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.

headshot of Cardinal CEO Richard Topping.
Cardinal CEO Richard Topping. Image courtesy Cardinal Innovations

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.

Groundbreaking for the PBH corporate office in Kannapolis in 2010.
Former CEO Pam Shipman (third from right) was pushed out by the board in 2015 to make way for Topping to take her place and angering lawmakers. Image courtesy PBH/ Cardinal

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.

Consumer frustration

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.

Laurie Coker has spent years creating places to nurture and support people with mental health issues.
Laurie Coker has been a long-time critic of Cardinal’s management. Photo credit: Taylor Sisk/ NCHN

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.”

We’re different

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.

Botts headshot
Mark Botts, UNC School of Government

“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.

headshot of Cohen with the sign reading "DHHS" behind her
Mandy Cohen in her office on the Dorothea Dix campus. She said she’s become “very familiar,” with the state statute governing the state’s mental health system in recent months. Photo credit: Rose Hoban

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.

Statement from Cardinal Innovations about the DHHS takeover:
“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

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Rose Hoban is the founder and editor of NC Health News, as well as being the state government reporter. Hoban has been a registered nurse since 1992, but transitioned to journalism after earning degrees...

9 replies on “Mental Health Advocates Say the Reckoning at Cardinal Innovations Was a Long Time Coming”

  1. This could never have happened if the state legislature had not fallen into the “privatize everything” mindset. Why did they/do they think that these services would be more efficient by privatization? These organizations become top heavy by draining funding from the very people they are intended to serve, but offering fewer services, and paying direct care providers less and less, leading to either lack of or unqualified staffing, while the big administrators like Topping rake in the taxpayer cash intended to serve the develomentally disabled and mental health and substance abuse populations. And they justified building a new $14.7 million headquarters with Medicaid money as “savings”…..savings on the backs of the disabled and those who directly care for them. Cardinal is the poster child for abuse of public trust and public funds. Cardinal is the exposed cancer of what the legislature is doing to mental health and Medicaid dollars.

    1. Patti Ulirsch hits the nail on the head in her response to this article. Cardinal spent $14.7 million on headquarters that are now practically empty, while they decided to move their headquarters to the NASCAR Hall of Fame. Quite elaborate! Why? For prestige?

    2. Thanks for noting that the direct care staff people are not trained so that you can actually leave your child with them. It’s not a career. It’s a need some extra cash, so I’ll work for a few weeks” job. These folks also come from working other jobs and are so tired, you find them asleep on the floor. The huge problem is that no matter who is in charge there is fraud and when documented and reported, nothing happens to the people who committed the fraud, but you become a troublemaker, and people in DHHS retaliate.

      1. But direct caregivers should be paid more so that 1) more qualified people are drawn into the field; 2) turnover is lowered, thus enhancing quality of care; 3) staff does not so easily burn out; 4) less neglect and abuse will result. This is not rocket science. IF CAREGIVERS ARE VALUED, THEN CARE WILL BE BETTER. If we really focus on the needs of the people who need support and services, then I predict that both efficiency and quality outcmes will occur. It’s when more and more administrative levels get added into the mix that costs go up and quality services go down. Just look at the fact that Cardinal has a VP of Communications and Marketing. Marketing? Really? 30+ years ago, drug prices started going up when the”marketers” took over the leadership of pharmaceutical companies from the scientists and researchers. We need to get back to basics.

  2. I wish I had bought some Cardinal stock options when they diverted Medicaid funds into building their corporate headquarters and invested in real estate at a perfect time. By now, their property is probably worth a lot and if I invested early I would have probably earned 7% per year.

    Just think about the opportunities for diverting public money into investment opportunities once the entire NC Medicaid system gets converted to managed care! It won’t just be millions….it will be BILLIONS! This time, I won’t miss out – I’m definitely going to get in on the ground floor!

    1. I’m an approved Medicaid Provider and found Cardinal’s closed network to be frustrating and unfair to new behavioral health providers. With the growing population and need for MH/SA services it makes little sense to further handicap residents from receiving therapeutic services from providers of their choice. Much of the time there are long waiting lists to be initially seen which discourages clients from following through. I’m hopeful that with this takeover the entire program will be revamped.

  3. The sad thing is that some of us DID see this kind of thing coming years ago. I urged the Legislatiative Subcommittee on LME/MCO governance not to give so many protections and proprietary rights to MCOs because with too little accountability held of them, it would be easier for them to do exactly what has happened here. Living away from Raleigh and being familiar wit the practices and organizational values of my own MCO and seeing minutes from Cardinal meetings from years before–it was obviously conveyed we were moving fast toward this kind of result in too many NC catchment areas. Unfortunately, political pressure favored ensuring strong management and NOT genuine, community informed system who would be held accountable according to service outcomes. But I will tell you, people passed me notes under the table who were afraid of speaking out, fearing their job positions might be impacted–because they firmly believed what I was recommending was very important. But I think it fell on too many deaf or unbelieving ears.

    I am most appreciative of the MCO (s?) who have been steady in engaging and including feedback from their Consumer and Family Advisory Committees. But even if you live in a community where “things are working” you surely by now realize that Topping’s mess is an indicator of broader system problems where we will not be well served as consumers and families until we have strong policies that protect us and we have a different organizational culture from the state level on down. We are all too often “done to” instead of included and “worked with” so leaders do not get enough of the story until it is too late.

    . . . We DID see this coming! And we were frustrated that no one along the way cared.

  4. Kudos to the comment: “especially the DMA”. When presented with the outcrys of lme, mco abuses of families, Dave Richards made clear at traveling tours: DMA had no intentions of replacing the LME, MCOs. Now the another fox is guarding the hen house. The DHHS is ultimately to blame for allowing Cardinal to run wild with funds meant for the disabled. Cardinal did not operate in a vacuum. Why did it take years for DHHS to see the light? Mandy Cohen is woefully unfit for office if just within the “recent months” she just saw the authority of her office. DHHS did not care what Cardinal did as long as DHHS operating monies were safe. Now, in recent months as of May, DHHS is fighting 2 lawsuits, (l federal, l state) over DHHS violations of the ADA rights of the disabled and Medicaid expansion is off the table with Trumps’ funds denial. Now DHHS needs to recoup some funds for themselves. They now all of a sudden care for the vulnerable and needy. Right–give me a break.

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