North Carolina’s top health official has called it “unconscionable” to pay the CEO of a local taxpayer-funded health agency nearly $1 million in compensation for fiscal year 2017.
At a contentious legislative hearing in late November, Rick Brajer, the state’s secretary of health and human services, used that word to describe the pay package recently approved for Richard Topping, CEO of Cardinal Innovations Healthcare, the largest of seven public agencies that provide services for people with mental illness, developmental disabilities and substance abuse.
Brajer said CEOs of the other six agencies each are paid between $167,000 and $250,000, and none have bonus or a long-term incentive plans. For Topping to receive a salary of $635,000 plus bonus and incentive pay is “an irresponsible use of public funds,” Brajer said, especially for an agency charged with taking care of the state’s “most vulnerable” citizens.
Also at the meeting of the Joint Legislative Oversight Committee on Medicaid and N.C. Health Choice, Sen. Tommy Tucker, R-Waxhaw, criticized the Cardinal board for approving Topping’s compensation. “I don’t know what kind of medication they’re on,” he said. “…We’re serving the poor. We’re serving the least of these.”
Tucker said it’s difficult to justify Topping’s pay to parents of a disabled child who might be on a five-year waiting list for services. “How in the world do I tell somebody, ‘I’m sorry. I can’t get you off the (waiting) list,’ but the guy at Cardinal can make $1 million a year?” Tucker asked.
Topping’s pay came to the attention of Brajer and Tucker in recent weeks when they received copies of the minutes of the Sept. 16 Cardinal board meeting.
At that meeting, the board raised Topping’s salary from $400,000 in fiscal year 2016 to $635,000 for 2017. The board also will give him a bonus of zero to 40 percent, that could mean $254,000. The board also approved a long-term incentive package of $412,000 that could be paid over several years. If Topping receives everything, it would total $1.3 million.
At the legislative hearing and an interview with the Observer, Topping defended his compensation by explaining that Cardinal has saved the state money every year, even as it has grown, by operating efficiently enough to “slow the rate of cost increases.”
“It’s 1 percent less this year than it was last year,” Topping said. “Over 10 years, on average, Cardinal has decreased the cost by 1.2 percent (each year).”
Cardinal receives about $1 billion in federal and state tax money to pay for behavioral health services for more than 1 million clients in 20 counties that stretch from Mecklenburg to Halifax. Most of the funding comes from reimbursement for patients covered by Medicaid. The non-profit organization is monitored by the N.C. Department of Health and Human Services, and it contracts with psychologists and other professionals to provide services.
Topping said Cardinal uses only 8 percent of the public funds it receives for administrative costs, even though federal rules allow 15 percent. He added that the 8 percent can’t be used for services, so the increase in his compensation does not mean a cutback in services for clients.
In an interview with the Observer, Topping said Cardinal is different from the other six mental health agencies, officially called “local management entities/managed care organizations” or LME/MCOs. Unlike employees at the other six agencies, Cardinal’s are not part of “state personnel” and are not part of the state retirement system, Topping said.
Topping’s responses did little to placate the anger and frustration evident in the voices of Tucker and Brajer.
“Richard is doing his very best to present that Cardinal Innovations is something other than an LME/MCO,” Brajer said. “He goes out of his way to compare himself to nonprofit hospitals. They are nothing like a nonprofit hospital.…Virtually any of the other CEOs (in the six agencies) could step into his job. It’s not as if he has a unique skillset.”
Brajer said Topping’s pay package is “completely out of market” when compared with leaders of other LME/MCOs. “There is literally nothing that Cardinal Innovations does or is asked to do that is different” from the other six agencies, Brajer told the Observer. For that reason, he said, there is no justification for the “titanic difference” in compensation.
Some of Topping’s claims have been contradicted by state officials. For example, in the Observer interview, Topping initially said Cardinal “is not an LME/MCO.” But when pressed, he rephrased the statement: “We’ve not operated as an LME.…Cardinal operates as a public nonprofit and has for 11 years.”
Topping also said Cardinal “provides better value” and has “capabilities beyond what the LME/MCOs can do.” But Brajer said Cardinal is no different from the other agencies.
Based on performance measures kept by the state, “Cardinal is very average when it comes to their comparison to other LME/MCOs,” said Jason Vogler, an official with the state Division of Mental Health, Developmental Disabilities and Substance Abuse Services. “All seven of them…their performance is roughly the same.”
At the hearing, Brajer asked legislators to consider giving his agency more power “to make sure LME/MCOs do the work they’re supposed to do and do it in a financially responsible way.”
Brajer said the state, which contracts with LME/MCOs, has little control over the agency boards, which are made up of county commissioners, health officials and lay people in the communities they serve. Each agency has been given “a state-run monopoly” to coordinate services for specific counties, he said.
The Cardinal board is chaired by Lucy Drake, a realtor, former mayor of Stallings and mother of a son with autism. Other members are: Mecklenburg commissioner George Dunlap; Nancy Fey-Yensan, dean of the College of Health and Human Services at UNC Charlotte; Bill Burgin, a Rowan County architect; Amanda Blanks, a retired employee of John Umstead Hospital in Butner; Ethel Fuller, a retired social worker from Caswell County; Carolyn Chaney Hoskins, a nurse from Caswell County; Fred McClure, a Davidson County commissioner; John Moon, former director of the Alamance-Caswell Area Mental Health and Substance Abuse Authority; Marcelle Smith, a Halifax County commissioner; Bryan Thompson, a Winston-Salem lawyer; Danny Wright, a CPA and former Vance County commissioner; and Steve Yuhasz, a lawyer, surveyor and former Orange County commissioner.
In an interview with the Observer, Drake, the Cardinal board chair, said she “stands firm behind” Topping’s pay, explaining that the board works with a human resources consultant who recommends “market-based” compensation.
Drake, who has been on the board since 1998, said Cardinal has always offered a potential bonus for its CEO, but this is the first year for a long-term incentive package, as part of a three-year contract. If Topping earns the incentive pay, he will receive it over seven years, she said.
“We wanted to be able to keep our CEO,” Drake said. “We wanted to give him an incentive to stay.…We expect our CEO to perform or they don’t get a bonus and they don’t get the long-term incentive.”
Topping, previously Cardinal’s general counsel, took over as CEO in April 2015 when former CEO Pam Shipman was pushed out by the agency’s board. Shipman’s salary at the time was $400,000, and that’s what Topping received when he took over. Recalling that action, Drake said the board is not shy about changing direction when needed. “If Richard can’t perform…he’ll be gone,” she said.
At the legislative hearing, Tucker also questioned Topping about rumors that Cardinal plans to leave its Kannapolis headquarters and move into leased office space in the NASCAR Plaza office tower in uptown Charlotte “for $300 to $400 per square foot plus employee parking.”
Topping responded that Cardinal is planning to sell the 26 properties it owns across the state and “get out of the real estate business.” He told the Observer that Cardinal currently has corporate offices in several locations, including Kannapolis. Starting Jan. 1, the agency will begin consolidating corporate offices into two locations in Charlotte, including three floors previously occupied by Chiquita Brands International in the NASCAR tower. Cardinal will also expand its existing Prosperity Place office in the University area.
Staff reporter Gavin Off contributed.
What others make
CEOs of the other six agencies each are paid between $167,000 and $250,000, and none have bonus or a long-term incentive plans. For Cardinal CEO Richard Topping to receive a salary of $635,000 plus bonus and incentive pay is “an irresponsible use of public funds,” Brajer said, especially for an agency charged with taking care of the state’s “most vulnerable” citizens.