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DHHS Temporarily Takes Over Cardinal Innovations to Return Organizational Focus to Consumers


Effective immediately, the N.C Department of Health and Human Services has temporarily assumed leadership of Cardinal Innovations, an LME-MCO authorized under state law to provide essential behavioral services using public funds.

Secretary Mandy Cohen and her DHHS leadership team have taken over responsibility for all LME functions after recent unlawful actions, including serious financial mismanagement by the leadership and Board of Directors at Cardinal Innovations regarding executive team compensation and severance payments.

In addition to temporarily assuming control of the organization, the department has revoked Cardinal’s alternative board structure, necessitating a reconstituting of the board. DHHS’s actions are being taken after consultation with the chairs of the General Assembly’s Joint Legislative Oversight Committee on Health and Human Services and with its full support. Importantly, behavioral health service to consumers and payments to providers will not be interrupted during this interim period.

“I am deeply disappointed in the actions of Cardinal Innovations' leadership and board,” said Secretary Cohen. “They are entrusted with the responsibility to care for some of our most vulnerable residents, but instead of living up to that obligation, they have lost the public’s trust by violating the law and mismanaging public funds. DHHS is temporarily taking control of Cardinal to stabilize the organization and return its focus to the consumers and families that Cardinal serves.”

During this interim period, DHHS staff will be on site at Cardinal Innovations and will work closely with interim CEO Trey Sutten and other Cardinal staff to manage and stabilize the organization, hire additional executive team members and develop a corrective action plan to bring Cardinal into compliance with all applicable laws. This temporary action is authorized under N.C. G.S. 122C-115.4, which authorizes DHHS to temporarily remove LME functions from an entity that demonstrates serious financial mismanagement or serious regulatory noncompliance.

During the time that LME functions are temporarily removed from Cardinal’s direct control, the department will be responsible for authorizing all financial transactions. Executive leadership who are in the process of leaving the organization, including former CEO Richard Topping, will not be permitted on the premises of Cardinal during this time.

In addition, DHHS has determined that the structure of the Cardinal Innovations Board of Directors is not in the best interest of consumers or the counties that Cardinal serves. DHHS has revoked approval of the current board composition effectively immediately, which means the prior board has no authority to take any further action. DHHS and County Commissioners in the Cardinal catchment area will appoint new board members in compliance with the statutory requirements of N.C. G.S. 122C-118.1 by Dec. 15, 2017.