Audit report, for the year ended June 30, 1996, Jesup Rest A-While Nursing Home, Medicaid provider no. 00142689A, Nursing Facilities Services Program

GA

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J~-i DEPARTMENT OF AUDITS AND ACCOUNTS

Medicaid and Local-Government Audits

AUD1TREPO-RT
FOR THE YEAR ENDED JUNE 30, 1996
.JEsup REST A-WHILE NURSING HOME
MEDICAIDJ?ROVIDER NUMBER 00142_689A -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 14

Schedule of Allowable Costs and Patient Day Statistics 16

16

Nursing Facilities Services Program

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

ALLOWABLE COSTS

Routine Services

$ 610,910 $ (13,176) $ 597,734

Special Services

109,653

(10,278)

99,375

Dietary

194,681

(17,270)

177,411

Laundry and Housekeeping

147,096

(9,582)

137,514

Operation and Maintenance ofPlant

73,050

(2,962)

70,088

Administrative and General

263,632

(76,727)

186,905

Property and Related Expenses

97,564

27,303

124,867

Total Allowable Costs

$ 1,496,586 $ (102,692) $ 1,393,894

PATIENT DAY STATISTICS

23,120

(35)

23,085

:

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

August 7, 1997

Members of the Board of Medical 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 Jesup Rest A-While Nursing Home, provider number 00142689A, 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.
Rea:~
Claude L. Vickers State Auditor
CLV/rh/by

1996 Audit Report: Jesup Rest A-While 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 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 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

Jesup Rest A-While Nursing Home, a 72-bed long-term health care facility located in Jesup, Georgia, is a provider emolled 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 owned by HCP III Jesup, Inc., and operated as a component of Premiere Associates Management Company, a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1996.

The purpose of this audit was to determine whether Jesup Rest A-While 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 Jesup Rest A-While 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: Jesup Rest A-While Nursing Home

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 Jesup Rest A-While 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

FINDINGS AND RECOMMENDATIONS

Finding No.1

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 Routine Services Special Services Dietary Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General

$

(1,613)

(5,484)

(16,644)

(2,439)

(2,378)

(3,831)

Total Adjustment to Allowable Costs

$===(3=2=,3=89=)

Finding No.2

Expense Reimbursements
Documentation examined during the audit showed that amounts shown on the cost report as revenues were from sales of materials and/or services, the cost of which were included in allowable costs claimed. Federal regulations provide that amounts received for discounts, allowances, refunds and rebates are not to be considered a form of income but should be used to reduce the specific costs to which they apply. We recommend that the provider implement policies and procedures to ensure that

1996 Audit Report: Jesup Rest A-While Nursing Home

5

allowable costs claimed are reduced by any expense reimbursements received. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs claimed by expense reimbursements shown as revenues.
(HCFA Pub. 15-1 Sections 800, 809)

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

$

(2,474)

(861)

(282)

(7,143)

(64)

(283)

Total Adjustment to Allowable Costs

$.====(1=1=,1=07=)

Finding No.3

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.
(HCFA Pub. 15-1 Section 2302.1)

Adjustments to Balance Sheet Accounts:

Allowable Costs

June 30, 1995 Balance Accounts Payable

$,==~(5:a:;;;,0~08~)

6

Nursing Facilities Services Program

June 30, 1996 Balance Accounts Payable
Total Adjustment to Allowable Costs
COST CENTER Routine Services Special Services Dietary Operations and Maintenance of Plant Administrative and General
Total Adjustment to Allowable Costs

$

(4,206)

$

(9,214)

$

(2,384)

(5,165)

(344)

(78)

(1,243)

$

(9,214)

Finding No.4

Liabilities Not Liquidated
Liabilities shown on Schedule C of the cost report for June 30, 1995, included amounts which had not been paid at June 30, 1996. In addition, liabilities shown on Schedule C of the cost report for June 30, 1996, included amounts the provider decided not to pay in the subsequent year. 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 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)

1996 Audit Report: Jesup Rest A-While Nursing Home

7

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

$

(369)

(140)

(508)

(11,486)

$=====(1:=2:=,5==:03=)

Finding No.5

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 Office Supplies Ward Clerk Salaries and Benefits Operation and Maintenance of Plant Repairs Travel Administrative and General General Liability Insurance Expense Leasehold Guarantee Expense Office Supplies Repairs Travel Ward Clerk Salaries and Benefits

$

(137)

(5,981) $

$

141

(75)

$

76

(12,643)

137

(141)

75

5,981

(6,118) 66
(6,515)

8

Nursing Facilities Services Program

Property and Related Expenses

General Liability Insurance Expense $

(76)

Leasehold Guarantee Expense

12,643

12,567

Total Adjustment to Allowable Costs

$====0=

Finding No.6

Related Party Costs

Documentation examined during the audit showed that the provider paid for services obtained 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 of Medical Assistance make the following adjustment to reduce allowable costs to the related party's cost.
(HCFA Pub. 15-1 Section 1000)

COST CENTER Routine Services Special Services

$

(218)

(22,482)

Total Adjustment to Allowable Costs

$=====(2=::2=,7=00:::)

Finding No.7

Recalculation ofAncillary Services Cost Adjustment
The provider received revenues from the sale of ancillary services to patients; therefore, allowable costs for special services are limited to the maximum allowable cost calculated on Schedule B-1A ofthe cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on' Schedule B-1 A as total cost per books, total charges, Medicaid charges, total patient

1996 Audit Report: Jesup Rest A-While Nursing Home

9

days, and Medicaid patie~t days. These findings required the recalculation of Schedule B-IA. A copy ofthis recalculation has been furnished to the provider. We recommend that the provider implement policies and procedures to ensure that all information used to calculate the ancillary services cost adjustment 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.
(General Instructions to the Cost Report)

Ancillary Services

Adjustment Per Cost Report

Recalculated Adjustment Audit Finding

Physical Therapy Pharmacy Speech Therapy Occupational Therapy Medical Supplies

$ (103,061) $ (90,543) $

(11,373)

(5,964)

(1,496)

0

(96,162)

(91,966)

(944)

(709)

12,518 5,409 1,496 4,196
235

$ (213,036) $ 089,182) $

23,854

COST CENTER Special Services

$===2:=3,=85:::4=

Finding No.8

Allocations from Home Office
The provider was a component of a chain organization for the year ended June 30, 1996. As a result of our audit of the home office cost report filed in connection with the Medicaid Nursing Home Facilities Program, we recommended that the Department of Medical 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)

10

Nursing Facilities Services Program

COST CENTER Administrative and General Functionally Allocated Costs Pooled Costs Allocation Statistics Administrative Expenses Non-Capital Related Interest Expense Property and Related Expenses Pooled Capital Related Interest Expense
Total Adjustment to Allowable Costs

$ 15,956
(1,043) (1,512)
(9,539) $

3,862

7,593 $======1:=1=.4:=55=

Finding No.9

Home Office Costs Paid by Chain Component

Allowable costs claimed by this component ofa chain organization included amounts incurred for the benefit of the entire chain. Federal regulations provide that allowable costs incurred for the benefit of, or directly attributable to, a specific provider must be allocated directly to the chain entity for which they were incurred; however, federal regulations also provide that allowable costs that have not been directly assigned to specific chain components must be allocated among the providers on a basis to equitably allocate the costs over the chain components or activities receiving the benefits of the costs. We recommend that the provider and its home office implement policies and procedures to ensure that costs incurred for the benefit of the entire chain organization are included in home office allowable costs rather than in the provider's allowable costs. We recommend that the Department of Medical Assistance make the following adjustment to remove the costs benefiting the entire chain from this provider's allowable costs.
(HCFA Pub. 15-1 Section 2150.3)

COST CENTER Administrative and General

$

(33,537)\

1996 Audit Report: Jesup Rest A-While Nursing Home

11

Finding No. 10

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 219, 2102.1, 2102.3, 2139; DMA Policies and Procedures Section 1002.1(k))

ITEMS Insurance Expense Applicable to Related Facility Loss on Sale of Receivables Political Action Committee Contribution

$

(279)

(23,336)

(79)

$ (23,694)

COST CENTER Administrative and General

$,=~(2~3~,6::f,;94~)

Finding No.1]

Cost Report Adjustment Reversal
An adjustment was made during cost report preparation to offset the gain from the sale of fixed assets against allowable costs. Documentation examined during the audit showed that the amount recorded as income was actually rental income from suppliers. Federal regulations provide that amounts paid by a supplier for use of equipment constitute a form of discount. Federal regulations also provide that amounts received for discounts, allowances, refunds and rebates are not to be considered a form of income but should be used to reduce the specific costs to which they apply. The rental income from suppliers adually earned during the period has

12

Nursing Facilities Services Program

been included in the adjustment recommended in Finding No.2. In addition, 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 adjustments made during cost report preparation are accurate. We recommend that the Department of Medical Assistance make the following adjustment to reverse a portion ofthe provider adjustment.
(HCFA Pub. 15-1 Section 2304)

COST CENTER Property and Related Expenses

$,===7=:,1:::::::43=

Finding No. 12

Patient Day Statistics
Census records examined during the audit showed that the nursing home had 23,085 patient days of service rather than the 23,120 shown on the cost report. 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 accumulate accurate patient day statistics. We recommend that the Department of Medical Assistance make the adjustment of 35 days to correct the statistical infonnation.
(HCFA Pub. 15-1 Section 2304)

Finding No. 13

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 $607.78 shown in the following table represents overpayments from the

1996 Audit Report: Jesup Rest A-While Nursing Home

13

Department of Medical Assistance that had not been resolved as of April 30, 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
Barnum, Johnnie Weaver, Millard
Total

Balance

$

271.68

336.10

$===6=0:::::7.=78=

Finding No. 14

Interest on Patient Trust Funds Not Properly Credited
Documentation examined during the audit showed that the provider manages funds belonging to its patients. This documentation also showed that the interest income earned on the patient trust funds was not allocated among the residents participating in the fund. Federallaw requires that the interest earned on residents' personal funds be credited to the residents' accounts. We recommend that the provider implement policies and procedures to ensure that interest earned on patients' personal funds is allocated to their accounts. We also recommend that the Department of Medical Assistance ensure that the provider allocates the interest earned on residents' personal fund to the patients' individual accounts.
(42 CFR 483.10C(3)(I))

14

Nursing Facilities Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1

Lack of Sufficient Documentation

2

Expense Reimbursements

3

Accrual Basis of Accounting

4

Liabilities Not Liquidated

5

Incorrect Expense Classifications

6

. Related Party Costs

$

(1,613)

(2,474)

(2,384)

(369)

(6,118)

(218) $

Special Services

1

Lack of Sufficient Documentation

$

(5,484)

2

Expense Reimbursements

(861)

3

Accrual Basis ofAccounting

(5,165)

4

Liabilities Not Liquidated

(140)

6

Related Party Costs

(22,482)

7

Recalculation of Ancillary Services Cost

Adjustment

23,854

Dietary

1

Lack of Sufficient Documentation

2

Expense Reimbursements

3

Accrual Basis of Accounting

$ (16,644) (282) (344)

Laundry and Housekeeping

1

Lack of Sufficient Documentation

2

Expense Reimbursements

$

(2,439)

(7,143)

(13,176)
(10,278) (17,270)
(9,582)

1996 Audit Report: Jesup Rest A-While Nursing Home

15

FINDING NUMBER

ALLOWABLE COSTS

Operation and Maintenance ofPlant

1

Lack of Sufficient Documentation

2

Expense Reimbursements

3

Accrual Basis of Accounting

4

Liabilities Not Liquidated

5

Incorrect Expense Classifications

$

(2,378)

(64)

(78)

(508)

66

(2,962)

Administrative and General

1

Lack of Sufficient Documentation

$

(3,831)

2

Expense Reimbursements

(283)

3

Accrual Basis of Accounting

(1,243)

4

Liabilities Not Liquidated

(11,486)

5

Incorrect Expense Classifications

(6,515)

8

Allocations from Home Office

3,862

9

Home Office Costs Paid by Chain Component

(33,537)

10

Costs Not Related to Patient Care

(23,694)

(76,727)

Property and Related Expenses

5

Incorrect Expense Classifications

8

Allocations from Home Office

11

Cost Report Adjustment Reversal

$

12,567

7,593

7,143

27,303

Total Audit Findings Affecting Allowable Costs

$ (102,692)

PATIENT DAY STATISTICS

12 Decrease in Patient Day Statistics

(35)