Audit report, for the six months ended June 30, 1997, Fitzgerald Nursing Center, Inc., Medicaid provider no. 00140665A, Nursing Facilities Services Program

DEPARTMENT OF AUDITS AND ACCOUNTS Medicaid and Local Government Audits
AUDIT REPORT FOR THE SIX MONTHS ENDED JUNE 30, 1997
FITZGERALD NURSING CENTER, INC.
MEDICAID PROVIDER NUMBER 00140665A NURSING FACILITY SERVICES PROGRAM

TABLE OF CONTENTS
LETTER OF TRANSMITTAL .............................. i
INTRODUCTION ......................................... 1
FINDINGS AND RECOMMENDATIONS .................... 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 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

July 1, 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 Fitzgerald Nursing Center, Inc., provider number 00140665A, a participant in the Nursing Facility Services Program for the six months 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.
Respectfully Submitted,
~~
Claude L. Vickers State Auditor
CLV/dc/bw

1997 Audit Report: Fitzgerald Nursing Center, 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 ofGeorgia 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

Fitzgerald Nursing Center, Inc., a 167-bed long-term health care facility located in Fitzgerald, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facility Services Program. The facility provides both skilled and intermediate care services to resident

2 Audit Objectives

Nursing Facility Services Program
patients. The facility was operated as a component of NewCare Health, Corporation, a chain organization which filed a Home Office Cost Report with DMA for the six months ended June 30, 1997.

The purpose of this audit was to determine whether Fitzgerald Nursing Center, Inc., maintained adequate documentation to support the allowable costs and patient day statistics reported in its Nursing Home Cost Report for the six months ended June 30, 1997; and to determine whether Fitzgerald Nursing Center, 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 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: Fitzgerald Nursing Center, 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 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 ofMedical Assistance has calculated the payment rate for Fitzgerald Nursing Center, 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 Fitzgerald Nursing Center, Inc., our audit did not include a review ofthese 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 lease expense. We have included findings related to these matters in our report.
The Department ofAudits and Accounts is responsible for providing the Department ofMedical Assistance with information regarding the accuracy of cost and patient data for Fitzgerald Nursing Center, Inc. for the six months 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.

1997 Audit Report: Fitzgerald Nursing Center, Inc.

5

FINDINGS AND RECOMMENDATIONS

Finding No.1

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 Supplies Special Services Cable Television Contracted Services Dietary Repairs and Maintenance Supplies Operation and Maintenance of Plant Cable Television Repairs and Maintenance Administrative and General Lease Expense Supplies Property and Related Expenses Lease Expense

$

$

163

800

$

(225)

353

$

(163)

225

$

(170)

(556)

(597) 963 128 62 (726) 170

Total Adjustment to Allowable Costs

$

0

6

Nursing Facility Services Program

Finding No.2

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.
(HCFA Pub. 15-1 Section 2304)

COST CENTER Routine Services Special Services Dietary Operation and Maintenance of Plant Administrative and General Property and Related Expenses

$ (28,791) (975)
(6,554) (1,180) (7,986) (1,253)

Total Adjustment to Allowable Costs

$====(==46='=73=9==)

Finding No. 3

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 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 2106.1; DMA Policies and Procedures Sections 902)

1997 Audit Report: Fitzgerald Nursing Center, Inc.

7

ITEMS Cable Television Prescription Drugs
COST CENTER Routine Services Operation and Maintenance of Plant Total Adjustment to Allowable Costs

$

(3,158)

(241)

$==(=3===,3=99=)

$

(241)

(3,158)

$==(==3==,3=99=)

Finding No. 4

Related Party Costs

Documentation examined during the audit showed that the provider paid for oxygen obtained from related parties. Federal regulations provide that costs applicable to services, facilities, and supplies furnished by related organizations are includable in the allowable costs of the provider at the cost to the related organization. We recommend that the provider implement policies and procedures to ensure that only the costs incurred by the related organization to furnish services, facilities, and supplies are included in allowable costs. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs to the related party's cost.
(HCFA Pub. 15-1 Section 1000)

COST CENTER Special Services

$===(==2===17==)

Allocations from Home Office

Finding No.5

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

8

Nursing Facility Services Program

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 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 Allocation Statistics
Total Adjustment to Allowable Costs

$ (63,091) (12,390)
$====::!(::::::75==48=1=)

Accrual Basis ofAccounting

Finding No. 6

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)

1997 Audit Report: Fitzgerald Nursing Center, Inc.
Adjustments to Balance Sheet Accounts: June 30, 1997 Balance
Property Taxes Payable COST CENTER
Property and Related Expenses

9
Allowable Costs
$===(3='=94=3=) $==(=3==,9==43==)

Excess Vehicles

Finding No. 7

Documentation examined during the audit showed that expenses were claimed for 3 vehicles for the year under review. DMA guidelines allow a maximum of 2 vehicles 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 of vehicles operated in excess of the maximum number allowable.
(DMA Vehicle Guidelines)

COST CENTER Property and Related Expenses

$===(=5=81=)

Patient Day Statistics

Finding No.8

Census records examined during the audit showed that the nursing home had 28,542 patient days of service rather than the 27,137 shown on the cost report. In addition, census records examined during the audit for January, February and March were

10

Nursing Facility Services Program

incomplete and unreliable. The census was adjusted to reflect 100% occupancy during these three months under review. 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 1,405 days to correct the statistical information.
(HCFA Pub. 15-1 Section 2304)

Patient Trust Fund Not in Balance

Finding No. 9

Documentation examined during the audit showed that the provider- manages funds belonging to its patients. The assets ofthe patient trust fund at June 30, 1997, totaled $39,891.30; patient trust fund liabilities were $22,596.87. Federal law requires that the provider establish and maintain a system that assures a full and complete and separate accounting, according to generally accepted accounting principles, of each resident's personal funds. We recommend that the provider implement policies and procedures to maintain a balanced, reconciled patient trust fund. The patient trust fund had been balanced as of February 28, 1998. We also recommend that the Department ofMedical Assistance ensure that the provider returns the excess funds and implements the policies and procedures necessary to maintain a balanced, reconciled patient trust fund.
(42 CFR483.10C(4))

Accounts Receivable Credit Balances

Finding No. 10

Documentation examined during the audit showed that the provider had numerous credit balances in its individual accounts receivable. Credit balances in the facility's

1997 Audit Report: Fitzgerald Nursing Center, Inc.

11

accounts receivable result from overpayments for services provided to its patients. The $29,255.12 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of April 20,1998. 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.

Patient Name
Andeberg, Wayne Bryant, Roberta Canady, Jewel Collins, William Cook, Ruby Graham, Mary McDaniel, Vera McDonald, Walter Money, George Paulk, Earnest Rish, Alma Rutledge, Lacie Wilkes, Evie
Total

Balance

$

71.11

358.53

999.75

570.51

451.79

19.40

3,053.39

280.74

6,954.10

750.89

14,679.01

200.01

865.89

$ 29~255.12

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

2

Lack ofSufficient Documentation

3

Costs Not Related To Patient Care

Special Services

1

Incorrect Expense Classifications

2

Lack of Sufficient Documentation

4

Related Party Costs

Dietary

1

Incorrect Expense Classifications

2

Lack of Sufficient Documentation

Operation and Maintenance ofPlant

1

Incorrect Expense Classifications

2

Lack of Sufficient Documentation

3

Costs Not Related To Patient Care

Administrative and General

1

Incorrect Expense Classifications

2

Lack of Sufficient Documentation

5

Allocations from Home Office

$

(597)

(28,791)

(241) $

$

963

(975)

(217)

$

128

(6,554)

$

62

(1,180)

(3,158)

$

(726)

(7,986)

(75,481)

(29,629) (229)
(6,426) (4,276) (84,193)

1997 Audit Report: Fitzgerald Nursing Center, Inc.

13

FINDING NUMBER

ALLOWABLE COSTS

Property and Related Expenses

1

Incorrect Expense Classifications

2

Lack of Sufficient Documentation

6

Accrual Basis of Accounting

7

Excess Vehicles

$

170

(1,253)

(3,943)

(581)

(5,607)

Total Audit Findings Affecting Allowable Costs

$ (130,360)

PATIENT DAY STATISTICS
8 Patient Day Statistics

1405

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

$ 720,617 $ (29,629) $ 690,988

Special Services

25,450

(229)

25,221

Dietary

170,402

(6,426)

163,976

Laundry and Housekeeping

111,265

111,265

Operation and Maintenance ofPlant

87,127

(4,276)

82,851

Administrative and General

200,551

(84,193)

116,358

Property and Related Expenses

176,590

(5,607)

170,983

Total Allowable Costs

$ 1,492,002 $ (130,360) $ 1,361,642

PATIENT DAY STATISTICS

27,137

1,405

28,542