Topping Questions State's Authority To Take Over Cardinal

Nov 28, 2017

Over the last year, Cardinal Innovations Healthcare has been under intense scrutiny. Three state audits focused on the CEO’s compensation and the generous severance packages for him and 10 other top executives.

Richard Topping
Credit Cardinal Innovations Healthcare

Former CEO Richard Topping was earning far more than his state mandated salary of $204,195. And he just took a severance of $1.7 million. He’s been publicly silent until now. He spoke to WFAE Monday night, after he was immediately removed and the North Carolina Department of Health and Human Services took control of the Charlotte company that coordinates behavioral health care for 850,000 people in 20 counties. 

Richard Topping was not at Cardinal's headquarters in Uptown when the state surprised the behavioral health care organization with an unannounced visit in the form of a company takeover.

He found out over the phone that he was out as CEO immediately rather than the scheduled Friday date. But he isn’t fully buying that the state’s takeover is legitimate.

"I’m aware we got a letter from DHHS that says they are in control of Cardinal but I haven't yet received a court order on that. I think that, [we] certainly received their opinion on this...This is still is going to need to be resolved and needs to be resolved in the appropriate form by the appropriate authority," Topping said.

DHHS Secretary Mandy Cohen's letter to lawmakers

Topping on salaries that exceed state mandates

“Cardinal is not part of state personnel and has not been certainly during my time there.  We operate a private sector personnel system. And our pay philosophy has always been around that we pay market-based compensation because we want our folks to have the same access that folks that are enrolled in Blue Cross have. And so I think this argument, that simply because Cardinal receives public money as a contractor that somehow the government gets to set salaries and compensation is…it's not accurate.”

Cardinal is what is called a Local Management Entity/Managed Care Organization. According to state law, the LME part of that equation refers to what an organization does, in this case coordinate behavioral healthcare to 850,000 people in the state. That is what the state is taking over. The MCO part of that title means that the organization is under contract with the state to disburse Medicaid dollars. Topping is correct that the employees are not part of the state payment or pension system. But the same law that defines what Cardinal is also defines rules for how and when a CEO can get paid more than the state allowed salary. The law specifically states, "The area board shall not authorize any salary adjustment that is above the normal allowable salary range without obtaining prior approval from the Director of the Office of State Human Resources." 

Cardinal and Topping disagree with this assessment and have filed a petition against the State Office of Human Resources.  ​In that petition, Cardinal says it has submitted salary documentation to OSHR and has never been denied or disapproved. The state admits in the audit that OSHR has failed to enforce the salary limits until recently. The status of that litigation is unclear. 

Topping on why his compensation was justified

“We pay market based compensation because we want our folks to have the same access that folks that are enrolled in Blue Cross have. And so I think that the argument that simply because Cardinal receives public money as a contractor that somehow the government gets to set salaries and compensation is, it’s not accurate.  NPR receives public money. And yet I don't think you'd agree that you're a state employee or the state can come and set your salary just because NPR receives public money”

WFAE, which is a local affiliate of NPR, receives no state funding. The station does receive a small portion of its funding from federal dollars but not in the form of a government contract. Richard topping had a base salary of $635,000. That was way above state rules, which mandate a salary of $204,195.

Topping on who controls Cardinal now

“I'm aware that DHHS’ position is that they control Cardinal. I'm aware of the board's position that the board controls Cardinal. I'm an employee of the board. I work at the board’s direction. As I have for nine years, I'll take my direction from my bosses.”