North Carolina health department officials temporarily took over a regional managed-care mental health agency Monday because of "serious financial mismanagement" by its leaders in the wake of state reviews criticizing its spending and executive pay.
Citing state law, the Department of Health and Human Services announced control of Cardinal Innovations Healthcare Solutions and removed the current board of directors. The department will provide staff to work with Cardinal to bring it into financial compliance after "unlawful actions" by its leadership, DHHS Secretary Mandy Cohen wrote to Cardinal's top lawyer.
DHHS now must approve all financial transactions by Cardinal, which receives hundreds of millions of federal and state taxpayer dollars annually to help treat people who are mentally ill, misuse substances or have disabilities.
"The board and Cardinal management have repeatedly violated their duty of care to properly manage the public funds to which they were entrusted," Cohen wrote Cardinal general counsel Wallace Hollowell.
State audits determined Cardinal spent excessively on salaries for top executives, conferences and Christmas parties. CEO Richard Topping's pay was well above what directors in the other six regional agencies received and what state law allowed, the reports said, with the Cardinal board authorizing more than $600,000 in salary and bonuses for Topping last year. Cardinal leaders argued their CEO was exempt from state salary limits.
Facing pressure from DHHS this fall, the board dramatically lowered Topping's salary. Then, earlier this month, it fired him effective Dec. 1. Now an interim CEO will begin working in his new post immediately.
The board also had agreed to generous severance packages for Topping and 10 other top executives, according to a DHHS report. Cohen said Cardinal also must, by Friday, repay the state $3.8 million in severance to Topping and three other executives who stepped down.
"We kept seeing a continued pattern of actions that was not in the best interest of the folks that the organization serves, nor ... in the best interest of the taxpayers," Cohen said in an interview.
Charlotte-based Cardinal is the largest of the managed-care providers created by the state, serving 20 mostly Piedmont counties and potentially covering 850,000 people. There's been no evidence the salaries and expenses directly resulted in eroded services, and Cohen pledged these changes wouldn't negatively affect patients.
Cohen said she didn't know how long DHHS would retain temporary control. County commissioners must appoint new board members by Dec. 15 or Cohen will do so. Topping and the three other departing executives are barred from Cardinal's premises, DHHS said.
Cardinal spokeswoman Ashley Conger said late Monday that DHHS officials arrived "unexpectedly" Monday. "We expect to work quickly and closely with the department to address their outstanding concerns and resume normal operations," she said in a release.
Cohen said she had spoken with General Assembly leaders who oversee for health matters and had their support.
Rep. Nelson Dollar of Wake County, who is also senior chairman of the House Appropriations Committee, said he believed "these actions are necessary and in the best interest of taxpayers and the individuals and families served in our mental health system."
Another longtime critic of Cardinal backed Cohen's decision. "The arrogance of Mr. Topping and the board have been on display for some time," said Sen. Tommy Tucker of Union County, adding "their chickens finally have come home to roost."