The North Carolina Department of Health and Human Services surrendered control of Medicaid disproportionate-share payments to Carolinas Medical Center, the state's biggest Medicaid provider, State Auditor Ralph Campbell charged.
Campbell also questioned the propriety of $414 million in federal Medicaid payments to hospitals in 2002 and 2003.
He said the health department "allowed (Carolinas) and its attorney to design the repayment formula used for hospitals in North Carolina, analyze cost data and gather the cost data from other hospitals."
He said he reported his information to federal and state authorities.
Carolinas spokesman Alan Taylor said the medical center volunteered to do the computations on behalf of the state's teaching hospitals after the state said it had no staff to do so. He said the state approved all data.
"We've done nothing wrong. We welcome any investigation," Taylor said.
North Carolina has been negotiating with the CMS to determine if the state must repay the federal disproportionate-share payments, hospital sources said.