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Payment Error Rate Measurement (PERM)


The Centers for Medicare and Medicaid Services' (CMS) Payment Error Rate Measurement (PERM) program measures improper payments in Medicaid and the Children's Health Insurance Program (CHIP). PERM complies 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 people who are 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, 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. 

Questions about claims reviews? Email the PERM Coordinator, Barbara Key

Eligibility review

PERM eligibility reviews are conducted every three years.

  • In the first year, the Centers for Medicaid and Medicare Services (CMS) employs an Eligibility Review Contractor (ERC) to perform remote audits of enrollment actions. Reviews consist of Approvals (Actives) for an individual person receiving either Medicaid or the Children’s Health Insurance Program (CHIP).
  • In the second and third years, Medical Eligibility Quality Control (MEQC) performs similar reviews to support mitigating the findings from the ERC according to State and Federal eligibility criteria. MEQC reviews Actives, but also includes Terminations and Closures (Negatives).
  • States must develop a Corrective Action Plan (CAP) for any cases found to be ineligible or eligible with actions incongruent with policy. States must report audit findings quarterly to CMS to meet the CAP requirements to avoid Federal Dollar Match disallowance in future years.
  • When completed, CMS computes and publishes a national and state annual PERM report, with a breakdown of error rates and findings.

Questions about PERM / MEQC background, eligibility reviews or findings? Contact the Quality Control Unit Eligibility Lead, Jeff Reilly, 503-602-7063

Frequently asked questions

​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.​

​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.

​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.

​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.

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.

IMPORTANT: ​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 complete ​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.

​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.

​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 state 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.

Contact us

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 page 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.

CMS Payment Error Rate Measurement (PERM) website