1Qt1 :A~OO.rYt1 Rt Gh5 Iq(15~~b DEPARTMENT OF AUDITS AND ACCOUNTS Medicaid and Local Government Audits AUDIT REPORT FORTHEYEAI{ENDEDJUNE 30,1996 GRANDVlE\VCARECENTER, INC. ME1)ICAlD PROVIDERNUMBER00141215A NURSING FACILITIES 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 December 17, 1997 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 o Ladies and Gentlemen: \ ::s. '} This report provides the results ofour audit ofGrandview Care Center, Inc., provider number 00141215A, a participant in the Nursing Facilities Services Program for the year ended June 30, 1996. This report is intended to be used solely in connection with the administration of the Georgia Department ofMedical Assistance Nursing Facilities Services Program and is not to be used or relied upon for any other purpose. Respectfully Submitted, ~~ Claude L. Vickers State Auditor CLV/mnlbw 1996 Audit Report: Grandview 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 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 Facilities 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 Grandview Care Center, Inc., a 1DO-bed long-term health care facility located in Athens, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facilities Services Program. The facility provides both skilled and intermediate care services to resident patients. The 2 Nursing Facilities Services Program Audit Objectives facility was operated as a freestanding nursing home for the year ended June 30, 1996. The purpose of this audit was to determine whether Grandview 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, 1996; and to determine whether Grandview Care Center, Inc., complied with the federal and state laws, regulations, policies and procedures for the Nursing Facilities 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 Facilities 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. 1996 Audit Report: Grandview Care Center, Inc. 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 Grandview Care Center, Inc., for the year ended June 30, 1996. 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. 4 Nursing Facilities Services Program 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 Dietary Supplements Medical Record Forms Supplies Dietary Dietary Supplements Linen Expense Laundry and Housekeeping Linen Expense Operation and Maintenance of Plant Supplies Administrative and General Liability Insurance Expense Medical Record Forms Supplies Property and Related Expenses Liability Insurance Expense $ (1,533) (966) 1,513 $ $ 1,533 (45) $ 11,440 966 (482) (986) 1,488 45 (1,031) 11,924 (11,440) Total Adjustment to Allowable Costs $====0= 1996 Audit Report: Grandview Care Center, Inc. 5 Finding No.2 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. 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 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) COST CENTER Dietary Cost of Minor Equipment Laundry and Housekeeping Cost of Major Moveable Equipment Operation and Maintenance of Plant Cost of Fixed Equipment Property and Related Expenses Allowable Depreciation Expense $ (1,359) (1,049) (4,598) 1,068 Total Adjustment to Allowable Costs $==(=5=,9=38:=) Finding No.3 Allocation ofIndirect Expenses to Non-Patient Care Areas The provider uses a portion of its building for purposes which are not related to patient care. Indirect expenses related to the non-patient care use of the building are calculated on Schedule B-5 of the cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on Schedule B-5 as allowable costs and square footage. These findings required the recalculation of Schedule B-5. A copy of this recalculation has been furnished to the provider. We recommend that the provider implement policies and procedures to 6 Nursing Facilities Services Program ensure that all infonnation used to allocate indirect expenses to non-patient care areas 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. (HCFA Pub. 15-1 Section 2102.3; General Instructions to the Cost Report) COST CENTER Laundry and Housekeeping Operation and Maintenance of Plant Property and Related Expenses $ 31 85 316 Total Adjustment to Allowable Costs $=======4:=32= Finding No.4 Lack ofSufficient Documentation Some of the expenses included in allowable costs were not supported by adequate documentary evidence. Federal regulations provide that cost infonnation 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 Operation and Maintenance of Plant Administrative and General Property and Related Expenses $ (952) (8,634) (2,501) Total Adjustment to Allowable Costs $====(1=2=,0=87=:) 1996 Audit Report: Grandview Care Center, Inc. 7 Finding No.5 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 Section 2102.3) ITEMS Personal Purchases Personal Use of Vehicle $ (2,805) (2,777) $ (5,582) COST CENTER Administrative and General Property and Related Expenses Total Adjustment to Allowable Costs $ (2,805) (2,777) $===(5=,5=82:=:) Finding No.6 Accrual Basis ofAccounting 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 8 Nursing Facilities Services Program 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) Adjustments to Balance Sheet Accounts: Allowable Costs June 30, 1995 Balance Property Taxes Payable $=====(1=2=,2==:10:=) COST CENTER Property and Related Expenses $=====(1:=2=,2==:10:=) Finding No.7 Accounts Receivable Credit Balances 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 $5,779.48 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of November 14, 1997. 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 Bond, Dorothy N. Carlan, Horace Coleman, Gussie Gibson, Beatrice C. Balance $ 779.97 60.61 655.67 750.27 1996 Audit Report: Grandview Care Center, Inc. 9 Patient Name Harris, James T. Jackson, Leslie V. Mitchell, Cora Rucker, Idella Wofford, James Total Balance 1,430.97 834.00 1,085.70 121.22 61.07 $=====5=,7=7=:9.=48= Patient Trust Fund Not in Balance Finding No.8 Documentation examined during the audit showed that the provider manages funds belonging to its patients. The assets ofthe patient trust fund at June 30, 1996, totaled $857.82; patient trust fund liabilities were $3,475.43. 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 reimburse the patient trust fund for this shortage. We further recommend that the provider implement policies and procedures to maintain a balanced, reconciled patient trust fund. We also recommend that the Department of Medical Assistance ensure that the provider reimburses the shortage in the patient trust fund and implements the policies and procedures necessary to maintain a balanced, reconciled patient trust fund. (42 CFR 483.10C(4 Patient Trust Funds Not in Interest Bearing Account Finding No.9 Documentation examined during the audit showed that the provider manages funds belonging to its patients. Residents' personal funds in excess of$50 were maintained in a non-interest-bearing account. Federal law requires that all residents' personal 10 Nursing Facilities Services Program funds in excess of$50 be maintained in an interest-bearing account. We recommend that the provider implement policies and procedures to ensure that patients' personal funds in excess of $50 are maintained in an interest-bearing account. We also recommend that the Department of Medical Assistance ensure that the provider maintains the patients' personal funds in excess of$50 in an intere~t-bearing account. (42 CFR 483.10C(3)(I)) 1996 Audit Report: Grandview Care Center, Inc. 11 SUMMARY OF AUDIT FINDINGS.AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS FINDING NUMBER ALLOWABLE COSTS Routine Services 1 Incorrect Expense Classifications Dietary 1 Incorrect Expense Classifications $ 2 Fixed Asset Purchases Claimed as Expense Laundry and Housekeeping 1 Incorrect Expense Classifications $ 2 Fixed Asset Purchases Claimed as Expense 3 Allocation of Indirect Expenses to Non-Patient Care Areas Operation and Maintenance ofPlant 1 Incorrect Expense Classifications $ 2 Fixed Asset Purchases Claimed as Expense 3 Allocation oflndirect Expenses to Non-Patient Care Areas 4 Lack of Sufficient Documentation Administrative and General 1 Incorrect Expense Classifications $ 4 Lack of Sufficient Documentation 5 Costs Not Related to Patient Care $ 1,488 (1,359) 45 (1,049) 31 (1,031) (4,598) 85 (952) 11,924 (8,634) (2,805) (986) 129 (973) (6,496) 485 12 Nursing Facilities Services Program FINDING NUMBER ALLOWABLE COSTS Property and Related Expenses 1 Incorrect Expense Classifications $ (11,440) 2 Fixed Asset Purchases Claimed as Expense 1,068 3 Allocation of Indirect Expenses to Non-Patient Care Areas 316 4 Lack of Sufficient Documentation (2,501) 5 Costs Not Related to Patient Care (2,777) 6 Accrual Basis of Accounting (12,210) (27,544) Total Audit Findings Affecting Allowable Costs $====(3=5=,3=85=) SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS ~ (M COST REPORT TOTALS OFFICE AUDIT FINDINGS (1) FIELD AUDIT FINDINGS AUDITED TOTALS ALLOWABLE COSTS Routine Services $ 877,545 $ (2,785) $ (986) $ 873,774 Special Services 49,228 49,228 Dietary 301,627 129 301,756 Laundry and Housekeeping 167,576 (973) 166,603 Operation and Maintenance of Plant 264,425 1,595 (6,496) 259,524 Administrative and General 262,566 (18,466) 485 244,585 Property and Related Expenses 132,523 (27,544) 104,979 Total Allowable Costs $ 2,055,490 $ (19,656) $ (35,385) $ 2,000,449 =z IJ=.~C..l. -n...=~ .............. ttl fof) PATIENT DAY STATISTICS 35,702 35,702 rJ) ttl .~... n ttl fof} (I) An office audit of the provider was performed before this field audit. The results of the office audit are included in this column .~, for informational purposes. .,Q IJCl e=