Why Friday May Be A Pivotal Moment For Cardinal Innovations Healthcare
The board of Cardinal Innovations Healthcare is meeting Friday. Normally this alone is not news. But the last few months have been anything but normal for the largest behavioral health managed care organization in the state.
The state contracts with Cardinal to coordinate behavioral health care for 850,000 Medicaid patients, much like an insurance company. It is one of seven similar organizations that operate in North Carolina. Cardinal gets $682 million of taxpayer dollars to serve patients in Mecklenburg and 19 other counties.
The organization’s reputation took two severe blows this year both in the form of state audits. They found lavish spending on parties, board retreats and excessive compensation for Cardinals CEO Richard Topping. He was making $617,000, far more than state law allows.
Cardinal has taken at least two steps to get in line with state standards. The organization agreed not to hold anymore off site board meetings. And at the last board meeting in October, the CEO’s salary was reduced to $204,000 to match state rules.
That action happened behind closed doors and according to Chairwoman Lucy Drake, Topping was not happy with his pay cut. Drake described that conversation.
“We brought him in and we offered it to him,” she said. “And he has said he cannot accept that. But he has his contract that will give him up to 90 days but he knows we don’t want to go that long.”
Topping has remained the CEO. But according to Drake he still has time to reconsider.
What to expect from the board meeting
A Cardinal spokeswoman said the organization has identified outstanding issues the state wants Cardinal to address. Among those is the generous severance packages for the CEO and 10 other top staffers.
Cardinal’s employment agreements are not public record. What we know about the severance packages comes from the North Carolina Department of Health And Human Services audit.
The CEO, six other executives and four key employees would get between two and three years salary. And those severance packages are triggered not just for being fired without cause, as is standard, but for a whole slew of reasons including regulatory changes that materially alter Cardinal's services, certain changes in the company's board of directors, even changes in revenue. Or if the CEO is fired or resigns for any reason.
That’s a problem according to Dave Richard who leads the Medicaid division of the state health department.
“The way the severance packages were designed they were much more in design with allegiance to the CEO rather than the organization,” He said.
None of the six other similar organizations have severance packages like those at Cardinal. Some of them have severance agreements for the CEO, but none have any for other employees.
One other executive has left Cardinal since the second of the audits surfaced. Former CFO James Otterberg left the organization October 2. We don't know the circumstances of his departure, the details of his severance arrangement or if he took advantage of it because his contract is not a public record.
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