Audit report,for the year ended June 30, 1996, Bonterra Nursing Center, Medicaid provider no. 00140357A, Nursing Facilities Services Program [June 30, 1996]

GA A.'-25 CCC :v1+
iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii~
Ri

13~ ;~ DEPARTMENT OF AUDITS AND ACCOUNTS

iC\r"<- C

.



1 i-io- ~

Medicaid and Local Government Audits

AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 1996 .
BONTERRA NURSING CENTER
MEDICAID PROVIDER NUMBER 00140357A NURSING FACILITIES SERVICES PROGRAM

TABLE OF CONTENTS
LETTER OF TRANSMITTAL .............................. i
INTRODUCTION ......................................... 1
FINDINGS AND RECOMMENDATIONS .................... 4 Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 10 Schedule of Allowable Costs and Patient Day Statistics 12

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

CLAUDE L. VICKERS
STATE AUDITOR

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535

August 5, 1997

Members of the Board of Medical Assistance, and The Honorable Marge Smith, 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 ofBonterra Nursing Center, provider number 00140357A, a participant in the Nursing Facilities Services Program for the year ended June 30, 1996. This report is intended to be used solely in connection with the administration of the Georgia Department of Medical Assistance Nursing Facilities Services Program and is not to be used or relied upon for any other purpose.
R~~
Claude L. Vickers State Auditor
CLV/rh/bw

1996 Audit Report: Bonterra Nursing Center

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. 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

Bonterra Nursing Center, a 118-bed long-term health care facility located in East Point, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facilities Services Program. The facility provides both skilled and intermediate care services to resident patients. The

2

Nursing Facilities Services Program

Audit Objectives

facility was owned by SHCM Bonterra, Inc., and operated as a component of Southeastern Health Care Management, Inc., a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1996.

The purpose ofthis audit was to determine whether Bonterra Nursing Center 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, 1996; and to determine whether Bonterra Nursing Center complied with the federal and state laws, regulations, policies and procedures for the Nursing Facilities Services Program in effect for that period. The specific objectives of this audit were to:



determine ifallowable 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 Facilities 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.

1996 Audit Report: Bonterra Nursing Center

3

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.
The Department of Audits and Accounts is responsible for providing the Department ofMedical Assistance with information regarding the accuracy of cost and patient data for Bonterra Nursing Center for the year ended June 30, 1996. 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.

4

Nursing Facilities Services Program

FINDINGS AND RECOMMENDATIONS

Finding No.1

Incorrect Expense Classifications

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 ofMedical Assistance make the following adjustment to reclassify costs to the appropriate cost centers.
(DMA Policies and Procedures, Appendix D)

COST CENTER Routine Services Management Fees Medical Equipment Medical Records Consultant Recruiting Expense Training Expenses Ward Clerk Salaries and Benefits Dietary Leased Equipment Management Fees Laundry and Housekeeping Management Fees Operation and Maintenance of Plant Data Support Expense Interior Design Expense Medical Equipment Administrative and General Capital Related Interest Expense Data Support Expense Interior Design Expense Management Fees Medical Records Consultant

$ (40,344) 5,182 (708) (806) (229)
(39,175) $

$

(570)

(27,906)

$

(225)

571

(5,182)

$ (1,059) 225 (571)
89,208 708

(76,080) (28,476) (20,958)
(4,836)

1996 Audit Report: Bonterra Nursing Center

5

Recruiting Expense Training Expenses Ward Clerk Salaries and Benefits Working Capital Interest Expense Property and Related Expenses Capital Related Interest Expense Leased Equipment Working Capital Interest Expense
Total Adjustment to Allowable Costs

806 229 39,175 295

$

1,059

570

(295)

129,016 1,334

$=======0=

Finding No.2

Lack ofSufficient Documentation

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 Routine Services Operation and Maintenance of Plant Administrative and General

$

(4,864)

(214)

(681)

Total Adjustment to Allowable Costs

$==(=5=7,=59=)

6

Nursing Facilities Services Program

Finding No. 3

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 ofMedical 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)

Adjustments to Balance Sheet Accounts:

Allowable Costs

June 30, 1995 Balance Accounts Payable
June 30, 1996 Balance Accounts Payable
Total Adjustment to Allowable Costs

$======(=54=5=)
$======(1==2==,4==84==) $===(1=3=,02=9==)

COST CENTER Routine Services Administrative and General
Total Adjustment to Allowable Costs

$

(12,484)

(545)

$===(1=3=,0=29:::!:::)

Finding No.4

Costs Not Related to Patient Care
Allowable costs claimed included payments for prescription drugs 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

1996 Audit Report: Bonterra Nursing Center

7

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, OMA Policies and Procedures Sections 902)

COST CENTER Routine Services

$===(3='=63=7=)

Finding No. 5

Fixed Asset Purchases Claimed as Expense

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 ofpurchased assets claimed as expense and to increase allowable costs by depreciation allowable.
(HCFA Pub. 15-1 Section 108; OMA Policies and Procedures, Appendix 0)

COST CENTER Operation and Maintenance of Plant Cost of Fixed Equipment Property and Related Expenses Allowable Depreciation Expense

$

(687)

137

Total Adjustment to Allowable Costs

$=====(=55=0=)

8

Nursing Facilities Services Program

Finding No. 6

Allocationsfrom Home Office

The provider was a component of a chain organization for the year ended June 30, 1996. 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 ofMedical 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.
(HCFA Pub. 15-1 Section 2150)

COST CENTER Administrative and General Directly Allocated Costs Allocation Statistics Administrative Expenses Pooled Costs Allocation Statistics Administrative Expenses Non-Capital Related Interest Expense Property and Related Expenses Pooled Capital Related Interest Expense

$ (18,594) 15,855
(15) (10,605)
(1,028) $

(14,387)

1,033

Total Adjustment to Allowable Costs

$===(1=3=,3=54=)

Finding No. 7

Patient Day Statistics
Census records examined during the audit showed that the nursing home had 42,869 patient days of service rather than the 42,861 shown on the cost report. Federal , regulations provide that cost information as developed by the provider must be

1996 Audit Report: Bonterra Nursing Center

9

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 8 days to correct the statistical information.
(HCFA Pub. 15-1 Section 2304)

Nursing Facilities Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1

Incorrect Expense Classifications

2

Lack of Sufficient Documentation

3

Accrual Basis ofAccounting

4

Costs Not Related to Patient Care

$ (76,080) (4,864)
(12,484) (3,637) $

Dietary

1

Incorrect Expense Classifications

Laundry and Housekeeping

1

Incorrect Expense Classifications

Operation and Maintenance ofPlant

1

Incorrect Expense Classifications

$

(4,836)

2

Lack of Sufficient Documentation

(214)

5

Fixed Asset Purchases Claimed as Expense

(687)

Administrative and General

1

Incorrect Expense Classifications

2

Lack of Sufficient Documentation

3

Accrual Basis of Accounting

6

Allocations from Home Office

$ 129,016 (681) (545)
(14,387)

(97,065) (28,476) (20,958)
(5,737)
113,403

1996 Audit Report: Bonterra Nursing Center

11

FINDING NUMBER

ALLOWABLE COSTS

Property and Related Expenses

1

Incorrect Expense Classifications

$

1,334

5

Fixed Asset Purchases Claimed as Expense

137

6

Allocations from Home Office

1,033

Total Audit Findings Affecting Allowable Costs

$

2,504 (36,329)

PATIENT DAY STATISTICS

7 Increase in Patient Day Statistics

8

12

Nursing Facilities Services Program

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

ALLOWABLE COSTS

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

Routine Services

$ 1,398,302 $ (97,065) $ 1,301,237

Special Services

139,868

0

139,868

Dietary

364,548

(28,476)

336,072

Laundry and Housekeeping

214,518

(20,958)

193,560

Operation and Maintenance ofPlant

202,284

(5,737)

196,547

Administrative and General

353,749

113,403

467,152

Property and Related Expenses

400,320

2,504

402,824

Total Allowable Costs

$ 3,073,589 $ (36,329) $ 3,037,260

PATIENT DAY STATISTICS

42,861

8

42,869