By Taylor Knopf
Lawmakers used the words “irresponsible,” “unbelievable,” “exorbitant,” “arrogant,” “greedy,” “egregious,” “avarice” and “unconscionable” to describe the spending at North Carolina’s largest behavioral health management company during a legislative hearing Tuesday.
Leadership from the Department of Health and Human Services appeared before the Joint Legislative Oversight Committee on Health and Human Services on Tuesday at the capitol to fill in lawmakers on some of the details of its investigation into Charlotte-based Cardinal Innovations. Last week, DHHS released a new report which found unusually generous salaries, bonuses and severance packages for Cardinal’s top executives.
State lawmakers on both sides of the aisle expressed their fury with those executives.
The DHHS review was prompted by a scathing report issued in May by the state auditor, which found expenditures such as four chartered flights during a three-month period for Cardinal executives, all within the state of North Carolina.
On Tuesday, lawmakers again criticized the high salary of Cardinal’s CEO Richard Topping, who makes $517,000 with potential for a $100,000 bonus, according to state Medicaid head Dave Richard. In comparison, the CEOs of the other six behavioral health management companies, known as LME-MCOs, range between $166,000 and $217,000.
“I think it’s unbelievable that we are dealing with people with mental health issues, dealing with developmentally disabled folks and opioid abuse and everything, and those folks are sitting on $270 million in cash,” Sen. Tommy Tucker (R-Waxhaw) said.
“They are paying the exorbitant salaries, and now have a trigger of $12 million to $15 million in compensation in severance packages,” he added. “I mean, I don’t know how you choke this snake that has eroded the public trust, but there are things that the secretary (of DHHS) and the department can do now.”
“There is no limit to the arrogance and the greed of this crowd,” said Sen. Tamara Barringer (R-Cary). “These people are the most vulnerable in our society, and yet I don’t think we’ve seen this level of greed and avarice on Wall Street where there are scandals.
“The word ‘unconscionable’ has arisen. ‘Unconscionability’ in the law means ‘shocks the conscience.’ It’s a word we only use in the most egregious of situations, and frankly, this one fits the bill,” she added.
The severance packages for Cardinals top executives range from 24 to 36 months and could be triggered by events beyond dismissal without cause, such as a change in the CEO or to the board of directors.
Cardinal manages almost $1 billion in state and federal funds and manages mental health services in 20 counties, for as many as 850,000 Medicaid recipients. Richard said he fears that if too many of these severance packages were triggered at once, it would destabilize the organization. The leadership would be gone, yet Cardinal would still be paying out millions of dollars to people no longer working there.
Richard was cautious in his public remarks to lawmakers, citing legal action that Cardinal instigated against the N.C. Office of State Human Resources.
He said Cardinal staff have responded to DHHS, pledging to cease holding board meetings outside their corporate offices and contracting with private planes for travel.
“We share your frustration about the actions that are happening at the administrative level of Cardinal,” Richard said. “There is no tolerance for this executive abuse that exists at this point. We will do everything that we can within the authority we have. We know that the House and Senate are continuing to talk about options, and again, we certainly welcome any authority you give us to deal with this.”
DHHS Sec. Mandy Cohen said the salary issue with Cardinal is “completely unacceptable.”
Additional authority from the General Assembly would allow the department to work faster, she said.
“We will hold them in compliance for these things, but welcome the additional work you all are doing,” she told the committee. “I encourage you all to do that quickly. I would love to see that work happen over the next week here. I think now is the time.”
During the regular legislative session this spring, House lawmakers drafted a bill that would have placed restrictions on the salaries for leaders of the state’s mental health managed care organizations.
But in June, members of the Senate gutted the bill and replaced the restrictions on Cardinal with language that would completely overhaul the state’s mental health system within two years.
The bill stalled when House leadership objected to the changes.
Rep. Nelson Dollar asked Tuesday whether DHHS could terminate its contract with Cardinal and shift its clients to the other LME-MCOs.
“There are circumstances in which we can terminate contracts for LMEs in the state,” Richard said. “We continue to review those standards.”
Dollar added that he’s seen and heard many things in state government over the last 30 years that would “curl your hair, that you would think would be impossible, but I don’t think I’ve ever seen anything quite like this.”Richard said that Cardinal hasn’t responded in much detail to DHHS’ requests during this investigation. The department’s staff will be on site at Cardinal’s offices later this month to get more information. DHHS will also meet with Cardinal’s board of directors during its scheduled November meeting.
He said that the board of directors “has not acted appropriately overseeing the program.”
“Mr. Richard, one of the things… I would suggest is a letter of intent to Cardinal that actually laid out what your concerns were and a date by which they would fix them,” said committee co-chair Rep. Donny Lambeth (R-Winston-Salem) in closing Tuesday’s meeting.
“If they don’t fix them, I would terminate the contract and I would be prepared to move the other LME-MCOs into that service area,” he said. “I think we’ve fooled with this a long time, and I haven’t seen a significant amount of movement on their part. You’re going to have to get their attention beyond another incremental piece.”