for past poor decisions???? Curiouser and curiouser.
Regardless, let’s give a “hat’s off” and a “thank you” to Richard Craver staying on top of this important and upsetting issue. #icantwaituntilwererich (see below for context).
By Richard Craver Winston-Salem Journal
The fired chief executive of Cardinal Innovations, Richard Topping Jr., filed Tuesday his countersuit to thwart the agency’s attempt to recover $1.68 million in paid severance.
A reconstituted board of directors for Cardinal, the state’s largest behavioral health managed care organization, has alleged that Topping used his post to enrich himself and three other executives. That board filed its lawsuit March 29.
Both lawsuits were filed in Mecklenburg Superior Court.
The agency oversees providers of mental, substance abuse and development disabilities services for 20 counties, including Forsyth County. It has responsibility for more than 850,000 Medicaid recipients and more than $675 million in federal and state Medicaid funding.
According to an investigation done by former federal prosecutor Kurt Meyers at the new board’s request, Topping convinced the former board leadership to pay him the severance before he was removed by state health Secretary Mandy Cohen on Nov. 27 as part of a N.C. Department of Health and Human Services takeover of Cardinal.
The current Cardinal board not only wants to recoup $3.8 million in overall executive severance, but also at least $125,000 in damages. The complaint called Topping’s severance “excessive and unlawful payments.”
Topping faces seven claims in the Cardinal lawsuit: breach of contract; breach of fiduciary duties; breach of implied duty of good faith and fair dealing (in his role as CEO); conversion (deleting data from Cardinal-owned devices and not returning Cardinal electronic property); unjust enrichment; constructive trust (knowingly accepting overpayments in severance); and constructive fraud (taking without permission highly confidential Cardinal financial and operational data).
“He inflated his salary without regard to the reputational, regulatory and legal damages it was going to cause,” Meyers said.
Topping claims his reputation has been “severely damaged” in the healthcare sector by the Cardinal lawsuit and investigation.
Topping called claims made in Meyers’ detailed presentation “misleading and false” even though it contained email and text exchanges between Topping, former Cardinal executives and former board chairwoman Lucy Drake about his post-Cardinal plans.
“Topping took these steps acknowledging he would never get another contract with Cardinal, nor likely with any other North Carolina healthcare provider,” Trey Sutten said March 29. Sutten was named as interim CEO by Cohen on Nov. 27 and full-time CEO on March 29.
The Charlotte Observer said among those named by Topping as defendants were Cardinal general counsel Chuck Hollowell, deputy general counsel Stephen Martin and board vice chairwoman Carmen Hooker Odom. DHHS said Tuesday it had no comment about Topping’s countersuit.
Topping was paid as much as $635,000 in annual salary, about 3½ times the maximum allowed under state law.
Topping has claimed the salary, which was raised twice by the former board during his term, was justified based on an independent market survey of Charlotte-area healthcare executives. The Charlotte Observer said Topping claims he and the other former executives were paid at the 50th percentile of market rates.
According to Meyers’ investigation, Topping pressured the former board not to fire him for several months by saying that if he was terminated, his entire management team would also leave with him. According to Meyers, Topping told the board that if that action occurred, it would “end Cardinal as they knew it.”
Topping claimed he did not create the severance platform in dispute.
“Cardinal Innovations Healthcare, Carmen Hooker Odom, Chuck Hollowell and Stephen Martin deny the false claims and baseless allegations brought by former CEO Richard Topping,” Cardinal spokeswoman Ashley Conger said in a statement.
Texts and emails between Topping and Pete Murphy, former chief information officer, epitomized their self-enrichment thinking, Meyers said.
The former board paid $1.7 million in severance to Topping, along with $740,000 to Murphy; $690,000 to Will Woodell, chief operating officer; and $684,000 to Dr. Ranota Hall, chief medical officer.
One exchange— sent Nov. 17 before Topping was fired by the former board — involved Murphy and Topping discussing Topping’s securing 1.5-gigabytes of highly confidential Cardinal management files, including personnel files, before leaving his post.
Murphy wrote that Topping “was smart to take files now.” Topping ended the text with an emoji with a finger over the lips. Meyers said he interpreted that emoji as saying “Shhh. Be quiet, and don’t tell anyone what I’m doing.”
An email exchange between the former executives took place after Topping’s termination by the former board. The board agreed to allow Topping to remain as CEO through Nov. 30.
The context, according to Meyers, was Topping’s work to secure venture capital or private equity for a private startup business, potentially to compete against Cardinal in the planned Medicaid reform marketplace with Cardinal’s confidential financial and operational information in hand.
“I can’t wait until we’re rich,” Murphy wrote. Topping answered, “I’ve made great progress on that front.” (emphasis added).
Topping’s lawsuit claims he was gathering information to create a healthcare smartphone app.
Here is an article that I wrote as a Medicaid news update, state-by-state, as seen on RACMonitor.
The latest and greatest in Medicaid news, state by state.
While Medicare is a nationwide healthcare insurance program, Medicaid, the government-funded health insurance for the poor and developmentally disabled, is state-specific, generally speaking. The backbone of Medicaid is federal; federal regulations set forth the minimum requirements that states must follow. It is up to the states to decide whether to mandate more stringent or more regulatory oversight than is required by the federal regulations.
Why is it important for you to know the latest up-to-date information on Medicaid issues? First, if you accept Medicaid, you need to know. Secondly, if you are thinking about expanding into different states, you need to be aware of how Medicaid is handled there.
What is happening in your State?
|Alabama:||Alabama did not expand Medicaid. The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) recommended that Alabama improve its Medicaid security program, aligning it with federal requirements. The OIG also stated that Alabama also needs to provide adequate oversight to its contractors and address other vulnerabilities OIG found in its audit. Expect more audits here. In particular, the Medicaid Maternity Program is under the microscope. Apparently, healthcare providers that provide medically necessary services to women on the Maternity Program have been duped before, as some of the women enrolled had already given birth. Recoupment!|
|Alaska:||Alaska expanded Medicaid in 2015. Currently, lawmakers in the legislature here have introduced bills that would require the state to seek 20-hour work requirements for those enrolled in Medicaid.|
|Arizona:||Arizona expanded Medicaid, but with an approved section 1115 waiver. Arizona has failed to collect up to $36.7 million in rebates from prescription drug manufacturers since 2010 and may need to pay the federal government a portion of that amount, according to a new federal audit, which means more audits to reconcile the payback. Arizona State Rep. Kelli Butler wants to allow uninsured individuals to buy into the state’s Medicaid program. Butler is expected to introduce legislation to authorize a buy-in or direct state officials to study the proposal. The buy-in option would require consumers to pay the full cost of their insurance coverage.|
|Arkansas:||Arkansas expanded Medicaid, but with an approved section 1115 waiver. On March 5, 2018, it became the third state to win the Trump administration’s permission to compel Medicaid recipients to work or prepare for a job. The state’s program integrity is focusing its upcoming audits on home health, long-term care facilities, and inpatient hospital stays.|
|California:||California expanded Medicaid. The state’s Medicaid agency has posted draft language of a new state plan amendment (SPA) that would make major changes to Federally Qualified Health Center (FQHC) and Rural Health Clinic (RHC) reimbursement. If approved, the SPA would be retroactive to Jan. 1, 2018, so expect audits and recoupments. The proposed SPA would implement multiple new requirements for FQHC and RHCS. For example, the proposed productivity standard requires physicians to document 3,200 visits per year and applicable allied health professionals such as physician assistants and nurse practitioners to document 2,600 visits per year. In January 2018, Aetna received approval to participate in California’s Medicaid program as “Aetna Better Health of California.”|
|Colorado:||Colorado expanded Medicaid. Not unexpectedly, the state has one of the more lenient regulatory environments. For example, Colorado’s permissive approach to regulating more than 700 licensed residential and outpatient drug treatment centers got the attention of a congressional subcommittee investigating the drug rehab industry last year. Also, Colorado’s governor announced that he is not opposed to work requirements for Medicaid beneficiaries.|
|Connecticut:||Connecticut expanded Medicaid. The Connecticut Health Policy Project data shows that net pharmacy spending minus rebates from Connecticut’s Medicaid program tripled from 2000 to 2017. After rebates, Medicaid’s pharmacy costs decreased from $542 million in 2015 to $465 million in 2017, a drop of over 14 percent. Interestingly, on March 21, 2018, the state’s General Assembly increased Connecticut’s 8,500 home care workers’ wages, and adding worker’s compensation, even those workers are being compensated by Medicaid. The increased wage will rise to $16.25 per hour by 2020 and will cost the state, after federal Medicaid reimbursement, $725,790 in 2018, almost $7 million in 2019, and over $9.3 million in 2020. If you have a home health agency here, you better make sure that lawmakers are smart enough to increase the reimbursement rates; otherwise, a lot of home health agencies will go out of business.|
|Delaware:||Delaware expanded Medicaid, but since it is so small in size and population, the expansion only added approximately 10,000 Medicaid recipients. This year, after two years of increasing Medicaid spending by approximately $70 million, Delaware’s Medicaid costs are expected to decrease a small amount, even with the expansion. Beginning this year, Delaware gives additional weight to value-based care when determining payment. Rather than paying solely for volume of care – hospital stays, tests and procedures, regardless of outcomes – the state will pay for achieving optimal health for its Medicaid recipients.|
|Florida:||Florida did not expand Medicaid. Lawmakers are considering opioid prescription limits for Medicaid recipients. The proposals would limit prescriptions for opioids to three-day supplies, but also allow for up to seven-day supplies if physicians deem it medically necessary. If passed, I question whether lawsuits will be filed claiming that such a move violates the Equal Protection Clause of the Constitution, because it violates parity between Medicaid recipients and the private-pay insured. And what about the people suffering with chronic, long-term pain? (especially considering the state’s demographics). In other news, Gov. Rick Scott has proposed to transition the state’s Children’s Medical Services program to a private managed care organization, beginning in 2019.|
|Georgia:||Georgia did not expand Medicaid. Recently, the Georgia Department of Community Health mistakenly issued multiple Medicaid ID numbers to hundreds of patients. Those mistakes led the state and federal governments to make duplicate payments for care of some Medicaid patients. Now, Georgia is being asked to refund the federal government’s share of the duplicate payments — more than $665,000. Expect more audits to fund the repayment.|
|Hawaii:||Hawaii expanded Medicaid. But the state is cracking down on its providers. In an effort to improve fraud prevention, Hawaii is performing more comprehensive screening, credentialing, and enrollment for all Medicaid providers. Those of you who are already credentialed here, expect tougher standards for re-credentialing.|
|Idaho:||Idaho did not expand Medicaid, but it did expand dental coverage. On March 12, 2018, the state’s Senate passed a bill that restores Medicaid non-emergency dental coverage. The coverage was cut in 2011 during the recession. The bill, HB 465, already passed the House and now moves to Gov. Butch Otter. It is expected to cost $38 a year per patient.|
|Illinois:||Illinois expanded Medicaid. On Jan. 12, 2018, five nursing home operators filed a federal lawsuit against the state, arguing that low Medicaid payment rates and the claims backlog are jeopardizing patient care. The lawsuit was filed by Generations Health Care Network, Carlyle Healthcare Center, St. Vincent’s Home, Clinton Manor Living Center, and Extended Care Clinical, which operate 100 skilled nursing facilities throughout the state. Because of Section 30(A) of the Social Security Act (SSA), which mandates that reimbursement rates allow for quality of care, why aren’t more health care providers filing lawsuits to increase Medicaid reimbursement rates?|
|Indiana:||Indiana expanded Medicaid, but with an approved section 1115 waiver, which includes work requirements and adds premium penalties for tobacco users. The state also plans to use an enrollment block on members who fail to meet work requirements. Indiana focuses its audits on outliers: in other words, a provider that provides significantly more services than like-specialties.|
|Iowa:||Iowa expanded Medicaid, but with an approved section 1115 waiver. The state’s Department of Human Services announced on March 12, 2018 that Iowa is in the process of searching for additional managed care organizations for the current program. So if you have the capacity to act as an Managed Care Organization (MCO), throw your name in the ring. Because of pressure from the federal government, Iowa has implemented more prepayment reviews. Specifically, auditors are reviewing hospital discharge records for any sign of noncompliance.|
|Kansas:||Kansas did not expand Medicaid. On Feb. 15, 2018, the American Civil Liberties Union (ACLU) filed a federal class-action lawsuit arguing that the state’s Medicaid program is improperly denying Hepatitis C medication to members until they are severely ill. The suit names Kansas Department of Health and Environment (KDHE) Secretary Jeff Andersen and KDHE Division of Health Care Finance Director Jon Hamdorf. Medicaid managed care plans in the state either require “severe liver damage” before covering the drugs or allow some coverage before that point. If you have a Kansas Medicaid contract, on Feb. 18, 2018, Maximus instituted a compliance plan and announced that it is committed to reaching a June 1 deadline to deal with state concerns over the company’s processing of Medicaid applications. Maximus is required to reach certain performance standards or face fines and the potential loss of its contract.|
|Kentucky:||Kentucky expanded Medicaid, but with an approved section 1115 waiver. In January, Kentucky’s waiver was approved by the federal government to implement work requirements for Medicaid recipients. Implementation will start in April 2018, with full implementation by July 2018. The waiver was approved for five years, through Sept. 30, 2023. In state audit news, non-emergency medical transportation (NEMT) providers are on the chopping block.|
|Louisiana:||Louisiana expanded Medicaid, but now the state may remove 46,000 elderly and disabled individuals from Medicaid as part of a series of healthcare-related budget cuts proposed by Gov. John Bel Edwards for 2019. The proposal would cut $657 million in state healthcare funding and as much as $2.4 billion, including federal matching funds, in total. The proposal would also cut funding to safety net hospitals and eliminate mental health services for adults who don’t otherwise qualify for Medicaid.|
|Maine:||Maine expanded Medicaid. The state adopted the Medicaid expansion through a ballot initiative in November 2017; the measure required submission of the state plan amendment within 90 days and implementation of expansion within 180 days of the effective date. In Maine audit news, a behavioral healthcare provider accused of fraud has put behavioral healthcare providers on the front line.|
|Maryland:||Maryland expanded Medicaid. Maryland’s system of pushing hospitals to achieving lower admissions has added up to hundreds of millions of dollars in savings, a new report shows. Since 2014, the state caps hospitals’ revenue each year, letting them keep the difference if they reduce inpatient and outpatient treatment while maintaining care quality. Per capita hospital spending by all insurers has grown by less than 2 percent a year in Maryland, below the economic growth rate, defined four years ago as 3.58 percent annually, a key goal for the program.|
|Massachusetts:||Massachusetts expanded Medicaid. The state has begun to roll out new Accountable Care Organization (ACO) networks. Members assigned to an ACO have until May 31 to switch before they are locked in for nine months. The changes are expected to impact more than 800,000 Medicaid recipients and are designed to better manage patient care, reimburse providers based on quality, and address social determinants of health. There is expected confusion with this change among Medicaid patients and providers.|
|Michigan:||Michigan expanded Medicaid, but with an improved section 1115 waiver. On Feb. 18, 2018, Michigan announced that it would consider a proposal to transition the state’s $2.8 billion Medicaid nursing home and long-term care services programs into managed care. An initial review by the state Department of Health and Human Services is expected to begin by July 1.|
|Minnesota:||Minnesota expanded Medicaid. MN has a proposed Medicaid waiver bill, which requests permission from the federal government to implement an 80-hour-per-month requirement that would mandate Medicaid beneficiaries who are able-bodied adults and not the sole caretaker of a child to work, actively seek employment, participate in educational or training programs, or volunteer.|
|Mississippi:||Mississippi did not expand Medicaid. The five-year waiver request from Gov. Phil Bryant seeks to require nondisabled adults, including low-income parents and caretakers, to participate in at least 20 hours per week of “workforce training.” To be eligible, Medicaid beneficiaries must work, be self-employed, volunteer, or be in a drug treatment program, among other approved activities. If people don’t comply, they’ll be kicked off Medicaid.|
|Missouri:||Missouri did not expand Medicaid. The Missouri Hospital Association has won a lawsuit against the Centers for Medicare & Medicaid Services (CMS) over a rule that deducts Medicare and commercial insurance reimbursements from total disproportionate-share hospital (DSH) allotments. U.S. District Judge Brian Wimes ruled that the agency exceeded its authority. State hospitals would have had to pay back $96 million for 2011 and 2012 alone. Expect more scrutiny on hospitals in light of this decision.|
|Montana:||Montana expanded Medicaid, but with an approved 1115 waiver. Montana is one of many states that have proposed budget cuts to Medicaid. A new proposed rule, which would take effect April 1, would move the state’s addiction counseling from a needs-based system to a cap of 12 individual sessions. The rule may be retroactive, so expect audits to recoup if the rule passes.|
|Nebraska:||Nebraska did not expand Medicaid. On March 7, 2018, advocates for Medicaid expansion launched a petition drive, “Insure the Good Life,” to place the expansion issue on the November 2018 general election ballot. State lawmakers have rejected the expansion measure the past five legislative attempts. Nebraska has paid millions to the federal government in the past few years for noncompliance. Many think it will owe millions more. Audits on providers will increase in Nebraska to compensate for money paid to the federal government – in all service types.|
|Nevada:||Nevada did expand Medicaid. It paid the federal government roughly $4.1 million in 2017 to use HealthCare.gov. CMS also asked for 1.5 percent of the premium payments that were collected through its exchange last year, a percentage that will double in 2019. Nevada plans to cut its IT costs by replacing its use of HealthCare.gov with a new health insurance exchange in 2019. Pain management providers and pharmacies are the target of Medicaid audits here.|
|New Hampshire:||New Hampshire expanded Medicaid, but with an approved section 1115 waiver. On March 9, 2018, the New Hampshire Senate passed a bill to continue the state’s Medicaid expansion program. The legislation, which now heads to the House, would impose work requirements on members and utilize 5 percent of liquor revenues to cover the cost of expansion. The Senate voted to reauthorize the Medicaid program for five years and transition to managed care in 2019. The current expansion program, the New Hampshire Health Protection Program, covers about 50,000 individuals.|
|New Jersey:||New Jersey expanded Medicaid. On March 13, 2018, Gov. Phil Murphy delivered his first budget address, unveiling a $37.4 billion budget with a projected surplus of $743 million. 2019 revenues are projected to grow by 5.7 percent from last year. Among the healthcare provisions are: a) close to $4.4 billion in state funds to provide healthcare to almost 1.8 million residents through New Jersey’s Medicaid program, NJ FamilyCare; b) $8.5 million to implement autism spectrum disorder services for Medicaid-eligible children and teens to help 10,000+ families with behavioral and physical supports; c) $11 million in state and federal funds to expand family planning services under NJ FamilyCare to residents at or below 200 percent of the federal poverty level; d) $252 million to fund the hospital Charity Care program; and e) $100 million to fund addiction initiatives (list not exhaustive).|
|New Mexico:||New Mexico expanded Medicaid. The 15 behavioral healthcare providers that were put out of business in 2013 have filed lawsuits against the state. Speculation has it that after the election this year – likely taking Gov. Susana Martinez out of office – the providers may get compensated. New Mexico auditors are focused on the delivery of babies and services to the elderly.|
|New York:||New York expanded Medicaid. Recently, the state’s Assembly released its one-house budget bill. The plan restores $135 million in reductions to the Medicaid program. The big news in the Big Apple regarding Medicaid is in home health. The New York Court of Appeals, the state’s highest court, has agreed to hear a case regarding wages for home care workers. A state Appellate Court ruled in September 2017 that home care agencies must pay live-in home health aides for 24 hours per day, not the 13 hours that is the industry standard, assuming that they are allowed eight hours of sleep and three hours for meals. The New York Department of Labor has issued an emergency regulation that maintains the policy of allowing employers to pay home care workers for 13 hours of a 24-hour shift. If the decision stands, it means that agencies must pay for an additional 11 hours of care per day, almost doubling the cost of care. It is estimated that it will increase costs for home care in New York’s Medicaid program by tens of millions of dollars. Any of you who have home health care agencies in New York, which are dependent on Medicaid, beware that the reimbursement rates are not increasing to accommodate for the increased wages. Many home health companies will go out of business if the decision stands.|
|North Carolina:||North Carolina did not expand Medicaid. The state is seeking to transition its Medicaid program from a fee-for-service model to a managed care model for all services. The transition of beneficiaries with a serious mental illness, a serious emotional disturbance, a substance use disorder, or an intellectual/developmental disability (IDD) will be delayed until the launch of behavioral health and IDD tailored plans. The state estimates that 2.1 million individuals will be eligible for managed care. This is a huge overhaul of the Medicaid system.|
|North Dakota:||North Dakota expanded Medicaid. The state received substantial funds from a settlement designed to compensate states, in part, for the billions of dollars in healthcare costs associated with treating tobacco-related diseases under state Medicaid programs. To date, states have received more than $50 billion in settlement payments. North Dakota is also one of the “test” states to allow Medicare Advantage Value-Based Insurance Design to waive many requirements of federal regulation.|
|Ohio:||Ohio expanded Medicaid. On March 13, 2018, it was announced that the Ohio Pharmacists Association alleged that CVS Caremark overcharges Medicaid managed care plans for medications while often reimbursing pharmacists less than the cost of the drugs. CVS denied accusations of overcharging in an attempt to drive out retail competition and reported that there are strict firewalls between their retail business and their pharmacy benefit manager (PBM) business, CVS Caremark. Beginning in July, Medicaid MCOs will be required to report to state regulators how much PBMs are paying pharmacies.|
|Oklahoma:||Oklahoma did not expand Medicaid. On March 6, 2018, Gov. Mary Fallin issued an executive order to develop Medicaid work requirements. On March 13, 2018, the OK Senate approved legislation to tighten the income threshold for Medicaid eligibility among parents and caretakers to 20 percent of the federal poverty level, down from 40 percent under current state law. The move could impact nearly 44,000 of the 107,000 parents and caretakers on Medicaid in the state. The legislation now moves to the House.|
|Oregon:||Oregon expanded Medicaid. But how it will be funded makes state hospitals angry. Voters approved taxes on hospitals and health plans to continue to fund the state’s Medicaid expansion. The taxes, which were approved in a ballot measure, are expected to generate $210 million to $320 million over two years by imposing a 0.7 percent tax on some hospitals and a 1.5 percent tax on gross health insurance premiums and on managed care organizations. Unions and large, self-insured employers are exempt.|
|Pennsylvania:||Pennsylvania expanded Medicaid. On March 8, 2018, the state’s Department of Human Services discussed HB 59, a bill that would require able-bodied Medicaid recipients to prove they are looking for work. The bill was passed last year by the General Assembly, but vetoed by Gov. Wolf. Acting Human Services Secretary Teresa Miller said implementing the requirements would be expensive, estimating that the project could run up to $600 million in the first year.|
|Rhode Island:||Rhode Island expanded Medicaid. On Feb. 14, 2018, it was announced that the number of recently released inmates in Rhode Island who died from an opioid overdose decreased between 2016 and 2017. The study attributed the decrease to the availability of medication-assisted treatment in correctional facilities starting in 2016. Rhode Island was the first state to offer inmates methadone, buprenorphine, and naltrexone.|
|South Carolina:||South Carolina did not expand Medicaid. The state is overhauling its Medicaid Management Information System. Cognosante was awarded the contract, effective March 6, 2018 through March 5, 2023.|
|South Dakota:||South Dakota did not expand Medicaid. Furthermore, the state is seeking permission from the Trump administration to implement Medicaid work requirements, a move that would affect 4,500 beneficiaries. In South Dakota audit news, Program Integrity has ramped up the number of audits and prepayment reviews, especially on behavioral healthcare, dental care, hospital care, and home health.|
|Tennessee:||Tennessee did not expand Medicaid. In February, the Centers for Medicare & Medicaid Services approved a proposal to launch a two-year pilot designed to improve prescription drug adherence and effectiveness for Medicaid beneficiaries. As part of the pilot, pharmacists will work with Medicaid beneficiaries enrolled in patient-centered medical homes to ensure that medications are appropriate, safe, and taken as directed. As many as 300,000 enrollees may be affected by the pilot. This initiative will affect pharmacies based within hospitals.|
|Texas:||Texas did not expand Medicaid. The state’s Health and Human Services Commission (HHSC) announced contract awards for the state’s Children’s Health Insurance Program (CHIP) in rural areas. The six awardees are Blue Cross and Blue Shield of Texas (Central Region), Driscoll Children’s Health Plan (Hidalgo Region), Molina Healthcare of Texas, Inc. (Central, Hidalgo, Northeast, and West Regions), Superior Health Plan, Inc./Centene (West Region), and TX Children’s Health Plan, Inc. (Northeast Region). Contracts are slated to begin on Sept. 1, 2018. This is a big change to Texas Medicaid.|
|Utah:||Utah did not expand Medicaid. On March 9, 2018, Utah legislators passed a limited Medicaid expansion bill. The legislation would cover approximately 70,000 individuals who earn under 100 percent of the federal poverty level and impose a work requirement and spending cap for enrollees.|
|Vermont:||Vermont expanded Medicaid. One hospital here recently paid $1.6 million to resolve allegations that it violated the False Claims Act (FCA). According to the government, between January 2012 and September 2014, Brattleboro Memorial knowingly submitted a number of outpatient laboratory claims that lacked proper documentation. On another note, Vermont only has 188 beds in its mental health system, and patients are placed on waiting lists or forced to rely on hospital ERs. This is an ongoing problem for patients and hospitals.|
|Virginia:||Virginia did not expand Medicaid. On March 2, 2018, Gov. Ralph Northam told state budget legislators to include Medicaid expansion spending plans or he would add the expansion as a budget amendment. In state audit news, Program Integrity’s spotlight is shining on long-term care facilities, durable medical equipment, transportation, and hospitals.|
|Washington:||Washington expanded Medicaid. On Feb. 20, 2018, the state announced that it approved all nine Accountable Communities of Health (ACH) Medicaid Transformation Project Plans. The Medicaid Transformation Project is the state’s Section 1115 waiver, approved by the Centers for Medicare & Medicaid Services (CMS) in 2017. Under the waiver, the first initiative involves transforming Medicaid delivery in each regional service area through ACHs. The newly approved project plans will look to improve the overall health of Medicaid beneficiaries by tackling the opioid crisis and integrating behavioral health, among other aims.|
|West Virginia:||West Virginia expanded Medicaid. On March 6, 2018, it was announced that Medicaid funding could be at risk after Gov. James Justice signed a bill increasing state workers’ and teachers’ pay by 5 percent following a statewide teachers’ strike. According to West Virginia Senate Finance Chairman Craig Blair, the pay raises could be funded through cuts to Medicaid, among other areas; however, the Governor stated that the Medicaid budget would not be cut. The strike was in response to low pay and rising health insurance costs. The raises are expected to cost the state treasury approximately $110 million a year.|
|Wisconsin:||Wisconsin did not expand Medicaid. The state covers adults up to 100 percent of the federal poverty line in Medicaid, but it did not adopt the Patient Protection and Affordable Care Act (PPACA) expansion. Still, managed care will soon be mandatory. The state’s Department of Health Services reported that through June 2018, it will roll out mandatory enrollment for many Supplemental Security Income (SSI) beneficiaries in Medicaid managed care. Approximately 28,000 beneficiaries may be impacted. The change impacts members who live an SSI managed care service area, are age 19 or older, and have a Medicaid SSI or SSI-related disability. Previously, SSI beneficiaries could opt out of managed care after two months. Up to two-thirds of eligible beneficiaries typically opt out of managed care.|
|Wyoming:||Wyoming did not expand Medicaid. A bill that would have required able-bodied Medicaid recipients in Wyoming to work at a job, go to school, or do volunteer work died this month in a House committee. The state’s Department of Health is partnering with Medicity to develop a new health information exchange for the state. The Wyoming Frontier Information Exchange will be a centralized repository of clinical data for participating patients, powered in part by Medicity’s data aggregation and interoperability technology.|
$1.68 million. That’s what company controlling millions in taxpayer dollars wants back from fired CEO
Article in the Winston Salem Journal today:
Cardinal Innovations filed a lawsuit Monday in Mecklenburg Superior Court against fired chief executive Richard Topping.
The state’s largest managed care organization – which controls hundreds of millions in taxpayer dollars – is suing to recoup $1.68 million in severance from Topping, as well as prevent him from collecting any further payments approved by the former board that was disbanded Nov. 27.
The lawsuit says Topping’s severance represents “excessive and unlawful payments.”
Cardinal oversees providers of services for mental health, developmental disabilities and substance abuse for more than 850,000 Medicaid enrollees in 20 counties, including Forsyth and five others in the Triad. It handles more than $675 million in annual federal and state Medicaid money.
An investigation by McGuireWoods LLP was requested by a reconstituted board, formed in January and approved by state health Secretary Mandy Cohen, along with interim chief executive Trey Sutten. It was conducted by McGuireWoods partner Kurt Meyers, a former federal prosecutor.
The lawsuit represents a new action by Cardinal, and is not in response to the previous board’s lawsuit against the state to allow for executive salaries, including for Topping, that exceeded those permitted by state law.
However, it does represent a follow-up on the temporary restraining order and then preliminary injunction won against Topping and the former board filed in the same court.
The injunction prevents Topping and the former board from interfering with N.C. Department of Health and Human Services’ regulatory actions versus Cardinal that began when Cohen ordered the takeover of the organization on Nov. 27.
The former board took action against Topping’s employment at its Nov. 17 meeting by terminating his contract without cause. The board, at Topping’s request, would have been allowed to stay on through Dec. 1.
Cardinal said in the lawsuit that “Topping’s motive in asking the board to allow him to remain CEO was so that he could use his position as CEO to ensure that Cardinal Innovations paid him the lump-sum severance before his departure.”
Now to my opinion:
Disclosure: I have not read the Complaint and would love someone to send it to me. But, on the face of this article, my experience in the legal world, and my limited knowledge about the whole Topping debacle:
While we can all agree that Topping’s salary, plus bonuses and perks, was absolutely repugnant and offensive to taxpayers (like me), Topping did not get there all by himself. The Board of Directors met, discussed Topping’s salary, and voted to give him that salary. The Board of Directors, essentially, is the heart and the brain of Cardinal Innovations.
Is Cardinal Innovations going to sue itself for bestowing such an outrageous salary, plus benefits, to Topping?
Because if I am Topping and I get sued for having a high salary, I am going to point at the Board of Directors and say, “I couldn’t have gotten paid without your votes, Board. So have fun and sue yourself.”
BTW: Isn’t this lawsuit a conflict of interest?? It was only last year that Cardinal filed a lawsuit asking the court to ALLOW TOPPING TO CONTINUE TO RECEIVE SUCH OUTRAGEOUS SALARY THAT NOW – SAME COMPANY – IS SUING BECAUSE IT GAVE THIS SALARY TO IT CEO…which is it, Cardinal? Or is it just a matter of following the wind of public opinion?
Not to mention – HOW IS CARDINAL FUNDING THE LAWSUIT (ATTORNEYS’ FEES) – WITH OUR TAX DOLLARS!!!!!!! I mean, good for Womble Carlyle, the law firm hired with our tax dollars to spend more money on a losing case (my opinion) because Cardinal mismanaged our tax dollars! Winner, winner, chicken dinner! Last year it got paid to file a lawsuit to keep Topping’s salary and perks. Five months later it’s hired to sue for giving Topping’s salary and perks. See blog.
Does anyone else not see how screwed up this is?????
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!
Is this the end of the managed care organizations (MCOs)?
If the Senate’s proposed committee substitute (PCS) to House Bill 403 (HB 403) passes the answer is yes. The Senate’s PCS to House Bill 403 was just favorably reported out of the Senate Health Care Committee on June 15, 2017. The next step for the bill to advance will be approval by the Senate Rules Committee. Click here to watch its progress.
As my readers are well aware, I am not a proponent for the MCOs. I think the MCOs are run by overpaid executives, who pay themselves too high of bonuses, hire charter flights, throw fancy holiday parties, and send themselves and their families on expensive retreats – to the detriment of Medicaid recipients’ services and Medicaid providers’ reimbursement rates. See blog. And blog.
Over the last couple days, my email has been inundated by people abhorred with HB 403 – urging the Senators to retain the original HB 403, instead of the PCS version. As with all legislation, there are good and bad components. I went back and re-read these emails, and I realized multiple authors sat on an MCO Board. Of course MCO Board members will be against HB 403! Instead of hopping up and down “for” or “against” HB 403, I propose a (somewhat) objective review of the proposed legislation in this blog.
While I do not agree with everything found in HB 403, I certainly believe it is a step in the right direction. The MCOs have not been successful. Medically necessary behavioral health care services have been reduced or terminated, quality health care providers have been terminated from catchment areas, and our tax dollars have been misused.
However, I do have concern about how quickly the MCOs would be dissolved and the new PHPs would be put into effect. There is no real transition period, which could provide safety nets to ensure continuity of services. We all remember when NCTracks was implemented in 2013 and MMIS was removed on the same day. There was no overlap – and the results were catastrophic.
The following bullet points are the main issues found in HB 403, as currently written.
- Effective date – MCOs dissolve immediately (This could be dangerous if not done properly)
Past legislation enacted a transition time to dissolve the MCOs. Session Law 2015-245, as amended by Session Law 2016-121, provided that the MCOs would be dissolved in four years, allowing the State to implement a new system slowly instead of yanking the tablecloth from the table with hopes of the plates, glasses, and silverware not tumbling to the ground.
According to HB 403, “on the date when Medicaid capitated contracts with Prepaid Health Plans (PHPs) begin, as required by S.L. 2015-245, all of the following shall occur:…(2) The LME/MCOs shall be dissolved.”
Session Law 2015-245 states the following timeline: “LME/MCOs shall continue to manage the behavioral health services currently covered for their enrollees under all existing waivers, including the 1915(b) and (c) waivers, for four years after the date capitated PHP contracts begin. During this four-year period, the Division of Health Benefits shall continue to negotiate actuarially sound capitation rates directly
with the LME/MCOs in the same manner as currently utilized.”
HB 403 revises Session Law 2015-245’s timeline by the following: “
LME/MCOs shall continue to manage the behavioral health services currently covered for their enrollees under all existing waivers, including the 1915(b) and (c) waivers, for four years after the date capitated PHP contracts begin. During this four-year period, the Division of Health Benefits shall continue to negotiate actuarially sound capitation rates directly with the LME/MCOs in the same manner as currently utilized.”
Instead of a 4-year transition period, the day the PHP contracts are effective, the MCOs no longer exist. Poof!! Maybe Edward Bulwer-Lytton was right when he stated, “The pen is mightier than the sword.”
Again, I am not opposed to dissolving the MCOs for behavioral health care; I just want whatever transition to be reasonable and safe for Medicaid recipients and providers.
With the MCOs erased from existence, what system will be put in place? According to HB 403, PHPs shall manage all behavioral health care now managed by MCOs and all the remaining assets (i.e., all those millions sitting in the savings accounts of the MCOs) will be transferred to DHHS in order to fund the contracts with the PHPs and any liabilities of the MCOs. (And what prevents or does not prevent an MCO simply saying, “Well, now we will act as a PHP?”).
What is a PHP? HB 403 defines PHPs as an entity, which may be a commercial plan or provider-led entity with a PHP license from the Department of Insurance and will operate a capitated contract for the delivery of services. “Services covered by PHP:
- Physical health services
- Prescription drugs
- Long-term care services
- Behavioral health services
The capitated contracts shall not cover:
Behavioral health Dentist services
- The fabrication of eyeglasses…”
It would appear that dentists will also be managed by PHPs. As currently written, HB 403 also sets no less than three and no more than five contracts between DHHS and the PHPs should be implemented.
Don’t we need a Waiver from the Center for Medicare and Medicaid Services (CMS)?
Yes. We need a Waiver. 42 CFR 410.10(e) states that “[t]he Medicaid agency may not delegate, to other than its own officials, the authority to supervise the plan or to develop or issue policies, rules, and regulations on program matters.” In order to “Waive” this clause, we must get permission from CMS. We had to get permission from CMS when we created the MCO model. The same is true for a new PHP model.
Technically, HB 403 is mandating DHHS to implement a PHP model before we have permission from the federal government. HB 403 does instruct DHHS to submit a demonstration waiver application. Still, there is always concern and hesitancy surrounding implementation of a Medicaid program without the blessing of CMS.
- The provider network (This is awesome)
HB 403 requires that all contracts between PHPs and DHHS have a clause that requires PHPs to not exclude providers from their networks except for failure to meet objective quality standards or refusal to accept network rates.
- PHPs use of money (Also good)
Clearly, the General Assembly drafted HB 403 out of anger toward the MCOs. HB 403 implements more supervision over the new entities. It also disallows use of money on alcohol, first-class airfare, charter flights, holiday parties or similar social gatherings, and retreats, which, we all know these are precisely the activities that State Auditor Beth Wood found occurring, at least, at Cardinal. See Audit Report.
HB 403 also mandates that the Office of State Human Resources revise and update the job descriptions for the area directors and set limitations on salaries. No more “$1.2 million in CEO salaries paid without proper authorization.”
- Provider contracts with the PHPs (No choice is never good)
It appears that HB 403 will not allow providers to choose which PHP to join. DHHS is to create the regions for the PHPs and every county must be assigned to a PHP. Depending on how these PHPs are created, we could be looking at a similar situation that we have now with the MCOs. If the State is going to force you to contract with a PHP to provide Medicaid services, I would want the ability to choose the PHP.
In conclusion, HB 403 will re-shape our entire Medicaid program, if passed. It will abolish the MCO system, apply to almost all Medicaid services (both physical and mental), open the provider network, limit spending on inappropriate items, and assign counties to a PHP.
Boy, what I would give to be a fly on the wall in all the MCO’s boardrooms (during the closed sessions).
Eastpointe Sues DHHS, Former Sec. Brajer, Nash County, and Trillium Claiming Conspiracy! (What It Means for Providers)
In HBO’s Game of Thrones, nine, noble, family houses of Westeros fight for the Iron Throne – either vying to claim the throne or fighting for independence from the throne.
Similarly, when NC moved to the managed care organizations for Medicaid behavioral health care services, we began with 12 MCOs (We actually started with 23 (39 if you count area authorities) LME/MCOs, but they quickly whittled down to 11). “The General Assembly enacted House Bill 916 (S.L. 2011-264) (“H.B. 916) to be effective June 23, 2011, which required the statewide expansion of the 1915(b)/(c) Medicaid Waiver Program to be completed within the State by July 1, 2013.” Compl. at 25. Now the General Assembly is pushing for more consolidation.
Now we have seven (7) MCOs remaining, and the future is uncertain. With a firehose of money at issue and the General Assembly’s push for consolidation, it has become a bloody battle to remain standing in the end, because, after all, only one may claim the Iron Throne. And we all know that “Winter is coming.”
Seemingly, as an attempt to remain financially viable, last week, on Thursday, June 8, 2017, Eastpointe, one of our current MCOs, sued the Department of Health and Human Services (DHHS), Nash County, Trillium Health Resources, another MCO, and former secretary Richard Brajer in his individual and former official capacity. Since the Complaint is a public record, you can find the Complaint filed in the Eastern District of NC, Western Division, Civil Action 5:17-CV-275. My citations within this blog correspond with the paragraphs in the Complaint, not page numbers.
Eastpointe’s Complaint wields a complex web of conspiracy, government interference, and questionable relationships that would even intrigue George R. R. Martin.
The core grievance in the lawsuit is Eastpointe alleges that DHHS, Trillium, Nash County, and Brajer unlawfully conspired and interfered with Eastpointe’s contract to manage behavioral health care services for its twelve (12) county catchment area, including Nash County. In 2012, Nash County, as part of the The Beacon Center, signed a contract and became part of a merger with Eastpointe being the sole survivor (Beacon Center and Southeastern Regional Mental Health were swallowed by Eastpointe). At the heart of Eastpointe’s Complaint, Eastpointe is alleging that Nash County, Trillium, DHHS, and Brajer conspired to breach the contract between Eastpointe and Nash County and unlawfully allowed Nash County to join Trillium’s catchment area.
In June 2013, the General Assembly, pursuant to Senate Bill 208 (S.L. 2013-85 s. 4.(b)), appended N.C.G.S. § 122C-115 to include subparagraph (a3), permitting a county to disengage from one LME/MCO and align with another with the approval of the Secretary of the NCDHHS, who was required by law to promulgate “rules to establish a process for county disengagement.” N.C.G.S. § 122C-115(a3) (“Rules”) (10A N.C.A.C. 26C .0701-03).
Why does it matter whether Medicaid recipients receive behavioral health care services from providers within Trillium or Eastpointe’s catchment area?? As long as the medically necessary services are rendered – that should be what is important – right?
Wrong. First, I give my reason as a cynic (realist), then as a philanthropist (wishful thinker).
Cynical answer – The MCOs are prepaid. In general and giving a purposely abbreviated explanation, the way in which the amount is determined to pre-pay an MCO is based on how many Medicaid recipients reside within the catchment area who need behavioral health care services. The more people in need of Medicaid behavioral health care services in a catchment area, the more money the MCO receives to manage such services. With the removal of Nash County from Eastpointe’s catchment area, Eastpointe will lose approximately $4 million annually and Trillium will gain approximately $4 million annually, according to the Complaint. This lawsuit is a brawl over the capitated amount of money that Nash County represents, but it also is about the Iron Throne. If Eastpointe becomes less financially secure and Trillium becomes more financially secure, then it is more likely that Eastpointe would be chewed up and swallowed in any merger.
Philanthropic answer – Allowing Nash County to disengage from Eastpointe’s catchment area would inevitably disrupt behavioral health care services to our most fragile and needy population. Medicaid recipients would be denied access to their chosen providers…providers that may have been treating them for years and created established trust. Allowing Nash County to disembark from Eastpointe would cause chaos for those least fortunate and in need of behavioral health care services.
Eastpointe also alleges that DHHS refused to approve a merger between Eastpointe and Cardinal purposefully and with the intent to sabotage Eastpointe’s financial viability.
Also in its Complaint, Eastpointe alleges a statewide, power-hungry, money-grubbing conspiracy in which Brajer and DHHS and Trillium are conspiring to pose Trillium as the final winner in the “MCO Scramble to Consolidate,” “Get Big or Die” MCO mentality arising out of the legislative push for MCO consolidation. Because, as with any consolidation, duplicate executives are cut.
Over the last couple years, Eastpointe has discussed merging with Cardinal, Trillium, and Sandhills – none of which occurred. Comparably, Joffrey Lannister and Sansa Stark discussed merging. As did Viserys and Illyrio wed Daenerys to Khal Drogo to form an alliance between the Targaryens.
Some of the most noteworthy and scandalous accusations:
Leza Wainwright, CEO of Trillium and director of the NC Council of Community MH/DD/SA Programs (“NCCCP”) (now I know why I’ve never been invited to speak at NCCCP). Wainwright “brazenly took actions adverse to the interest of Eastpointe in violation of the NCCCP mission, conflicts of interest policy of the organization, and her fiduciary duty to the NCCCP and its members.” Compl. at 44.
Robinson, Governing Board Chair of Trillium, “further informed Brajer that he intended for Trillium to be the surviving entity in any merger with Eastpointe and that “any plan predicated on Trillium and Eastpointe being coequal is fundamentally flawed.”” Compl. at 61.
“On or about May 11, 2016, Denauvo Robinson (“Robinson”), Governing Board Chair of Trillium wrote Brajer, without copying Eastpointe, defaming Eastpointe’s reputation in such a way that undermined the potential merger of Eastpointe and Trillium.” Compl. at 59.
“Robinson, among other false statements, alleged the failure to consummate a merger between Eastpointe, CoastalCare, and East Carolina Behavioral Health LMEs was the result of Eastpointe’s steadfast desire to maintain control, and Eastpointe’s actions led those entities to break discussions with Eastpointe and instead merge to form Trillium.” Compl. at 60.
“Trillium, not Nash County, wrote Brajer on November 28, 2016 requesting approval to disengage from Eastpointe and to align with Trillium.” Compl. at 69.
Dave Richards, Deputy Secretary for Medical Assistance, maintains a “strong relationship with Wainwright” and “displayed unusual personal animus toward Kenneth Jones, Eastpointe’s former CEO.” Compl. at 47.
Brajer made numerous statements to Eastpointe staff regarding his animus toward Jones and Eastpointe. “Brajer continued to push for a merger between Eastpointe and Trillium.” Compl. at 53.
“On December 5, 2016, the same day that former Governor McCrory conceded the election to Governor Cooper, Brajer wrote a letter to Trillium indicating that he approved the disengagement and realignment of Nash County.” Compl. at 72.
“On March 17, 2016, however, Brajer released a memorandum containing a plan for consolidation of the LME/MCOs, in which NCDHHS proposed Eastpointe being merged with Trillium.” Compl. at 55.
Brajer’s actions were “deliberately premature, arbitrary, and capricious and not in compliance with statute and Rule, and with the intent to destabilize Eastpointe as an LME/MCO).” Compl. at 73.
“Brajer conspired with Nash County to cause Nash County to breach the Merger Agreement.” Compl. at 86.
Brajer “deliberately sought to block any merger between Eastpointe and other LME/MCOs except Trillium.” Compl. at 96.
“Brajer and NCDHHS’s ultra vires and unilateral approval of the Nash County disengagement request effective April 1, 2017 materially breached the contract between Eastpointe and NCDHHS. Equally brazen was Brajer’s calculated failure to give Eastpointe proper notice of the agency action taken or provide Eastpointe with any rights of appeal.” Compl. at 101.
Against Nash County
“To date, Nash County is Six Hundred Fifty Three Thousand Nine Hundred Fifty Nine Thousand and 16/100 ($653,959.16) in arrears on its Maintenance of Efforts to Eastpointe.” Compl. at 84.
“While serving on Eastpointe’s area board, Nash County Commissioner Lisa Barnes, in her capacity as a member of the Nash County Board of Commissioners, voted to adopt a resolution requesting permission for Nash County to disengage from Eastpointe and realign with Trillium. In so doing, Barnes violated her sworn oath to the determent of Eastpointe.” Compl. at 85.
What Eastpointe’s lawsuit could potentially mean to providers:
Eastpointe is asking the Judge in the federal court of our eastern district for a Temporary Restraining Order and Preliminary Injunction prohibiting Nash County from withdrawing from Eastpointe’s catchment area and joining Trillium’s catchment area. It is important to note that the behavioral health care providers in Eastpointe’s catchment area may not be the same behavioral health care providers in Trillium’s catchment area. There may be some overlap, but without question there are behavioral health care providers in Trillium’s catchment area that are not in Eastpointe’s catchment area and vice versa.
If Eastpointe is not successful in stopping Nash County from switching to Trillium’s catchment area, those providers who provide services in Nash County need to inquire – if you do not currently have a contract with Trillium, will Trillium accept you into its catchment area, because Trillium runs a closed network?!?! If Trillium refuses to include Nash County’s behavioral health care providers in its catchment area, those Nash County providers risk no longer being able to provide services to their consumers. If this is the case, these Nash County, non-Trillium providers may want to consider joining Eastpointe’s lawsuit as a third-party intervenor, as an interested, aggrieved person. Obviously, you would, legally, be on Eastpointe’s side, hoping to stay Nash County’s jump from Eastpointe to Trillium.
Even if Eastpointe is successful in stopping Nash County’s Benedict Arnold, then, as a provider in Eastpointe’s catchment area, you need to think ahead. How viable is Eastpointe? Eastpointe’s lawsuit is a powerful indication that Eastpointe itself is concerned about the future, although this lawsuit could be its saving grace. How fair (yet realistic) is it that whichever providers happen to have a contract with the biggest, most powerful MCO in the end get to continue to provide services and those providers with contracts with smaller, less viable MCOs are put out of business based on closed networks?
If Nash County is allowed to defect from Eastpointe and unite with Trillium, all providers need to stress. Allowing a county to abscond from its MCO on the whim of county leadership could create absolute havoc. Switching MCOs effects health care providers and Medicaid recipients. Each time a county decides to choose a new MCO the provider network is upended. Recipients are wrenched from the provider of their choice and forced to re-invent the psychological wheel to their detriment. Imagine Cherokee County being managed by Eastpointe…Brunswick County being managed by Vaya Health…or Randolph County being managed by Partners. Location-wise, it would be an administrative mess. Every election of a county leadership could determine the fate of a county’s Medicaid recipients.
Here is a map of the current 7 MCOs:
All behavioral health care providers should be keeping a close watch on the MCO consolidations and this lawsuit. There is nothing that requires the merged entity to maintain or retain the swallowed up entities provider network. Make your alliances because…
“Winter is coming.”
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.