This report concerns the Health Care Financing Administration's (HCFA) contracting with Utilization and Quality Control Peer Review Organizations (PROs) as a means of monitoring the medical necessity and quality of in-hospital care provided to Medicare beneficiaries. Findings from a HCFA survey of PROs in California, Florida, and Georgia are used to illustrate the need for PROs to profile data on hospital and physician quality-of-care problems and to monitor inappropriate discharges of beneficiaries needing skilled nursing care. It is recommended that PROs be required to include quality-of-care review data available from the 1984-1986 contract period in their profiling of hospitals and physicians. It is also recommended that, as part of their discharge reviews, PROs be required to include an assessment of the appropriateness of discharge destinations to better assure that patients needing skilled nursing care are allowed to remain in the hospital while awaiting placement in a nursing home. (NB)