Submit Claims Without Getting the RUG Pulled Out from Under You: Using PEPPER to Season SNF Compliance Programs

May 2014 marked the second annual release of the Program for Evaluating Payment Patterns Electronic Reports (PEPPER) for skilled nursing facilities. The PEPPER contains billing data for episodes of care in six “target areas” that CMS has identified as being particularly susceptible to fraud and abuse. The report allows skilled nursing facilities (SNFs) to see how they compare with other SNFs in the target areas at a national, jurisdictional, and state level. As information in the PEPPER is used by CMS to identify potential improper billing practices, facilities should take advantage of having access to this information and use it to improve internal compliance programs. Integrating PEPPER data into internal audit processes may enable SNFs to capture accurately the care they provide with greater confidence that coding will withstand scrutiny.

Accessing PEPPER

Previously provided only in writing, PEPPERs are now available to a SNF’s Chief Executive Officer, President, or Administrator via a secure on-line portal.[i] There is no registration process but the SNF representative requesting access to the report will need to provide his/her name and e-mail address, basic information on the facility, the SNF’s CMS Certification Number, and a Patient Control Number or Medical Record Number from the UB04 for a Medicare FFS claim with dates of service between September 1–30 of 2013. PEPPERs may be accessed through the portal for approximately one year.

Data Reported in the Pepper

PEPPER data come from a facility’s UB-04 claims submitted to the Medicare Administrative Contractor (MAC) and reflect claims information for each target area during the preceding three fiscal years.[ii] There are six target areas analyzed in the report:

  1. Therapy resource utilization groups (RUGs) with high ADL scores (“Therapy Hi ADL”)
  2. Non-therapy RUGs with high ADL scores (“Nontherapy Hi ADL”)
  3. Change of Therapy Assessments (“COT Assmnt”)
  4. Ultrahigh therapy RUGs (“Ultrahigh”)
  5. Therapy RUGs (“Therapy”)
  6. Episodes of Care lasting 90 days or longer (“90+ Days”)

Data from these target areas are reported for the individual facility and in aggregate for three comparison groups, permitting the facility to compare its percentage of claims submissions in the target areas with other SNFs nationally, with those in the same MAC jurisdiction, and with SNFs that are in the same MAC jurisdiction within the same state.

Calculating Percentages

A SNF’s percent in each target area reflects the number of days billed for episodes of care within the report period for services in the target area (the numerator) and a broader category of related services (the denominator). For example, a facility’s percent for the target area Therapy Hi ADL would be derived from the following ratio:

Numerator = number of days the facility billed for RUG codes RUX, RVX, RHX, RMX, RUC, RVC, RHC, RMC, and RLB.

Denominator = number of days billed for all therapy RUGs.

If a SNF’s claims for a particular target area are within either the top or bottom quintile (20th percentile), CMS presumes the SNF an outlier. The SNF PEPPER User’s Guide adopted by CMS advises SNFs to give “highest priority” to their national percentile ranking.[iii]

Outliers & Audits

CMS views top quintile scores as indicating potential fraud, waste, and abuse and bottom quintile scores as reflecting possible substandard quality of care. CMS’s stated concern is that SNFs with top quintile scores may be coding residents as receiving more services than were actually provided, or they may be providing more services than were actually needed. Conversely, SNFs in the bottom quintile may be at risk for failing to provide adequate services in that target area to meet residents’ needs in a manner consistent with quality of care standards. The same reasoning applies more generally to the target area of admissions longer than 90 Days, with upper-end outliers indicative of promoting greater lengths of stay than necessary and lower-end outliers suggesting a practice of discharging residents before they have met attainable goals.[iv]

Although PEPPER data are not publicly available, they are available to CMS, MACs, and Medicare RACs (recovery audit contractors), and to the SNFs themselves. PEPPER access now provides SNFs the same data available to these oversight agencies, thus allowing the SNFs to implement targeted audits to review areas that are likely to be the focus of audits conducted by these agencies. By tailoring internal audits to review these target areas, especially for those facilities in the top or bottom quintile in a given area, facilities can help ensure that their coding and documentation will substantiate their billing practices. Utilization of PEPPER data to conduct internal reviews will also allow facilities an opportunity to correct any billing discrepancies that may be occurring before those issues are raised by external auditors.[v]


Hospitals have been receiving PEPPERs for years and tailoring their internal audits to address potential areas of concern. Nursing facilities would be wise to follow that example and take advantage of this report as a resource for audit-readiness. Knowing the exact claims sample and timeframe available to auditors permits facilities the opportunity to review all relevant documentation regarding target area claims prior to an audit occurring. SNFs that have integrated PEPPER data into their triple-check process will have increased peace of mind that their claims will withstand the scrutiny of agency review should an audit occur.

When it comes to audits, the best defense is always a good offense. Whether working to improve an internal review process or already facing an audit, facilities should take action now to develop facility systems and to minimize the risk of recovery. SNFs in the top or bottom quarter in any target area should develop an audit-ready internal review process. SNFs subject to an audit should remember that legal assistance is most effective when sought upon initial contact by an oversight agency.

If you have questions regarding the interpretation or use of PEPPER data, how to develop effective internal claims review processes, or if you require legal assistance with an audit, please contact Peter Mellette ( or Harrison Gibbs (, or call Mellette PC at (757) 259-9200.

[i] The portal and detailed instructions for accessing the PEPPER are available at

[ii] Based on federal fiscal year, which runs from October 1 through September 30

[iii] TMF Health Quality Institute’s Skilled Nursing Facility Program for Evaluating Payment Patterns Electronic Report User’s Guide, Second Edition is available for download at

[iv] The concern with a high percentage of COT assessments is that facilities may not be delivering care as anticipated, which could reflect a need to improve care planning or the therapy scheduling process. Facilities with COT percentages in the bottom quintile may be targeted for MAC or RAC audits to determine whether these facilities are properly completing COTs as required.

[v] Sample audit tools are also available for download at

This Client Advisory is for general educational purposes only. It is not intended to provide legal advice specific to any situation you may have. Individuals desiring legal advice should consult legal counsel for up to date and fact specific advice.
Categories: Client Advisory