Audit report, for the year ended December 31, 1995, Crestview Nursing Facility, Medicaid provider no. 00273567A, Nursing Facilities Services Program

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DEPARTMENT OF AUDITS AND ACCOUNTS
Medicaid and Local GovernmentAudits

.. . AUDIT REPORT

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. FOR THE YEAR ENDED DECEMBER 31, 1995

CRESTVIEW NURSING FACILITY

MEDICAID PROVIDER NUMBER 00273567A

NURSING FACILITIES SERVICES PROGRAM

TABLE OF CONTENTS
LETTER OF TRANSMITTAL .............................. i
INTRODUCTION ......................................... 1
FINDINGS AND RECOMMENDATIONS .................... 6 Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 14 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

March 2, 1999

Members ofthe Board ofMedical Assistance, and The Honorable Dr. William R. Taylor, 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 Crestview Nursing Facility, provider number 00273567A, a participant in the Nursing Facilities Services Program for the year ended December 31, 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.

CLV/ar/bw

Respectfully Submitted,
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Claude L. Vickers State Auditor

1996 Audit Report: Crestview Nursing Facili1:y

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 of Medical 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

Crestview Nursing Facility, a 388-bed long-term health care facility located in Atlanta, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facilities Services Program. The facility provides both skilled and intermediate care services to resident patients. The

2

Nursing Facilities Services Program

Audit Objectives

facility is owned and operated by the Fulton-DeKalb Hospital Authority, which operated both Grady Memorial Hospital and Crestview Nursing Facility in separate physical facilities during the year under review.

The purpose of this audit was to determine whether Crestview Nursing Facility maintained adequate documentation to support the allowable costs and patient day statistics reported in its Nursing Home Cost Report for the year ended December 31, 1995; and to determine whether Crestview Nursing Facility 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 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;



compare patient day statistics included in the cost

report to provider records to determine if the patient

day statistics are accurately reported;



determine if the provider meets the requirements for

classification as a hospital-based nursing home

1996 Audit Report: Crestview Nursing Facility

3

Scope and Methodology

outlined in OMA Policies and Procedures for Nursing Facility Services, Section 1002.l(g); and



recommend appropriate action based on the results of

our audit.

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 D~ Policies and Procedures for Nursing Facility Services.
In accordance with Section 1002 of Policies and Procedures for Nursing Facility Services, the Department ofMedical Assistance has calculated the payment rate for Crestview Nursing Facility 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

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Nursing Facilities Services Program

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 Crestview Nursing Facility, 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 lease expense. We have included findings related to these matters in our report.
Allowable costs reported on the Nursing Home Cost Report include both direct costs ofthe nursing facility and indirect costs allocated to it from Grady Memorial Hospital. These indirect cost allocations result from the step-down of general service costs from the hospital as shown on the hospital's Medicare cost report. Our audit did not include tests ofeither these indirect costs or the reclassifications and adjustments made to determine net expenses for cost allocation on the Medicare cost report worksheets. These costs are subject to audit by the Medicare intermediary. Any audit findings by the Medicare intermediary related to indirect costs that impact the nursing facility will be reflected in ~e Medicaid cost report in the year the Medicare cost report is final-settled.

1996 Audit Report: Crestview Nursing Facility

5

The Department ofAudits and Accounts is responsible for providing the Department ofMedical Assistance with information regarding the accuracy of cost and patient data for Crestview Nursing Facility for the year ended December 31, 1995. 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.

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Nursing Facilities Services Program

FINDINGS AND RECOMMENDATIONS

Finding No. J

Hospital-Based Status
The provider was in compliance with the Department of Medical Assistance's requirements for classification as a hospital-based nursing home as specified in DMA Policies and Procedures for Nursing Facility Services, Section 1002.1 (g).

Incorrect Expense Classifications

Finding No.2

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 Subscription Supplies Expense Travel Expense Special Services Medical Records Expense Rental Supplies Supplies Expense Dietary Rental Expense Repair Expense Supplies Expense

$

(287)

(16,008)

(1,046) $

$ (7,760) (3,450) (3,414)

$ (16,560) (125)
(2;845)

(17,341) (14,624) (19,530)

1996 Audit Report: Crestview Nursing Facility

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Laundry and Housekeeping Supplies Expense
Operation and Maintenance ofPlant Photocopier Expense Rental Expense Repair Expense Supplies Waste Removal
Administrative and General Medical Records Expense Photocopier Expense Subscription Supplies Travel Expense Waste Removal
Property and Related Expenses Rental Expense
Total Adjustment to Allowable Costs

$

(580)

(19,150)

125

1,261

181

$

7,760

580

287

20,574

1,046

(181)

$

432
(18,163)
30,066 39,160
0

Lack ofSufficient Documentation

Finding No. 3

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 aresupported 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)

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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

$

(5,658)

(110,805)

(55,658)

(10,071)

(15,525)

(53,964)

$ (251,681)

Excess Compensation

Finding No. 4

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 ofcompensation paid in excess ofthe DMA guidelines, plus related employer's share ofpayroll taxes.
(DMA Compensation Ceilings; HCFA 15-906)

Position Title
Social Services Director Payroll Taxes
Dietary Supervisor Payroll Taxes

Total Compensation

Guideline Ceiling

Excess

$

44,053 $ 35,638 $

(8,415)

3,370

2,726

(644)

38,243

35,638

{2,605)

2,926

2,727

(199)

$

882592 $ 762729 $

(112863)

1996 Audit Report: Crestview Nursing Facility
COST CENTER Special Services Dietary Total Adjustment to Allowable Costs

9

$

(9,059)

(2,804)

$====(1=1=,8=63=)

Finding No. 5

Costs Not Related to Patient Care

Allowable costs claimed included prescription drugs which are 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 2102.1, 2102.3; OMA Policies and Procedures Sections 902)

COST CENTER Special Services

$=====(=84='=82=1=)

Recalculation ofAncillary Services Cost Adjustment

Finding No. 6

The provi,der 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-lA ofthe cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on Schedule B-lA as total cost per books, total charges, Medicaid charges, total patient

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Nursing Facilities Services Program

days, and Medicaid patient days. These findings required the recalculation of Schedule B-lA. 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 calculate the ancillary services cost adjustment is correct. We recommend that the Department of Medical Assistance make the following adjustment to decrease allowable costs for the net effect ofthe recalculation.
(General Instructions to the Cost Report)

Ancillary Services
Physical Therapy Pharmacy Occupational Therapy Medical Supplies

Adjustment Per Cost Report

Recalculated Adjustment Audit Finding

$

(60,670) $ (95,418) $

(34,748)

(170,278)

(28,504)

141,774

(215,756)

(328,141)

(112,385)

(215,244)

(215,244)

$ (446,704) $ (667,307) $ (220,603)

COST CENTER Special Services

$ (220,603)

Fixed Asset Purchases Claimed as Expense

Finding No. 7

Allowable costs claimed included purchases of assets which are considered to be capital additions to property under generally accepted accounting principles. The Uniform Chart ofAccounts 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

1996 Audit Report: Crestview Nursing Facility

11

make the following adjustment to reduce allowable costs by the amount ofpurchased assets claimed as expense and to increase allowable costs by depreciation allowable.
(HCFA Pub. 15-1 Section 108; DMA Policies and Procedures, Appendix D)

COST CENTER Dietary Cost ofMajor Moveable Equipment Operation and Maintenance ofPlant Cost ofFixed Equipment Cost of Leasehold Improvements Cost ofMajor Moveable Equipment Property and Related Expenses Allowable Depreciation Expense
Total Adjustment to Allowable Costs

$

(1,040)

$ (15,400) (2,500) (1,667)

(19,567) 1,174

$====(1=9=,4=33=)

Expense Reimbursements

Finding No. 8

Documentation examined during the audit showed that amounts shown on the cost report as revenues were from sales of materials and/or services, the cost of which were included in allowable costs claimed. Federal regulations provide that amounts received for discounts, allowances, refunds and rebates are not to be considered a form ofincome but should be used to reduce the specific costs to which they apply. We recommend that the provider implement policies and procedures to ensure that allowable costs claimed are reduced by any expense reimbursements received. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs claimed by expense reimbursements shown as revenues.
(HCFA Pub. 15-1 Section 800)

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Nursing Facilities Services Program

COST CENTER Dietary Administrative and General
Total Adjustment to Allowable Costs

$

(35,928)

(174)

$ ==='3=6=,1=02=)

Patient Trust Fund Not in Balance

Finding No. 9

Documentation examined during the audit showed that the provider manages funds belonging to its patients. The assets of the patient trust fund at December 31, 1995 totaled $118,595.15; patient trust fund liabilities were $90,411.29. Federal law requires that the provider establish and maintain a system that assures a full and complete and separate accounting, according to generally accepted accounting principles, of each resident's personal funds. We recommend that the provider return these excess funds to the appropriate parties. We further recommend that the provider implement policies and procedures to maintain a balanced, reconciled patient trust fund. We also recommend that the Department of Medical Assistance ensure that the provider returns the excess funds and implements the policies and procedures necessary to maintain a balanced, reconciled patient trust fund.
(42 CPR 483.10C(4))

Individual Accounts Receivable Listing

Finding No. JO

The provider did not maintain an individual accounts receivable listing. We recommend that the provider implement policies and procedures to ensure that an
..
individual accounts receivable list is maintained. We further recommend that the Department of Medical Assistance review this matter and determine whether any
credit balances exist.

1996 Audit Report: Crestview Nursing Facility

13

Patient Day Statistics

Finding No. JI

The provider stated on the cost report that it furnished 122,491 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate.

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Nursing Facilities Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

2

Incorrect Expense Classifications

3

Lack of Sufficient Documentation

$ (17,341) (5,658) $ (22,999)

Special Services

2

Incorrect Expense Classifications

$ (14,624)

3

Lack of Sufficient Documentation

(110,805)

4

Excess Compensation

(9,059)

5

Costs Not Related to Patient Care

(84,821)

6

Recalculation ofAncillary Services Cost

Adjustment

(220,603)

(439,912)

Dietary

2

Incorrect Expense Classifications

$ (19,530)

3

Lack of Sufficient Documentation

(55,658)

4

Excess Compensation

(2,804)

7

Fixed Asset Purchases Claimed as Expense

(1,040)

8

Expense Reimbursements

(35,928)

(114,960)

Laundry and Housekeepinr

2

Incorrect Expense Classifications.

3

Lack of Sufficient Documentation

$

432

(10,071)

(9,639)

1996 Audit Report: Crestview Nursing Facility

15

FINDING NUMBER

ALLOWABLE COSTS

Operation and Maintenance ofPlant

2

Incorrect Expense Classifications

$ (18,163)

3

Lack of Sufficient Documentation

(15,525)

7

Fixed Asset Purchases Claimed as Expense

(19,567)

(53,255)

Administrative and General

2

Incorrect Expense Classifications

3

Lack of Sufficient Documentation

8

Expense Reimbursements

$

30,066

(53,964)

(174)

(24,072)

Property and Related Expenses

2

Incorrect Expense Classifications

$

39,160

7

Fixed Asset Purchases Claimed as Expense

1,174

40,334

Total Audit Findings Affecting Allowable Costs

$ (624,503)

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

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\C

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COST

OFFICE

FIELD

=>..Q....,..,

REPORT TOTALS

AUDIT

AUDIT

FINDINGS (Q FINDINGS

AUDITED TOTALS

l
Q

~

ALLOWABLE COSTS

n

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Routine Services Special Services

$ 5,090,381 $ 788,742

(165,298) $ (22,999) $ 4,902,084

(439,912)

348,830

l'IJ
;3:

Dietary

1,546,524

(114,960) 1,431,564

=e2~

Laundry and Housekeeping

807,593

160,114

(9,639)

958,068

aQ

Operation and Maintenance ofPlant Administrative and General

916,032 1,237,177

(53,255) (24,072)

862,777 1,213,105

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4

Property and Related Expenses

439,692

40,334

480,026

Total Allowable Costs

=========== $ 10,826,141 $

(5,184) $ (624,503) $ 10,196,454

PATIENT DAY STATISTICS

122,491

122,491

(1) An office audit of the provider was performed before this field audit. The results of the office audit are included in this column for informational purposes.