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Understanding the PEPPER Can Reduce Home Health and Skilled Nursing Audit Risks

We all love free tools that help our organizations perform better. But there is a particular educational tool that tends to fall under the radar of many healthcare organizations.

Every year, the Centers for Medicare and Medicaid Services (CMS) releases the Program for Evaluating Payment Patterns Electronic Report (PEPPER). The PEPPER gives your organization a snapshot of your case mix, coding, and billing practices and compares you to other providers in the nation, Medicare Administrative Contractor jurisdiction, and state.

This free resource is accessible online and can play an essential part in your internal compliance program in 2023, a year of increased oversight by CMS.

Why should you read the PEPPER?

Utilizing data from the most recent three calendar years, the PEPPER offers providers specific Medicare data statistics for discharges or services that may be vulnerable to improper payments. This report can help organizations identify potential overpayments as well as potential underpayments.

The report is available for the following facilities:

  • Skilled nursing facilities
  • Home health agencies
  • Hospices
  • Inpatient psychiatric facilities
  • Inpatient rehabilitation facilities
  • Long‐term acute care hospitals
  • Partial hospitalization programs
  • Short-term acute care hospitals
  • Critical access hospitals

The report does not identify if your organization has received improper payments, but it can guide you in identifying and preventing payment errors.

Low retrieval rates

Although the report is free and accessible easily online, provider download rates tend to be low. For instance, the retrieval rates for the Q4FY21 PEPPER for skilled nursing facilities in almost half of the country (23 states) were 20% to 39%. In 18 states, retrieval rates were 40% to 59%. Most states’ retrieval rates of the 2021 home health agencies PEPPER stood at 40% to 59%.

This is a missed opportunity if you aren’t actively assessing available data to identify gaps, target areas that need improvement, and enhance education to correct procedures and practices.

Target areas for home health agencies

Medicare has identified 10 target areas as risky for proper payments.

Some of these target areas include:

  • Low/high comorbidity
  • Medium/high functional impairment level
  • Average case mix
  • Admission source

A high percentage in a target area may mean an increased risk of improper billing that your agency needs to investigate. Being at or above 80% in a PEPPER target area puts your agency in an outlier category, which means a high risk of receiving improper payment.

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

“With the implementation of PDGM and PDPM, it isn’t just about billing and reimbursement; it is looking to see that the functional impairment levels and the number of visits align and how they compare to other agencies,” said Tiffany Shubert, Senior Product Manager for Therapy at Relias. “This information is critical for targeted training for staff who need to skill up in this area. PEPPER quickly and easily provides this information at the agency level.”

Reducing audit risks

CEOs and administrators, CFOs, compliance officers, quality improvement staff, and health information management staff may find the PEPPER helpful to track changes in billing practices, identify areas of potential overpayments or underpayments, potential diagnosis-related group over-coding and undercoding, and other areas that can put your organization at risk.

 Trish Richardson, MSN, BSBA, RN, NE-BC, CMSRN, Director of Post-Acute Care Solutions at Relias and President-elect of the North Carolina Nurses Association, said, “I strongly advise integrating this report into your quality assurance and performance improvement program as a tool to enhance your risk mitigation efforts and improve care delivery.” Richardson suggests engaging a broader interdisciplinary team, including Minimum Data Set (MDS) coordinators, to offer differing viewpoints when analyzing the report. “Your work may uncover specific care providers who may need additional education and training to improve documentation and reduce associated risk,” she said.

Reviewing and analyzing the report is essential to identifying your billing issues and preventing CMS audits. This data provides an introspective view of your organization and the opportunity to address high-risk areas. Missing this chance to self-assess your current compliance practice places your organization at risk and prevents you from correcting actionable problem billing areas.

Understanding PEPPER helps you find areas to improve care outcomes, internal procedures, quality metrics, and the financial strength of your organization.



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