Audit report, schedule of reimbursable costs and patient day statistics, Shepherd Hills Health Care Center, Inc., Lafayette, Georgia, Medicaid provider no. 00142964A, 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 ARD
PATIEHT DAY STATISTICS SHEPHERD HILLS HEALTH CARE CENTER, INC.
LAFAYETTE, GEORGIA MEDICAID PROVIDER NO. 00142964A FOR THE YEAR ENDED JUNE 30, 1994 GEORGIA DEPARTMENT OF MEDICAL ASSISTANCE

SHEPHERD HILLS HEALTH CARE CENTER, 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

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 Shepherd Hills Health Care Center, 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 Shepherd Hills Health care Center, 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 Shepherd Hills Health Care Center, Inc., 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 Shepherd Hills Health Care Center, 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.
Respectfully submitted,
~~
Claude L. Vickers State Auditor CLV/kw/by
vi

SHEPHERD BILLS HEALTH CARE CENTER, INC. SCOPE OF THE AUDIT
FOR THE YEAR ENDED JURE 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 DMA 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

SHEPHERD HILLS HEALTH CARE CENTER, 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

$1,259,932

Special Services

135,487

Dietary

315,819

Laundry and Housekeeping

233,390

Operation and Maintenance of Plant

185,231

Administrative and General 295,248

Property and Related Expenses

248,739

OFFICE

FIELD

AUDIT

AUDIT

ADJUSTMENTS ADJUSTMENTS

ADJUSTED TOTALS

$ (56,419) $1,203,513

4,342

139,829

(1,899)

313,920

(3,850)

229,540

(1,857) 22,069

183,374 317,317

(778)

247,961

Total Reimbursable Costs $2,673,846

$ (38,392) $2,635,454

PATIENT DAY STATISTICS

38,379

38,379

2

SHEPHERD HILLS HEALTH CARE CENTER, INC. NOTES TO SCHEDULE
FOR THE YEAR ENDED JUNE 30, 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ENTITY INFORMATION
Shepherd Hills Health Care Center, Inc., is a 112-bed long-term health care facility located in Lafayette, Georgia. The facility provides both skilled and intermediate care services to resident patients. The facility was 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 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 ADJUS~S 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 Pruitt Properties, Inc., a related party. The cost of this lease was $6.07 per available bed per day for the year ended June 30, 1994. An adjustment was made during the preparation of the cost report to reduce the cost of the lease to $5.09 per available bed per day, the actual cost to the related party.
3

SHEPHERD BILLS HEALTH CARE CENTER, INC. SUMMARY OF FIELD AUDIT ADJUSTMENTS FOR THE YEAR ENDED JUNE 30, 1994

ADJUSTMENT NUMBER

REIMBURSABLE COSTS

ROUTINE SERVICES

1

Related Party Costs

$

(372)

2

Lack of Sufficient Documentation

(11,212)

3

Incorrect Expense Classifications

(53,464)

4

Allocations from Home Office

(4,066)

5

Costs Misclassified as Nurse Aide Testing

and Training

12,695 $ (56,419)

SPECIAL SERVICES

1

Related Party Costs

$ (9,840)

2

Lack of Sufficient Documentation

(174)

3

Incorrect Expense Classifications

18,387

6

Recalculation of Special Services

Cost Adjustment

(4,031)

4,342

DIETARY

1

Related Party Costs

$

(36)

4

Allocations from Home Office

(1,252)

7

Fixed Asset Purchases Claimed as Expense

(611)

(1,899)

LAUNDRY AND HOUSEKEEPING

1

Related Party Costs

8

Expense Reimbursements

$

(20)

(3,830)

(3,850)

OPERATION AND MAINTENANCE OF PLANT

1

Related Party Costs

2

Lack of Sufficient Documentation

$

(1)

(1,856)

(1,857)

ADMINISTRATIVE AND GENERAL

1

Related Party Costs

$

(7)

2

Lack of Sufficient Documentation

(532)

3

Incorrect Expense Classifications

34,933

4

Allocations from Home Office

(9,433)

8

Expense Reimbursements

(651)

9

Costs Not Related to Patient Care

(2,445)

10

Expenses Claimed by Another Chain Component 204

22,069

4

SHEPHERD HILLS HEALTH CARE CENTER, INC. SUMMARY OF FIELD AUDIT ADJUSTMENTS FOR THE YEAR ENDED JUNE 30, 1994

ADJUSTMENT NUMBER

REIMBURSABLE COSTS (continued)

PROPERTY AND RELATED EXPENSES

3

Incorrect Expense Classifications

$

144

4

Allocations from Home Office

4

7

Fixed Asset Purchases Claimed as Expense

25

11

Excess Depreciation

(951)

(778)

Net Adjustment to Reimbursable Costs

$ (38,392)

5

ADJUSTMENT NUMBER
1

SHEPHERD BILLS HEALTH CARE CENTER, INC. EXPLANATION OF FIELD AUDIT ADJUSTMENTS
FOR THE YEAR ENDED JUNE 30, 1994

EXPLANATION

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

$

(372)

(9,840)

(36)

(20)

(1)

(7)

Total Adjustment to Reimbursable Costs

(10,276)

2

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 Routine Services Special Services Operation and Maintenance of Plant Administrative and General

$ (11,212) (174)
(1,856) (532)

Total Adjustment to Reimbursable Costs

$ (13,774)

6

ADJUSTMENT NUMBER
3

EXPLANATION (continued)

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 Physical Therapy Costs Ward Clerk Costs Special Services Cable Television Physical Therapy Costs Administrative and General Cable Television Rent Ward Clerk Costs Property and Related Expenses Rent

$ (15,823) (37,641) $ (53,464)

$ 2,564 15,823

18,387

$ (2,564) (144)
37,641

34,933

144

Net Adjustment to Reimbursable Costs

$

0

4

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 .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 Services Directly Allocated Costs Administrative and General Directly Allocated Costs Pooled Costs Allocation Statistics Administrative Expenses Non-Capital Related Interest Expense

$ (4,066)

(1,252)

$ (5,573)

(46) (4,763)

949

(9,433)

7

ADJUSTMENT NUMBER

EXPLANATION (continued)
Property and Related Expenses Pooled Capital Related Interest Expense
Net Adjustment to Reimbursable Costs

4
$ (14,747)

5

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)

COST CENTER Routine Services

$ 12,695

6

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

Special Service Physical Therapy Pharmacy Speech Therapy Occupational Therapy Medical Supplies

Adjustment Per Cost Report
$ (65,330) (47,573)
(116,879) (179,029)
(5,606)

Recalculated Adjustment $ (78,657) (39,319) (116,710) (178,749) (5,013)

Audit Adjustment $ (13,327)
8,254 169 280 593

$ (4,031)

8

ADJUSTMENT NUMBER

EXPLANATION (continued)
COST CENTER Special Services

$ (4,031)

7

FIXED ASSET PURCHASES CLAIMED AS EXPENSE

Reimbursable costs claimed in the cost report included purchases of assets which are considered to be capital additions to property under generally accepted accounting principles. The Uniform Chart of Accounts issued by OMA provides for inclusion of such assets in property accounts. This adjustment is made to reduce reimbursable costs by the amount of purchased assets claimed as expense and to increase reimbursable costs by depreciation allowable. (HCFA 15-108; OMA Policies and Procedures, Appendix D)

COST CENTER Dietary Cost of Major Moveable Equipment Property and Related Expenses Allowable Depreciation Expense

$

(611)

25

Net Adjustment to Reimbursable Costs

$

(586)

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

$ (3,830) (651)

Total Adjustment to Reimbursable Costs

$ (4,481)

9

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

9

ADJUSTMENT NUMBER

EXPLANATION (continued)

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; OMA Policies and Procedures Section 1002.l(k))

Items Directory Advertising Late Charges Replacement of Stolen Money

$ (1,526) (549) (370)

$ (2,445)

COST CENTER Administrative and General

$ (2,445)

10

EXPENSES CLAIMED BY ANOTHER CHAIN COMPONENT

Reimbursable costs claimed by another chain component included travel 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 component. (HCFA 15-2304)

COST CENTER Administrative and General

$

204

COMPONENT FACILITY (1) Fort Oglethorpe Nursing Center

$

(204)

(1) An appropriate audit adjustment has been made to the reimbursable costs claimed of the other chain component.

11

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

10

ADJUSTMENT NUMBER

EXPLANATION (continued}

adjustment is made to reduce reimbursable costs claimed by the amount of depreciation expense claimed in excess of total allowable. (OMA Depreciation Guidelines)

COST CENTER Property and Related Expenses

$

(951)

11

CIAUDE 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 LEr:rER

MICHAEL A. PLANT
DIRECTOR (404) 656-2006

Georgia Department of Medical Assistance Atlanta, Georgia
and Management Officials of Shepherd Hills Health care Center, Inc.
we have audited the records and documentation supporting the cost report filed by Shepherd Hills Health Care Center, 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, conditions were noted that we believe are weaknesses whicn should be addressed by management. In our audit we found that:
1. Numerous errors in the level of care classification of patients were found during the review of census records.
2. An excessive dollar amount of expenses were not properly classified in accordance with the DMA 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.
5. 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.

12

7. Accounts receivable credit balances at June 30, 1994, totalling $53,046.51 had not been refunded to the Department of Medical Assistance.
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 Shepherd Hills Health Care Center, 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