TABLE OF CONTENTS LETTER OF TRANSMITTAL j ][1'lTRO][)1lJ::TI01'l..............................................................................:1 FI1'l][)I1'lGS AN"][) RE::OMME1'l][)ATI01'lS 5 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 w., 254 Washington Street. s. 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 Washington Street, S.w., Suite 322 Atlanta, Georgia 30334-8400 Telephone (404) 656-2006 Facsimile (404) 656-7535 June 15, 1999 MICHAEL A. PLANT DIRECTOR Members of the Board of Medical Assistance, and The Honorable Dr. William R. Taylor, Commissioner Department of Medical Assistance 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303 Ladies and Gentlemen: This report provides the results of our audit of Family Life Enrichment Centers, Inc., provider number 002l28l4A, a participant in the Nursing Facility Services Program for the year ended June 30, 1998. This report is intended to be used solely in connection with the administratio.n 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, ~~ ..J:::t:.. Russell W. Hinton State Auditor RWH/aslbw 1998 Audit Report: Family Life Enrichment Centers, Inc. 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 o 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 Jor this service using rates calculated from Nursing Home Cost Reports submitted by each provider. These cost reports include (inancial, 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 Family Life Enrichment Centers, Inc., a IOO-bed long-term healthcare facility located in High Shoals, 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. 2 Nursing Facility Services Program The facility was operated as a freestanding nursing home for the year ended June30, 1998. Audit Objectives The purpose of this audit was to determine whether Family Life Enrichment Centers, Inc., 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 Family Life Enrichment Centers, Inc., 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 govermng 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: Family Life Enrichment Centers, Inc. 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 o 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. In accordance with Section 1002 of Policies and Procedures for Nursing Facility Services, the Department of Medical Assistance has calculated the payment rate for Family Life Enrichment Centers, Inc., 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 Family Life Enrichment Centers, Inc., 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 an adjustment which should be made by the Department of Medical Assistance related to lease expense. We have included a finding related to this matter 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 Family Life Enrichment Centers, Inc., 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 recon~ideration 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. 1998 Audit Report: Family Life Enrichment Centers; Inc. 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 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 Dietary Supplements Dietary Dietary Supplements Administrative and General Insurance Expense $ Lease Expense Property and Related Expenses Insurance Expense $ Lease Expense Total Adjustment to Allowable Costs Excess Compensation Finding No.2 Allowable cos.ts 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 6 Nursing Facility Services Program which exceeds the DMA maximum limitations is excluded from allowable costs claimed. We recommend that the Department o[ 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) Position Title Quality Control Instructor Payroll Taxes Dietary Supervisor Payroll Taxes Administrator Payroll Taxes Director ofPurchasing Payroll Taxes Total Guideline Compensation Ceiling (A) Excess $ 45,053 $ 41,029 $ (4,024) 3,447 3,139 ( 308) 37,156 23,892 (13,264), 2,842 1,827 (1,015) 88,031 81,147 (6,884) 5,517 5,417 ( 100) 35,909 34,247 (1,662) 2,747 2,620 (127) $ 220,702 $ 193,318 $ (27,384) (A) Ceilings have been adjusted to percentage of full-time, where applicable. Includes amounts paid on behalf of owner/administrator and director's fees. , COST CENTER Routine Services Dietary Administrative and General $ (4,331) (14,279) (8,774) Total Adjustment to Allowable Costs $=====*(2=7~,3==84"",,) 1998 Audit Report: Family Life Enrichment Centers, Inc. 7 Costs Misclassijied as Nurse Aide Testing and Training Finding No.3 An adjustment was made during cost report preparation to remove nurse aide testing and training expenses from allowable costs. Documentation examined during the audit showed that some of these costs were not incurred to provide nurse aide testing and training services. 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 beneficiari~s. We recommend that the provider implement policies and procedures to ensure that all costs shown on the cost report as nurse aide testing and training expenses were incurred to provide nurse aide testing and training services. We recommend that the Department of Medical Assistance make the following adjustment to a reverse portion of the provider's adjustment. (HCFA Pub. 15-1 Section 2304) COST CENTER Routine Services $===3:.=3..8.. Recalculation ofAncillary Services Cost Adjustment Finding No.4 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-IA of the 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 of this 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 of the recalculation. (General Instructions to the Cost Report) 8 Nursing Facility Services Program Ancillary Services Adjustment Per Cost Report Recalculated Adjustment Audit Finding Oxygen Medical Supplies Supplemental Feeding $ (48,615) $ (52,159) $ (11,063) (9,535) (2,527) (2,299) (3,544) 1,528 228 $ (62,205) $ 63,993 $ (1,788) COST CENTER Special Services Dietary $ (2,016) 228 Total Adjustment to Allowable Costs $ (1,788) 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 increase allowable costs claimed for expenses applicable to the year under review. (HCFA Pub. 15-1 Section 2302.1) Adjustments to Balance Sheet Accounts: June 30, 1998 Balance Accounts Payable Allowabfe;''''' Costs $==~6,=90=2 1998 Audit Report: Familv Life Enrichment Centers, Inc. 9 COST CENTER Special Services $======6,=90=2 Lack ofSufficient Documentation Finding No.6 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. (HCFA Pub. 15-1 Section 2304) COST CENTER Operation and Maintenance of Plant Property and Related Expenses $ (429) (858) $ (1,287) Costs Not Related to Patient Care Finding No.7 Allowable costs claimed included payments for legal fees 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 10 Nursing Facility Services Program Assistance make the following adjustment to remove the non-patient care expenses from allowable costs. (HCFA Pub. 15-1 Section 2154.4 (b COST CENTER Administrative and General $=====(=12==,9=75==) Patient Day Statistics Finding No.8 Census records examined during the audit showed that the nursing home had 31,234 patient days of service rather than the 31,274 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) Accounts Receivable Credit Balances Finding No.9 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 $2,343.82 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of March 5, 1999. 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. 1998 Audit Report: Family Life Enrichment Centers, Inc. Patient Name Coffer, Lou Ellen Simpson, Helen Tucker, Donovan D. Waddell, Elsie 11 Balance $ 555.20 207.60 851.10 729.92 $ 2,343.82 12 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 $ (751) 2 Excess Compensation (4,331) 3 Costs Misc1assifiedas Nurse Aide Testing and Training 338 $ Special Services 4 Recalculation of Ancillary Services Cost Adjustment $ (2,016) 5 Accrual Basis of Accounting 6,902 Dietary 1 Incorrect Expense Classification $ 751 2 Excess Compensation (14,279) 4 Recalculation of Ancillary Services Cost Adjustment 228 Operation and Maintenance ofPlant 6 Lack of Sufficient Documentation Administrative and General 1 Incorrect Expense Classifications 2 Excess Compensation 7 Costs Not Related to Patient Care $ 6,233 (8,774) (12,975) (4,744) 4,886 (13,300) (429) (15,516) 1998 Audit Report: Family Life Enrichment Centers, Inc. 13 FINDING NUMBER ALLOWABLE COSTS ProperfJ? and Related Expenses 1 Incorrect Expense Classifications 7 Costs Not Related to Patient Care $ (6,233) (858) (7,091) Total Audit Findings Affecting Allowable Costs $====(3=6=,1=94=) PATIENT DAY STATISTICS 8 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 $ 1,323,405 $ (4,744) $ 1,318,661 Special Services 180,092 4,886 184,978 Dietary 381,619 (13,300) 368,319 Laundry and Housekeeping 165,428 165,428 Operation and Maintenance of Plant 317,388 (429) 316,959 Administrative and General 522,224 (15;516) 506,708 Property and Related Expenses 181,517 (7,091) 174,426 Total Allowable Costs $ 3,071,673 $ (36,1~4) $ 3,035,479 PATIENT DAY STATISTICS 31,274 ( 40) 31,234 1998 Audit Report: Bethany Home Nursing Center of Vidalia 13 SCBEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS ALLOWABLE COSTS Routine Services Special Services Dietary Laudry and Housekeeping Operation and Maintenance ofPlant Administrative and General Property and Rela~ed Expenses COST REPORT TOTALS FIELD AUDIT FINDINGS TOTALS TOTALS $ 2,207,385 $ 129,469 623,872 321,028 306,768 535,930 415,406 (15,481) $ 2,191,904 (2,903) 126,566 (995) 622,877 4,923 325,951 (4,252) 302,516 7,398 543,328 (1,601) 413,805 Total Allowable Costs $ 4,539,858 $ (12,911) $ 4,526,947 PATIENT DAY STATISTICS 61,196 61,196