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Hospice Billing Compliance: The Latest PEPPER Updates

The Program for Evaluating Payment Patterns Electronic Report, or PEPPER, contains valuable information to help your hospice organization identify billing issues and prevent improper payment audits. The provider-specific PEPPER analyzes Medicare data and statistics from discharges and services compared with every hospice nationwide. Reviewing your hospice PEPPER is an important part of your hospice compliance program.

In a recent joint webinar from Relias and Weatherbee Resources, Weatherbee Principal Carrie Cooley, MSN, RN, emphasized that each organization must confidently analyze its PEPPER. By learning what to do with the data, hospice leaders can take action to fix trouble spots.

Though it has been a widely available tool for hospice organizations to identify billing errors since 2012, statistics show that only 63% of U.S. providers open their PEPPERs.

“I distinctly remember getting my hands on my first PEPPER,” Cooley said while explaining how the report has evolved since its 2012 debut. “This information is really important because it shows what is behind the scenes and what supports PEPPER.”

This article reveals why reviewing your PEPPER data is so important, how it can highlight fixable areas where improper billing may be occurring, how to understand your data, and tips to make it a yearly part of your organization’s internal compliance program.

What Is the PEPPER?

PEPPER is a yearly report given to hospices, skilled nursing facilities, inpatient and outpatient rehabilitation centers, and other U.S. healthcare providers. A CMS contractor who develops and distributes PEPPER — TMF Health Quality Institute — organizes and creates the report to monitor healthcare program integrity.

The PEPPER itself does not identify if a provider has received improper payments. However, Cooley explains that the report is “intended to be used as a guide for a hospice provider to self-monitor and self-correct if necessary.”

Although PEPPER is an “educational tool” for providers, it holds an incredible amount of weight because it falls under the Centers for Program Integrity (CPI) umbrella.

It’s each hospice provider’s ultimate responsibility to acknowledge and act on PEPPER’s findings. Cooley notes that failure to fix billing and payment issues uncovered by PEPPER could suggest to CPI “that the hospice showed blatant disregard…or saw or should have seen that you had an issue and you failed to correct it.”

Cooley emphasized that not reading and self-correcting PEPPER data can make an organization even more vulnerable to audits.

What Information Does PEPPER Provide?

PEPPER provides each hospice organization’s paid Medicare claims for the last three fiscal years. Hospices fall into three different comparison groups:

  • National
  • Jurisdictional or Medicare Administrative Contractor (MAC)
  • State

Each facility’s PEPPER is accessible online every April, and it is each organization’s responsibility to retrieve it.

PEPPER reports come in an Excel format and contain the following:

  • Cover page
  • Definitions pages
  • Compare reports
  • 14 target areas report (three new and one deleted for 2021)
  • Top terminal conditions
  • Live discharges

CMS can see who does and doesn’t retrieve their reports on a group and an individual level. For example, the 2021 PEPPER retrieval rate was as low as 34% in California. This data indicates that 66% of hospice organizations in the state never looked at their facility’s 2021 data. This is a missed opportunity and could prevent CMS audits.

Important Differences: Percent and Percentile

Cooley advised hospice officials to be sure they clearly understand how to read two essential terms on the PEPPER, including the difference between percent and percentile.

  • “Target area percent” is the actual provision of services and billing data.
  • “Target area percentile” is where a hospice provider falls in the three comparison groups mentioned above: national, jurisdictional (MAC), and state.

A higher percent on PEPPER means you are performing well. But the target area percentile allows PEPPER to compare hospices to one another. A higher percentile ranking means you are performing more poorly.

PEPPER Target Areas

Medicare officials have identified 14 target areas as “risky” for improper payment, Cooley said, including three new ones in 2021.

Some of these target areas include:

  • Lengthy stays
  • Routine or continuous home care provided in an assisted living facility
  • Live discharges where a patient is not terminally ill or for revocation

A high percentile in a target area may mean an increased risk of improper billing that requires further investigation from your organization.

For example, a facility with a large number of dementia patients with a very long length of stay might suggest that a facility is admitting these patients sooner than necessary or the eligibility evaluation process is incorrect.

You can look at the PEPPER website’s user guide list to see all target areas and a list of potential interventions for each.

Significance of 80th Percentile in a Target Area

Being at or above the 80th percentile in a PEPPER target area puts a hospice into an outlier category, which means high risk for receiving improper payment.

For example, if you have a target area score in the 85th percentile nationally, you are ranked in the bottom 15% of all hospitals for that target area in the nation. CMS conducts audits using this information.

PEPPER Review and Analysis Process

According to Cooley, “The PEPPER is the best one-stop-shop to evaluate vulnerability in billing patterns.”

But just being aware of your data is not enough. CMS can see that an organization accesses its PEPPER, and not improving risky improper payment data can make organizations vulnerable. Taking action is the best way to prevent audits.

Here are actionable steps:

  • Get your fiscal year 2021 PEPPER right away.
  • Establish a yearly PEPPER retrieval plan.
    • Set a reminder.
    • Who will review and analyze the data?
    • How will the information be delivered to your leadership team and governing board?
  • Establish a PEPPER review analysis committee:
    • Medical director, chief nursing officer, sales & marketing director, governing board
    • An outside expert on PEPPER data, if needed

Cooley recommends that facilities put their plan in writing and review it before retrieving each year’s PEPPER.

Key PEPPER Takeaways

The PEPPER helps hospices identify potential priority areas where improper billing may occur and prevent auditing. Every organization is responsible for retrieving, analyzing, and remedying any negative information.

“The biggest mistake that I see is that hospices are looking for big, bold font,” says Cooley. “Or they look for outlier versus no outlier and assume that it all looks good. But they don’t analyze it step-by-step,” she adds.

In other words, just because you are not an identified as an outlier doesn’t mean there are no improper payment issues present.

Failing to act on your PEPPER data can put your institution at risk and prevent you from fixing actionable problem billing areas.

“If your hospice has PEPPER problems, you will be getting audited,” Cooley says. “CMS has the data they need to audit.”


Editor’s Note: This post was originally published in June 2021 and has been updated.


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