rcm glossary

Program for Evaluating Payment Patterns Electronic Report (PEPPER)

PEPPER is an electronic report generated by CMS that evaluates payment patterns, helping healthcare providers identify potential billing irregularities.

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What is Program for Evaluating Payment Patterns Electronic Report (PEPPER)?

The Program for Evaluating Payment Patterns Electronic Report (PEPPER) is a valuable tool used in the healthcare industry to assess and monitor payment patterns for various healthcare providers, including hospitals, skilled nursing facilities (SNFs), hospices, and home health agencies. PEPPER is a report generated by the Centers for Medicare & Medicaid Services (CMS) and is designed to provide providers with comparative data on their billing practices and payment patterns.

The PEPPER report is generated annually and provides a comprehensive analysis of a provider's claims data, highlighting areas of potential risk or vulnerability. It compares the provider's billing and payment patterns to national, regional, and state averages, allowing providers to identify any outliers or discrepancies that may require further investigation. The report is intended to assist providers in identifying potential areas of non-compliance, overutilization, or underutilization of services, and to help them improve their billing practices and overall revenue cycle management (RCM) processes.

How does PEPPER differ from other similar terms?

PEPPER is often confused with other similar terms in the healthcare industry, such as Recovery Audit Contractor (RAC) audits, Medicare Administrative Contractor (MAC) audits, and Comprehensive Error Rate Testing (CERT) audits. While these terms are all related to auditing and monitoring payment patterns, they serve different purposes and have distinct characteristics. Here are the key differences:

1. PEPPER vs. RAC audits:

RAC audits are conducted by independent contractors hired by CMS to identify and recover improper Medicare payments. These audits focus on identifying and correcting specific billing errors or fraudulent activities. In contrast, PEPPER is a comparative report that provides providers with data on their payment patterns and allows them to identify potential areas of risk or vulnerability.

2. PEPPER vs. MAC audits:

MAC audits are conducted by CMS-contracted entities responsible for processing Medicare claims and ensuring compliance with Medicare rules and regulations. MAC audits primarily focus on claims processing and compliance, whereas PEPPER provides comparative data on payment patterns to help providers identify potential areas of concern.

3. PEPPER vs. CERT audits:

CERT audits are conducted by CMS to measure the accuracy of Medicare claims processing and payment. These audits randomly select claims for review and assess the error rate in payment. PEPPER, on the other hand, is not an audit but a comparative report that allows providers to assess their payment patterns and identify potential areas of risk or vulnerability.

Examples of PEPPER in healthcare revenue cycle management

To better understand how PEPPER is utilized in healthcare revenue cycle management, let's consider a few examples:

1. Hospital PEPPER:

A hospital receives its annual PEPPER report, which compares its billing and payment patterns to national, regional, and state averages. The report highlights areas where the hospital's billing practices differ significantly from the averages, such as high utilization rates for certain procedures or services. The hospital's revenue cycle management team reviews the report and identifies potential areas for improvement, such as ensuring proper documentation for services provided or addressing any coding or billing errors.


A skilled nursing facility (SNF) receives its PEPPER report, which shows that its average length of stay for Medicare patients is significantly longer than the regional and national averages. The SNF's revenue cycle management team investigates further and discovers that some patients are being unnecessarily kept in the facility for extended periods, leading to increased costs and potential compliance issues. The SNF takes corrective measures, such as implementing care coordination programs and improving discharge planning, to reduce the length of stay and improve overall revenue cycle performance.

3. Home Health Agency PEPPER:

A home health agency receives its PEPPER report, which reveals that its billing patterns for therapy services are significantly higher than the state and national averages. The agency's revenue cycle management team conducts a thorough review and identifies potential issues, such as improper documentation or overutilization of therapy services. The agency implements additional training for its staff on proper documentation requirements and establishes internal controls to monitor and manage therapy services more effectively.

In all these examples, PEPPER serves as a valuable tool for providers to identify potential areas of risk or vulnerability in their billing practices and payment patterns. By leveraging the insights provided by PEPPER, healthcare organizations can improve their revenue cycle management processes, ensure compliance with Medicare rules and regulations, and optimize their financial performance.

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