The Centers for Medicare & Medicaid Services says it will offer recovery audit contractors (RACs) financial incentives to uncover instances in which Medicare healthcare providers were underpaid.

The incentives should be “welcome news” to providers, said Gerald Walters of CMS’s Office of Financial Management. RACs identify improper Medicare payments that have been made to providers and were not detected through the prepayment review process. They have been receiving “contingency fees” for uncovering overpayments but not underpayments, Walters said.

This incentive program is designed to enhance the three-year RAC demonstration project, Walters said. The project uses proprietary software to identify previously undetected overpayments and underpayments. The project is in New York, California and Florida, and applies only to providers who have carriers and fiscal intermediaries in those states.