NCDHHS audit uncovers questionable payments by mental health agency
Eastpointe Health Services executives received millions in payouts before merger with Trillium, thousands of emails deleted
In North Carolina, LME/MCOs, or Local Management Entity/Managed Care Organizations, are companies that manage NC Medicaid tailored plans, coordinate certain services for NC Medicaid Direct beneficiaries and coordinate certain services for tribal members. There is one LME/MCO for each county.
An audit by the North Carolina Department of Health and Human Services (DHHS) has revealed over $4 million in questionable payments to top executives and a law firm ahead of a mandated merger between Eastpointe Health Services and Trillium Health Resources. The audit also uncovered the deletion of thousands of emails by Eastpointe executives before the consolidation.
Weeks before the merger, Eastpointe's former CEO Sarah Stroud received $707,480 in unauthorized payments, and former Chief Business Officer Catherine Dalton received $383,110 in a severance package, both without full board approval as required by state law. The audit, dated June 27, recommends that Trillium seek to recover these payments.
Eastpointe's external counsel, The Charleston Group, received $3 million for charges dating back to 2021. The audit criticized the deletion of thousands of emails by Stroud and Dalton, which officials said hindered the investigation.
The merger, part of a restructuring effort by Democrat NCDHHS Secretary Kody Kinsley, aimed to streamline care management for individuals with mental health and substance use issues. This restructuring reduced the number of LME-MCOs from six to four. The audit highlights the need for stricter oversight and training for board members. It also called for new procedures for contract execution during consolidations and annual training for board members to ensure compliance with state regulations.
Auditors found that Stroud and Dalton were deleting thousands of emails from their accounts, with Stroud deleting 2,000 emails on Dec. 31 and Dalton deleting about 11,000 emails between Dec. 20 and Dec. 30 ahead of her departure. Those emails are public records, according to state law.
“Trillium had difficulty accessing certain email records of the Eastpointe CEO and CBO and was unable to determine if all email records were recovered due to unresolved problems with Eastpointe’s primary email archive,” the audit said.
In addition, Jerry Jones, the chair of the Eastpointe governing board at the time of consolidation, did not make himself available for an interview to auditors. “These factors limited the ability of [Office of the Internal Auditor] to obtain all sufficient, reliable, relevant, and useful information needed to understand Eastpointe’s activities during and leading up to its consolidation with Trillium,” the audit states.
Jones hung up the phone on NC Health News, who first reported the story, when asked about the DHHS audit.
History of troubled LME-MCO finances
North Carolina’s mental health local management organizations received state appropriations to cover the care for people without insurance who need mental health services. But the organizations are mostly funded by Medicaid dollars, which flow through the agencies to pay for care received by people with intellectual, developmental and mental health disabilities, NC Health News reported.
Medicaid expansion launched in December, as I previously reported. On July 1, Medicaid Tailored Plans launched. On July 1, leadership met virtually to discuss the launch. (Watch: Side by Side with DMHDDSUS - North Carolina's Transition to Tailored Plans. View archives here.)
According to Centers for Medicare and Medicaid Services federal rules, managed care organizations that save Medicaid dollars are permitted to spend them in ways they see fit. LME-MCOs say that money saved would be put back into the mental health system. But that doesn’t always happen. One notable case was Mecklenburg County-based Cardinal Innovations, which used those saved Medicaid dollars to build corporate offices in Cabarrus County in 2012, which the organization left about a decade later for high-end offices in downtown Charlotte. Cardinal eventually folded after 2017 audits showed that executive leadership gave itself generous bonuses, threw lavish holiday parties and transported board members to meetings on a private jet.
Jerry Jones now serves on the new combined Trillium governing board, along with four other former Eastpointe board members. In a bill passed on the last day of the legislative "short" session, lawmakers gave Kinsley the power to “approve the new alternative board structure.” It was the same day the audit was released.
If you have information about questionable finances, the NC Medicaid Office of Compliance and Program Integrity (OCPI) works to stop fraud, waste and abuse in Medicaid. “You are encouraged to report matters involving Medicaid fraud and abuse,” their website said.
Cops & Congress commentary: Why all North Carolinians should care about this NCDHHS audit
The recent NCDHHS audit revealing millions in questionable payments by Eastpointe Health Services executives ahead of their merger with Trillium Health Resources is more than just a scandal—it's a wake-up call for every North Carolinian. Here’s why everyone in the state should be concerned:
1. Impact on public funds
The misuse of over $4 million in taxpayer money intended for mental health services is a direct blow to public trust. North Carolinians work hard and pay taxes with the expectation that their money will be used responsibly to support essential services. Mismanagement and unauthorized payouts undermine this trust and divert funds from those in need.
2. Mental health services in jeopardy
Eastpointe Health Services managed care for thousands of residents with mental health, developmental, and substance use issues. Questionable financial practices within such a crucial agency can lead to service disruptions, reduced quality of care, and hindered access to necessary support for some of our most vulnerable citizens.
3. Systemic issues need attention
The audit highlights systemic problems within North Carolina’s mental health management system. By bringing these issues to light, the state has an opportunity to address and reform the system, ensuring that it functions efficiently and equitably for all who depend on it. This is not just an issue for those directly receiving services but for all citizens who benefit from a healthy, well-supported community.
4. Accountability and transparency
This incident underscores the need for stronger oversight and transparency within public institutions. Holding leaders accountable for their actions is crucial for maintaining the integrity of public service. North Carolinians deserve to know that their officials and organizations are acting in their best interest, especially when it comes to managing public funds.
5. A call for reform
The findings of this audit should prompt statewide calls for reform. By advocating for more stringent regulations, better oversight, and mandatory training for board members, North Carolinians can help prevent such incidents in the future. Engagement and vigilance from the public are essential in driving the changes needed to protect public resources and ensure effective service delivery.
In conclusion, the NCDHHS audit described above is not just a localized issue. It’s a matter of statewide importance. Every North Carolinian has a stake in ensuring that public funds are used appropriately and that essential services are provided efficiently and equitably. By staying informed and demanding accountability, we can work towards a better, more transparent, and more effective system for all.
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