Module 1, Topic 1
In Progress

Red Flags and the PEPPER

Petria September 3, 2020

Red Flags and the PEPPER


Would you like to know if your statistics might be a red flag to auditors?


What is PEPPER?

  • .PEPPER summarizes Medicare claims data statistics for one provider in “target areas” that may be at risk for improper Medicare payments.
  • .PEPPER compares the provider’s Medicare claims data statistics with aggregate Medicare data for the nation, MAC jurisdiction, and the state.
  • .PEPPER cannot identify improper Medicare payments!



History of PEPPER

  • 2003: TMF developed for short-term acute care and later long-term acute care hospitals; it was provided by Quality Improvement Organizations (QIOs) through 2008.
  • 2010: TMF began distributing PEPPERs to all providers in the nation, and it developed PEPPERs for other provider types: CAH, IPF, IRF (2011), Hospice, PHP (2012), SNF (2013), HHA (2015).
  • 2018: CMS combined the Comparative Billing Report (CBR) and the PEPPER programs into one contract; RELI Group and its partners, TMF and CGS, began producing CBRs and PEPPERs.



PEPPER Summarizes Medicare Data from past 3 CY

Paid Medicare claims (UB-04)

  • Home health part A or part B final action claims
  • Medicare claim payment amount>zero (note: includes Medicare secondary payer claims)
  • Final action claim (interim and non-payment claims excluded)
  • Exclude HMO/MA claims
  • Exclude canceled claims



Required Information to Access PEPPER via the PEPPER Portal

  • Six-digit CMS Certification Number (also referred to as the provider number or PTAN).
    • Not the same as the tax ID or NPI number.
  • Patient Control Number (form locator 03a) or Medical Record Number (form locator 03b) from claim of traditional fee-for-service Medicare beneficiary receiving services between Oct. 1 –Dec. 31, 2018.
  • Validation code is updated for each release.




HHA PEPPER Retrievals–PEPPER ResourcesPortal

The PEPPERs are available through the PEPPER Resources Portal. They will remain accessible for approximately two years from the original release date. Providers do not need to register to obtain the report.




Home Health Agencies

Annually, July 8, 2019
View a map of HHA PEPPER retrievals by state.

Available electronically to the agency’s CEO, president, administrator or compliance officer via thePEPPER Resources
Portal. You will need to enter your 6-digit CMS Certification Number (also referred to as Provider Number or PTAN) (see
special note). The 3rd digit of this number will be a 3, 7, 8 or 9.



  • Available July 8, 2019
  • Summarizes statistics for three calendar years:
    –2016 –2017 –2018
  • Statistics for all time periods are refreshed with each release.
  • The oldest calendar year rolls off as the new one is added.



Why are providers receiving PEPPER?

  • CMS is tasked with protecting the Medicare Trust Fund from fraud, waste, and abuse.
  • The provision of PEPPER supports CMS’ program integrity activities.
  • PEPPER is an educational tool that is intended to help providers assess their risk for improper Medicare payments.




HHA Improper Payment Risks

  • HHAs are reimbursed through the HHA prospective payment system(PPS).
  • HHAs can be at risk for improper payments.
  • Target areas were identified based on a review of the HHA PPS, review of studies related to improper payments, analysis of claims data, and coordination with CMS subject matter experts.




PEPPER Target Areas

  • Areas identified as potentially at risk for improper payments (e.g., coding or billing errors, unnecessary services)
  • The OIG published a report in August 2012, OEI-04-11-00240, “Inappropriate and Questionable Billing by Medicare Home Health Agencies” and it identified six measures of questionable billing



HHA Target Areas

Target Area Target Area Definition
Average Case Mix Numerator (N): sum of case mix weight for all episodes paid to the HHA during the report period, excluding LUPAs (identified by Part A NCH HHA LUPA code) and PEPs (identified as patient discharge status code equal to ‘06’)

Denominator (D): count of episodes paid to the HHA during the report period, excluding LUPAs and PEPs
Note: reported as a rate, not a percent

Average Number of Episodes N: count of episodes paid to the HHAD: count of unique beneficiaries served by the HHA Note: reported as a rate, not a percent
Episodes with 5 or 6 Visits N: count of episodes with five or six visits paid to the HHA D: count of episodes paid to the HHA
Non-LUPA Payments N: count of episodes paid to the HHA that did not have a LUPA payment
D: count of episodes paid to the HHA
High Therapy Utilization Episodes N: count of episodes with 20+ therapy visits paid to the HHA (first digit of HHRG equal to ‘5’)
D: count of episodes paid to the HHA
Outlier Payments N: dollar amount of outlier payments (identified by the amount where Value Code equal to ’17’) for episodes paid to the HHA
D: dollar amount of total payments for episodes paid to the HHA




Percentiles in PEPPER

  • .Percentile tells us the percentage of HHAs that have a lower target area percent.
  • .Target area percentsat/above national 80th percentile are identified as “outliers” in PEPPER




Comparison Groups

  • Nation
  • Medicare Administrative Contractor (MAC) Jurisdiction
  • State




How does PEPPER apply to providers?

  • PEPPER is a roadmap to help you identify potentially vulnerable or improper payments.
  • Providers are not required to use PEPPER or to take any action in response to their PEPPER statistics.
  • But: Why not take advantage of this free comparative report provided by CMS?





Use PEPPER to:

  • .Access tables and graphs displaying billing activity over time in comparison with other hospitals or facilities
  • .Review hospital-or facility-specific data and comparative target area statistics for the state, jurisdiction, and nation
  • .Track and trend administrative data statistics to identify changes in billing practices and Medicare reimbursement for CMS target areas


•Use PEPPER to:

  • .Identify areas of potential overpayments and underpayments
  • .Identify DRGs with a high proportion of short-stay outliers (for long-term care hospitals)
  • .Compare length of stay data to length of stay data for the jurisdiction
  • .Assess Medicare reimbursement for target areas, track and trend over time


Use PEPPER to:

  • .Review hospital-or facility-specific data statistics for target areas identified by CMS as at high risk for improper payment
  • .Identify areas of potential overpayments and underpayments
  • .Help prioritize areas for compliance auditing and monitoring
  • .Access data tables and graphs displaying billing activity over time in comparison with other hospitals or facilities


Use PEPPER to:

  • Identify areas that may be in need of closer study to determineadmission necessity or whether a procedure or treatment was performed in the appropriate setting
  • Monitor readmission rates to assist in identifying opportunities for improvement related to case management, discharge planning and quality of care
  • Identify target areas where the average length of stay is increasing (or decreasing, in the case of long-term care hospitals)
  • Aid efforts to improve medical record documentation


Use PEPPER to:

  • Identify potential DRG over-coding and under-coding
  • Identify DRGs that are problematic on which the hospital or facility may want to focus auditing and monitoring
  • Access tables and graphs displaying billing activity over time in comparison with other hospitals or facilities, which can be used for educational training activities
  • Prioritize areas for coding compliance auditing and monitoring
  • Aid efforts to improve medical record documentation




How does PEPPER identify HHAs at Risk?

  • An HHA’s target area percent/rate is compared to other HHAs’ percents/rates in the nation, MAC jurisdiction and state.
  • If the HHA’s target area percent/rate is at/above the national 80thpercentile it is identified as at risk for improper Medicare payments.
  • Compare and Target Area reports:
  • –Red bold print– at or above the national 80th percentile for the target area


Success Story

Oklahoma Home Health Agency Tackles Length of Stay
PEPPER identifies concerns, agency focuses on opportunities

Aspire Home Care and Hospice, a company comprised of three home health agencies (HHAs) and three hospices based in Oklahoma City, considers PEPPER a vital tool for identifying risk areas and benchmarking with their peers. Since they are nota large corporation, they do not have the internal resources to calculate the types of statistics provided by PEPPER.

The Program for Evaluating Payment Patterns Electronic Report (PEPPER) is an annual comparative data report that summarizes aHHA’s Medicare claims data statistics for areas prone to abuse/improper Medicare payments. PEPPER is also available annually forhospices.

Kristin Glover, RN, COS-C, WCC is the vice president of compliance at Aspire and oversees compliance and ethics, the quality assurance/performance improvement (QAPI) function, as well as accreditation, external audits and 5-star ratings. She has been using PEPPER for the past seven years.

“We’ve incorporated PEPPER into QAPI; we use it as part of our annual assessment,” Ms. Glover said. “It tells us so much about our billing and risk areas. We also evaluate changes in our statistics over time, with a special focus on any areas in which we may be outliers. Our organization is healthier as a result of our continued focus on quality of care and compliance.”

She said that PEPPER helped them identify that their HHA “average number of episodes” was high, which is an indication of long lengths of stay.

Ms. Glover described how Aspire tackled the issue of high episodes: “Initially, we identified the patients who had the greatest length of stay and reviewed those records. We asked ourselves, ‘What was their diagnosis? Was medical necessity there?’ And we progressed in this manner down the continuum of length of stay (LOS). Now we look at all patients on a continuous basis. It’s part of our process.”

In regard to the long LOS, she described the process as: “We started out with educationon Medicare requirements and regulations. We recognized that we had staff turnover, and we needed to continuously educateour staff. Then we moved to conducting dailyconversations on patients. We have weeklycase conferences, and we developed a case conference template form, which uses terms that Medicare uses, such as the acute illness/injury that occurred, continued need for skilled nursing or therapy services. We improved our communication at all levels, starting with the front-line nursing staff, carrying over to the physicians, the local director of the branch and all the way up to the vice president of operations. Along the way, we continue auditing/monitoring on a weekly basis. As a result, we’ve seen our LOS decrease over time, as our PEPPER ‘average number of episodes’ shows.”(see graph, below)

The Aspire team has also put their electronic medical record (EMR) system to use.

“We identified a spike in one of our HHA PEPPERs for the ‘Episodes with 5 or 6 visits’ target area,” Ms. Glover said. “Our EMR allowed us to compare HHA branches that billed to that provider number. We could identify the branch that looked different from the others, so we could focus our efforts on that particular branch. Our EMR allowed us to easily pull reports to help us identify practices that contributed to this risk area.”

What advice does Ms. Glover offer to someone just starting to review PEPPER? –“Don’t rush to the numbers in the report. Resist knee-jerk reactions. Take the time to review the PEPPER user’s guide, which includes step-by-step information on how the statistics are calculated, explains what the target area numerators and denominators represent, and where the data come from. It’s important to understand what you are looking at, so you can look at the trends in the statistics and think about how the statistics work out for you.

“Having benchmarks is priceless to maintaining good solid business practices related to mitigating risk areas.”

For more on PEPPER, visit

To contact Ms. Glover: Phone: 855-527-7473. Email:[email protected]. Learn more about Aspire Home Care and Hospice at



Patient-Driven Grouping Model(PDGM)