How to Read Your PEPPER Report and Act on It

What PEPPER Is and Where It Comes From

PEPPER is a quarterly data report distributed by the Office of Inspector General and administered through the Texas Medical Foundation Health Quality Institute under contract with CMS. It has been distributed to home health agencies since the mid-2000s and is one of the primary data tools CMS makes available to providers for self-assessment of billing patterns.

The data in your PEPPER comes from the claims your agency has submitted to Medicare. CMS processes those claims, calculates your billing pattern metrics, and compares your numbers to the national distribution of all Medicare-certified home health agencies. The report shows where you fall in that distribution for each category, expressed as a percentile.

The percentile position is the number that matters. A percentile of 80 means 80 percent of agencies nationally have a lower rate than yours in that category. A percentile of 20 means 80 percent of agencies nationally have a higher rate. Being high is not always bad and being low is not always good, but being in the extreme upper percentiles in categories associated with billing vulnerabilities is specifically what MACs look for when they are selecting agencies for Targeted Probe and Educate reviews and Additional Documentation Requests.

How to Access Your PEPPER Report

PEPPER reports are distributed through the PEPPER Resources website at pepperresources.org. Agencies access their reports through a secure portal using their CMS Certification Number. Reports are published quarterly with approximately a two-quarter lag, meaning the most recently published report reflects claims data from approximately six months prior.

The report is distributed as a PDF with an accompanying data file. The PDF contains the narrative explanation of each category and your percentile position. The data file contains the underlying numbers that produced each percentile. Both are useful: the PDF gives you the interpretation, the data file gives you the specific claim counts and rates behind each percentile position.

If your agency has not accessed PEPPER before, the first step is to register at pepperresources.org, claim your facility, and pull the four most recent quarterly reports. Reading a single quarter in isolation is less useful than reading four quarters in sequence, because trend direction matters as much as absolute percentile position. An agency trending from the 60th to the 80th percentile in a high-risk category over four quarters is a more concerning picture than an agency sitting at the 75th percentile consistently.

The PEPPER Categories for Home Health

The home health PEPPER report contains several billing pattern categories. Not all of them carry equal audit risk weight. The following are the most consequential for home health agencies and the ones that most directly connect to known documentation and billing vulnerabilities.

Therapy thresholds

This category measures the percentage of your episodes in which therapy visit counts clustered near specific thresholds that historically correlated with payment bumps under the pre-PDGM payment model. Under PDGM, therapy thresholds no longer directly determine payment in the same way, but the category persists in PEPPER as a measure of whether therapy utilization patterns appear driven by clinical need or by payment optimization.

A high percentile in therapy thresholds suggests your therapy visit patterns cluster in ways that look like threshold gaming rather than clinically determined visit frequency. Even under PDGM, this pattern is a red flag for MAC reviewers because it suggests a historically threshold-oriented clinical culture that may also manifest in other documentation practices. If your percentile here is above 80, pull a sample of therapy-heavy episodes and confirm that visit frequency is clinically documented in the therapy notes rather than scheduled to hit a round number.

High therapy utilization

Separate from threshold clustering, this category measures the overall rate of episodes with high therapy visit counts. An agency significantly above national benchmarks in high therapy utilization should be able to show, in the clinical record, that the therapy need was documented at admission and that visit frequency was justified by functional assessment findings across the episode.

The question a MAC reviewer asks when they see high therapy utilization is: does the clinical documentation support this level of therapy, or does it look like therapy was ordered routinely regardless of functional need? The clinical record needs to answer that question before the reviewer asks it.

Outlier claims

Home health outlier payments are additional payments available for episodes with unusually high costs relative to the standard PDGM payment. An agency with a high outlier claim rate is not necessarily doing anything wrong, but outlier claims are a known audit target because they involve additional payment and because the documentation requirements for outlier qualification are specific. A high percentile here warrants a review of your outlier claim documentation to confirm that the cost threshold and clinical justification are fully supported in each episode.

Early episode billing rate

This category measures the proportion of your 30-day periods that are early episode periods, meaning the first two periods following admission. A very high early episode rate relative to national benchmarks can indicate a pattern of short episode length, which may reflect appropriate care delivery or may reflect early discharge before clinical goals are met. MACs reviewing this category are looking for patterns that suggest patients are being admitted, billed for the early episode payment which is higher under PDGM, and then discharged before completing the full episode.

If your early episode rate is in the upper percentiles, review a sample of your single-period episodes to confirm that discharge documentation supports the clinical rationale for the episode length. Homebound status at discharge, goal attainment, and patient stability should all be documented.

No-therapy low-utilization episodes

This category flags episodes with very low visit counts and no therapy component. These episodes are lower risk from a payment standpoint but represent a population of patients who received minimal skilled nursing visits with no therapy. A high rate here can suggest either appropriate management of low-acuity patients or a pattern of inadequate care delivery. Review a sample of these episodes for homebound documentation quality and skilled need documentation at each visit. If the skilled need is not clearly documented in low-utilization episodes, they are vulnerable in a medical review even though the payment is modest.

How to Actually Read Your PEPPER

Reading PEPPER effectively requires a specific sequence. Most people who open the report for the first time look at the charts and move on. That is not reading it. Reading it means connecting each percentile position to a specific set of claims, tracing those claims to documentation practices, and making an operational decision about whether a practice change is warranted.

Step 1: Identify your highest-risk categories

Open the current quarter PEPPER and note your percentile position in each category. Flag any category where you are above the 75th percentile nationally. These are your priority review areas. If you are above the 90th percentile in any category, that is an immediate action item, not a deferred review.

Step 2: Pull the prior three quarters

For each flagged category, note your percentile position across the last four quarters. Are you stable, trending up, or trending down? A stable high percentile suggests a consistent billing practice. A rising percentile suggests the pattern is growing. A falling percentile suggests something has already changed. The trend matters because it tells you whether the current number is a snapshot or a trajectory.

Step 3: Connect the percentile to specific claims

The PEPPER data file shows you the specific claim counts and rates behind each percentile. For a flagged category, calculate how many of your episodes fall in the flagged pattern. This is the denominator for your clinical review. If your therapy threshold percentile reflects 200 episodes per quarter, you need a documentation review strategy that covers that population, not just a spot check of three charts.

Step 4: Pull a clinical record sample

For each high-risk category, pull a random sample of ten to fifteen episodes that fall in the flagged pattern and conduct a targeted clinical record review. For therapy threshold categories, review the therapy notes for evidence that visit frequency was clinically determined. For early episode billing, review discharge documentation for clinical rationale. For outlier claims, review cost and clinical justification documentation. The question you are asking at each chart is: if a MAC reviewer pulled this record, would the documentation support the billing pattern?

Step 5: Identify the root cause

When your sample review finds documentation gaps, the next question is whether the gap is individual or systemic. An individual gap means one clinician documented inadequately on specific episodes. A systemic gap means the workflow does not produce the required documentation reliably. Systemic gaps require workflow changes. Individual gaps require targeted feedback and coaching. The distinction determines whether your response is a staff meeting or a process redesign.

Step 6: Document your review and action

Maintain a record of your PEPPER review: when it was conducted, who participated, what categories were flagged, what the clinical record sample showed, what root cause was identified, and what action was taken. This documentation serves two purposes. First, it demonstrates a good-faith compliance program if you are ever selected for a probe review. Second, it gives you a baseline for comparing the next quarter's PEPPER against the actions you took.

PEPPER and TPE: The Connection Most Agencies Miss

Targeted Probe and Educate reviews are the MAC's primary tool for addressing billing pattern concerns at the agency level. Understanding the relationship between PEPPER data and TPE selection is one of the most practically useful things an agency can know about its audit risk. The TPE framework is covered in detail in our ADR and TPE post, but the PEPPER connection is worth stating directly here.

MACs select agencies for TPE based on billing pattern analysis. PEPPER data is part of that analysis. An agency in the 90th percentile nationally for therapy thresholds is more likely to be selected for a TPE probe that focuses on therapy documentation than an agency at the median. The probe will focus on the category driving the elevated percentile. The documentation the MAC will review is the documentation that should support the billing pattern they identified in the PEPPER data.

This means PEPPER review is not just retrospective compliance hygiene. It is forward-looking TPE risk management. An agency that identifies a rising percentile in a high-risk category and takes corrective action before the MAC's quarterly analysis runs has potentially avoided a TPE selection that would have consumed months of operational bandwidth in documentation review, appeal preparation, and education session compliance.

The agencies that exit TPE after round one are often the ones that already knew they had a problem because they were reading their PEPPER. They had already started to address it before the MAC letter arrived. The remediation they presented in the education session was not reactive. It was documentation of a process change that was already underway.

PEPPER and PDGM: What Changed and What Did Not

The transition to PDGM in 2020 changed the payment model but did not eliminate PEPPER or its relevance to audit risk. Some of the specific metrics in PEPPER reflect pre-PDGM payment thresholds that no longer directly drive payment. But the underlying question the report is asking has not changed: do your billing patterns look like they are driven by clinical need or by payment optimization?

Under PDGM, the primary drivers of payment are the clinical grouping from the primary diagnosis, the functional impairment level from specific OASIS items, and the comorbidity adjustment from secondary diagnoses. Billing patterns that appear to optimize these payment drivers in ways that are not supported by clinical documentation are exactly the type of pattern that MAC reviews are designed to identify.

The PDGM billing patterns most relevant to PEPPER-driven audit risk are primary diagnosis coding accuracy, which determines the clinical grouping, and functional impairment level documentation, which determines whether a case is classified as low, medium, or high impairment. Systematic over-coding of primary diagnoses or over-documentation of functional limitations at admission to maximize payment grouping are patterns that will appear in billing data over time and that will connect back to PEPPER percentiles in ways that are not immediately obvious without understanding the PDGM payment mechanics. The PDGM coding framework is covered in our PDGM diagnosis sequencing post.

What to Do When Your PEPPER Shows Elevated Risk

The response to an elevated PEPPER percentile depends on what the clinical record review reveals. There are three possible findings, and each requires a different response.

Finding 1: The billing pattern is clinically supported

Your records show that the billing pattern reflects genuine clinical need. Therapy utilization is high because your patient population requires it, and the therapy notes document the clinical basis for each visit. Outlier claims are supported by detailed cost and clinical documentation. Your high early episode rate reflects appropriate short episodes for lower-acuity patients with well-documented discharge rationale.

In this case, your response is documentation, not change. Maintain a record of your PEPPER review, the sample you pulled, and the finding that the pattern is clinically supported. If you are ever selected for a probe review, this documentation demonstrates that you reviewed your own data, pulled the relevant records, found them to be compliant, and maintained that finding. That is a materially stronger position than having no record of any self-review.

Finding 2: The billing pattern reflects a documentation gap

Your records show that the clinical care may have been appropriate but the documentation does not adequately support the billing pattern. Therapy visits are high but the therapy notes are generic rather than functionally specific. Outlier claims are present but the cost documentation is thin. Episodes are short but discharge rationale is templated rather than episode-specific.

This is the most common finding and the most actionable. The problem is not the care. The problem is that the documentation does not reflect it. The response is targeted documentation improvement: specific feedback to the clinicians producing the flagged documentation, workflow changes that prompt the required documentation elements, and a follow-up review at the next PEPPER quarter to confirm the documentation pattern has changed.

Finding 3: The billing pattern reflects a practice concern

Your records show that visit frequency, episode length, or service selection genuinely appears to be influenced by payment factors rather than clinical need. Therapy visits consistently cluster at round numbers regardless of the patient's functional trajectory. Episodes are consistently short in ways that do not map to documented clinical goals. Outlier claims appear across patient populations that do not appear to be genuinely high-cost cases.

This finding requires immediate leadership escalation and a structured compliance response. It may require engaging a compliance consultant or legal counsel depending on the nature and scope of the pattern. Self-identification and voluntary disclosure of a practice concern is a materially different situation than being identified through an audit. The PEPPER review that surfaces this finding, while uncomfortable, is exactly the self-monitoring function that a good-faith compliance program is supposed to perform.

Building PEPPER Review Into Your Compliance Calendar

PEPPER review works best as a structured quarterly function, not an ad hoc review that happens when someone remembers to pull the report. The quarterly compliance calendar covered in our compliance calendar post includes PEPPER review as a standing quarterly item with defined participation: both the DON and the billing manager should be in the room, because interpreting PEPPER requires both clinical and billing context.

The review should follow the six-step sequence above and produce a documented output: what was found, what action was taken, and what will be checked at the next quarterly review. Over four quarters, this documentation builds a compliance audit trail that shows continuous self-monitoring rather than reactive response.

The agencies that manage PEPPER most effectively treat it not as a compliance report but as a business intelligence tool. The percentile data tells you something real about how your billing patterns compare to the market. Understanding why you are where you are, and whether that position reflects clinical reality or documentation gaps, is information that is useful independent of audit risk. It tells you where your documentation practices are strong and where they need investment.

TL;DR

CMS sends every Medicare-certified home health agency a PEPPER report every quarter. PEPPER stands for Program for Evaluating Payment Patterns Electronic Report. It shows how your billing patterns compare to every other home health agency in the country across a set of categories tied to known fraud and billing error risk. An agency with numbers in the upper percentiles nationally in any category has elevated audit risk. MACs use this data to prioritize which agencies to probe. Most agencies receive PEPPER, file it, and never read it. This post explains what the report actually contains, what each category means, how to read your percentile position, what action each finding requires, and how to use PEPPER as a forward-looking audit risk management tool rather than a document that sits in a folder.

Frequently Asked Questions

How often is PEPPER published?

Quarterly. CMS distributes new PEPPER reports approximately every three months. There is typically a lag of one to two quarters between the claims data and the published report. You should have access to your most recent PEPPER within a few weeks of each quarterly distribution.

Is a high PEPPER percentile proof of wrongdoing?

No. A high percentile position means your billing pattern differs from the national median in a specific category. It is a statistical signal, not an accusation. The appropriate response is to understand why your pattern differs and whether that difference is clinically supported. Many agencies have legitimate clinical reasons for billing patterns that appear elevated in national comparison. The PEPPER review process is how you document that rationale.

Does CMS see our PEPPER?

CMS and the MACs have access to the same billing data that generates your PEPPER report. The PEPPER report is essentially CMS giving you a consumer-facing version of the analysis they are already doing internally. This is why reading your PEPPER matters: you are looking at a version of the same data the MAC uses to prioritize audit selection.

What if our PEPPER shows we are in the 90th percentile in multiple categories?

Multiple elevated categories simultaneously is a more serious risk signal than a single elevated category. It suggests billing pattern concerns that may be systemic rather than isolated to one service line or practice. The appropriate response is to prioritize the highest-risk categories for immediate clinical record review, engage billing and clinical leadership together in interpreting the findings, and consider whether the pattern warrants consultation with a healthcare compliance specialist.

How long does it take to move a PEPPER percentile?

PEPPER percentiles reflect a rolling period of claims data, typically one to two years depending on the specific metric. This means that even if your documentation and billing practices change tomorrow, your PEPPER percentile will not immediately reflect that change. It will lag by the length of the measurement window. This is why early action matters: correcting a practice today reduces your risk exposure over the coming quarters, but it will not produce an immediate improvement in your reported percentile. Track the underlying practice metrics directly rather than waiting for the PEPPER to show the change.

Related Reading

• Why Home Health Agencies Fail ADR and TPE Audits

• The Home Health Compliance Calendar: What to Do Every Month

• Home Health Claim Denials Are Not Billing Problems

• PDGM Diagnosis Sequencing: The Coding Decision That Sets Your Reimbursement

• The PDGM Comorbidity Adjustment: What Qualifies, What Gets Missed, and What It Costs

• Homebound Status Documentation: What Survives MAC Review