Audit report, for the year ended September 30, 1995, Lakeland Villa Convalescent Center, Medicaid provider no. 00141732A, Nursing Facilities Services Program

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ii14-i: DEPARTMENT OF AUDITS AND ACCOUNTS Medicaid and Local Government Audits
AUDIT REPORT FOR THE YEAR ENDED SEPTEMBER 30, 1995 LAKELAND VILLA--CONVALESCENT CENTER
MEDICAID PROVIDER NUMBER 00141732A NURSING FACILITIES SERVICES PROGRAM

TABLE OF CONTENTS
LETTER OF TRANSMITTAL .............................. i
INTRODUCTION ......................................... 1
FINDINGS AND RECOMMENDATIONS ................... 6 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
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

February 25, 1999

Members of the Board of Medical Assistance, and The Honorable Dr. William R. Taylor, Commissioner Department of Medical Assistance 2 Peachtree Street, N.W., Suite 27-100 Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit ofLakeland Villa Convalescent Center, provider number 00141732A, a participant in the Nursing Facilities Services Program for the year ended September 30, 1995. This report is intended to be used solely in connection with the administration of the Georgia Department of Medical Assistance Nursing Facilities Services Program and is not to be used or relied upon for any other purpose.
Respectfully Submitted,

CLV/ml/ds

Claude L. Vickers State Auditor

1996 Audit Report: Lakeland Villa Convalescent Center

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 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

Lakeland Villa Conyalescent Center, a 62-bed long-term health care facility located in Lakeland, Georgia, is a provider in the Georgia Medicaid Nursing Facilities Services Program. The facility provides both skilled and intermediate care services to resident patients. The

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Nursing Facilities Services Program

Audit Objectives

facility is owned and operated by Lanier Health Services, Inc., which operated both Louis Smith Memorial Hospital and Lakeland Villa Convalescent Center in separate physical facilities during the year under review.

The purpose of this audit was to determine whether Lakeland Villa Convalescent Center maintained adequate documentation to support the allowable costs and patient day statistics reported in its Nursing Home Cost Report for the year ended September 30, 1995; and to determine whether Lakeland Villa Convalescent Center 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;

1996 Audit Report: Lakeland Villa Convalescent Center

3

Scope and Methodology



determine if the provider meets the requirements for

classification as a hospital-based nursing home

outlined in DMA Policies and Procedures for

Nursing Facility Services, Section 1002.l(g); and



recommend appropriate action based on the results of

our audit.

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.
In accordance with Section 1002 of Policies and Procedures for Nursing Facility Se,:w,ces, the Department ofMedical Assistance has calculated the payment rate for Lakeland Villa Convalescent Center using a method often called the "Dodge Index system". Under the Dodge Index system, reasonable construction and asset acquisition

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Nursing Facilities Services Program

costs are used in calculating the payment rate rather than the actual costs incurred by the nursing home for property costs such as depreciation and amortization; capital-related interest expense; and lease expense. Because these property costs are not considered by the Department ofMedical Assistance when calculating the payment rate for Lakeland Villa Convalescent Center, our audit did not include a review of these costs. However, because property taxes and insurance are used by the Department of Medical Assistance to calculate the provider's payment rate, we have reviewed those costs as part of our audit.
Allowable costs reported on the Nursing Home Cost Report include both direct costs ofthe nursing facility and indirect costs allocated to it from Louis Smith Memorial Hospital. These indirect cost allocations result from the step-down ~f general service costs from the hospital as shown on the hospital's Medicare cost report. Our audit did not include tests of either these indirect costs or the reclassifications and adjustments made to determine net expenses for cost allocation on the Medicare cost report worksheets. These costs are subject to audit by the Medicare intermediary. Any audit findings by the Medicare intermediary related to indirect costs that impact the nursing facility will be reflected in the Medicaid cost report in the year the Medicare <;ost report is final-settled.
The Department ofAudits and Accounts is responsible for providing the Department ofMedical Assistance with information regarding the

1996 Audit Report: Lakeland Villa Convalescent Center

5

accuracy of cost and patient data for Lakeland Villa Convalescent Center for the year ended September 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.

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Nursing Facilities Services Program

FINDINGS AND RECOMMENDATIONS

Finding No.1

Hospital-Based Status
The provider was in compliance with the Department of Medical Assistance's requirements for classification as a hospital-based nursing home as specified in DMA Policies and Procedures for Nursing Facility Services, Section 1002.l(g).

Incorrect Expense Classifications

Finding No.2

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 ofMedical Assistance make the following adjustment to reclassify costs to the appropriate cost centers.
(DMA Policies and Procedures, Appendix D)

COST CENTER Routine Services Administrative Supplies Rental Expense Routine Supplies Software Maintenance Expense Special Services Administrative Supplies Dietary Supplies Linens Repair Expense

$ (1,378) (195) 775 (200) $
$ (4,718) (2,878) (446) (193)

(998) (8,235)

1996 Audit Report: Lakeland Villa Convalescent Center

7

Dietary Dietary Supplies
Laundry and Housekeeping Linens
.Operation and Maintenance ofPlant Repair Expense Routine Supplies
Administrative and General Administrative Supplies Software Maintenance
Property and Related Expenses Rental Expense
Total Adjustment to Allowable Costs

$

193

(775)

$

6,096

200

$

2,878 446
(582)
6,296 195 0

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 ofMedical Assistance make the following adjustment to remove the non-patient care expenses from allowable costs.
(HCFA Pub.15-1 Sections 2102.1, 2102.3)

ITEMS Consulting Services Contracted Nursing

$

1,449

450

$.===1=,8=99=

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Nursing Facilities Services Program

COST CENTER Routine Services Special Services
Total Adjustment to Allowable Costs

$

(1,449)

(450)

$=='=1=,8=99=)

Finding No~ 4

Accounts Receivable Credit Balances
Documentation examined during the audit showed that the provider had 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 $142 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of October 19, 1998. 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 Sirmans, Thelma

Balance $===14=2=.00=

Finding No. 5

Patient Day Statistics
The provider stated on the cost report that it furnished 22,411 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate.

1996 Audit Report: Lakeland Villa Convalescent Center

9

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

2

Incorrect Expense Classifications

3

Costs Not Related to Patient Care

Special Services

2

Incorrect Expense Classifications

3

Costs Not Related to Patient Care

Dietary

2

Incorrect Expense Classifications

Laundry and Housekeepin:

2

Incorrect Expense Classifications

Operation and Maintenance ofPlant

2

Incorrect Expense Classifications

Administrative and General

2

Incorrect Expense Classifications

$

(998)

(1,449) $

$

(8,235)

(450)

{2,447) (8,685) 2,878
446 (582) 6,296

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Nursing Facilities Services Program

FINDING NUMBER

ALLOWABLE COSTS

Property and Related Expenses

2

Incorrect Expense Classifications

Total Audit Findings Affecting Allowable Costs

195

$

(1,899)

1996 Audit Report: Lakeland Villa Convalescent Center

11

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

ALLOWABLE COSTS

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

Routine Services

$ 679,737 $ (2,447) $ 677,290

Special Services

141,404

(8,685)

132,719

Dietary

335,625

2,878

338,503

Laundry and Housekeeping

113,747

446

114,193

Operation and Maintenance of Plant

169,979

(582)

169,397

Administrative and General

171,372

6,296

177,668

Property and Related Expenses

58,155

195

58,350

Total Allowable Costs

$ 1,670,019 $ (1,899) $ 1,668,120

PATIENT DAY STATISTICS

22,411

22,411