Jodi Harpstead, new DHS commissioner, promises to 'rebuild trust' at embattled agency

Incoming Department of Human Services (DHS) Commissioner Jodi Harpstead told a Minnesota Senate panel Wednesday that her priority is restoring credibility in a sprawling social service agency that has undergone a chaotic leadership shuffle amid revelations of poor financial controls and whistleblower complaints.

"The theme for my 90-day plan is to rebuild trust," said Harpstead, who headed Lutheran Social Service of Minnesota until she was tapped by DFL Gov. Tim Walz to take over the $17.5 billion agency.

Facing lawmakers in her second day on the job, Harpstead offered few specifics on the problems facing the agency or how she might address them. But in a nod to questions that have been raised by some legislators, Harpstead said she would be open to discussions about breaking up the behemoth agency, with a view toward making it more nimble and manageable.

"By doing that I'd want to be sure there aren't unintended consequences," she said. The most frequently discussed idea would create a separate agency to provide services for the most challenging population of mentally ill, disabled and drug-addicted Minnesotans. Citing recent management failures at the department, Sen. Rich Draheim, R-Madison Lake, said Wednesday he will author legislation next year to divide the agency into smaller components.

Harpstead also outlined a general plan for her first 90 days. She said she would press for the completion of internal audits and establish new processes to prevent future financial missteps — especially when it comes to federal program money. She also said she would build a diverse team around her.

Republican lawmakers, holding their second in a continuing round of hearings on management problems at DHS, said Harpstead has a lot of work to do.

"There are so many places where trust has been broken," said state Sen. Michelle Benson, R-Ham Lake, chairwoman of a key health care committee.

Walz praised his new commissioner's first encounter with the Legislature. "I think it was a good start," he said. "I think the 90-day plan matters to show some real process." He also said the department needs to have the trust of the citizens of Minnesota, the department's clients, counties and legislators.

"[Lawmakers] are right," Walz said. "They have every right to ask these questions."

He said he thought the tone at the hearing was one of collaboration instead of political grandstanding.

"We're very interested in working together," Walz said. "I want to see a plan on how we make the internal controls work better at DHS. There's a lot of good things happening over there, but those will be canceled out if we don't have those things in. I think those legislators want to see things that they can measure, a dashboard."

In recent months, the Legislature learned that the Department of Human Services (DHS) overpaid two Indian bands approximately $25 million for substance-abuse treatment after assuring the bands the billing had been proper.

The federal government also says DHS made improper payments to as many as 100 chemical-dependency providers since 2014 and must return the money to Washington.

Separately, a compliance officer at DHS said she was the victim of retaliation after she raised alarms about the legality of some agency contracts.

A disability advocate alleges that he was retaliated against and eventually pushed out of the agency soon after he began raising concerns of racial bias within the agency's embattled enforcement division.

Amid the revelations of inadequate financial controls and whistleblower protections, the agency also has undergone a top management shake-up. Walz's first DHS commissioner, former DFL state Sen. Tony Lourey, lasted just six months on the job.

The agency recently lost the director of the Medical Assistance program, the giant state version of the federal Medicaid program that serves 1.1 million Minnesotans. A deputy commissioner resigned, returned and resigned again. The medical director of Medical Assistance was forced out.

Sen. Jim Abeler, R-Anoka and chairman of another key committee, said he and other lawmakers have been hearing from DHS employees seeking to alert the Legislature to other problems — but requesting anonymity to do so because they fear retribution.

Abeler said DHS should be more transparent. "The amount of information coming from DHS to the Legislature has been the smallest amount that can be given; more comprehensive information to us would rebuild trust," he said. "If there is more bad news, let's hear it from you."

The agency's 7,300 employees provide a wide range of services, including health care coverage for low-income Minnesotans, child protection, and services for people with mental illness or physical or developmental disabilities.

In a brief interview after her appearance, Harpstead said the problem areas are under review.

"We are working to get to the bottom of each of those," said Harpstead, who had a long career as a corporate executive at Medtronic before joining Lutheran Social Service in 2011. She is the first commissioner of DHS since a 1984 reorganization to hold a master's degree in business administration.

Legislators offered mostly friendly encouragement to Harpstead. Sen. Julie Rosen, R-Vernon Center, chairwoman of the Senate Finance Committee, said she appreciated that Harpstead reached out to her right away.

But Rosen added that Harpstead should be ready to fix the problems — including the money owed to the federal government — without new funding from the Legislature.

"What we have is already very well supported, and they have to do with what they have," Rosen said. "There's no extra money."

J. Patrick Coolican • 651-925-5042 Staff writer Jessie Van Berkel contributed to this report.