LANSING – In the first full-scale departure of a department head during the administration of Governor Rick Snyder, state capital observers were surprised Wednesday when it was announced that Department of Community Health Director Olga Dazzo is resigning. She was replaced by James Haveman, who led the department for many years under former Governor John Engler.

The move was unexpected, and in making the announcement that she had resigned Mr. Snyder’s office said Dazzo would go back to the private sector. However, no one interviewed knew where she might be going.

Haveman served as a department director throughout the administration of Mr. Engler, first as his director of the Department of Mental Health and then as DCH director after the two departments were merged. After leaving state government, he helped set up the national health care system in Iraq after the invasion by the U.S. and other nations toppled the regime of Saddam Hussein.

In making the announcement, Snyder said in a statement that Dazzo was a dedicated public servant whose “contributions to Michigan residents are very much appreciated.” Snyder said he respected her decision to go back to the private sector where she wanted to work more directly with the health care system.

And Dazzo said in the statement she was pleased that during her tenure the department had been able to set “a vision and a framework to address chronic illness and infant mortality.”

Dazzo was one of the first major appointments announced by Snyder after his election in 2010. She has played a major role in department efforts to move ahead on proposals to combat obesity and infant mortality. And during her short tenure, the state began an effort to coordinate benefits for those who are dually eligible for Medicare and Medicaid. That proposal still awaits approval from the federal Centers for Medicare and Medicaid Services.

And the announcement was apparently completely unexpected. Sources within the department said they had no idea a change was coming. All communications about the switch were handled by Snyder’s office.

It caught outside groups by surprise as well. Dazzo had recently appeared before the board of the Michigan Health and Hospital Association and proposed some actions she thought they could help with.

Kevin Downey, spokesperson for the organization, said, “We had a terrific relationship with Director Dazzo.” While they were disappointed she was leaving, “we are confident we will be able to work with Haveman as we did under Governor Engler.”

Privately, some in the health care world were stunned and concerned that Snyder is returning Haveman to his old post. During his tenure, the state transitioned from fee-for-service to a managed care model of Medicaid, a transition that infuriated many providers hurt by the resulting financial crunch.

As the former mental health director, Haveman also oversaw the restructuring of that system that triggered the fury of mental health advocates.

One source, speaking on condition of anonymity, said Haveman’s appointment amounted to a finger in the eye to those entities that receive funding from DCH.

Snyder press secretary Sara Wurfel said the administration chose Haveman based on his skill-set and how he would fit within the issues it wants to achieve.

“Any time you have agencies that are over so many significant things, I think the governor feels confident in Jim’s skill-set, everything that he’s accomplished and really building on where the governor has outlined about building on health and wellness as well as just ensuring quality of life and building for the future,” she said when asked about the alarm among some of those in the health care industry at his selection.

Snyder has said mental health is a priority to him. Asked about the disdain mental health advocates have for Haveman, Wurfel said, “The governor is a big proponent of how interconnected (physical and mental health) are, so it is something that I know he has asked Jim to take a look at.”

Sources in the health care industry said no one event precipitated Dazzo’s departure, but it was more just that over time, she had not dazzled.

Asked if the governor or someone on his staff asked Dazzo to leave, Wurfel said, “Not that I’m aware of, no.” Wurfel said she did not know if Dazzo approached Snyder or his staff about a desire to return to the private sector or whether someone in the administration raised the idea.

But Wurfel also said that Snyder was pleased with the progress Dazzo made on obesity and infant mortality “where she has made really important strides.”

“The governor thanks her for her service,” she said. “She’s definitely really helped move the needle on a couple of key issues.”

Haveman will take office September 1. But Dazzo will stay on for about two months to help with the transition on projects now underway. There is no set timeframe for her departure.

“She was I think really gracious to agree to stick around and really help make sure there’s a smooth transition and we can tap her expertise and knowledge as the transition occurs,” Wurfel said.

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