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By Rose Hoban
When the state Department of Health and Human Services made the surprise move Monday to take over Cardinal Innovations, many long-time observers of changes in the state’s mental health system had the same thought: “Finally.”
It’s been a dramatic year for the state-funded organization that manages behavioral health services for some 850,000 people in 23 counties. The fireworks started about a year ago when legislators dressed down Cardinal CEO Richard Topping over a salary that was higher than any of his counterparts in the state’s LME-MCO system. The drama continued through a May state auditor’s report that detailed expensive parties, private planes and lavish salaries for top executives of the organization and a subsequent internal DHHS audit released this fall that expanded on the state auditor’s findings.
Rep. Nelson Dollar (R-Cary), one of the primary architects of the state’s mental health managed care system, said that there had been questions raised by legislative oversight committees for “some time.”
“We all wish that Cardinal and their board had acted differently all along to a range of concerns brought to their attention,” he said Tuesday. He quickly noted that many of the front line staff do good work, but he had long-term frustrations with the organization’s leadership.
“In the past legislators have spoken with board members, asked them to come to Raleigh and have discussions about a range of concerns,” Dollar continued. “Unfortunately the board never responded appropriately to the concerns that were raised by members of the General Assembly and continued to take actions that were not in the best interest of patients and of taxpayers.”
Through its history, Cardinal has often gone its own way. Leaders at the organization seemed impervious to criticism about agency spending and about the way they presented themselves and their agency. They long insisted that Cardinal did not need to adhere to state rules.
That seems to have come to a pause this week.
Piedmont Behavioral Health
Cardinal, originally known as Piedmont Behavioral Health, was formed in the early 2000s as the state was reforming the mental health system. Legislators gave PBH a green light to conduct a multiyear pilot where the agency would receive a lump sum of state and Medicaid dollars in return for managing the care for all the people with mental health and intellectual and developmental disabilities in a five-county area just north of Charlotte.
Leaders of the organization spent fewer dollars on mental health care while claiming an increase in the quality of care. But even then, the agency raised eyebrows when leaders constructed a $14.7 million headquarters in Kannapolis with Medicaid money the organization had accrued from savings on care management.
PBH also became the target of litigation by Disability Rights North Carolina on a number of cases.
“We routinely have had Medicaid appeals against Cardinal and other MCOs but we’ve also litigated against Cardinal in federal court,” said Corye Dunn, a lobbyist for Disability Rights since 2011. In one suit, Disability Rights argued that PBH was paying such low rates to behavioral health providers, they were being forced out of business, leaving people with intellectual and developmental disabilities without services.
In another case, Disability Rights argued that PBH denied due process to people who wished to appeal the agency’s decisions to cut their services.
Disability Rights prevailed in both cases.
Laurie Coker is angry about the way Cardinal has seemed deaf to repeated requests for input from county commissioners, mental health patients, their families and even the state over the years.
Coker, who heads the NC Consumer Advocacy, Networking and Support Organization, sat on the committee which helped devise LME-MCO governance structure back in 2012. Around the same time PBH rebranded itself as Cardinal.
She also sat on the board of Centerpoint, an LME-MCO absorbed by Cardinal last year.
Through both appointments, she flagged the need for more input from counties and mental health consumers.
“[Cardinal] needed help to understand that because they’re publicly run means that they’d have a special set of publicly accountable behaviors, and they weren’t just operating out of the goodness of their hearts,” she said. “Instead, I’m watching it unroll just as I thought it would.”
What was lacking, Coker said, was a focus on quality and measuring outcomes in the mental health system.
In more recent years, she’s watched with frustration as Cardinal has positioned itself for when the overall Medicaid system moves to managed care.
“They were trying to grow, grow, grow their numbers hard and fast so that the legislature would allow them the ability to compete like a big managed care company,” she said.
“What we the taxpayers are buying should be value, quality,” she argued. “But they’re thinking it’s all about their company and their productivity and their growth.”
Leaders at Cardinal, including Topping, who was originally hired as general counsel, have insisted that the organization is not subject to rules governing other state agencies.
“This behavior has been part and parcel of a certain perspective that view Cardinal as something other than a public entity,” said Mark Botts, a legal analyst from the UNC School of Government who specializes in North Carolina mental health law. Botts began raising questions around the same time as Coker.
“The way Richard talks, the way the public relations person talks, the words they use, they lead people to believe that they’re something other than a public entity,” he said. “And it works. I’ve been at meetings in the community and talked to legislators who say ‘We know they’re not a governmental entity,’ and I would say, ‘Wait a second!’”
Botts has continued to advise lawmakers that Cardinal is a fully public entity, not a private contractor with the state government.
Nonetheless, Topping continues to argue ”Cardinal receives public money as a contractor” as he did during an interview with WFAE on Monday.
This exasperates Botts.
“Sometimes law is subject to interpretation, but sometimes it’s not,” he said. “When someone consistently says things that are not true, you begin to think that they’re being deliberately dishonest.”
He cited state statute 122c, which requires that a state agency provide “documentation of comparable salaries in comparable operations within the region” in order to get approval for a higher salary from the Office of State Human Resources.
“They say they’ve done this market analysis, but they never say they presented that market analysis to OSHR,” he said, comparing Cardinal’s attorneys’ arguments to a poker player’s bluff.
“If you talk about everything else but the applicable law, it’s a signal to some of us that you know the law’s not on your side,” he said.
Primacy of the law
Topping has also argued that federal Medicaid rules permit Cardinal to spend its savings as it sees fit, including granting him a salary that exceeds those of other LME-MCO heads around the state.
But DHHS Sec. Mandy Cohen said her department’s attorneys feel confident that 122C gives DHHS control over Cardinal, gives the state personnel agency the right to review Cardinal’s executive salaries, and, ultimately, gives her the right to take over the organization.
“I’ve become very familiar with the statute over the past number of months,” she said.
Botts recounted pressing Cohen at a public meeting this spring about when DHHS would move against Cardinal. At the time, she deflected the question, he said.
But Cohen said Cardinal’s consistent flouting of state rules, Topping’s and the board’s defiance of her agency’s attempts to rein them in, with the added tussle over Topping’s salaries finally pushed her to act this past week.
“What was concerning here was the continued pattern, that we would identify issues that needed to be addressed, and they were either not addressed or they moved further away from where they needed to be,” Cohen said. “In fact [the board] had signaled to us that they were not willing to make the changes to take the organization in a new direction.”
Cohen said that for an organization that had its start-up funds from the state, received a state mandate to function, and operated with state funds, it’s obvious to her that her agency is in the right.
“Their ongoing defense of their work… makes it more evident why we needed to make the change,” she said.
“DHHS arrived at Cardinal Innovations unexpectedly and informed the Executive Leadership Team that the Department is assuming control of Cardinal’s governance. This enables the Department to remove the current Board of Directors and previously announced departing executives immediately. This is a temporary measure and will not impact services to our members or our day-to-day operations. We expect to work quickly and closely with the Department to address their outstanding concerns and resume normal operations.” – Ashley Conger, Vice President, Communications & Marketing