TABLE OF CONTENTS
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5
Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 10
Schedule of Allowable Costs and Patient Day Statistics
12
Report PreparedBy:
State ofGeorgia Department ofAuditsand 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
August 3, 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 of Brightmoor Health Care, Inc., provider number 00140412A, 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,
RWH/mkp/teh
Russell W. Hinton State Auditor
1998 Audit Report: Brightmoor Health Care, 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 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 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
Brightmoor Health Care, Inc., a 133-bed long-term health care facility located in Griffin, 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 component of A&B Management Company, a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1998.
2
Nursing Facility Services Program
Audit Objectives
The purpose of this audit was to determine whether Brightmoor Health Care, Inc., 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 Brightmoor Health Care, Inc., 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
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 basis, evidence supporting these amounts and disclosures and
1998 Audit Report: Brightmoor Health Care, Inc.
3
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 Brightmoor Health Care, Inc., 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 Brightmoor Health Care, Inc., 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 capital-related interest expense. We have included findings related to these matters in our report.
4
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 Brightmoor Health Care, Inc., 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: Brightmoor Health Care, Inc.
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
Employee Benefits
Special Services
Employee Benefits
Dietary
Employee Benefits
Laundry and Housekeeping
Employee Benefits
Operation and Maintenance of Plant
Employee Benefits
Administrative and General
Employee Benefits
$
Insurance Expense
Property and Related Expenses
Insurance Expense
Total Adjustment to Allowable Costs
$
5,989 9,937
$
56,275 4,185 (75,939) 7,158 2,332
15,926 (9,937)
0
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Nursing Facility Services Program
Nurse Aide Testing and Training Costs
Finding No.2
Documentation examined 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)
COST CENTER Routine Services
$ - - _...(.9...7...).
Excess Compensation
Finding No.3
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 provider 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 of the DMA guidelines, plus related employer's share of payroll taxes.
(DMA CompensationCeilings; HCFA 15-906)
1998 Audit Report: Brightmoor Health Care, Inc.
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Position Title
Social Services Director Payroll Taxes
Directors (2)
Total Compensation
Guideline Ceiling
Excess
$
38,251 $
37,449 $
(802)
2,926
2,865
(61)
4,800
3,216
(1,584)
$
45,977 $
43,530 $
(2,447)
COST CENTER Special Services Administrative and General
Total Adjustment to Allowable Costs
$
(863)
(1,584)
$
(2,447)
Fixed Asset Purchases Claimed as Expense
Finding No.4
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.
(HCFA Pub. 15-1 Section 108;DMA Policiesand Procedures, AppendixD)
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Nursing Facility Services Program
COST CENTER Operation and Maintenance of Plant Cost of Major Moveable Equipment Administrative and General Cost of Major Moveable Equipment Property and Related Expenses Allowable Depreciation Expense
Total Adjustment to Allowable Costs
$
(768)
(11,420)
929
(11,259)
Finding No.5
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 Section2150)
COST CENTER Administrative and General Pooled Costs Administrative Expenses Property and Related Expenses Pooled Capital Related Interest Expense
Total Adjustment to Allowable Costs
$
(30,469)
487 (29,982)
1998 Audit Report: Brightmoor Health Care, Inc.
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Excess Vehicles
Finding No.6
Documentation examined during the audit showed that expenses were claimed for
three vehicles for the year under review. DMA guidelines allow a maximum two vehicles 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 ~
,0
excluded from reimbursable costs claimed. We recommend that the Department
of Medical Assistance make the following adjustment to reduce allowable costs claimed for the depreciation 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 Expense
Total Adjustment to Allowable Costs
$
(694)
0,751)
(2,445)
Patient Day Statistics
Finding No.7
The provider stated on the cost report that it furnished 48,282 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate.
10
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
$
56,275
2
Nurse Aide Testing and Training Costs
(97) $
Special Services
1
Incorrect Expense Classifications
3
Excess Compensation
$
4,185
(863)
Dietary
1
Incorrect Expense Classifications
Laundry and Housekeeping
I
Incorrect Expense Classifications
Operation and Maintenance ofPlant
I
Incorrect Expense Classifications
$
4
Fixed Asset Purchases Claimed as Expense
Administrative and General
I
Incorrect Expense Classifications
$
3
Excess Compensation
4
Fixed Asset Purchases Claimed as Expense
5
Allocations from Home Office
6
Excess Vehicles
2,332 (768)
15,926 (1,584) (11,420) (30,469)
(694)
56,178 3,322 (75,939) 7,158 1,564
(28,241)
1998 Audit Report: Brightmoor Health Care. Inc.
11
FINDING
NUMBER
ALLOWABLE COSTS
Property and Related Expenses
1
Incorrect Expense Classifications
$
(9,937)
4
Fixed Asset Purchases Claimed as Expense
929
5
Allocations from Home Office
487
6
Excess Vehicles
(1,751)
(10,272)
Total Audit Findings Affecting Allowable Costs
$===(4=6,=23=0)
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Nursing Facility Services Program
SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS
ALLOWABLE COSTS
Routine Services
Special Services Dietary
Laundry and Housekeeping Operation and Maintenance of
Pl!'1nt
Administrative and General
Property 'and Related Expenses
COST REPORT TOTALS
FIELD AUDIT FINDINGS
AUDITED TOTALS
$ 1,842,616 $ 158,538 511,419 252,974 262,895 389,328 311,876
56,178 $ 3,322 (75,939) 7,158 1,564 (28,241) (10,272)
1,898,794 161,860 435,480 260,132 264,459 361,087 301,604
Total Allowable Costs
$ 3,729,646 $
(46,230) $ 3,683,416
PATIENT DAY STATISTICS
48,282
48,282