Audit report, for the year ended June 30, 1996, Heardmont Nursing Home, Medicaid provider no. 00082981A, Nursing Facilities Services Program [June 30, 1996]

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Audits

TABLE OF CONTENTS

LETTER OF TRANSMITTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .. i

INTRODUCTION

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 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
lITATE 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

March 21, 1997

Members of the 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, provider number 00082981A, 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,

CLV/yklby

Claude L. Vickers State Auditor

1996 Audit Report: Heardmont 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 and Accounts has accepted the responsibility of auditing Medicaid providers.

Provider Information

Heardmont Nursing Home, 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 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 Heardmont 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, 1996; and to determine whether Heardmont 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.

1996 Audit Report: Heardmont 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 DMA Policies and Procedures/or Nursing Facility Services.
The Department of Audits and Accounts is responsible for providing the Department ofMedical Assistance with information regarding the accuracy of cost and patient data for Heardmont Nursing Home 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

Finding No.1

FINDINGS AND RECOMMENDATIONS

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 Membership Fees Supplies Special Services Advertising Supplies Dietary Dietary Supplements Education Expense Supplies Laundry and Housekeeping Supplies Operation and Maintenance ofPlant Lease Expense Membership Fees Supplies Administrative and General Advertising Education Expense Insurance Expense Membership Fees Supplies

$ (5,589) (808) (210) $

$

(34)

(14)

$

5,589

(50)

(2,459)

$

(134)

(684)

177

$

34

50

1,221

1,492

234

(6,607) (48)
3,080 2,289 (641)
3,031

1996 Audit Report: Heardmont Nursing Home

5

Property and Related Expenses Insurance Expense Lease Expense
Total Adjustment to Allowable Costs

$ (1,221) 117 .

(1,104)

$,====o~

Finding No.2

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 make the following adjustment to decrease allowable costs claimed for expenses not applicable to the year under review.
(HCFAPub. 15-1 Section 2302.1)

Adjustments to Balance Sheet Accounts:

Allowable Costs

June 30, 1995 Balance Prepaid Insurance

$===(:::]~64:!::::5=)

COST CENTER Routine Services Special Services Dietary Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General
Total Adjustment to Allowable Costs

$

(1,080)

(86)

(233)

(184)

(47)

(15)

$===(!d]=6!6:4~5=)

6

Nursing Facilities Services Program

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 expens~s 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.lS-l Sections 2102.1, 2102.3, 2130)

ITEMS Health Insurance Premiums for Non-Employees Officers' Life Insurance Premiums Penalties Travel Expense ofNon-Employees

$

(6,710)

(3,653)

(809)

(145)

$ (J1317)

COST CENTER Routine Services Dietary Operation and Maintenance of Plant Administrative and General
Total Adjustment to Allowable Costs

$

(5,071)

(851)

(847)

(4,548)

$==:!=(J!::!1~3==1!::!7=)

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

1996 Audit Report: Heardmont Nursing Home

7

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.
(ReFA Pub. 15-1 Section 2304)

COST CENTER Routine Services Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General

$

(7,865)

(987)

(1,502)

(710)

Total Adjustment to Allowable Costs

$====::!(c:]::=.1:=06!:!::4!:::)

Finding No.5

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

8

Nursing Facilities Services Program

Position Title

Total

Guideline

Compensation Ceiling (A)

Excess

Office Supervisor Payroll Taxes
Directors(4) Payroll Taxes

$

15,954 $ 10,843 $

(5,111)

1,220

829

(391)

39,548

6,120

(33,428)

2,428

0

(2,428)

$

59 150 $ 17792 $

(41 358)

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

COST CENTER Administrative and General

$'=~(.i!:4=1 ~35~8!:.!:)

Finding No.6

Patient Day Statistics
Census records examined during the audit showed that the nursing home had 21,839 patient days of service rather than the 21,830 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 9 days to correct the statistical information.
(HCFA Pub. 15-1 Section 2304)

1996 Audit Report: Heardmont Nursing Home

9

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

10

Nursing Facilities Services Program

FINDING NUMBER

ALLOWABLE COSTS

Administrative and General

1

Incorrect Expense Classifications

2

Accrual Basis of Accounting

3

Costs Not Related to Patient Care

4

Lack of Sufficient Documentation

5

Excess Compensation

$

3,031

(15)

(4,548)

(710)

(41,358)

(43,600)

Property and Related Expenses

1

Incorrect Expense Classifications

(1,104)

Total Audit Findings Affecting Allowable Costs

$======(6:=5=,3=84:=)

PATIENT DAY STATISTICS

6 Increase in Patient Day Statistics

9

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

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

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

$ 613,176 $ (20,623) $ 592,553

62,223

(134)

62,089

187,697

1,996

189,693

102,087

1,118

103,205

77,374

(3,037)

74,337

141,669

(43,600)

98,069

18,270

(1,104)

17,166

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Total Allowable Costs

$ 1,202,496 $ (65,384) $ '1,137,112

PATIENT DAY STATISTICS

21,830

9

21,839

........