Overview
The Program for Evaluating Payment Patterns Electronic Report (PEPPER) is a confidential comparative billing report distributed to individual healthcare facilities by CMS's contractor (RELI Group and TMF). PEPPER is available for short-term acute-care hospitals, critical-access hospitals, long-term acute-care hospitals (LTCH), inpatient rehabilitation facilities (IRF), inpatient psychiatric facilities (IPF), skilled nursing facilities (SNF), hospices, home health agencies, and partial hospitalization programs.
PEPPER reports compare a facility's Medicare billing patterns against state, MAC jurisdiction, and national percentiles on specific "target areas" that CMS, OIG, and RACs have historically identified as prone to improper payment. Target areas vary by facility type but commonly include short-stay admissions, one-day stays, three-day qualifying hospital stays for SNF, specific MS-DRG pairs (e.g., sepsis with/without MCC, medical back), readmissions, and concentration of specific HCPCS codes. Each target area is reported as a percentile with accompanying data showing the facility's raw numerator, denominator, and rate.
Facilities in the top 80th percentile on any target area are flagged as "high outliers"; those below the 20th percentile are "low outliers." Neither status necessarily implies improper billing — high outliers may reflect genuine patient-mix differences, and low outliers may miss coding opportunities. PEPPER is a screening tool, not a finding of wrongdoing. Facilities are expected to review high-outlier target areas, determine whether the pattern reflects legitimate case-mix differences or potential billing errors, and document their review.
For compliance programs, PEPPER is foundational. The OIG's Compliance Program Guidance expects organizations to use data analytics — and specifically PEPPER where available — to monitor billing patterns. Absence of PEPPER review is frequently cited as a compliance program weakness in OIG corporate integrity agreements and RAC audit responses. Most mature hospital compliance programs maintain a quarterly PEPPER review workflow with owners assigned to each target area, documented review findings, and corrective actions where issues are identified.
PEPPER access is restricted. Each facility's report is released to designated recipients — typically the Chief Executive Officer, Chief Financial Officer, Compliance Officer, or Quality Director — and is not publicly available. Facilities must authenticate and download their PEPPER through the PEPPER Resources portal. Reports are typically released quarterly with 12-month rolling data.
PEPPER data has direct operational applications. High outlier status on sepsis DRG pair often indicates coding error (sepsis over-documented), clinical practice variation, or CDI opportunity. High outlier on one-day stays suggests observation-versus-inpatient decision-making challenges worth reviewing. Low outlier on a procedure might indicate missed coding opportunities — conservatively coded cases costing the facility legitimate revenue. Triangulating PEPPER with internal case review, CDI queries, and UR documentation converts data into action.
Industry benchmark
CMS PEPPER Resources (https://PEPPER.cbrpepper.org). Released quarterly. Outlier thresholds: 80th percentile (high outlier), 20th percentile (low outlier). Industry reference: RELI Group User's Guides for each facility type.
Worked example
A 420-bed hospital reviews Q4 PEPPER: high outlier (92nd percentile) on sepsis with MCC (MS-DRG 871) vs. sepsis without MCC (MS-DRG 872) coding ratio. CDI team pulls 40 random sepsis-coded charts for review. Finding: 11 of 40 (28%) lack documented evidence of MCC despite coded assignment. Corrective actions: physician education on sepsis MCC criteria, CDI query workflow for borderline cases, proactive audit. Estimated reversal impact: $680K in likely recoupment risk mitigated; coding accuracy target set at 95%+.
Frequently asked questions — PEPPER Report
Who receives the PEPPER report?
Designated recipients at each facility (typically CEO, CFO, Compliance Officer, or Quality Director). Access is restricted; PEPPER must be downloaded through authenticated access on the PEPPER Resources portal. Reports are not publicly available and cannot be shared outside authorized recipients without specific authorization.
Does high outlier status mean we're being audited?
No. PEPPER is a screening tool, not an audit finding. High outlier status signals patterns worth reviewing; it does not by itself trigger RAC or MAC audits. However, the same patterns that produce PEPPER outliers frequently draw audit interest, so proactive review is prudent.
What should we do with our PEPPER report?
Review each target area with designated clinical, coding, and compliance owners. For outliers, determine whether the pattern reflects legitimate case-mix variation or potential billing errors through sample case review. Document findings and corrective actions. Most effective programs review PEPPER quarterly within 30 days of release.
Are PEPPER findings evidence in False Claims Act matters?
PEPPER itself is not evidence of wrongdoing — it's a screening tool. However, absence of PEPPER review despite access has been cited in OIG compliance reviews as a program deficiency. Conversely, documented PEPPER review with corrective actions is treated as evidence of a functioning compliance program.
Disclaimer
This glossary entry is operational reference for revenue-cycle and medical-billing professionals. It is not legal, clinical, or contractual advice. Industry benchmarks cite named public sources where available; always verify against the current guidance from the authority body before relying on a number in a contract, policy, or compliance filing.