Health Information Management

Use PEPPER to respond effectively to outliers

JustCoding News: Inpatient, September 12, 2012

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PEPPER (Program for Evaluating Payment Patterns Electronic Report) compares hospital data regarding a variety of benchmarks. CMS and the OIG use these reports to target certain facilities that, according to their data, are outliers.

Hospitals can use PEPPER to better understand how auditors may view them as well as to conduct self-audits to prepare for any potential scrutiny. In particular, hospitals should review PEPPER to locate any persistent trends and develop strategies to proactively counter negative findings.
Although PEPPER provides high-level data only, hospitals may be able to draw some fairly solid conclusions when studying the results over a period of quarters or years, says John Zelem, MD, FACS, executive director of client education and relations for Executive Health Resources in Newtown Square, Pa. Zelem spoke during HCPro’s June 12 webcast “PEPPER Report 2012: Improve your organization’s Medicare claims profile.”
However, it’s also important to note that PEPPER includes data from the previous six to nine months, he says. This means that if hospitals do implement changes to improve compliance based on PEPPER, the data probably won’t reflect any positive results until a couple of quarters later.
Zelem says hospitals should focus on developing strong internal processes and respond effectively with procedural changes as problematic trends arise.
Determine the cause of your outlier status
Hospitals that are outliers according to PEPPER don’t necessarily provide poor care, nor do they necessarily participate in fraudulent or deficient coding or billing practices, says Zelem. Outlier status could simply reflect the specialized services a hospital performs. For example, a hospital that specializes in cardiac procedures may be an outlier in chest pain (MS-DRG 313) when compared to other hospitals.
The OIG evaluates a hospital’s outlier status in the larger context of the internal processes it has established. CMS expects hospitals to use PEPPER as a gauge for the strengths and weaknesses of current processes.
However, if the hospital is frequently an outlier in several areas, this may indicate the potential for a larger, facility-wide procedural deficiency. Zelem says hospitals should perform an internal audit to determine where deficiencies exist and develop policies to amend these areas accordingly.
Going forward, CMS and the OIG will focus on these areas of vulnerability, says Zelem:
  • MS-DRG validation for medical CC/MCC, surgical CC/MCC, and stroke intracerebral hemorrhage
  • Two-day inpatient stay for heart failure
  • One-day inpatient stay chest pain
  • Atherosclerosis
  • Cardiac arrhythmia and conduction disorders without CC/MCC (MS-DRG 310)
  • Syncope and collapse (MS-DRG 312)
  • Chronic obstructive pulmonary disease without CC/MCC (MS-DRG 192)
Prioritize education for key stakeholders
It’s important to educate the executive committee about the importance of PEPPER and the role it can play in monitoring areas of weakness, says Brenda Hogan, RN, BS, director of clinical outcomes at Maury Regional Medical Center in Columbia, Tenn.
Hogan, who presented with Zelem during the June 12 webcast, emphasized the importance of providing context for these reports. “Don’t assume that they get this report and understand it,” says Hogan. “If you’re privy to the information, it’s your responsibility to educate them.”
Many hospital committees rotate on a scheduled basis, so there’s always the potential to educate new members. Include PEPPER analysis as an item on each meeting’s agenda so the topic becomes an ongoing conversation rather than a one-time informational session.
Extend PEPPER education to the clinical staff as well. Insufficient documentation contributes significantly to the coding errors that affect PEPPER outlier status. “Physicians want to care for patients, and a lot of the technical and documentation issues are not as important. It’s not that they don’t care, they just need reminders,” says Hogan.
Emphasize documentation as the first line of defense
In June 2011, CMS began processing claims using predictive modeling with the ultimate goal of catching fraudulent claims before it pays them. These predictive models will alert CMS to errors in real-time, and the agency will become more aware of procedural deficiencies as well.
It’s important to ensure clear, consistent, and thorough front-end documentation to justify a hospital’s coding, says Hogan. An effective CDI program that actively monitors documentation will help to ensure fewer coding errors. Fewer errors will, in turn, translate to more accurate—and potentially favorable—PEPPER results.
“I urge my staff to build as strong a case in the medical record as possible that will be defendable for years to come,” says Hogan. “This requires time and appropriate staffing, but it’s a must on the front end to realize any success.”
Common documentation traps that may raise red flags for auditors include the following, says Hogan:
  • Data in the EHR that auditors can’t access easily. This includes data that is difficult, having access to too much data, and not having access to electronic case management notes.
  • Lack of prioritization and/or order of documents in the paper record.
  • Insufficient physician documentation of assessment of patients’ risk factors
The more proactive hospitals can be in guiding auditors to the required documentation, the more likely they are to experience positive audit outcomes. Regularly scheduled self-audits can highlight areas in the EHR that require streamlining and additional maintenance, says Hogan.
Consider the following tips that Hogan provides for achieving a positive outcome when receiving a denial or audit request:
  • Submit your own packet for each level of appeal
  • Provide a detailed cover letter referencing items included as exhibits
  • Include page numbers in the event that your documents become disordered
  • Write your opinion in simplistic terms
  • Include internal statistics regarding the number of admissions with the same DRG as well as the average length of stay (LOS) compared to the CMS geometric mean LOS
  • Highlight any documentation in the medical record that supports the claims
PEPPER will always include outliers, says Zelem. “You cannot eliminate outliers. If you’re an outlier, it doesn’t mean you’re doing something wrong, but you do need to explain why you are an outlier,” he says. Monitoring clinical documentation and performing self-audits provide facilities the means to justify their standing in the PEPPER report, he adds.


Email your questions to Senior Managing Editor Michelle A. Leppert, CPC, at

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