RALEIGH, N.C. (AP) - A court told the former CEO and ousted board members of North Carolina’s largest regional mental health care agency to stay clear of the finances of Cardinal Innovations Healthcare Solutions since state officials have now taken it over.
Mecklenburg County Superior Court Judge Todd Pomeroy signed a restraining order on Wednesday preventing ex-chief executive Richard Topping and the former board from interfering with actions of the Department of Health and Human Services for 10 days. DHHS also is seeking more permanent orders.
The department took charge temporarily of Charlotte-based Cardinal Innovations on Monday following recent audits chronicling what they called excessive spending, executive pay and severance. DHHS accused the former leaders of “serious financial mismanagement” and taking unlawful actions.
In a phone interview later Wednesday, Topping defended Cardinal’s administrative expenses as reasonable and that critics had cherry-picked certain numbers “for political purposes.” DHHS went to court to cover its tracks after Monday’s takeover, he said.
“DHHS came in and seized Cardinal Innovations without a court order and without justification to do so,” Topping told The Associated Press. Department Secretary Dr. Mandy Cohen cited state law in the temporary takeover and has support from top General Assembly leaders on health care matters for her actions.
Topping received a board-approved $635,000 base salary during the last fiscal year, not including a $254,000 bonus, according to an audit. Topping’s pay had been well above those of the top leaders of the state’s six other managed-care agencies that treat people who are mentally ill, misuse substances or have disabilities. State officials said his pay violated state salary limits. Cardinal leaders said they had received an exemption.
The Cardinal board fired Topping earlier this month after sharply reducing his pay under pressure by state officials. But Topping and three other executives who resigned were paid $3.8 million in severance, DHHS said in its complaint.
Documents presented by a state attorney to Pomeroy included copies of recent emails between Topping and previous board chairwoman Lucy Drake suggesting there was a plan afoot by Cardinal Innovations leaders to block state access to its cash.
DHHS said in an email that discovered documents “raise serious concerns about proposed financial activities by former board leadership and the former CEO.”
“We are pursuing this litigation out of an abundance of caution in the protection of taxpayer dollars,” the release said.
But Topping told the AP the state attorney didn’t include an earlier email in the chain between a board member and Cardinal’s general counsel. The email, provided by Topping, described how the board member wanted to discuss at a meeting early next year how to manage money that Cardinal retains from Medicaid patients it serves.
The regional health agencies receive a set monthly payment from the state for each consumer they cover. Topping argues federal regulators have said that managed-care organizations like Cardinal can choose to use as they wish the Medicaid funds it doesn’t spend on patients for required services because of efficiencies. The state disagrees, according to Topping.
The dispute is “about whether Cardinal and its board, or DHHS and the secretary, control Cardinal’s Medicaid savings,” Topping wrote in an email, adding that the takeover and legal complaint are designed for the state to seize those savings. Topping said these disputed funds are separate from administrative money earmarked for salaries and benefits.
DHHS has demanded Cardinal repay the state $3.8 million for the severance by Friday. Cohen said Monday she didn’t know how long the department would stay in charge at Cardinal Innovations, which serves 20 mostly Piedmont counties and receives hundreds of millions of federal and state dollars annually. She wants county officials to assemble a new board by Dec. 15.
Topping’s termination date was Dec. 1 but an interim CEO began working Monday. Topping said it would be up to the ousted board to decide whether to challenge the DHHS takeover.
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