Audit report, schedule of reimbursable costs and patient day statistics, Holly Hill Nursing Home, Valdosta, Georgia, Medicaid provider no. 00141479A, for the year ended June 30, 1994, Georgia Department of Medical Assistance [June 30, 1994]

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STATE OF GEORGIA DEPARTMENT OF AUDITS
254 WASHINGTON STREET ATLANTA. GEORGIA 30334

AUDIT REPORT SCHEDULE OP REIMBURSABLE COSTS AND
PATIENT DAY STATISTICS HOLLY BILL NURSING HOME
VALDOSTA, GEORGIA MEDICAID PROVIDER NO. 00141479A FOR THE YEAR ENDED JUNE 30, 1994 GEORGIA DEPARTMENT OP MEDICAL ASSISTANCE

HOLLY HILL NURSING HOME - TABLE OF CONTENTS -

AUDITOR'S REPORT

V

SCOPE OF THE AUDIT

1

SCHEDULE OF REIMBURSABLE COSTS AND PATIENT DAY STATISTICS

2

NOTES TO SCHEDULE

3

SUMMARY OF FIELD AUDIT ADJUSTMENTS

5

EXPLANATION OF FIELD AUDIT ADJUSTMENTS

7

APPENDIX

MANAGEMENT COMMENT LETTER

13

CLAUDE L. VICKERS
STATE AUDITOR (404) 656-2174

DEPARTMENT OF AUDITS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
March 21, 1995

Nursing Home Reimbursement Section Georgia Department of Medical Assistance 2 Peachtree Street, NW Room 27-208 Atlanta, Georgia 30303-3159
Ladies and Gentlemen:
We have audited the Nursing Home Cost Report filed with the Georgia Department of Medical Assistance under the Title XIX Medicaid Program by Lowndes County Health Services, Inc., d/b/a Holly Hill Nursing Home, for.the year ended June 30, 1994, and have compiled the accompanying Schedule of Reimbursable Costs and Patient Day Statistics based on our audit. The Nursing Home Cost Report is the responsibility of the management of Lowndes County Health Services, Inc., d/b/a Holly Hill Nursing Home. Our responsibility is to determine if the reimbursable costs and patient day statistics reported in the Nursing Home Cost Report are reasonable and allowable, in all material respects, in accordance with the federal and state laws, regulations, policies and procedures governing the Georgia Nursing Home Reimbursement Program. It is also our responsibility to report the results of our audit, including any required adjustments to the cost report data, to the Georgia Department of Medical Assistance.
We conducted our audit in accordance with the Nursing Home 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 in the Nursing Home Cost Report. 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.
As described in Note 1 of the Notes to Schedule, the accompanying Schedule of Reimbursable Costs and Patient Day Statistics was prepared to present the data necessary for the Georgia Department of Medical Assistance to determine Medicaid reimbursement 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 Lowndes County Health Services, Inc., d/b/a Holly Hill Nursing Home on the basis described.

V

In our opinion, the "adjusted totals" column in the accompanying Schedule of Reimbursable Costs and Patient Day Statistics - which was compiled by us and reflects any adjustments to the cost report data required as a result of our audit - presents fairly, in all material respects, the reimbursable costs and patient day statistics of Lowndes County Health Services, Inc., d/b/a Holly Hill Nursing Home for the year ended June 30, 1994, on the basis of accounting described in Note 1.
This report is intended to be used solely in connection with the administration of the Georgia Department of Medical Assistance Nursing Home Reimbursement Program and is not to be used or relied upon for any other purpose.
Respectfully submitted,
~~
Claude L. Vickers State Auditor CLV/mdj/bw
vi

HOLLY BILL NURSING HOME SCOPE OF THE AUDIT
FOR THE YEAR ENDED JUNE 30, 1994
This audit was performed in order to determine if the reimbursable costs and patient day statistics reported in the Nursing Home Cost Report 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 cost report data 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 in the Nursing Home Cost Report, and assessed the accounting principles used and significant estimates made bi management. Tested transactions and accounts were evaluated for compliance with OMA Policies and Procedures for Nursing Home Services and for compliance with federal laws and regulations applicable to the Title XIX Medicaid Program. Any adjustments to the cost report data required as a result of our audit are included in this report.
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

HOLLY BILL NURSING HOME SCHEDULE OF REIMBURSABLE COSTS AND
PATIENT DAY STATISTICS FOR THE YEAR ENDED JUNE 30, 1994

REIMBURSABLE COSTS

PER COST REPORT
AS FILED

OFFICE

FIELD

AUDIT

AUDIT

ADJUSTMENTS ADJUSTMENTS

ADJUSTED TOTALS

Routine Services

$ 936,353 $

$ (42,715) $ 893,638

Special Services

80,596

1,962

82,558

Dietary

308,619

(2,222)

306,397

Laundry and Housekeeping

156,704

(6,470)

150,234

Operation and Maintenance of Plant

99,531

1,875

101,406

Administrative and General 238,433

22,259

260,692

Property and Related Expenses

221,458

101

221,559

Total Reimbursable Costs $2,041,694

$ (25,210) $2,016,484

PATIENT DAY STATISTICS

33,908

33,908

2

HOLLY BILL NURSING HOME NOTES TO SCHEDULE
FOR THE YEAR ENDED JUNE 30, 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ENTITY INFORMATION
Holly Hill Nursing Home is a 100-bed long-term health care facility located in Valdosta, Georgia. The facility provides both skilled and intermediate care services to resident patients. The facility was owned by Lowndes County Health Services, Inc., and operated as a component of Pruitt Corporation, a chain organization which filed a Home Office Cost Report with OMA for the year ended June 30, 1994.
BASIS OF ACCOUNTING The Nursing Home Cost Report and the associated Schedule of Reimbursable
Costs and Patient Day Statistics, 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 Nursing Home 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 allowable reimbursable costs and patient day statistics and required for OMA to determine the healthcare provider's Medicaid reimbursement rate. This report does not reflect the provider'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 Nursing Home Reimbursement Program and is not to be used or relied upon for any other purpose.
NOTE 2: OFFICE AUDIT ADJUSTMENTS The Office Audit Adjustments column on the Schedule is provided to show
the net effect of adjustments made during the office audit process. No office audit was performed prior to the cost report field audit and, therefore, no adjustments are shown.
NOTE 3: FIELD AUDIT ADJUSTMENTS The Field Audit Adjustments column on the Schedule is provided to show
the net effect of adjustments made during the cost report field audit process. The audit adjustments made as a result of this audit are shown on the Summary of Field Audit Adjustments and are explained in the Explanation of Field Audit Adjustments.
NOTE 4: LEASED FACILITIES The land, buildings, and equipment used in health care operations were
leased from Neil L. Pruitt a related party. The cost of this lease was $5.16 per available bed per day for the year ended June 30, 1994. An adjustment was made during the preparation of the cost report to increase the cost of the lease to $5. 22 per available bed per day, the actual cost to the related party.
3

HOLLY BILL NURSING HOME NOTES TO SCHEDULE
FOR THE YEAR ENDED JUNE 30, 1994 NOTE 5: PROPERTY COST REIMBURSEMENT
Records examined during the audit showed that the lease on the facility became effective on September 1, 1992. Because this property transaction occurred after June 14, 1983, the provider is reimbursed for property and related expenses under the Dodge Index system rather than historical costs.
4

HOLLY HILL NURSING HOME SUMMARY OF FIELD AUDIT ADJUSTMENTS
FOR THE YEAR ENDED JUNE 30, 1994

ADJUSTMENT NUMBER

REIMBURSABLE COSTS

ROUTINE SERVICES

1

Related Party Costs

$

(325)

2

Incorrect Expense Classifications

(38,798)

3

Allocations from Home Office

(3,592) $ (42,715)

SPECIAL SERVICES

1

Related Party Costs

$ (1,592)

2

Incorrect Expense Classifications

4,728

4

Lack of Sufficient Documentation

(457)

5

Reclaculation of Special Services

Cost Adjustment

(717)

1,962

DIETARY

1

Related Party Costs

3

Allocations from Home Office

6

Excess Compensation

$

(37)

(1,106)

(1,079)

(2,222)

LAUNDRY AND HOUSEKEEPING

1

Related Party Costs

$

(1)

4

Lack of Sufficient Documentation

(694)

7

Expense Claimed by Another Chain

Component

1,255

8

Expense Reimbursements

(7,030)

(6,470)

OPERATION AND MAINTENANCE OF PLANT

1

Related Party Costs

$

(1)

2

Incorrect expense Classifications

7,999

7

Expense Claimed by Another Chain

Component

77

1,875

ADMINISTRATIVE AND GENERAL

1

Related Party Costs

$

(1)

2

Incorrect Expense Classifications

32,271

3

Allocations from Home Office

(9,570)

6

Excess Compensation

(97)

7

Expense Claimed by Another Chain

Component

79

8

Expense Reimbursements

(225)

9

costs Not Related to Patient Care

(234)

10

Costs Misclassified as Nurse Aide

Testing and Training

36

22,259

5

HOLLY HILL NURSING HOME SUMMARY OF FIELD AUDIT ADJUSTMENTS
FOR THE YEAR ENDED JUNE 30, 1994

ADJUSTMENT NUMBER

REIMBURSABLE COSTS (continued)

PROPERTY AND RELATED EXPENSES

3

Allocations from Home Office

$

3

8

Expense Claimed by Another Chain

Component

98

101

Net Adjustment to Reimbursable Costs

$ (25,210)

6

ADJUSTMENT NUMBER

HOLLY BILL NURSING HOME EXPLANATION OF FIELD AUDIT ADJUSTMENTS
FOR THE YEAR ENDED JUNE 30, 1994
EXPLANATION

1

RELATED PARTY COSTS

Documentation examined during the audit showed that the provider paid for supplies and services obtained from related parties. Federal regulations provide that costs applicable to services, facilities, and supplies furnished by related organizations are includable in the allowable cost of the provider at the cost to the related organization. This adjustment is made to reduce reimbursable costs to the related party's cost. (HCFA 15-1000)

COST CENTER Routine Services Special Services Dietary Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General

$

(325)

(1,592)

(37)

(1)

(1)

(1)

Total Adjustment to Reimbursable Costs

$ (1,957)

2

INCORRECT EXPENSE CLASSIFICATIONS

Documentation examined during the audit showed that some of the expenses were not classified in accordance with the Uniform Chart of Accounts prescribed by the Department of Medical Assistance for providers participating in the Medicaid Nursing Home Reimbursement Program. This adjustment is made to reclassify costs to the appropriate cost centers. (DMA Policies and .Procedures, Appendix D)

COST CENTER Routine Services Oxygen Physical Therapy Costs Repairs and Maintenance Ward Clerk Costs Special Services Cable Television Oxygen Physical Therapy Costs

$

(400)

(4,083)

(1,530)

(32,785) $ (38,798)

$

245

400

4,083

4,728

7

ADJUSTMENT NUMBER

EXPLANATION (continued)
Operation and Maintenance of Plant Repairs and Maintenance
Administrative and General Cable Television Repairs and Maintenance Ward Clerk Costs
Net Adjustment to Reimbursable Costs

1,799

$

(245)

(269)

32,785

32,271

$

0

3

ALLOCATIONS FROM HOME OFFICE

The provider was a component of a chain organization for the year ended June 30, 1994. Adjustments were made to the home office cost report filed in connection with the M~dicaid Nursing Home Reimbursement Program. This adjustment is made to correct reimbursable costs to reflect the allocation of the adjustments made to the home office cost report. (HCFA 15-2150)

COST CENTER Routine Services Directly Allocated Costs Dietary Directly Allocated Costs Administrative and General Directly Allocated Costs Pooled Costs Allocation Statistics Administrative Expenses Non-Capital Related Interest Expense Property and Related Expenses Pooled Capital Related Interest Expense

$ (3,592)

(1,106)

$ (6,160)

(41) (4,208)

839

(9,570)

3

Net Adjustment to Reimbursable Costs

$ (14,265)

4

LACK OF SUFFICIENT DOCUMENTATION

Some of the 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 reimbursable costs. (HCFA 15-2304)

8

ADJUSTMENT NUMBER

EXPLANATION (continued)
COST CENTER Special Services Laundry and Housekeeping
Total Adjustment to Reimbursable Costs

$

( 457)

(694)

$ (1,151)

5

RECALCULATION OF SPECIAL SERVICES COST ADJUSTMENT

The provider received revenues from the sale of ancillary services to patients; therefore, reimbursable costs for special services are limited to the maximum reimbursable cost calculated on Schedule B-lA of the cost report. Documentation examined during the audit showed that certain adjustments were necessary to amounts reported on Schedule B-lA as total cost per books. These adjustments required the recalculation of Schedule B-lA. A copy of this recalculation has been furnished to the provider. This adjustment is made to decrease reimbursable costs for the net effect of the recalculation. (General Instructions to the Cost Report)

SJ:!ecial Service Physical Therapy Pharmacy Speech Therapy Oxygen Occupational Therapy

Adjustment Per Cost ReJ:!ort
$ (7,168) (18,962) (5,778) (373) (3,432)

Recalculated Adjustment
$ (8,996) (17,809) (5,770) (429) (3,426)

Audit Adjustment $ (1,828)
1,153 8
(56) 6

$

(717)

COST CENTER Special Services

$

(717)

6

EXCESS COMPENSATION

Reimbursable costs claimed on the cost report included compensation to employees which exceeded DMA maximum limitations. The Department of Medical Assistance annually calculates allowable salary ceilings for various positions as well as maximum fees allowable for medical and corporate directors. This adjustment is made to reduce reimbursable costs by the amount of compensation paid in excess of the DMA guidelines, plus related employer's share of payroll taxes. (DMA Compensation Ceilings; HCFA 15-906)

9

ADJUSTMENT NUMBER

EXPLANATION (continued)

Position Title

Total Compensation

Guideline Ceiling (A)

Excess

Dietary Supervisor Payroll Taxes
Administrator Payroll Taxes

$ 2,610 200
42,796 2,720

$ 1,608 123
42,700 2,719

$ (1,002)
(77)
(96) (1)

$ 48,326

$ 47,150

$ (1,176)

(A) Ceilings have been adjusted to percentage of full-time.

COST CENTER Dietary Administrative and General

$ (1,079) (97)

Total Adjustment to Reimbursable Costs

$ (1,176)

7

EXPENSES CLAIMED BY ANOTHER CHAIN COMPONENT

Reimbursable costs claimed by other chain components included supplies and services expense applicable to this provider. 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 increase reimbursable costs by the amount of expense applicable to this provider which was claimed by the other chain components. (HCFA 15-2304)

COST CENTER Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General Property and Related Expenses

$ 1,255
77
79 98

Net Adjustment to Reimbursable Costs

$ 1,509

COMPONENT FACILITIES (1) Heritage House Nursing Home Crestwood Nursing Home
Total Adjustment to Reimbursable Costs

$ 1,255 254
1,509

(1) Appropriate audit adjustments have been made to the reimbursable costs claimed of the other chain components.

10

ADJUSTMENT NUMBER

EXPLANATION (continued)

8

EXPENSE REIMBURSEMENTS

Documentation examined during the audit showed that amounts shown on the cost report as revenues were from sales of materials and/or services, the cost of which were included in reimbursable costs claimed. Federal regulations provide that amounts received for discounts, allowances, refunds and rebates are not to be considered a form of income but should be used to reduce the specific costs to which they apply. This adjustment is made to reduce reimbursable costs claimed by expense reimbursements shown as revenues. (HCFA 15-800)

COST CENTER Laundry and Housekeeping Administrative and General

$ (7,030) (225)

Total Adjustment to Reimbursable Costs

$ (7,255)

9

COSTS NOT RELATED TO PATIENT CARE

Expenses claimed in the cost report included payments for civic organization dues 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 reimbursable costs. (HCFA 15-2102.3; DMA Policies and Procedures Section 1002.l(k))

COST CENTER Administrative and General

$

(234)

10

COSTS MISCLASSIFIED AS NURSE AIDE TESTING AND TRAINING COSTS

An adjustment was made during cost report preparation to remove nurse aide testing and training expenses from reimbursable costs. Documentation examined during the audit showed that some of these costs were not incurred to provide nurse aide testing and training services. Federal regulations provide that cost information as developed by the provider must be current, accurate, and in sufficient detail to support

11

ADJUSTMENT NUMBER

EXPLANATION (continued)

payments made for services rendered to beneficiaries. This adjustment is made to reverse a portion of the provider's adjustment. (HCFA 15-2304)

COST CENTER Administrative and General

$

36

12

CLAUDE L. VICKERS
STATE AUDITOR (404) 656-2174

DEPARTMENT OF AUDITS
MEDICAID AND LocAL GoVERNMENT Auo1Ts DMSION 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
MANAGEMENT COMMENT LETTER

MICHAEL A. PLANT
DIRECTOR (404) 656-2006

Georgia Department of Medical Assistance Atlanta, Georgia
and Management Officials of Holly Hill Nursing Home
We have audited the records and documentation supporting the cost report filed by Holly Hill Nursing Home in connection with the Medicaid Nursing Home Reimbursement Program for the year ended June 30, 1994. 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 this audit, conditions were noted that we believe are weaknesses which should be addressed by management. In our audit we found that:
1. Students hours and expenses for the NATT program were not adequately documented.
2. An excessive dollar amount of expenses were not properly classified in accordance with the OMA Chart of Accounts.
3. Expenses claimed on the cost report were not properly offset with the associated revenues.
4. Transactions with related parties were not properly accounted for on the cost report.
s. Original documentary evidence supporting transactions was not
maintained in an orderly fashion.
6. An excessive number, and amount, of audit adjustments were required to satisfactorily formulate an opinion on the Schedule of Reimbursable Costs and Patient Day Statistics.
13

7. Accounts receivable credit balances at June 30, 1994 totalling $6,169.63 had not been refunded to the Department of Medical Assistance.
8. Some residents' personal funds accounts had credit balances at June 30, 1994.
As a participant in the Medicaid Nursing Home Reimbursement Program, the Provider 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:
"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 provider should take corrective action to resolve the audit findings mentioned above. This management comment letter is related to findings during an audit of the cost report filed in connection with the Medicaid Nursing Home Program by Holly Hill Nursing Home for the year ended June 30, 1994. This letter and the related audit report are intended to be used solely in connection with the administration of the Medicaid Nursing Home Reimbursement Program.
GEORGIA DEPARTMENT OF AUDITS
14