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

TABLE OF CONTENTS

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5

Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 14

Schedule of Allowable Costs and Patient Day Statistics

16

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
August 10, 1999

MICHAEL A. PLANT
DIRECTOR
c

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 of Baptist Village A, provider number 00140203A, 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,
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Russell W. Hinton State Auditor

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1998 Audit Report: Baptist Village A

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. 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 of auditing Medicaid providers.

Provider Information

Baptist Village A, a 148-bed long-term health care facility located in Waycross, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facility Services Program. The facility provides skilled care services to resident patients. The facility was operated as a component of Baptist Village, Inc., a chain organization which filed a Home Office Cost Report with DMA for the year ended FYE June 30, 1998.

2

Nursing Facility Services Program

Audit Objectives

The purpose of this audit was to determine whether Baptist Village A maintained adequate documentation to support the allowable costs and patient day statistics reported in its Nursing Home Cost Report for the year ended FYE June 30, 1998; and to determine whether Baptist Village A 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

govenung 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

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

1998 Audit Report: Baptist Village A

3

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 Baptist Village A 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 Baptist Village A, our audit did not include a review of these costs. 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.
As a result of audit procedures related to other (non-property) costs, we noted an adjustment which should be made by the Department of Medical Assistance related to. depreciation and amortization. We have included a finding related to this matter in our report.

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Nursing Facility Services Program

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 Baptist Village A for the year ended FYE 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 fmdings. 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.

1998 Audit Report: Baptist Village A

5

FINDINGS AND RECOMMENDATIONS

Incorrect Expense Classifications

Finding
No.1

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

Routine Services

Dietary Supplements

$

Employee Physicals

Housekeeping Supplies

Insurance Expense

Maintenance Supplies

Medical Record Forms

Worker's Compensation Insurance

Special Services

Employee Physicals

$

Insurance Expense

Medical Director Fees

Recreational Supplies

Worker's Compensation Insurance

Dietary

Dietary Supplements

$

Employee Physicals

Insurance Expense

Worker's Compensation Insurance

(712) 2,885 (1,672) 1,299
(179) (3,722) 13,754 $
125 108 5,752 257 1,144
712 458 170 1,805

11,653 7,386 3,145

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Nursing Facility Services Program

Laundry and Housekeeping

Employee Physicals

$

Housekeeping Supplies

Insurance Expense

Worker's Compensation Insurance

Operation and Maintenance of Plant

Employee Physicals

$

Insurance Expense

Maintenance Supplies

Recreational Supplies

Software Maintenance

Worker's Compensation Insurance

Administrative and General

Employee Physicals

$

Insurance Expense

Medical Director Fees

Medical Record Forms

Software Maintenance

Worker's Compensation Insurance

Property and Related Expenses

Insurance Expense

Total Adjustment to Allowable Costs (1)

290 1,672
111 1,173
187 86 179 (159) (769) 907
(2,777) 8,720
(3,937) 3,722
851 (18,783)
$

3,~46
431
(12,204) (8,541) 5,116

(1) A total of $5,116 was reclassified from other related facilities which do not receive Medicaid reimbursement and therefore, are not included in this report.

Finding No.2

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 Medical

1998 Audit Report: Baptist Village A

7

Assistance make the following adjustment to increase allowable costs claimed for expenses 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
$ ====4,0=91=

COST CENTER Routine Services Special Services Dietary Laundry and Housekeeping Operationand Maintenance ofPlant Administrative and General
Total Adjustment to Allowable Costs

$

3,013

401

235

117

219

106

$ ======4=,0=9=1=

Recalculation ofAncillaryServices CostAdjustment

Finding No.3

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, 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.

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Nursing Facility Services Program

Ancillary Services

Adjustment Per Cost Report

Recalculated Adjustment

Audit Finding

Physical Therapy Other Medical Supplies

$ (147,408) $ (23,130)

(205,866) $ (20,911)

(58,458) 2,219

Total Adjustment to Allowable Costs $ (170,538) $ (226,777) $

(56,239)

COST CENTER Routine Services Special Services
Total Adjustment to Allowable Costs

$

2,219

(58,458)

(56,239)

Costs Not Related to Patient Care

Finding No.4

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 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.lS-l Sections 2102.1, 2102.3; DMA Policies and Procedures Section 1002.1(k

ITEMS Legal Expense National Association Dues (50%) Personal Purchases

$

(1,839)

(1,909)

(286)

Total Adjustment to Allowable Costs

$ ====(=4=,0=34=)

1998 Audit Report: Baptist Village A
COST CENTER Routine Services Administrative and General Total Adjustment to Allowable Costs

9

$

(286)

(3,748)

(4,034)

Nurse Aide Testing and Training Costs

Finding No.5

Documentationexamined during the audit showed that the provider did not remove nurse aide testing and training costs from allowable costs claimed as required by the Department of Medical Assistance in General Instructions to Cost Report. We recommend that the provider implement policies and procedures to ensure that nurse aide testing and training costs are not included in allowable costs. We recommend that the Department of Medical Assistance make the following adjustment to decrease allowable costs by the amount of nurse aide testing and training costs.
(DMAGeneralInstructions to Cost Report)

GOSTCENTER Routine Services Administrative and General
Total Adjustment to Allowable Costs

$

(2,547)

(9,742)

$ ======(1=2,2=89=)

Expense Reimbursements

Finding No.6

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 allowable 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. We recommend that the provider implement policies and procedures to ensure that allowable costs claimed are reduced by any expense reimbursements received. We

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Nursing Facility Services Program

allowable costs claimed are reduced by any expense reimbursements received. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs claimed by expense reimbursements shown as revenues.
(HCFA Pub. 15-1 Section 800)

COST CENTER
Dietaly

(1,852)

Lack ofSufficient Documentation

Finding No.7

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 recommend that the Department of Medical Assistance make the following adjustment to remove the undocumented expenses from allowable costs.
(HCFA Pub. 15-1 Section 2304)

COST CENTER Operation and Maintenance ofPlant Administrative and General Property and Related Expenses
Total Adjustment to Allowable Cost

s

(2,051)

(148)

(9,262)

$====(1=1,4=61=)

Excess Compensation
Finding Allowable costs claimed included compensation to employees which exceeded No.8 DMA maximum limitations. The Department of Medical Assistance annually

1998 Audit Report: Baptist Village A

11

allowable for medical and corporate directors. We recommend that the provider

implement policies and procedures to ensure that compensation to its employees

which exceeds the ])MA 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 of the DMA guidelines, plus related employer's share of payroll taxes.

(DMA Compensation Ceilings; HCFA 15-906)
0

Position Title

Total

Guidline

Compensation Ceiling (A)

Excess

Maintenance Supervisor

$

13,961 $

12,621 $

(1,340)

Payroll Taxes

1,068

965

(103)

Assistant Administrator

29,753

24,972

(4,781)

Payroll Taxes

2,276

1,910

(366)

$

47,058 $

40,468 $

(6,590)

(A) Ceilings have been adjusted to percentage of full-time, where applicable.

COST CENTER Operation and Maintenance of Plant Administrative and General
TotalAdjustment to Allowable Costs

$

(1,443)

(5,147)

$ =====(=6=,5=90=)

FixedAsset Purchases Claimed as Expense

Finding No.9

Allowable costs claimed 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 DMA provides for inclusion of such assets in property accounts. We recommend that the provider implement policies and procedures to ensure that all purchases of fixed assets are shown on the cost report

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Nursing Facility Services Program

procedures to ensure that all purchases of fixed assets are shown on the cost report as capital additions. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs by the amount of purchased assets claimed as expense and to increase allowable costs by depreciation allowable.
(HCFA Pub. 15-1 Section 108; DMA Policies and Procedures, Appendix D)

Operation and Maintenance of Plant Cost of Major Moveable Equipment
Property and Related Expenses Allowable Depreciation Expense
Net Adjustment to Allowable Costs

$

(692)

69

$ = = = =(=623=)

Finding No. 10

Allocationsfrom Home Office
The provider was a component of a chain organization for the year ended June 30, 1998. As a result of our audit of the home office cost report filed in connection with the Medicaid Nursing Home Facilities Program, we recommended that the Department of Medical Assistance make adjustments to the allowable costs claimed by the home office. We recommend that the provider and. its home office implement policies and procedures to ensure that only allowable costs are allocated from the home office to the provider. We recommend that the Department of Medical Assistance make the following adjustment to correct allowable costs to . reflect the allocation of the adjustments made to the home office cost report.
(HCFAPub. 15-1 Section 2150)

COST CENTER Administrative and General Pooled Costs Administrative Expenses

$ (20,486)

1998 Audit Report: Baptist Village A

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Expense Applicable to Another Chain Component

Finding No. 11

Allowable costs claimed included salaries and benefits expense applicable to another chain component. 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, its home office, and all other components of the chain implement policies and procedures to ensure that all costs are included in allowable costs of the chain component to which they apply. We recommend that the Department of Medical Assistance make the following adjustment to remove from allowable costs the expenses applicable to another chain component.
(HCFA Pub. 15-1 Section 2304)

COST CENTER Administrative and General
COMPONENT FACILITY Lake Park

$ ======(1=,=38=9=) $ = = = =1,=389=

Patient Day Statistics

Finding No. 12

The provider stated on the cost report that it furnished 49,959 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate.

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Nursing Facility Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING
NUMBER

ALLOWABLE COSTS

Routine Services
1 Incorrect Expense Classifications 2 Accrual Basis ofAccounting 3 Recalculation of Ancillary Services Cost Adjustment 4 Costs Not Related to Patient Care 5 Nurse Aide Testing and Training Costs

$ 11,653 3,013 2,219 (286) (2,547) $ 14,052

Special Services

1 Incorrect Expense Classifications

$

7,386

2

Accrual Basis of Accounting

401

3

Recalculation of Ancillary Services Cost Adjustment

(58,458)

Dletarv

1 . Incorrect E~pense Classifications

2

Accrual Basis of Accounting

6

Expense Reimbursements

$

3,145

235

(1,852)

(50,671) 1,528

1998 Audit Report: Baptist Village A

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FINDING NUMBER

ALLOWABLE COSTS

Operation and Maintenance ofPlant

1 Incorrect Expense Classifications 2 Accrual Basis of Accounting 7 Lack of Sufficient Documentation 8 Excess Compensation 9 Fixed Asset Purchases Claimed as Expense

$

431

219

(148)

(1,443)

(692)

(1,633)

Administrative and General
1 Incorrect Expense Classifications 2 Accrual Basis of Accounting 4 Costs Not Related to Patient Care 5 Nurse Aide Testing and Training Costs 7 Lack of Sufficient Documentation 8 Excess Compensation 10 Allocations From Home Office 11 Costs Applicable To Arlother Chain Component
Property and Related Expenses
1 Incorrect Expense Classifications 7 Lack of Sufficient Documentation 9 Fixed Asset Claimed as Expense
Total Adjustment to Allowable Costs

$ (12,204) 106
(3,748) (9,742) (2,051) (5,147) (20,486) (1,389)

(54,661)

$

(8,541)

(9,262)

69

(17,734)

$ (105,756)

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Nursing Facility Services Program

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

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

COST REPORT TOTALS

FIELD AUDIT FINDINGS

TOTALS TOTALS

$ 2,486,931 $ 211,599 624,586 266,637 378,826 500,432 179,701

14,052 $ 2,500,983

(50,671)

160,928

1,528

626,114

3,363

270,000

(1,633)

377,193

(54,661)

445,771

(17,734)

161,967

Total Allowable Costs

$ 4,648,712 $ (105,756) $ 4,542,956

PATIENT DAY STATISTICS

49,959

49,959