Department of Health and Human Services Should Improve Monitoring of Professional Standards Review Organizations

HRD-81-26: Published: Dec 29, 1980. Publicly Released: Jan 12, 1981.

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Professional Standards Review Organizations (PSRO) are designed to make sure that health care services provided under Medicare and Medicaid are delivered as effectively, efficiently, and economically as possible. GAO reviewed the records of acute care patients whose hospital stays were determined to be either partially or entirely medically unnecessary and not paid for by Medicare and Medicaid.

In one of the PSRO's visited, information suggested that hospital care was inappropriately certified as medically necessary for reasons that did not conform with Federal or State regulations. Department of Health and Human Services (HHS) monitoring reports showed no specific mention of these compliance problems, and HHS regional officials were unaware of the problems. PSRO monitoring of concurrent review functions being performed by hospitals does not appear to be adequate. Payments to physicians for medically unnecessary days of hospital care do not appear large; thus the potential for savings by focusing reviews in this specific area is limited. Concern has been expressed regarding the cost of PSRO hospital review. HHS plans to reduce the average cost of patient review primarily by not reviewing areas which do not appear to offer a potential for cost savings or improved care. HHS has issued instructions which require hospitals to justify all costs over those previously estimated and agreed upon, and proposed regulations that would require hospitals and PSRO's to establish budgets and review plans. If implemented, these regulations should provide HHS and PSRO's with better control over hospital review costs. Hospital discharge planning appeared to be adequate and not a principle cause of the problem.

Recommendation for Executive Action

  1. Status:

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

    Recommendation: The Secretary of HHS should direct the Administrator of the Health Care Financing Administration to require that the periodic PSRO assessments and project officers' monitoring emphasize the extent that concurrent review activities comply with HHS coverage and procedural requirements, including (1) PSRO requirements and hospital practices for extending patients' hospital stays; (2) compatibility of PSRO and hospital certification procedures with the paying agents' payment procedures; (3) PSRO and hospital promptness in approving and denying extensions of patients' stays; and (4) PSRO monitoring of delegated hospitals.

    Agency Affected: Department of Health and Human Services


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