Audit report, for the year ended June 30, 1997, Gilmer Nursing Home, Medicaid provider no. 00141127A, Nursing Facilities Services Program

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DEPARTMENT OF AUDITS AND ACCOUNTS Medicaid and Local Government Audits
AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 1997
,GILMER NURSING HOME
MEDICAID PROVIDER NUMBER 00141127A NURSING FACILITY SERVICESPROGRAM

TABLE OF CONTENTS
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
INTRODUCTION ......................................... 1
FINDINGS AND RECOMMENDATIONS .................... 6 Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 9
Schedule of Allowable Costs and Patient Day Statistics 10

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

February 24, 1999

Members of the Board of Medical Assistance, and The Honorable Dr. William R. Taylor, Commissioner Department of Medical Assistance 2 Peachtree Street, N.W., Suite 27-100 Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit of Gilmer Nursing Home, provider number 00141127A, 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 of the Georgia Department of Medical Assistance Nursing Facility Services Program and is not to be used or relied upon for any other purpose.

CLV/sw/ds

Respectfiilly Submitted,
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State Auditor

1997 Audit Report: Gilmer Nursing Home

1

INTRODUCTION

General Information Provider 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.
Gilmer Nursing Home, a 100-bed long-term health care facility located in Ellijay, Georgia, is a provider in the Georgia Medicaid Nursing Facility Services Program. The facility provides both skilled and intermediate care services to resident patients. The facility is owned and operated by Southern Health Corporation of Ellijay, Inc.,

2

Nursing Facility Services Program

Audit Objectives

which operated both North Georgia Medical Center and Gilmer Nursing Home in separate physical facilities during the year under review.

The purpose of this audit was to determine whether Gilmer Nursing Home 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 Gilmer Nursing Home 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 ofthis audit were to:



determine if the provider meets the requirements for

classification as a hospital-based nursing home

outlined in DMA Policies and Procedures for

Nursing Facility Services, Section 1002.1 (g); and



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

1997 Audit Report: Gilmer Nursing Home

3

Scope and Metltodology



recommend appropriate action based on the results of

our audit.

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.
Allowable costs reported on the Nursing Home Cost Report include both direct costs of the nursing facility and indirect costs allocated to it from North Georgia Medical Center. These indirect cost allocations result from the step-down of general service costs from the hospital as shown on the hospital's Medicare cost report. Our audit did not include tests of either these indirect costs or the reclassifications and adjustments made to determine net expenses for cost allocation on the. Medicare cost report worksheets. These costs are subject to audit by the Medicare intermediary. Any audit findings by the Medicare intermediary related to indirect costs that impact the

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Nursing Facility Services Program

nursing facility will be reflected in the Medicaid cost report in the year the Medicare cost report is final-settled.
In accordance with Section 1002 of Policies and Procedures for Nursing Facility Services, the Department of Medical Assistance has calculated the payment rate for Gilmer Nursing Home 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 Gilmer Nursing Home, 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.
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 Gilmer Nursing Home 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 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

1997 Audit Report: Gilmer Nursing Home

5

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.

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Nursing Facility Services Program

FINDINGS AND RECOMMENDATIONS

Finding No. 1

Hospital-Based Status
The provider was in compliance with the Department of Medical Assistance's requirements for classification as a hospital-based nursing home as specified in DMA Policies and Procedures for Nursing Facility Services, Section 1002.1 (g).

Finding No.2

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 of Medical Assistance make the following adjustment to reclassify costs to the appropriate cost centers.
(OMA Policies and Procedures, Appendix D)

COST CENTER
Routine Services Administrative Expenses Cleaning Services Repairs Expense Working Capital Interest Expense
Operation and Maintenance of Plant Cleaning Services Repairs Expense

$ (6,660) (2,532) (2,401)
(12,007) $

$

2,532

2,401

(23,600) 4,933

1997 Audit Report: Gilmer Nursing Home

7

Administrative and General Administrative Expenses Working Capital Interest Expense
Total Adjustment to Allowable Costs

$

6,660

12,007

18,667

$====0=

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.15-1 Sections 2104.1)

ITEMS Ambulance Service Working Capital Interest

$

(1,085)

(550)

COST CENTER Routine Services Administrative and General
Total Adjustment to Allowable_Costs

$==(=1=,6=35=)

$

(1,085)

(550)

$==(=1=,6=35=)

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Nursing Facility Services Program

Finding. No. 4

Patient Day Statistics
Census records examined during the audit showed that the nursing home had 36,107 patient days of service rather than the 36,103 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 day statistics. We recommend that the Department of Medical Assistance make the adjustment of 4 days to correct the statistical information.
(HCFA Pub. 15-1 Section 2304)

1997 Audit Report: Gilmer Nursing Home

9

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

2

Incorrect Expense Classifications

3

Costs Not Related to Patient Care

$ (23,600) (1,085) $

Operation and Maintenance ofPlant

2

Incorrect Expense Classifications

Administrative and General

2

Incorrect Expense Classifications

3

Costs Not Related to Patient Care

$

18,667

(550)

(24,685) 4,933 18,117

Total Audit Findings Affecting Allowable Costs

$

(1,635)

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Nursing Facility Services Program

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

ALLOWABLE COSTS

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

Routine Services

$ 1,667,536 $ (24,685) $ 1,642,851

Special Services

144,976

144,976

Dietary

630,805

630,805

Laundry and Housekeeping

293,457

293,457

Operation and Maintenance of Plant

178,108

4,933

183,041

Administrative and General

447,478

18,117

465,595

Property and Related Expenses

425,113

425,113

Total Allowable Costs

$ 3,787,473 $ (1,635) $ 3,785,838

PATIENT DAY STATISTICS

36,103

4

36,107