In the 34th Edition of the User’s Guide for Short-Term Acute Care Program for Evaluating Payment Patterns Electronic Report (PEPPER)(ST PEPPER User’s Guide), the Centers for Medicare and Medicaid Services (CMS) has included a new target area – Severe Malnutrition. Also effective with the Q3FY21 release, CMS is discontinuing the Transient Ischemic Attack target area.
PEPPER is an electronic data report that contains a single hospital’s claims data statistics for Medicare-Severity Diagnosis-Related Groups (MS-DRGs) and discharges at risk for improper payment due to billing, coding, and/or admission necessity issues.
The Short-Term (ST) Acute Care PEPPER (ST PEPPER) is the version of PEPPER designed specifically for short-term acute care hospitals. In ST PEPPER, a hospital is compared to other short-term acute care hospitals in three comparison groups: the nation, Medicare Administrative Contractor (MAC) jurisdictions, and the state in which the hospital operates. These comparisons help a hospital determine whether it differs from other short-term acute care hospitals and is therefore an outlier. The PEPPER was designed to assist the hospital in identifying potential overpayments as well as potential underpayments and is available to hospitals on a quarterly basis.
Each PEPPER contains statistics for the most recent 12 federal fiscal quarters for each area at risk for improper payments (referred to as “target areas”). CMS approves ST PEPPER target areas because they are specifically identified as prone to improper Medicare payments. Historically, many of these target areas were the focus of Office of Inspector General audits, while others were identified through the former Payment Error Prevention Program and Hospital Payment Monitoring Program, which were implemented by state Medicare Quality Improvement Organizations from 1999 through 2008. More recently, the Recovery Audit Contractor (RAC) program has identified additional areas prone to improper payments.
The Office of Inspector General (OIG) found widespread miscoding of severe malnutrition in instances where hospitals should have used codes for other forms of malnutrition or no malnutrition diagnosis code at all. Four ICD-10 diagnosis codes, E40, E41, E42, and E43, qualify as an MCC and can raise the payment for a claim if included as a secondary diagnosis.
In general, the target areas are constructed as ratios and expressed as percentages; the numerator represents discharges that have been identified as problematic, and the denominator represents discharges of a larger comparison group. Target areas related to DRG coding generally include in the numerator the DRG(s) that have been identified as prone to DRG coding errors, and the denominator includes these DRGs in addition to the DRGs to which the original DRG is frequently changed. For the new target area, Severe Malnutrition, the numerator is the count of discharges for DRGs assigned on the basis of an MCC with one of the severe malnutrition codes as the only MCC while the denominator is the count of discharges for DRGs assigned on the basis of an MCC when one or more MCCs includes severe malnutrition.
As part of its compliance program, a hospital should conduct regular audits to ensure charges for Medicare services are correctly documented and billed. The PEPPER can help guide hospitals’ auditing and monitoring activities.