Responses to Questions About Performance Evaluation Criteria for Professional Standards Review Organizations

Pursuant to a congressional request, GAO reviewed the criteria and methodology which the Health Care Financing Administration (HCFA) used in its 1981 and 1982 evaluation of Professional Standards Review Organizations (PSRO). PSRO's are the organizations primarily responsible for assuring that inpatient hospital services are medically necessary, appropriate, and of acceptable quality. GAO was asked to determine: (1) what basis there was for the differences between the 1981 and 1982 evaluation criteria and methodology; (2) why there were dramatic changes in the relative rankings of several PSRO's; (3) whether quarterly assessments adversely influence the HCFA capability to measure the relative performance of PSRO's; and (4) whether HCFA assessments provide a sound basis for terminating PSRO funding for ineffectiveness.

GAO found that: (1) evidence indicates that the 1982 evaluation criteria and scoring levels were revised with the objective of terminating a specific number of PSRO's during fiscal year 1982 to conform to proposed 1983 budget limitations; (2) the HCFA 1982 criteria for assessing PSRO impact on improving quality of care are more definitive, objective, and difficult to meet than 1981 criteria; (3) PSRO's included in the first quarter evaluations for fiscal year 1982 may have been at a relative disadvantage in the evaluation process since they had less time than their peers to adjust their programs or meet the requirements of new evaluation criteria; and (4) evidence suggests that the 1982 evaluation passing score was set with the objective of terminating a specific number of PSRO's to meet proposed 1983 budgetary constraints, and errors have been found in the scores of several PSRO's which have significantly changed initially reported evaluation results. GAO concluded that it has significant reservations as to whether the HCFA 1982 assessments provide a sound basis for terminating PSRO's for ineffectiveness.