Audit report, for the year ended June 30, 1998, Bethany Home Nursing Center of Millen, Medicaid provider no. 00140269A, Nursing Facilities Services Program [June 30, 1998]

TABLE OF CONTENTS . LETTER OF TRANSMITTAL 1

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Fm][)I~GS ~][) REc::OMME~][)ATIO~S

5

Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 9

Schedule of Allowable Costs and Patient Day Statistics

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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
June 17, 1999

MICHAEL A. PLANT
DIRECTOR

Members of the Board of Medical Assistance, and "
The Honorable Dr. William R. Taylor, Commissioner Department of Medical Assistance 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit of Bethany Home Nursing Center of Millen, provider number 00140269A, 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,
?~~.~~ Russell W. Hinton State Auditor
RWH/kec/bw

1998 Audit Report: Bethany Home Nursing Center of Millen

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

Bethany Home Nursing Center of Millen, a 100-bed long-term health care facility located in Millen, 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 was operated as a freestanding nursing home by Bethany Home, Inc., for the year ended June 30, 1998.

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Nursing Facility Services Program

Audit Objectives

The purpose of this audit was to determine whether Bethany Home Nursing Center of Millen 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 Bethany Home Nursing Center of Millen 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

governmg 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

1998 Audit Report: Bethany Home Nursing Center of Millen

3

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 Manuo] (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 Bethany Home Nursing Center of Millen 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 Bethany Home Nursing Center of Millen, 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 adjustments which should be made by the Department of Medical Assistance related to depreciation and amortization; and lease

4

Nursing Facility Services Program

expense. We have included findings related to these matters in our report.
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 Bethany Home Nursing Center of Millen 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 report. In all other respects, this audit was conducted in accordance with generally accepted government auditing standards.


1998 Audit Report: Bethany Home Nursing Center of Millen

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

Education Expense

$

Employee Benefits

Inservice Training Expense

Medical Records Expense .

Underpads

Special Services

Education Expense

$

Employee Benefits

Recreation Supplies

Dietary

Education Expense

$

Employee Benefits

Vending Machine Commissions Offset

Laundry and Housekeeping

Employee Benefits

$

Underpads

Operation and Maintenance of Plant

Employee Benefits

$

Phone Lease

(280) (11,287)
(140) (610) (7,421) $
(250) (600) 230
(90) 15,759 (6,549)
(1,495) 7,421
(724) (888)

(19,738) (620) 9,120 5,926
(1,612)

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Nursing Facility Services Program

Administrative andGeneral

Education Expense

$

Employee Benefits

Inservice Training Expense

Medical Records Expense

Phone Lease

Recreation Supplies

Vending Machine Commissions Offset

Property andRelated Expenses

Phone Lease

Total Adjustment to Allowable Costs

620 (1,653)
140 610 2,266 (230) 6,549

8,302

(1,378)

$ - - - . . . . . . ; .o. .

Fixed Asset Purchases Claimed as Expense

Finding No.2

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 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.
(HCFAPub. 15-1 Section 108;DMAPoliciesand Procedures, AppendixD)

COST CENTER Operationand Maintenance of Plant Cost of Fixed Equipment Property and RelatedExpenses Allowable Depreciation Expense
Total Adjustment to Allowable Costs

$

(549)

34

$ =====(=51=5)

1998 Audit Report: Bethany Home Nursing Center of Millen

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Costs Not Related to Patient Care
Finding Allowable costs claimed included payments which were not considered to be for
No.3 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 2102.3, 2104.4; DMA Policies and Procedures Section 1002.1(k))

ITEMS Advertising Dental Expense Personal Purchases

$

(200)

(825)

(312)

Total Adjustment to Allowable Costs

$

(1,337)

COST CENTER Administrative and General

$ ========(=1=,3=3=7=)=

Excess Vehicles

Finding
No.4

Documentation examined during the audit showed that expenses were claimed for three vehicles for the year under review. DMA guidelines allow a maximum of one vehicle for nursing homes of the size operated by the provider. We recommend that the provider implement policies and procedures to ensure that any costs incurred operating vehicles in excess of the maximum number allowable are excluded from reimbursable costs claimed. We recommend that the

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Nursing Facility Services Program

Department of Medical Assistance make the following adjustment to reduce allowable costs claimed for the insurance and operating expenses of vehicles operated in excess of the maximum number allowable.
(DMA Vehicle Guidelines)

COST CENTER Administrative and General Operating Expenses Property and Related Expenses Insurance
Total Adjustment to Allowable Costs

$

(1,100)

(943)

(2,043)

Patient Day Statistics

Finding No.5

The provider stated on the cost report that it furnished 36,248 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate.

1998 Audit Report: Bethany Home Nursing Center of Millen

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SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1 Incorrect Expense Classifications
Special Services

$ (19,738)

1 Incorrect Expense Classifications
Dietary

(620)

1 Incorrect Expense Classifications

9,120

Laundry and Housekee_Qing

1 Incorrect Expense Classifications
Operation and Maintenance ofPlant

5,926

1 Incorrect Expense Classifications

$ (1,612)

2 Fixed Asset Purchases Claimed as Expense

(549)

(2,161)

Administrative and General
1 Incorrect Expense Classifications 3 Costs Not Related to Patient Care 4 Excess Vehicles

. $ 8,302 (1,337) (1,100)

5,865

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Nursing Facility Services Program

FINDING NUMBER

ALLOWABLE COSTS

Properf1 and &lated Expenses

I Incorrect Expense Classifications

$ (1,378)

3 Fixed Asset Purchases Claimed as Expense

34

4 Excess Vehicles

(943)

(2,287)

Total Adjustment to Allowable Costs

$ (3,895)

1998 Audit Report: Bethany Home Nursing Center of Millen

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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

$ 1,282,834 $ 81,545
338,091 233,022 203,305 315,101 150,887

(19,738) $ (620) 9,120 5,926
(2,161) 5,865 (2,287)

1,263,096 80,925
347,211 238,948 201,144 320,966 148,600

Total Allowable Costs

$ 2,604,785 $

(3,895) $ 2,600,890

PATIENT DAY STATISTICS

36,248

36,248