Audit report, for the year ended June 30, 1995, Kentwood Nursing Home, Medicaid provider no. 00143426A, Nursing Facilities Services Program

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DEPARTMENT OF AUDITS
Medicaid and Local Government Audits

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AUDITREPORT

FOR THE YEAR ENDED JUNE JO, 1995

. KENTWOOD NURSING HOME

MEDICAID PROVIDER NUMBER 00143426A .. NURSING FACILITIES SERVICES PROGRAM

TABLE OF CONTENTS
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FINDINGS AND RECOMMENDATIONS ................... 3
Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 7 Schedule of Allowable Costs and Patient Day Statistics 9

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
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535
April 24, 1996

Members of the Board of+ Medical Assistance, and The Honorable Marge Smith, Commissioner Department ofMedical Assistance 2 Peachtree Street, N.W., Suite 27-100 Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit of Kentwood Nursing Home, provider number 00143426A, 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,
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Claude L. Vickers State Auditor
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1995 Audit Report: Kentwood Nursing Home

1

INTRODUCTION

Provider Information

Kentwood Nursing Home is a 60-bed long-term health care facility located in Augusta, Georgia. The facility provides both skilled and intermediate care services to resident patients. The facility was owned by and operated as a component of University Extended Care, Inc., a chain organization which filed a Home Office Cost Report with OMA for the year ended June 30, 1995.

Audit Objectives

The purpose of this audit was to determine whether Kentwood Nursing Home, a provider enrolled in the Georgia Medicaid Nursing Facilities Services (NFS) Program, 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 Kentwood Nursing Home complied with the federal and state laws, regulations, policies and procedures for the NFS 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;

2
Scope and Methodology

Nursing Facilities Services Program



determine if patient day statistics included in the cost

report are accurately reported; and



recommend appropriate action based on the results of

our audit.

To accomplish these objectives, 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 performed a limited review of the provider's internal control structure to the extent necessary to plan our audit. 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.

1995 Audit Report: Kentwood Nursing Home

3

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 Employee Benefits Special Services Dietary Supplements Employee Benefits Medical Records Dietary Employee Benefits Dietary Supplements Repairs Laundry and Housekeeping Employee Benefits Operation and Maintenance ofPlant Employee Benefits Repairs Administrative and General Automobile Insurance Automobile Taxes Employee Benefits Medical Records Repairs

$

$

(888)

36

(2,405)

$

112

888

(100)

$

14

311

$ (3,583) (450)
(1,149) 2,405 (211)

925 (3,257)
900 62
325
(2,988)

4

Nursing Facilities Services Program

Property and Related Expenses Automobile Insurance Automobile Taxes
Net Adjustment to Allowable Costs

$

3,583

450

4 033

$=======

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

COST CENTER Operation and Maintenance of Plant

$==:::::::!l:(~2~2!!::!:6~8=)

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 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 2102.3, 2102.1)

1995 Audit Report: Kentwood Nursing Home

5

ITEMS Late Fees Sales Tax
COST CENTER Administrative and General Property and Related Expenses Total Adjustment to Allowable Costs

$

(110)

(649)

$_ _____.(..;_75;;..;;9_,_)

$

(649)

(110)

$'====='=7!::::59==)

Finding No. 4

Cost Report Adjustment Reversal

An adjustment for $1, 162 was made during cost report preparation to remove nonallowable dues. Documentation examined during the audit showed that the correct amount of non-allowable dues was actually $907. 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 adjustments made during cost report preparation are accurate. We recommend that the Department of Medical Assistance make the following adjustment to reverse a portion of the provider adjustment.
(HCFAPub. 15-1 Section2304)

COST CENTER Administrative and General

$===~2===55==

Finding No. 5

Excess Vehicles
Documentation examined during the audit showed that expenses were claimed for two vehicles for the year under review. DMA guidelines allow a maximum of one vehicle for nursing homes of the size operated by the provider. We recommend that the provider implement policies and procedures to ensure that any costs incurred

6

Nursing Facilities Services Program

operating vehicles in excess of the maximum number allowable are excluded from reimbursable costs claimed. We recommend that the Department of Medical Assistance make' the following adjustment to reduce allowable costs claimed for the insurance, leases, and taxes of vehicles operated in excess of the maximum number allowable.
(DMA Vehicle Guidelines)

COST CENTER Property and Related Expenses Insurance Lease Taxes
Total Adjustment to Allowable Costs

$

(551)

(2,608)

(178)

$===(3~33~7==)

Finding No. 6

Assets Leasedfrom Related Party

Documentation examined during the audit showed that land, buildings, and/or equipment used in health care operations were leased from a related party. Federal regulations provide that reimbursement to a provider leasing facilities or equipment from a related organization is limited to the costs of ownership of the leased assets. We recommend that the provider implement policies and procedures to ensure that reimbursable costs claimed for assets leased from a related party are limited to the costs of ownership. We recommend that the Department of Medical Assistance make the following adjustment to decrease allowable costs to the cost to the related party.
(HCFA Pub. 15-1 Sections 1011.5, 1212)

COST CENTER Property and Related Expenses Related Party Expenses Depreciation/Amortization

$.====':!::7~6=7~5=)

1995 Audit Report: Kentwood Nursing Home

7

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1

Incorrect Expense Classifications

$

Special Services

I

Incorrect Expense Classifications

Dietary

1

Incorrect Expense Classifications

Laundry and Housekeeping

1

Incorrect Expense Classifications

Operation and Maintenance o{Plant

1

Incorrect Expense Classifications

2

Expense Reimbursements

$

325

(2,268)

Administrative and General

1

Incorrect Expense Classifications

3

Costs Not Related to Patient Care

4

Cost Report Adjustment Reversal

$

(2,988)

(649)

255

925 (3,257)
900 62
(1,943)
(3,382)

8

Nursing Facilities Services Program

FINDING NUMBER

ALLOWABLE COSTS

Property and Related Expenses

1

Incorrect Expense Classifications

3

Costs Not Related to Patient Care

5

Excess Vehicles

6

AssetsLeased from Related Party

$

4,033

(110)

(3,337)

(7,675)

(7,089)

Total Audit Findings Affecting Allowable Costs

$=====(1=3==7,:::::::84=)

1995 Audit Report: Kentwood Nursing Home

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

AUDIT FINDINGS

AUDITED TOTALS

$ 1,214,020 $ 135,915 260,589 102,357 94,529 243,817 72,787

925 $ (3,257)
900 62
(1,943) (3,382) (7,089)

1,214,945 132,658 261,489 102,419 92,586 240,435 65,698

Total Allowable Costs

$ 2,124,014 $ (13,784) $ 2,110,230

PATIENT DAY STATISTICS

21,326

21,326