Follow-up Audit of the Health Care Financing Administration's Use of Bid Proposal Audits of Peer Review Organizations

EXECUTIVE SUMMARY:

This follow-up audit report points out that peer review organizations (PRO), as reported in our previous audit, continue to include unsupported costs in their bid proposals, and at a higher rate than previously reported. We determined that of the $770 million of costs proposed by 49 PROs, $266 million, or about 35 percent, was not supported by the necessary documentation. We also determined that some PROs continue to have deficiencies in their internal control systems. As a result of these continuing problems, we developed a "Proposal Guidance Book" which clarifies in specific detail the documentation needed to support proposed costs. We are recommending that the Health Care Financing Administration incorporate the use of the Proposal Guidance Book in the request for proposal process, require PROs to complete it, attach the required documentation, and submit it as part of their bid proposal.