Audit report, schedule of reimbursable patient day statistics, Nursecare of Atlanta, Inc., Atlanta, Georgia, Medicaid provider no. 00142183A, 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 NURSECARE OF ATLANTA, INC.
ATLANTA, GEORGIA MEDICAID PROVIDER NO. 00142183A FOR THE YEAR ENDED JUNE 30, 1994 GEORGIA DEPARTMENT OF MEDICAL ASSISTANCE

NURSECARE OF ATLANTA, INC. - 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

4

EXPLANATION OF FIELD AUDIT ADJUSTMENTS

6

APPENDIX

MANAGEMENT COMMENT LETTER

12

CIAUDE L. VICKERS
STATE AUDITOR (404) 6562174

DEPARTMENT OF AUDITS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
December 22, 1994

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 Nursecare of Atlanta, Inc., 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 Nursecare of Atlanta, Inc. 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 Nursecare of Atlanta, Inc.

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 Nursecare of Atlanta, Inc., 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.

CLV/lb/by

Claude L. Vickers State Auditor

vi

NURSECARE OF ATLANTA, INC. 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, a reportable condition was identified in controls related to compliance with Medicaid policies, procedures, laws and/or regulations. This weakness is described in the management letter included in the Appendix of this report.
l

NURSECARE OF ATLANTA, INC. SCHEDULE OF REIMBURSABLE COSTS AND
PATIENT DAY STATISTICS FOR THE YEAR ENDED JUNE 30, 1994

REIMBURSABLE COSTS

PER COST REPORT
AS FILED

Routine Services

$2,448,296

Special Services

248,338

Dietary

636,496

Laundry and Housekeeping

396,781

Operation and Maintenance of Plant

350,239

Administrative and General

700,409

Property and Related Expenses

507,196

OFFICE

FIELD

AUDIT

AUDIT

ADJUSTMENTS ADJUSTMENTS

ADJUSTED TOTALS

$ (41,135) $2,407,161

(32,026)

216,312

(5,271)

631,225

1,167

397,948

3,397 (26,524)

353,636 673,885

(44,586)

462,610

Total Reimbursable Costs $5,287,755

$ (144,978) $5,142,777

PATIENT DAY STATISTICS

76,925

1,172

78,097

2

NURSECARE OF ATLANTA, INC. NOTES TO SCHEDULE
FOR THE YEAR ENDED JUNE 30, 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ENTITY INFORMATION
Nursecare of Atlanta, Inc., is a 220-bed long-term health care facility located in Atlanta, Georgia. The facility provides both skilled and intermediate care services to resident patients. The facility was operated as a freestanding nursing home 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.
3

NURSECARE OF ATLANTA, INC. SUMMARY OF FIELD AUDIT ADJUSTMENTS
FOR THE YEAR ENDED JUNE 30, 1994

ADJUSTMENT NUMBER

REIMBURSABLE COSTS

ROUTINE SERVICES

1

Accrual Basis of Accounting

$

952

2

Incorrect Expense Classifications

(411)

3

Costs Not Related to Patient Care

(58)

4

Liabilities Not Liquidated

(41,618) $ (41,135)

SPECIAL SERVICES

1

Accrual Basis of Accounting

$

793

2

Incorrect Expense Classifications

(770)

3

costs Not Related to Patient Care

(1,602)

5

Recalculation of Special Services Cost

Adjustment

(30,447)

(32,026)

DIETARY

1

Accrual Basis of Accounting

$

63

6

Excess Compensation

(4,556)

7

Lack of Sufficient Documentation

(778)

(5,271)

LAUNDRY AND HOUSEKEEPING

1

Accrual Basis of Accounting

1,167

OPERATION AND MAINTENANCE OF PLANT

1

Accrual Basis of Accounting

$

237

2

Incorrect Expense Classifications

3,160

3,397

ADMINISTRATIVE AND GENERAL

1

Accrual Basis of Accounting

$

85

2

Incorrect Expense Classifications

34,354

3

Costs Not Related to Patient Care

(558)

6

Excess Compensation

(60,161)

8

Investment Income Offset

(244)

(26,524)

PROPERTY AND RELATED EXPENSES

1

Accrual Basis of Accounting

$ (265)

2

Incorrect Expense Classifications

(36,333)

9

Excess Depreciation

(6,024)

10

Gain on Sale of Assets

(1,964)

(44,586)

Net Adjustment to Reimbursable Costs

$(144,978)

4

NURSECARE OF ATLANTA, INC. SUMMARY OF FIELD AUDIT ADJUSTMENTS
FOR THE YEAR ENDED JUNE 30, 1994

ADJUSTMENT NUMBER

PATIENT DAY STATISTICS

11

Increase in Patient Day Statistics

1,172

5

ADJUSTMENT NUMBER
1

NURSECARE OF ATLANTA, INC. EXPLANATION OF FIELD AUDIT ADJUSTMENTS
FOR THE YEAR ENDED JUNE 30, 1994

EXPLANATION

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 increase reimbursable costs claimed for expenses applicable to the year under review. (HCFA 15-2302.1)

Adjustments to Balance Sheet Accounts:

Reimbursable Costs

June 30, 1994 Balance Accounts Payable Cash Inventory Payroll Taxes Payable Prepaid Insurance

$ 1,104 1,254 221 718 (265)

Net Adjustment to Reimbursable Costs

$ 3,302

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

$

952

793

63

1,167

237

85

(265)

$ 3,032

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)

6

ADJUSTMENT NUMBER

EXPLANATION (continued}
COST CENTER Routine Services Medical Waste Disposal Special Services Forms Operation and Maintenance of Plant Maintenance Contracts Medical waste Disposal Administrative and General Forms Liability Insurance Expense Licenses and Fees Maintenance Contracts Property and Related Expenses Liability Insurance Expense Licenses and Fees
Net Adjustment to Reimbursable Costs

$

( 411)

(770)

$ 2,749 411

3,160

$

770

23,182

13,151

(2,749}

34,354

$ (23,182) (13,151}

(36,333}

$

0

3

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 15-2102.1, 2122.2; OMA Policies and Procedures Section 902, 1001.2(A)&(F))

Items Association Dues (50%) Donations Penalties Political Contributions VA Patient Physician Care

$

(106)

(50)

(102)

(300)

(1,660)

$ (2,218)

COST CENTER Routine Services Special Services Administrative and General
Total Adjustment to Reimbursable Costs

$

( 58)

(1,602)

(558)

$ (2,218)

7

ADJUSTMENT NUMBER
4

EXPLANATION (continued)

LIABILITIES NOT LIQUIDATED

Liabilities shown on Schedule C of the cost report for June 30, 1993, included amounts which had not been paid at June 30, 1994. Federal regulations provide that short term liabilities must be liquidated within one year after the end of the cost reporting period in which the liability was incurred and must be made by check or other negotiable instrument, cash or legal transfer of other assets. Furthermore, where the liability is not liquidated within the 1-year time limit or does not qualify under the exceptions specified in HCFA 15-2305.1, the cost incurred for the related goods and services is not allowable in the cost reporting period when the liability is incurred, but is allowable in the cost reporting period when the liquidation of the liability occurs. This adjustment is made to reduce reimbursable costs for the expense relating to the unliquidated liability. (HCFA 15-2305A)

COST CENTER Routine services

$ (41,618)

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, total charge~, Medicaid charges, total patient days, 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 decrease reimbursable costs for the net effect of the recalculation. (General Instructions to the Cost Report)

Special Service Physical Therapy Pharmacy Occupational Therapy Medical Supplies

Adjustment Per cost RePQrt
$ (97,008) (40,483)
(176,130) (46,575)

Recalculated Adjustment
$ (97,050) (68,362)
(178,861) (46,370)

Audit

Adjustment

$

(42)

(27,879)

(2,731)

205

$ (30,447)

8

ADJUSTMENT NUMBER

EXPLANATION (continued)
COST CENTER Special Services

$ (30,447)

6

EXCESS COMPENSATION

Reimbursable costs claimed on the cost report included compensation to employees which exceeded OMA 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 OMA guidelines, plus related employer's share of payroll taxes. (OMA Compensation ceilings; HCFA 15-906)

Position Title

Total Compensation

Guideline Ceiling

Excess

Dietary Supervisor FICA Taxes
Office Supervisor FICA Taxes
Director FICA Taxes

$ 38,203 2,923
36,381 2,783
52,149 3,989

$ 33,971 2,599
31,148 2,383 1,496 114

$ (4,232) (324)
(5,233) (400)
(50,653) (3,875)

$136,428

$ 71,711

$ (64,717)

COST CENTER Dietary Administrative and General
Total Adjustment to Reimbursable Costs

$ (4,556) (60,161}
$ (64,717)

7

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)

9

ADJUSTMENT NUMBER

COST CENTER Dietary

EXPLANATION (continued)

$

(778)

8

INVESTMENT INCOME OFFSET

Documentation examined during the audit showed that the provider earned investment income. Federal regulations provide that interest expense must be reduced by investment income. This adjustment is made to reduce reimbursable costs by the amount of investment income offset against interest expenses. (HCFA 15-202.2)

COST CENTER Administrative and General

$

(244)

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. OMA 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. (OMA Depreciation Guidelines, OMA Policies and Procedures section 1002.l(k))

COST CENTER Property and Related Expenses

$ (6,024)

10

GAIN ON SALE OF ASSETS

Documentation examined during the audit showed that the provider recorded a gain of $1,964 from the sale of fixed assets, the cost of which was included in reimbursable costs claimed. Federal regulations provide that the amount of gain included in determination of allowable costs is limited to the amount of depreciation previously included in allowable costs. This adjustment is made to reduce reimbursable costs claimed by the amount of expense reimbursements received. (HCFA 15-130)

COST CENTER Property and Related Expenses

$ (1,964)

10

ADJUSTMENT NUMBER
11

EXPLANATION (continued)
PATIENT DAY STATISTICS
Census records examined during the audit showed that the nursing home had 78,097 patient days of service rather than the 76,925 shown on the cost report. The adjustment of 1,172 days has been made to correct the statistical information.

11

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 LETTER

MICHAEL A. PLANT
DIRECTOR (404) 656-2006

Georgia Department of Medical Assistance Atlanta, Georgia
and Management Officials of Nursecare of Atlanta, Inc.
We have audited the records and documentation supporting the cost report filed by Nursecare of Atlanta, Inc., 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 patient trust fund ledgers were not properly maintained. The total of the individual patient's balances was not reconciled to the assets of the patient trust fund.
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 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
12

Nursecare of Atlanta, Inc., 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
13