RALEIGH — A regional managed care mental health agency that receives taxpayer funds spent excessively on salaries for top executives, conferences and Christmas parties, a state audit said Thursday, but Cardinal Innovations Healthcare Solutions defended its actions as lawful.
State Auditor Beth Wood’s performance audit, requested by legislators, marks the latest flap between state officials and Cardinal, which manages and monitors services for the mentally ill, substance abusers and people with developmental disabilities in 20 counties. Close to $600 million — or 85 percent of its annual funds in 2016 — came from Medicaid, the federal and state agency for the poor, the audit says.
Cardinal “has not demonstrated accountability in the use of its federal and state resources as evidenced by some of its spending,” the audit reads. “This type of unreasonable spending erodes the public’s trust in Cardinal’s ability to deliver quality health care to a vulnerable population.”
The audit alleged Cardinal made $1.2 million in unauthorized salary payments to its current and former CEO since 2014, exceeding the $187,364 maximum salary set for such positions in these other regional mental health agencies by the North Carolina Office of Human Resources.
That money “could have been used for other operational needs,” the audit stated. Based on current Cardinal CEO Richard Topping’s current $635,000 salary, he is receiving more than $447,000 in unapproved pay, according to the review.
In its written response to the audit, Cardinal argued that a salary range set for mental health area directors such as Topping was not legally binding on Cardinal. The company said it followed the law and the CEO pay was permitted under its annual salary plan that was submitted to and accepted by state officials.
“We are pleased that the audit findings do not find any deficiencies with Cardinal innovations’ performance with regard to meeting the service needs of its members,” the company’s response said. “In addition, there were no findings regarding any type of fraud or malfeasance.”
Wood’s office took the unusual step of giving a written rebuttal to Cardinal’s lengthy response, saying Cardinal made several “incorrect assertions” in its defense.
Cardinal is one of seven managed care entities created through the General Assembly’s authority. Cardinal is the largest of the seven, with their coverage area stretching from Charlotte to Winston-Salem, moving along the Virginia border as far east as Halifax County, while dipping into Burlington and Chapel Hill.
It is currently in the process of merging with Eastpointe, the agency that provided mental health services to Robeson County.
The audit also accused Cardinal of “unreasonable” spending on board retreats, meetings and travel totaling more than $250,000 over two years. More than $18,000 was spent on a Christmas party, with an average cost of $242 per attendee, the audit found.
While saying it had already made some changes, Cardinal downplayed the critique by stating the expenses represented a fraction of administrative expenditures compared with the more than $1.1 billion it had spent on health care services during that same period.
But Sen. Tommy Tucker, a Union County Republican and vocal Cardinal critic, said the Senate next week would advance a House bill to bar the top leader of the mental health agencies from getting paid 30 percent above the normal salary range for “comparable operations.” Other salaries above the range would have to get state approval.
Cardinal leaders have “spent money in ways that are very difficult to justify to those populations that are very difficult to serve,” Tucker told reporters. “I couldn’t sleep at night and spend that money when I know I have a mission to treat ‘the least of these.’”
Legislators and state health officials have been particularly angry about the pay package Cardinal’s board gave Topping. During a legislative committee last November, Topping defended the compensation. He’s said the agency keeps saving the state money and keeps administrative costs low.
Associated Press writer Gary D. Robertson contributed to this report.