Audit report, for the year ended June 30, 1998, Baptist Village, Inc., Home Office, Nursing Facilities Services Program [June 30, 1998]

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_- DEPARTMENT OF AUDITS AND ACCOlJNTS -

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Medicaid and LocalGovernment Audits

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- AUDIT REPORT --

- FOR.THE fltAR ENDED JUNE 30, 1998

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. BAJ>TISTVI~LAGE, INC,- -

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IIOME OFFICE

. NURSING FACILITIES SERVICES PROG}M

TABLE OF CONTENTS
LETTER OF TRANSMITTAL ............................. i
INTRODUCTION ........................................ 1
FINDINGS AND RECOMMENDATIONS .................... 5 Summary of Audit Findings Affecting Allowable Costs 6 Schedule of Allowable Costs ~ 7 Summary of Allocations to Chain Components . . . . . . . . . . . . 8

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

July 21, 1999
Members of the Board of Community Health, and The Honorable Russ Toal, Commissioner Georgia Community Health 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit ofBaptist Village, Inc., a home office with chain components participating in the Nursing Facilities Services Program for the year ended June 30, 1998. This report is intended to be used solely in connection with the administration ofthe Georgia Department of Medical Assistance Nursing Facilities Services Program and is riot to be used or relied upon for any other purpose.
Respectfully Submitted,
~w.4. Russell W. Hinton State Auditor
RWH/adc/ds

1998 Audit Report: Baptist Village, Inc.

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 Facilities 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.
A home office such as Baptist Village, Inc., does not provide medical services directly to individuals. Instead, a home office provides a variety of administrative 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 Report it

2

Nursing Facilities Services Program

Home Office Information
Audit Objectives

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 of the 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 financial, 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 ofAudits and Accounts has accepted the responsibility of auditing Medicaid providers and home offices.

Baptist Village, Inc., 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 two chain

components, both ofwhich are nursing homes, and both ofwhich are

in Georgia. In addition to the audit ofthe home office cost report, we

have completed audits ofprovider cost reports filed by components

of the chain organization:



Baptist Village A



Baptist Village B

The purpose of this audit was to determine whether Baptist Village, Inc., 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 Baptist Village, Inc., complied with the federal and state laws, regulations, policies and

1998 Audit Report: Baptist Village, Inc.

3

Scope and Methodology

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



determine if allowable costs reported in the Home

Office Cost Report are reasonable and allowable, in

all material respects, in accordance with federal ana

state laws, regulations, policies and procedures

governing the Georgia Nursing Facilities 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

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Nursing Facilities Services Program

Provider Reimbursement Manual (HCFA Pub. 15-1) and DMA Policies and Procedures for Nursing Facility Services.
The Department ofAudits and Accounts is responsible for providing the Department ofMedical Assistance with information regarding the accuracy of cost information for Baptist Village, Inc., and the allocation ofits 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 Baptist Village, Inc. The allocation of these audit adjustments among the chain components is shown in the Summary of Allocations to Chain Components on page 8. 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 ofMedical Assistance for reconsideration of the audit findings. 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 respects, this audit was conducted in accordance with generally accepted government auditing standards.

1998 Audit Report: Baptist Village, Inc.

5

FINDINGS AND RECOMMENDATIONS

Finding No. I

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

Total Compensation

Guideline Ceiling

Excess

ChiefExecutive Officer Payroll Taxes
Chief Financial Officer Payroll Taxes

$

122,172 $ 84,074 $

(38,098)

9,346

6,432

(2,914)

27,005.

26,162

(843)

2,065

2,001

{64)

$ 160 588 $ 118 669 $" (41 919)

ALLOWABLE COSTS Pooled Administrative Expenses

$ (41 919)

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Nursing Facilities Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS

FINDING NUMBER

ALLOWABLE COSTS

Pooled Administrative Expenses

1

Excess Compensation

$ (41 919)

1998 Audit Report: Baptist Village, Inc.

7

SCHEDULE OF ALLOWABLE COSTS

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

POOLED COSTS Administrative Expenses

$

220 l 52 $

~1 212l $

228 240

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Nursing Facilities Services Program

SUMMARY OF ALLOCATIONS TO CHAIN COMPONENTS

GEORGIA NURSING HOMES Baptist Village A Baptist Village B
TOTAL GEORGIA NURSING HOMES TOTAL OTHER COMPONENTS
TOTAL ALLOCATION

ALLOCATION OF: BAPTIST VILLAGE, INC.
ADJUSTMENTS TO:
POOLED COSTS:
ADMINISTRATIVE EXPENSES

$

(20,486)

(12,756)

$

(33,242)

(8,677)

$

{41,919~