Provider Notice issued 05/09/11

Payment Error Rate Measurement (PERM) Audit

To comply with the Improper Payments Information Act of 2002, the federal Department of Health and Human Services, Center for Medicare and Medicaid Services (federal CMS) has implemented a Payment Error Rate Measurement (PERM) program, which measures improper payments within each state's Medicaid and Children's Health Insurance Program (CHIP) program. Each state is required to participate in PERM every three (3) years.

Insufficient documentation, procedure coding errors and medically unnecessary services were errors identified in the FFY 2009 PERM review. The following serves as a reminder of the established department policies specific to these issues.

Insufficient Documentation: Maintenance of Records

The PERM errors included instances of providers not submitting sufficient documentation to support the service billed. Department policy requires providers to maintain the following records:

• Any and all business records which may indicate financial arrangements between the provider and other providers in the program or other entities, or which are necessary to determine compliance with federal and state requirements, including, but not limited to:
  • business ledgers of all transactions;
  • records of all payments received, including cash;
  • records of all payments made, including cash;
  • corporate papers, including stock record books and minute books;
  • records of all arrangements and payments related in any way to the leasing of real estate or personal property, including any equipment;
  • records of all accounts receivable and payable; and
  • original signed billing certification forms for each voucher received.

• Any and all professional records which relate to the quality of care given by the provider or which document the care for which payment is claimed, including, but not limited to:
  • medical records for applicants and participants in the Department's Medical Programs (copies of claims alone will not meet this requirement), including a record of ancillary services ordered as a result of medical care rendered by the provider; and
  • other professional records required to be maintained by applicable federal or state law or regulations.

The business and professional records required to be maintained are to be kept in accordance with accepted business and accounting practice and are to be legible.

Professional records documenting the history, diagnosis, treatment services, etc., of a Medical Assistance, Moms and Babies, All Kids, FamilyCare, Illinois Cares Rx, Veterans Care, Health Benefits for Workers with Disabilities, Illinois Healthy Women, Transitional Assistance or State Family and Children Assistance patient are to be made available to other healthcare providers who are treating or serving the patient, without charge and in a timely manner, when authorized by the patient in writing.

Procedure Coding Errors: Billing for Services Provided

PERM errors identified instances of incorrect coding attributable to billing for the wrong procedure code, admission date or provider number. Department policy states that a practitioner may charge only for services personally provided, or which are provided under direct supervision in the practitioner's offices by ancillary licensed or certified staff, e.g., laboratory tests done by a technician in the practitioner's employ.

Medically Unnecessary Services: Hospital billing for outpatient observation services if an inpatient admission is not medically necessary

PERM errors also identified instances of an inpatient hospital admission not being medically necessary. Some patients, while not requiring hospital admission, may require an extended period of observation. Appropriate observation and ancillary services may be obtained in the outpatient setting to determine the patient's future medical management. While the continued outpatient observation period may be medically necessary, admission to the hospital may not be medically necessary. Observation services should be used only for patients who do not meet medical necessity for inpatient admission.

The need for outpatient observation must be documented in the medical record. There must be a physician's order to admit the patient for observation, and the corresponding nurses' notes should show that skilled observation has been furnished.

Additionally, this notice also serves as a reminder that all services for which charges are made to HFS are subject to audit, which is an important, and necessary part of the department's monitoring of health care facilities and services, as required by the federal and State law.

Questions regarding this notice may be directed to the Bureau of Comprehensive Health Services at 1-877-782-5565.

Theresa A. Eagleson, Administrator
Division of Medical Programs