PEPPER outliers are key indicators of potential compliance problems

Fighting fraud and abuse, particularly Medicare fraud and abuse, is a hot, apparently nonpartisan topic at the federal government these days. Just over the past two weeks, multiple announcements about new and ongoing anti-fraud initiatives have hit the news.

So when CMS and the OIG highlight the Program for Evaluating Payment Patterns Electronic Report (PEPPER) as a compliance tool for short-term acute-care and long-term acute-care hospitals, it's probably wise to pay attention. CMS contracts with the TMF Health Quality Institute in Austin, Texas, to provide PEPPER to hospitals, as well as to provide CMS, the fiscal intermediaries/Medicare administrative contractors (FIs/MACs), and the recovery audit contractors with the corresponding Medicare claims data and the ability to generate their own PEPPERs.

CMS brought back a new and improved PEPPER in 2010 after a roughly one-year hiatus, noted Kimberly Hrehor, the TMF project director for the CMS contract, during a recent CMS/OIG conference call for providers. PEPPER is a Microsoft Excel workbook that contains each hospital's Medicare claims data statistics for specific target areas (i.e., areas at risk for payment errors) for the most recent 12 federal fiscal quarters, explained Hrehor.

Currently, PEPPER has 11 target areas for short-term acute-care hospitals, five involving coding errors and six involving admission necessity errors, she said. The coding-focused target areas are: stroke/intracranial hemorrhage, respiratory infection, simple pneumonia, septicemia, and medical MS-DRGs with a CC or MCC. The admission necessity-focused target areas are: chest pain one-day stays, medical back problems, readmission within 30 days to the same hospital or to another short-term acute-care hospital, one-day stays excluding transfers, three-day skilled nursing facility qualifying admissions, and one-day stays for medical MS-DRGs.

PEPPER for long-term acute-care hospitals has four target areas. Two are focused on admission necessity (rehabilitation and short stays), and two are focused on coding (septicemia and excisional debridement), said Hrehor.

PEPPER provides each hospital's percent for the target areas. This target area percent "lets the hospital know its billing patterns," said Hrehor. More importantly, PEPPER provides percentile data showing how each hospital compares to other hospitals in the same state, in the same FI/MAC jurisdiction and in the nation. "The definition of a percentile is the percentage of hospitals with a lower target area percent," she explained. "For example, if 40 percent of the hospitals target area percents in a group were lower than hospital A, than hospital A would be at the 40th percentile."

What hospitals want to focus on is outliers (above the 80th percentile or, for coding target areas, below the 20th percentile), said Hrehor. "Outlier status can help cue a hospital in to when its percent is different from the majority of other hospitals in the comparison group. Just being an outlier does not mean that payment errors exist. Payment errors can only be confirmed through a review of documentation in the medical record. However, if a hospital is an outlier, it should be interpreted as a signal that the hospital may wish to conduct a review to determine if improper payments exist. The goal here is to help hospitals get paid right the first time and to avoid the pay-and-chase scenario."

Hrehor offered four PEPPER scenarios that definitely should trigger hospitals to conduct internal audits:

  • When a hospital is an outlier for many or all time periods for a target area;
  • When a hospital sees an increasing trend in target area percents over time or a decreasing trend for coding-focused target areas;
  • When the hospital's percent is above the 80th percentile as compared to the nation;
  • When the hospital is an outlier in several target areas, especially if there is similarity in the target areas (e.g., all three one-day-stay target areas or all five coding target areas).

To learn more, visit the PEPPER user website here. You can also e-mail questions about how CMS uses PEPPER. - Caralyn