Audit report, for the year ended May 31, 1994, Lee Medical Arts Center, Medicaid provider no. 00188537A, Rural Health Clinic Services Program [May 31, 1994]

DEPARTMENT OFAUDITS Medicaid and Local Government Audits
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AUDIT.REPORT FOR.THE YEAR ENDED MAY 31, 1994
LEE MEDICAL ARTS CENTER
MEDICAID PROVIDER NUMBER 00188537A RURAL HEALTH CLINIC SERVICES PROGRAM

TABLE OF CONTENTS
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FINDINGS AND RECOMMENDATIONS ................... 3 Summary of Audit Findings Affecting Allowable Costs and Patient Visit Statistics 7
Schedule of Allowable Costs and Patient Visit Statistics 8
Summary of Allocation of Overhead to Direct Services 9 Medicaid Cost Settlement 10

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
February 8, 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 Lee Medical Arts Center, provider number 00188537A, a participant in the Rural Health Clinic Services Program for the year ended May 31, 1994. This report is intended to be used solely in connection with the administration ofthe Georgia Department of Medical Assistance Rural Health Clinic Services Program and is not to be used or relied upon for any other purpose.
Respectfully Submitted,
~~
Claude L. Vickers State Auditor
CLV/dv/lc/bw

1994 Audit Report: Lee Medical Arts Center

1

INTRODUCTION

Provider Information

Lee Medical Arts Center is a rural health clinic located in Leesburg, Georgia. The center provides a full range of primary, diagnostic and therapeutic services. The center was operated as a component of Albany Area Primary Health Care, Inc., for the year ended May 31, 1994.

Audit Objectives

The purpose ofthis audit was to determine whether Lee Medical Arts Center, a provider enrolled in the Georgia Medicaid Rural Health Clinic Services (RHCS) Program, maintained adequate documentation to support the allowable costs and patient visit statistics reported in its Rural Health Clinic Cost Report for the year ended May 31, 1994; and to determine whether Lee Medical Arts Center complied with the federal and state laws, regulations, policies and procedures for the RHCS Program in effect for that period. The specific objectives of this audit were to:



determine if allowable costs reported in the Rural

Health Clinic Cost Report are reasonable and

allowable, in all material respects, in accordance with

federal and state laws, regulations, policies and

procedures governing the Georgia Rural Health Clinic

Services Program;

2
Scope and Methodology

Rural Health Clinic Services Program



detennine if patient visit statistics included in the cost

report are accurately reported;



determine the amount of any settlement between Lee

Medical Arts Center and the Department of Medical

Assistance; 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 Rural Health Clinic 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 OMA Policies and Proceduresfor Rural Health Clinic Services. We also obtained information from the Department of Medical Assistance related to the number of paid Medicaid visits and the total amount paid for those visits.

1994 Audit Report: Lee Medical Arts Center

3

FINDINGS AND RECOMMENDATIONS

Finding No. J

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.
(HCFAPub.15-1 Section2102.3)

ITEMS Advertising Association Dues (50%) Civic Organization Dues (100%)

$

(175)

(4,162)

(153)

$==='=4=4=9==0==)

COST CENTER Rural Health Clinic Services Facility Overhead - Administrative Costs
Total Adjustment to Allowable Costs

$

(175)

(4,315)

$.==='==4=4:!:::!9::::li!0=}

4

Rural Health Clinic Services Program

Finding No. 2

Fixed Asset Purchases Claimed as Expense

Allowable costs claimed included purchases of assets which are considered to be capital additions to property under generally accepted accounting principles. We recommend that the provider implement policies and procedures to ensure that all purchases of fixed assets are shown on the cost report as capital additions. We recommend that the Department ofMedical Assistance make the following adjustment to reduce allowable costs by the amount of purchased assets claimed as expense and to increase allowable costs by depreciation allowable.
(HCFAPub. 15-1 Section 108)

COST CENTER Facility Overhead - Facility Costs Cost ofLeasehold Improvements Allowable Depreciation

$

(6,245)

937

$==:::!t!i(5!:il:i3!1!::0~8~)

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 ofMedical 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)

1994 Audit Report: Lee Medical Arts Center

5

Adjustment to Balance Sheet Accounts May 31, 1993 Balance
Accounts Payable Deferred Loan Costs
COST CENTER Facility Overhead - Facility Costs Facility Overhead - Administrative Costs Total Adjustment to Allowable Costs

Reimbursable Costs

$

(1,478)

(209)

$

(J 687)

$

(209)

(1,478)

$

(] 687)

Finding No. 4

Allocationsfrom Home Office
Documentation examined during the audit showed that the provider was a component of Albany Area Primary Health Care, Inc., a chain organization. Further documentation showed that the Home Office did not file a Medicare home office cost statement. Based on auditing procedures applied, certain costs included in the home office accounting records and allocated to the provider were determined to be nonallowable. Federal regulations provide that each intermediary servicing a provider in a chain must be furnished with a detailed home office cost statement as a basis for reimbursing the provider for home office costs and equity capital. Federal regulations also 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 for all future cost reporting periods, the Medicare intermediary is furnished with a home office cost statement prepared in a format which contains detailed schedules ofthe determination of home office costs and equity capital and their allocation. We recommend that the Department of

6

Rural Health Clinic Services Program

Medical Assistance make the following adjustment to correct the allocation of home office costs and remove the provider's share of non-allowable home office costs claimed. (HCFA Pub. 15-1 Sections 2102.3, 2153)

COST CENTER Facility Overhead-Administrative Costs Allocation Statistics Administrative Expenses
Total Adjustment to Allowable Costs

$

5,056

(2,100)

$.===2!!!:!:::::!95!!=6=

Finding No. 5

Total Patient Visit Statistics
Census records examined during the audit showed that the center had 12,932 total patient visits rather than the 12,897 shown on the cost report. 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 accumulate accurate patient visit statistics. We recommend that the Department of Medical Assistance make the adjustment of 35 visits to correct the statistical information.
(HCFA Pub. 15-1 Section 2304)

1994 Audit Report: Lee Medical Arts Center

7

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT VISIT STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Rural Health Clinic Services

I

Costs Not Related to Patient Care

$

Facility Overhead- Facility Costs

2

Fixed Asset Purchases Claimed as Expense

$

(5,308)

3

Accrual Basis of Accounting

(209)

Facility Overhead -Administrative Costs

I

Costs Not Related to Patient Care

3

Accrual Basis ofAccounting

4

Allocations from Home Office

$

(4,315)

(1,478)

2,956

Total Audit Findings Affecting Allowable Costs

$

(175) (5,517)
(2,837) (8,529)

PATIENT VISIT STATISTICS

5 Increase in Patient Visit Statistics

35

8

Rural Health Clinic Services Program

SCHEDULE OF ALLOWABLE COSTS AND PATIENT VISIT STATISTICS

ALLOWABLE COSTS Rural Health Clinic Services Other Services Total Direct Services Costs

COST REPORT TOTALS

AUDIT FINDINGS

AUDITED TOTALS

$ 386,718 $ 8,192
$ 394,910 $

(175) $ 0
(175) $

386,543 8,192
394,735

Facility Overhead - Facility Costs Facility Overhead - Administrative
Costs Total Facility Overhead
Total Allowable Costs

$

68,422 $

351,344 $ 419,766 $

$ 814,676 $

(5,517) $

62,905

(2,837)

348,507

(8,354) $- -41-1,41-2

(8,529) $==80=6=1,=47=

PATIENT VISIT STATISTICS

12,897

35

12,932

1994 Audit Report: Lee Medical Arts Center

9

SUMMARY OF ALLOCATION OF OVERHEAD TO DIRECT SERVICES

Rural Health Clinic Services Other Services
Total Direct Services

AUDITED DIRECT COSTS

PERCENTAGE OF DIRECT COSTS

ALLOCATION OF OVERHEAD

TOTAL ALLOWABLE
COSTS

$

386,543

8192

97.92 $ 2.08

402,855 $ 8557

789,398 16 749

$

394,735

100.00 $

411,412 $

806,147

10

Rural Health Clinic Services Program

MEDICAID COST SETTLEMENT

Total Allowable Cost ofRural Health Clinic Services (page 9) Total Patient Visits (page 8)
Allowable Cost per Patient Visit
Maximum Allowable Cost per Patient Visit Lower of Allowable or Maximum Cost per Patient Visit Total Visits by Medicaid Patients (1) Total Allowable Costs for Visits by Medicaid Patients Interim Payments by the OMA (1)
Amount Due to/(from) Provider

$ 789,398 12,932

$

61.04

$

53.67

$

53.67

2,810

$ 150,813 139,080

$

11,733

(1) This information was furnished to us by the Department of Medical Assistance.