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Pepper Reports Updated for 2013 Claims Information

August 27, 2014


George W. Thomas, CPA

The Centers for Medicare and Medicaid Services (CMS) has again contracted with TMF Health Quality Institute to produce a second round of Program for Evaluating Payment Patterns Electronic Report (PEPPER) reports for Skilled Nursing Facilities (SNF). Unlike the first round of reports which was mailed to your facility, this round of reports is available to the president or administrator of your facility after sign-up via a secure portal at This website also provides training and updates on the PEPPER report process. Your facility should have been able to obtain these reports earlier this summer. While the access of these reports is limited to your organization through the portal, CMS has also shared these reports with the Medicare Audit Contractor and the Recovery Auditors. These reports are on a fiscal year basis and will compare your facility’s data to the corresponding state data, your Medicare Audit Contractor’s data from its jurisdiction and national statistics for 2013, 2012 and 2011.

Documentation Billing Errors

The intent of the PEPPER report is to identify areas in which CMS believes that SNFs are most likely having billing, coding and documentation errors resulting in improper Medicare payments. The reports contain six target areas, including calculations based on billed activity. (If your facility did not have at least 11 activities in a given target area, that area will not be calculated for your facility).

  1. Therapy RUGs with High ADLs— Therapy RUGs Days with ADLs in excess of 16 in RUGs III as a percentage of total Therapy RUG Days
  2. Non-Therapy RUGs with High ADLs — Non-Therapy RUGs Days with ADLs in excess of 16 in RUGs III as a percentage of Total Non-Therapy RUG Days
  3. Change of Therapy Assessment— Count of Assessments with second digit as a percentage of Total Assessments
  4. Ultrahigh Therapy RUGs— Ultrahigh Therapy RUGs Days as a percentage of Total Therapy RUGs Days
  5. Therapy RUGs — Total Therapy RUGs Days as a percentage of Total Therapy and Non-Therapy RUGs
  6. 90+ Episodes of Care— Cases with length of stay in excess of 90 days as a percentage of Total Cases

These target areas identify situations in which:

  • Residents may be receiving more or less assistance than needed in activities of daily living
  • A facility is experiencing challenges with delivering services needed to residents
  • A facility is billing improperly for therapy services
  • A facility is continuing treatment beyond the point services are considered necessary. 

 A variance in these areas between your facility and the comparison groups does not necessarily indicate a problem. However, variances that place your facility in the 80% or greater percentile or in the 20% or lower percentile of all facilities in your comparison groups will likely attract CMS’ attention and should be investigated internally. This investigation should include the administrator and the medical director, as well as MDS and general nursing, therapy billing and accounting staff. A sample of claims in the target area where the variance occurred should be selected for review of the related medical record documentation and to revisit the accuracy of the billing and coding. This investigation should be performed in conjunction with certain elements of your compliance program, specifically the auditing and monitoring functions.

With this PEPPER Report information in hand, it is only a matter of time before the Recovery Auditors and other government auditors will begin to test the underlying supporting documentation to confirm these billings. Facilities should consider this an opportunity to validate or modify patient care and billing practices and procedures before a third party auditor request to review your facility billings.


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