DEPAR1MENT QFAUDITSAND ACCOUNTS iMedicaidandLocal Government 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 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 12, 1997 Members of the Board ofMedical Assistance, and The Honorable Dr. William R. Taylor, 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 ofImperial Health Care Center, Inc., provider number 00256088A, 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/mn/bw Claude L. Vickers State Auditor 1996 Audit Report: Imperial Health 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 of Georgia 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 ofMedical 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 Imperial Health Care Center, Inc., a 120-bed long-term health care facility located in Atlanta, 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, 1996. The purpose of this audit was to determine whether Imperial Health 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 Imperial Health 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: Imperial Health Care Center, Inc. 3 Scope and Methodology To accomplish these objectives, we performed a limited review ofthe 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 of cost and patient data for Imperial Health 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 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 Linen Expense Medical Record Forms Supplies Expense Special Services Salaries and Employee Benefits Expense Dietary Dietary Supplements Laundry and Housekeeping Linen Expense Operation and Maintenance of Plant Supplies Expense Administrative and General Insurance Expense Investment Income Offset Lease Expense Medical Record Forms Phone System Lease Salaries and Employee Benefits Expense Supplies Expense $ (26,521) (848) (305) 300 $ (27,374) $ 11,044 79 (1,867) 305 2,498 4,501 1,482 (4,501) 26,521 848 (1,782) 18,042 1996 Audit Report: Imperial Health Care Center, Inc. 5 Property and Related Expenses Insurance Expense Investment Income Offset Lease Expense Phone System Lease Total Adjustment to Allowable Costs (11,044) (79) 1,867 (2,498) (11,754) $'===::::::l0f::: 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.15-1 Sections 2102.1,2102.3,; DMA Policies and Procedures Sections 902, 1002.1(k)) ITEMS Donation Late Charges Personal Purchases Personal Use of Vehicle Prescription Drugs $ (2,000) (1,334) (1,737) (11,843) (2,286) $ (19,200) COST CENTER Routine Services Administrative and General Property and Related Expenses Total Adjustment to Allowable Costs $ (2,678) (5,612) (10,910) $=:::::::::!:::(1~9==,2==00:f:) 6 Nursing Facilities Services Program Finding No.3 Nurse Aide Testing and Training Costs Documentation examined during the audit showed that the provider did not remove nurse aide testing and training costs from allowable costs claimed as required by the Department of Medical Assistance in General Instructions to Cost Report. We recommend that the provider implement policies and procedures to ensure that nurse aide testing and training costs are not included in allowable costs. We recommend that the Department of Medical Assistance make the following adjustment to decrease allowable costs by the amount of nurse aide testing and training costs. (DMA General Instructions to Cost Report) COST CENTER Routine Services $==(:=3=,1=82=:) Finding No.4 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 Special Services Cost of Minor Equipment Dietary Cost of Minor Equipment Operation and Maintenance of Plant Cost of Leasehold Improvements Cost of Major Moveable Equipment $ $ (52,650) (1,401) (678) (758) (54,051) 1996 Audit Report: Imperial Health Care Center, Inc. 7 Property and Related Expenses Allowable Depreciation Expense Total Adjustment to Allowable Costs 3,811 $===(5=1=,6=76=) Finding No.5 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 Operation and Maintenance of Plant Administrative and General Property and Related Expenses $ (68) (1,962) (5,016) (534) Total Adjustment to Allowable Costs $===(=7,=58=0==) Finding No.6 Office Audit Adjustment Reversal An adjustment was made during the office audit to decrease depreciation expense. Documentation examined during the audit showed that depreciation expense should have been added for assets capitalized in the 1995 audit. Another adjustment was made during the office audit to add expense removed in the prior year audit as subsequent period expense. However, that prior year adjustment was reversed on 8 Nursing Facilities Services Program appeal. An adjustment will be made to reverse the office audit adjustment. We recommend that the Department of Medical Assistance make the following adjustment to reverse the office audit adjustments. COST CENTER Administrative and General Property and Related Expenses Total Adjustment to Allowable Costs (906) $- - - -12-2 $===(=7:::84=:) Finding No.7 Prior Year Audit Adjustments Documentation examined during the audit showed that adjustments made to the prior year allowable costs that affected current year costs were not reflected in the cost report for the period under review. We recommend that the provider implement policies and procedures to ensure that adjustments made to prior year allowable costs are considered in preparing future year cost reports. We recommend that the Department of Medical Assistance make the following adjustment to increase allowable costs for the effect ofthose prior year audit adjustments. ITEM Depreciation Expense - Asset Capitalized in Prior Year Audit $=======12=2= COST CENTER Property and Related Expenses $=======1=22= Finding No.8 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. 1996 Audit Report: Imperial Health Care Center, Inc. 9 The $2,196.08 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 Anderson, Joe Bartcliff, William Dawson, Levi Gatewood, Lucile Pitts, Lillian Pye, Rosa Warner, Gertie Zanders, Emma Total Balance $ 441.72 15.38 960.40 164.24 21.00 21.00 57.00 515.34 $ 2,196.08 Finding No.9 Patient Trust Fund Not in Balance 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 $23,184.82; patient trust fund liabilities were $25,471.12. 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. A similar shortage was noted during the audit of the provider's cost report for the years ended June 30, 1993, and June 30, 1995. As of the date of this audit no effort has been made to reconcile the patient trust fund or to 10 Nursing Facilities Services Program reimburse the shortage. 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 ofMedical Assistance notify the provider that they must reimburse the shortage in the patient trust fund and implement policies and procedures necessary to maintain a balanced, reconciled patient trust fund and that failure to do so could result in referral of this matter to the State Health Care Fraud Control Unit for possible criminal and/or civil action. (42 CFR 483.10C(4) Patient Trust Funds Not in Interest Bearing Account Finding No. 10 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 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 interest-bearing account. (42 CFR 483.10C(3)(I 1996 Audit Report: Imperial Health 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 $ (27,374) 2 Costs Not Related to Patient Care (2,678) 3 Nurse Aide Testing and Training Costs (3,182) $ Special Services 1 Incorrect Expense Classifications $ (4,501) 4 Fixed Asset Purchases Claimed as Expense (678) Dietary 1 Incorrect Expense Classifications $ 26,521 4 Fixed Asset Purchases Claimed as Expense (758) 5 Lack of Sufficient Documentation (68) Laundry and Housekeeping 1 Incorrect Expense Classifications Operations and Maintenance 1 Incorrect Expense Classifications $ (1,782) 4 Fixed Asset Purchases Claimed as Expense (54,051) 5 Lack of Sufficient Documentation (1,962) (33,234) (5,179) 25,695 848 (57,795) 12 Nursing Facilities Services Program FINDING NUMBER ALLOWABLE COSTS Administrative and General 1 Incorrect Expense Classifications 2 Costs Not Related to Patient Care 5 Lack of Sufficient Documentation 6 Office Audit Adjustment Reversal $ 18,042 (5,612) (5,016) (906) 6,508 Property and Related Expenses 1 Incorrect Expense Classifications $ (11,754) 2 Costs Not Related to Patient Care (10,910) 4 Fixed Asset Purchases Claimed as Expense 3,811 5 Lack of Sufficient Documentation (534) 6 Office Audit Adjustment Reversal 122 7 Prior Year Audit Adjustments 122 (19,143) Total Audit Findings Affecting Allowable Costs $====(8=2=,3=00=) SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS -tM COST REPORT TOTALS OFFICE AUDIT FINDINGS (1) FIELD AUDIT FINDINGS AUDITED TOTALS ALLOWABLE COSTS Routine Services $ 1,423,348 $ (10,813) $ (33,234) $ 1,379,301 Special Services 128,295 (210) (5,179) 122,906 Dietary 317,272 (623) 25,695 342,344 Laundry and Housekeeping 319,709 (969) 848 319,588 Operation and Maintenance of Plant 273,693 (198) (57,795) 215,700 Administrative and General 347,836 (11,022) 6,508 343,322 Property and Related Expenses 213,249 (21,955) (19,143) 172,151 :=..z, S{Il IJCl Total Allowable Costs $ 3,023,402 $ (45,790) $ (82,300) $ 2,895,312 -~ .n...=............ ('ll {Il 00 PATIENT DAY STATISTICS 43,284 43,284 _.('ll :! n ('ll {Il (1) 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. .~ ., ..,o IJCl a=