Taking the helm at Minnesota’s sprawling Department of Human Services, Jodi Harpstead brings long experience in managing large organizations that Gov. Tim Walz hopes will provide stability and focus to a struggling agency.

Since July, the Department of Human Services (DHS) has been roiled by an unusual series of resignations in top leadership, revelations of nearly $80 million in payment mistakes and allegations of retaliation against internal whistleblowers.

But even before the Walz administration took over in January, legislators have been highly critical of the agency for a lack of transparency and program failures, prompting ever-increasing calls to break up the behemoth into more manageable parts.

Additionally, officials in some of the state’s 87 counties, which operate on the front lines of agency programs such as Medical Assistance, cash welfare and food stamps, say the relationship with DHS has become increasingly strained and counterproductive.

Taken together, Harpstead’s challenge goes beyond the management of 7,000 agency employees and the stewardship of a $17.5 billion budget. In order to right the ship, she needs to repair and maintain relationships with the state’s legislators and county seats, as well as with Washington D.C., which sets the rules for much of the money that DHS receives.

A key challenge may be improving oversight of the way DHS spends $7 billion in federal Medicaid money each year. As the agency’s mission has expanded in recent decades into new forms of mental health care and chemical-dependency counseling, so has the number of channels through which federal money flows. At least two of the agency’s recent embarrassments involved improper use of federal money through programs that operate under increasingly splintered oversight.

“We may need to consolidate and strengthen our federal billing … [and] be even better at properly billing Medicaid and other federal programs,” Harpstead told the Legislature last week.

Big pay cut

Harpstead was chief executive at Lutheran Social Service of Minnesota, one of the state’s largest nonprofit social service agencies, for eight years before taking the high-profile job at DHS. She said her new role has “far more public constituencies” than her previous job, but added that there are similarities: “You have always got someone looking over your shoulder.”

The move to state government comes with a big pay cut. She earned about $300,000 a year in her previous job; the new position pays $155,000.

Harpstead said she took the job because she cares about the agency’s work. From the outside, she witnessed the leadership changes that began when two deputy commissioners resigned. Soon after that, DHS Commissioner Tony Lourey resigned. After an interim commissioner was reappointed, the deputies came back, only to have one of them resign again.

“I could see, like everybody else, what was happening with the leadership changes,” Harpstead said in an interview. “I was particularly eager to come in and settle that and rebuild.”

Harpstead said it is too early to say whether she will shake up the remaining top leadership, or even what the leadership structure would look like.

Sen. Jim Abeler, R-Anoka, said he urged Harpstead to take a good look at upper management.

“I don’t know who needs to change, but hopefully she will be able to figure out who that is,” said Abeler, chair of a key Senate health committee.

“There is absolutely a culture of indifference to the public, to the Legislature and to the counties about how they are running things,” he said.

Harpstead spoke to a joint panel of the two Senate health committees Wednesday, her second day on the job, where senators expressed concerns that DHS employees were fearful to speak up about problems.

“We are not going to tolerate retaliation,” Harpstead told the Star Tribune Friday. “We obviously want to have an open culture here.”

Harpstead told senators that she would be open to the idea of splitting apart some of the agency’s pieces. One common suggestion, endorsed by Pamela Wheelock, who was interim DHS commissioner in July and August, would calve off the agency’s direct care and treatment division, which operates the state’s sex offender program, some state hospitals and other facilities for the mentally ill.

But some mental health and disability advocates say that the idea needs closer scrutiny.

“Why are we dividing it up? What is the problem we are trying to solve?” said Barnett Rosenfield, an attorney with Mid-Minnesota Legal Aid. “It has to be more than just DHS is too big and we have to find a line where to make the crack.”

Harpstead said any proposal would need to consider the consequences carefully.

“I don’t think [DHS] needs to be smaller just because it is big,” she said, noting that she has seen how much cross-communication there is among the agency’s various divisions.

“We would hate to lose that,” said Harpstead.

‘They are just patching holes’

On another front, many counties are frustrated with state computer systems they use to determine applicants’ eligibility for the huge Medicaid health insurance program, which covers 1.1 million residents. Designed to streamline the process for county case workers, the system has instead had the opposite effect.

“In our own county we had to hire eight additional staff because the system doesn’t work,” said Olmsted County Commissioner Sheila Kiscaden, a former state legislator. “It is terribly inefficient, and it is costing Minnesotans a lot of money.”

Kiscaden said counties across the state have been forced to absorb the costs of the additional workload through property taxes. Despite pleas from local officials asking DHS to expedite permanent fixes, it could take years for the system to work properly.

“There is no long-range plan. They are just patching holes and patching holes,” Kiscaden said.

And recent actions taken by DHS could shut down some county programs that administer Medicaid health insurance directly to their residents, a program that more counties are showing interest in.

“Counties are a creature of the state, and they are meant to be the extensions of the state into local regions,” said Steve Gottwalt, executive director of the Minnesota Association of County Health Plans. Instead of working together, he said, many now see the relationship as one of “butting heads.”

“There is an opportunity for Commissioner Harpstead because there is a hunger to re-establish that partnership,” he said.