Minnesota DHS chief grill on breakdowns in oversight

The new head of the Minnesota Department of Human Services (DHS) pledged aggressive action Wednesday to correct the embarrassing gaps in oversight that have roiled the agency since this summer and led to nearly $80 million in improper payments for substance-use disorder treatment.

At a prolonged Senate hearing, Human Services Commissioner Jodi Harpstead unveiled the broad outlines of a plan to strengthen internal controls within the agency and to increase scrutiny over how funding decisions are made in the state's Medicaid program, the public insurance program that serves 1.1 million Minnesotans and is overseen by the DHS. She also promised a top-to-bottom investigation into the agency's decisionmaking process and how it drastically overpaid two Indian bands and chemical-dependency treatment providers since 2014.

"I am as tired as all of you about reading about problems with the Department of Human Services," Harpstead told lawmakers at a joint Senate committee hearing. "The really good news is that we have the very expertise to remedy the situation."

Several lawmakers appeared exasperated as they listened to Harpstead for the second straight day since Legislative Auditor James Nobles released a detailed and harshly worded report Tuesday into the agency's overpayments to the Indian bands, White Earth Nation and the Leech Lake Band of Ojibwe, for their opioid treatment programs.

The auditor's report found that "troubling dysfunction," including a lack of checks and balances within the DHS, led the agency to make $29 million in wrongful payments to the bands, which now face painful cuts to their social programs. The auditor's office found that no one at the DHS could identify who was responsible for the overpayments, or offer a rationale for the unorthodox and unauthorized billing method that led to the problem.

In a series of exchanges at the hearing, both Democrats and Republicans expressed indignation and confusion over the mistakes, as well as fear that more costly revelations may be coming from the DHS.

"Your internal auditors do not appear to have taken internal controls seriously," said Sen. Michelle Benson, R-Ham Lake, chairwoman of the Senate Health and Human Services Committee.

Added Sen. Jerry Relph, R-St. Cloud, "I am concerned that this is just the tip of the iceberg."

This week's Office of the Legislative Auditor (OLA) report, coming on the heels of allegations of retaliation against DHS whistleblowers and recent leadership resignations, paints an unflattering portrait of the inner workings of the state's largest agency, which has a $17.5 billion biennial budget. The auditor's office found that DHS staff can make decisions to spend Medicaid funds without review and approval from DHS officials who are responsible for the state's Medicaid program. The agency also lacks a policy that requires that its various divisions, offices and units to obtain approval from Medicaid officials before making spending decisions, the legislative auditor found.

The DHS' decentralized management structure appears to be part of the problem. The legislative auditor found, for instance, that the agency's behavioral-health division had its own staff for setting payment rates and that it did not coordinate with the health care division, which actually oversees payments. Because DHS failed to establish uniform payment controls, the unauthorized payments to White Earth and Leech Lake continued for several years, the auditor's report said.

The overpayments were for an unauthorized billing practice that enabled the bands to bill the Medicaid program an unusually high rate — $455 a day — for an anti-addiction medication, Suboxone, even when patients took the drug at home without interacting with a clinician. The payments continued over several years even though they were never authorized. A month after that billing error became public, the agency disclosed that it was ordered to repay $48 million to the federal government.

In its report, the legislative auditor found that no one at the agency documented the decision that allowed the Indian bands to bill the Medicaid program for self-administering drugs at home. The state's failure to do so, the auditor's office found, violated the Minnesota Official Records Act, which requires that state agencies preserve all records "necessary to a full and accurate knowledge" of their official activities.

"We continually asked, 'What is the documentation? Do you know who made the decision?' " Nobles told legislators at Wednesday's hearing. "… No one raised their hand and said, 'I made the decision and I'm responsible.' It's disturbing that this could occur."

In testimony, Harpstead apologized for the erroneous payments and said they demonstrated "the dangers of institutional memory" at the large agency, in which decisions and practices tend to be accepted over time without review. To address the problems, she said a team of experts is coming together to identify the root cause of the overpayments and map out how decisions are made and by whom. She also has proposed a tighter process for documenting decisions.

The changes, Harpstead said, will result in multiple layers of approval before Medicaid funds are disbursed — and a clear paper trail.

"We have imagined, for example, that when they complete that work, both our program administrations and our Medicaid director will have to sign off on all new program payment decisions before our finance division will disburse funds toward those payments," she said. The process, she said, would create a "triple-checked, permanently documented, accountable process that we can better track and control."

Chris Serres • 612-673-4308