Frederic Leonard
Frederic Leonard, the owner of Cedarbrook Residential Center in McDowell County, appears Tuesday before an Office of Administrative Hearings session conducted at the offices of his attorneys in Greensboro. Leonard hopes for a temporary restraining order to lift the states suspension of admissions at the 80-bed adult care home. Michael Gebelein / Carolina Public Press

Residents at an adult care home in McDowell County, which was already battling the state in the courts over regulatory actions, have been receiving state-contracted services through a company owned by the owner of the facility in which they are living, posing a potential conflict of interest and a possible violation of the law.

Cedarbrook Residential Center of Nebo is an 80-bed facility that provides care to adults with serious disabilities, in many cases with mental illness and severe cognitive impairments. Its physical address is 1267 Pinnacle Church Road in Nebo. The facility’s owner is Frederic Leonard.

Strategic Interventions is a behavioral health services company with several offices around the state, including one on Pinnacle Church Road in Nebo. Its owner is Frederic Leonard.

Among the various enterprises of Strategic Interventions, the company provides Assertive Community Treatment teams – commonly called ACT teams – to individuals requiring services.

According to state Department of Health and Human Services, an ACT team in this state “consists of a community-based group of medical, behavioral health and rehabilitation professionals who use a team approach to meet the needs of an individual with severe and persistent mental illness.”

It’s not unusual for ACT teams from Strategic Interventions and other providers to contract with the state to visit residents at adult care homes and provide services. One big reason for this is that state and federal laws prohibit the adult care homes themselves from providing certain types of care or from forcing residents to accept care from someone whom the home has chosen, rather than someone whom the resident, or a resident’s legal representative, has chosen.

Advocacy groups with whom Carolina Public Press discussed this arrangement expressed concern that the situation at Cedarbrook poses an apparent conflict of interest that runs counter to the spirit of the law, and possibly the letter of the law as well.

They also warned that it appears to run counter to the spirit of the state’s settlement agreement with the federal government to protect the rights of mentally ill adults, which the U.S. Department of Justice has already accused the state of violating.

Leonard, however, denied that his companies have done anything inappropriate and pointed to glowing state evaluations of Strategic Interventions.

Elusive evidence

In July 2017, Carolina Public Press began publishing a series of reports on questions about care at adult care homes in general and, beginning in October 2017, about Cedarbrook specifically. During the reporting process for this series, several independent sources alerted CPP to the overlapping ownership of Cedarbrook and Strategic Interventions and the appearance of ethical and legal problems this posed.

At least two independent observers from different organizations described seeing residents of Cedarbrook receive ACT team services from Strategic Interventions. But when CPP talked with the Department of Health and Human Services about this issue in September 2017, a spokesperson for the agency appeared uncertain that this was actually happening, simply because it wasn’t something DHHS knew how to detect.

“After speaking with (DHHS) staff, it is my understanding that we do not track or sort the records in our Adult Care Licensing Section by any named mental/behavioral health provider, and they are unable to reasonably identify or locate records in their possession response to this request,” DHHS Legal Communications Director Paul Hogle wrote.

CPP also asked the McDowell County Department of Social Services about Strategic Interventions around the same time. Oversight for adult care homes is shared between county DSS agencies and the state Division of Health Service Regulation at DHHS.

An attorney for McDowell County responded that the county was involved in litigation related to Cedarbrook Residential Center and could not answer any such inquiries.

LME-MCO contracts

How could the existence of overlapping contracts be confirmed? Beginning in November 2017, CPP issued multiple public records requests in an attempt to seek this confirmation.

ACT team services, whether for residents at an adult care home or for care recipients in other situations, are contracted in North Carolina through the state’s seven regional Local Management Entity-Managed Care Organizations, generally referred to as LME-MCOs.

LME-MCOs may appear to operate like health care companies, but in fact they are taxpayer-funded state agencies that happen to operate with a substantial degree of autonomy. The regional LME-MCO in a care-recipient’s home county handles that person’s contracts for services, even if the individual is housed – in theory temporarily – at an adult care center in another part of the state.

So, for instance, a resident of eastern Wilmington who receives a placement at Cedarbrook Residential Center in western McDowell County, would have services for an ACT team contracted through the LME-MCO for the southeastern region of the state – Beulaville-based East Pointe – rather than one of the LME-MCOs serving a region closer to Cedarbrook. (This is just an illustration — East Pointe said it has no contracts for ACT team services with Strategic Interventions.)

Although the state Department of Health and Human Services exercises some oversight for LME-MCOs, DHHS would not normally have direct access to these ACT team contracts, which is the issue that Hogle identified. Even if these were logged into a database that DHHS could access, the contracts would not normally state that the person was a resident at a facility such as Cedarbrook, since technically the adult care home was not a party to the contract.

To confirm the existence of such contracts despite these issues, CPP contacted each of the state’s seven LME-MCOs with a request for information. First, did they have any contracts for ACT team services through Strategic Interventions? Second, did any of those contracts provide for services to be rendered at the physical address, 1267 Pinnacle Road in Nebo?

The results confirm the existence of multiple contracts with multiple LME-MCOs for Strategic Interventions to provide ACT team services to individuals residing at the physical address of Cedarbrook Residential Center. This verifies the claims of independent groups who said they observed this occurring.

Just how many contracts in total are involved remains unclear, though the observers described substantial numbers.

Although all of the LME-MCOs are state agencies, different LME-MCOs’ legal counsels had different interpretations of their obligations to comply with the state open records laws and whether providing such information conflicted with rules protecting the confidentiality of care recipients.

At least two agencies expressed shock at the potential conflict of interest CPP was unmasking and were eager to provide the requested information as quickly as possible.

Most of the agencies provided full answers, agreeing that since CPP had not requested any information that would identify individual care recipients, there could be no confidentiality violation. However, two LME-MCOs, generally citing remaining concerns about protecting clients, provided partial answers and have remained in discussion with CPP about potentially providing fuller answers. One LME-MCO would not provide any data.

The partial answers suggest that the scope of the LME-MCO contacts could be quite large, just as observers have said. One LME-MCO that provided only a partial answer so far has told CPP that it has more than 150 contracts with Strategic Interventions for ACT team services, though it has not yet said how many of those, if any, are for residents of Cedarbrook.

DHHS response

After CPP contacted DHHS this week about the findings in this article and their implications, a spokesperson for the agency responded.

CPP asked about whether the situation raises the agency’s concerns about a conflict of interest and whether it violates a specific statute, G.S. 131D-2.2(d).

‘The statute you referenced sets out a resident’s right in an adult care home to obtain services at their own expense from providers other than the adult care home,” DHHS press assistant Kelly Haight acknowledged, pointing to similar protections in Medicaid law for the large proportion of adult care home residents whose care is covered by Medicaid rather than out of their own pockets.

“DHHS is not aware of an incident in which an adult care home has violated (these laws) …” Haight said. “DHHS would certainly investigate a complaint alleging such conduct. An investigation such as this might entail collaboration with, and separate action taken by an LME-MCO, the Division of Medical Assistance or the Division of Mental Health, Developmental Disabilities and Substance Abuse Services.”

Advocate response

Advocacy groups for long-term care residents and disabled North Carolinians seemed surprised that a spokesperson for DHHS implied the agency had no knowledge of the situation.

Regardless, advocacy groups indicated that at least one of the LME-MCOs should have been aware that some of its contracts with Strategic Interventions were for care to residents at Cedarbrook, with both companies being owned by the same individual.

“The contracts have concerned us, and we have taken those to at least one of the LME/MCOs,” explained Corye Dunn, policy director for Disability Rights North Carolina.

None of the LME-MCOs’ spokespersons acknowledged such advance knowledge of the potential conflict of interest when CPP contacted them late last year.

Told about the situation, Bill Lamb of Friends of Residents in Long-Term Care, expressed misgivings about the “interlocking interests” of those who have financial ties to a care provider like Cedarbrook.

Warning that residents of adult care homes are already highly vulnerable, Lamb noted that “residents are in placement because someone wanted them in placement.”

Dunn said she was highly concerned with the implications for the state’s settlement agreement with the federal government over the lack of housing choices for mentally ill adults, which the U.S. Department of Justice has already accused the state of violating, “whether it is a violation of statutes or not – and I think it very possibly is.”

“It is troubling that, when the state is operating within a settlement agreement, … it would choose to contract one of the services (for affected people) through a provider who has a financial interest in keeping people in adult care homes,” she said.

The advocates’ concerns could result in the formal complaint that DHHS has indicated it would investigate.

Dunn also suggested that the situation raises doubts about the effectiveness of the LME-MCOs and their failure to detect and halt what appeared to be a serious conflict of interest.

Frederic Leonard response

The owner of both Cedarbrook and Strategic Interventions, Frederic Leonard, also responded after CPP notified him of the news organization’s findings. He emphasized the role of the LME-MCOs, rather than Strategic Interventions or Cedarbrook, in establishing the contracts.

“I can say that Strategic Interventions contracts only with (LME-MCOs) across the state and does not contract for mental health services with individuals directly,” Leonard wrote in an email. “The (LME-MCOs) – not Strategic Interventions – determine the individuals’ eligibility to receive mental health services on an individual-by-individual basis.

“There is certainly no violation of state law,” Leonard continued. “Strategic Interventions strives to provide the best possible support for severely mentally ill adults living independently in the community. A very small percentage of the clients served by Strategic Interventions reside in facilities across the state, all as approved by the (LME-MCOs).”

In his response, Leonard did not directly confirm or deny whether Strategic Interventions was specifically serving individuals residing at a facility he also owned. However, he did defend the track record of Strategic Interventions in helping move residents away from reliance on adult care home housing.

“It should be noted that state evaluators have stated that Strategic Interventions has been instrumental in transitioning more individuals moving from facilities into the community than any other mental health provider in the state and more than many of the (LME-MCOs),” Leonard said.

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Frank Taylor is the managing editor of Carolina Public Press. Contact him at

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