G-A AicoJY\4- Ri L'J37 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 2 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 4 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. 6 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= 8 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 10 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