establishing Professional Standards Review Organizations (PSRO). The PSRO law was
intended to assure that services provided under Medicare, Medicaid, and the Maternal and
Child Health Act were:
(1) medically necessary.
(2) of a quality that meets professional standards.
(3) provided at the most economical level consistent with quality care.
e. Professional Review Organization. In an attempt to address the failure of the
PSRO program, The Peer Review Improvement Act (Public Law 97-248) was enacted as
a provision of the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982. This act
requires Medicare providers to release patient information to a PSRO or PRO for private
review. The Health Care Finance Administration was directed to develop the requirements
for the new Professional Review Organization (PRO).
(1) PROs review claims from Medicare services furnished by hospitals to
quality of care.
the appropriateness of the setting in which the care is given.
(2) The statutes make it clear that the congressional intent of the PSRO and
PRO programs is to address cost as well as quality. PROs have greater authority in
recommending sanctions against hospitals and physicians than did the PSROs.
f. Other Significant Legislation.
(1) In an effort to contain costs, the prospective payment system (PPS) was
established in 1983 under Public Law 98-21. PPS created an even greater need for a
strong review system because hospitals now had the incentive to increase admissions
(which increased payments), to increase readmissions, and to inappropriately classify a
(2) In 1986, Public Law 99-509, the Sixth Omnibus Budget Reconciliation Act
(SOBRA) made several major changes in PRO requirements:
there was a shift away from merely containing cost to a stronger