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llfi'ii.f-95  -DEPARTMENT OFAUDlTS- - 
 
Medicaid and Local GovernmentAudits'. 
 
- .-_- _-- - ---.... < AUDIT-REPORT -- 
. _ _. FOR THE YEAR ENDE-D JUNE30, 1995' . 
.- CltATSWORTII HEALTH CARE CENTER, INC. - 
. . .  . .- MEDICAID ,PROVIDERNUMBER 00.2O9778A 
NURSING_FACILITIESSERVICES PROGRAM. _ 
 
 TABLE OF CONTENTS 
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i 
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
FINDINGS AND RECOMMENDATIONS ................... 3 
Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics       9 Schedule of Allowable Costs and Patient Day Statistics                     11 
 
 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 AUDrTOR 
 
DEPARTMENT OF AUDITS 
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 
Telephone (404) 656-2006 Facsimile (404) 656-7535 
May 7, 1996 
 
Members of the Board of Medical Assistance, and The Honorable Marge Smith, Commissioner Department ofMedical Assistance 2 Peachtree Street, N.W., Suite 27-100 Atlanta, Georgia 30303 
Ladies and Gentlemen: 
This report provides the results of our audit of Chatsworth Health Care Center, Inc., provider number 00209778A, a participant in the Nursing Facilities Services Program for the year ended June 30, 1995. This report is intended to be used solely in connection with the administration of the Georgia Department ofMedical Assistance Nursing Facilities Services Program and is not to be used or relied upon for any other purpose. 
Respectfully Submitted, 
~~ 
Claude L. Vickers State Auditor 
CLV/mj/by 
 
 1995 Audit Report: Chatsworth Health Care Center, Inc. 
 
1 
 
INTRODUCTION 
 
Provider Information 
 
Chatsworth Health Care Center, Inc., is a 120-bed long-term health care facility located in Chatsworth, Georgia. The facility provides both skilled and intermediate care services to resident patients. The facility was operated as a component of Blue Ridge Nursing Homes, Inc., a chain organization which filed a Home Office Cost Report with OMA for the year ended June 30, 1995. 
 
Audit Objectives 
 
The purpose of this audit was to determine whether Chatsworth Health Care Center, Inc., a provider enrolled in the Georgia Medicaid Nursing Facilities Services (NFS) Program, 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, 1995; and to determine whether Chatsworth Health Care Center, Inc., complied with the federal and state laws, regulations, policies and procedures for the NFS 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 Facilities Services Program; 
 
 2 
Scope and Methodology 
 
Nursing Facilities Services Program 
 
 
 
determine if patient day statistics included in the cost 
 
report are accurately reported; and 
 
 
 
recommend appropriate action based on the results of 
 
our audit. 
 
To accomplish these objectives, 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 performed a limited review of the provider's internal control structure to the extent necessary to plan our audit. 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 OMA Policies and Proceduresfor Nursing Facility Sen,ices. 
 
 1995 Audit Report: Chatsworth Health Care Center, Inc. 
 
3 
 
FINDINGS AND RECOMMENDATIONS 
 
Finding No.1 
 
Incorrect Expense Classifications 
 
Documentation examined during the audit showed that some ofthe expenses were not classified in accordance with the Uniform Chart of Accounts prescribed by the Department ofMedical 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 Administrative Supplies Special Services Cable Television Oxygen Dietary Lease Laundry and Housekeeping Waste Cans Operation and Maintenance of Plant Cable Television Administrative and General Administrative Supplies Liability Insurance Expense Property Taxes Waste Cans Property and Related Expenses Lease Liability Insurance Expense Oxygen Property Taxes 
 
$ 
 
$ 
 
257 
 
8 819 
 
$ 
 
1,910 
 
1,123 
 
(87) 
 
(397) 
 
$ 
 
1,148 
 
(1,123) 
 
(8,819) 
 
87 
 
(1,910) 9,076 (1,148) 
397 (257) 
2,549 
 
Net Adjustment to Allowable Costs 
 
$=======!!= 
 
 4 
 
Nursing Facilities Services Program 
 
Finding No.2 
 
Nurse Aide Testing and Training Costs 
 
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 ofMedical Assistance make the following adjustment to decrease allowable costs by the amount of nurse aide testing and training costs. 
(DMA General Instructions to Cost Report) 
 
COST CENTER Routine Services 
 
$=====C~St::!:!6=1~2}= 
 
Finding No. 3 
 
Costs Not Related to Patient Care 
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.15-1 Sections 2102.3, 2102.1, 2139; DMA Policies and Procedures Section I002.1 (k)) 
 
 1995 Audit Report: Chatsworth Health Care Center, Inc. 
 
5 
 
ITEMS Association Dues (50%) Donations Flowers for Doctors Late Fees Political Contributions Property Taxes on Rental Building V.A. Patient Visits Vehicle Expense - Personal Usage 
COST CENTER Special Services Operation and Maintenance of Plant Administrative and General Property and Related Expenses 
Total Adjustment to Allowable Costs 
 
$ 
 
(43) 
 
(50) 
 
(108) 
 
(465) 
 
(180) 
 
(1,185) 
 
(1,954) 
 
(90) 
 
$ 
 
(4 075) 
 
$ 
 
(1,954) 
 
(108) 
 
(621) 
 
(1,392) 
 
$ 
 
(4 075) 
 
Finding No. 4 
 
Recalculation ofAncillary Services Cost Adjustment 
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 ofMedical Assistance make the following adjustment to decrease allowable costs for the net effect of the recalculation. 
(General Instrnctions to the Cost Rep01t) 
 
 6 
 
Nursing Facilities Services Program 
 
Ancillary Services Oxygen 
COST CENTER Special Services 
 
Adjustment Per Cost Report 
 
Recalculated Adjustment Audit Finding 
 
$ 
 
(22:1) $ (2 Q:13) $ 
 
(8 812) 
 
$.====='8:!::8!:!::::]!::::!2=::) 
 
Finding No. 5 
 
Allocationsfrom Home Office 
 
The provider was a component of a chain organization for the year ended June 30, 1995. As a result of our audit of the home office cost report filed in connection with the Medicaid Nursing Facilities Services 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. 
(HCFA Pub. 15-1 Section 2150) 
 
COST CENTER Operation and Maintenance of Plant Directly Allocated Costs Administrative and General Pooled Costs Administrative Expenses Property and Related Expenses Pooled Capital Related Interest Expense 
 
$ 
 
(3,711) 
 
(6,972) (1,496) 
 
Total Adjustment to Allowable Costs 
 
$====='c::!::1:!=!:12:::!:::]7==2=) 
 
 1995 Audit Report: Chatsworth Health Care Center, Inc. 
 
7 
 
Finding No. 6 
 
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 paymef!ts 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 Administrative and General Property and Related Expenses 
 
$ 
 
(518) 
 
(3,732) 
 
Total Adjustment to Allowable Costs 
 
$.======'4:::!:::=2!::!:5:!:!:0=) 
 
Finding No. 7 
 
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 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) 
 
 8 
 
Nursing Facilities Services Program 
 
Adjustments to Balance Sheet Accounts: 
June 30, 1995 Balance Accounts Payable 
COST CENTER Administrative and General Property and Related Expenses 
Total Adjustment to Allowable_ Costs 
 
Allowable Costs 
 
$ 
 
(J 256) 
 
$ 
 
(450) 
 
(806) 
 
$ 
 
(] 256) 
 
Finding No. 8 
 
Expense Applicable to Anotlter Cltain Component 
 
Allowable costs claimed included amortization and interest 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 
 
$,====='~6t:!!!6::!=!8:::!::]""") 
 
COMPONENT FACILITY Fairburn Health Care Center, Inc. 
 
$==='!c!:6=:!6=:!:8:::!:]::i!:::) 
 
 1995 Audit Report: Chatsworth Health Care Center, Inc. 
 
9 
 
SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS 
 
FINDING NUMBER 
 
ALLOWABLE COSTS 
 
Routine Services 
 
1 
 
Incorrect Expense Classifications 
 
2 
 
Nurse Aide Testing and Training Costs 
 
$ 
 
(1,910) 
 
(8,612) $ 
 
Special Services 
 
I 
 
Incorrect Expense Classifications 
 
3 
 
Costs Not Related to Patient Care 
 
4 
 
Recalculation of Special Services Cost 
 
Adjustment 
 
$ 
 
9,076 
 
(1,954) 
 
(8,819) 
 
Dietary 
 
1 
 
Incorrect Expense Classifications 
 
Laundry and Housekeeping 
 
1 
 
Incorrect Expense Classifications 
 
Operation and Maintenance o(Plant 
 
1 
 
Incorrect Expense Classifications 
 
3 
 
Costs Not Related to Patient Care 
 
5 
 
Allocations from Home Office 
 
$ 
 
(257) 
 
(108) 
 
(3,711) 
 
(10,522) 
(1,697) (1,148) 
397 (4,076) 
 
 Nursing Facilities Services Program 
 
FINDING NUMBER 
 
ALLOWABLE COSTS 
 
Administrative and General 
 
1 
 
Incorrect Expense Classifications 
 
3 
 
Costs Not Related to Patient Care 
 
5 
 
Allocations from Home Office 
 
6 
 
Lack of Sufficient Documentation 
 
7 
 
Accrual Basis of Accounting 
 
8 
 
Expense Applicable to Another Chain 
 
Component 
 
$ 
 
2,549 
 
(621) 
 
(6,972) 
 
(518) 
 
(450) 
 
{61681) 
 
(12,693) 
 
Property and Related Expenses 
 
1 
 
Incorrect Expense Classifications 
 
3 
 
Costs Not Related to Patient Care 
 
5 
 
Allocations From Home Office 
 
6 
 
Lack of Sufficient Documentation 
 
7 
 
Accrual Basis of Accounting 
 
$ 
 
(8,707) 
 
(1,392) 
 
(1,496) 
 
(3,732) 
 
{806) 
 
061133) 
 
Total Audit Findings Affecting Allowable Costs 
 
$======{4=5=,8=72=) 
 
 1995 Audit Report: Chatsworth Health Care Center, Inc. 
 
11 
 
SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS 
 
ALLOWABLE COSTS Routine Services Special Services Dietary Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General Property and Related Expenses 
 
COST REPORT TOTALS 
 
AUDIT FINDINGS 
 
AUDITED TOTALS 
 
$ 1,366,474 $ 109,849 298,075 241,613 166,449 417,429 226,398 
 
(10,522) $ (1,697) (1,148) 397 (4,076) 
(12,693) (16,133) 
 
1,355,952 108,152 296,927 242,010 162,373 404,736 210,265 
 
Total Allowable Costs 
 
$ 2,826,287 $ (45,872) $ 2,780,415 
 
PATIENT DAY STATISTICS 
 
43,286 
 
43,286