Audit report, for the year ended June 30, 1998, Accord Health Care Corporation, Home Office, Nursing Facilities Services Program [June 30, 1998]

TABLE OF CONTENTS

LETTER OF TRANSMITTAL

i

INTRODUCTION

1

FINDINGS AND RECOMMENDATIONS

6

Summary of Audit Findings Affecting Allowable Costs 10

11 Schedule of Allowable Costs

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Summary ofAllocations to Chain Components

12

RUSSELLW.IIINTON
STATE AUDITOR

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535

July 14, 1999

Members ofthe Board of Medical Assistance, and The Honorable Dr. William R. Taylor, Commissioner Department ofMedical Assistance 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit of Accord Health Care Corporation, a home office with chain components participating in the Nursing Facility Services Program for the year ended June 30, 1998. This report is intended to be used solely in connection with the administration of the Georgia Department of Medical Assistance Nursing Facility Services Program and is not to be used or relied upon for any other purpose.
Respectfully Submitted,
~LcJ.~ Russell W. Hinton State Auditor
RWH/ks/bw

1998 Audit Report: Accord Health Care Corporation

1

INTRODUCTION

General Information

The Georgia Medical Assistance Program (Medicaid) is administered by the Georgia Department of Medical Assistance and is jointly funded by the State of Georgia and the federal government. Medicaid pays health care providers for furnishing health care services to individuals or families with low income and limited resources. The Department of Medical Assistance has established specific payment guidelines and limitations for each covered medical service.
Through the Nursing Facility Services Program, Medicaid pays for care in institutional settings for recipients who are unable to remain at home or in the community. Nursing homes are paid for this service using rates calculated from Nursing Home Cost Reports submitted by each provider. These cost reports include fmancial, patient census, and other information.
A home office such as Accord Health Care Corporation does not provide medical services directly to individuals. Instead, a home office provides a variety ofadministrative and other support services to other organizations. The organizations receiving services from the home office are known as chain components. Because a home office does not provide medical services directly to individuals, Medicaid does not pay a home office directly for the services provided by the home office. However, a chain component may include the cost of services furnished by its home office in the Nursing Home Cost

2

Nursing Facility Services Program

HomeOfflce Information
Audit Objectives

Report it submits to the Department of Medical Assistance. The costs that an individual chain component may include in its costs report are determined by an allocation ofthe home office's allowable costs shown on the Home Office Cost Report submitted to the Department of Medical Assistance. The Home Office Cost Report includes fmancial, statistical, and other information. Information included in both the Nursing Home Cost Report and the Home Office Cost Report is subject to audit by the Department of Medical Assistance or its agents. In an agreement with the Department of Medical Assistance, the Department of Audits and Accounts has accepted the responsibility ofauditing Medicaid providers and home offices.
Accord Health Care Corporation filed a Home Office Cost Report with the Georgia Department of Medical Assistance for the year ended June 30, 1998. The Home Office Cost Report listed three chain components, one of which is a nursing home in Georgia. In addition to the audit of the home office cost report, we have completed an audit ofFt. Gaines Nursing Home, Inc.
The purpose of this audit was to determine whether Accord Health Care Corporation maintained adequate documentation to support the allowable costs reported in its Home Office Cost Report for the year ended June 30, 1998; and to determine whether Accord Health Care Corporation complied with the federal and state laws, regulations,

1998 Audit Report: Accord Health Care CorP.or.a.ti.oo.D

3

Scope and Methodology

policies and procedures for the Nursing Facility Services Program in effect for that period. The specific objectives of this audit were to:



detennine if allowable costs reported in the Home

Office Cost Report are reasonable and allowable, in all material respects, in accordance with federal a~d

state laws, regulations, policies and procedures

governing the Georgia Nursing Facility Services

Program;



determine if allowable costs have been properly

allocated among the components of the chain

organization; and



recommend appropriate action based on the results of

our audit.

To accomplish these objectives, we performed a limited review ofthe home office's internal control structure to the extent necessary to plan our audit. We interviewed home office personnel and examined records and documentation to determine the adequacy ofamounts and disclosures included in the Home Office Cost Report. We also reviewed, on a test basis, evidence supporting these amounts and disclosures . and assessed the accounting principles used and significant estimates made by management. We evaluated the tested transactions and accounts for compliance with cost reporting principles included in the Health Care Financing Administration

4

Nursing Facility Services Program

Provider Reimbursement Manual (HCFA Pub~ 15-1) and DMA Policies and Procedures/or Nursing Facility Services.
The Department ofAudits and Accounts is responsible for providing the Department ofMedical Assistance with infonnation regarding the accuracy of cost infonnation for Accord Health Care Corporation and the allocation of its costs among its chain components for the year ended June 30, 1998. As a result of our audit, we have recommended that the Department of Medical Assistance make adjustments to the allowable costs claimed by Accord Health Care Corporation. The allocation of these audit adjustments among the chain components is shown in the Summary of Allocations to Chain Components on page 12. In our separate audits of the chain components, we have recommended that the Department of Medical Assistance adjust the allowable costs claimed by each chain component for its share of the adjustments to the home office's allowable costs.
Ifthe Department ofMedical Assistance implements the recommendations in this report and the individual chain component audit reports by adjusting the allowable costs used in calculating the billing rate of each individual nursing home provider, that provider may appeal to the Department of Medical Assistance for reconsideration of the audit fmdings. For this reason, we have not included a response from the home office in our report. However, we have discussed the contents of this report with the home office and have considered its responses when preparing the report. In all other

1998 Audit Report: Accord Health Care Corporation

5

respects, this audit was conducted in accordance with generally accepted government auditing standards.

6

Nursing Facility Services Program .

Finding No.1

FINDINGS AND RECOMMENDATIONS

Costs Applicable to Specific Chain Components

Allowable costs claimed by the home office included expenses applicable to specific chain components. Federal regulations provide that allowable costs incurred for the benefit of, or directly attributable to, a specific provider must be allocated directly to the chain entity for which they were incurred. We recommend that the home office implement policies and procedures to ensure that costs applicable to specific chain components are directly allocated to the individual chain components. We recommend that the Department of Medical Assistance make the following adjustment to reclassify the costs applicable to a specific chain component from pooled costs to directly allocated costs..
(HCFA Pub. 15-1 Section 2150.3B)

ALLOWABLE COSTS Directly Allocated Costs Legal Fees Physician Costs Pooled Administrative Expenses Chain Component Costs

$

4,382

10,000 $

14,382 (14,382)

Net Adjustment to Allowable Costs

$'======:!lQ=

Finding No.2

Costs Not Related to Patient Care
Allowable costs claimed 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 allowable costs. We recommend that the home office implement policies and procedures to ensure that expenses claimed in the cost report do not include items not related to patient care. We recommend that the Department ofMedical Assistance make the following adjustment to remove the non-patient care expenses from allowable costs.
(HCFA Pub. 15-1 Sections 2102.1, 2138; DMA Policies and Procedures Sections 1002.1(k), 1002.2)

1998 Audit Report: Accord Health Care Corp_or_a_t_io_D

7

ITEMS Dues Expense Vehicle Expense
ALLOWABLE COSTS Pooled Administrative Expenses

$

(1,278)

(14,513)

$

(] 579])

$

(]579])

Finding No.3

Excess Compensation
Allowable costs claimed 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. We recommend that the home office implement policies and procedures to ensure that compensation to its employees which exceeds the DMA maximum limitations is excluded from allowable costs claimed. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs by the amount of compensation paid in excess ofthe DMA guidelines, plus related employer's share ofpayroll taxes. (DMA Compensation Ceilings; HCFA 15-906)

Position Title
President Payroll Taxes
Vice-President Payroll Taxes
Controller Payroll Taxes
Accounts Payable Manager Payroll Taxes

Total Compensation

Guideline Ceiling

Excess

$ 125,000 $ 19,860 $ (105,140)

5,867

1,519

(4,348)

100,000

16,560

(83,440)

5,505

1,267

(4,238)

26,743

6,180

(20,563)

2,027

473

(1,554)

18,291

6,180

(12, Ill)

1,384

473

(911)

$ 284817 $ 52512 $ (232 305)

8

Nursing Facility Services Program

ALLOWABLE COSTS Pooled Administrative Expenses Adjustment

$ (232305)

Finding No.4

Lack ofSufficient Documentation

Some of the expenses included in allowable costs were not supported by adequate documentary evidence. Federal regulations provide that cost information as developed by the pr.ovider must be current, accurate, and in sufficient detail to support payments made for services rendered to beneficiaries. We recommend that the home office implement policies and procedures to ensure that all expenses shown on the cost report are supported by sufficient documentation. We recommend that the Department ofMedical Assistance make the following adjustment to remove the undocumented expenses from allowable costs.
(HCFA Pub. 15-1 Section 2304)

ALLOWABLE COSTS Pooled Administrative Expenses

$,===::!(~86~9]!:!:8==)

Finding No.5

Related Party Costs
Documentation examined during the audit showed that the home office paid for consultant 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 costs of the home office at the cost to the related organization. We recommend that the home office implement policies and procedures to ensure that only the costs incurred by the related organization to furnish services, facilities, and supplies are included in allowable costs. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs to the related party's cost.
(HCFA Pub. 15-1 Section 1000)

1998 Audit Report: Accord Health Care CorP.o.r...a_t.I"..o.D..
ALLOWABLE COSTS Pooled Administrative Expenses

9
$'====!(l::!:1~Q=3=15=",=)

10

Nursing Facility Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS

FINDING
NUMBER

ALLOWABLE COSTS

Directly Allocated Costs

1

Costs Applicable to Specific Chain

Components

$

Pooled Administrative Expenses

1

Costs Applicable to Specific Chain

Components

2

Costs Not Related to Patient Care

3

Excess Compensation

4

Lack of Sufficient Documentation

5

Related Party Costs

$ (14,382) (15,791)
(232,305) (86,918) (10,315)

Total Audit Findings Affecting Allowable Costs

$

14,382
(359,711) (345329)

1998 Audit Report: Accord Health Care Corporation

11

SCHEDULE OF ALLOWABLE COSTS

Directly Allocated Costs
Pooled Costs Administrative Expenses
Total Allowable Costs

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS 0

$ 14,382 $ 14,382

$ 497,655

(359,711)

137,944

$ 497655 $ (345329) $ 152326

12

Nursing Facility Services Program

SUMMARY OF ALLOCATIONS TO CHAIN COMPONENTS

GEORGIA NURSING HOMES Ft. Gaines Nursing Horne, Inc.

ALLOCATION OF ADmSTMENTS TO:

DIRECTLY ALLOCATED
COSTS

POOLED COSTS:

ALLOCATION STATISTICS

ADMINISTRATIVE EXPENSES

$

52,595 $

(60,291)

TOTAL OTHER COMPONENTS $

TOTAL ALLOCATION

$

14,382 14,382 $

4 52,599 $

(299,420) (359,711)