Audit report, for the year ended June 30, 1998, Franklin Health Care Center, Inc., Medicaid provider no. 00141039A, Nursing Facilities Services Program

TABLE OF CONTENTS

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5

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

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
DIIlECTOR

August 3, 1999

Members of the Board of Community Health, and The Honorable Russ Toal, Commissioner Georgia Community Health 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results .of our audit of Franklin Health Care Center, Inc., provider number 00141039A, 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,
~w.~- Russell W. Hinton State Auditor
RWH/clw/ds

1998 Audit Report: Franklin Health Care 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 of Georgia and the federal government. Medicaidc 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

Franklin Health Care Center, Inc., a 78-bed long-term health care facility located in Franklin, 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 Franklin Health Care Center, 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 Franklin Health Care 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.

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

1998 Audit Report: Franklin Health Care Center, Inc.

3

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 Franklin Health Care 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 Franklin Health Care Center, 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.
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 amortization and

4

Nursing Facility Services Program

capital-related interest expense. We have included findings related to these matters 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 Franklin Health Care Center, 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 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: Franklin Health Care Center, Inc.

5

FINDINGS AND RECOMMENDATIONS

Lack ofSufficient Documentation

Finding No.1

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 Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General

$ (14,017) (1,648) (1,852) (2,638) (1,672) (580)

Total Adjustment to Allowable Costs

$======(2=2===,4=07::::=)

Incorrect Expense Classifications

Finding No.2

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)

6

Nursing Facility Services Program

COST CENTER Routine Services Dietary Supplements Linens Medical Equipment Medical Records Medical Supplies Waste Removal Dietary Dietary Supplements Dishwasher Laundry Detergent Medical Equipment Medical Supplies Laundry and Housekeeping Laundry Detergent Linens Operation and Maintenance of Plant Dishwasher Waste Removal Administrative and General Insurance Expense Interest Expense Medical Records Property and Related Expenses Insurance Expense Interest Expense
Total Adjustment to Allowable Costs

$

(226)

(320)

877

(132)

1,439

(281) $

$

226

511

(999)

(877)

(1,439)

$

999

320

$

(511)

281

$

1,205

(325)

132

$ (1,205) 325

$

1,357
(2,578) 1,319 (230) 1,012 (880)


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 beneficiaries. We recommend that the provider implement policies and procedures to ensure

1998 Audit Report: Franklin Health Care Center, Inc.

7

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 aportion of the provider's adjustment.
(HCFA Pub. 15-1 Section 2304)

COST CENTER Routine Services

$_ _..;.1.;.;:'7.;.;.89..;.5"

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 increase allowable costs for the net effect of the recalculation.
(General Instructions to the Cost Report)

Ancillary Services

Adjustment Per Cost Report

Recalculated Adjustment Audit Finding

Physical Therapy

$

25,331 $

24,868 $

463

COST CENTER Special Services

$

463

8

Nursing Facility Services Program

Fixed Asset Purchases Claimed as Expense

Finding No.5

Allowable costs claimed included purchases of assets which are considered to be capital additions to property under generally accepted accounting principles. The Uniform Chart of Accounts issued by DMA provides for inclusion of such assets in 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 of purchased assets claimed as expense and to increase allowable costs by depreciation allowable.
(HCFA Pub. 15-1 Section 108; DMA Policies and Procedures, Appendix D)

COST CENTER Laundry and Housekeeping Cost of Major Moveable Equipment Operations and Maintenance of Plant Cost of Major Moveable Equipment Property and Related Cost of Major Moveable Equipment

$

(530)

(5,300)

433

Total Adjustment to Allowable Costs

$==~(5~,3==97~)

Costs Not Related to Patient Care

Finding
"No. 6

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.15-1 Section 2102.3)

1998 Audit Report: Franklin Health Care Center, Inc.

9

ITEMS Donations Personal Purchases
COST CENTER Operation and Maintenance of Plant Administrative and General Total Adjustment to Allowable Costs

$

(930)

(4,407)

$

(5,337)

$

(1,146)

(4,191)

$

(5,337)

Patient Day Statistics

Finding No.7

The provider stated on the cost report that it furnished 28,408 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate.

Accounts Receivable Credit Balances

Finding No.8

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 $7,268.35 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of June 1, 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.

10
Patient Name
Addison, Jim Banks, Margaret Bell, Mort Bouchard, Yvonne Burdett, Jewell Cosper, Aley Hammond, Glenn Hanson, Georgia Hill, Lillie Hill, Parrie Huff, Ruby Jones, Wilma Kee, William Lasseter, Luther Mack, Darnell Martin, Charlotte Peek, William Shepard, Mary Stephens, Sarah Stewart, Mary Stogner, Alice Witcher, Ruth
Total

Nursing Facility Services Program

Balance

$

544.85

404.80

25.00

149.42

449.50

256.19

548.95

98.00

20.00

55.50

360.00

136.85

328.00

50.00

235.00

1,143.50

780.00

22.60

600.21

57.98

756.00

246.00

$

7,268.35

1998 Audit Report: Franklin Health Care Center, Inc.

11

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1

Lack of Sufficient Documentation

$

(14,017)

2

Incorrect Expense Classifications

1,357

3

Costs Misclassified as Nurse Aide Testing

and Training

17,895 $

Special Services

1

Lack of Sufficient Documentation

$

(1,648)

4

Recalculation ofAncillary Services Cost

Adjustment

463

Dietary

1

Lack of Sufficient Documentation

2

Incorrect Expense Classifications

$

(1,852)

(2,578)

Laundry and Housekeeping

1

Lack of Sufficient Documentation

$

(2,638)

2

Incorrect Expense Classifications

1,319

5

Fixed Asset Purchases Claimed as Expense

(530)

Operation and Maintenance ofPlant

1

Lack of Sufficient Documentation

$

(1,672)

2

Incorrect Expense Classifications

(230)

5

Fixed Asset Purchases Claimed as Expense

(5,300)

6

Costs Not Related to Patient Care

(1,146)

5,235 (1,185) (4,430) (1,849) (8,348)

12

Nursing Facility Services Program

FINDING NUMBER

ALLOWABLE COSTS

Administrative and General

1

Lack of Sufficient Documentation

2

Incorrect Expense Classifications

6

Costs Not Related to Patient Care

$

(580)

1,012

(4,191)

(3,759)

Propertv and Related Expenses

2

Incorrect Expense Glassifications

$

(880)

5

Fixed Asset Purchases Claimed as Expense

433

(447)

Total Audit Findings Affecting Allowable Costs

$====(1=4=,7=83=)

1998 Audit Report: Franklin Health Care Center, Inc.

13

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

ALLOWABLE COSTS Routine Services
Special Services Dietary Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General Property and Related

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

$ 757,301 $ . 46,663 197,831 157,285 181,800 270,245 164,037

5,235 $ (1,185) (4,430) (1,849) (8,348) (3,759)
(447)

762,536 45,478 193,401 155,436 173,452 266,486 163,590

Total Allowable Costs

$ 1,775,162 $ (14,783) $ 1,760,379

PATIENT DAY STATISTICS

28,408

28,408