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must also review specified samples of other cases: patient transfers among hospitals, length-of-stay and cost-per-case outliers, and readmissions within 15 or 31 days of a previous discharge. Moreover, if a reviewed provider or practitioner exceeds a predetermined denial rate (six cases or 5 percent of the cases reviewed in a quarter, whichever is greater), a more intense level of review may be initiated. Altogether, the required review activities for PROs cover about 25 percent of all Medicare discharges, a considerably higher percentage than the committee was aware of in private programs.

Beyond these differences in review loci in the PRO program, the essential distinctions between PRO review and private utilization management stem from two factors: (1) the direct relationship between the provider and payer in Medicare, and (2) the public law principles that guide PRO procedures.

In Medicare, the responsibility for initiating preadmission review lies with the hospital or physician, not the patient. Failure to obtain the relevant certification may lead to a penalty for the provider, not the patient. The provider is also responsible if the PRO denies payment based on retrospective review of the necessity of care.1 Generally, in the private sector, a contractual relationship must exist between the payer and the provider in order for the patient to be "held harmless" (without financial liability) in similar circumstances.

An even more fundamental difference between PROs and private review is founded in the public nature of PROs. Their agendas, objectives, criteria, and results are public. The manner in which they operate is subject to federal regulation and published guidelines and is informed by public law principles, including principles of due process. PROs are required by the Health Care Financing Administration (HCFA) to seek physician comments on their review criteria, to provide their criteria to state medical organizations, and to send the criteria to anyone requesting them.

The Congress and the HCFA take a very directive role with the PROs. Each contract period is covered by an extensive scope of work that lays out the work expected. This scope of work is accompanied by an array of

1 In 1972, Congress recognized that the burden of a retrospective claims denial under Medicare fell unfairly on the beneficiary who incurs Medicare costs as a result of orders and charges generated by the physician and hospital. Therefore, in Section 1879 of the Social Security Act (1972), Congress established that where services were denied as not medically necessary or custodial, if the patient did not know and had no reason to know the care would be denied, Medicare would pay for the unnecessary services, waiving the patient's liability. The burden would then fall on the hospital and physician, and a judgment would be made as to whether they knew or should have known that the services would be deemed medically unnecessary. If they did not have the requisite knowledge, they too would be indemnified by Medicare. More recently, physicians have been required to reimburse Medicare patients who have paid for care (for example, through coinsurance) that was later determined to be inappropriate.

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