Audit report, for the year ended June 30, 1997, Elberta Health Care Medicaid provider no. 00140918A, Nursing Facilities Services Program [June 30, 1997]

lTh
A'iDO ,rtJLr
Rl 4-3
i~16-1'1

DEPARTMENT OF AUDITS AND ACCOUNTS Medicaid. and Local Government Audits

AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 1997
ELBERTAH:EALTHCAlffi
MEI>ICAIDPROVIDER NUMBER 0014.0918A . NURSING FACILITY SERVICES PROGRAM

TABLE OF CONTENTS

LETTER OF TRANSMITTAL

i

INTRODUCTION

1

FINDINGS AND RECOMMENDATIONS

~

4

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

June 22, 1998

Members of the Board ofMedical 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 Elberta Health Care, provider number 00140918A, 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 ofMedical Assistance Nursing Facility Services Program and is not to be used or relied upon for any other purpose.

CLV/prlbw

Claude L. Vickers State Auditor

1997 Audit Report: Elberta Health Care

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 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.

Provider Information

Elberta Health Care, a 66-bed long-term health care facility located in Warner Robins, 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

2

Nursing Facility Services Program

Audit Objectives

facility was owned by Tunstall Enterprises, Inc., and operated as a component ofTheraTx, Inc., a chain organization which filed a Home Office Cost Report with DMA for the year ended December 31, 1996.

The purpose of this audit was to determine whether Elberta Health Care 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 Elberta Health Care 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 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 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: Elberta Health Care

3

Scope and Methodology

To accomplish these objectives, we perfonned 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 detennine 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 of Audits and Accounts is responsible for providing the Department ofMedical Assistance with infonnation regarding the accuracy of cost and patient data for Elberta Health Care for the year ended June 30, 1997. 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 Facility Services Program

FINDINGS AND RECOMMENDATIONS

Finding No.1

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.
(HCFAPub.15-1 Section 2304)

COST CENTER Routine Services Special Services Operation and Maintenance of Plant Administrative and General

$

(1,057)

(150)

(894)

(857)

Total Adjustment to Allowable Costs

$==(=2=,9==:58=:)

Finding No.2

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 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)

1997 Audit Report: Elberta Health Care

5

COST CENTER Routine Services Dietary Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General
Total Adjustment to Allowable Costs

$

(1,351 )

(242)

(202)

(36)

(169)

$===(2=,0=00:::::)

Finding No.3

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

COST CENTER Routine Services Linen Laundry and Housekeeping Linen Operation and Maintenance ofPlant Lease Expense Office Supplies Property Taxes Software Maintenance Administrative and General Liability Insurance Office Supplies Software Maintenance

$

$ (1,283) (462) (74)
(4,325)

$

3,449

462

4,325

(766) 766
(6,144) 8,236

6

Nursing Facility Services Program

Property and Related Lease Expense Liability Insurance Property Taxes
Total Adjustment to Allowable Costs

$

1,283

(3,449)

74

(2,092)

$====0=

Finding No.4

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 ofthe cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on 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 of Plant Property and Related Expenses

$

(512)

(258)

(394)

Total Adjustment to Allowable Costs

$==(=1=,1=64=)

1997 Audit Report: Elberta Health Care

7

Finding No.5

Expense Reimbursements

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 fonn of income 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)

COST CENTER Special Services

$===(:=1=38:=)

Finding No.6

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 ofMedical 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)

8

Nursing Facility Services Program

Adjustment to Balance Sheet Accounts:
June 30, 1997 Balance Accounts Payable
COST CENTER Operation and Maintenance ofPlant

Allowable Costs
$==(=1:=:.3=00::=)
$===(1:5.3=00:=)

Finding No.7

Allocations/rom 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 Administrative and General Functionally Allocated Costs Pooled Costs Allocation Statistics Administrative Expenses

$

(568)

4,996 (9,032)

Total Adjustment to Allowable Costs

$===(4=,=60=:4:::)

1997 Audit Report: Elberta Health Care

9

Finding No.8

Cost Report Adjustment Reversal

An adjustment was made during cost report preparation to reduce allowable costs claimed by the amount ofrental income earned. Documentation examined during the audit showed that the provider also removed the costs applicable to the rental income, in effect reducing allowable costs twice for the same matter. 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 adjustments made during cost report preparation are accurate. We recommend that the Department of Medical Assistance make the following adjustment to reverse the provider adjustment related to the rental income.
(HCFA Pub. 15-1 Section 2304)

COST CENTER Property and Related Expenses

$===5=,0:=00=

Finding No.9

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 thatthe 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

$==(=:6:=3=:25:f:)

10

Nursing Facility Services Program

COST CENTER Property and Related Expenses

$==(=:6=.3:=25::=),

Finding No. 10

Patient Day Statistics
Census records examined during the audit showed that the nursing home had 23,830 patient days of service rather than the 23,870 shown on the cost report. 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 accumulate accurate patient day statistics. We recommend that the Department of Medical Assistance make the adjustment of 40 days to correct the statistical information.
(HCFA Pub. 15-1 Section 2304)

Finding No. 11

Accounts Receivable Credit Balances
Documentation examined during the audit showed that the provider had numerous credit balances in its individual accounts receivable. Credit balances in the facility's accounts receivable result from overpayments for services provided to its patients. The $482.44 shown in the following table represents overpayments from the Department ofMedical Assistance that had not been resolved as ofMay 5, 1998. We recommend that the provider review its credit accounts receivable and refund overpayments to the appropriate party. We further recommend that the provider implement policies and procedures to ensure that overpayments on patients' accounts are promptly refunded to the payor. We also recommend that the Department of Medical Assistance review this matter and recover any overpayments identified.

1997 Audit Report: Elberta Health Care
Patient Name Smith, Bobby E Tindall, Ellen Total

11

Balance

$

72.16

410.28

$.===48~2==.4=4

12

Nursing Facility Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1

Lack of Sufficient Documentation

$

2

Nurse Aide Testing and Training Costs

3

Incorrect Expense Classifications

Special Services

1

Lack of Sufficient Documentation

$

5

Expense Reimbursements

Dietary

2

Nurse Aide Testing and Training Costs

Laundry and Housekeeping

2

Nurse Aide Testing and Training Costs

$

3

Incorrect Expense Classifications

4

Allocation of Indirect Expenses to Non-Patient

Care Areas

(1,057) (1,351)
(766) $
(150) (138)
(202) 766 (512)

(3,174) (288) (242)
52

1997 Audit Report: Elberta Health Care

13

FINDING NUMBER

ALLOWABLE COSTS

Operation and Maintenance ofPlant

1

Lack of Sufficient Documentation

$

(894)

2

Nurse Aide Testing and Training Costs

(36)

3

Incorrect Expense Classifications

(6,144)

4

Allocation of Indirect Expenses to Non-Patient

Care Areas

(258)

6

Accrual Basis of Accounting

(1,300)

Administrative and General

1

Lack of Sufficient Documentation

$

(857)

2

Nurse Aide Testing and Training Costs

(169)

3

Incorrect Expense Classifications

8,236

7

Allocations from Home Office

(4,604)

Property and Related Expenses

3

Incorrect Expense Classification

$

(2,092)

4

Allocation of Indirect Expenses to Non-Patient

Care Areas

(394)

8

Cost Report Adjustment Reversal

5,000

9

Excess Depreciation

(6,325)

Total Audit Findings Affecting Allowable Costs

$

(8,632)
2,606
(3,811) (13,489)

PATIENT DAY STATISTICS

10 Patient Day Statistics

(40)

14

Nursing Facility Services Program

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

ALLOWABLE COSTS

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

Routine Services

$ 790,493 $ (3,174) $ 787,319

Special Services

10,950

(288)

10,662

Dietary

230,291

(242)

230,049

Laundry and Housekeeping

140,174

52

140,226

Operation and Maintenance ofPlant

110,354

(8,632)

101,722

Administrative and General

244,857

2,606

247,463

Property and Related Expenses

125,691

(3,811)

121,880

Total Allowable Costs

$ 1,652,810 $ (13,489) $ 1,639,321

PATIENT DAY STATISTICS

23,870

(40)

23,830