Need To Better Use the Professional Standards Review Organization Post-Payment Monitoring Program

HRD-80-27: Published: Dec 6, 1979. Publicly Released: Dec 6, 1979.

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Professional Standards Review Organizations (PSRO) are responsible for reviewing the medical necessity and appropriateness of inpatient admissions to hospitals and length of patient stays. Under the post-payment monitoring program, intermediaries, such as Blue Cross and Aetna Life and Casualty sample and review 20 percent of Medicare claims for hospital services. This program was the subject of a review.

While the program could be a useful tool to improve the cost-effectiveness of the entire PSRO program, it has not met the objectives of: (1) being an educational tool; and (2) helping the Department of Health, Education, and Welfare (HEW) assess the effectiveness of patient reviews performed by individual PSRO. In some cases it was found that PSRO had certified days of care as necessary while the intermediaries questioned the necessity of both admission and length of stay. A recent analysis of the program by HEW established that it was cost-effective as a result of reducing Medicare hospital utilization by 1.5 percent. However, another analysis determined that PSRO must reduce utilization by 2.9 percent in order to be cost-effective. A major cause of the program's ineffectiveness is that HEW has not issued guidelines or instructions on what data is appropriate for intermediaries to report and how the reports are to be used to meet program objectives. It was also noted that intermediaries do not always randomly select claims for review.

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 issue guidelines and instructions outlining how the post-payment monitoring system should work. These instructions should emphasize how the program should be used: (1) to identify the causes of and eliminate, to the extent practicable, unnecessary days of hospitalization and, thus, improve the cost-effectiveness of individual PSRO; (2) to educate PSRO and hospital personnel on new and proper techniques for reviewing the appropriateness of patient care; and (3) by HEW as a potential indicator of the effectiveness of the patient care reviews made by PSRO. The Secretary should also direct the Administrator to revise the instructions to intermediaries to require the reporting of total days of care sampled and to remind the intermediaries of the importance of existing instructions requiring the use of random sampling methods.

    Agency Affected:


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