Minnesota Department of Human Services: A Case Study in Management Control Systems

Minnesota State’s Department of Health and Human Services or MDHS is known not only throughout the state but also to other states in the union as providing the best assistance to its needy, disabled and aging residents. This department seeks and solicits funding, which it converts through legislative processes into service programs and manages their delivery by local governments and non-profit providers.

Being a government agency, it operates in a political, legal, ethical and budget-constrained environment with seemingly unchangeable personnel policies. Out-of-control conditions have been seething for several years until a major operational error was finally detected. For this Department, it is in the form of an overpayment to a local government provider at an accumulated amount of $29 million. The State’s Office of Legislative Audit investigated and found that (a) reimbursements were paid to claims by healthcare providers even though their service encounters with clients were not in accordance with statutes and (b) the knowledge of these errant transactions were denied by layers of managers above the staff that gave the wrong payment instruction to those local healthcare providers (1). This report recommended MDHS undergo structural revision of its organization and to better define its internal control.

This article will demonstrate how a management control system analysis can be used to better understand the situation and lead to more in-depth recommendations.

A management control system involves processes by which the agency’s manager coordinates, communicates and motivates agency resources through an organizational structure towards the strategic goals of the agency. An effective span of control limits the number of management information that can digest, action directives that can be promulgated and duties that can be executed at the required frequency. To overcome the limitation, the authority to manage the departmental branches have to be delegated to several subordinates. As the Commissioner is installed by MDHS stakeholders to be responsible for moving the Department towards its goals in observance of agency policies, so does the subordinates being responsible to the manager for meeting their respective branch goals and agency policies. A responsibility performance measurement binds the organization and sets into motion the control system.

Organizational Structure. Among websites of the State of Minnesota, one will find the organization of the Department of Health and Human Services. It is immediately obvious that an organizational chart does not exist but in its place a list of offices and sub-groups that comprise the Department.

In contrast, the Department of Public Safety, a sister agency has an organizational chart complete with distinct lines connecting various levels of managerial responsibility.

The organizational chart above was inferred from the descriptions of the main function of MDHS. It is in the area of the Deputy Commissioner for Policy, or Policy where funding sources primarily federal are identified and sought for. The funding is then packaged into intended service programs and brought to the Legislature. The new state programs designed for delivery by local governments and qualified providers embody procedures that reflect a complex mix of laws, rules, and guidelines for the delivery of service and claiming payment upon fulfillment of the service.

The two other areas either provide direct services or delegate the administration of direct services. Health Care Services distribute healthcare through state-operated and affiliated clinics and treatment centers, while the Operations area distributes social services through counties, other local governments, and qualified providers.

Responsibility Accounting. Ideally, the MDHS Commissioner has overall responsibility for providing high-quality healthcare and social service to as many Minnesotans in need as departmental budget and policies allow. With this responsibility, the position is bestowed the authority to command the deployment and usage of MDHS personnel and financial resources. MDHS responsibility is delegated to three managers that report directly to the Commissioner. Authority comes with delegated responsibility. For example, as the Deputy Commissioner for Operations has the overall responsibility for assisting Minnesotans in need of assistance, the position has the authority to command the deployment and usage of assigned social service resources.

Since the MDHS Commissioner has the ultimate responsibility for departmental objectives, reliance has to be placed on monthly management information, from the three areas, summarizing variances from planned budget, service levels, and quality.

The Overpayment Situation. A Human Services Program Consultant at the Policy Area gave an opinion that an encounter where a client self-administers medication at home may claim and receive payment as a regular face-to-face encounter at a clinic with a healthcare professional administering the medication. This payment of the illegal claims went on unnoticed for several years until the total reached $29 million when warning sirens sounded leading to an audit by the State’s Office of Legislative Audit.

A reader of the audit report will have noticed the following: (1) the information was given to the healthcare service provider by a staff from the Policy Area and not from the provider’s direct contact at the Health Care Services Area, (2) measures of performance over the program consultant’s responsibility failed to inform his manager of the occurrence of over-payments, (3) important operational expertise was allowed to be kept in an individual rather than distributed throughout the direct service areas, and (4) there appears to be no monthly provider payments summary given to Health Care Services Area staff overseeing the provider claimant. As the exhaustive enumeration of areas of disconnect is impossible by merely inferring from an audit report, those pointed out here are sufficient to generate meaningful recommendations.

Improving the MDHS' Management Control System. While it is important that disconnects in MDHS' management control system have to be addressed, any improvement initiative must be designed to have the least interruption in the provision of services to Minnesota's residents. For a management control system to be viable, all of the components have to be working well and in unison. The following recommendations were developed from the observations mentioned in this article.

1. Examine, redefine and realign units, workgroups, and offices in MDHS. Those whose work involves the delivery of healthcare and treatment services to clients and patients are placed within the management scope of the Health Care Services CEO, while workers delivering social and income maintenance services are managed by the Deputy Commissioner for Operations. On the Deputy Commissioner for Policy rests the responsibility for all other staff related to and in support of direct service delivery.

2. The Policy Area’s scope of responsibility includes: (a) secure human and healthcare services and matching funding, (b) work with Minnesota State Legislature to make these funds available for reimbursement for services administered by service providers in the state, (c) develop standard service delivery procedures, modify these based on feedback from operating areas and develop facilities for the recording of delivery transactions, and finally, (d) develop standard procedures for filing claims by providers for reimbursement of their service rendered.

3. Two items should be included in the set of departmental policies. Transparency creates an organizational atmosphere wherein managers and workers perform their assignments with rigor and high quality due to constant introspective examination. The other is to discourage the condition that places pockets of expertise to rest with an individual. This demotivates excellence at the workplace.

4. Document any new realignment of responsibility relationships in an organizational chart. The Commissioner will require all employees to be trained such that the idea behind the chart is understood. Whenever there are organizational changes, this chart has to be modified and modification communicated throughout the organization.

5. The manager’s budget is the basic responsibility accounting measure since its acceptance presents the commitment of a manager to the agency. It takes a primary role in the agency's management information system (2). As a measure, an increase must correlate with a positive performance. Other measures such as total payment for services delivered during the month can be developed from service transaction data collected by the State. MMIS is an example of such a database.

6. Establish an annual planning system (3) with the budget as the primary planning measure. Volume measures such as the number of encounters in a month are planned for. The same considerations apply to quality measures. Variances from planned amounts comprise agency performance measures. Personal measures increase the motivational aspect of planning. All managers, from the Commissioner to unit supervisors, must be trained to have basic proficiency in forecasting, goal setting, work planning, monitoring of performance versus plan, mid-course corrective action, and annual performance review.

These recommendations, while not exhaustive, will make MDHS' management control system operationally robust when implemented. The following are articles and report upon which ideas for these articles were derived from:

1. Department of Human Services: Payments for Self-Administered Opioid Treatment Medication. Oct 29, 2019. Www.auditor.leg.mn.us/sreview/dhsover.pdf.

2. Continuous Improvement and the Administrator. Mar 28, 2019. Www.mgmtlaboratory.com/blog.

3. How Much Do Services Delivered by Your Agency Cost? Sep 26, Dec 8, Dec 22, 2018. Www.mgmtlaboratory.com/blog.

4. Where Has MIS Gone? Feb 23, 2018. Www.mgmtlaboratory.com/blog.

5. Administrator = Leader + Technologist. Dec 17, 2017. Www.mgmtlaboratory.com/blog.

6. Annual Cycle Management Process. Sep 16, 2017. Www.mgmtlaboratory.com/blog.

By Noel Jagolino

Management consultant and content contributor,

Mgmtlaboratory.com 2019

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