DEPARTMENT OF AUDITS AND ACCOUNTS Medicaid and Local Government Audits AUDIT REPORT '-.' -.- . FOR THE YEAR ENDED JUNE 30, 1997 .MEADOWBROOK NURSING HOME, INC. MEDICAID PROVIDER NUMBER00141864A NURSING FACILITY 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 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 2LAUDE 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 November 4, 1998 Members of the Board of Medical 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 Meadowbrook Nursing Home, Inc., provider number 00141864A, a participant in the Nursing Facility Services Program for the year ended June 30, 1997. This report is intended to be used solely in connection with the administration ofthe Georgia Department of Medical Assistance Nursing Facility Services Program and is not to be used or relied upon for any other purpose. Respectfully Submitted, tt~ Claude L. Vickers State Auditor CLV/sg/bw 1997 Audit Report: Meadowbrook 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 of Georgia 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 Facility 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 Horrie 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 Meadowbrook Nursing Home, Inc., a 144-bed long-term health care facility located in Tucker, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facility Services Program. The facility provides both skilled and intermediate care services to resident 2 Nursing Facility Services Program Audit Objectives patients. The facility was operated as a component ofAllgood Health Care, Inc., a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1997. The purpose of this audit was to determine whether Meadowbrook 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, 1997; and to determine whether Meadowbrook Nursing Home, Inc., complied with the federal and state laws, regulations, policies and procedures for the Nursing Facility 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 Facility 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. 1997 Audit Report: Meadowbrook Nursing Home, Inc. 3 Scope and Methodology To accomplish these objectives; we perfonned 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 detennine 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/or Nursing Facility Services. The Department of Audits and Accounts is responsible for providing the Department ofMedical Assistance with infonnation regarding the accuracy of cost and patient data for Meadowbrook Nursing Home, Inc., for the year ended June 30, 1997. 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 Facility Services Program FINDINGS AND RECOMMENDATIONS Finding No.1 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 ofMedical 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 Expense Repairs Expense Special Services Cable Television Expense Employee Benefits Expense Dietary Employee Benefits Expense Laundry and Housekeeping Employee Benefits Expense Operation and Maintenance of Plant Employee Benefits Expense Repairs Expense Administrative and General Cable Television Expense Employee Benefits Expense $ 913 (449) $ $ 518 65 $ 31 449 $ (518) (1,266) 464 583 126 131 480 (1,784) Total Adjustment to Allowable Costs $====0= 1997 Audit Report: Meadowbrook Nursing Home, Inc. 5 Finding No.2 Costs Misclassijied as Nurse Aide Testing and Training Costs An adjustment was made during cost report preparation to remove nurse aide testing and training expenses from allowable costs. Documentation examined during the audit showed that some ofthese costs were not incurred to provide nurse aide testing and training services. 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 costs shown on the cost report as nurse aide testing and training expenses were incurred to provide nurse aide testing and training services. We recommend that the Department of Medical Assistance make the following adjustment to reverse a portion of the provider's adjustment. (HCFA Pub. 15-1 Section 2304) COST CENTER Routine Services Administrative and General $ 99 247 Total Adjustment to Allowable Costs $=======34::::::6= Finding No.3 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. The Uniform Chart ofAccounts issued by DMA provides for inclusion of such assets in property accounts. 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 of Medical Assistance make the following adjustment to reduce allowable costs by the amount ofpurchased assets claimed as expense and to increase allowable costs by depreciation allowable. (HCFA Pub. 15-1 Section 108; DMA Policies and Procedures, Appendix D) 6 Nursing Facility Services Program Dietary Cost ofMajor Moveable Equipment Property and Related Expenses Allowable Depreciation Expense $ (2,090) 35 Total Adjustment to Allowable Costs $ (2,055) ) Finding No.4 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 Operation and Maintenance ofPlant Administrative and General $ (1,954) (11,430) Total Adjustment to Allowable Costs $=====(1=35.3=84:=) Finding No.5 Allocationsfrom Home Office The provider was a component of a chain organization for the year ended June 30, 1997. 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 1997 Audit Report: Meadowbrook Nursing Home, Inc. 7 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 $=====(6=9==:.4:=17=) Patient Day Statistics Finding Census records examined during the audit showed that the nursing home had 46,420 No.6 patient days of service rather than the 46,479 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 day statistics. We recommend that the Department of Medical Assistance make the adjustment of 59 days to correct the statistical information. (HCFA Pub. 15-1 Section 2304) (. Finding No.7 Accounts Receivable Credit Balances Documentation examined during the audit showed that the provider had numerous 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 $147.08 shown in the following table represents overpayments from the Department ofMedical Assistance that had not been resolved as of January 1, 1998. 8 Nursing Facility Services Program 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 Newell H. Moore Balance $===14=7=.0:=8 1997 Audit Report: Meadowbrook Nursing Home, Inc. 9 SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS FINDING NUMBER ALLOWABLE COSTS Routine Services 1 Incorrect Expense Classifications $ 464 2 Costs Misclassified as Nurse Aid Testing and Training Costs 99 $ 563 Special Services 1 Incorrect Expense Classifications 583 Dietary 1 Incorrect Expense Classifications $ 126 3 Fixed Asset Purchases Claimed as Expense (2,090) (1,964) Laundry and Housekeeping 1 Incorrect Expense Classifications 131 ( Operation and Maintenance ofPlant 1 Incorrect Expense Classifications 4 Lack of Sufficient Documentation $ 480 (1,954) (1,474) 10 Nursing Facility Services Program FINDING NUMBER ALLOWABLE COSTS Administrative and General 1 Incorrect Expense Classifications $ (1,784) 2 Cost Misclassified as Nurse Aide Testing and Training Costs 247 4 Lack of Sufficient Documentation (11,430) 5 Allocations from Home Office (69,417) (82,384) Property and Related Expenses 3 Fixed Asset Purchases Claimed as Expense 35 Total Audit Findings Affecting Allowable Costs $=====(=8=4=,=51=0=)= PATIENT DAY STATISTICS 6 Decrease in Patient Day Statistics (59) 1997 Audit Report: Meadowbrook Nursing Home, Inc. 11 SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS ALLOWABLE COSTS COST REPORT TOTALS FIELD AUDIT FINDINGS AUDITED TOTALS Routine Services $ 1,811,557 $ 563 $ 1,812,120 Special Services 150,515 583 151,098 Dietary 474,137 (1,964) 472,173 Laundry and Housekeeping 275,177 131 275,308 Operation and Maintenance of Plant 215,665 (1,474) 214,191 Administrative and General 426,585 (82,384) 344,201 Property and Related Expenses 896,392 35 896,427 Total Allowable Costs $ 4,250,028 $ (84,510) $ 4,165,518 PATIENT DAY STATISTICS 46,479 (59) 46,420