The Carter administration has tentatively decided to drop a controversial three-year-old program intended to cut medical care costs by reviewing physicians' practices under Medicare and Medicaid.

The Office of Management and Budget has recommended eliminating federal funding of Professional Standards Review Organizations (PSROs) from the fiscal 1979 budget.

The decision, which Health Education and Welfare Secretary Joseph A. Califano Jr. reportedly has decided to appeal is part of a generally spartan approach what OMB took with the health budget. According to one HEW official. "Almost everything has been cut to minimum levels."

Although HEW officials and congressional aides predicted that the PSRO program ultimately would be restored one knowledgeable source sounded a note of caution: "I'm confident they'll be in there, but it's handwriting on the wall."

According to this source, HEW has "lagged in developing effective ways of measuring PSRO performance . . . Who's going to defend it if we can't measure it?"

PSROs were established by Congress in a section of the 1972 Social Security amendments. Local medical societies were given the initial opportunity to set up organizations to examine the quality of medical care given by doctors and hospitals receiving federal funds. After Dec. 31, HEW can ask alternative groups, that is, nonmedical ones, to establish PSROs.

Of the approximately 200 PSROs envisioned about 120 are in operation and 60 more are in the Planning stage. About $147 million was appropriated for PSROs in the 1978 budgets.

From the outset, PSROs met with hostility from physicians and hospital administrators who complained that they placed another bureaucratic burden on th medical process and, rather than cutting costs increased them.

A study by HEW evaluating the performance of PSROs found no evidence that they had saved money in most cities or achieved reductions in hospital use nationally although improvement was found in some areas.

Califano defended the program at a Nov. 9 press conference saying that if physicians cannot find a way to restrain costs, "then somebody else is going to do it." Califano also said "we need a PSRO program" and that he was looking for ways to strengthen it.

Califano is scheduled to meet today or Wednesday with OMB acting director James T. McIntyre Jr. to discuss the proposed HEW budget. The HEW chief will have another opportunity for appeal when he meets with President Carter at the end of the week.

The bulk of HEW's approximately $43 billion health budget is for Medicare and Medicaid - medical care for the aged and the poor - which account for about $38 billion in the current fiscal year.

Administration officials have said that they do not want to have spending increase much more than the rate of inflation. The only major new helath initiative expected in 1978 is an administration proposal for national health insurance which would not require immediate funding since it would not become effective during fiscal 1979, which begins Oct. 1.

Several officials described the process as a "game" involving "strategies," with OMB trying to force HEW to make changes in the PSRO program by taking an extreme step to show displeasure.

Generally, said one HEW official involved in the department's budget deliberations, cuts were made by OMB in requests for fiscal 1979 rather than from current levels of funding. "I would suspect that at this point you hear the howls because the negotiation process is still going on," this official said. "It's very difficult to say where we are. Everyone's very nervous."