Audit report, for the year ended June 30, 1998, Cumming Nursing Center, Medicaid provider no. 00140302A, Nursing Facilities Services Program [June 30, 1998]

TABLE OF CONTENTS

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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

RUSSELL W. HINTON
STATE AUDITOR

DEPARTMENT OF AUDITS AND ACCOUNTS
MEDICAID AND LOCAL GOVERNMENT AUDITS
254 W~hington Street, S.W., Suite 322 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535

MICHAEL A. PLANT
DIRECfOR

August 17, 1999

Members of the Board of Community Health, and The Honorable Russ Toal, Commissioner Georgia Community Health 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit of Cunning Nursing Center, provider number 00140302A, a participant in the Nursing Facility Services Program for the year ended June 30, 1998. This report is intended to be used solely in connectiOIi 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.
Respectfully Submitted,
?~u\4~ Russell W. Hinton State Auditor
RWH/mkp/teh

1998 AUdit"Report: Cumming Nursing Center

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 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 this service using rates calculated from Nursing Home Cost Reports subm,itted by each provider. These cost reports include fmancial, 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

Cumming Nursing Center, an 87-bed long-term health care facility located in Cumming, 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 by Rubil Corporation and operated as a component

2

Nursing Facility Services Program

of A&B Management Company, a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1998.

Audit Objectives

The purpose of this audit was to determine whether Cumming Nursing 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 Cumming Nursing 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.

1998 Audit Report: Cumming Nursing 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 DMA Policies and Proceduresfor 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 Cumming Nursing 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 Cumming Nursing 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 provider's payment rate, we have reviewed those costs as part of our audit.

4

Nursing Facility Services Program

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 capital-related interest expense. We have included findings related to these matters in our report.
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 Cumming Nursing 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 fmdings. 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: Cumming Nursing 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 Unifonn 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 Contracted Services Employee Benefits Insurance Expense Special Services Employee Benefits Insurance Expense Dietary Employee Benefits Insurance Expense Laundry and Housekeeping Employee Benefits Insurance Expense Operation and Maintenance of Plant Employee Benefits Insurance Expense Administrative and General Contracted Services Employee Benefits Insurance Expense

$

(2,015)

39,721

(1,660) $

$

1,635

(57)

$ (56,147) (294)

$

8,311

(321)

$

1,021

(36)

$

2,015

5,459

9,089

36,046 1,578
(56,441) 7,990 985
16,563

6

Nursing Facility Services Program

Property and Related Expenses Insurance Expense
Total Adjustment to Allowable Costs

(6,721) $====0

Nurse Aide Testing and Training Costs

Finding No.2

Documentation examined during the audit showed that the provider did not remove nurse aide testing and training costs from allowable costs claimed as required by the Dep~ent 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 Routine Services

$

(319)

Costs Not Related to Patient Care

oFinding No.3

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.IS-I Sections 2102.3,2106.1; DMA Policies and Procedures Section 1002.1(k))

1998 Audit Report: Cumming Nursing Center

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Fixed Asset Purchases Claimed as Expense

Finding No.4

Allowable costs claimed included purchases of assets which are considered to be capital additions to property under generally accepted accounting'principles. The Uniform Chart of Accounts 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 make the follo~g adjustment to reduce allowable costs by the amount of purchased assets claimed as expense and to increase allowable costs by depreciation allowable.
(ReFA Pub. 15-1 Section 108; DMA Policies and Procedures, Appendix D)

COST CENTER . Operation and Maintenance of Plant
Cost of Fixed Equipment Property and Related Expenses
Allowable Depreciation Expense

$

(5,102)

229

Total Adjustment to Allowable Costs

(4,873)

8

Nursing Facility Services Program

Excess Vehicles

Finding No.5

Documentation examined during the audit showed that expenses were claimed for two vehicles for the year under review. DMA guidelines allow a maximum of one vehicle for nursing homes of the size operated by the provider. We recommend that the provider implement policies and procedures to ensure that any costs incurred operating vehicles in excess of the maximum number allowable are excluded from reimbursable costs claimed. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs claimed for the insurance and operating expenses of vehicles operated in excess of the maximum number allowable.
(DMA Vehicle Guidelines)

COST CENTER Operation and Maintenance of Plant Operating Expenses Administrative and General Operating Expenses Property and Related Expenses Insurance
Total Adjustment to Allowable Costs

$

(1,125)

(75)

(2,257)

$

(3._,4_5.7).

Flnding No.6

Allocationsfrom Home Office
The provider was a component of a chain organization for the year ended June 30, 1998. 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 of Medical 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

1998 Audit Report: Cumming Nursing Center

9

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 Pooled Costs Administrative Expenses Property and Related Expenses Pooled Capital Related Interest Expense
Total Adjustment to Allowable Costs

$

(23,814)

381 $=====(2=2..,.4..=33==)

Patient Day Statistics

Finding No.7

The provider stated on the cost report that it furnished 36,122 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

$

36,046

2

Nurse Aide Testing'and Training Costs

(319) $

Special Services

1

Incorrect Expense Classifications

Dietary

1

Incorrect Expense Classifications

Laundry and Housekeeping

1

Incorrect Expense Classifications

3

Costs Not Related to Patient Care

$

7,990

(815)

Operation and Maintenance ofPlant

1

Incorrect Expense Classifications

$

4

Fixed Asset Purchases Claimed as Expense

5

Excess Vehicles

Administrative and General

985 (5,102) (1,125)
;:

1

Incorrect Expense Classifications

3

Costs Not Related to Patient Care

5

Excess Vehicles

6

Allocations From Home Office

$

16,563

(5,373)

(75)

(23,814)

35,727 1,578
(56,441) 7,175 (5,242)
(12,699)

1998 Audit Report: Cumming Nursing Center

11

FINDING NUMBER

ALLOWABLE COSTS

Property and Related Expenses

1

Incorrect Expense Classifications

$

(6,721)

4

Fixed Asset Purchases Claimed as Expense

229

5

Excess Vehicles

(2,257)

6

Allocations From Home Office

381

(8,368)

Total Audit Findings Affecting Allowable Costs

$====(=3.8;,=27=0=)

12

Nursing Facility Services Program

SCHEDULE 'OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

ALLOWABLE COSTS
Routine Services
Special Services Dietary
Laundry and Housekeeping Operation and Maintenance of
P1l:lnt
Administrative and General Property and Related Expenses

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

$ 1,256,381 $ 61,664 332,764
229,893 105,725 240,684 267,651

35,727 $ 1,578
(56,441) 7,175 (5,242)
(12,699) (8,368)

1,292,108 63,242
276,323 237,068 100,483 227,985 259,283

Total Allowable Costs

$ 2,494,762 $ (38,270) $ 2,456,492

PATIENT DAY STATISTICS

31,622

31,622