Audit report, schedule of home office allowable costs, ABC Home Health Services, Inc., Medicare Certified Division, Brunswick, Georgia, for the year ended December 31, 1994, Georgia Department of Medical Assistance

GA
AY/)0
.RI 0Y-'-:'Ut
ICfC/!f
STATE OF GEORGIA DEPARTMENT OF AUDITS
254 WASHINGTON STREET ATLANTA. GEORGIA 30334

AUDIT REPORT SCHEDULE OF HOME OFFICE ALLOWABLE COSTS
ABC HOME HEALTH SERVICES, INC. MEDICARE CERTIFIED DIVISION BRUNSWICK, GEORGIA
FOR THE YEAR ENDED DECEMBER 31, 1994 GEORGIA DEPARTMENT OF MEDICAL ASSISTANCE
Report Prepared By: State ofGeorgia
Department ofAudits and Accounts Medicaid and Local Govemment Audits Division
254 Washington Street, S. W, Suite 322 Atlanta, Georgia 30334-8400 (404) 656-2006

ABC HOME HEALTH SERVICES, INC. - MEDICARE CERTIFIED DIVISION - TABLE OF CONTENTS -
AUDITOR'S REPORT SCOPE OF THE AUDIT SCHEDULE OF HOME OFFICE ALLOWABLE COSTS NOTE TO SCHEDULE SUMMARY OF FIELD AUDIT ADWSTMENTS EXPLANATION OF FIELD AUDIT ADWSTMENTS SUMMARY OF ALLOCATION TO CHAIN COMPONENTS APPENDIX
MANAGEMENT COMMENT LETTER

Page
V
2 5 6 9 11
12

CLAUDE L VICKERS
STATE AUDITOR

DEPARTMENT OF AUDITS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
Telephone(404)656-2006 Facsbnlle (404) 656-7535
November 13, 1995

Home Health Services Program Division ofNon-Institutional Reimbursement Georgia Department of Medical Assistance 2 Peachtree Street, NW 25th Floor Atlanta, Georgia 30303-3159
Ladies and Gentlemen:
We have audited the Home Office Cost Data Form filed with the Georgia Department of Medical Assistance under the Title XIX Medicaid Program by ABC Home Health Services, Inc.Medicare Certified Division for the year ended December 31, 1994, and have compiled the accompanying Schedule ofHome Office Allowable Costs based on our audit. The Home Office Cost Data Form is the responsibility of the management of ABC Home Health Services, Inc.- Medicare Certified Division. Our responsibility is to determine if the home office allowable costs reported on the Home Office Cost Data Form are reasonable and allowable, in all material respects, in accordance with the federal and state laws, regulations, policies and procedures governing the Georgia Home Health Services Program. It is also our responsibility to report the results of our audit, including any required adjustments to the Home Office Cost Data Form, to the Georgia Department of Medical Assistance.
Except as discussed in paragraph 4, we conducted our audit in accordance with the Home Health Agency Home Office Audit Program approved by the Georgia Department of Medical Assistance. Our audit included examining and evaluating, on a test basis, evidence supporting the amounts and disclosures on the Home Office Cost Data Form. Our audit also included assessing the accounting principles used and significant estimates made by management. We believe our audit provides a reasonable basis for our report.
V

As described in Note 1 ofthe Notes to Schedule, the accompanying Schedule ofHome Office Allowable Costs was prepared to present the data necessary for the Georgia Department of Medical Assistance to determine Medicaid reimbursement for the home health agency components of the home office and is not intended to be a presentation in accordance with generally accepted accounting principles, nor is it intended to be a complete presentation of the assets, liabilities, revenues and expenses of ABC Home Health Services, Inc.- Medicare Certified Division on the basis described.
We were unable to obtain representation from management officials concerning the fair presentation ofinformation contained in the cost data form, the availability of all financial records and related data, or that all transactions with outside parties were conducted on an arms-length basis. The possible effects of this lack of management representation are unknown to us and may be material.
In our opinion, except for the effects ofsuch adjustments, if any, as might have been necessary
had we been able to obtain representation from management, the "adjusted totals" column in the accompanying Schedule of Home Office Allowable Costs - which was compiled by us and reflects any adjustments to home office allowable costs required as a result of our audit - presents fairly, in all material respects, the home office allowable costs of ABC Home Health Services, Inc.- Medicare Certified Division for the year ended December 31, 1994, on the basis of accounting described in Note I.
This report is intended to be used solely in connection with the administration of the Georgia Department of Medical Assistance Home Health Services Program and is not to be used or relied upon for any other purpose.
Respectfully submitted,

CLV/yk/by

Claude L. Vickers State Auditor

VI

ABC HOME HEALTH SERVICES, INC. - MEDICARE CERTIF'IED DIVISION SCOPE OF THE AUDIT
FOR THE YEAR ENDED DECEMBER 31, 1994
This audit was performed in order to determine if the home office allowable costs reported on the Home Office Cost Data Form are reasonable and allowable, in all material respects, in accordance with the federal and state laws, regulations, policies and procedures governing the Georgia Medicaid Program, and to report to the Georgia Department of Medical Assistance (DMA) any adjustments to the Home Office Cost Data Form required as a result of our audit.
In order to accomplish these objectives, we examined, on a test basis, evidence supporting the amounts and disclosures on the Home Office Cost Data Form, and assessed the accounting principles used and significant estimates made by management. Tested transactions and accounts were evaluated for compliance with OMA Policies and Procedures for Home Health Services and for compliance with federal laws and regulations applicable to the Title XIX Medicaid Program. Any adjustments to the Home Office Cost Data Form required as a result of our audit are included in this report on the Summary of Allocations to Chain Components.
Costs reported on the Home Office Cost Data Form are derived from data reported in the Medicare Home Office Cost Report (Form HCFA 287). Schedule B of the Medicare cost report summarizes the allowable costs claimed by the home office. The Schedule of Home Office Allowable Costs presented in this audit report is based on Schedule B ofthe Medicare Home Office Cost Report and shows the adjustments made to the individual expense categories as a result of our audit.
We were unable to obtain representation from management officials concerning the fair presentation ofinformation contained in the cost data form, the availability of all financial records and related data, or that all transactions with outside parties were conducted on an arms-length basis.
Our audit included a limited consideration of the organization's internal control structure sufficient to plan the audit. Our consideration for this limited purpose would not necessarily disclose all reportable conditions in the internal control structure. Accordingly, we do not express an opinion on the internal control structure. However, as a result of our audit, reportable conditions were identified in controls applicable to financial operations and in controls related to compliance with Medicaid policies, procedures, laws and/or regulations. These weaknesses are described in the management letter included in the Appendix of this report.
1

ABC HOME HEALTH SERVICES, INC. - MEDICARE CERTIFIED DIVISION SCHEDULE OF HOME OFFICE ALLOWABLE COSTS FOR THE YEAR ENDED DECEMBER 31, 1994

ALLOWABLE COSTS

PER MEDICARE COST REPORT AS FILED

FIELD AUDIT ADJUSTMENTS

ADJUSTED TOTALS

FUNCTIONALLY ALLOCATED COSTS

Non-Capital Related Costs

Facilities

$ 705,460

Quality Improvement

1,282,384

Central Intake Coordinator

1,315,565

Total Functionally Allocated Costs

$ 3,303,409

$ 705,460 1,282,384 1,315,565
$ 3,303,409

POOLED COSTS

New Capital-Related Costs

Buildings and Fixtures

$

(6,515)

Moveable Equipment

519,108

Other Capital Related Costs

Taxes and Licenses (except

Income)

750,652

Other

292,279

Non-Capital Related Costs

Reimbursement

727,118

Accounting Support

415,317 $

Patient Business Services

1,535,222

PBS Software Development

1,113,445

Facilities

71,094

Human Resources Recruiting

1,498,804

National Accounts

556,946

JCAHO Accreditation

1,463,297

Operations Executive Support

13,243,305

COO Operations Support

3,293,370

Shared Clinical Supervisors

73,731

2

$

(6,515)

519,108

(349)
(411,440) (3,795) (100)
(74,043) (5,158)

750,652 292,279
727,118 414,968 1,535,222 1,113,445
71,094 1,087,364
553,151 1,463,197
13,169,262 3,288,212
73,731

ABC HOME HEALTH SERVICES, INC. - MEDICARE CERTIFIED DIVISION SCHEDULE OF HOME OFFICE ALLOWABLE COSTS FOR THE YEAR ENDED DECEMBER 31, 1994

ALLOWABLE COSTS

PER MEDICARE COST REPORT AS FILED

FIELD AUDIT ADJUSTMENTS

ADJUSTED TOTALS

POOLED COSTS (continued) Regulatory Group Operations Support (General) Education Rehabilitative Services Administrative and General Expenses Employee Benefits Travel Amortization of Intangibles Bank Charges Late Fees Board/Supervisor Meetings Books, Journals and Subscriptions Coffee and Soft Drinks Community Awareness Professional Consulting Data Processing Expenses Dues and Subscriptions Dues National Associations Freight Expense Interest (Total) Insurance Legal Fees Office Supply Expenses Other Miscellaneous Printing and Stationary

1,651,574
3,429,567 3,891,763
325,268
(2,500) 78,015
261,435 71,106 5,855
16,986
3,493 4,230 52,051 95,385
934 15,399
100 13,286 (440,938)
(679) 2,853,748
18,314 (14,287)
2,423

(1,651,574) (3,429,567)
(52,051) (18,627) (15,000)
(50) (1,088) (1,360,210) (1,012)

0
0 3,891,763
325,268
(2,500) 78,015
261,435 71,106 5,855
16,986
3,493 4,230
0 76,758
934 399
50 13,286 (440,938) (1,767) 1,493,538 18,314 (14,287)
1,411

3

ABC HOME HEALTH SERVICES, INC. - MEDICARE CERTIFIED DIVISION SCHEDULE OF HOME OFFICE ALLOWABLE COSTS FOR THE YEAR ENDED DECEMBER 31, 1994

ALLOWABLE COSTS

PER MEDICARE COST REPORT AS FILED

FIELD AUDIT ADJUSTMENTS

ADJUSTED TOTALS

POOLED COSTS (continued) Postage/UPS Expenses Purchase Discounts Taxes and Licenses Telephone Expenses Training Materials Recruiting Holding Company Allocation General Non-Operating Income Offset

61,182 (318)
23,247 132,507
13,810 27,873
4,957,562
(58,179)

(3,128)
(953) (667,046)

58,054 (318)
23,247 132,507
13,810 26,920
4,290,516
(58,179)

Total Pooled Costs

$ 43,037,385 $ (7,695,191) $ 35,342,194

4

ABC HOME HEALTH SERVICES, INC. - MEDICARE CER11F'IED DIVISION NOTES TO SCHEDULE
FOR THE YEAR ENDED DECEMBER 31, 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ENTITY INFORMATION
ABC Home Health Services, Inc.-Medicare Certified Division filed a Home Office Cost Data Form with the Georgia Department of Medical Assistance for the year ended December 31, 1994. The Medicare Home Office Cost Report listed eighty-two chain components, fifty-six of which are home health agencies, seven of which are in Georgia. In addition to the audit of the Home Office Cost Data Form, audits have been made of provider cost data forms filed by seven components of the chain organization:
ABC Home Health of Albany ABC Home Health of Atlanta ABC Home Health ofBrunswick ABC Home Health of Dublin ABC Home Health ofMacon ABC Home Health of Milledgeville ABC Home Health of Valdosta
BASIS OF ACCOUNTING The Home Office Cost Data Form and the associated Schedule of Home Office Allowable
Costs, hereinafter referred to as the Schedule, were prepared in conformity with the Principles of Reimbursement for Provider Cost published by the Secretary of Health and Human Services as modified by the provisions of Policies and Procedures for Home Health Services published by the Georgia Department of Medical Assistance. This basis of accounting required by the Medicaid Program differs from generally accepted accounting principles. Consequently, the information presented in this report reflects only the home. office allowable costs required for DMA to determine the Medicaid reimbursement rate for the home health agency components ofthe home office. This report does not reflect the home office's financial position or the results of its operations; it is intended to be used solely in connection with the administration of the Georgia Department of Medical Assistance Home Health Services Program and is not to be used or relied upon for any other purpose.
NOTE 2: FIELD AUDIT ADJUSTMENTS The Field Audit Adjustments column on the Schedule is provided to show the net effect of
adjustments made during the field audit process .The audit adjustments made as a result of this audit are shown on the Summary ofField Audit Adjustments and are explained in the Explanation of Field Audit Adjustments.
5

ABC HOME HEALTH SERVICES, INC. - MEDICARE CERTIFIED DMSION SUMMARY OF FIELD AUDIT ADJUSTMENTS FOR THE YEAR ENDED DECEMBER 31, 1994

ADWSTMENT NUMBER

POOLED COSTS

ACCOUNTING SUPPORT

1

Costs Not Related to Patient Care

$

(349)

HUMAN RESOURCES RECRUITING

1

Costs Not Related to Patient Care

(411,440)

NATIONAL ACCOUNTS

1

Costs Not Related to Patient Care

(3,795)

JCAHO ACCREDITATION

1

Costs Not Related to Patient Care

(100)

OPERATIONS EXECUTIVE SUPPORT

1

Costs Not Related to Patient Care

(74,043)

COO OPERATIONS SUPPORT

1

Costs Not Related to Patient Care

(5,158)

REGULATORY GROUP

1

Costs Not Related to Patient Care

(1,651,574)

OPERATIONS SUPPORT (GENERAL)

1

Costs Not Related to Patient Care

(3,429,567)

6

ABC HOME HEALTH SERVICES, INC. - MEDICARE CERTIFIED DMSION SUMMARY OF FIELD AUDIT ADJUSTMENTS FOR THE YEAR ENDED DECEMBER 31, 1994

ADWSTMENT NUMBER

POOLED COSTS

COMMUNITY AWARENESS

1

Costs Not Related to Patient Care

(52,051)

PROFESSIONAL CONSULTING

1

Costs Not Related to Patient Care

(18,627)

DUES AND SUBSCRIPTIONS

1

Costs Not Related to Patient Care

(15,000)

DUES NATIONAL ASSOCIATIONS

1

Costs Not Related to Patient Care

(50)

INSURANCE

1

Costs Not Related to Patient Care

(1,088)

LEGAL FEES

1

Costs Not Related to Patient Care $ (1,029,551)

2

Lack of Sufficient Documentation

(330,659)

(1,360,210)

PRINTING AND STATIONARY

1

Costs Not Related to Patient Care

(1,012)

POSTAGE/UPS EXPENSES

1

Costs Not Related to Patient Care

(3,128)

7

ABC HOME HEALTH SERVICES, INC. - MEDICARE CERTIFIED DMSION SUMMARY OF FIELD AUDIT ADJUSTMENTS FOR THE YEAR ENDED DECEMBER 31, 1994

ADJUSTMENT NUMBER

POOLED COSTS

RECRUITING

I

Costs Not Related to Patient Care

(953)

HOLDING COMPANY ALLOCATION

3

Allocations from Home Office

(667,046)

Net Adjustment to Pooled Costs

$ (7,695,191)

8

ABC HOME HEALTH SERVICES, INC. - MEDICARE CERTIFIED DMSION EXPLANATION OF FIELD AUDIT ADJUSTMENTS FOR THE YEAR ENDED DECEMBER 31, 1994

ADJUSTMENT NUMBER

EXPLANATION

1

COSTS NOT RELATED TO PATIENT CARE

Expenses claimed in the cost report included payments which were not considered to be for patient care operations. Federal regulations provide that costs which are not appropriate or necessary and proper in developing and maintaining the operation of patient care facilities and activities are not allowable in computing reimbursable costs. This adjustment is made to remove the non-patient care expenses from allowable costs. (HCFA 15-2102.3,2136.2~DMAPolicies and Procedures Section 1001.2 (a), (b), (f), (h))

Items Advertising Civic Organization Dues Legal Association Dues (50%) Personal Purchases Lobbying Expenses

$ (3,994,092) (16,818)
(1,029,551) (3,587) (1,864)
(1,651,574)

$ (6 697 486)

POOLED COSTS Accounting Support Human Resources Recruiting National Accounts JCAHO Accreditation Operations Executive Support COO Operations Support Regulatory Group Operations Support (General) Community Awareness Professional Consulting Dues and Subscriptions Dues National Associations Insurance Legal Fees Printing and Stationary

$

(349)

(411,440)

(3,795)

(100)

(74,043)

(5,158)

(1,651,574)

(3,429,567)

(52,051)

(18,627)

(15,000)

(50)

(1,088)

(1,029,551)

{1,012)

9

ADJUSTMENT NUMBER

EXPLANATION (CONTINUED)

Postage/UPS Expenses Recruiting

(3,128) (953)
$ (6 697 486)

2

LACK OF SUFFICIENT DOCUMENTATION

Some ofthe expenses shown on the cost report were not supported by adequate documentary evidence. Federal regulations provide that cost information as developed by the provider must be current, accurate, and in sufficient detail to support payments made for services rendered to beneficiaries. This adjustment is made to remove the undocumented expenses from allowable costs. (HCFA 15-2304)

POOLED COSTS Legal Fees

$====:!'c!::3:!!!::::30-65!l::=9::I!)=

3

ALLOCATIONS FROM HOME OFFICE

The provider was a component of a chain organization for the year ended December 31, 1994. Adjustments were made to the Home Office Cost Data Form filed in connection with the Medicaid Home Health Services Program. This adjustment is made to correct allowable costs for the portion ofthe home office audit adjustments which are allocated to the provider. (HCFA 15-2150)

POOLED COSTS Holding Company Allocation ABC Home Health Services, Inc. Holding Company Pooled Costs

$====:!(==!:6:!::!::67:!::::l::!:!::04::!:::!6:!:I!)=

ABC HOME HEALTH SERVICES, INC. - MEDICARE CERTIFIED DMSION SUMMARY OF ALLOCATION TO CHAIN COMPONENTS FOR THE YEAR ENDED DECEMBER 31, 1994

CHAIN COMPONENTS
GEORGIA HOME HEALTH AGENCIES ABC Home Health ofAlbany ABC Home Health ofAtlanta ABC Home Health ofBrunswick ABC Home Health ofDublin ABC Home Health ofMacon ABC Home Health ofMilledgeville ABC Home Health of Valdosta
TOTAL GEORGIA HOME HEALTH AGENCIES
TOTAL OTHER COMPONENTS
TOTAL ALLOCATION

ALLOCATION OF ADWSTMENTS TO:
POOLED COSTS

$

(72,801)

(656,433)

(192,074)

(124,560)

(139,835)

(104,087)

(109,219)

$

(1,399,009)

(6,296,182)

$

(7,695,191)

11

CLAUDE L VICKERS
STATE AUDITOR

DEPARTMENT OF AUDITS
MEDICAID AND LoCAL GOVERNMENT AUDITS
254 Washington Street, S.W., Suite 322 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535
MANAGEMENT COMMENT LETTER

MICHAELA. PLANT
DIRECTOR

Georgia Department ofMedical Assistance Atlanta, Georgia
and Management Officials of ABC Home Health Services, Inc. - Medicare Certified Division

We have audited the records and documentation supporting the Home Office Cost Data Form filed by ABC Home Health Services, Inc.- Medicare Certified Division in connection with the Medicaid Home Health Services Program for the year ended December 31, 1994. Our audit included a limited consideration ofthe organization's internal control structure sufficient to plan the audit. Our consideration for this limited purpose would_.not necessarily disclose all reportable conditions in the internal control structure. Accordingly, we do not express an opinion on the internal control structure.

However, as a result of this audit, conditions were noted that we believe are weaknesses which should be addressed by management. In our audit we found that:



Expenses claimed included items not related to patient care operations.



The home office did not maintain adequate documentation supporting certain

transactions.

As a participant in the Medicaid Home Health Services Program, the home office has the responsibility of compliance with program policies and procedures particularly with provisions of the Federal Provider Reimbursement Manual. Section 2304 of this publication states:

12

"Cost information as developed by the provider must be current, accurate, and in sufficient detail to support payments made for services rendered to .beneficiaries. This includes all ledgers, books, records and original evidences of cost (purchase requisitions, purchase orders, vouchers, requisitions for materials, inventories, labor time cards, payrolls, bases for apportioning costs, etc.) which pertain to the determination of reasonable cost, capable of being audited." The home office should take corrective action to resolve the audit findings mentioned above. This management comment letter is related to findings during an audit of the Home Office Cost Data Form filed in connection with the Medicaid Home Health Services Program by ABC Home Health Services, Inc. - Medicare Certified Division, for the year ended December 31, 1994. This letter and the related audit report are intended to be used solely in connection with the administration ofthe Medicaid Home Health Services Program.
GEORGIA DEPARTMENT OF AUDITS
13