DHS rescinds exemption offered to Amplatz hospital

Listen to this article

A controversial Medicaid rate cut exemption granted to Fairview University Medical Center’s Amplatz unit is apparently off.

Scott Leitz, the Department of Human Services official who came under fire for the decision after an internal audit questioning the move became public, notified Fairview in writing earlier this month that “it is likely” that the Amplatz Children’s Hospital doesn’t qualify for the exemption after all.

“As such,” Leitz wrote in a letter obtained by Politics in Minnesota, “we are ending the exemption. We are reviewing past payments under this provision and we will provide a notice of recovery once the amount of overpayment is determined.”

The audit, which became public in early October, produced evidence that Leitz had improperly decided that Fairview University Medical Center’s Amplatz Unit should be granted an exemption to a 10 percent cut in Medicaid rates. The rate cut and the related exemption were both passed by the Legislature in 2011, with the latter meant to avoid punishing hospitals that handle long-term care for children with serious illnesses. A subsequent legal review by DHS attorneys has upheld the audit’s findings.

In his letter to Fairview president Carolyn Wilson, Leitz went on to describe the “difficult situation” around the audit’s findings. According to the audit, Leitz made the decision after a meeting with Fairview representatives.

“Amplatz approached [DHS] in good faith… and [DHS] reviewed and responded in good faith by providing Amplatz an exemption in 2011,” Leitz wrote.

Leitz blamed the misreading of the legislation on the department’s failure to obtain a legal opinion at the time it granted the exemption.

In a statement issued to Politics in Minnesota on Thursday afternoon, Fairview argued that it still felt that it qualified for the exemption under the law.

“Fairview continues to believe — and legislators have confirmed – that they intended for the exemption to include the University of Minnesota Amplatz Children’s Hospital,” reads the statement. “We are continuing to discuss this matter with legislators and DHS.”

At the time of the audit’s completion, Rep. Sarah Anderson, R-Plymouth, told a reporter from KSTP that Leitz appeared to be “using taxpayers’ money to take care of buddies in the hospital system,” and called for his immediate resignation.

Just days later, the four most prominent legislative voices on the health care industry came to Leitz’s defense. A letter dated Oct. 15 was authored by Sen. Tony Lourey, DFL-Kerrick, and Rep. Tom Huntley, DFL-Duluth, the respective chairs of health and human services committees in the Senate and House, and also bore the signatures of Senate Minority Leader David Hann and Rep. Jim Abeler, R-Anoka, who chaired those committees when Republicans held the majority.

The lawmakers wrote that Leitz is a knowledgeable and dedicated public servant, and commended his service to the state and to the Legislature over the previous three administrations.

“While we are concerned by the issues raised by the internal audit of DHS, we do not believe that they call into question the integrity or professionalism of Assistant Commisioner Leitz,” reads the letter.

Reached by phone on Thursday, Huntley said he had learned of the audit, and the potentially precarious situation it put Leitz in, following a meeting with another DHS official shortly after the audit’s completion. Huntley said Leitz’s expertise is a valued asset, and pointed out that Leitz is frequently invited to speak at national and regional conferences on state administration of health care.

Huntley said the swirl of controversy around Leitz had left him worried that the department might demote, reassign or terminate him as assistant commissioner.

“That would’ve been the worst case,” Huntley said. “I certainly want to keep him in DHS.”

In a statement to Politics in Minnesota, DHS Commissioner Lucinda Jesson said the agency has taken the audit “very seriously,” pointing to the department’s move to lift the Amplatz exemption. Jesson also expressed confidence in the work of Leitz and deputy assistant commissioner Jim Golden. Golden, who also featured prominently in the internal audit, has since been named the state Medicaid director, where he replaces Carol Backstrom, who left that position in late October; a spokesperson for DHS described the appointment as a “lateral move” for Golden, who will still work directly under Leitz.

“Overall,” Jesson said, “the Health Care Administration at DHS, led by Assistant Commissioner Scott Leitz and Jim Golden, has done excellent work during my three years as commissioner in saving Minnesotans over a billion dollars by getting better value for our publicly funded health care programs and making other much needed reforms.”

Huntley added that he disagreed with Leitz’s interpretation of the law, but said he considered the granting of an exemption to Amplatz a mistake, albeit one that did not suggest “anything unethical” had taken place.

Legislative Auditor Jim Nobles takes the same view. In an interview on Thursday, Nobles said he was still monitoring the DHS response to its audit findings, but that he was currently unaware of any suggestion that Leitz had awarded the exemption due to a conflict of interest.

“I think there still is the issue of why Scott Leitz acted the way he did,” said Nobles, who pointed out that Leitz had served as the department’s liaison during the drafting of the rate-cut legislation. He continued: “My guess is that he thought, having been the person that was involved in the conference committee — dealing with Abeler, and with others — [Leitz] thought he understood what would be there, in that language.”

Nobles said he had spoken with Abeler about the audit’s findings, and is confident that Leitz was trying to act in accordance with what he thought was the “legislative intent,” rather than the letter of the law.

On another point, Nobles faulted DHS for its refusal to make public the legal opinion it had obtained regarding Amplatz; a request from Politics in Minnesota was rejected on the grounds of “attorney-client” privilege. Nobles compared that argument to Secretary of State Mark Ritchie’s similar refusal to share a legal opinion on his online voter registration program.

“I don’t think it puts public agencies in a good light to do that,” Nobles said. “Don’t they want the world to come along with them on that decision?”

At least one frequent critic of the agency thinks the internal audit points to larger issues within the department. Sen. Sean Nienow, R-Cambridge, said he understands why some might call for Leitz to face repercussions, including possible termination, following the release of the audit.

“When you have something like that that happens, you have to ask those questions,” Nienow said.

For his part, Nienow said blame should rest with the agency as a whole, which he said often has a culture that is too closed off from public oversight, and is sometimes too close to the very entities it is tasked with regulating.

“It seems to be that there is this closed loop, where people know people, and things happen, and it’s not always good,” Nienow said.