Audit report, for the year ended June 30, 1995, Dublinair Nursing Home, Medicaid provider no. 00059947A, Nursing Facilities Services Program

GA A~Od.,'Viif RI D8' 1714-'15

DEPARTMENT OF AUDITS. Medicaid and Local:Government Audits

. . AUDIT REPORT ..
FOR THE YEARE:NDED JUNE 30, 1995 ,. " . .. DUBLINAIR"NURSING HOME
MEDICAID PROVIDER NUMBER 00059947A . NURSING FAGILITIE,S SERVICES PROGRAM

TABLE OF CONTENTS
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FINDINGS AND RECOMMENDATIONS ................... 3 Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 12 Schedule of Allowable Costs and Patient Day Statistics 14

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
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535
May 13, 1996

Members of the Board ofMedical Assistance, and The Honorable Marge Smith, Commissioner Department of Medical Assistance 2 Peachtree Street, N.W., Suite 27-100 Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit ofDublinair Nursing Home, provider number 00059947A, a participant in the Nursing Facilities Services Program for the year ended June 30, 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.
Respectfully Submitted,
~-~
Claude L. Vickers State Auditor
CLV/scp/by

1995 Audit Report: Dublinair Nursing Home

1

INTRODUCTION

Provider Information

Dublinair Nursing Home is a 149-bed long-term health care facility located in Dublin, Georgia. The facility provides both skilled and intermediate care services to resident patients. The facility was owned by and operated as a component of Care More, Inc., a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1995.

Audit Objectives

The purpose ofthis audit was to determine whether Dublinair Nursing Home, a provider enrolled in the Georgia Medicaid Nursing Facilities Services (NFS) Program, 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, 1995; and to determine whether Dublinair Nursing Home complied with the federal and state laws, regulations, policies and procedures for the NFS 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;

2
Scope and Methodology

Nursing Facilities Services Program



determine if patient day statistics included in the cost

report are accurately reported; and



recommend appropriate action based on the results of

our audit.

To accomplish these objectives, 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 performed a limited review of the provider's internal control structure to the extent necessary to plan our audit. 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.

1995 Audit Report: Dublinair Nursing Home

3

FINDINGS AND RECOMMENDATIONS

Finding No.1

Incorrect Expense Classifications

Documentation examined during the audit showed that some ofthe expenses were not classified in accordance with the Uniform Chart of Accounts prescribed by the Department ofMedical 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 Minor Equipment Training Expense Special Services Cable Television Dietary Minor Equipment Operation and Maintenance of Plant Cable Television Lease Expense Repairs and Maintenance Administrative and General Repairs and Maintenance Training Expense Property and Related Expenses Lease Expense

$

(260)

{2l298} $

$ (2,916) (3,972) 421

$

(421)

2 298

(2,558) 2,916
260
(6,467) 1,877 3 972

Total Adjustment to Allowable Costs

$

4

Nursing Facilities Services Program

Finding No. 2

Self-insurance Reserve Fund

Documentation examined during the audit showed that allowable costs claimed included contributions to a self-funded trust for group health insurance. Federal regulations provide that contributions for any period in excess of the amount of losses paid by the fiduciary of the self-insurance fund plus expenses related to these losses are not allowable. We recommend that the provider implement policies and procedures to ensure that contributions to the self-insurance reserve fund in excess of allowable expenses are not included in the cost report. We recommend that the Department of Medical Assistance make the following adjustment to remove from allowable costs the contributions made to the self-insurance reserve fund in excess of the allowable expenses.
(HCFA Pub. 15-1 Sections 2161, 2162)

COST CENTER Routine Services Dietary Laundry and Housekeeping Administrative and General

$

(545)

(84)

(105)

(28)

Total Adjustment to Allowable Costs

$===='=76!:!.!2=:)

Finding No.3

Nurse Aide Testing and Training Costs
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 Department 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 ofMedical 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)

1995 Audit Report: Dublinair Nursing Home

5

COST CENTER Routine Services

$.======'=3~5:!:!:3: :!:1=)

Finding No.4

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-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 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 ofMedical Assistance make the following adjustment to decrease allowable costs for the net effect of the recalculation.
(General Instructions to the Cost Report)

Ancillary Services
Physical Therapy Speech Therapy Occupational Therapy

Adjustment Per Cost Report

Recalculated Adjustment Audit Finding

$ (125,677) $ (126,938) $

(84,160)

(84,386)

(210,344)

(212,620)

(1,261) (226)
(2,276)

$ (420 181) $ (423 944) $

(3 763)

COST CENTER Special Services

$

(3 763)

6

Nursing Facilities Services Program

Finding No. 5

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, 1994 Balance Accounts Payable

$

(1,269)

June 30, 1995 Balance Prepaid Accounting Fees

(5,700)

Total Adjustment to Allowable Costs

$==='~6=9~6:!=9=)

COST CENTER Operation and Maintenance of Plant Administrative and General
Total Adjustment to Allowable Costs

$

(100)

(6,869)

$.====::!i:(6~9~6==9=)

Finding No. 6

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

1995 Audit Report: Dublinair Nursing Home

7

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 Section 1002.1 (k))

ITEMS Advertising Civic Organization Dues

$

(513)

(580)

$

(J 093)

COST CENTER Administrative and General

$

(] 093)

Finding No. 7

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)

8

Nursing Facilities Services Program

Position Title
Administrator (B) Payroll Taxes

Total

Guideline

Compensation Ceiling (A)

Excess

$

88,528 $ 75,302 $ (13,226)

5 986

5 698

(288)

$

2:1 51:1 $ 81 QQQ $

C13 51:1)

(A) Ceilings have been adjusted to percentage of full-time, where applicable. (B) Includes amounts paid on behalf of administrator.

COST CENTER Administrative and General

$====='=]:=!::13==5=1:1==)

Finding No. 8

Allocationsfrom Home Office

The provider was a component of a chain organization for the year ended June 30, 1995. As a result of our audit of the home office cost report filed in connection with the Medicaid Nursing Facilities Services 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 Administrative and General Directly Allocated Costs Pooled Costs Administrative Expenses

$

674

4 146

Total Adjustment to Allowable Costs

$====:1!::2:8~2~Q=

1995 Audit Report: Dublinair Nursing Home

9

Finding No. 9

Expenses Claimed by Another Chain Component

Allowable costs claimed by another chain component included relocation 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. I 5-1 Section 2304)

COST CENTER Administrative and General

$===6=9~9=7=

COMPONENT FACILITY Treutlen County Nursing Home

$======6=9===9=7=

Finding No. JO

Investment Income Offset
The provider was a component of a chain organization for the year ended June 30, 1995. As part of the allocation of allowable costs process, related party investment income was allocated to the provider. Federal regulations provide that the provider's share of non-related party home office investment income should be combined with the provider's investment income and the combined amount used to reduce the provider's interest expense. Documentation examined during the audit showed that a portion of the home office's investment income, which was used to offset the provider's interest expense, resulted from transactions with a related party. We recommend that the provider implement policies and procedures to ensure that interest expense claimed is reduced only by the amount of non-related home office

Nursing Facilities Services Program

investment income allocated to the provider. We recommend that the Department of Medical Assistance make the following adjustment to increase allowable costs by the amount of related party investment income offset against interest expense by the provider.
(HCFA Pub. 15-1 Sections 2 l 50.3(F), 202.2)

COST CENTER Property and Related Expenses

$.=======

Finding No.11

Excess Depreciation

Documentation examined during the audit in support of fixed assets and depreciation showed that either the property was not included in the proper class or depreciation was not calculated in accordance with DMA guidelines. DMA Policies and Procedures require the use ofminimum required asset lives. We recommend that the provider implement policies and procedures to ensure that depreciation expense is calculated in accordance with DMA guidelines. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs claimed by the amount of depreciation expense claimed in excess of the total allowable.
(DMA Depreciation Guidelines, DMA Policies and Procedures Section 1002.1 (k))

COST CENTER Property and Related Expenses

$===='=4!:!!2!:::l!O=)

Finding No.12

Accrual of Vacation Benefits
The accrual of vacation benefits included in allowable costs was not supported by adequate documentary evidence. Leave records examined during the audit showed that the provider was not in compliance with policies contained in the provider's employee policy manual for accruing and paying vacation benefits. An analysis of vacation benefits included in allowable costs showed that current year costs were not

1995 Audit Report: Dublinair Nursing Home

11

materially misstated. 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 the accrual and payment of vacation benefits is supported by sufficient documentary evidence and is in accordance with company policies.
(HCFAPub. 15-1 Section2304)

12

Nursing Facilities Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1

Incorrect Expense Classifications

2

Self-insurance Reserve Fund

3

Nurse Aide Testing and Training Costs

$

(2,558)

(545)

(3,531) $

Special Services

1

Incorrect Expense Classifications

$

2,916

4

Recalculation of Ancillary Services Cost

Adjustment

(3,763)

Dietary

1

Incorrect Expense Classifications

2

Self-insurance Reserve Fund

$

260

(84)

Laundry and Housekeeping

2

Self-insurance Reserve Fund

Operation and Maintenance ofPlant

1

Incorrect Expense Classifications

5

Accrual Basis of Accounting

$

(6,467)

(100)

(6,634) (847) 176 (105)
(6,567)

1995 Audit Report: Dublinair Nursing Home

13

FINDING NUMBER

ALLOWABLE COSTS

Administrative and General

I

Incorrect Expense Classifications

$

1,877

2

Self-insurance Reserve Fund

(28)

5

Accrual Basis of Accounting

(6,869)

6

Costs Not Related to Patient Care

(1,093)

7

Excess Compensation

(13,514)

8

Allocations from Home Office

4,820

9

Expenses Claimed by Another Chain Component

6 997

(7,810)

Property and Related Expenses

I

Incorrect Expense Classifications

IO

Investment Income Offset

11

Excess Depreciation

$

3,972

11

(420)

3 563

Total Audit Findings Affecting Allowable Costs

$=====(=1=8,=2=2=4=)

14

Nursing Facilities Services Program

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

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

COST REPORT TOTALS

AUDIT FINDINGS

AUDITED TOTALS

$ 1,851,229 $ 33,972
380,249 243,831 254,535 401,353 355,237

(6,634) $ (847) 176 (105)
(6,567) (7,810) 3,563

1,844,595 33,125
380,425 243,726 247,968 393,543 358,800

Total Allowable Costs

$ 3,520,406 $ (18,224) $ 3,502,182

PATIENT DAY STATISTICS

53,166

53,166