The first fully implemented year of Medicare's recovery audit contractors in Florida was a costly one for health care providers.

They returned nearly $125 million to the government last year, a report by the Centers for Medicare and Medicaid showed.

The pilot program in Florida, New York and California ends on March 27. Then, CMS will select four regional auditing companies to run the national program starting later this year.

Of the $371 million in improper Medicare payments the RAC program identified in fiscal 2007, which ended Sept. 30, they found $128.7 million in Florida. Statewide, the auditors collected $124.6 million in overpayment from health care providers and paid them back $4.1 million for Medicare underpayments.

Florida inpatient hospitals returned $115.1 million in overpayment, outpatient hospitals returned $3.4 million and physicians returned $5.1 million. All of the money returned went to inpatient hospitals.

According to CMS, almost half of the improper payments were the result of incorrect billing coding. One-third were ruled medically unnecessary -- a category that has frustrated Florida hospitals because of the auditors second-guessing decisions of clinical staff. Starting last summer, CMS required the RAC programs to have medical directors to review claims.

Heart failure and shock was the most common type of claim where RAC found overpayment in Florida, with $9.5 million collected.

In the state, 14 percent of RAC overpayment claims were appealed, with 8.9 percent of all claims being overturned on appeal.

Many Florida hospitals executives said the RAC filed too many baseless cases because the auditors receive their fee even after the claim is overturned by an administrative law judge. In the national program, the auditors will lose their fee if the claim is overturned on appeal.