After downloading the 2025 PHP PEPPER workbook, you notice that some percentile values are highlighted in red on the Compare Targets tab. The obvious next question is what those numbers actually require you to review.
In our September 14 Pulse briefing, we flagged CMS’s release of the 2025 PEPPER for Partial Hospitalization Programs and recommended comparing current target areas with prior periods. This is the next step.
What is a PEPPER report for PHP?
The Program for Evaluating Payment Patterns Electronic Report is a CMS peer-comparison tool that shows how a PHP’s Medicare billing patterns compare with national, Medicare Administrative Contractor jurisdiction, and state peers across four target areas. It uses three calendar years of claims data. A result at or above the national 80th percentile places the program in the top 20% for that target area and is treated by PEPPER as a potential improper-payment risk signal. It is a reason to review the underlying claims and documentation. It is not a finding of fraud or an automatic determination that a claim was improper.[1]
What the PHP PEPPER report measures and why it matters now
CMS announced on September 10, 2026 that 2025 PEPPER reports for PHPs were available through the PEPPER Portal.[2] The release was part of CMS’s 2026 PEPPER relaunch cycle.[3] CMS identifies PEPPER as a resource providers can use to review billing trends, flag areas that may warrant closer attention, and monitor patterns associated with longer patient stays.[2]
Using Medicare claims data, the report calculates key ratios and benchmarks each provider’s performance against PHPs nationally, across its MAC jurisdiction, and within its state. Target Area Reports display three years of data, while the Compare Targets Report shows the most recent year’s numerator count, target percentage, peer percentiles, and Sum of Payments.[1]
PEPPER builds an episode of care from a beneficiary’s consecutive claims. A gap of more than seven days between one claim’s through date and the next claim’s from date starts a new episode.[1] All four target areas count episodes, not patients or days.
The national percentile deserves the most attention. The PEPPER User’s Guide says PHPs should place the highest priority on the national comparison, then consider jurisdiction and state results. A national target-area percentage at or above the 80th percentile is shown in red bold and identifies a pattern CMS considers at risk for improper payment.[1]
The PEPPER Team also supplies MACs and Recovery Auditors with FATHOM, a separate tool that can produce a PEPPER.[1] The guide doesn’t describe how contractors use it to select PHPs for review, so treat your PEPPER as a self-audit prompt, not a forecast of an audit.
The enforcement climate is a reason to take that self-audit seriously. The 2026 National Health Care Fraud Takedown charged 455 defendants in schemes involving more than $6.5 billion in alleged false claims.[4] The takedown spans many provider types; it is background, not evidence about PHP outliers. PHP fraud has been prosecuted before, including the Riverside General Hospital case involving approximately $158 million in false or fraudulent PHP claims.[5]
What are the four PEPPER target areas for partial hospitalization programs?
The 2025 PHP PEPPER focuses on four areas: group therapy, absence of individual psychotherapy, 60 or more days of service, and 30-day readmissions.[1]
Each one is a claims signal. The useful compliance question is what documentation should exist if the pattern is clinically legitimate.
Group therapy only
What it measures: PEPPER’s Group Therapy target counts episodes ending in the report period where the only therapy billed was group therapy, using HCPCS G0410 or G0411, divided by all episodes ending in the period.[1]
What a high outlier can signal: PEPPER guidance says a high result can indicate that the PHP is not providing the individualized plan of care needed for the beneficiary, or that services delivered are not being included correctly on the claim.[1]
The documentation review starts upstream. Does the treatment plan support an individualized service mix? If other covered services were delivered, are they present in progress notes and on the claim?
Medicare’s Benefit Policy Manual requires an individualized written plan of care. In line with current practice guidelines, treatment goals should be measurable, functional, time-bound, and supported by medical necessity. Progress notes should capture the service delivered, the patient’s response, and the connection between the two and the established treatment goals.[6] PEPPER guidance also reminds providers to verify that every documented service is reflected on the corresponding claim.[1]
Where the workflow breaks: Treatment plans may follow a group-focused program structure without adequately explaining why that mix of services is clinically appropriate for each patient. In other cases, individual or additional services may have been delivered and documented but failed to carry through to the billing claim.
Absence of individual psychotherapy
What it measures: The numerator contains episodes with zero units of individual psychotherapy billed. The denominator is all episodes ending in the report period.[1]
This target needs careful interpretation. The PEPPER User’s Guide explicitly says individual psychotherapy is not a Medicare requirement for every PHP episode. It also says that because PHP is provided in lieu of inpatient psychiatric hospitalization, there is a general expectation that the program will provide some amount of individual psychotherapy alongside a range of services during treatment.[1]
What a high outlier can signal: A reviewer may question whether the program is delivering the intensity and individualized mix of services expected of PHP care, or whether services that were provided failed to reach the claim.[1]
Review whether the treatment plan supports the actual service mix. If individual psychotherapy was clinically necessary, was it recorded as a formal, structured encounter? If it was not included in the treatment episode, does the documentation still demonstrate an individualized and intensive plan of care?
60 or more days of service
What it measures: PEPPER calculates the proportion of episodes ending in the report period with at least 60 days of PHP service.[1]
Medicare does not impose an automatic 60-day limit on PHP stays. PEPPER uses the threshold because longer episodes may warrant review for continued medical necessity.[1]
What a high outlier can signal: The central question becomes whether patients are remaining in PHP after the level of intensity is still medically necessary.
This is where recertification quality matters.
Medicare’s Benefit Policy Manual requires the first physician recertification on the 18th calendar day after admission, with subsequent recertifications scheduled at intervals determined by the provider, but no less frequently than every 30 days. Each recertification must address the patient’s response to treatment, ongoing psychiatric symptoms that create a risk of hospitalization, and treatment goals that support coordinated discharge planning.[6]
When a PHP episode extends over several weeks, the clinical record should reflect how the patient’s condition and treatment needs have changed. Documentation should capture updated symptoms, measurable progress or lack of improvement, current hospitalization risk, treatment plan adjustments, barriers to stepping down to a lower level of care, and clearly defined discharge goals.
Simply repeating the original admission rationale in subsequent recertifications does little to establish why the patient continues to require PHP-level care.
30-day readmissions
What it measures: PEPPER identifies index episodes followed by a return to PHP care within 30 days, whether the patient resumes treatment at the same PHP or a different one.[1]
What a high outlier may indicate: According to PEPPER, this pattern may point to premature discharge or gaps in the discharge-planning process.[1]
Reviewing this measure requires looking at both sides of the transition.
At discharge, does the record establish which measurable treatment goals the patient achieved, why stepping down to a lower level of care was appropriate, and what aftercare and follow-up arrangements were made?
At readmission, does the new assessment explain what changed after discharge and why the patient now requires PHP-level care again?
A readmission within 30 days is not necessarily inappropriate. It may be clinically justified. What matters is whether the documentation establishes the change in the patient’s condition and the need for a return to this level of care.
How should you prioritize what to audit first?
Not every red PEPPER result deserves the same level of urgency. Prioritize findings based on their clinical and financial implications rather than treating every outlier as an equally significant concern.
- Start with the Compare Targets Report.
- Start with the national percentile. PEPPER assigns this comparison the highest priority because it benchmarks your program against PHPs across the country.
- Then review the MAC-jurisdiction and state percentiles for context. Those groups are smaller, so PEPPER advises giving them lower priority.[1]
- Next, look at Sum of Payments and the Target Numerator Count. The User’s Guide says an area at or above the 80th percentile with a high payment sum or numerator count may deserve more attention than a similar percentile involving fewer cases or fewer dollars.[1]
- Then look across target areas. CMS does not mandate that two red targets result in a higher audit status. However, multiple outliers warrant prompt internal review, as they may stem from the same underlying process gaps.
- For instance, high results for both group therapy and absence of individual psychotherapy may point to common issues with treatment-plan design, service documentation, and claim completeness.
- Finally, sample the underlying records.
PEPPER guidance says providers should consider whether there is enough volume, roughly a numerator count of 10 to 30 depending on the denominator, to warrant review.[1] Use that as a practical starting range where volume supports it.
PEPPER doesn’t list the patients in each numerator. CMS says providers can identify them using the target-area definition and the claims inclusion criteria, and PEPPER Resources posts guidance on building the listing.
Pull numerator cases from the flagged area and trace each one through the relevant documentation:
- Treatment plan
- Progress notes and service capture
- Certification or recertification where applicable
- Discharge and readmission documentation where applicable
- Final claim
When the clinical record supports the pattern, the outlier is explainable. When it does not, it points to a workflow gap that needs to be addressed.
Review trends across all three years, too. PEPPER recommends investigating substantial changes that could be linked to shifts in staffing, billing practices, utilization review, or documentation processes.[1]
What does it mean to be a high outlier in PEPPER?
A PHP is considered at risk for improper Medicare payments when its target-area percentage is at or above the national 80th percentile. In practical terms, its percentage is in the highest 20% of PHPs with reportable data for that target area.[1]
The designation flags a pattern that warrants further review. It does not, by itself, mean the services lacked medical necessity, the documentation was inadequate, the claims were inaccurate, or fraud occurred.
An internal audit is needed to establish whether the outlier is supported by the clinical and billing records.
Why PHP PEPPER outliers can trace back to EHR configuration before billing
PEPPER is built from claims, so the warning arrives as a billing pattern.
The underlying failure can sit earlier in the workflow.
Billing staff cannot fill in gaps in individualized treatment-plan rationale that clinicians never documented. Accurate claim submission cannot compensate for a recertification that fails to establish the continued need for PHP. Likewise, coding corrections cannot retrospectively demonstrate that a patient was ready for discharge.
The stronger control point is the clinical workflow feeding the claim.
A behavioral health EHR should support the same operational areas that PEPPER brings under scrutiny:
Treatment planning: Support program-specific treatment plans with individualized goals, defined interventions, review schedules, and clinical rationale for the selected mix of services.
Progress notes: Link each service delivered to a structured encounter. This allows individual, group, family, psychiatric, and other documented services to flow accurately into the billing process.
Recertification: Set up review schedules and automated reminders that align with PHP policies and Medicare requirements. Include structured fields to capture current treatment response, ongoing hospitalization risk, and discharge goals.
Discharge and readmission: Capture measurable discharge criteria, clinical justification, and aftercare arrangements. Make prior-episode information available when a patient is subsequently readmitted.
Billing: Connect attendance records, encounter documentation, procedure-code configuration, and institutional claim generation to ensure claims accurately reflect the services documented in the clinical record.
blueBriX’s outpatient, IOP, and PHP behavioral health EHR can be configured to support program-specific treatment plans, clinical documentation, recertification schedules, attendance-based PHP billing, UB-04 claim generation, and payer-specific requirements.
The objective is to close gaps in documentation and encounter capture before they contribute to PEPPER outliers.
If your 2025 report already highlights unusual patterns, begin by reviewing the records behind the numerator. Then trace each finding back through the clinical and billing workflows to identify where the gap originated.
