But, she said, "there has been virtually no audit oversight" of Medicare contractors.

The evaluators assembled a list of questions, which they asked during a random sampling of calls to Medicare contractors.

Medicare contractors in the West and the Midwest said they were looking into reports of similar activity.

Mr. Holder said the agreement was "the largest settlement ever with a Medicare contractor."

The company has been a Medicare contractor since 1983.

Even before the Government told Medicare contractors to change their payment cycles, doctors in some parts of the country were complaining of delays.

In many cases, he said, the Medicare contractors fail to investigate beneficiaries' complaints about fraud by doctors, laboratories and other services.

In fiscal year 1994 the proposed appropriation for all Medicare contractors to administer the program is $1.6 billion.

Executives at two other Medicare contractors, in New York and Pennsylvania, have been found guilty of similar charges.

The $140 million settlement was the largest ever with a Medicare contractor.