Audit report, schedule of reimbursable costs and patient day statistics, Magnolia Manor Methodist Nursing Center, Americus, Georgia, Medicaid provider no. 00040785A, 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 OF REIMBURSABLE COSTS AND
PATIENT DAY STATISTICS MAGNOLIA MANOR METHODIST NURSING CENTER
AMERICUS, GEORGIA MEDICAID PROVIDER NO. 00040785A FOR THE YEAR ENDED JUNE 30, 1994 GEORGIA DEPARTMENT OF MEDICAL ASSISTANCE

MAGNOLIA MANOR METHODIST NURSING CENTER - TABLE OF CONTENTS -
AUDITOR'S REPORT SCOPE OF THE AUDIT SCHEDULE OF REIMBURSABLE COSTS AND PATIENT DAY STATISTICS NOTES TO SCHEDULE SUMMARY OF FIELD AUDIT ADJUSTMENTS EXPLANATION OF FIELD AUDIT ADJUSTMENTS APPENDIX
MANAGEMENT COMMENT LETTER

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

DEPARTMENT OF AUDITS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
April 20, 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 South Georgia Methodist Home for the Aging, Inc., d/b/a Magnolia Manor Methodist Nursing Center 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 South Georgia Methodist Home for the Aging, Inc., d/b/a Magnolia Manor Methodist Nursing Center. Our responsibility is to determine if the reimbursable cost~ 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 South Georgia Methodist Home for the Aging, Inc. , d/b/a Magnolia Manor Methodist Nursing Center on the basis described.
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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 South Georgia Methodist Home for the-Aging, Inc., d/b/a Magnolia Manor Methodist Nursing Center 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/tw/by
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MAGNOLIA MANOR METHODIST NURSING CENTER 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 by 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.
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MAGNOLIA MANOR METHODIST NURSING CENTER 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

$2,621,894

$ 25,910 $2,647,804

Special Services

501,853

(277,960)

223,893

Dietary

750,990

(3,442)

747,548

Laundry and Housekeeping

535,668

{32,316)

503,352

Operation and Maintenance of Plant

561,361

{140,155)

421,206

Administrative and General 676,272

3,927

680,199

Property and Related Expenses

517,368

(115,033)

402,335

Total Reimbursable Costs $6,165,406

$ (539,069) $5,626,337

PATIENT DAY STATISTICS

85,721

85,721

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MAGNOLIA MANOR METHODIST NURSING CENTER NOTES TO SCHEDULE
FOR THE YEAR ENDED JUNE 30, 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ENTITY INFORMATION
Magnolia Manor Methodist Nursing Center is a 238-bed long-term health care facility located in Americus, Georgia. The facility provides both skilled and intermediate care services to resident patients. The facility was operated as a freestanding nursing home by South Georgia Methodist Home for the Aging, Inc., 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 required for DMA 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.
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MAGNOLIA MANOR METHODIST NURSING CENTER SUMMARY OF FIELD AUDIT ADJUSTMENTS FOR THE YEAR ENDED JUNE 30, 1994

ADJUSTMENT NUMBER

REIMBURSABLE COSTS

ROUTINE SERVICES

1

Incorrect Expense Classifications

$ 27,259

2

Costs Not Related to Patient Care

(1,349) $ 25,910

SPECIAL SERVICES

1

Incorrect Expense Classifications

$ 29,445

2

Costs Not Related to Patient Care

(381,681)

3

Excess Compensation

(11,038)

4

Expense Reimbursements

(154)

5

Recalculation of Special Services

Cost Adjustment

85,468

(277,960)

DIETARY

1

Incorrect Expense Classifications

$ (1,051)

3

Excess Compensation

(2,391)

(3,442)

LAUNDRY AND HOUSEKEEPING

1

Incorrect Expense Classifications

$ (29,642)

2

Costs Not Related to Patient care

(2,674)

(32,316)

OPERATION AND MAINTENANCE OF PLANT

1

Incorrect Expense Classifications

$ (23,594)

2

Costs Not Related to Patient Care

(116,129)

6

Accrual Basis of Accounting

(432) (140,155)

ADMINISTRATIVE AND GENERAL

1

Incorrect Expense Classifications

$ 47,889

2

Costs Not Related to Patient Care

(62,473)

6

Accrual Basis of Accounting

(3,294)

7

costs Misclassified as Nurse Aide

Testing and Training

21,805

3,927

PROPERTY AND RELATED EXPENSES

1

Incorrect Expense Classifications

$ (50,306)

2

costs Not Related to Patient Care

(14,195)

8

Lack of Sufficient Documentation

(1,102)

9

Excess Depreciation

(49,430) (115,033)

Net Adjustment to Reimbursable Costs

$(539,069)

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ADJUSTMENT NUMBER
1

MAGNOLIA MANOR METHODIST NURSING CENTER EXPLANATION OF FIELD AUDIT ADJUSTMENTS
FOR THE YEAR ENDED JUNE 30, 1994

EXPLANATION

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 Billable Supplies Medical Records Expense Salaries and Employee Benefits Special Services Billable Supplies Cable Television Expense Salaries and Employee Benefits Waste Removal Expense Dietary Salaries and Employee Benefits Laundry and Housekeeping Salaries and Employee Benefits Operation and Maintenance of Plant Cable Television Expense Maintenance Expense Salaries and Employee Benefits Travel Expense waste Removal Expense Administrative and General Ad Valorem Tax Bond Issue Costs Communications Expense Liability Insurance Expense Medical Records Expense Travel Expense Property and Related Expenses Ad Valorem Tax Bond Issue Costs Communications Expense Liability Insurance Expense Maintenance Expense

$ (3,102) (332)
30,693 $ 27,259

$ 3,102 1,918
24,764 (339)

29,445

(1,051)

(29,642)

$ (1,918) 5,592
(24,764) (2,843) 339

(23,594)

$

(397)

(3,168)

24,195

24,084

332

2,843

47,889

$

397

3,168

(24,195)

(24,084)

(5,592)

(50,306)

Net Adjustment to Reimbursable Costs

$

0

5

ADJUSTMENT NUMBER
2

EXPLANATION (continued)

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 reimbursable costs. (HCFA 15-2102.3, 2104.4; DMA Policies and Procedures Section 902, 1002 .1 (k))

Items Advertising Allocation to Non-Patient Care Area Certificate of Need Expense Dental care Expense Donations Guest Dinner Expense Nurse Aide Training Overpayment Personal Vehicle Expenses Pharmacy Expenses Prescription Drugs Related Facility Expenses Scholarship Expense

$

(147)

(6,719)

(2,676)

(1,050)

(101)

(1,260)

(9,461)

(810)

(86,390)

(301,588)

(167,253)

(1,046)

$(578,501)

COST CENTER Routine Services Special Services Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General Property and Related Expenses
Total Adjustment to Reimbursable Costs

$ (1,349) (381,681) (2,674) (116,129) (62,473) (14,195)
$(578,501)

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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 guidelirtes, plus related employer's share of payroll taxes. (DMA Compensation Ceilings; HCFA 15-906)

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ADJUSTMENT NUMBER

EXPLANATION (continued)

Position Title

Total Compensation

Guideline Ceiling

Dietary Supervisor Payroll Taxes
Medical Director

$ 36,192 2,769
36,000

$ 33,971 2,599
24,962

Excess
$ (2,221) (170)
(11,038)

$ 74,961

$ 61,532

$ (13,429)

COST CENTER Special Services Dietary
Total Adjustment to Reimbursable Costs

$ (11,038) (2,391)
$ (13,429)

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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 Special Services

$

(154)

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 increase reimbursable costs for the net effect of the recalculation. (General Instructions to the Cost Report)

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ADJUSTMENT NUMBER

EXPLANATION (continued)

Special Service Pharmacy Medical Supplies

Adjustment Per Cost Report
$ (97,787) (18,928)

Recalculated Adjustment
$ (9,863) (21,384)

Audit Adjustment $ 87,924
(2,456)

$ 85,468

COST CENTER Special Services

$ 85,468

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ACCRUAL BASIS OF ACCOUNTING

Documentation examined during the audit showed that amounts recorded for certain expenses did not reflect actual amounts incurred for the period under review. Federal regulations provide that expenditures are recorded in the period in which they are incurred, regardless of when they are paid. This adjustment is made to decrease reimbursable costs claimed for expenses not applicable to the year under review. (HCFA 15-2302.1)

Adjustments to Balance Sheet Accounts:

Reimbursable Costs

June 30, 1993 Balance Accounts Payable

$ (3,726)

COST CENTER Operation and Maintenance of Plant Administrative and General
Net Adjustment to Reimbursable Costs

$

(432)

(3,294}

$ (3,726)

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

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ADJUSTMENT NUMBER

EXPLANATION (continued)
COST CENTER Administrative and General

$ 21,805

8

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)

COST CENTER Property and Related Expenses

$ (1,102)

9

EXCESS DEPRECIATION

Documentation examined during the audit in support of fixed assets and depreciation showed that either the property was not included in the proper class or depreciation was not calculated in accordance with DMA guidelines. DMA Policies and Procedures require the use of minimum required asset lives. This adjustment is made to reduce reimbursable costs claimed by the amount of depreciation expense claimed in excess of total allowable. (DMA Depreciation Guidelines, DMA Policies and Procedures Section 1002.l(k))

COST CENTER Property and Related Expenses

$ (49,430)

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

DEPARTMENT OF AUDITS
MEDICAID AND LocAL GOVERNMENT AUDITS DMSION
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
MANAGEMENT COMMENT LE!r'rER

MICHAEL A. PLANT
DIRECTOR (404) 656-2006

Georgia Department of Medical Assistance Atlanta, Georgia
and Management Officials of Magnolia Manor Methodist Nursing Center
We have audited the records and documentation supporting the cost report filed by Magnolia Manor Methodist Nursing Center 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. Payroll procedures did not include adequate use of documentary evidence.
2. Reimbursable costs claimed on the cost report included expenses of separate business entities owned by the provider.
3. Expenses were not properly classified in accordance with the OMA Chart of Accounts, causing numerous reclassification adjustments.
4. Items determined to be personal expenditures were included in reimbursable costs.
5. Expenses claimed on the cost report included items not related to patient care operations.
6. An excessive number, and amount, of audit adjustments were required to satisfactorily formulate an opinion on the Schedule of Reimbursable Costs.

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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 Magnolia Manor Methodist Nursing Center 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
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