Politics & Government

What you need to know to understand Cardinal’s downfall

Mental health agency Cardinal Innovations, once a small authority based in Kannapolis, controls hundreds of millions of tax dollars and recently made headlines for its spending practices.

Cardinal, now located in Charlotte, became the focus of scrutiny by lawmakers after a state audit on spending for Christmas parties and other luxuries including in-state charter flights. Another audit by the Department of Health and Human Services criticized excessive severance pay policies for top executives.

Frustrated with Cardinal’s actions, DHHS took over Cardinal, firing the board and accelerating the end of CEO Richard Topping’s employment.

Here’s what you need to know about Cardinal:

Q: What is Cardinal Innovations?

A: Cardinal helps coordinate and monitor services and treatment for patients who have needs involving mental health, disabilities or substance abuse.

Cardinal contracts with almost 1,000 doctors, hospitals and other health professionals. It operates in 20 N.C. counties, including Mecklenburg, serves more than 850,000 N.C. residents and has 840 employees, according to a May audit.

Q: When did it start?

A: It began in 1974 as Piedmont Behavioral Health, a public authority that oversaw mental health services in Cabarrus, Union and Stanly counties. In 2004 the Department of Health and Human Services made it North Carolina’s pilot for managed care, in which organizations contract with psychologists, counselors, clinics and other professionals to provide Medicaid services.

In 2009 Piedmont changed its name to Cardinal Innovations. It was a 2013 decision by the outgoing administration of Democratic Gov. Bev Perdue that put Cardinal in charge of Mecklenburg County’s Medicaid program.

Q: Is it a private company or a state agency?

A: It’s something else altogether: A Local Management Entity, or LME. It’s a type of public authority, like Carolinas HealthCare System, but with different rules.

LMEs were created by an act of the then-Democratic controlled General Assembly in 2001. They transitioned from local mental health systems, splitting funding and oversight from the actual service providers. Lawmakers in 2011 expanded the managed care pilot statewide. Cardinal and similar organizations are known as LME/MCOs.

In the eyes of state lawmakers, there’s no doubt that Cardinal is a public agency. “(It) is absolutely a state agency,” says Democraic Rep. Verla Insko of Orange County. “It runs over 100 percent with tax dollars.”

Q: Who uses Cardinal services?

A: Patients who qualify for Medicaid, the federal insurance program for low-income and disabled U.S. residents, or have no insurance coverage.

Q: Why is Cardinal under scrutiny?

A: Lavish Christmas parties. Expensive flights in-state. Hefty executive salaries. Golden parachute severance packages. State audits have detailed that Cardinal board members expenses and said that “unreasonable spending could erode public trust.” One example, includes paying $15,765 to take four chartered flights to in-state locations during three months of 2015. In addition, ousted CEO Richard Topping was paid $635,000, more than three times the amount that state policy permits.

Q: What happened to Cardinal’s CEO and board?

A: The Cardinal board voted several times to reduce, then raise Topping’s salary. Finally, on Nov. 17, the board voted to remove him. However, he had planned to work until Friday, Dec. 1. The board also approved paying Topping severance at his highest salary and spent $1.7 million on him and a total of $3.8 million in severance to three other outgoing executives.

On Monday, Nov. 27, Department of Health and Human Services Secretary Mandy Cohen took over Cardinal and fired the Cardinal board members. “I am deeply troubled by the unlawful excessive severance package you have authorized for your departing CEO,” Cohen wrote in a letter to Cardinal’s attorney, adding that the board paid “$3.8 million state, county and federal dollars that are supposed to provide mental health, developmental disability, and substance abuse services to residents of Cardinal’s 20 county coverage area.”

The state agency also requested and was approved for a temporary restraining order against Topping and the former board members to prevent them from interfering with the takeover or accessing Cardinal money.

Q: What will happen next?

A: Health Secretary Cohen has said that during the takeover period, DHHS staff will be on-site working with interim CEO Trey Sutten and Cardinal staff to stabilize the organization. She also said HHS plans to help hire additional executive team members and “develop a corrective action plan to bring Cardinal into compliance with all applicable laws.”

By Dec. 15, DHHS and county commissioners will appoint new board members dictated by state law.

Q: How did Cardinal become Mecklenburg’s mental health provider?

A: Cardinal Innovations originated as nonprofit Piedmont Behavioral Health, based in Kannapolis in 1974. From 2001-2005 Piedmont managed state-funded behavioral services for the uninsured and underinsured. Then, Piedmont pushed to consolidate management of Medicaid and state-funded behavioral healthcare into a single public entity.

In 2005, Piedmont operated in five counties: Cabarrus, Davidson, Rowan, Stanley and Union.

Mecklenburg County’s MeckLINK Behavioral Healthcare oversaw government-funded mental health services for county residents and was set to oversee Medicaid for behavioral health services in 2013.

But in late 2012, as MeckLINK was preparing to oversee millions in Medicaid money, then-outgoing DHHS Secretary Albert Delia wrote county officials to instead assign Cardinal Innovations to manage the money. County officials balked, and it wasn’t until late 2013 that commissioners voted to negotiate transfer services to Cardinal.

Q: What is Cardinal’s budget?

A: Cardinal had $682.6 million in the budget year that ended June 30, 2016, the latest available on Cardinal’s website. Of that, $587.3 million came from Medicaid. Another $83.9 million came from state funding and $7.2 million from counties. Meanwhile, $4.2 million was from the U.S. Department of Housing and Urban Development and other money.

Q: Have Cardinal’s actions affected you?

A: If you or someone you know receives health care services through Cardinal and you have a story to tell please contact reporters Cassie Cope (704-358-5926) or Jim Morrill (704-358-5059.)

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