,', " . DEPARTMENT OF AtJDITS AND ACCOUNTS Medicaid and Local Government Audits TABLE OF CONTENTS LETTER OF TRANSMITTAL i INTRODUCTION 1 FINDINGS AND RECOMMENDATIONS 4 Swnmary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 13 Schedule of Allowable Costs and Patient Day Statistics 16 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 December 2, 1997 Members of the Board ofMedical Assistance, and The Honorable Dr. William R. Taylor, Acting Commissioner Department of Medical Assistance 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303 0'.:)' Ladies and Gentlemen: :$ (2 This report provides the results of our audit of Community Care of America at Marietta, provider number 00140159A, 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 ad.mlnistration 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, CLVlbrlbw Claude L. Vickers State Auditor 1996 Audit Report: Community Care of America at Marietta 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 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 Community Care of America at Marietta, a 109-bed long-term health care facility located in Marietta, Georgia, is a provider emolled in the Georgia Medicaid Nursing Facilities Services Program. The facility provides both skilled and intermediate care services to resident 2 Nursing Facilities Services Program Audit Objectives patients. The facility was owned by and operated as a component of Community Care of America, 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 Community Care of America at Marietta 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 Community Care ofAmerica at Marietta 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 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 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: Community Care of America at Marietta 3 Scope and Methodology To accomplish these objectives, weperfonned a limited review ofthe 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 (RCFA 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 infonnation regarding the accuracy of cost and patient data for Community Care of America at Marietta 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 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 Fee Consulting Education Employee Benefits Interest Expense Repairs Supplies Special Services Cable Television Employee Benefits Therapy Settlement Dietary Consulting Education Employee Benefits Laundry and Housekeeping Employee Benefits Lease Expense Supplies $ (100) (780) (1,045) 18,508 (76) (68) (1,906) $ $ 683 1,772 (19,543) $ 1,190 (105) 734 $ 2,212 (996) (247) 14,533 (17,088) 1,819 969 1996 Audit Report: Community Care of America at Marietta 5 Operation and Maintenance of Plant Cable Television Employee Benefits Repairs Supplies Administrative and General Administrative Fee Communication Expense Consulting Education Employee Benefits Insurance Interest Expense Lease Expense Supplies Therapy Settlement Property and Related Expenses Communication Expense Insurance Lease Expense Total Adjustment to Allowable Costs $ (683) 232 68 1,331 $ 100 1,635 (410) 1,150 (23,458) (7,781) 76 (137) 822 19,543 $ (1,635) 7,781 1,133 $ 948 (8,460) 7,279 0 Finding No.2 Expenses Claimed by Another Chain Component Allowable costs claimed by another chain component included workers' compensation insurance expense applicable to this provider. 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 increase allowable costs by the amount of expense applicable to this provider which was claimed by the other chain component. (HCFA Pub. 15-1 Section 2304) 6 Nursing Facilities Services Program COST CENTER Routine Services Special Services Dietary Laundry and Housekeeping Operation and Maintenance ofPlant Administrative and General Total Adjustment to Allowable Costs COMPONENT FACILITY Community Care of America at Conner Community Care of America at Dublin Community Care of America at Macon Total Adjustment to Allowable Costs $ 5,329 354 662 778 158 36 $===7:=.3=17= $ 1,830 2,518 2,969 $===75:.3=:17= Finding No.3 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) 1996 Audit Report: Community Care of America at Marietta 7 COST CENTER Routine Services Special Services Laundry and Housekeeping Operation and Maintenance ofPlant Administrative and General Property and Related Expenses Total Adjustment to Allowable Costs $ (781) (142) (190) (1,364) (6,536) (15,933) $,=====(2==:4=,9::::::46:=) 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 Section 2102.3; DMA Policies and Procedures Sections 902, 1002.I(k)) ITEMS Barber Shop Fees Doctor Visits Dues Late Fees Marketing Prescription Drugs $ (247) (582) (354) (1,543) (249) (26,046) $ (29,021) COST CENTER Routine Services Administrative and General Property and Related Expenses $ (26,628) (850) (1,543) Total Adjustment to Allowable Costs $,=====(2=:9=,0=:21=) 8 Nursing Facilities Services Program Finding No.5 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 ofthe cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on Schedule B-1 A 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 of Medical Assistance make the following adjustment to increase allowable costs for the net effect of the recalculation. (General Instructions to the Cost Report) Ancillary Services Adjustment Per Cost Report Recalculated Adjustment Audit Finding Physical Therapy Speech Therapy $ (75,720) $ (76,091) $ (32,310) (12,767) (371) 19,543 $ 008.030) $ C88,858) $ 19,172 COST CENTER Special Services $===1:=9,=17=2= Finding No.6 Allocation ofIndirect Expenses to Non-Patient Care Areas 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 1996 Audit Report: Community Care of America at Marietta 9 Schedule B-5 as allowable costs and square footage. These findings required the recalculation of Schedule B-5. A copy ofthis recalculation has been 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 of the 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 $ (1,966) (1,640) (639) Total Adjustment to Allowable Costs $==(=4=,24=5:=) 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) Adjustments to Balance Sheet Accounts: Allowable Costs June 30, 1996 Balance Accounts Payable Prepaid Insurance Accrued Property Taxes Total Adjustment to Allowable Costs $ (14,034) (347) 1,006 $=====(1:=3=.3=75=) 10 Nursing Facilities Services Program COST CENTER Operation and Maintenance ofPlant Administrative and General Property and Related Expenses Total Adjustment to Allowable Costs $ (275) (347) (12,753) $.====(1=3=.3=75=) Finding No.8 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 ofthe home office cost report filed in connection with the Medicaid Nursing Home Facilities Program, we recommended ~at 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 $ Pooled Costs Allocation Statistics Administrative Expenses Property and Related. Expenses Direct Capital Related Interest Expense (154,791) (217) (14,598) $ (169,606) (45) Total Adjustment to Allowable Costs $ (169,651) 1996 Audit Report: Community Care of America at Marietta 11 Finding No.9 Excess Compensation 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 Compensation Ceilings; HCFA 15-906) Position Title Total Guideline Compensation Ceiling Excess Bookkeeper Payroll Taxes $ 35,097 $ 32,677 $ 2,685 2,500 (2,420) (185) $ 37,782 $ 35,177 $ (2,605) COST CENTER Administrative and General (2,605) Finding No. 10 Liabilities Not Liquidated Expenses shown on Schedule B-2 of the cost report for June 30, 1996, included amounts which had not been paid at June 30, 1997. Federal regulations provide that short term liabilities must be liquidated within one year after the end of the cost reporting period in which the liability was incurred and must be made by check or other negotiable instrument, cash or legal transfer of other assets. Furthermore, where the liability is reduced as a result of a settlement, the cost of the related goods and 12 Nursing Facilities Services Program services is not allowable in the cost reporting period. We recommend that the provider implement policies and procedures to ensure that liabilities included in the cost report are liquidated. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs for the expense relating to the unliquidated liability. (HCFA Pub. 15-1 Section 2305A) COST CENTER Property and Related Expenses $==(::::::16:=9:=,1=00=) Finding No. 11 Patient Day Statistics Census records examined during the audit showed that the nursing home had 39,198 patient days of service rather than the 39,168 shown on the cost report. Federal regulations provide that cost infonnation 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 accumulate accurate patient day statistics. We recommend that the Department of Medical Assistance make the adjustment of 30 days to correct the statistical infonnation. (HCFA Pub. 15-1 Section 2304) 1996 Audit Report: Community Care of America at Marietta 13 SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS FINDING NUMBER ALLOWABLE COSTS Routine Services 1 Incorrect Expense Classifications 2 Expenses Claimed by Another Chain Component 3 Lack of Sufficient Documentation 4 Costs Not Related to Patient Care $ 14,533 5,329 (781) (26,628) $ Special Services 1 Incorrect Expense Classifications $ (17,088) 2 Expenses Claimed by Another Chain Component 354 3 Lack of Sufficient Documentation (142) 5 Recalculation of Ancillary Services Cost Adjustment 19,172 Dietary 1 Incorrect Expense Classifications 2 Expenses Claimed by Another Chain Component $ 1,819 662 Laundry and Housekeeping 1 Incorrect Expense Classifications $ 969 2 Expenses Claimed by Another Chain Component 778 3 Lack of Sufficient Documentation (190) 6 Allocation ofIndirect Expenses to Non-Patient Care Areas (1,966) (7,547) 2,296 2,481 (409) 14 Nursing Facilities Services Program FINDING NUMBER ALLOWABLE COSTS Operation and Maintenance ofPlant 1 Incorrect Expense Classifications $ 948 2 Expenses Claimed by Another Chain Component 158 3 Lack of Sufficient Documentation (1,364) 6 Allocation of Indirect Expenses to Non-Patient Care Areas (1,640) 7 Accrual Basis of Accounting (275) (2,173) Administrative and General 1 Incorrect Expense Classifications 2 Expenses Claimed by Another Chain Component 3 Lack of Sufficient Documentation 4 Costs Not Related to Patient Care 7 Accrual Basis of Accounting 8 Allocations from Home Office 9 Excess Compensation $ (8,460) 36 (6,536) (850) (347) (169,606) (2,605) (188,368) PropertY and Related Expenses 1 Incorrect Expense Classifications $ 7,279 3 Lack of Sufficient Documentation (15,933) 4 Costs Not Related to Patient Care (1,543) 6 Allocation of Indirect Expenses to Non-Patient Care Areas (639) 7 Accrual Basis ofAccounting (12,753) 8 Allocations from Home Office (45) 10 Liabilities Not Liquidated (169,100) (192,734) Total Audit Findings Affecting Allowable Costs $ (386,454) 1996 Audit Report: Community Care of America at Marietta 15 FINDING NUMBER PATIENT DAY STATISTICS 11 Increase in Patient Day Statistics 30 16 Nursing Facilities Services Program SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS ALLOWABLE COSTS COST REPORT TOTALS FIELD AUDIT FINDINGS AUDITED TOTALS Routine Services $ 1,377,673 $ (7,547) $ 1,370,126 Special Services 89,826 2,296 92,122 Dietary 355,239 2,481 357,720 Laundry and Housekeeping 227,089 (409) 226,680 Operation and Maintenance of Plant 191,295 (2,173) 189,122 Administrative and General 526,524 (188,368) 338,156 Property and Related Expenses 266,362 (192,734) 73,628 Total Allowable Costs $ 3,034,008 $ (386,454) $ 2,647,554 PATIENT DAY STATISTICS 39,168 30 39,198