By Rose Hoban

Since firing the CEO and the board of directors of Cardinal Innovations, employees from the Department of Health and Human Services have been working to get the organization back on track.

And DHHS leaders told lawmakers on Tuesday that they intend to make their presence in Cardinal’s offices a short-term stay and guaranteed that delivery of services would not be interrupted.

“Temporary is temporary,” state Medicaid head Dave Richard told members of the Joint Legislative Oversight Committee on Health and Human Services. “We have no desire to be running Cardinal for any length of time. We believe that is the best function for a board of directors that is appointed in the proper manner.”

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

And state leaders told legislators they would do everything they could to claw back about $3.8 million in severance paid out to former CEO Richard Topping and several other officers of the organization. But HHS Sec. Mandy Cohen could not provide lawmakers any guarantees they’d see the money extracted from Topping’s and others’ bank accounts.

“Before the former board took the action with the severance, we had sent them a letter saying this is not proper, if you do this, we will have to claw it back from your administrative funds and that is what we did,” she told lawmakers. “When we went and took over that first day as part of that, we issued a demand for that money back from their administrative funds.”

Cohen acknowledged lawmakers’ desire that Topping, who walked away with $1.7 million, and the others give back the money, she signaled that won’t be easy — or even possible.

“I think those are places that we are still exploring with our lawyers about what are our legal options there,” she said. “I know that folks are very interested in that.”

Drip, drip, drip

Cohen said that her decision to take over Cardinal had been brewing for a long time, admitting that she’s had DHHS lawyers examining her legal standing for months.

Last month, she told NC Health News that she had become “very familiar” with Chapter 122C of the North Carolina General Statutes, which contains language about the governance of state-funded local mental health management agencies.

Dave Richard headshot
Dave Richard heads North Carolina’s Medicaid program.

“There are a lot of rules that govern many of our health entities… We identify issues and we do things like corrective action plans, it’s sort of a normal standard business,” she told lawmakers. “What we saw differently in Cardinal that became a pattern, I think, before I got here was the fact that these issues would be highlighted by the State Auditor, by this committee, by our department and it was a continual pattern of not recognizing that… ‘Hey, we need to get back into compliance.’

“It was that pattern over the course of the year that lead us to this point.”

After the meeting, Cohen said what finally convinced her to act was the final board meeting where the first thing directors did was vote to expel the one person who had been critical of the high salaries paid to Topping and others.

“Then they fired Richard,” she said. “And I’m putting that in air quotes because he wasn’t actually fired, he was given another two weeks.”

So, instead of making turkey sandwiches the weekend after Thanksgiving, Cohen spent it on the phone, calling legislators from the oversight committee and another committee that oversees Medicaid administration to tell them her plan. Then on Monday, DHHS officials arrived and took over.

“There are members of this body who wanted me to take action earlier in the year and I respect that,” she said. “I felt like I needed to go through a deliberative process under my time at the department to give them opportunities.”

Sen. Dan Bishop (R-Charlotte) expressed frustration that the severances had already been paid by the time DHHS acted.

“If this were a private business and folks recognized this was a problem we would not have sat for several months while those millions of dollars were in the hands of private individuals before taking action,” he said.

But others, such as Sen. Tamara Barringer (R-Cary), said while she wished the process had been faster, she appreciated Cohen’s “deliberate approach.”

New board soon

Legislators could have acted this spring with the introduction of House Bill 403, which was introduced in response to a scathing state auditor’s report in late 2016 which detailed generous salaries paid to Cardinal officials and spending on meetings, parties and travel on private planes.

HB403 would have set limits to the salaries paid to the heads of mental health agencies and it would also have required approval by the HHS secretary and the Office of State Human Resources to pay a higher-than-usual salary to a mental health CEO.

In June, the Senate Health Committee rewrote the bill to include sweeping changes to the state’s mental health system. In the end, the bill died when the two chambers could not agree on a strategy.

Barringer said that she initially supported HB403 and said she commented Tuesday hoped the bill would be revived.

In the meantime, county commissioners from the 20 counties served by Cardinal will meet on Thursday in Graham to choose the next board.

According to laws written in 2012, LME-MCO boards can have as many as 20 members, and county commissioners from the counties served by the organizations have a say in board appointments..

Richard said that once the board is seated, DHHS will train the new members, with a special focus on their fiduciary responsibilities to the agencies.

Barringer, a business attorney, noted that Cardinal’s former board members may have crossed a legal line and committed a breach of their “fiduciary obligation.”

“The people who voted for those outrageous golden parachutes breached the trust, at least of the vulnerable people of this state, and I would not put any of them back on the board,” she said.

Familiar face

Meanwhile, DHHS officials at Cardinal are being helped by a former colleague, Trey Sutten, who left the department earlier this year to be Cardinal’s chief financial officer. Now Sutten is running the organization.

“We are committed to working together to improve our governance and ensure that our operations are better aligned with both state and stakeholder expectations,” Sutten wrote in an open letter posted on the Cardinal website. “During this temporary transition period, I want to assure you that everyone’s collective focus is on stability, continuity, and working as hard as we can to minimize disruptions for our members, employees and daily operations.”

“The goal will be that some time in the next two months that we’ll turn over the operations back to that board of directors once they’ve been trained and understand the responsibilities that they have,” Richard said.

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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...