About $1 billion of revenue will pass through 900-employee Cardinal Innovations Healthcare this year for services aiding foster kids and people with severe substance abuse and mental health problems in 20 N.C. counties.
In short, it’s a key cog in how the state treats many of its most vulnerable citizens. And it’s in trouble.
Charlotte-based Cardinal is a not-for-profit, state-chartered group that manages health care needs for more than 60,000 clients annually who rely on the Medicaid health insurance plan for low-income residents. It started in the mid-1970s as a care provider, but now it solely administers money to other hands-on groups.
After largely operating under the radar. Cardinal hit the headlines several years back when various public officials concluded former CEO Richard Topping was vastly overpaid and wasted a lot of money. He was fired in 2017.
Since then, new CEO Trey Sutten has rebuilt the organization, restored its financial stability and responded to concerns from officials in several counties who have questioned the group’s effectiveness, especially involving foster cases.
But the conflict continues. Union and Cabarrus counties were so upset with Cardinal that they are shifting their relationship from Cardinal to a smaller, similar organization based in Gastonia, Partners Health Management. Mandy Cohen, secretary of the N.C. Department of Health and Human Services, approved the shift last month. She’s in charge because the state oversees Medicaid spending.
Last week, Forsyth County commissioners voted to ask Cohen for permission to quit Cardinal and join Partners. Mecklenburg County officials have criticized Cardinal, but they aren’t as far along in the disengagement process. Losing the counties that include Winston-Salem and Charlotte would be a tough blow for the organization.
To learn more, I talked with Cardinal CEO Sutten for the Business North Carolina weekly podcast. He’s a turnaround management veteran who worked as a consultant on cases involving Fannie Mae/Freddie Mac, Westinghouse and the Los Angeles Public Schools. He was chief financial officer for N.C. Medicaid, which spends $13 billion annually, before joining Cardinal in 2017.
While most patients would receive care from the same providers once a county moves from Cardinal to Partners, Sutten notes that there’s a lot of potential for disruption. Many of the patient’s care coordinators are employed by Cardinal and have worked with the same families for a decade or more. The changes are poorly timed, he says, given the difficult conditions over the last year caused by the coronavirus pandemic and North Carolina’s pending transformation of its overall Medicaid program to a managed-care system.
Sutten says cutting administrative costs have led to fiscal stability after Cardinal was losing $30 million a year under Topping. His team has transformed Cardinal to satisfy critics and meet client needs, he says. He’s optimistic that Cardinal can salvage its relationship with Mecklenburg and others.
Sutten contends much of the controversy reflects a “revolt against managed care.” North Carolina is among the last U.S. states to change its Medicaid system to that model, which attempts to limit spending while providing equal or better service.
In particular, he notes that the statewide foster care system is in major need of reform and shifting blame to his organization isn’t fair.
