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If granting an exemption to Amplatz is found to be in violation of the statute, the audit recommends the state should "immediately revoke the exemption and take back any excess amounts paid to date."

DHS assistant commissioner faulted in internal audit

Scott Leitz, assistant DHS commissioner, is at the center of a new internal audit. (Staff photo: Peter Bartz-Gallagher)

Scott Leitz, assistant DHS commissioner, is at the center of a new internal audit. (Staff photo: Peter Bartz-Gallagher)

An internal audit of the Department of Human Services has turned up at least two troubling findings, one of which may have led to a hospital’s receiving an undue exemption that could have cost the state and federal government tens of millions of dollars.

At issue is a decision made by Assistant DHS Commissioner Scott Leitz, who is said to have taken the lead on granting Fairview University Medical Center’s Amplatz Unit an exemption from a 10 percent cut in Medicaid payment rates. That rate cut, as passed by the Legislature in 2011, was meant as a cost-cutting measure by the state. But the statue also granted an exemption to certain hospitals, including those which handle long-term care or which “predominantly” treat children.

After that law was passed, representatives from Amplatz met with officials from DHS, including Leitz, who authorized the hospital to receive the 10 percent exemption. Leitz told the auditors he applied a “common sense” definition of the term “children’s hospital” in determining that Amplatz qualified, and was unaware of any internal DHS objections to his decision.

But several DHS employees expressed their concern, at least to the auditors, that Amplatz should not have qualified, and is instead classified as a hospital within the University of Minnesota Medical Center (UMMC). The auditors took the same view of the issue, and said Amplatz falls outside the statute as written.

A footnote in the report suggests Leitz might have granted the exemption based on a legal opinion provided by Amplatz itself, which Leitz denies.

The audit recommends that DHS “obtain a formal legal opinion and proceed accordingly on this issue in a fair, open and transparent manner.” If, as the auditors suggest, the exemption to Amplatz is found to be in violation of the statute, the state should “immediately revoke the exemption and take back any excess amounts paid to date,” the recommendation continues.

Leitz also features prominently in another finding from the same audit. According to that piece of the investigation, DHS failed to rebase its in-patient hospital rates by January 1, 2013, as is required by Minnesota statute. The rate rebasing process had apparently been carried out by DHS staffers based on historical methodology, but Leitz halted the process so that he could fulfill a promise he had made to “have a dialogue with the industry, most notably people at the Minnesota Hospital Association,” to get input on the rate proposals.

Rates for 2013 still have not been set, according to the audit, which raises the possibility of “negative or adverse implications” stemming from failure to meet the January 1 deadline.

“Essentially,” the auditors write, “we need to know if this will impact the Department’s ability to claim a federal [Medicaid funding] match for the first three quarters [of 2013].”

The audit does not allege wrongdoing on behalf of the DHS on the rate rebasing process, writing that “it appears there is an ongoing effort to formulate the most accurate and cost-neutral rates.”

Read the full audit here.


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