Opportunities To Reduce Administrative Costs of Professional Standards Review Organizations

HRD-78-168: Published: Oct 12, 1978. Publicly Released: Oct 12, 1978.

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Professional Standards Review Organizations (PSRO) were established in order to assure that health care services provided under Medicare and Medicaid conform to appropriate professional standards and are delivered in the most effective, efficient, and economical manner possible. On November 14, 1977, the Department of Health, Education, and Welfare (HEW) announced that it was increasing the maximum allowable compensation for PSRO Executive Directors and Medical Directors.

The salary schedules established for executive directors appeared to be inflated, and criteria and data on which they were based were not consistent with the backgrounds of most executive directors. The salary increases are about 8 percent to 10 percent higher than they would be if they were based on rates for similar positions in nonprofit organizations, and the levels are equal to, or higher than, those in similar positions in the medicare-medicaid administration complex. Also, there are similarities in the administrative hierarchy within each organization and opportunities in states with more than one PSRO to consolidate similar administrative functions which could result in cost savings. The 164 PSRO's in the 21 states with more than one PSRO area will spend over $40 million for administrative staffs. Consolidation can best be achieved when nonperforming organizations are identified and removed from the program.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary, HEW, should direct the Administrator of the Health Care Financing Administration to: (1) rescind the executive director salary levels published in November 1977 and establish new levels based on salaries paid comparable positions in nonprofit organizations; and (2) identify PSRO areas where administrative staff and functions can be combined, paying particular attention to situations where nonperforming PSRO's are replaced, and encourage the sharing of support services.

    Agency Affected:


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