With national HMO quality assurance requirements pending for Medicare risk contracts, three HMOs in Minnesota established a working group with the state Department of Health to develop and test a new methodology proposed for quality of care review. A two-tiered system was developed for ambulatory chart review based on 15 hospitalization diagnoses having a potential for inadequate prehospital care. This system was applied to 796 cases from the HMOs (2% of admissions). Technical problems limited actual review to 673 of these cases. Although 304 (45%) of reviewed cases failed initial screening, physician review found only 22% of such failures (10% of reviewed cases) to represent probable quality of care problems. The approach appears to be feasible and unusually efficient. Although there is considerable variability that limits its potential use for interhealth plan comparison, the approach holds promise for quality assurance within an individual health plan.