Audit report, for the year ended June 30, 1997, Forrest Lake Health Care, Inc., Medicaid provider no. 00142535A, Nursing Facility Services Program [June 30, 1997]

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Irtb41 DEPARTMENT OF AUDITS AND ACCOUNTS

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Medicaid and Local Government Audits

AUDIT REPORT
FOR THE YEAR ENDED JU:N"E 30, 1997 FORREST LAKE HEALTH CARE,INC.
MEDICAID PROVIDER NUMBER 00142535A 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 11

Schedule of Allowable Costs and Patient Day Statistics 13

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

November 4, 1998

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 Forrest Lake Health Care, Inc., provider number 00142535A, 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 ofthe Georgia Department of Medical 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/sglbw

1997 Audit Report: Forrest Lake 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

Forrest Lake Health Care, Inc., a IOO-bed long-term health care facility located in Martinez, 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

Nursing Facility Services Program

patients. The facility was operated as a component ofAllgood Health Care, Inc., a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1997.

.)

Audit Objectives

The purpose of this audit was to determine whether Forrest Lake Health Care, 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, 1997; and to determine whether Forrest Lake Health Care, 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: Forrest Lake 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 Forrest Lake Health Care, Inc., 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
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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

Liabilities Not Liquidated

Liabilities shown on Schedule C of the cost report for June 30, 1996, included amounts which had not been paid at June 30, 1997. Federal regulations provide that short tenn liabilities must be liquidated within one year after the end of the cost reporting period in which the liability was incurred and must be made by check or other negotiable instrument, cash or legal transfer ofother assets. Furthennore, where the liability is not liquidated within the I-year time limit or does not qualify under the exceptions specified in HCFA 15-2305.1, the cost incurred for the related goods and services is not allowable in the cost reporting period when the liability is incurred, but is allowable in the cost reporting period when the liquidation of the liability occurs. We recommend that the provider implement policies and procedures to ensure that liabilities included in the cost report are liquidated within the required time frame. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs for the expense relating to the unliquidated liability.
(HCFA Pub. 15-1 Section 2305A)

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

$

(184)

(3,444)

(92)

(300)

(2,218)

Total Adjustment to Allowable Costs

$==(=6=,2=:38=)

1997 Audit Report: Forrest Lake Health Care

5

Finding No.2

Allocations from Home Office

The provider was a component of a chain organization for the year ended June 30, 1997. As a result of our audit of the home office cost report filed in connection with 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 Routine Services Directly Allocated Costs Dietary Directly Allocated Costs Administrative and General Directly Allocated Costs Pooled Costs Administrative Expenses

$

$

2,380

(53,210)

10,036 721
(50,830)

Total Adjustment to Allowable Costs

$=:::::::=:(4=:0=,0=73=)

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 of Medical Assistance make the following adjustment to

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Nursing Facility Services Program

decrease allowable costs by the amount of nurse aide testing and training costs.
(DMA General Instructions to Cost Report)

COST CENTER Routine Services

$==(=8=,5=:06=)

Finding No.4

Costs Not Related to Patient Care

Allowable costs claimed contributions to an Employee Stock Ownership Plan 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.15-1 Section 2102.3)

COST CENTER Special Services Laundry and Housekeeping Operation and Maintenance ofPlant

$

(129)

(757)

(282)

Total Adjustment to Allowable Costs

$.==(=1=,1=:68=)

Finding No.5

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

1997 Audit Report: Forrest Lake Health Care

7

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 Special Services Cable Television Operation and Maintenance of Plant Cable Television Landscaping Expense Administrative and General Insurance Expense Landscaping Expense Lease Expense Property and Related Expenses Insurance Expense Lease Expense

$

$

(647)

310

$

1,026

(310)

74

$ (1,026) (74)

647 (337)
790 (1,100)

Total Adjustment to Allowable Costs

$



Fixed Asset Purchases Claimed as Expense

Finding

Allowable costs claimed included purchases of assets which are considered to be

No.6

capital additions to property under generally accepted accounting principles. The

Unifonn Chart of Accounts issued by DMA provides for inclusion of such assets in

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property accounts. We recommend that the provider implement policies and

procedures to ensure that all purchases of fixed assets are shown on the cost report

as capital additions. We recommend that the Department of Medical Assistance

make the following adjustment to reduce allowable costs by the amount ofpurchased

assets claimed as expense and to increase allowable costs by depreciation allowable.

(HCFA Pub. 15-1 Section 108; DMA Policies and Procedures, Appendix D)

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Nursing Facility Services Program

COST CENTER Operation and Maintenance of Plant Cost of Fixed Equipment Property and Related Expenses Allowable Depreciation Expense

$

(4,275)

351

--,.

Total Adjustment to Allowable Costs

$

(3,924)

Finding No.7

Lack ofSufficient Documentation

Interest 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 Administrative and General

$==(=1=,92==:7=)

Finding No.8

Investment Income Offset
Documentation examined during the audit showed that the provider earned investment income. Federal regulations provide that interest expense must be reduced by certain investment income. We recommend that the provider implement policies and procedures to ensure that interest expense claimed is reduced by such investment income. We recommend that the Department of Medical Assistance

1997 Audit Report: Forrest Lake Health Care

9

make the following adjustment to reduce allowable costs by the amount of investment income offset against interest expense.
(RCFA Pub. 15-1 Section 202.2)

COST CENTER Administrative and General Property and Related Expenses

$

(235)

(52,645)

Total Adjustment to Allowable Costs

$====(5=::2=,8=80=)

Finding No.9

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; RCFA 15-906)

Position Title

Total

Guideline

Compensation Ceiling (A)

Excess

Directors (4)

$

4,800 $

1,566 $=====(=::35.23=4=)

(A) Ceilings have been adjusted to percentage of full-time, where applicable.

COST CENTER Administrative and General

$,==(=3=,2:=34=)

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Nursing Facility Services Program

Expenses Claimed by Another Chain Component

Finding

Allowable costs claimed by another chain component included Employee Stock

No. 10

Ownership Plan contributions 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. 15-1 Section 2304)

COST CENTER Administrative and General

$===4=,8=79=

COMPONENT FACILITY West Lake Manor Health Care Center

$==(!:::::4==,87=9::f::)

Finding No.n

Patient Day Statistics
The provider stated on the cost report that it furnished 35,582 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate.

1997 Audit Report: Forrest Lake Health Care

11

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1

Liabilities Not Liquidated

$

(184)

2

Allocations from Home Office

10,036

3

Nurse Aide Testing and Training Costs

(8,506) $

1,346

Special Services

1

Liabilities Not Liquidated

4

Costs Not Related to Patient Care

5

Incorrect Expense Classifications

$

(3,444)

(129)

647

(2,926)

Dietary

2

Allocations from Home Office

721

Laundry and Housekeeping

1

Liabilities Not Liquidated

4

Costs Not Related to Patient Care

$

(92)

(757)

(849)

,

Operation and Maintenance ofPlant

1

Liabilities Not Liquidated

$

(300)

4

Costs Not Related to Patient Care

(282)

5

Incorrect Expense Classifications

(337)

6

Fixed Asset Purchases Claimed as Expense

(4,275)

(5,194)

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Nursing Facility Services Program

FINDING NUMBER

ALLOWABLE COSTS

Administrative and General

1

Liabilities Not Liquidated

2

Allocations from Horne Office

5

Incorrect Expense Classifications

7

Lack of Sufficient Documentation

8

Investment Income Offset

9

Excess Compensation

10

Expense Claimed by Another Chain

Component

$

(2,218)

(50,830)

790

(1,927)

(235)

(3,234)

4,879

Property and Related Expenses

5

Incorrect Expense Classifications

$

(1,100)

6

Fixed Asset Purchases Claimed as Expense

351

8

Investment Income Offset

(52,645)

Total Audit Findings Affecting Allowable Costs

$

(52,775)
(53,394) (113,071)

1997 Audit Report: Forrest Lake Health Care

13

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

ALLOWABLE COSTS

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

Routine Services

$ 1,161,561 $

1,346 $ 1,162,907

Special Services

70,496

(2,926)

67,570

Dietary

379,252

721

379,973

Laundry and Housekeeping

148,289

(849)

147,440

Operation and Maintenance of Plant

167,186

(5,194)

161,992

Administrative and General

365,268

(52,775)

312,493

Property and Related Expenses

586,578

(53,394)

533,184

Total Allowable Costs

$ 2,878,630 $ (113,071) $ 2,765,559

PATIENT DAY STATISTICS

35,582

35,582