Summary: In response to a congressional request, GAO reviewed the Health Care Financing Administration's (HCFA) evaluation of peer review organizations' (PRO) contract performance for contract renewal, to assess: (1) whether HCFA properly evaluated PRO performance; and (2) how HCFA determined the level of funding for new PRO contracts.
GAO found that: (1) the evaluation process was internally inconsistent, and HCFA inconsistently applied it; (2) HCFA did not adequately document evaluation decisions; (3) HCFA internal controls were not sufficient to identify and correct instances of poor PRO performance before contract renewal evaluations; (4) although HCFA identified its monitoring problem during the evaluation process and redesigned its monitoring program, the program might not provide adequate criteria to differentiate between acceptable and unacceptable performance; and (5) although the methodology HCFA used to estimate the contract costs to individual PRO contained many uncertainties, the contract negotiation process may have compensated for the uncertainties because most of the contract costs differed from the original estimates.
