GA 1\800 ~RI 31',,f3z. 1qq3-q4 STATE OF GEORGIA DEPARTMENT OF AUDITS 254 WASHINGTON STREET ATLANTA. GEORGIA 30334 AUDIT REPORT SCHEDULE OF REIMBURSABLE COSTS AND PATIENT DAY STATISTICS MARIETTA HEALTH CARE CENTER MARIETTA, GEORGIA MEDICAID PROVIDER NO. 00202507A FOR THE YEAR ENDED JUNE 30, 1994 GEORGIA DEPARTMENT OF MEDICAL ASSISTANCE MARIETTA HEALTH CARE CENTER - 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 6 APPENDIX MANAGEMENT COMMENT LETTER 9 CLAUDE L. VICKERS STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS 254 Washington Street, S.W-, Suite 214 Atlanta, Georgia 30334-8400 March 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 Beverly California Corporation, d/b/a Marietta Health Care 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 Beverly California Corporation, d/b/a Marietta Health Care Center. 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 Beverly California Corporation, d/b/a Marietta Health Care Center 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 Beverly California Corporation, d/b/a Marietta Health Care 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/js/bw vi MARIETTA HEALTH CARE 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 (OMA) 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, a reportable condition applicable to financial operations was identified and is described in the management letter included in the Appendix of this report. 1 MARIETTA HEALTH CARE 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 $1,741,931 $ (7,202) . $1,734,729 Special Services 126,031 (3,739) 122,292 Dietary 395,808 (588) 395,220 Laundry and Housekeeping 216,610 (243) 216,367 Operation and Maintenance of Plant 222,609 222,609 Administrative and General 384,148 11,583 395,731 Property and Related Expenses 306,150 (6,263) 299,887 Total Reimbursable Costs $3,393,287 $ (6,452) $3,386,835 PATIENT DAY STATISTICS 42,672 42,672 2 MARIETTA HEALTH CARE CENTER NOTES TO SCHEDULE FOR THE YEAR ENDED JUNE 30, 1994 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ENTITY INFORMATION Marietta Health Care Center is a 119-bed long-term health care facility located in Marietta, Georgia. The facility provides both skilled and intermediate care services to resident patients. The facility was owned by Beverly California Corporation and operated as a component of Beverly Enterprises, Inc., a chain organization which filed a Home Office Cost Report with DMA 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. NOTE 4: LEASED FACILITIES The land, buildings, and equipment used in health care operations were leased from Pickwith Manor Nursing Home, Inc. The cost of this lease was $4.43 per available bed per day for the year ended June 30, 1994. 3 MARIETTA HEALTH CARE CENTER 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 was renewed on July 1, 1990. 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 MARIETTA HEALTH CARE CENTER SUMMARY OF FIELD AUDIT ADJUSTMENTS FOR THE YEAR ENDED JUNE 30, 1994 ADJUSTMENT NUMBER REIMBURSABLE COSTS ROUTINE SERVICES 1 Costs Not Related to Patient Care $ (181) 2 Incorrect Expense Classifications (7,021) $ (7,202) SPECIAL SERVICES 1 Costs Not Related to Patient Care $ (72,991) 3 Recalculation of Special Services Cost Adjustment 70,252 4 Accrual Basis of Accounting (1,000) (3,739) DIETARY 1 Costs Not Related to Patient Care $ (78) 2 Incorrect Expense Classifications (510) (588) LAUNDRY AND HOUSEKEEPING 1 Costs Not Related to Patient Care (243) ADMINISTRATIVE AND GENERAL 1 Costs Not Related to Patient Care $ (185) 2 Incorrect Expense Classifications 13,794 5 Alloc~tions from Home Office (2,026) 11,583 PROPERTY AND RELATED EXPENSES 2 Incorrect Expense Classifications (6,263) Net Adjustment to Reimbursable Costs $ (6,452) 5 ADJUSTMENT NUMBER MARIETTA HEALTH CARE CENTER EXPLANATION OF FIELD AUDIT ADJUSTMENTS FOR THE YEAR ENDED JUNE 30, 1994 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 reimbursable costs. (HCFA 15-2102.3, 2160; OMA Policies and Procedures Section 902, 1002.l(k)) Items Association Dues (50%) Charitable Contributions Marketing Expense Non-Patient Outing Prescription Drugs Workers' Compensation Claims not Filed $ (38) (100) (148) (60) (72,831) (501) $ (73,678) COST CENTER Routine Services Special Services Dietary Laundry and Housekeeping Administrative and General $ (181) (72,991) (78) (243) (185) Total Adjustment to Reimbursable Costs $ (73,678) 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. (OMA Policies and Procedures, Appendix D) 6 ADJUSTMENT NUMBER EXPLANATION (continued) COST CENTER Routine Services Medical Records Expense Dietary Classified Advertising Administrative and General Ad Valorem Tax Classified Advertising General Liability Insurance Medical Records Expense Tax Consulting Property and Related Expenses Ad Valorem Tax General Liability Insurance Tax Consulting Net Adjustment to Reimbursable Costs $ (7,021) (510) $ (202) 510 5,953 7,021 512 13,794 $ 202 (5,953) (512) (6,263) $ 0 3 RECALCULATION OF SPECIAL SERVICES COST ADJUSTMENT The provider received revenues from the sa.le 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, total charges, Medicaid charges, and Medicaid patient days. 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) s12ecial Service Pharmacy Speech Therapy Oxygen Medical Supplies Other Special Services Adjustment Per Cost Re12ort $ (85,185) (136,968) (63,600) (16,432) (57) Recalculated Adjustment $ (14,483) (136,981) (63,633) (16,465) (428) Audit Adjustment $ 70,702 (13) (33) (33) (371) $ 70,252 COST CENTER Special Services $ 70,252 7 ADJUSTMENT NUMBER EXPLANATION (continued) 4 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 $ (1,000) COST CENTER Special Services $ (1,000) 5 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 Medicaid Nursing Hom~ 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 Administrative and General Pooled Costs Corporate West Southeastern Region $ (1,498) (528) Net Adjustment to Reimbursable Costs $ (2,026) 8 DEPARTMENT OF AUDITS MEDICAID AND LOCAL GOVERNMENT AUDITS DMSION 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 CLAUDE L. VICKERS STATE AUDITOR (404) 656-2174 MANAGEMENT COMMENT LETTER Georgia Department of Medical Assistance Atlanta, Georgia and Management Officials of Marietta Health Care Center MICHAEL A. PLANT DIRECTOR (404) 656-2006 We have audited the records and documentation supporting the cost report filed by Marietta Health Care 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, a condition was noted that we believe is a weakness which should be addressed by management. In our audit we found that ancillary supply charges were not adequately documented. 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 ~304 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 finding 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 Marietta Health Care 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 9