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| The Centers for Medicare and Medicaid Services (CMS) developed the Payment Error Rate Measurement (PERM) program in response to the Improper Payment Information Act, 2002 [IPIA, Public Law 107–300,] enacted November 26, 2002. This act required federal agencies to review annually programs they oversee that are susceptible to significant erroneous payments, to estimate the amount of improper payments, to report those estimates to Congress and to submit a report of the actions the federal agency is taking to reduce erroneous expenditures. |
| CMS published a proposed rule (FR/Vol. 69, No. 166/Friday, August 27, 2004), an interim final rule (FR/Vol. 70, No. 192/Wednesday, October 5, 2005), a second interim final rule (FR/Vol 71, No.166/Monday, August 28, 2006), and a final rule (FR/Vol.72, No. 169/Friday, August 31, 2007). CMS also published a Systems of Records notice for PERM (FR/Vol.71, No. 94/Tuesday, May 16, 2006). To comply with the IPIA, CMS published PERM regulations at 42 CFR Parts §431 and §457, formalizing the measurement of Medicaid and State Children’s Health Insurance Program (SCHIP) improper payments which the Office of Management and Budget (OMB) identified as programs at risk for significant improper payments. |
| PERM is a comprehensive, ongoing federal audit intended to measure how frequently errors occur when providers submit claims to states and when states pay those claims. This federal audit has three distinct areas: Data Processing, Medical Necessity and Recipient Eligibility. Currently all 50 states are being measured over a three-year period. Minnesota, along with 16 other states, was selected to be the first group of states to undergo the federal audit in federal fiscal year (FFY) 2006 and will continue to be a part of the audit on a three year cycle. A state and national payment error rate will be announced by the CMS in the Performance and Accountability Reports. |
| PERM is designed to estimate the proportion of Medicaid payments made in error. The estimated payment error rate is calculated as the ratio of the dollar value of all inaccurate payments to the dollar value of the total payments. The dollar amounts of any errors identified (overpayments and underpayments) are tracked and used to calculate the final payment error rate. The state-specific estimates will be used to establish national payment error rates for Medicaid and SCHIP. States are required to reimburse CMS for payment errors identified. States will, in turn, collect dollars in error from Providers. |
| CMS uses national contractors to conduct the data processing, medical necessity and final error calculation parts of PERM as follows: |
| • A Statistical Contractor provides statistical support by producing the samples to be reviewed and by calculating Minnesota’s error rate |
| • A Documentation/Database Contractor supports PERM by collecting payment related policies from states and medical records from providers |
| • A Review Contractor examines the accuracy of the claims-processing system and the medical necessity of the service for which payment was claimed |
| Recipient eligibility reviews are conducted directly by the PERM Section of the Internal Audits Division of DHS in collaboration with CMS and their contractors. |
| Data Processing examines a random sample of MA and SCHIP fee-for-service (FFS) and managed care provider claims that includes paid and denied claims to see, for example, if the claim: |
| • Paid for a non-covered service |
| • Paid as a fee-for-service claim when it should have been paid as a managed care claim |
| • Should have been paid by a TPL (third party liability) and if so, if TPL was sought |
| • Lacked system edits to correctly pay the claim (such as a gender conflict or payment for services dated after the end of eligibility/death of a recipient) |
| • Had a data entry, rate cell or managed care payment error to name a few of the review elements. |
| Medical Necessity reviews a random sample of MA and SCHIP fee-for-service claims that are a part of the Data Processing sample. This process involves requesting the complete documentation from providers for the claims selected for the Data Processing review with the exception of capitated managed care claims, Medicare crossover claims, buy-in claims and denied claims. CMS’ contractors examine the provider documentation submitted with the associated paid claims to determine if the service was necessary and the provider documented the service according to all applicable policies, procedures and regulations that impact the provider’s ability to provide services. For example, if the provider is required to be Medicare-certified to provide Medicaid services, the provider will be evaluated for all of the Medicare required and regulated documentation as well as the DHS required documentation. One such provider type example would be nursing homes. |
| PERM reviewers look to see if a provider: |
| • Responded to the request for documentation within the required time frame |
| • Submitted documentation but the documentation did not support the procedure code that was reimbursed |
| • submitted insufficient documentation |
| • Submitted a procedure code that was an error (such as, the provider performed a procedure but billed using an incorrect procedure code) |
| • Billed with an incorrect diagnosis |
| • Billed for the separate components of a procedure code when only one inclusive procedure code should have been billed |
| • Billed for an incorrect number of units for a particular procedure or revenue code |
| • Billed for a service determined to have been medically unnecessary based on the information in the medical/service record about the patient’s condition |
| • Billed and was paid for a service that was not in agreement with a documented policy, regulation or other requirement |
| In addition, PERM reviewers also review the documentation submitted by providers to make sure they meet all DHS and other applicable policies, procedures and regulations. |
| Click the following links to view the PERM 2009 sample record requests: |
| Minnesota providers whose claims are selected for the PERM review will receive a letter from DHS notifying the provider that a claim has been selected for review. A representative from Livanta LLC calls all providers in the PERM sample to verify the provider’s contact information and then sends the provider a request for medical/service records. There is a 60 day turnaround time for the initial request for medical/service records to be sent to Livanta. The medical/service records have to be received by Livanta no later than the 60th day from the date on the letter. When Livanta makes a request for additional information, the providers have only 14 days to send documentation to Livanta. Failure to comply results in an automatic error. DHS strongly encourages providers selected for the PERM review to send in medical/service records related to the claim submitted as soon as they receive the letter. |
| DHS’ PERM Section conducts recipient eligibility reviews for MA and SCHIP. These reviews start October 1, 2008. The sample selection is not tied to the Data Processing or Medical Necessity PERM samples. The Eligibility samples are selected each month from October 1, 2008, to September 30, 2009. After the sample is chosen, DHS PERM contacts the county or MinnesotaCare to obtain a copy of the recipient case file. The case file is reviewed to verify that the worker correctly granted, denied or closed eligibility for MA or SCHIP in accordance with all Federal and State regulations and policies. DHS retrieves claims of recipients in the sample for services provided during the month of the eligibility review and the claims become the basis for the payment error if a recipient eligibility error is found. |
| CMS has multiple other audit initiatives. The following are just a few examples of some of the CMS audits. |
| • Medicare’s Comprehensive Error Rate Testing (CERT), which measures the error rate for the Medicare claims submitted by providers to Carriers and Fiscal Intermediaries |
| • Medicare’s Hospital Payment Monitoring Program (HPMP), which identifies areas of risk for payment error and develops interventions and processes to improve the accuracy of billing for acute inpatient services |
| • Recovery Audit Contractors detect and correct improper payments in the Medicare FFS program based on Section 306 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) |
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