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Payment Error Rate Measurement (PERM)

The Payment Error Rate Measurement (PERM) is an audit program that was developed and implemented by the federal Centers for Medicare and Medicaid Services (CMS) to comply with the Improper Payments Information Act (IPIA) of 2002. The purpose of the program is to examine eligibility determinations and claims payment of Medicaid program and Children’s Health Insurance Program (CHIP) for accuracy and to ensure that the States only pay for appropriate claims. In Colorado, CHIP is called Child Health Plan Plus (CHP+).


  • Colorado's next PERM cycle is federal fiscal year 2013 (October 2012 - September 2013).


Providers: Please go to the Department's PERM provider web page for more information on how PERM affects Medicaid and CHP+ providers.



Why is PERM required?

  • PERM is required by CMS pursuant to the Improper Payments Information Act of 2002 (IPIA; Public Law 107-300).
  • Medicaid and CHIP are identified as programs at higher risk for significant improper payments by the U.S. Office of Management and Budget (OMB).
  • CMS has to report the improper payment error rate and estimates of improper amounts to Congress.
  • CMS has to submit the report on actions to reduce erroneous expenditures.
PERM Process
  • Groups of states are selected on a rotational basis once every three years.
  • Colorado is one of 17 States, or Cycle 2 states, randomly selected by CMS for federal fiscal year (FFY) 2013 and previously in FFY 2010 and 2007. FFY runs from October 1 through September 30.
How is PERM implemented?

  • Claims Review
    • A claim is reviewed to determine if it was processed correctly and that the services were actually provided, medically necessary, coded correctly, and properly paid or denied.
    • For the PERM cycle, CMS uses two contractors to perform claims reviews:
      1. The Statistical Contractor, the Lewin Group, who collects universe claims data quarterly from states and uses a stratified random sampling design to draw the sample for review.
      2. The Review Contractor, A+ Government Solutions, who uses the sample list to request copies of medical records from the providers and reviews for medical necessity, correct coding, correct payment or denial of claims, and services actually provided. 
  • Eligibility Review
    • Recipient's eligibility determinations are reviewed for accuracy.
    • The Department of Health Care Policy and Financing (the Department) has awarded Myers and Stauffer, LC to review eligibility determinations in FY 2013. 


What is the purpose of the eligibility determination review?


  • The purpose of the eligibility review is to verfiy the eligibility of sampled cases using state eligibility criteria in effect at the time of the decision under review.


How will eligibility sites know if any of their eligibility determinations have been selected?


  • The Department, or Myers and Stauffer, LC, will contact eligibility sites and request copies of the case file.


What do eligibility sites need to do?

  1. Eligibility sites need to check if the case is currently undergoing investigation for fraud.  If so, this must be reported to the Department.
  2. Eligibility sites need to submit copies of the requested case file within 10 business days of the date of the request.  Original documentation will not be accepted.
  3. If the eligibility site is not the correct site, it should inform the Department with the evidence of which site that has the requested case file information.


What happens if there is an error finding in the eligibility determination?


  • Myers and Stauffer, LC will contact the eligibility sites about the results of the case file review.  Eligibility sites may appeal the finding.  The appeal process is currently in development.


What about maintaining patient privacy?



How can I find out more information?


  • The Department will make a presentation in the spring of 2013 about PERM and eligibility site responsibilities.  The Department will soon release details to eligibility sites via email.
  • Visit the CMS website at
  • Contact the Department's PERM Program Manager, Matt Ivy, at or 303-866-2706.