The Centers for Medicare & Medicaid Services will use Recovery Audit Contractors (RACs) to identify Medicare overpayments to hospitals pursuant to a three-year, three-state demonstration project set to begin in May. Approved RACs will be paid on a contingency fee basis--around 28 percent on average--for overpayment recoveries. The three states affected are Florida, California and New York. Hospitals in these states should be aware that Medicare fiscal intermediaries will be stepping up overpayment recovery efforts pursuant to this demonstration. As usual, hospitals will be able to appeal overpayment recovery demands. McDermott lawyers in our Reimbursement/ Fraud & Abuse Practice have extensive experience representing providers before the Centers for Medicare & Medicaid Services, its intermediaries and carriers, the Provider Reimbursement Review Board and administrative law judges with reimbursement appeals.