Cardinal Innovations Healthcare is making changes in the face of state investigations about excessive salaries and severance packages for top executives. The organization manages behavioral health care for Medicaid patients in 20 counties including Mecklenburg. Its board includes Mecklenburg County Commissioner George Dunlap. WFAE’s Alex Olgin spoke with him about those changes and why Cardinal’s CEO was paid $617,526, far in excess of state law. She joins host David Boraks during All Things Considered to discuss.
David Boraks: Alex, remind us again what problems the two recent state audits found at Cardinal?
Alex Olgin: So the two audits focused on how much the organization was spending on executive compensation and travel. The state contracts with Cardinal to manage behavioral health care for Medicaid patients. So the organization gets a lot of federal and state dollars. Last year, it was on the order of $675 million. And because of that the state has a say over how much executives are paid. The CEO was being paid three times what state law says, so earlier this week the board decided to reduce his salary by two-thirds to bring it into compliance. The board has also passed resolutions to curtail spending on charter flights and offsite board meetings.
Boraks: CEO Richard Topping was being paid $617,526 a year. Why did board members pay him so much if it was against state law?
Olgin: Well David, I talked to George Dunlap, who is a board member of the organization and a Mecklenburg County Commissioner. He says $617,526 was market rate.
Dunlap says based on the study from an outside consultant. Now I haven’t seen that study, the organization says its proprietary. However, a legal filing from Cardinal says that study evaluates salaries paid by public, private and not-for-profit managed care organization that are similar to Cardinal in both size and scope. But I asked him, regardless of law did he think it was a responsible decision?
Dunlap: The board did what it thought it had the authority to do.
Alex: Right, but what I’m asking you is not whether or not the board had authority or was within regulations. But my question was do you think it was a responsible decision given that it was taxpayer dollars?
Dunlap: Well, let me ask you this, because I also help make decisions about the county manager and other people. If you are asking me whether I think it is a responsible decision to pay market rate, then I do. Because I believe people ought to be compensated for what they do and what their worth is.
It is been going on for a while, Cardinal paid the previous CEO $400,000 - around double what state law allows.
Boraks: Is the board doing anything else to get in compliance with state standards?
Olgin: The board already passed resolutions to stop using charter flights around the state and not hold board meetings off site. But the outstanding issue is the severance packages. The state says none of the other organizations like Cardinal across the state have severance for anyone but the CEO. The Cardinal severance packages are for the CEO and 10 other employees. They would get two to three years in salary plus health care for a variety of reasons including: if the CEO resigns or is fired or there are regulatory changes that impact Cardinal’s services, governance or employment practices. The state health department is concerned about this. In fact, in the last audit they put out they said: “raises concerns about the entity’s solvency and ability to continue to provide services in the event of a significant change in its leadership team.”
Both Dunlap and a spokeswoman for Cardinal say the board plans to address the severance packages at the next board meeting set for November.
Boraks: Is the state satisfied with the changes Cardinal is making to get in line with regulations?
Olgin: So far it seems so, I met with the health department secretary Mandy Cohen this morning just a few blocks from Cardinal’s headquarters. She was in town for other reasons. But she says she’s pleased with the steps the board has taken so far. And so the health department is actually giving Cardinal a little more time to iron out some details before they come in to follow up later this month.
Cohen: “We are using every tool that we have. Going through an audit process…And collectively I think we have tools to bring folks into compliance with rules and regulations around this. The general assembly can always see fit if they want it to go faster and to give me additional authority related to that.”
Cohen is referring to legislation that was introduced last year that would have given her more direct discretion over how much the head of an organization like Cardinal gets paid. That bill wasn’t passed. But Cohen is getting more oversight over Cardinal and similar organizations. Starting next year, the health department is requiring the groups to report back to the state on how well they are delivering care. And Cohen explained if the organizations aren’t complying, the state can withhold payment.
Boraks: Thanks Alex
Olgin: You are welcome
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