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Audit: Managed care organization misspent Medicaid money

May 19th, 2017

— North Carolina’s largest managed care organization for mental health, developmental disabilities and substance abuse services misused federal and state Medicaid dollars by overpaying its chief executive and through excessive spending on corporate retreats, charter flights and other questionable expenses, according to a state audit released Thursday.

Cardinal Innovations Healthcare Solutions, which serves more than 85,000 people in 20 counties, denied any wrongdoing in a 22-page response to the audit.

Auditors determined that Cardinal paid its former and current CEOs annual salaries of $400,000 to $635,000 since 2014, far above the maximum salary of $187,364 that that Office of State Human Resources set for mental health area directors, meaning that an extra $1.2 million went to executive salary than into mental health services during the three-year period. Cardinal never obtained state authorization to exceed the maximum salary, according to the audit, but the company said it provides its salary information to OSHR every year and has never been told to scale back anything.

Auditors also questioned more than $400,000 in “unreasonable” expenses, including corporate retreats at a luxury hotel in Charleston, S.C.; chartering planes to fly to Greenville, Rocky Mount and Smithfield; providing monthly detailing service for the CEO’s car; and purchasing alcohol, first-class airline tickets and other items with company credit cards.

“The unreasonable spending on board retreats, meetings, Christmas parties and travel goes against legislative intent for Cardinal’s operations, potentially resulting in the erosion of public trust,” the audit states.

Cardinal responded by noting that auditors “did not identify any violation of any statute or any legal requirement with respect to any of these expenditures” and went on to defend the spending as necessary.

Auditors also dinged the company for exploring business opportunities outside its core mission and geographic area.

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