TABLE OF CONTENTS ~~~~~~ =)~ ~~~~~~~ i ][~~~=)][)llJ4::~][=)~ 1 ~INI)IN'G~ ANI) RE4::=)MMENI>A~I=)~~ 5 Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 12 Schedule ofAllowable Costs and Patient Day Statistics 14 Report Prepared By: State o/Georgia Department 0/Audits and Accounts Medicaid and Local Government Audits Division 254 Washington Street. S. Jr.. 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 MICHAEL A. PLANT DIIlJ:CTOR July 16, 1999 Members ofthe 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 Fifth Avenue Health Care, provider number 00140984A, 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 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, ?~~tO.~ Russell W. Hinton State Auditor RWHlja/bw 1998 Audit Report: Fifth Avenue 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 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 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 Fifth Avenue Health Care, a 100-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 operated as a freestanding nursing home for the year ended June 30, 1998. 2 Nursing Facility Services Program Audit Objectives The purpose of this audit was to determine whether Fifth Avenue 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, 1998; and to determine whether Fifth Avenue 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 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. 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 exainined records and 1998 Audit Report: Fifth Avenue Health Care 3 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. In accordance with Section 1002 of Policies and Procedures for Nursing Facility Services, the Department of Medical Assistance has calculated the payment rate for Fifth Avenue Health Care using a method often called the llDodge 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 Fifth Avenue Health Care, 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. 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:' depreciation; capital-related interest 4 Nursing Facility Services Program expense; and 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 Fifth Avenue Health Care 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: Fifth Avenue Health Care 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 Contracted Services Dietary Supplements Employee Benefits Expense Linen Special Services Oxygen Supplies Dietary Contracted Services Dietary Supplements Supplies . Laundry and Housekeeping Linen Operation and Maintenance ofPlant Contracted Services Employee Benefits Expense Oxygen Supplies Administrative and General Contracted Services Insurance Expense $ (3,198) (4,594) 245 (3,449) $ (10,996) $ 1,684 268 1,952 $ 300 4,594 253 5,147 3,449 $ 1,578 (245) (1,684) (521) ( 872) $ 1,320 2,722 4,042 6 Nursing Facility Services Program Property and Related Expenses Insurance Expense Total Adjustment to Allowable Costs (2,722) $-======....0...... Costs Miselassified as Nurse Aide Testing and Training Finding No.2 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 beneficiaries. 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 reverse a portion of the provider's adjustment. (HCFA Pub. 15-1 Section 2304) COST CENTER Routine Services $=====1'60=14=2 Costs Not Related to Patient Care Finding 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 1998 Audit Report: Fifth Avenue Health Care 7 followiIig adjustment to remove the non-patient care expenses from allowable costs. (HCFA Pub.15-1 Sections 2102.1, 2102.3, 2106.1, 2138.3, 2139; DMA Policies and Procedures Section 1002.1(k ITEMS Cable Television National Association Dues (50%) Personal Purchases Salaries and Benefits $ (3,312) (415) (311) (23,766) Total Adjustment to Allowable Costs $ (2_7.,.8._0.4). COST CENTER Special Services Operation and Maintenance Administrative and General Total Adjustment to Allowable Costs $ (3,312) (111) (24,381) $_....,;;,(2_7.-,8.0.4.""") Recalculation ofAncillary ServIces Cost Adjustment Finding No.4 The provider received revenues from the sale of ancillary servic~s to patients; therefore, allowable costs for special services are limited to the maximum allowable cost calculated -on Schedule B-1 A of the cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on Schedule B-1 A 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 Oxygen COST CENTER Special Services Adjustment Per Cost Report Recalculated Adjustment Audit Finding $ (3,153) $ (1,469) $_ _.(..1...,.6._.84"""') $=........-=.(1==,6=84==) Excess Compensation Finding No.5 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 ma'Ximum 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) Position Title Dietary Supervisor Office Supervisor (B) Administrator (B) Total Guideline Compensation Ceiling (A) Excess $ 40,561 $ 37,449 $ (3,112) 38,168 34,338 (3,831) 82,814 81,146 (1,667) $ 161,543 $ 152,933 $ (8,610) (A) Ceilings have been adjusted to percentage of full-time, where applicable. (B) Includes amounts paid on behalf of owner/administrator and director's fees. 1998 Audit Report: Fifth Avenue Health Care 9 COST CENTER Dietary Administrative and General Total Adjustment to Allowable Costs $ (3,112) (5,498) $_ _.(..8..-,6_10_) Allocation ofIndirect Expenses to Non-Patient Care Areas Finding No.6 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 of the 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 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 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 ofthe recalculation. (HCFA Pub. 15-1 Section 2102.3; General Instructions to the Cost Report) COST CENTER Laundry and Housekeeping Operation and Maintenance ofPlant Property and Related Expenses Total Adjustment to Allowable Costs $ (862) (1,450) (1,314) $_ _.(3.-,6_26"",,) Lack ofSufficient Documentation Finding No.7 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 10 Nursing Facility Services Program 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 $_ _.(1..;.;;,O..;;;,;19~) Finding No.8 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) Adjustment to Balance Sheet Accounts: June 30~ 1997 Balance Accounts Payable Allowable Costs $ ( 9-.2""",9) COST CENTER Operation and Maintenance of Plant $==~(9~29~) 1998 Audit Report: Fifth Avenue Health Care 11 Patient Day Statistics Finding No.9 Census records examined during the audit showed that the nursing home had 35,413 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate. (ReFA Pub. 15-1 Section 2304) 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 $ (10,996) 2 Cost Misclassified as Nurse Aide Testing and Training 1,142 $ Special Services 1 Incorrect Expense Classifications 3 Costs Not Related to Patient Care 4 Ancillary Service Adjustment $ 1,952 (3,312) 0,684) Dietary 1 Incorrect Expense Classifications 5 Excess Compensation $ 5,147 (3,112) Laundry and Housekeeping 1 Incorrect Expense Classifications D6 Cost Not Related To Patient Care B-5 $ 3,449 (862) Operation and Maintenance ofPlant 1 Incorrect Expense Classifications 3 Cost Not Related to Patient Care 6 Cost Not Related To Patient Care B-5 7 Lack of Sufficient Documentation 8 Accrual Basis of Accounting $ (872) (111) (1,450) (1,019) (929) (9,854) (3,044) 2,035 2,587 (4,381) 1998 Audit Report: Fifth Avenue Health Care 13 FINDING NUMBER ALLOWABLE COSTS Administrative and General 1 Incorrect Expense Classifications 3 Cost Not Related to Patient Care 5 Excess Compensations $ 4,042 (24,381) (5,497) (25,836) Property and Related Expenses 1 Incorrect Expense Classifications 6 Cost Not Related To Patient Care B-5 $ (2,722) (1,314) (4,036) Total Audit Findings Affecting Allowable Costs $ (42,529) 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 $ 982,133 $ (9,854) $ 972,279 Special Services 92,268 (3,044) 89,224 Dietary 341,533 2,035 343,568 Laundry and Housekeeping 213,502 2,587- 216,089 Operation and Maintenance ofPlant 210,758 (4,381) 206,377 Administrative and General 341,937 (25,836) 316,101 Property and Related Expenses 190,990 (4,036) 186,954 Total Allowable Costs $ 2,373,121 $ (42,529) $ 2,330,592 PATIENT DAY STATISTICS 35,413 35,413