Audit report, for the year ended June 30, 1995, Gray Nursing Home, Medicaid provider no. 00082992A, Nursing Facilities Services Program

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DEPARTMENT OF AUDITS AND ACCOUNTS

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Medicaid and Local Government Audits

AUDIT REPORT FOR THE YEAR ENDEI> JUNE 30, 1995 .
. GRAY NURSING HOME ...
. MEDICAi]) PROVIDER NUMBER 00082992A NURSING FACILITIES SERVICES PltOGRAM.

TABLE OF CONTENTS
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
IN"TRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FINDINGS AND RECOMMENDATIONS ................... 4 Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 9 Schedule of Allowable Costs and Patient Day Statistics 11

Report Prepared By:
State ofGeorgia Department ofAudits andAccounts 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 AUDIT AND ACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535

January 8, 1997

Members ofthe Board ofMedical Assistance, and The Honorable Marge Smith, 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 Gray Nursing Home, provider number 00082992A, a participant in the Nursing Facilities Services Program for the year ended June 30, 1995. 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,

CLV/tw/by

Claude L. Vickers State Auditor

1995 Audit Report: Gray Nursing Home

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 has accepted the responsibility of auditing Medicaid providers.

Provider Information

Gray Nursing Home, a 58-bed long-term health care facility located in Gray, 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 facility was

2

Nursing Facilities Services Program

Audit Objectives

operated as a component of Geriatric Health Services, Inc., a chain organization which filed a Home Office Cost Report with OMA for the year ended June 30, 1995.

The purpose of this audit was to determine whether Gray 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, 1995; and to determine whether Gray Nursing Home 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.

1995 Audit Report: Gray Nursing Home

3

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 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 OMA Policies and Procedures for Nursing Facility Services.
The Department ofAudits is responsible for providing the Department ofMedical Assistance with information regarding the accuracy of cost and patient data for Gray Nursing Home for the year ended June 30, 1995. 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.

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Nursing Facilities Services Program

FINDINGS AND RECOMMENDATIONS

Finding No.1

Incorrect Expense Classifications

Documentation examined during the audit showed that medical supplies expenses were not classified in accordance with the Unif~rm 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)

COST CENTER Routine Services Operation and Maintenance of Plant

$

611

(611)

Total Adjustment to Allowable Costs

$====0===

Finding No. 2

Liabilities Not Liquidated
Liabilities shown on Schedule C of the cost reports for June 30, 1994, and June 30, 1995, included amounts which had not been paid at June 30, 1996. 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 cost report are liquidated within

1995 Audit Report: Gray Nursing Home

5

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 Dietary Operation and Maintenance ofPlant Administrative and General

$

(627)

(55)

(97)

(1,737)

Total Adjustment to Allowable Costs

$===<k!i2~s==1!::!16!:I!::}

Finding No.3

Lack ofSufficient Documentation

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 Dietary Administrative and General

$

(613)

{1,142)

Total Adjustment to Allowable Costs

$.==::::::!c::!()=7=S==S==}

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Nursing Facilities Services Program

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 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 2102.1, 2102.3; DMA Policies and Procedures Section 1002.1(k))

ITEMS Association Dues (50%) Insufficient Funds Charges Non-Patient Care Areas

$

(167)

(140)

(3,940)

$==='=4!:t:!2=:4:!::!7::c)

COST CENTER Operation and Maintenance ofPlant Administrative and General Property and Related Expenses
Total Adjustment to Allowable Costs

$

(2,002)

(307)

(1,938)

$==='!1::::4!::1=2!:!:4!::!:7::i!:::)

Finding No. 5

Fixed Asset Purcltases 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

1995 Audit Report: Gray Nursing Home

7

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 I 08~ DMA Policies and Procedures, Appendix D)

COST CENTER Operation and Maintenance ofPlant Cost ofMajor Moveable Equipment Property and Related Expenses Allowable Depreciation Expense

$

(635)

48

Net Adjustment to Allowable Costs

$===::11:1(5!1!:!8:!:::!7::,1::)

Finding No. 6

Allocationsfrom Home Office

The provider wa:s a component of a chain organization for the year ended June 30, 1995. As a result ofour audit of the home office cost report filed in connection with the Medicaid Nursing Home Facilities Program, we recommended that the Department ofMedical 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 Administrative and General Pooled Costs Allocation Statistics Administrative Expenses Property and Related Expenses Allocation Statistics

$ (4,905) 412 $

(4,493) (55)

Total Adjustment to Allowable Costs

$==='==4!:!:!5=4~8==)

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Nursing Facilities Services Program

Finding No. 7

Insurance Expense

Documentation examined during the audit showed that the provider, its home office and other chain components were insured against certain losses under common policies. The costs of these policies were allocated among all of the organizations receiving the coverage; however, the allocations were not based on the cost attributable to each organization. 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 chain components implement policies and procedures to ensure that costs are appropriately allocated among the organizations benefitting from those costs. We recommend that the Department of Medical Assistance make the following adjustment to correct the allocation of insurance costs among the home office and its chain components.
(HCFAPub. 15-1 Section2304)

COST CENTER Administrative and General Property and Related Expenses

$

(2,869)

(674)

Total Adjustment to Allowable Costs

$.====!c!:(3!:t::5=:::::4:!::=3::1!::)

1995 Audit Report: Gray Nursing Home

9

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

I

Incorrect Expense Classifications

2

Liabilities Not Liquidated

$

611

(627) $

Dietary

2

Liabilities Not Liquidated

3

Lack ofDocumentation

$

(55)

(613)

Operation and Maintenance ofPlant

I

Incorrect Expense Classifications

$

(611)

2

Liabilities Not Liquidated

(97)

4

Costs Not Related to Patient Care

(2,002)

5

Fixed Asset Purchases .Claimed as Expense

(635)

Administrative and General

2

Liabilities Not Liquidated

3

Lack of Sufficient Documentation

4

Costs Not Related to Patient Care

6

Allocations from Home Office

7

Insurance Expense

$

(1,737)

(1,142)

(307)

(4,493)

(2l869)

(16) (668) (3,345) (10,548)

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Nursing Facilities Services Program

FINDING NUMBER

ALLOWABLE COSTS

Property and Related Expenses

4

Costs Not Related to Patient Care

$

(1,938)

5

Fixed Asset Purchases Claimed as Expense

48

6

Allocations from Home Office

(55)

7

Insurance Expense

(674)

Total Audit Findings Affecting Allowable Costs

$=======(1=7=1,=96=)

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS Ii

UI

= >
Q.

COST REPORT

NATT AUDIT

FIELD AUDIT

AUDITED

Ir

TOTALS FINDINGS ill FINDINGS TOTALS

ALLOWABLE COSTS

Routine Services

$ 630,678 $

(479) $

(16) $ 630,183

Special Services

50,182

50,182

Dietary Laundry and Housekeeping Operation and Maintenance of Plant

182,635 105,680 107,526

(668)

181,967

105,680

Ii

(3,345)

104,181

Administrative and General

246,243

(10,548)

235,695

Property and Related Expenses

104,195

(2,619)

101,576

Total Allowable Costs

$ 1,427,139 $

(479) $ (17,196) $ 1,409,464

PATIENT DAY STATISTICS

20!768

20!768

(1) A Nurse Aide Testing and Training (NATT) audit ofthe provider was performed before this field audit. The results of the NATT audit are included in this column for informational purposes.
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