Audit report, for the year ended June 30, 1998, Cherry Blossom Health Care Center, Medicaid provider no. 00413509A, Nursing Facilities Services Program

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DEPARTMENT OF AUDITS AND ACCOUNTS
Medicaid and Local Gpvernment Audits
.AUDlT REPORT . . .FQRTHEYEARENDEIJJUNE30, 1998. CHERRY BLOSSOM HEALTH CA.RE CENTER
. .. MEDICAID PROVIDER NUMBER. 00413509A NURSING FACILITY SERVICES PROGRAM
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TABLE OF CONTENTS
LETTER OF TRA.NSMITTAL..........~....~.............................................. i
INTRODUCTION .......................................... ~ ....................................... ~:vt
FINDINGS AND RECOMMENDATIONS ......................................... 5
Summary ofAudit Findings Affecting Allowable Costs and Patient Day Statistics ........... 7
Schedule ofAllowable Costs and Patient Day Statistics .....................~..................... 8

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
STATEAUDITOR

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

May 24, 1999

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 of our audit of Cherry Blossom Heal!}l Care Center, provider number 00413509A, 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.
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Claude L. Vickers State Auditor

1998 Audit Report: Cherry Blossom Health Care Center

1

INTRODUCTION

General Information

The Georgia Medical Assistance Program (Medicaid) is administered by the Georgia Department of Medical Assistance and is jointly funded J:>y 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 tls 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

Cherry Blossom Health Care Center, a 82-bed long-term health care facility located in Macon, 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.

2

Nursing Facility Services Program

The facility was operated as a freestanding nursing home for the year ended June 30, 1998.

Audit Objectives

The purpose of this audit was to determine whether Cherry Blossom Health Care 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, 1998; and to determine whether Cherry Blossom Health Care Center 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 ofthis 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.

1998 Audit Report: Cherry Blossom Health Care 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 OMA 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 Cherry Blossom Health Care Center 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 Cherry Blossom Health Care Center 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

4

Nursing Facility Services Program

provider's payment rate, we have reviewed those costs as part of our audit.

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 Cherry Blossom Health Care Center 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: Cherry Blossom Health Care Center

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

COST CENTER Routine Services Software Maintenance Administrative and General Insurance Expense Software Maintenance Property and Related Expenses Insurance Expense
Total Adjustment to Allowable Costs

$

3,357

935

$

(935)
4,292 (3,357)
0

Allocation ofIndirect Expenses to Non-Patient Care Areas

Finding No. 2

The provider uses a portion of its building for. purposes which are not related to patient care. Indirect expenses related to the non-patient care use of the building are calculated on Schedule B-5 of the cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on Schedule B-5 as allowable costs and square footage. These findings required the recalculation of Schedule B-5. A copy of this recalculation has been

6

Nursing Facility Services Program

furnished to the provider. We recommend that the provider implement policies and procedures to ensure that all information used to allocate indirect expenses to non-patient care areas is correct. We recommend that the Department of Medical Assistance make the following adjustment to decrease allowable costs for the net effect ofthe recalculation. (HCFA Pub. 15-1 Section 2102.3; General Instructions to the Cost Report)

COST CENTER Laundry and Housekeeping Operation and Maintenance ofPlant Property and Related Expenses
Total Adjustment to Allowable Costs

$

(306)

(213)

(347)

$

(866)

Patient Day Statistics

Finding No. 3

The provider stated on the cost report- that it furnished 28,999 patient daY.s of service. Census.records examined during the audit showed that the patient days shown on the cost report were accurate.

1998 Audit Report: Cherry Blossom Health Care Center

7

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1

Incorrect Expense Classifications

$

Laundry and Housekeeping

2

Allocation ofIndirect Expenses to Non-Patient Care Areas

Operation and Maintenance ofPlant

2

Allocation of Indirect Expenses to Non-Patient Care Areas

Administrative and General

1

Incorrect Expense Classifications

Property and Related Expenses

1

Incorrect Expense Classifications

$

(3,357)

2

Allocation of Indirect Expenses to Non-Patient Care Area

(347)

Total Audit Findings Affecting Allowable Costs

$

(935) (306) (213) 4,292
(3,704) (866)

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Nursing Facility Services Program

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

<r-

ALLOWABLE COSTS

Routine Services

$

Special Services Dietary

Laundry and Housekeeping

Operation and Maintenance ofPlant

Administrative and General

Property and Related Expenses

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

961,097 $ 71,181 .
288,157 170,153 115,485 275,939 208,953

(935) $
(306) (213) 4,292 (3,704)

960,162 71,181
288,157 169,847 115,272 280,231 205,249

Total Allowable Costs

$

2,090,965 $

(866) $

2,090,099

PATIENT DAY STATISTICS

28,999

28,999