The peer-review organizations (PROs) were created by Congress in 1984 to monitor the cost and quality of care received by Medicare beneficiaries. In order to do this, the Health Care Financing Administration (HCFA) contracted with the PROs through a series of contracts referred to as "Scopes of Work." Under the Fourth Scope of Work, the HCFA initiated the Health Care Quality Improvement Program (HCQIP) in 1990, as an application of the principles of continuous quality improvement. Since then, the PROs have participated with health care providers in cooperative projects to improve the quality of primarily inpatient care provided to Medicare beneficiaries. Through HCFA-supplied administrative data and clinical data abstracted from patient records, the PROs have been able to identify opportunities for improvements in patient care. In May 1995, the HCFA proposed a new Fifth Scope of Work, which will shift the focus of HCQIP from inpatient care projects to projects in outpatient and managed care settings. This article describes the HCQIP process, the types of data used by the PROs to conduct cooperative projects with health care providers, and the informatics challenges in improving the quality of care received by Medicare beneficiaries.