TABLE OF CONTENTS

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Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 11

Schedule of Allowable Costs and Patient Day Statistics

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Report PreparedBy:
State ofGeorgia DepartmentofAudits and Accounts Medicaidand Local Government Audits Division
254 Washington Street. S.w.. Suite 322
Atlanta, Georgia 30334-8400 (404) 656-2006
MichaelA. 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

MICHAEL A. PLANT
DIRECTOR

January 21,2000
Members of the Board of Community Health, and The Honorable Russ Toal, Commissioner Department of Community Health 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303
Ladies and Gentlemen:
. This report provides the results of our audit of Banks-Jackson-Commerce Nursing Home, provider number 00059331A, a participant in the Nursing Facility Services Program for the year ended June 30, 1999. This report is intended to be used solely in connection with the administration of Georgia Nursing Facility Services Program and is not to be used or relied upon for any other purpose.
Respectfully Submitted,
~...Jb ~.~-h Russell W. Hinton State Auditor

RWHlkec/bw

1999 Audit Report: Banks-Jackson-Commerce Nursing Home

1

INTRODUCTION

General Information

The Georgia Medical Assistance Program (Medicaid) is administered by the Department of Community Health 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 Community Health 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 Community Health or its agents. In an agreement with the Department of Community Health, the Department of Audits and Accounts has accepted the responsibility of auditing Medicaid providers.

Provider Information

Banks-Jackson-Commerce Nursing Home, a 167-bed long-term health care facility located in Commerce, Georgia, is a provider enrolled in the Georgia Nursing Facility Services Program. The facility provides both skilled and intermediate care services to resident patients. The facility is owned and operated by Banks-Jackson-Commerce Hospital and Nursing Home Authority, which operated both Banks-Jackson-

2

Nursing Facility Services Prosram

Commerce Medical Center and Banks-Jackson-Commerce Nursing Home in the same physical facility during the year under review.

Audit Objectives

The purpose of this audit was to determine whether Banks-JacksonCommerce 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, 1999; and to determine whether Banks-Jackson-Commerce 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 DCH Policies and Procedures for

Nursing Home Facility Services, Section 1002.1(g);

and

1999 Audit Report: Banks-Jackson-Commerce Nursing Home

3

Scope and Methodology

recommend appropriate action based on the results of our audit.
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 DCH Policies and Procedures for Nursing Facility Services.
Allowable costs reported on the Nursing Home Cost Report include both direct costs of the nursing facility and indirect costs allocated to it from Banks-Jackson-Commerce Medical Center. 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 findings 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.

4

Nursing Facility Services Program

The Department of Audits and Accounts is responsible for providing the Department of Community Health with information regarding the accuracy of cost and patient data for Banks-Jackson-Commerce Nursing Home for the year ended June 30, 1999. If the Department of Community Health 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 Community Health 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 report. In all other respects, this audit was conducted in accordance with generally accepted government auditing standards.

1999 Audit Report: Banks-Jackson-Commerce Nursing Home

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FINDINGS AND RECOMMENDATIONS

Finding No.1

Hospital-Based Status
The provider was in compliance with the Department of Community Health's requirements for classification as a hospital-based nursing home as specified in DCH Policies and Procedures/or Nursing Facility Services, Section 1002.1(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 Community Health 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 Community Health make the following adjustment to reclassify costs to the appropriate cost centers.
(GCR Policies and Procedures, Appendix D)

COST CENTER Routine Services Copier Expense Employee Benefits Office Equipment Salaries Expense Subscriptions Supplies Expense Waste Disposal Special Services Consulting Services Laundry and Housekeeping Supplies Expense

$

(807)

(39,808)

(1,125)

(189,588)

(364)

(5,262)

(7,520) $

(244,474) 10,020 247

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Nursing Facility Services Program

Operation and Maintenance of Plant Software License Supplies Expense Waste Disposal
Administrative and General Consulting Services Copier Expense Employee Benefits Office Equipment Salaries Expense Software License Subscriptions Supplies Expense
Total Adjustment to Allowable Costs

$

(3,205)

(306)

7,520

4,009

$ (10,020) 807
39,808 1,125
189,588 3,205 364 5,321

230,198

$ = = = =o

Costs Misclassijied as Nurse Aide Testing and Training

Finding No.3

An adjustment was made during cost report preparation to remove nurse aide testing and training expenses from allowable 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. We recommend that the provider implement policies and procedures to ensure that all costs shown on the cost report as nurse aide testing and training expenses were incurred to provide nurse aide testing and training services. We recommend that the Department of Community Health make the following adjustment to reverse a portion of the provider's adjustment.
(HCFA Pub. 15-1 Section 2304)

COST CENTER Routine Services

$ = = = =28=0

1999 Audit Report: Banks-Jackson-Commerce Nursing Home

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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-1A of the cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on Schedule B-1A as total charges and Medicaid charges. These fmdings required the recalculation of Schedule B-1A. 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 Community Health make the following adjustment to decrease allowable costs for the net effect of the recalculation.
(General Instructions to the Cost Report)

Ancillary Services
Oxygen
COST CENTER Special Services

Adjustment Per Cost Report

Recalculated Adjustment Audit Finding

$

(1,208) $

(85,265)

$ (85,265)

Lack ofSufficient Documentation

Finding No.5

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 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 ensure that all expenses shown on the cost report are supported by sufficient .documentation. We

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Nursing Facility Services Program

recommend that the Department of Community Health make the following adjustment to remove the undocumented expenses from allowable costs.
(HCFAPub.15-1 Section 2304)

COST CENTER Dietary . Operation and Maintenance of Plant
Total Adjustment to Allowable Costs

$

(19,670)

(377)

$===",=========

Finding No.6

Accrual Basis ofAccounting
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 Community Health 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)

Adjustments to Balance Sheet Accounts:
June 30, 1998 Balance Accounts Payable

Allowable Costs
(2,897)

COST CENTER Operation and Maintenance of Plant

$--(~ 2,89~7)

1999 Audit Report: Banks-Jackson-Commerce Nursing Home

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Investment Income Offset

Finding No.7

Documentation examined during the audit showed that the provider earned investment income. Federal regulations provide that interest expense must be reduced by certain investment income. We recommend that the provider implement policies and procedures to ensure that interest expense claimed is reduced by such investment income. We recommend that the Department of Community Health make the following adjustment to reduce allowable costs by the amount of investment income offset against interest expense.
(HCFA Pub. 15-1 Section202.2)

COST CENTER Property and Related Expenses

$==~=(=1=,0f63,)

Costs Not Related to Patient Care

Finding No.8

Allowable costs claimed included payments for liability insurance on a hospital employee. These payments 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 Community Health make the following adjustment to remove the non-patient care expenses from allowable costs.
(HCFA Pub.15-1 Section 2102.3)

COST CENTER Property and Related Expenses

$====*(9=94~)

10

Nursing Facility Services Program

Patient Trust Fund Not in Balance

Finding No.9

Documentation examined during the audit showed that the provider, manages funds belonging to its patients. The assets of the patient trust fund at June 30, 1999, totaled $10,907.65; patient trust fund liabilities were $11,585.66. Federal law requires that the provider establish and maintain a system that assures a full and complete and separate accounting, according to generally accepted accounting principles, of each resident's personal funds. We recommend that the provider return these excess funds to the appropriate parties. We further recommend that the provider implement policies and procedures to maintain a balanced, reconciled patient trust fund. We also recommend that the Department of Community Health ensure that the provider returns the excess funds and implements the policies and procedures necessary to maintain a balanced, reconciled patient trust fund.
(42 CFR483.10C(4

Individual Accounts Receivable Listing

Finding No. 10

The provider did not maintain an individual accounts receivable listing. .We recommend that the provider implement policies and procedures to ensure that an individual accounts receivable list is maintained. We further recommend that the Department of Community Health review this matter and determine whether any credit balance exist.

Patient Day Statistics

Finding No. 11

The provider stated on the cost report that it furnished 60,164 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate.

1999 Audit Report: Banks-Jackson-Commerce Nursing Home

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SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

12

Nursing Facility Services Program

FINDING NUMBER

ALLOWABLE COSTS

Property and Related Expenses

7

Investment Income Offset

8

Cost Not Related to Patient Care

$

(1,063)

(994)

Total Audit Findings Affecting Allowable Costs

$

(2,057) (109,986)

1999 Audit Report: Banks-Jackson-Commerce Nursing Home

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SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

ALLOWABLE COSTS
Routine Services
Special Services Dietary
Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General Property and Related Expenses

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

$ 3,001,686 $ (244,194) $ 2,757,492

85,265

(75,245)

10,020

991,018

(19,670)

971,348

519,865

247

520,112

260,702

735

261,437

364,041 484,536

230,198 (2,057)

594,239 482,479

Total Allowable Costs

$ 5,707,113 $ (109,986) $ 5,597,127 .

PATIENT DAY STATISTICS

60164

60,164