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North Carolina RAC

HMS® ( is under contract with the State of North Carolina Division of Medical Assistance (DMA) as North Carolina’s Medicaid Recovery Audit II Contractor (RAC II), pursuant to Section 6411 of the Patient Protection and Affordable Care Act of 2010. Accordingly, HMS is authorized to audit provider payments and associated financial records for Fee-For-Service claims to identify underpayments and overpayments, and to recover any overpayments made to providers.

HMS has identified the following targets to date:

Complex Review Targets

Newborn DRG Upcoding

Target DRGs: This target consists of several combinations of DRGs and diagnosis codes which are often up-coded by hospital providers. Clinical and coding review will include:

  • Review medical records documentation to validate the MS-DRG assignment.
  • Validate accuracy of the hospital’s ICD-9-CM coding of all diagnoses and procedures that affect the MS-DRG
  • The review is based upon accepted principles of coding practice consistent with guidelines established for ICD-9-CM coding utilizing the version in place at the time the services were rendered.

Automated Review Targets

Outpatient Hospital – Outpatient Services Within 24 Hours of an Inpatient Admission

Outpatient Hospital Services, states that outpatient hospital services provided by a hospital to a beneficiary within the 24 hours immediately preceding an inpatient admission to the same hospital, and that are related to the inpatient admission, shall be included with the inpatient billing.

For claims targeted with likely billing/improper payment errors, HMS will notify providers that a potential reimbursement error has been identified. The provider will receive a letter outlining the finding, criteria citation in which the determination was made, and the estimated amount of the improper payment

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