Audit report, for the year ended June 30, 1995, Heardmont Nursing Home, Inc., Medicaid provider no. 00082981A, Nursing Facilities Services Program [June 30, 1995]

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Medicaid and Local GovernmenfAudits

AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 1995 -- HEARDMONTNURSINGHOME, INC.
.MEDICAID PROVIDER NUMBER.00082981A NURSING FACILITIES SER~CES PROGMM .

TABLE OF CONTENTS
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
IN'TRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FINDIN'GS AND RECOMMENDATIONS ................... 4 Summary of Audit Findings Affecting Allowable Costs and Pa~ient Day Statistics 10 Schedule of Allowable Costs and Patient Day Statistics 12

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
srAn: AUDnoR

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

January 9, 1997

Members ofthe Board of Medical Assistance, and The Honorable Marge Smith, Commissioner Department ofMedical Assistance 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit of Heardmont Nursing Home, Inc., provider number 00082981A, 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 ofthe Georgia Department ofMedical Assistance Nursing Facilities Services Program and is not to be used or relied upon for any other purpose.

CLV/rr/by

R ~ Submitted;.-a,~~:.,,c,,..,
4
Claude L. Vickers State Auditor

1995 Audit Report: Heardmont Nursing Home, Inc.

1

INTRODUCTION

General lnformati.on

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 Medic~ 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

Heardmont Nursing Home, Inc., a 60-bed long-term health care facility located in Elberton, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facilities Services Program. The facility provides both skilled and intermediate care services to resident

2

Nursing Facilities Services Program

Audit Objectives

patients. The facility was operated as a freestanding nursing home for the year ended June 30, 1995.

The purpose of this audit was to determine whether Heardmont Nursing Home, 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, 1995; and to determine whether Heardmont Nursing Home, 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 ofthis 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: Heardmont Nursing Home, Inc.

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 DMA Policies and Procedures for Nursing Facility Services.
The Department of Audits and Accounts is responsible for providing the Department ofMedical Assistance with information regarding the accuracy ofcost and patient data for Heardmont Nursing Home, Inc., 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.

4

Nursing Facilities Services Program

FINDINGS AND RECOMMENDATIONS

Finding No. I

Incorrect Expense Classifications

Documentation examined during the audit showed that some ofthe expenses were not classified in accordance with the Uniform Chart of Accounts prescribed by the Department ofMedical 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 Dietary Supplements Dietary Supplies Employee Physical Linen
Spe~ial Services Calculator Medical Records Consultant
Dietary Dietary Supplements Dietary Supplies Employee Physical Laundry Supplies
Laundry and Housekeeping Dietary Supplies Laundry Supplies Linen
Operation and Maintenance ofPlant Copier Lease Telephone

$ (28,927) (153) 38
(21 182) $

$

(53)

(3~000)

$ 28,927
730
45
p 1900l

$

(577)

1,978

21182

$ (1,425) (256)

(31,224) (3,053)
27,802 3,583 (1,68 I)

1995 Audit Report: Heardmont Nursing Home, Inc.

5

Administrative and General Calculator Copier Lease Employee Physical Laundry Supplies Medical Records Consultant Mortgage Interest Property Insurance Telephone
Property and Related Expenses Copier Lease Mortgage Interest Property Insurance
Total Adjustment to Allowable Costs

$

53

(809)

(83)

(78)

3,000

(330)

1,008

256

$

2,234

330

(1,008)

$

3,017
1 556
Q

Finding No.2

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. IS-I Sections 2102.3, 2102.1, 804, 2122.2, 2130)

ITEMS Forfeited Discounts Life Insurance Premiums Overdraft Fees

$

(73)

(3,518)

(75)

$==='"=3::t::!6~62:6:,c}

6

Nursing Facilities Services Program

COST CENTER Routine Services Administrative and General
Total Adjustment to Allowable Costs

$

(73)

(3,593)

$==~(3=6=:!6!!::=6!:=)

Finding No.3

Related Party Costs

Documentation examined during the audit showed that the provider purchased nursing supplies from related parties. Federal regulations provide that costs applicable to services, facilities, and supplies furnished by related organizations are includable in the allowable costs of the provider at the cost to the related organization. We recommend that the provider implement policies and procedures to ensure that only the costs incurred by the related organization to furnish services, facilities, and supplies are included in allowable costs. We recommend that the Department ofMedical Assistance make the following adjustment to reduce allowable costs to the related party's cost. (HCFA Pub. 15-1 Section I000)

COST CENTER Routine Services

$==='!a::=5!::l:4:!::!!2!!:=!9:::t::)

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 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)

1995 Audit Report: Heardmont Nursing Home, Inc.

7

COST CENTER Dietary Administrative and General
Total Adjustment to Allowable Costs

$

(374)

(499)

$=====(8!1!:=71::!!!3=)

Finding No. 5

Fixed Asset Purchases Claimed as Expense

Allowable costs claimed included purchases of air conditioners which are considered to be capital additions to property under generally accepted accounting principles. The Uniform Chart ofAccounts 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 ofMedical 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; OMA Policies and Procedures, Appendix D)

COST CENTER Laundry and Housekeeping Cost ofMajor Moveable Equipment Property and Related Expenses Allowable Depreciation Expense

$

(4,309)

589

Net Adjustment to Allowable Costs

$===(!.!:3::1:7~2~0=)

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

8

Nursing Facilities Services Program

which they are incurred. We recommend that the Department ofMedical Assistance make the following adjustment to decrease allowable costs claimed for expenses not . applicable to the year under review.
(HCFA Pub. I5- I Section 2302.I )

Adjustments to Balance Sheet Accounts:

Allowable Costs

June 30, 1994 Balance Accounts Payable Notes Payable Prepaid Insurance

$

(143)

(4,630)

{1.555)

$

(6 328)

June 30, 1995 Balance Accounts Payable
Total Adjustment to Allowable Costs

$

(775)

$

<7 103)

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

$

(775)

(4,773)

(1,555)

$

(7 ]03)

Finding No. 7

Excess Compensation
Allowable costs claimed included compensation to employees which exceeded DMA maximum limitations. The Department of Medical Assistance annually calculates allowable salary ceilings for various positions as well as maximum fees allowable for medical and corporate directors. We recommend that the provider implement policies and procedures to ensure that compensation to its employees which exceeds the DMA maximum limitations is excluded from allowable costs claimed. We recommend that

1995 Audit Report: Heardmont Nursing Home, Inc.

9

the Department of Medical Assistance make the following adjustment to reduce allowable costs by the amount ofcompensation paid in excess of the DMA guidelines, plus related employer's share of payroll taxes.
(DMA Compensation Ceilings; HCFA 15-906)

Position Title

Total

Guideline

Compensation Ceiling (A)

Excess

Assistant Administrator Payroll Taxes
Director

$

23,763 $ 15,422 $

(8,341)

1,818

1,180

(638)

21 749

1,530

(20,219)

$ ~2 33Q $ 18 132 $ ,22 128l

(A) Ceilings have been adjusted to percentage of full-time, where applicable.

COST CENTER Administrative and General

$.==~'2~2==12!i:::!18~l

Finding No. 8

Patient Day Statistics .
Census records examined during the audit showed that the nursing home had 21,520 patient days of service rather than the 21,550 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 30 days to correct the statistical information.
(HCFAPub. 15-1 Section2304)

10

Nursing Facilities Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

I

Incorrect Expense Classifications

2

Costs Not Related to Patient Care

3

Related Party Costs

$ (31,224) (73)
(5,429) $

Special Services

I

Incorrect Expense Classifications

Dietary

I

Incorrect Expense Classifications

4

Lack of Sufficient Documentation

$

27,802

(374)

Laundry and Housekeeping

I

Incorrect Expense Classifications

$

3,583

5

Fixed Asset Purchases Claimed as Expense

(4,309)

Operation and Maintenance ofPlant

I

Incorrect Expense Classifications

6

Accrual Basis ofAccounting

$

(1,681)

(775)

(36,726) (3,053) 27,428
(726) (2,456)

1995 Audit Report: Heardmont Nursing Home, Inc.

11

FINDING NUMBER

ALLOWABLE COSTS

Administrative and General

I

Incorrect Expense Classifications

2

Costs Not Related to Patient Care

4

Lack of Sufficient Documentation

6

Accrual Basis of Accounting

7

Excess Compensation

$

3,017

{3,593)

(499)

{4,773)

(29,198)

(35,046)

Property and Related Expenses

1

Incorrect Expense Classifications

$

1,556

5

Fixed Asset Purchases Claimed as Expense

589

6

Accrual Basis of Accounting

{1,555)

590

Total Audit Findings Affecting Allowable Costs

$====(4=9=,9=89=)

PATIENT DAY STATISTICS

Decrease in Patient Day Statistics

(30)

,_

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

N

ALLOWABLE COSTS Routine Services Special Services Dietary Laundry and Housekeeping Operation and Maintenance ofPlant Administrative and General Property and Related Expenses

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

$ 563,925 $ (36,726) $ 527,199

65,061

(3,053)

62,008

169,347

27,428

196,775

79,232

(726)

78,506

91,343

(2,456)

88,~87

118,182

(35,046)

83,136

19,230

590

19,820

~

C

Total Allowable Costs

$ 1, 106,320_ $~ (49,989) $ 1,056,331

,s~

----n
....
tll

PATIENT DAY STATISTICS

21,55_()

(30)

21~520

~
00

tll

:n-!

tll
~

a ~

IQ
a ~