&A A~CoJn4 fd (+1 1~1-i7 DEPARTMENT OF AUDITS AND ACCOUNTS Medicaid and LocalGovernment Audits AU])IT REPORT .. ' .. ' '., . .. FOR THE YEAR ENDED JUNE 30, 1997 CHATSWORTH HEALTH CARE CENTER, INC. MEDICMDPROVI~ERNUMBER00209778A NURSINGFACILITY~.ERVICESPROGRAM TABLE OF CONTENTS LETTER OF TRANSMITTAL i INTRODUCTION 1 FINDINGS AND RECOMMENDATIONS 5 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, 1998 Members of the Board of Medical Assistance, and The Honorable Dr. William R. Taylor, Commissioner Department ofMedical Assistance 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303 Ladies and Gentlemen: This report provides the results ofour audit of Chatsworth Health Care Center, Inc., provider number 00209778A, a participant in the Nursing Facility Services Program for the year ended June 30, 1997. This report is intended to be used solely in connection with the administration of the Georgia Department ofMedical Assistance Nursing Facility Services Program and is not to be used or relied upon for any other purpose. Respectfully Submitted, tf~~ Claude L. Vickers State Auditor CLV/tc/bw 1997 Audit Report: Chatsworth Health Care Center, 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 ofGeorgia 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 ofMedical 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 infonnation. Infonnation 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 Chatsworth Health Care Center, Inc., a 120-bed long-tenn health care facility located in Chatsworth, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facility Services Program. The facility provides both skilled and intennediate care services to resident 2 Nursing Facility Services Program Audit Objectives 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 DMA for the year ended June 30, 1997. The purpose of this audit was to determine whether Chatsworth Health Care Center, 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, 1997; and to determine whether Chatsworth Health Care Center, 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. 1997 Audit Report: Chatsworth Health Care Center, Inc. 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. In accordance with Section 1002 of Policies and Procedures for Nursing Facility Services, the Department of Medical Assistance has calculated the payment rate for Chatsworth Health Care Center, 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 ofMedical Assistance when calculating the payment rate for Chatsworth Health Care Center, 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 4 Nursing Facility Services Program 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 lease expense. We have included a finding related to this matter in our report. 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 Chatsworth Health Care Center, Inc., for the year ended June 30, 1997. 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. 1997 Audit Report: Chatsworth Health Care Center, Inc. 5 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 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 Communications Dietary Supplements Dietary Supplies Medical Records Supplies Security System Waste Removal Special Services Cable Television Resident Flowers Dietary Dietary Supplements Dietary Supplies Lease Operation and Maintenance of Plant Cable Television Repairs and Maintenance Security System Waste Removal $ (350) (3,209) (127) (2,366) (249) (1,480) $ $ 249 37 $ 3,209 127 (3,418) $ (249) 282 249 1,480 (7,781) 286 (82) 1,762 6 Nursing Facility Services Program Administrative and General Communications Liability Insurance Medical Records Supplies Occupational Tax Repairs and Maintenance Resident Flowers Property and Related Expenses Lease Liability Insurance Occupational Tax Total Adjustment to Allowable Costs $ 350 1,118 2,366 618 (282) (37) $ 3,418 (1,118) (618) $ 4,133 1,682 Finding No.2 Allocationsfrom Home Office The provider was a component of a chain organization for the year ended June 30, 1997. 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 Routine Services Functionally Allocated Costs Administrative and General Pooled Costs Allocation Statistics Administrative Expenses $ (2,397) $ (339) (5,122) (5,461) Total Adjustment to Allowable Costs $===(7=,8:=58=) 1997 Audit Report: Chatsworth Health Care Center, Inc. 7 Finding No.3 Costs Misclassijied as Nurse Aide Testing and Training Costs An adjustment was made during cost report preparation to remove nurse aide testing and training expenses from allowable costs. Documentation examined during the audit showed that some of these costs were not incurred to provide nurse aide testing and training services. 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 costs shown on the cost report as nurse aide testing and training expenses were incurred to provide nurse aide testing and training services. We recommend that the Department of Medical Assistance make the following adjustment to reverse a portion of the provider's adjustment. (HCFA Pub. 15-1 Section 2304) COST CENTER Routine Services $===1=,6=72= Finding No.4 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, 2122.2; DMA Policies and Procedures Section 1002.1(k)) 8 Nursing Facility Services Program ITEMS Association Dues (50%) Contributions Personal Use of Facility Vehicle Property Taxes on Rental Building COST CENTER Operation and Maintenance of Plant Administrative and General Property and Related Expenses Total Adjustment to Allowable Costs $ (377) (100) (431) (1,196) $ (2,104) $ (46) (601) (1,457) $==(=:2=,1:=04=:) Finding No.5 Nurse Aide Testing and Training Costs Documentation examined during the audit showed that the provider did not remove all 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. (DMA General Instructions to Cost Report) COST CENTER Administrative and General $======(::::::70=) 1997 Audit Report: Chatsworth Health Care Center, Inc. 9 Finding No.6 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. (HCFAPub.15-1 Section 2302.1) Adjustments to Balance Sheet Accounts: Allowable Costs June 30, 1997 Balance Property Taxes Payable $===(:=3:=64=::) COST CENTER Property and Related Expenses $.===(=3=64=) Finding No.7 Patient Day Statistics The provider stated on the cost report that it furnished 42,291 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 $ (7,781) 2 Allocations from Home Office (2,397) 3 Costs Misclassified as Nurse Aide Testing and Training 1,672 $ Special Services 1 Incorrect Expense Classifications Dietary 1 Incorrect Expense Classifications Operation and Maintenance ofPlant 1 Incorrect Expense Classifications 4 Costs Not Related to Patient Care $ 1,762 (46) Administrative and General 1 Incorrect Expense Classifications $ 4,133 2 Allocations from Home Office (5,461) 4 Costs Not Related to Patient Care (601) 5 Nurse Aide Testing and Training Costs (70) (8,506) 286 (82) 1,716 (1,999) 1997 Audit Report: Chatsworth Health Care Center, Inc. 11 FINDING NUMBER ALLOWABLE COSTS Property and Related Expenses 1 Incorrect Expense Classifications 4 Costs Not Related to Patient Care 6 Accrual Basis of Accounting $ 1,682 (1,457) (364) (139) Total Audit Findings Affecting Allowable Costs $=====(8=,7=2=4=) 12 Nursing Facility Services Program SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS COST REPORT TOTALS FIELD AUDIT FINDINGS AUDITED TOTALS ALLOWABLE COSTS Routine Services $ 1,348,887 $ (8,506) $ 1,340,381 Special Services 104,397 286 104,683 Dietary 341,353 (82) 341,271 Laundry and Housekeeping 253,316 253,316 Operation and Maintenance of Plant 182,745 1,716 184,461 Administrative and General 417,750 (1,999) 415,751 Property and Related Expenses 198,826 (139) 198,687 Total Allowable Costs $ 2,847,274 $ (8,724) $ 2,838,550 PATIENT DAY STATISTICS 42,291 42,291