North Carolina's state auditor charged last week that the state's Medicaid program surrendered control of disproportionate-share payments to Carolinas HealthCare System, the state's biggest Medicaid provider, and questioned the propriety of $414 million in federal Medicaid payments to the state's hospitals.
Auditor Ralph Campbell said he forwarded his findings, numbering more than 600 pages, to state and federal prosecutors. Hospital and state health department officials called Campbell's report old news. They said many of the problems in the state's Medicaid program have already been corrected and said the audit contained inaccuracies and exaggerated the amount of potentially misspent funds.
North Carolina has been negotiating with the CMS to determine if the state must repay the federal disproportionate-share payments and hospitals in the state might have to repay some of the funds, hospital sources said.
The audit covered payments from 2002 and 2003. However, Campbell said for years state health officials "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 more than $1 billion in Medicaid payments were distributed illegally to 41 public hospitals from 1997 to 2003 through a "liaison committee" formed by Carolinas and other hospitals.
Bad or inadequate data caused overpayments and payments to hospitals that didn't qualify for the disproportionate-share program, which compensates facilities that care for many poor patients, according to the audit. Also, it said, cost settlements that could detect overpayments or underpayments were not performed.
Late last week, the Insider, a state-government news service, reported that a state health department finance employee who discovered problems in the disproportionate-share program had resigned in March.
Carolinas spokesman Alan Taylor said Carolinas volunteered to do the calculations, after the state said it had no staff to do them, so that teaching hospitals in the state could collect disproportionate-share funds. He said the state approved the computations and submitted them to the federal government.
"Hospitals need to go after monies that they are eligible to receive," Taylor said.
Charlotte-based Carolinas HealthCare is a public system that operates eight hospitals. It reported an operating profit of $93.2 million on revenue of $1.5 billion in 2003, with 23% of revenue from Medicaid.
While it's unusual for a hospital to be involved in calculating Medicaid payments, hospitals in several states are taking measures to draw more federal Medicaid funding by enacting provider taxes. (See story, right.)
Taylor said Electronic Data Systems, which held a contract to process the state's Medicaid claims, was to blame for providing bad data. The state replaced EDS with another vendor.
The state health department has proposed giving back $11.6 million, but the CMS has asked for about $400 million, said North Carolina Hospital Association spokesman Don Dalton.