Audit report, for the year ended June 30, 1995, Lakehaven Nursing Home, Inc., Medicaid provider no. 00141721A, Nursing Facilities Services Program

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AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 1995
LAKEHAVEN NURSING HOME, INC.
MEDICAID PROVIDER NUMBER 00141721A 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 8 Schedule of Allowable Costs and Patient Day Statistics 10

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

April 15, 1998

Members ofthe 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 of Lakehaven Nursing Home, Inc., provider number 00141721A, 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,
~~
Claude L. Vickers State Auditor
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1995 Audit Report: Lakehaven Nursing Home, 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 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

Lakehaven Nursing Home, Inc., a 90-bed long-term health care facility located in Valdosta, 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 Audit Objectives

Nursing Facilities Services Program
patients. The facility was operated as a component of Pruitt Corporation, a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1995.

The purpose of this audit was to determine whether Lakehaven 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 Lakehaven 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 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.

1995 Audit Report: Lakehaven 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 of cost and patient data for Lakehaven 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.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

$

(6,329)

(511)

(996)

(801)

(279)

(1,379)

Total Adjustment to Allowable Costs

$======(1==0=.2==95=)

Finding No.2

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)

1995 Audit Report: Lakehaven Nursing Home, Inc.

5

COST CENTER Routine Services Education Expense Administrative and General Automobile Tax Education Expense Rent Expense Property and Related Expenses Automobile Tax Rent Expense
Total Adjustment to Allowable Costs

$

$

(70)

50

(2,182)

$

70

2,182

$

(50)
(2,202) 2,252
0

Finding No.3

Allocations from Home Office

The provider was a component of a chain organization for the year ended June 30, 1995. 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)

COST CENTER Administrative and General Pooled Costs Administrative Expenses Non-Capital Related Interest Expense

$ (1,336) (198) $=={=1=,5=34=)

6

Nursing Facilities Services Program

Finding No.4

Costs Not Related to Patient Care

Allowable costs claimed included payments for personal purchases 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)

COST CENTER Administrative and General

$==='=7=03=)

Finding No. 5

Excess Vehicles

Documentation examined during the audit showed that expenses were claimed for two vehicles for the year under review. OMA guidelines allow a maximum of one vehicle for nursing homes ofthe size operated by the provider. We recommend that the provider implement policies and procedures to ensure that any costs incurred 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 taxes of vehicles operated in excess of the maximum number allowable.
(DMA Vehicle Guidelines)

COST CENTER Administrative and General

$======='==54=)

1995 Audit Report: Lakehaven Nursing Home, Inc.

7

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1

Lack of Sufficient Documentation

2

Incorrect Expense Classifications

$

(6,329)

(50) $

Special Services

1

Lack of Sufficient Documentation

Dietary

1

Lack of Sufficient Documentation

Laundry and Housekeepinc

1

Lack of Sufficient Documentation

Operation and Maintenance ofPlant

1

Lack of Sufficient Documentation

Administrative and General

1

Lack of Sufficient Documentation

2

Incorrect Expense Classifications

3

Allocations from Home Office

4

Costs Not Related to Patient Care

5

Excess Vehicles

$

(1,379)

(2,202)

(1,534)

(703)

(54)

(6,379) (511) (996) (801) (279)
(5,872)

8

Nursing Facilities Services Program

FINDING NUMBER

ALLOWABLE COSTS

Property and Related Expenses

2

Incorrect Expense Classifications

Total Audit Findings Affecting Allowable Costs

2,252
$====(1=2=,5=86=)

....

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

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COST

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REPORT

PREVIOUS

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AUDITED

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TOTALS FINDINGS (1) FINDINGS TOTALS

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ALLOWABLE COSTS

Routine Services

$

Special Services

Dietary

Laundry and Housekeeping

Operation and Maintenance of Plant

923,345 $ 121,932 239,718 195,382 112,350

(6,647) $ (120)

(6,379) $ (511) (996) (801) (279)

910,319 121,421 238,722 194,461 112,071

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Administrative and General Property and Related Expenses

258,996 198,103

(22,202)

(5,872) 2,252

230,922 200,355

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Total Allowable Costs

$ 2,049,826 $

(28,969) $ (12,586) $ 2,008,271

PATIENT DAY STATISTICS

31,330

31,330

(1) This column includes adjustments made as a result of the office audit and additional adjustments made by the Department of Medical Assistance based on changes in program Policies and Procedures and results ofa previous year's legal proceeding.