State suspends payments to most providers in program at center of new fraud investigation

Gov. Tim Walz said Monday that Minnesota has halted payments to dozens of providers in a state program that is now at the center of another federal fraud investigation.

“They changed some of the statutes and I will tell you just candidly I am using one aggressively today in stopping payments to most of the people involved in this program,” Walz said during a bill signing event. “Those have happened today and the payments that were scheduled to go today are not going out to them. I fully expect some of those folks will sue the state of Minnesota.”

The Minnesota Department of Human Services (DHS) confirmed to Alpha News that it stopped payments to 50 Housing Stabilization Services (HSS) providers flagged for suspicious billing activity. Forty-three of those providers had payments halted on Monday; seven others were previously flagged.

“These actions were taken as a result of billing data analysis and investigations conducted by DHS’ Office of Inspector General,” DHS spokesperson Scott Peterson said in an email.

Federal agents raid multiple Twin Cities businesses

Alpha News was on scene earlier this month as federal agents executed a search warrant at the Griggs Midway Building in St. Paul — home to 22 HSS providers who collectively received more than $8 million in Medicaid payments.

The companies targeted by the warrant engaged in a “massive scheme” and “have received millions of dollars in Medicaid funds for housing stabilization services they did not actually provide,” the warrant says.

“Fraud is a huge problem in Minnesota. Hopefully today will help put a stop to it,” Acting U.S. Attorney Joe Thompson said during the raid.

DHS outlines new controls

In a statement to Alpha News, Temporary DHS Commissioner Shireen Gandhi said the agency “takes decisive and immediate action whenever we are able to determine credible evidence of fraud.”

Gandhi said the agency launched a new data analytics project in March to better detect fraud through advanced review of provider billing patterns. That effort led to the payment suspensions announced this week and referrals to law enforcement, according to Gandhi.

“Any HSS providers scheming to steal from our public programs are being stopped from receiving further public payment,” Gandhi said. “With the help of law enforcement partners, they will be prosecuted to the fullest extent of the law.”

DHS also outlined a series of new accountability measures for HSS providers:

• As of June 1, all HSS providers are classified as “high risk,” requiring on-site screenings, unannounced visits, and fingerprint background checks for owners with at least 5% stake.
• As of July 1, enrollment and revalidation require a Pre-Enrollment Risk Assessment, including a review of financial records and prior service performance.
• Starting Aug. 1, providers must submit additional service documentation and carry a surety bond between $50,000 and $100,000, depending on their billing history.

Lawmakers demand federal audit

The crackdown comes amid mounting political pressure. Republican lawmakers in the Minnesota House have called on the U.S. Department of Health and Human Services to conduct a full audit of DHS and its Medicaid-funded programs.

“For years, DHS has failed to prevent massive fraud and abuse,” said Rep. Kristin Robbins, R-Maple Grove, in a letter to the federal inspector general. “This culture of corruption must end. It’s time for real accountability, and that starts with a full, independent federal audit.”

Robbins, who chairs the House Fraud Prevention and State Agency Oversight Committee, cited concerns not only with HSS but with non-emergency medical transportation, recovery services, and an autism program — each previously flagged for internal control failures and improper payments.

“This fraud has gone unchecked for years,” she wrote.

A growing pattern of fraud

The July 16 search warrants targeted businesses including Brilliant Minds Services LLC, located in the Griggs Midway Building in St. Paul. The warrant says Brilliant Minds received more than $2.2 million from DHS and billed for services to 340 individuals — many of whom told investigators they never received meaningful support.

The program’s cost has ballooned since its inception, from $2.5 million in 2020 to over $100 million in 2024.

“This program has proved to be extremely vulnerable to fraud,” the federal warrant states, detailing how providers exploited addiction and housing crises by enrolling vulnerable clients and billing for hours of unrendered services.

 

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