Audit report, for the year ended June 30, 1998, Meadows Nursing Center, Medicade provider no. 00368423A, Nursing Facilities Services Program [June 30, 1998]

TABLE OF CONTENTS

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Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 9

Schedule of Allowable Costs and Patient Day Statistics

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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 AUDrroa

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W., Suite 322 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535
April 21, 1999

Members of the Board of Medical Assistance, and The Honorable Dr. William R. Taylor, Commissioner Department ofMedical Assistance 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit of Meadows Nursing Center, provider number 00368l23A, a participant in the Nursing Facility Services Program for the year ended June 30, 1998. This report is intended to be used solely in connection with the administration of the Georgia Department of Medical Assistance Nursing Facility Services Program and is not to be used or relied upon for any other purpose.
Respectfully Submitted,
~~.
Claude L. Vickers State Auditor
CLV/adc/bw

1998 Audit Report: Meadows Nursing 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 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 of Medical 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 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

Meadows Nursing Center, Inc., a 35-bed long-term health care facility located in Vidalia, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facility Services Prograni. The facility provides skilled care services to resident patients. The facility is owned and operated by Meadows Regional Medical Center, Inc., which operated

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Nursing Facility Services Program

Audit Objectives

Meadows Nursing Center and Meadow Regional Medical Center in the same physical facility during the year under review.

The purpose of this audit was to detennine whether Meadows Nursing Center 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, 1998; and to detennine whether Meadows Nursing Center 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:



detennine 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 detennine if the patient day statistics are accurately reported; and



detennine if the provider meets the requirements for

classification as a hospital-based nursing home

outlined in DMA Policies and Procedures for

Nursing Home Facility Services, Section 1002.1(g);

and

1998 Audit Report: Meadows Nursing Center

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recommend appropriate action based on the results of our audit.

Scope and Methodology

To accomplish these objectives, we performed a limited review of tl1e 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 Services, the Department of Medical Assistance has calculated the payment rate for Meadows Nursing Center using a method often called the "Dodge Index system". Under the Dodge Index system, reasonable construction and asset acquisition 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 of Medical Assistance when calculating the payment rate for Meadows

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Nursing Facility Services Program

Nursing 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 of the nursing facility and indirect costs allocated to it from Meadows Regional Medical Center. These indirect cost allocations result from the step-down of 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 detennine net expenses for cost allocation on the Medicare cost report worksheets. These costs are subject to audit by the Medicare intennediary. Any audit findings by the Medicare intennediary related to indirect costs that impact the nursing facility will be reflected in the Medicaid cost report in the year the Medicare cost report is final-settled..
The Department of Audits and Accounts is responsible for providing the Department of Medical Assistance with infonnation regarding the accuracy of cost and patient data for Meadows Nursing Center for the year ended June 30, 1998. 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

1998 Audit Report: Meadows Nursing Center

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report. In all other respects, this audit was conducted in accordance with generally accepted government auditing standards.

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Nursing Facility 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/or Nursing Facility Services, Section lO02.1(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 of Medical Assistance make the following adjustment to reclassify costs to the appropriate cost centers.
(DMA Policies and Procedures, Appendix D)

COST CENTER Routine Services Association Dues Medical Records Forms Travel Expense Supplies Expense Dietary Supplies Expense Laundry and Housekeeping Supplies Expense

$

(1,223)

(1,240)

(3,696)

(13,790) $

(19,949) 4,255 2,382

1998 Audit Report: Meadows Nursing Center

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Administrative and General Association Dues Medical Records Fonm Travel Expense Supplies Expense
Total Adjustment to Allowable Costs

$

1,223

1,240

3,696

7,153

13,312

$

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Costs Not Related to Patient Care

Finding No.3

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.
(HCFA Pub.15-1 Sections 2102.1, 2102.3; DMA Policies and Procedures Section 1002.1(k

ITEMS
Advertising Association Dues (50%)

$

(125)

(549)

Total Adjustment to Allowable Costs

$

(674)

COST CENTER Routine Services Administrative and General
Total Adjustment to Allowable Costs

$

(125)

(549)

$

(674)

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Nursing Facility Services Program

Finding No.4

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 ofwhen 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 of Medical 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)

Adjustments to Balance Sheet Accomrts:
J1.D.1e 30, 1998 Balance Accomrts Payable

Allowable Costs

$

(719)

COST CENTER Administrative and General

$

(719)

Patient Day Statistics

Finding No.5

The provider stated on the cost report that it furnished 11,464 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate.

1998 Audit Report: Meadows Nursing Center

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SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER
Routine Services

ALLOWABLE COSTS

1 fucorrect Expense Classifications 2 Costs Not Related to Patient Care

$ (19,949)
- - -(12-5) $

(20,074)

Dietary
1 fucorrect Expense Classifications
LaundryandHouuk~pmg
1 fucorrect ExpenSe Classifications

4255 2382

Administrative and General
1 fucorrect Expense Classifications 2 Costs Not Related to Patient Care 3 Accrual Basis ofAccounting
Total Adjustment to Allowable Costs

$ 13,312 (549) (719)

12,044

$ (1,393)

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Nursing Facility Services Program

SCHEDULE OF ALLOWABLE COSTS AND

PATIENT DAY STATISTICS

ALLOWABLE COSTS Routine Services Special Services Dietary Laudry and Housekeeping Operation and Maintenance ofPlant Administrative and General Property and Related Expenses

COST REPORT TOTALS

FIEID AUDIT FINDINGS

AUDITED TOTALS

$ 815,810 $ (20,074) $ 795,736

10,494

10,494

218,289

4,255

222,544

95,874

2,382

98,256

133,454

133,454

236,619

12,044

248,663

504,350

504,350

Total Allowable Costs

$ 2,014,890 $ (1,393) $ 2,013,497

PATIENT DAY STATISTICS

11,464

11,464