Audit report, for the nine months ended May 31, 1994, Georgia Highlands Medical Services, Inc., Medicaid provider no. 00192574A, Rural Health Clinic Services Program [May 31, 1994]

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:44DEPARTMENT OF AUDITS ,,~Medicaid and Local Government Audi_ts
AUDIT REPORT FOR THE NINE MONTHS ENDED MAY 31, 1994
GEORGIA HIGHLANDS MEDICAL SERVICES, INC.
MEDICAID PROVIDER NUMBER 00192574A RURAL HEALTH CLINIC SERVICES PROGRAM

TABLE OF CONTENTS
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
IN"TRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FIN"DIN"GS AND RECOMMENDATIONS ................... 3 Summary of Audit Findings Affecting Allowable Costs and Patient Visit Statistics 8 Schedule of Allowable Costs and Patient Visit Statistics 10 Summary of Allocation of Overhead to Direct Services 11 Medicaid Cost Settlement 12

CLAUDE L VICKERS
STATE AUDnoR

DEPARTMENT OF AUDITS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535
December 19, 1995

Members of the Board of Medical Assistance, and The Honorable Marge Smith, Commissioner Department ofMedical Assistance 2 Peachtree Street, N.W., Suite 27-100 Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit of Georgia Highlands Medical Services, Inc., provider number 00192574A, a participant in the Rural Health Clinic Services Program for the nine months ended May 31, 1994. This report is intended to be used solely in connection with the administration of the Georgia Department of Medical Assistance Rural Health Clinic Services Program and is not to be used or relied upon for any other purpose.
Respectfully Submitted,
a~~
Claude L. Vickers State Auditor
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1994 Audit Report: Georgia Highlands Medical Services, Inc.

1

INTRODUCTION

Provider Information Audit Objectives

Georgia Highlands Medical Services, Inc., is a rural health clinic located in Cumming, Georgia. The center provides a full range of primary and diagnostic and therapeutic services. The center was operated as a freestanding rural health clinic for the nine months ended May 31, 1994.

The purpose of this audit was to determine whether Georgia Highlands Medical Services, Inc., a provider enrolled in the Georgia Medicaid Rural Health Clinic Services (RHCS) Program, maintained adequate documentation to support the allowable costs and patient visit statistics reported in its Rural Health Clinic Cost Report for the nine months ended May 31, 1994; and to determine whether Georgia Highlands Medical Services, Inc., complied with the federal and state laws, regulations, policies and procedures for the RHCS Program in effect for that period. The specific objectives of this audit were to:



determine if allowable costs reported in the Rural

Health Clinic Cost Report are reasonable and

allowable, in all material respects, in accordance with

federal and state laws, regulations, policies and

procedures governing the Georgia Rural Health Clinic

Services Program;

2
Scope and Methodology

Rural Health Clinic Services Program



determine if patient visit statistics included in the cost

report are accurately reported;



determine the amount of any settlement between

Georgia Highlands Medical Services, Inc., and the

Department ofMedical Assistance based on payment

information provided by the Department of Medical

Assistance; and



recommend appropriate action based on the results of

our audit.

To accomplish these objectives, we interviewed provider personnel and examined records and documentation to determine the adequacy of amounts and disclosures included in the Rural Health Clinic Cost Report. We p~rformed a limited review of the provider's internal control structure to the extent necessary to plan our audit. 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 Proceduresfor - Rural Health Clinic Services. We also obtained information from the Department of Medical Assistance related to the number of paid Medicaid visits and the total amount paid for those visits.

1994 Audit Report: Georgia Highlands Medical Services, Inc.

3

FINDINGS AND RECOMMENDATIONS

Finding No. I

Incorrect Expense Classifications

Documentation examined during the audit showed that some ofthe expenses were not properly classified. 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 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.
(HCFA Pub. 15-1 Section 2304; Instructions to the Cost Report)

COST CENTER Rural Health Clinic Services Depreciation Expense Salaries and Employee Benefits Other Services Salaries and Employee Benefits Facility Overhead - Facility Costs Depreciation Expense Facility Overhead - Administrative Costs Salaries and Employee Benefits

$ (3,308) (30,140) $

(33,448) 3,372 3,308
26768

Net Adjustment to Allowable Costs

$========0=

Finding No.2

Excess Depreciation
Documentation examined during the audit in support of fixed assets and depreciation showed that either the property was not included in the proper class or depreciation was not calculated in accordance with AHA guidelines. We recommend that the provider implement policies and procedures to ensure that depreciation expense is calculated in accordance with AHA guidelines. We recommend that the Department

4

Rural Health Clinic Services Program

of Medical Assistance make the following adjustment to reduce allowable costs claimed by the amount of depreciation expense claimed in excess of the total allowable.
(HCFA Pub.15-1 Section 104.17)

COST CENTER Rural Health Clinic Services Facility Overhead - Facility Costs Facility Overhead - Administrative Cost_s

$

(261)

(I, I78)

(139)

Total Adjustment to Allowable Costs

$==='!c:!)~5==7~8==)

Finding No. 3

Liabilities Not Liquidated
Liabilities shown in the cost report for May 31, 1994, included amounts which had not been paid at May 31, I995. Federal regulations provide that short term 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 of other assets. Furthermore, 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 audit 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)

1994 Audit Report: Georgia Highlands Medical Services, Inc.

5

COST CENTER Rural Health Clinic Services

$.===(J!:::!16=:0!:!:::J!:::!J:::I!::)

Finding No. 4

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 deveioping 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.
(HCFAPub.15-1 Sections 2102.3, 2102.1)

ITEMS Association Dues (50%) Civic Organization Dues Non-Patient Care Use of Provider Facilities

$

(1,623)

(100)

(3,713)

COST CENTER Facility Overhead - Facility Costs Facility Overhead - Administrative Costs
Total Adjustment to Allowable Costs

$

(3,713)

(1,723)

6

Rural Health Clinic Services Program

Finding No.5

Fixed Asset Purchases Claimed as Expense
Allowable costs claimed included purchases of assets which are considered to be capital additions to property under generally accepted accounting principles. 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 ofMedical Assistance make the following adjustment to reduce allowable costs by the amount of purchased assets claimed as expense.
(HCFAPub. 15-1 Section 108)

COST CENTER Facility Overhead - Administrative Costs Closing Cost on Construction Loan

$===(3==0!!:::9!:::!:6==)

Finding No. 6

Total Patient Visit Statistics
Census records examined during the audit showed that the center had 10,607 total patient visits rather than the 11,055 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 visit statistics. We recommend that the Department of Medical Assistance make the adjustment of 448 visits to correct the statistical information.
(HCFAPub. 15-1 Section2304)

1994 Audit Report: Georgia Highlands Medical Services, Inc.

7

Finding No. 7

Inadequate Segregation ofDuties
Documentation examined during the audit showed that accounting duties and responsibilities were not segregated between different employees. This lack of segregation of duties increases the risk that material misstatements, errors, or irregularities may occur. We recommend that the provider implement policies and procedures to properly segregate accounting duties and responsibilities among its employees.

8

Rural Health Clinic Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT VISIT STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Rural Healt/z Clinic Services

1

Incorrect Expense Classifications

2

Excess Depreciation

3

Liabilities Not Liquidated

$ (33,448) (261)
(16,011) $

Other Services

1

Incorrect Expense Classifications

Facility Overhead- Facility Costs

1

Incorrect Expense Classifications

2

Excess Depreciation

4

Costs Not Related to Patient Care

$

3,308

(1,178)

(3,713)

Facility Overhead -Administrative Costs

1

Incorrect Expense Classifications

$

26,768

2

Excess Depreciation

(139)

4

Costs Not Related to Patient Care

(1,723)

5

Fixed Asset Purchases Claimed as Expense

(3,096)

Total Audit Findings Affecting Allowable Costs

$

(49,720) 3,372
(1,583)
21,810 (26,121)

1994 Audit Report: Georgia Highlands Medical Services, Inc.

FINDING NUMBER

PATIENT VISIT STATISTICS

6 Decrease in Patient Visit Statistics

9 (448)

10

Rural Health Clinic Services Program

SCHEDULE OF ALLOWABLE COSTS AND PATIENT VISIT STATISTICS

ALLOWABLE COSTS Rural Health Clinic Services Other Services Total Direct Services Costs

COST REPORT TOTALS

AUDIT FINDINGS

AUDITED TOTALS

$ 417,754 $ (49,720) $ 368,034

(242)

3,372

3,130

$ 417,512 $ (46,348) $ 371,164

Facility Overhead - Facility Costs Facility Overhead - Administrative
Costs Total Facility Overhead

$

46,382 $

(1,583) $

44,799

185,427 $ 231,809 $

21,810 20,227 $

207,237 252,036

Total Allowable Costs

$ 649,321 $ (26,121) $==62=3=,2=00=

PATIENT VISIT STATISTICS

11,055

(448)

10,607

1994 Audit Report: Georgia Highlands Medical Services, Inc.

11

SUMMARY OF ALLOCATION OF OVERHEAD TO DIRECT SERVICES

Rural Health Clinic Services Other Services
Total Direct Services

AUDITED DIRECT COSTS

PERCENTAGE OF DIRECT COSTS

ALLOCATION OF OVERHEAD

TOTAL ALLOWABLE
COSTS

$

368,034

3 130

99.16 $ 0.84

249,919 $ 2 117

617,953 5 247

$

371,164

100.00 $

252,036 $

623,200

12

Rural Health Clinic Services Program

MEDICAID COST SETTLEMENT

Total Allowable Cost ofRural Health Clinic SeJVices (page 11) Total Patient Visits (page 10)
Allowable Cost per Patient Visit
Maximum Allowable Cost per Patient Visit
Lower of Allowable or Maximum Cost per Patient Visit Total Visits by Medicaid Patients (I)
Total Allowable Costs for Visits by Medicaid Patients Interim Payments by the D.M.A. (1)
Amount Due to/(from) Provider

$ 617,953 10,607

$

58.26

$

54.39

$

54.39

3,129

$ 170,186 153,992

$

16,194

(1) This information was furnished to us by the Department of Medical Assistance.