Cardinal Innovations Healthcare Solutions will pay ousted CEO Pamela Shipman $424,975 in severance, wrapping up a year of leadership turmoil that has been costly to taxpayers.
On July 1, 2014, the board of the Kannapolis-based managed care group granted Shipman a 53 percent raise, bumping her salary from $260,000 to $400,000 a year. That was because her duties expanded as the group, which handles Medicaid spending for behavioral health, added Mecklenburg to its 15-county territory, new CEO Richard Topping said.
At that time, the board also gave Shipman an “exceeds expectations” job review and a $65,000 bonus based on 2013-14 goals, according to salary data recently released to the Observer.
The compensation, including the severance, comes from public money, mostly the state. But it doesn’t cut into Medicaid services, Topping said. Instead, it comes from the portion of the budget set aside by contract for administrative spending.
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Just 10 months after last summer’s rewards, the board held an emergency meeting in April and voted to demand Shipman’s retirement. Shipman, 61, was told to immediately leave the agency where she’d spent 28 years, though she was paid through June 30. Topping, who was promoted from general counsel and got a $97,500 raise to match Shipman’s pay, said in May that her performance had been in question for more than a year.
A handful of other top executives left during the same time period. At least two of them had also gotten significant raises and bonuses topping $50,000.
It’s a lot of money. It is. You’ve just got to look at the size and the scope and the scale.
Cardinal Innovations CEO Richard Topping on executive pay
Topping said the raises, bonuses and even the forced retirement that led to the severance package are part of Cardinal’s transition as it vies for a bigger role in North Carolina’s Medicaid reform movement.
“You’ve got a chance to change health care in North Carolina,” Topping said. “The stakes are big. I’ve got to have the staff that can help me do that.”
Shipman made Cardinal a statewide pioneer in efforts to rein in Medicaid spending for mental illness, addiction and developmental disabilities such as autism and intellectual disability.
Topping says he hopes to persuade state legislators that Cardinal should lead the way as North Carolina moves toward a new managed care model that merges Medicaid for physical and behavioral care, with a $14 billion statewide budget.
The goal is to provide a competitive public option.
Cardinal executive Bob Kocourek
Simply defining Cardinal poses a challenge. Originally a mental health agency serving three counties near Charlotte, it evolved into something like a public insurance company that handles Medicaid for behavioral health in 16 counties.
“We are a public entity that acts like a private company for a public purpose,” Topping says.
Cardinal is one of nine such groups serving that function in North Carolina. In a realm known for acronyms and jargon, their label is particularly cumbersome: They’re known as LME/MCOs, for “local management entity/managed care organizations.”
Cardinal, which had 635 employees and a budget of $635 million last year, is the largest of the nine, and its top executives are by far the best paid.
The Observer requested compensation data for the five highest-paid executives of each group for 2014-15. Cardinal’s top five ranged from $284,000 to $400,000, with performance bonuses ranging from $56,500 to just over $122,000.
In the other eight, Chief Medical Officer Craig Martin of the Asheville-based Smoky Mountain Partners was the top earner, with a salary of almost $268,000 and a $6,789 longevity bonus. Smoky Mountain also had the highest-paid CEO among the other groups, with Brian Ingraham earning $198,000 in salary and a longevity bonus of $6,184.
The CEO salary at Cardinal also dwarfs executive pay in most traditional public bodies. The $400,000 base pay matches that of President Barack Obama and is almost triple what Gov. Pat McCrory makes.
George Dunlap, a Mecklenburg County commissioner who serves on Cardinal’s board of directors, said he doesn’t think the managed care group compares directly with such offices: “Even though it’s a public entity, it’s totally different than government.”
You’ve got to have people with a lot of experience who have run large organizations and can handle dynamic growth.
Cardinal executive Bob Kocourek
Health care is a whole different world, even in the public realm. By those standards, Cardinal’s executive pay looks more reasonable.
The UNC system lists 101 employees who earned $400,000 or more last year, most of them in medical schools.
At Carolinas HealthCare System, a nonprofit that receives public money, the top 10 executives each received more than $1 million in compensation last year.
Topping said he considers higher education and public hospital systems as his organization’s peers, though the UNC system and Carolinas HealthCare are much larger. He said he’s trying to build an executive team with the skills and expertise to run a large and growing company, merging the best of the public and private worlds. Because Cardinal isn’t tied to a government pay scale, he said, its leadership can be more flexible and competitive than typical government agencies.
The N.C. Senate is looking at a plan that would turn Medicaid administration over to managed care organizations, which could include groups run by out-of-state for-profit insurance companies. A House plan would give that responsibility to nonprofit “accountable care organizations” run by doctors and hospitals. Topping wants them to look at Cardinal as a third option: “What Cardinal is trying to do is go right up the middle.”
Shipman’s departure raised some questions among legislators who are involved in Medicaid reform. State Sen. Tommy Tucker, a Waxhaw Republican who has long known Shipman and viewed her as an expert, said in May that Cardinal had damaged its credibility by forcing Shipman out with no explanation.
Cardinal initially announced that Shipman had retired. Topping said recently that the plan was to present her departure that way to protect her dignity and avoid the need for a severance package.
But when the Observer pressed for an explanation of her abrupt departure, Topping said the board had forced her out after more than a year of working on performance issues, including concerns about her ability to adapt to the group’s growth. Shipman’s lawyer, John Gresham, countered by releasing the summary pages of her last job evaluation, given last summer, in which she was rated “exceeds expectations” and told that she “continues to garner the board’s full support and confidence.”
Dunlap, who joined the Cardinal board last fall, said last week that his understanding is that Shipman’s work was highly regarded, but that the 2014 raise came with higher expectations that she didn’t meet. “When you’re paid at that level, you’re also expected to perform at that level,” he said.
Board Chair Lucy Drake could not be reached for comment.
Gresham said the board gave Shipman no indication of members’ concerns until just before her forced retirement in April.
Neither Gresham nor Cardinal would discuss details of the severance agreement, which was signed in late June. Gresham said it requires that neither party speak badly of the other. He released a statement from Shipman hailing “an amicable conclusion to my tenure.”
“I have great confidence that Cardinal Innovations will continue to make the world a better place for people with disabilities that depend on the public system for their care,” the statement concluded.
Cardinal executive pay
Here’s what the five highest-paid executives at Cardinal Innovations Healthcare Solutions made in 2014-15. Bonuses were based on prior year’s performance. Cardinal says “other compensation” was mostly contributions to 401(k) retirement accounts.
Pamela Shipman, former CEO
Shipman was forced to retire in April and paid through June 30.
▪ Salary: $400,000.
▪ Bonus: $65,000.
▪ Other compensation: $50,369.
Richard Topping, new CEO
Topping, who was Cardinal’s general counsel, was named acting CEO when Shipman left and assumed the permanent job July 1. His salary is for the new post.
▪ Salary: $400,000.
▪ Bonus: $61,010.
▪ Other compensation: $31,042.
Steven Timmons, former chief administrative officer
Timmons announced in May that he was resigning because of a family health situation.
▪ Salary: $305,000.
▪ Bonus: $59,500.
▪ Other compensation: $25,197.
Peter Murphy, chief information officer (technology)
▪ Salary: $300,000.
▪ Bonus: $56,500.
▪ Other compensation: $24,146.
Craig Hummel, former chief medical officer
Hummel left Cardinal on May 15 to take a job in Salt Lake City.
▪ Salary: $284,068.
▪ Bonus: $122,361 (includes performance reward for 2014-15).
▪ Other compensation: $61,480 (includes pay for unused vacation).
How that compares
Traditional public officials
▪ Tom Ross, president of the UNC system: $550,000 a year.
▪ Kevin Sigrist, state investment officer (North Carolina’s highest-paid state employee): $351,000 a year.
▪ Tony Zeiss, president of Central Piedmont Community College: $342,024 a year.
▪ Ann Clark, superintendent of Charlotte-Mecklenburg Schools: $262,000 a year.
▪ Dena Diorio, Mecklenburg County manager: $228,000 a year.
▪ Pat McCrory, governor of North Carolina: $142,265 a year.
Public health officials
▪ Michael Tarwater, CEO of Carolinas HealthCare System: $1.3 million salary, $5.3 million total compensation.
▪ Walter Randolph Chitwood, East Carolina University professor and founder of the university’s Heart Institute (retired in February, highest-paid employee of UNC system): $1,030,636 salary.
▪ William Roper, CEO of UNC Health Care and dean of UNC medical school: $753,900 salary.
Look up salaries
Find salaries for most public employees at www.charlotteobserver.com/news/databases/