Burgin: Mental health agency was moving toward privatization
By Elizabeth Cook
SALISBURY — The agency in charge of mental health services for Rowan and 19 other counties is in turmoil, with its CEO fired and board of directors dismissed.
That has left longtime board member Bill Burgin, a Salisbury architect, wondering where Cardinal Innovations went wrong.
Cardinal came under fire earlier this year for lavish Christmas parties and board retreats, charter flights for executives and questionable credit card purchases, including alcohol.
The last straw came when the board gave ex-CEO Richard Topping a $1.7 million severance package.
Looking back, Burgin sees the missteps Cardinal made with retreat expenses and the like, and he says Cardinal could have done a better job with public relations.
From Burgin’s perspective, though, Cardinal was trying to do what the state wanted — move toward privatization by acting more and more like a business. And the agency was making the transition by degrees, year by year, without hearing any objections from the state.
Until this year.
Burgin’s experience reflects North Carolina’s ever-changing approach to behavioral health care.
Around 1996, when Todd Arey was the newly elected chairman of the Rowan County Board of Commissioners, Burgin says he volunteered to help the county, if there was something Arey needed.
“I said ‘just let me know.’ He said, ‘I’ve got just the thing.'”
Soon after, Burgin learned Arey had appointed him to the board of Tri-County Mental Health, which was making headlines for financial troubles.
“When I got there it was as bad as the paper reported, maybe worse,” Burgin says.
As the state straightened things out in 1997, Tri-County was dissolved and Rowan became part of Kannapolis-based Piedmont Behavioral Healthcare, which Burgin says was more client-based and had good, stable leadership.
“I got to see the difference between a bad agency and a good agency.”
Piedmont then served five counties — Cabarrus, Davidson, Rowan, Stanly and Union — and was providing direct services to clients. If someone needed to see a psychologist or psychiatrist, they could go to Piedmont for help. Developmental disabilities and substance abuse were also treated at Piedmont.
The state struggled with mental health funding. According to Burgin, agencies would provide services, get behind, and ask the state for more money. “By the end of the year, the state’s blown their budgets,” Burgin says.
Under the leadership of its director, Dan Coughlin, Piedmont pioneered a new model of care. The agency received state funds on a capitated basis — “so much money for every eligible client in the catchment area,” Burgin says. Piedmonth was then responsible for managing the money and making it work.
“It saved the state a ton of money, tons of money. It was predictable,” Burgin says.
The agency divested its services to Daymark and contracted with providers.
“Basically, we converted to an insurance company.”
The state combined more agencies to get the benefits of size, Burgin says. Piedmont’s coverage area expanded, and in 2012 the agency changed its name to Cardinal Innovations Health Plan. Its 20 counties stretch from Halifax to Mecklenburg, and its offices are now in Charlotte.
One in four of the state’s Medicaid enrollees are insured by Cardinal Innovations, according to its last financial report.
The organization is called a LME-MCO — local management entity-managed care organization — a model the state eventually decided all its behavioral health agencies should follow.
The success of the model came in large part from the relationship Cardinal developed with the providers it contracted.
“The logic there is that, if we had the network, if they had plenty of customers, then we could get their rates down,” Burgin says. “That’s kind of part of that secret sauce.”
That led to Cardinal being able to negotiate rates and stay under its capitation rate. State and Medicaid money saved in that way was set aside for special projects, Burgin said.
One such project was specialized training for law enforcement officers who encounter people in a mental health crisis.
Cardinal also looked into providing services for veterans suffering with PTSD but, Burgin says, the state said the agency was veering away from its core mission.
An important change took place when Republicans gained control of the General Assembly, Burgin says.
“They began to look at ways to save money, and one of the ways that I think is always in front of them is to get it out of the government’s hands and get it into the private sector. So privatization came up.”
In 2015, legislators voted to privatize North Carolina’s $15 billion Medicaid program through regional managed care networks — something the state is working toward but has not yet implemented.
Burgin says Piedmont officials feared the people served by Cardinal for behavioral issues would get lost in the switch to privatization.
“We decided as a board that we would try to position ourselves so that, when this privatization took place, that we could make a case to let us go private.”
The board decided the first step in that direction would be to pay its employees salaries consistent with the private market. At the time, Cardinal was paying CEO Coughlin $180,000.
Burgin says the pay adjustments started with the agency’s “boots on the ground people” — the care coordinators who match clients with providers.
The first step in raising the CEO’s salary was paying $400,000 to Pam Shipman, who was hired after Coughlin retired.
“We sent our salary schedule to the state that year,” Burgin says. “We didn’t get a response back from the state. … But we also didn’t get somebody saying, ‘Wait a minute, you have exceeded the state’s maximum for your CEO.'”
Richard Topping later became CEO, with his pay peaking at $617,526 for the year ending June 30, 2016 — nearly three times more than what the next highest CEO earned among the North Carolina’s regional mental health agencies.
Burgin, chair of the compensation committee, says Cardinal is bigger than the other agencies, serving two out of every five North Carolinians with mental health, developmental disability or substance abuse issues.
Cardinal is not part of the state employment system, he says, and its officials do not think of Cardinal as a state agency.
“We consider ourselves a contractor. …,” Burgin says. “We’re a board … charged with operating a business. And we called it a business.”
Burgin says Topping’s $620,000 salary is on the low side of a salary market study for CEOs of businesses with an annual budget $750 million in the medical field, though Cardinal is not a perfect fit for those market studies.
“We still have a leg in the pond of being a public agency. I’ll admit that.”
The pay issue may be what triggered two scathing state audits this year. Cardinal sued the state over its authority to set executive compensation, but went on to reduce Topping’s pay to $204,195 — the maximum permitted by state law for the top position of a behavioral health managed care organizations. Later the board terminated his $617,000 contract.
A healthy severance package had been written into his contract — one year’s pay if the board became unhappy with Topping and two years if termination came about because of a change in control.
Burgin recalls warning the board about the contract.
“I told the board, ‘You got to remember, you write a contract to keep somebody, but then you let them go, you’re going to look pretty stupid.’ We all understood that.”
Burgin says the state forced the dismissal — “straight up they told us” — so Topping received two year’s pay at his contracted rate, for a total of $1.7 million. That plus severance paid to other top officials amounted to $3.8 million.
DHHS said Cardinal Innovations “acted unlawfully” in giving Topping the severance, and the state took over the agency in late November. State Rep. Nelson Dollar, a Cary Republican, called the payouts “immoral.”
The one thing that’s been said in the past two weeks that hurt Burgin was a TV interview with a woman who said she was not able to get the care she needed from Cardinal. If that woman had contacted any board members, they would have made sure she got help, Burgin says.
Still, he says, “that’s one person out of 850,000 people.”
The general public may not know about Cardinal, he says.
“We got bigger. We did get distant from our counties. …
“We also have a PR issue. We haven’t done a good job of letting people know who Cardinal Innovations is. It used to be Piedmont Health, so at least you knew you were in the health market.”
Now DHHS is working with the N.C. Association of County Commissioners to put together a new Cardinal board of directors. People can self-nominate, but they have to send in several documents — a resumé, cover letter and as many as three letters of support — to firstname.lastname@example.org by today. The state’s goal is to appoint the new board by Friday.
Burgin will be watching from the sidelines.
“If you were reading the news, would you want to be on that board?” he asks.