Audit report, for the year ended June 30, 1998, Appling Nursing Home, Medicade provider no. 00140093A, Nursing Facilities Services Program [June 30, 1998]

TABLE OF CONTENTS

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6

Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 12

Schedule of Allowable Costs and Patient Day Statistics

13

Report Prepared By:
State ofGeorgia Department ofAudits and Accounts Medicaid and Local Government Audits Division
254 Washington Street, S. w., Suite 322
Atlanta, Georgia 30334-8400 (404) 656-2006
Michael A. Plant, Director

RUSSELL W. HINTON
STATE AUDITOR

DEPARTMENT OF AUDITS AND ACCOUNTS
MEDICAID AND LOCAL GOVERNMENT AUDITS
254 Washington Street, S.W., Suite 322 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535
July 18, 1999

MICHAEL A. PLANT
DIRECTOR

Members of the 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 Appling Nursing Home, provider number 00140093A, a participant 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,
~LJ.~ Russell W. Hinton State Auditor

RWH/gl/ds

1998 Audit Report: Appling Nursing Home

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 financial, patient census, and other information. Information included in the Nursing Home 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.

Provider Information

Appling Nursing Home, a 3l-bed long-term health care facility located in Baxley, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facility Services Program. The facility provides both skilled and intermediate care services to resident patients. The facility is owned by Baxley Appling County Housing Authority operated both

2

Nursing Facility Services Program

Appling General Hospital and Appling Nursing Home In separate physical facilities during the year under review.

Audit Objectives

The purpose of this audit was to determine whether Appling Nursing Home maintained adequate documentation to support the allowable costs and patient day statistics reported in its Nursing Home Cost Report for the year ended June 30, 1998; and to determine whether Appling Nursing Home complied with the federal and state laws, regulations, policies and procedures for the Nursing Facility Services . Program in effect for that period. The specific objectives of this audit were to:



determine if allowable costs reported in the Nursing

Home Cost Report are reasonable and allowable, in

all material respects, in accordance with federal and

state laws, regulations, policies and procedures

governing the Georgia Nursing Facility Services

Program;



compare patient day statistics included in the cost

report to provider records to determine if the patient

day statistics are accurately reported; and

determine if the provider meets the requirements for classification as a hospital-based nursing home outlined in DMA Policies and Procedures for Nursing Home Facility Services, Section 1002.1(g); and

1998 Audit Report: Appling Nursing Home

3



recommend appropriate action based on the results

of our audit.

Scope and Methodology

To accomplish these objectives, we performed a limited review of the provider's internal control structure to the extent necessary to plan our audit. We interviewed provider personnel and examined records and documentation to determine the adequacy of amounts and disclosures included in the Nursing Home 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 Provider Reimbursement Manual (HCFA Pub. 15-1) and DMA Policies and Procedures for Nursing Facility Services.
In accordance with Section 1002 of Policies and Procedures for Nursing Facility Services, the Department of Medical Assistance has calculated the payment rate for Appling Nursing Home using a method often called the "Dodge Index System. Under the Dodge Index system, reasonable construction and asset acquisition costs are used in calculating the payment rate rather than the actual costs incurred by the nursing home for property costs such as depreciation and amortization; capital-related interest expense; and lease expense. Because these property costs are not considered by the Department of Medical. Assistance when calculating the payment rate for Appling Nursing Home, our audit did not include a review of these costs.

4

Nursing Facility Services Program

However, because property taxes and insurance are used by the Department of Medical Assistance to calculate the provider's payment rate, we have reviewed those costs as part of our audit.
Allowable costs reported on the Nursing Home Cost Report include both direct costs of the nursing facility and indirect costs allocated to it from Appling General Hospital. These indirect cost allocations result from the step-down of general service costs from the hospital as shown on the hospital's Medicare cost report. Our audit did not include tests of either these indirect costs or the reclassifications and adjustments made to determine net expenses for cost allocation on the Medicare cost report worksheets. These costs are subject to audit by the Medicare intermediary. Any audit fmdings by the Medicare intermediary related to indirect costs that impact the nursing facility will be reflected in the Medicaid cost report in the year the Medicare cost report is final-settled.
The Department of Audits and Accounts is responsible for providing the Department of Medical Assistance with information 'regarding the accuracy of cost and patient data for Appling Nursing Home for the year ended June 30, 1998. If the Department of Medical Assistance implements the recommendations in this report by adjusting the allowable costs' and/or patient day statistics used in calculating the provider's billing rate, the provider may appeal to the Department of Medical Assistance for reconsideration of the audit findings. For this reason, we have not included a response from the provider in our report. However, we have discussed the contents of this report with the provider and have considered its responses when preparing the

1998 Audit Report: Appling Nursing Home

5

report. In all other respects, this audit was conducted in accordance with generally accepted government auditing standards.

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Nursing Facility Services Program

FINDINGS AND RECOMMENDATIONS

Hospital..Based Status

Finding No.1

The provider was in compliance with the Department of Medical Assistance's requirements for classification as a hospital-based nursing home as specified in DMA Policies and Procedures/or Nursing Facility Services, Section lO02.l(g).

Incorrect Expense Classifications

Finding No.2

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 Facilities Services Program. We recommend that the provider implement policies and procedures to ensure that all of its expenses are classified in the appropriate cost centers. We recommend that the Department of Medical Assistance make the following adjustment to reclassify costs to the appropriate cost centers.
(DMA Policies and Procedures, Appendix D)

COST CENTER Special Services Supplies Dietary Supplies Laundry and Housekeeping Supplies Operation and Maintenance of Plant Software Maintenance Supplies

$ (lO,153)

9,007

628

$

(850)

395

(455)

1998 Audit Report: Appling Nursing Home

7

Administrative and General Software Maintenance Supplies

$

850

123

973

Total Adjustment to Allowable Costs

$

o

Costs Not Related to Patient Care

Finding No.3

Allowable costs claimed included personal purchases 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 provider 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 of Medical Assistance make the following adjustment to remove the non-patient care expenses from allowable costs.
(HCFA Pub.15-1 Sections 2102.1, 2102.3)

COST CENTER Special Services

$

(2,500)

Recalculation ofAncillary Services Cost Adjustment

Finding No.4

The provider received revenues from the sale of ancillary services to patients; therefore, allowable costs for special services are limited to the maximum allowable cost calculated on Schedule B-IA of the cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on Schedule B.. IA as total cost per books, total charges,

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Nursing Facility Services Program

Medicaid charges, total patient days, and Medicaid patient days. These findings required the recalculation of Schedule B-IA. A copy of this recalculation has been furnished to the provider. We recommend that the provider implement .policies and procedures to ensure that all information used to calculate the ancillary services cost adjustment is correct. We recommend that the Department of Medical Assistance make the following adjustment to decrease allowable costs for the net effect of the recalculation.
(General Instructions to the Cost Report)

Ancillary Services

Adjustment Per Cost Report

Recalculated Adjustment

Audit Finding

Oxygen

$

o$

3,997 $

(3,997)

COST CENTER Special Services

$

(3,997)

Accrual Basis ofAccounting

Finding No.5

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. We recommend that the provider implement policies and procedures to ensure that costs are recorded in the period in which they are incurred. We recommend that the Department of Medical Assistance make the following adjustment to decrease allowable costs claimed for expenses not applicable to the year under review.
(HCFA Pub. 15-1 Section 2302.1)

1998 Audit Report: Appling Nursing Home

9

Adjustments to Balance Sheet Accounts: June 30, 1997 Balance
Accounts Payable June 30, 1998 Balance
Accounts Payable
Total Accounts Payable
COST CENTER Special Services Operation and Maintenance ofPlant
Total Adjustment to Allowable Cost

Allowable Costs

$

(700)

(255).

$

(955)

$

(700)

(255)

$

(955)

Patient Day Statistics

Finding No.6

Census records examined during the audit showed that the nursing home had 11,187 patient days of service rather than the 11,209 shown on the cost report. 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. We recommend that the provider implement policies and procedures to accumulate accurate patient day statistics. We recommend that the Department of Medical Assistance make the adjustment of 22 days to correct the statistical information. (HCFA Pub. 15-1 Section 2304)

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Nursing Facility Services Program

Accounts Receivable Credit Balances

Finding No.7

Documentation examined during the audit showed that the provider had numerous credit balances in its individual accounts receivable. Credit balances in the facility's accounts receivable result from overpayments for services provided to its patients. The $55,745.88 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of May 21, 1999. We recommend that the provider review its credit accounts receivable and refund overpayments to the appropriate party. We further recommend that the provider implement policies and procedures to ensure that overpayments on patients' accounts are promptly refunded to the payor. We also recommend that the Department of Medical Assistance review this matter and recover any overpayments identified.

Patient Name

Balance

Beasley, Phoye Brown, Eunice Branch, Beulah Brooks, Annie Carter, Nina Cason, Lisa Marie Clark, Theo Creamer, Tonnie Davis, Bonnie Davis, Carrie Deveraux, Henrietta Dowdy, Lura Fletcher, Emerson Gray, Mary Griffin, Elbert Hayes, Pamela Howard, Carrie Kesler, Hubert

$

393.92

377.00

447.75

12,834.91

89.92

321.25

2,049.45

1,068.50

13.00

3,357.15

377.00

33.00

563.17

267.00

1,092.20

100.75

3,193.51

683.72

1998 Audit Report: Appling Nursing Home
Lewis, Geraldine Lightsey, Beulah Lightsey, Patricia Livingston, Silda Mann, Clayton Matthew, Ernest McCall,Pauline McDaniel, Aldon McLain, M. P. McLeod, Edna Blanche Mims, Lavern Mixon, Vivian Moody, Lois Lucille Moore, Christine Murray, Annie Norris, Roland Parker, Willie Powell, Bonnie Reynolds, Tommie Richardson, Hazel Robinson, Louise Ross, Hazel Ryals, Nellie Tollison, Wilma Turner, Sallie Williamson, Melissa
Total

11
454.00 4,751.18 1,223.07
50.19 101.39 398.12 360.00 0 485.27 1,319.93 7,229.75 492.14 441.32 289.90 1,389.04 213.88 246.15 928.60 461.00 1,140.61 178.00 1,402.44 3,915.65 777.82 153.91 11.00 68.32
$ 55,745.88

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Nursing Facility Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Special Services

2

Incorrect Expense Classification

3

Cost Not Related to Patient Care

4

Ancillary Service Adjustment

5

Accrual Basis ofAccounting

Dietary

2

Incorrect Expense Classifications

Laundry and Housekeeping

2

Incorrect Expense Classifications

Operation and Maintenance ofPlant

2

Incorrect Expense Classifications

5

Accrual Basis ofAccounting

Administrative and General

2

Incorrect Expense Classifications

$

(10,153)

(2,500)

(3,997)

(700) $ (17,350)

9,007

628

$

(455)

(255)

(710)

973

Total Audit Findings Affecting Allowable Costs

$ (7,452)

PATIENT DAY STATISTICS

7 Patient Day Statistics

(22)