MedicaidDocumentationHigh impact
Payment Error Rate Measurement (PREM) Audit
Illinois Medicaid - HFS·IL·Provider Notice
Effective date
May 9, 2011
We identified it
Jun 21, 2026
Summary
The Illinois Department of Healthcare and Family Services has issued a reminder about Payment Error Rate Measurement (PERM) audit requirements following identified errors in FFY 2009. Common billing errors included insufficient documentation, incorrect procedure coding, and billing for medically unnecessary services, particularly inpatient admissions when outpatient observation would be appropriate.
Action Required
Immediately: Review and strengthen documentation practices to ensure all business and professional records are maintained per policy requirements. Verify all procedure codes, admission dates, and provider numbers are accurate before billing. For hospital billing teams: Ensure inpatient admissions meet medical necessity criteria and consider outpatient observation services when inpatient stay is not medically necessary. Document physician orders and skilled nursing observations for all observation services. All services remain subject to ongoing audits.