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Payment Error Rate Measurement


The Centers for Medicare and Medicaid Services (CMS) implemented the Payment Error Rate Measurement (PERM)​ program to measure improper payments in the Medicaid and the Children's Health Insurance Program (CHIP). PERM is designed to comply with the Improper Payments Information Act of 2002 (IPIA; Public Law No. 107-300).

Under the Act, federal agencies must review programs that are at risk for payment errors. PERM uses a 17-state rotational approach to measure improper payments in Medicaid and CHIP for the 50 states and the District of Columbia over a three-year period. As a result, each state is measured once every three years.

The PERM program​:

  • Identifies program vulnerabilities that result in improper payments
  • Promotes efficient Medicaid and CHIP program operations
  • Helps ensure medical services are provided to the truly eligible​

Components and process

​Claims review

For the claim reviews, CMS uses contractors to perform statistical calculations, medical records collection and medical data processing reviews of Medicaid and CHIP fee-for-service and managed care claims. Each state submits quarterly "universe data" to the CMS Contractor. Universe data files are essentially very long "lists" of nearly all Medicaid and CHIP beneficiary-specific payment records adjudicated by a state during the quarter. States compile PERM universe files from MMIS systems, data warehouses, HIPP payment files, county and state agency systems, vendor payment systems, managed care files, and a variety of other sources. States then divide their PERM universe data into four program areas: Medicaid fee-for-service, CHIP fee-for-service, Medicaid managed care and CHIP managed care. Contact Barbara Key, PERM Coordinator, at 503-378-3299 with any questions. 

Eligibility ​​review

For eligibility reviews, states perform their own reviews according to state and federal eligibility criteria.The purpose of the eligibility review is to verify beneficiary eligibility, not the caseworker's actions. Eligibility reviewers look to the beneficiary's categorical and financial eligibility.

For active case reviews, a case is correct if the beneficiary is determined "eligible" and is in error if the beneficiary is determined "ineligible." Active cases are considered "undetermined" if eligibility cannot be verified with documentation provided or obtained. The "undetermined" cases are included in the national and state error rates. Negative cases are reviewed to determine if applicants and beneficiaries are denied or terminated in error.

Cases denied or terminated in error should be referred back to the agency responsible for the eligibility determination for a redetermination for benefits. Eligibility reviews are completed in two program areas:​ Medicaid eligibility and CHIP eligibility

When the review is completed, CMS computes and publishes a national and a state annual PERM report with a breakdown of error rates and findings. Contact Jeff Reilly, Quality Control Unit Eligibility Lead, at 503-602-6063 with any questions.


How many claims will be reviewed during the PERM review?
​​CMS considers the error rate from the state's previous PERM cycle to determine the state's annual sample size for the current PERM cycle. The maximum sample size is set at 1,000 claims for each component.
I’ve sent claims to Oregon Medicaid. How does this affect me?
If you have submitted a claim to Oregon, you may be randomly selected for review. If you are selected, you will receive a letter from the CMS data documentation contractor asking you to send copies of medical records and other documentation that supports the submitted claim. The data documentation contractor will tell providers what to send, where to send it and when.

The documentation may include medical information, proof of medical necessity, and proof that the services were provided as ordered and billed with correct codes.
What if an overpayment is discovered on one of my paid claims?
If an overpayment is discovered, the provider must return the overpayment to the state within 60 days of identification of the overpayment. The state will pursue recovery of the improper payment from the provider. The state is required to return to CMS the federal share of any overpayment.
If one of my claims is chosen for review, how long do I have to return the documentation?
Providers have 75 days to submit required documentation. The rules for submitting documentation fluctuate depending on whether or not the provider sent in everything the first time. If a provider sends partial documentation, they only get another 14 days to send the rest of the documents even if they have 40 days left from the original 75-day timeframe. Seventy-five days does not always mean 75 days.

For example, if the documentation submitted is insufficient, the review contractor will request additional documentation. The provider has a new timeframe of 14 calendar days to submit the additional documentation. The 14 days is not an extension of the original 75-day timeframe. Documentation that is incomplete or inaccurate may be counted as an error. Failure to send the requested documentation will be counted as an error. Please collect and return your documents right away.

IMPORTANT NOTE: If you have been asked to provide documentation for a claim, please gather all documents right away. It is crucial that you respond within 75 days. If you do not provide the documentation within the required timeframe, the claim will be cited as an erroneous payment and the state will pursue recovery of payment for the claim.
How will patient privacy be maintained?
The Health Insurance Portability and Accountability Act (HIPAA) allows for the collection and review of protected health information for the CMS PERM review. Providers are required by Section 1902(a)(27) of the Social Security Act to disclose information for state and federal reviews.

Special permission from patients is not required for the release of records for PERM reviews. Records do not need to be "de-identified" before they are sent to the CMS contractor.
One of my claims was determined to have an error and I want to appeal the decision. What do I need to do?
The Review Contractor will post disposition reports of claims review findings on their website for the Medicaid Program Integrity Coordinator to review. The state will then follow up with providers to receive any needed clarifications.

The states can file a notice that it disagrees with the error findings and provide supporting evidence that the claim was correctly paid. The Review Contractor will re-review the claim with the supporting documentation and reverse or uphold the findings. If the state disagrees with the re-review findings, they will file an appeal with CMS.

This site is informational only and is not designed to be exhaustive. CMS announces frequent changes and clarifications for the PERM process. The information on this site is to help providers better understand the PERM process, not to provide legal advice, business advice or protection from liability or responsibility during the PERM process.​​​​​​​