Audit report, for the year ended June 30, 1997, Creswell Health and Rehabilitation Center, Medicaid provider no. 00140753A, Nursing Facility Services Program [June 30, 1997]

TABLE OF CONTENTS

LETTER OF TRANSMITTAL

i

INTRODUCTION

1

FINDINGS AND RECOMMENDATIONS

4

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 11, 1998

Members ofthe 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 Creswell Health and Rehabilitation Center, provider number 00140753A, 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 of Medical Assistance Nursing Facility Services Program and is not to be used or relied upon for any other purpose.

CLVlkm/bw

Claude L. Vickers State Auditor

1997 Audit Report: Creswell Health and Rehabilitation Center

1

INTRODUCTION

General Information Provider 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 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.
Creswell Health and Rehabilitation Center, a 1DO-bed long-term health care facility located in Rome, 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. The facility was owned and operated by Beverly

2

Nursing Facility Services Program

Audit Objectives

Enterprises, Inc., a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1997.

The purpose ofthis audit was to determine whether Creswell Health and Rehabilitation 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, 1997; and to determine whether Creswell Health and Rehabilitation 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 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: Creswell Health and Rehabilitation Center

3

Scope and Methodology

To accomplish these objectives, we performed 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 (HCFA Pub. 15-1) and DMA Policies and Procedures for Nursing Facility Services.
The Department ofAudits and Accounts is responsible for providing the Department ofMedical Assistance with information regarding the accuracy of cost and patient data for Creswell Health and Rehabilitation Center for the year ended June 30, 1997. If the Department ofMedical 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 fmdings. For this reason, we have not included a response from the provider in our report. However, we have discussed the contents ofthis 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 Facility Services Program

FINDINGS AND RECOMMENDATIONS

Finding No.1

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 ofthe 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 Directly Allocated Costs Special Services Directly Allocated Costs Dietary Directly Allocated Costs Administrative and General Functionally Allocated Costs Pooled Costs Administrative Expenses

$
$ (1,354) (18,749)

(496) (222) (263)
(20,103)

Total Adjustment to Allowable Costs

$ (21,084)

Finding No.2

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

1997 Audit Report: Creswell Health and Rehabilitation Center

5

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

COST CENTER Routine Services Supplies Waste Disposal Services Special Services Recruitment Supplies Operation and Maintenance ofPlant Utilities Waste Disposal Services Administrative and General Recruitment Utilities Vehicle Registration Tax Property and Related Expenses Vehicle Registration Tax

$

773

(476) $

$

(192)

(773)

$

184

476

$

192

(184)

(308)

297 (965) 660
(300) 308

Net Adjustment to Allowable Costs

$,====0=

Finding No.3

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

6

Nursing Facility Services Program

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 (A)

Excess

Medical Director Dietary Supervisor
Payroll Taxes

$

24,000 $ 16,079 $

(7,921)

27,599

16,658

(10,941)

2,111

1,274

(837)

$

53,710 $ 34,011 $ 09,699)

(A) Ceilings have been adjusted to percentage of full-time, where applicable.

COST CENTER Special Services Dietary
Total Adjustment to Allowable Costs

$

(7,921)

(11,778)

$,=====0=9=,6=99:=:)

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 2102.1, 2102.3; DMA Policies and Procedures Section 902)

1997 Audit Report: Creswell Health and Rehabilitation Center

7

ITEMS Prescription Drugs
COST CENTER Special Services

$===(9=:5=,0=07=) $===(9=:5=,0=07=)

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-1 A ofthe 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 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 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 Pharmacy Speech Therapy Oxygen Occupational Therapy Medical Supplies

$ (239,708) $ (239,685) $

(89,513) (149,375)

(149,183)

(16,287)

(16,314)

(297,419)

(296,646)

(7,553)

(7,320)

23 89,513
192 (27) 773 233

$ (801,246) $ (710,539) $

90,707

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Nursing Facility Services Program

COST CENTER Special Services

$=====9=0=,7=07=

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 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 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 Dietary . Operation and Maintenance ofPlant Administrative and General

$

(234)

(817)

(394)

Total Adjustment to Allowable Costs

$,==(=1=.4==:45=)

Finding No.7

Cost Report Adjustment Reversal
An adjustment was made during cost report preparation to adjust depreciation expense to that allowable per DMA guidelines. Documentation examined during the audit showed that the adjustment was calculated incorrectly. 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 ensure that adjustments made during cost report preparation are accurate. We

1997 Audit Report: Creswell Health and Rehabilitation Center

9

recommend that the Department of Medical Assistance make the following adjustment to reverse a portion of the provider adjustment.
(HCFA Pub. 15-1 Section 2304)

COST CENTER Property and Related Expenses

$ (32,055) .

Finding No.8

Patient Day Statistics
Census records examined during the audit showed that the nursing home had 35,620 patient days of service rather than the 35,522 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 98 days to correct the statistical infonnation.
(HCFA Pub. 15-1 Section 2304)

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Nursing Facility Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1

Allocations From Home Office

2

Incorrect Expense Classifications

$

(496)

297 $

Special Services

1

Allocations From Home Office

$

(222)

2

Incorrect Expense Classifications

(965)

3

Excess Compensation

(7,921)

4

Costs Not Related to Patient Care

(95,007)

5

Recalculation of Ancillary Services Cost

Adjustment

90,707

Dietary

1

Allocations From Home Office

3

E~ _~ess Compensation

6

Lack of Sufficient Documentation

Operation and Maintenance ofPlant

$

(263)

(11,778)

(234)

2

Incorrect Expense Classifications

6

Lack of Sufficient Documentation

$

660

(817)

Administrative and General

1

Allocations From Home Office

2

Incorrect Expense Classifications

6

Lack of Sufficient Documentation

$ (20,103) (300) (394)

(199)
(13,408) (12,275)
(157) (20,797)

1997 Audit Report: Creswell Health and Rehabilitation Center

11

FINDING NUMBER

ALLOWABLE COSTS

Property and Related Expenses

2

Incorrect Expense Classifications

7

Cost Report Adjustment Reversal

$

308

(32,055)

(31,747)

Total Audit Findings Affecting Allowable Costs

$=====(=7=8,=5=8=3=)

PATIENT DAY STATISTICS

8 Patient Day Statistics

98

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Nursing Facility Services Program

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

ALLOWABLE COSTS

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

Routine Services

$ 1,394,743 $

(199) $ 1,394,544

Special Services

120,710

(13,408)

107,302

Dietary

389,676

(12,275)

377,401

Laundry and Housekeeping

211,556

211,556

Operation and Maintenance ofPlant

198,895

(157)

198,738

Administrative and General

389,223

(20,797)

368,426

Property and Related Expenses

240,985

(31,747)

209,238

Total Allowable Costs

$ 2,945,788 $ (78,583) $ 2,867,205

PATIENT DAY STATISTICS

35,522

98

35,620