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Cardinal Sues State to Keep Paying CEO $635,000 – With Our Tax Dollars!

On September 18, Cardinal filed a Petition at the Office of Administrative Hearings (OAH) challenging the State’s authority to set executive compensation limits. In other words, Cardinal is suing the State of NC to keep paying Toppings $635,000.00 with our tax dollars. See below:

petition

On Tuesday (October 10, 2017) legislators blasted Cardinal Healthcare and strongly urged DHHS Secretary Mandy Cohen to terminate its contract with Cardinal. The legislators challenged the impressive and questionably-needed administrative costs of the managed care organizations (MCOs), including exorbitant salaries, office parties, and private jets. Cardinal’s CEO Richard Topping, who became CEO in July 2015, was compensated at $635,000.00 this year. His total compensation was over $1.2 million in 2016 and 2017 (for a government job; i.e., our tax dollars. So we all may own a portion of his home). See blog. and blog. The State Auditor also reported excessive spending and mismanagement of funds. Let’s keep in mind, people, these funds are earmarked to provide medically necessary services to our most needy population suffering from mental illness, substance abuse, and developmentally disabilities. But Toppings wants a Porsche. (Disclaimer – my opinion).

And if we weren’t enraged enough about the obscene salary of Cardinal’s CEO, Cardinal decided to spend more tax dollars…on attorneys’ fees to litigate maintaining its CEO’s salary. When I heard this, I hoped that Cardinal, with our tax dollars, paid an internal general counsel, who would litigate the case. I mean, an in-house counsel gets a salary, so it wouldn’t cost the taxpayers extra money (over and beyond his/her salary) to sue the State. But, no. I was woefully disappointed. Cardinal hired one of the biggest law firms in the State of NC – Womble Carlyle – the only firm downtown Raleigh with its signage on the outside of the skyscraper. I am sure that costs a pretty penny. Please understand – this is nothing against Womble Carlyle. It is a reputable firm with solid lawyers, which is why Cardinal hired them. But they ain’t cheap.

BACKGROUND

Cardinal is a Local Management Entity/Managed Care Organization (LME/MCO) created by North Carolina General Statute 122C. IT IS NOT A PRIVATE COMPANY, LIKE BCBS. Cardinal is responsible for managing, coordinating, facilitating and monitoring the provision of mental health, developmental disabilities, and substance abuse services in 20 counties across North Carolina. Cardinal is the largest of the state’s seven LME/MCOs, serving more than 850,000 members. Cardinal has contracted with DHHS to operate the managed behavioral healthcare services under the Medicaid waiver through a network of licensed practitioners and provider agencies.  State law explicitly states Cardinal’s core mission as a government
entity.

CARDINAL’S FUNDING

Cardinal’s most significant funding is provided by Medicaid (85%). Funding from Medicaid totaled $567 million and $587 million for state fiscal years 2015 and 2016, respectively. Medicaid is a combination of federal and state tax dollars. If you pay taxes, you are paying for Toppings’ salary and the attorneys’ fees to keep that salary.

North Carolina General Statute 122C-123.1 states: “Any funds or part thereof of an area authority that are transferred by the area authority to any entity including a firm, partnership, corporation, company, association, joint stock association, agency, or nonprofit private foundation shall be subject to reimbursement by the area authority to the State when expenditures of the area authority are disallowed pursuant to a State or federal audit.” (Emphasis Added).

Our State Auditor, in its audit of Cardinal, already found that Cardinal’s spending of its funds is disallowed:

cardinals salary

Not only has the State Auditor called Cardinal out for excessive salaries, in a letter, dated August 10, 2017, the Office of State Human Resources told Cardinal that “Based on the information you submitted, the salary of your Area Director/CEO is above this new rate and, therefore, out of compliance. Please work to adjust the Area  Director/CEO salary accordingly and notify us of how you have remedied this situation. In the future, please ensure that any salary adjustment complies with the
provisions of G.S. 122C-121- the Mental Health, Developmental Disabilities, and Substance Abuse Act of 1985.” (emphasis added). In other words – follow the law! What did Cardinal do? Sued the Office of State Human Resources.

Concurrently, Cardinal is terminating provider contracts in its closed network (which keeps Cardinal from having to pay those providers), decreasing and denying behavioral health care services to Medicaid recipients (which keeps Cardinal from having to pay for those services). — And now, paying attorneys to litigate in court to keep the CEO’s salary of $635,000.00. Because of my blog, I receive emails from parents who are distraught because Cardinal is decreasing or terminating their child’s services. Just look at some of the comments people have written on my blog. Because of my job, I see firsthand the providers that are getting terminated or struck with alleged overpayments by Cardinal (and all the MCOs).

My questions are – if Cardinal has enough money to pay its CEO $635,000.00, why doesn’t Cardinal increase reimbursement rates to providers? Provide more services to those in need? Isn’t that exactly why it exists? Oh, and, let’s not forget Cardinal’s savings account. The State Auditor found that “For FY 2015 and 2016, Cardinal accumulated approximately $30 million and $40 million, respectively, in Medicaid savings.” Cardinal, and all the MCOs, sit in a position that these government entities could actually improve mental health in NC. They certainly have the funds to do so.

According to a blog follower, Cardinal pays lower reimbursement rates than other MCOs:

Psychiatric Diagnostic Eval. (Non-Medical) 90791
Cardinal MCO Pays $94.04
Partners MCO Pays 185.90
Medicare Pays 129.60
SC Medicaid Pays 153.94

Psychotherapy 60 minutes (in-home) 90837
Cardinal MCO Pays $74.57
Partners MCO Pays 112.00
Medicare Pays 125.93
SC Medicaid Pays 111.90

According to the Petition, Cardinal’s argument is that it is not a government entity. That its employees, including Toppings, does not receive state government benefits and are not part of the state retirement program. It also states in its Petition that Cardinal hires external consultants (with our tax dollars) to conduct a market compensation study every two years. (cough!). Cardinal complains, in the Petition, that “If forced to reduce its CEO’s salary to a level well below market rate for the leader of an organization of Cardinal Innovations’ size and complexity, Cardinal Innovations would be likely to immediately lose its current CEO and would be at a significant market disadvantage when trying to replace its current CEO with one of similar experience and expertise in the industry, as is necessary to lead Cardinal Innovations. This would result in immediate and irreparable harm to Cardinal Innovations and reduce the organization’s ability to fulfill its mission.” Wow – Toppings must be unbelievable…a prodigy…the picture of utopia…

The State has informed Cardinal that a salary is more appropriate at $194,471.00 with the possibility of a 5% exception up to $204,195.00.

In its Petition, Cardinal calls the statutorily required salary cap “an irrationally low salary range.” If I take out 50% for taxes, which is high, Toppings is paid $26,458.33 per month. In comparison, the Medicaid recipients he serves get the following per month (at the most):

eligibility

Disgusted? Angry? Contact your local representative. Don’t know who your representative is? Click here. I wonder how the IRS would react if I protested by refusing to pay taxes… Don’t worry. I’m not going to go all Martha Stewart on you.

Exhaustion of Administrative Remedies: Futile as the Caucus-Race?

Answer – Sometimes.

How many of you have received Remittance Advices from NCTracks that are impossible to understand, include denials without appeal rights, or, simply, are erroneous denials with no guidance as to the next steps?  While these were most prevalent in the first couple years after NCTracks was rolled out (back in July 2013), these burdensome errors still exist.

You are allowed to re-submit a claim to NCTracks for 18 months. How many times do you have to receive the denial in order for that denial to be considered a “final decision?” And, why is it important whether a denial is considered a final decision?

  1. Why is it important that a denial be considered a “final decision?”

As a health care provider, your right to challenge the Department of Health and Human Services’ (via CSC or NCTracks’) denial instantly becomes ripe (or appealable) only after the denial is a final decision.

Yet, with the current NCTracks system, you can receive a denial for one claim over and over and over and over without ever receiving a “final decision.”

It reminds me of the Causus-race in Alice and Wonderlandalice“There was no ‘One, two, three, and away,’ but they began running when they liked, and left off when they liked, so that it was not easy to know when the race was over. However, when they had been running half an hour or so, and were quite dry again, the Dodo suddenly called out ‘The race is over!’ and they all crowded round it, panting, and asking, ‘But who has won?'” – Alice in Wonderland.

On behalf of all health care providers who accept Medicaid in North Carolina and suffered hardship because of NCTracks, at my former firm, I helped file the NCTracks class action lawsuit, Abrons Family Practice, et al., v. NCDHHS, et al., No. COA15-1197, which was heard before the NC Court of Appeals on June 12, 2015. The Opinion of the Court of Appeals was published today (October 18, 2016).

The Court of Appeals held that the plaintiffs were not required to “exhaust their administrative remedies” by informal methods and the Office of Administrative Hearings (OAH) prior to bringing a lawsuit in the State Court for damages because doing to would be futile – like the Caucus-race. “But who has won?” asked Alice.

Plaintiffs argued that, without a “final decision” by DHHS as to the submitted claims, it is impossible for them to pursue the denials before the OAH.

And the Court of Appeals, in a 2-1 decision, agrees.

The Abrons decision solidifies my contention over the past 4-5 years that a reconsideration review is NOT required by law prior to filing a Petition for Contested Case at OAH…. Boom! Bye, Felicia!

Years ago, I informed a client, who was terminated by an managed care organization (MCO), that she should file Petition for Contested Case at OAH without going through the informal reconsideration review. One – the informal reconsideration review was before the very agency that terminated her (futile); and two – going through two processes instead of one costs more in attorneys’ fees (burdensome).

We filed in OAH, and the judge dismissed the case, stating that we failed to exhaust our administrative remedies.

I have disagreed with that ruling for years (Psssst – judges do not always get it right, although we truly hope they do. But, in judges’ defenses, the law is an ever-changing, morphing creature that bends and yields to the community pressures and legal interpretations. Remember, judges are human, and to be human is to err).

However, years later, the Court of Appeals agreed with me, relying on the same argument I made years ago before OAH.

N.C. Gen. Stat. 150B-22 states that it is the policy of the State that disputes between the State and a party should be resolved through informal means. However, neither 150B-22 nor any other statute or regulation requires that a provider pursue the informal remedy of a reconsideration review. See my blog from 2013.

I love it when I am right. – And, according to my husband, it is a rarity.

Here is another gem from the Abrons opinion:

“DHHS is the only entity that has the authority to render a final decision on a contested medicaid claim. It is DHHS’ responsibility to make the final decision and to furnish the provider with written notification of the decision and of the provider’s appeal rights, as required by N.C. Gen. Stat. 150B-23(f).”

N.C. Gen. Stat. 150B-23(f) states, ” Unless another statute or a federal statute or regulation sets a time limitation for the filing of a petition in contested cases against a specified agency, the general limitation for the filing of a petition in a contested case is 60 days. The time limitation, whether established by another statute, federal statute, or federal regulation, or this section, shall commence when notice is given of the agency decision to all persons aggrieved who are known to the agency by personal delivery or by the placing of the notice in an official depository of the United States Postal Service wrapped in a wrapper addressed to the person at the latest address given by the person to the agency. The notice shall be in writing, and shall set forth the agency action, and shall inform the persons of the right, the procedure, and the time limit to file a contested case petition. When no informal settlement request has been received by the agency prior to issuance of the notice, any subsequent informal settlement request shall not suspend the time limitation for the filing of a petition for a contested case hearing.”

2. How many times do you have to receive the denial in order for that denial to be considered a “final decision”?

There is no magic number. But the Court of Appeals in Abrons makes it clear that the “final decision” must be rendered by DHHS, not a contracted party.

So which we ask – What about terminations by MCOs? Do MCOs have the authority to terminate providers and render final decisions regarding Medicaid providers?

I would argue – no.

Our 1915b/c Waiver waives certain federal laws, not state laws. Our 1915 b/c Waiver does not waive N.C. Gen. Stat. 150B.

“But who has won?” asked Alice.

“At last the Dodo said, ‘everybody has won, and all must have prizes.'” – Only in Wonderland!

Sometimes, you just need to stop running and dry off.

General Assembly in Full Swing: What Medicaid Bills Are On the Agenda??

It’s that time of year again. The legislators are back in town. Moral Mondays resume. And all eyes are on the General Assembly. But, this is the short session, and the General Statutes limit the powers of legislative law-making in the short session.

For those of you who do not know how our General Assembly (GA) works and the difference between the short and long sessions, let me explain:

In odd-numbered years, the GA meets in January and continues until it adjourns. There is no requirement as to the length of the long session, but it is normally about 6 months. In the long session, everything is fair game. New laws or changes to the existing laws can be proposed in long sessions for all of the subjects on which the GA legislates.

The short session reconvenes every even-numbered year and typically lasts 6 weeks. Last year the long session adjourned July 26, 2013, and the GA reconvened May 14, 2014.

There are limits as to what measures may be considered in the short session. In fact, at the end of the long session, the GA passed Resolution 2013-23, which states exactly what topics/bills may be considered in the short session.

So…the question is: What Medicaid bills may be considered during this short session?

H0674
H0867
H0320

Now there are of course, exceptions. For example, any bill that directly and primarily affects the State Budget can be introduced. Obviously, a Medicaid bill could, arguably, directly and primarily affect the budget.

The bills I enumerated above, however, are the bills that are allowed to be considered in the short session because they constitute a crossover bill, that is, these bills were passed one house and were received in the other during last year’s long session and are considered “still alive” for consideration during the current short session.

So what do these Medicaid bills propose?

House Bill 674 could be a game changer for Medicaid providers. The bill, which passed the House last year with a vote of 116-0, would direct the Program Evaluation Division to study the contested case process in regards to Medicaid providers. There are 3 key components in this study according to the bill:

1. The Division must review the procedures for a contested case hearing under NCGS 150B and determine whether there is a way to streamline the process and decrease backlog.
2. The Division must consider alternative methods of review other than the contested cases.
3. The Division must review NCGS 108C-12 to determine whether any amendments to the law would improve the cost-effectiveness and efficiency of the Medicaid appeal process. (NCGS 108C-12 is the statute that allows providers to appeal adverse decisions to the Office of Administrative Hearings (OAH)).

Whew. The Program Evaluation Division would have its work cut out for it if the bill passes!

House Bill 674 was received by the Senate on May 5, 2013, and it passed its first reading.

House Bill 867 is named “An Act to Allow for the Movement of Certain Medicaid Recipients,” and it purports to allow those recipients with an 1915(c) Innovations Waiver slot to move about the State and for the slots to be recognized uniformly across the State. This way a person with an Innovations Waiver would not need to re-apply in another county if he or she moves there. However, for those served by the managed care organizations (MCOs), residency is determined by the county in which the recipient currently resides.

Then we come to House Bill 320. See my blog,”HB320: The Good News and the Bad News for NC Medicaid Providers.”

House Bill 320 mainly speaks to Medicaid recipient appeals, but imbedded within the language is one tiny proposed change to NCGS 108C-1. Just an itty, bitty change.

NCGS 108C-1 provides the scope of 108C (which applies to providers) and currently reads, “This Chapter applies to providers enrolled in Medicaid or Health Choice.”

If House Bill 320 passes, NCGS 108C-1 will read, “This Chapter applies to providers enrolled in Medicaid or Health Choice. Except as expressly provided by law, this Chapter does not apply to LME/MCOs, enrollees, applicants, providers of emergency services, or network providers subject to Chapter 108D of the General Statutes.”

What????

If House Bill 320 passes, what, may I ask, will be a Medicaid provider’s appeal options if NCGS 108C does not apply to MCOs? And would not the new scope of NCGS 108C-1 violate the State Plan, which explicitly gives OAH the jurisdiction over any contracted entity of the Department of Health and Human Services (DHHS)?  See my blogs on MCOs: “NC MCOs: The Judge, Jury and Executioner,” and “A Dose of Truth: If an MCO Decides Not to Contract With You, YOU DO HAVE RIGHTS!

I also wonder, if House Bill 320 passes, what effect this revision to NCGS 108C-1 will have. Arguably, it could have no effect because of the above-mentioned language in the State Plan, the 4th Circuit Court of Appeals case that determined that MCOs are agents of the state, and the fact that the Department is defined in 108C-2 to include any of its legally authorized agents, contractors, or vendors.

On the other hand, in every single lawsuit that I would bring on behalf of a provider against an MCO, I would have another legal obstacle to overcome. The MCO’s attorney would invariably make the argument that OAH does not have jurisdiction over the MCO because the scope of 108C has been changed to exclude the MCOs. They have been arguing already that OAH lacks jurisdiction over the MCOs since NCGS 108D was passed, but to no avail.

Needless to say, the MCO lobbyists will be pushing hard for H 320 to pass. H 320 passed its 3rd reading on May 15, 2013, by a vote of 114-0, and the Senate received it on May 16, 2013.