Do You Understand What It’s Telling You?

The new Home Health PEPPER examines 10 areas of Medicare claims activity that CMS considers potentially vulnerable to improper payment. Being an outlier does not mean your agency has done something wrong. But it may identify a question worth asking—and understanding why your agency’s results look the way they do can be considerably more important than the percentile itself.

After a two-year pause, the Home Health Agency Program for Evaluating Payment Patterns Electronic Report—or HHA PEPPER—is back.

And if you operate a Medicare-certified HHA, I would recommend downloading and reviewing yours.

The newly released HHA PEPPER uses Medicare claims data to evaluate an agency across 10 Target Areas that CMS has identified as potentially prone to improper Medicare payments. The report compares an HHA’s results with other HHAs nationally, within its Medicare Administrative Contractor (MAC) jurisdiction, and within its state.

But there is an important distinction to understand before looking at any of the individual measures:

PEPPER does not determine that an improper payment occurred.

It identifies payment and utilization patterns that may warrant additional review.

That distinction matters.

An agency appearing at the 80th or 90th percentile doesn’t automatically mean something is wrong. There may be perfectly legitimate clinical, demographic, referral, geographic or operational reasons for the result.

Likewise, being near the middle of the distribution doesn’t necessarily mean there is nothing worth understanding.

The percentile is information. Understanding what is producing it is where the value begins.

What Are the 10 HHA PEPPER Target Areas?

The 2026 HHA PEPPER contains 10 Target Areas. Several focus on factors that affect Case-Mix Weight and reimbursement. Others examine utilization, length of service, LUPAs, Outliers and admission source.

Here’s a big-picture look at what each is examining—and why I think HHA management should care.

1. Low Comorbidity

What PEPPER is looking at:
This Target Area examines the percentage of applicable Medicare payment periods classified in the Low Comorbidity adjustment category.

Why it matters:
Comorbidity adjustments affect the Case-Mix Weight and ultimately Medicare reimbursement. A result that differs significantly from other HHAs may raise questions about whether secondary diagnoses are being appropriately identified, coded and supported by the medical record.

Importantly, this isn’t simply about trying to produce a higher Case-Mix Weight. The objective should be to produce the right Case-Mix Weight based upon the patient’s actual condition. Understating a patient’s legitimate comorbidities can be just as worthy of investigation as overstating them.

CMS specifically recognizes both possibilities: high results may warrant review for potential over-coding, while unusually low results may indicate potential under-coding.

2. High Comorbidity

What PEPPER is looking at:
This Target Area examines the percentage of applicable payment periods receiving a High Comorbidity adjustment.

Why it matters:
A relatively high concentration of High Comorbidity periods can increase reimbursement and therefore attract attention to whether the secondary diagnoses supporting those adjustments are accurate, appropriately coded and supported by documentation.

Again, higher isn’t inherently better, and lower isn’t inherently better. Accurate is better.

The question management should be asking is whether the agency’s comorbidity profile reasonably reflects the patients it actually serves.

3. Functional Impairment — Medium

What PEPPER is looking at:
This Target Area examines the percentage of applicable periods assigned to the Medium Functional Impairment category based upon OASIS responses.

Why it matters:
Functional scoring contributes to the patient’s Case-Mix Weight. Differences in how clinicians assess and document functional status can therefore affect both the clinical picture of the patient and Medicare reimbursement.

The objective shouldn’t be to find ways to increase functional impairment scores. It should be to make sure the assessment accurately reflects what the patient can and cannot do.

That means understanding not only the resulting score, but how the assessment that produced it was performed.

4. Functional Impairment — High

What PEPPER is looking at:
Similar to the preceding measure, this Target Area identifies the percentage of applicable periods classified in the High Functional Impairment category.

Why it matters:
An unusually high result may warrant closer examination because greater reported functional impairment can contribute to higher reimbursement.

But the appropriate question isn’t simply, “Why are our scores high?”

It is:

Do our OASIS assessments accurately represent the functional condition of the patients we’re actually serving, and is that condition adequately supported by the clinical record?

That is a much more useful question.

5. Average Case Mix

What PEPPER is looking at:
This measure calculates the agency’s average Case-Mix Weight for applicable Medicare periods, excluding LUPAs and certain partial payment periods.

Why it matters:
Case-Mix Weight directly influences Medicare reimbursement, but the number by itself doesn’t tell management whether the result is appropriate.

A higher-than-peer Average Case Mix could reflect a legitimately more complex patient population. It could also warrant reviewing whether the clinical, functional and comorbidity information supporting those weights accurately reflects the patients being served. CMS identifies a high result as potentially indicating over-coding of clinical, functional or comorbidity status.

But I think there is an equally important management perspective:

The objective should not be to generate the highest CMW possible. It should be to establish the right CMW for the patient.

That means accurately assessing the patient’s condition—not understating it, but not overstating it either.

And establishing the appropriate CMW is only the beginning.

Once the patient’s condition and reimbursement profile have been appropriately identified, the next question becomes whether the Plan of Care and the resources being provided are reasonably aligned with that patient’s needs, acuity and goals.

Two patients can have similar Case-Mix Weights and still require different care. But over time, an agency should understand whether the resources it routinely deploys are reasonably consistent with the patients it is actually serving.

6. Average Number of Periods

What PEPPER is looking at:
This Target Area measures the number of Medicare 30-day payment periods relative to the number of unique beneficiaries served by the HHA.

In practical terms, it gives management an indication of how many 30-day periods of care Medicare patients receive, on average.

Why it matters:
A higher Average Number of Periods does not automatically mean patients are remaining on service too long.

The agency may serve a more clinically complex population, have referral sources that produce patients requiring longer courses of care, or simply be appropriately continuing services for beneficiaries who continue to meet the Medicare coverage requirements.

But CMS also identifies the other possibility: a high result could indicate that treatment is continuing beyond the point at which skilled services remain necessary. CMS therefore points agencies toward the medical necessity of continued skilled care, Plans of Care and discharge planning when investigating high results.

This is why the trend may be as important as the absolute number.

If an agency historically averaged, for example, two payment periods per beneficiary and suddenly moves materially higher, management should understand what changed.

Was patient acuity different?

Did referral patterns change?

Did discharge practices change?

Did utilization or clinical practice patterns change?

Or are patients simply receiving more periods of care without a corresponding change in need?

The measure tells you that duration changed. It does not tell you why.

7. Periods With Low Visits

What PEPPER is looking at:
This Target Area identifies payment periods where the number of visits equals the applicable LUPA threshold or is one visit above it.

In other words, PEPPER is looking specifically at periods clustered immediately around the point at which an encounter avoids becoming a LUPA.

Why it matters:
From a program-integrity perspective, CMS is understandably interested in whether visits are being provided because they are clinically necessary—or because one additional visit may move an encounter from LUPA reimbursement to a full-period payment.

But that doesn’t mean an agency should become afraid of providing the visit that crosses the LUPA threshold.

If the patient appropriately needs the visit, the visit should be provided.

And conversely, a visit should not be added merely to avoid a LUPA if it isn’t clinically necessary.

The objective is the same principle we’ve been discussing throughout:

Not more visits. Not fewer visits. The right visits.

From management’s perspective, periods clustered around the LUPA threshold may also warrant understanding for another reason.

If encounters are unexpectedly becoming LUPAs because scheduled or clinically appropriate visits were missed, that can create a very different operational and financial problem.

So the same Target Area may raise two very different questions:

Are visits being added simply to cross a reimbursement threshold?

or

Are clinically appropriate visits failing to occur, causing encounters to fall below one?

PEPPER identifies the pattern.

Management still has to determine which story—if either—the pattern is telling.

8. Non-LUPA Payments

What PEPPER is looking at:
This Target Area measures the percentage of Medicare payment periods that did not result in a LUPA payment.

Why it matters:
An unusually high Non-LUPA percentage can raise questions similar to the Low Visits measure: whether utilization patterns are being influenced by reimbursement thresholds rather than solely by patient need. CMS’s Sample PEPPER, for example, directs an HHA with a high result to examine whether it is considering the minimum number of visits necessary to obtain a full payment rather than a LUPA and whether the services were reasonable and necessary.

But there is another side to this relationship.

An unusually high or low LUPA experience can also raise operational questions about care planning, missed visits, staffing, scheduling and whether the Plan of Care is actually being carried out as intended.

A LUPA statistic can tell you what happened. It doesn’t necessarily tell you why it happened.

And the why can make an enormous difference.

9. Outlier Payments

What PEPPER is looking at:
This Target Area measures the dollar amount of Outlier payments as a percentage of the agency’s total Medicare payments. The Sample PEPPER also presents average Outlier payment information and comparative 80th-percentile results.

Why it matters:
Outlier payments are intended to provide additional reimbursement for unusually resource-intensive patient encounters.

A comparatively high Outlier percentage therefore tells management that a greater portion of its Medicare reimbursement is being generated by patients whose imputed costs exceed the applicable Outlier threshold.

That does not mean the Outlier payments are inappropriate.

Some agencies may legitimately serve more high-acuity, resource-intensive patients than others.

But I would want management to understand what is producing the result.

Are particular diagnoses or clinical groups driving it?

Are certain patients receiving substantially more visits than comparable patients?

Does the patient’s documented acuity support the intensity of services being provided?

Are the OASIS, CMW, Plan of Care and actual resource utilization telling a reasonably consistent story?

And perhaps most importantly:

Does management even know which patient encounters are generating the Outlier payments?

CMS’s suggested intervention focuses on whether clinical, functional and comorbidity status reported on the OASIS is appropriately supported by the medical record.

That’s important—but from a financial and operational perspective, I think the analysis should extend further.

An Outlier encounter is inherently a resource-intensive encounter. Management should understand not merely that an Outlier payment was received, but the relationship among:

patient acuity → assessment → Plan of Care → resources provided → cost → reimbursement.

That doesn’t mean trying to eliminate Outliers.

It means understanding why they occur and whether the clinical, operational and financial relationships make sense.

10. Admission Source

What PEPPER is looking at:
This Target Area examines the percentage of payment periods classified as having an institutional admission source.

Why it matters:
Admission source affects the PDGM payment calculation, so the accuracy of that classification matters.

An unusual result may therefore warrant understanding whether institutional versus community admission sources are being correctly identified and whether the agency’s result reasonably reflects its actual referral and patient population.

And that last point is important:

Sometimes being different from your peers simply means your agency is different from your peers.

The objective is to understand the difference—not automatically eliminate it.

An Outlier Is Not a Finding of Wrongdoing

This may be the most important point in the entire report.

PEPPER uses comparative claims data to identify patterns that may warrant attention. It is intended to help HHAs identify areas that could merit additional auditing and monitoring.

The report also provides multiple years of information, allowing management to look not only at where the agency stands relative to others, but also at how its own results are changing over time.

That’s why I wouldn’t look at PEPPER as a scorecard.

I’d look at it as a collection of questions.

Where are we different?

Where have we changed?

Why?

Does the result make sense based upon the patients we serve and how we operate?

Is there anything we should investigate?

And is the underlying documentation sufficient to explain what we’re seeing?

Information Is Only the Beginning

PEPPER gives HHAs a considerable amount of information.

It identifies results across 10 Target Areas, shows trends over multiple years, and allows comparison with HHAs nationally, within the agency’s MAC jurisdiction, and within its state.

But receiving the report isn’t the same thing as understanding it.

And identifying that your agency is at, for example, the 87th percentile for a Target Area doesn’t tell you whether you have a problem.

The more important question is why you’re at the 87th percentile.

There may be a perfectly reasonable explanation.

There may be a documentation or coding issue.

There may be a reimbursement opportunity you’re missing.

There may be a utilization or operational issue worth investigating.

Or there may be nothing that needs to change.

You won’t know simply from the percentile.

That is where I believe the real value of reviewing PEPPER begins.

Have You Reviewed Your HHA PEPPER?

If you haven’t downloaded your newly released HHA PEPPER, I would recommend doing so.

Then don’t simply look for highlighted cells, high percentiles or low percentiles.

Try to understand what they’re telling you about your agency.

And if you would like assistance, IFS4hh can review and summarize your HHA PEPPER from a financial, reimbursement and operational perspective, identify the Target Areas and trends that appear most worthy of management’s attention, and help you determine where additional investigation may—or may not—be warranted.

The objective isn’t to make your agency look more like everyone else.

And it certainly isn’t to generate the highest Case-Mix Weight possible.

The objective is to make sure the information accurately reflects your patients and your operations—and that the resources you provide are appropriate for the care those patients actually need.