Audit report, for the year ended June 30, 1998, Middle Georgia Nursing Home, Inc., Medicaid provider no. 00141974A, Nursing Facilities Services Program [June 30, 1998]

TABLE OF CONTENTS

LETTER OF tRANS'MITTAL ..........................i

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5

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

Schedule ofAllowable 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

RUSSELL W. HINTON
STATE AUDITOR

DEPARTMENT OF AUDITS AND ACCOUNTS
MEDICAID AND LOCAL GOVERNMENT AUDITS
254 Washington Street, S.w., Suite 322 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535
July 22, 1999

MICHAEL A. PLANT
DIRECTOR

Members of the Board of Community Health, and The Honorable Russ Toal, Commissioner Community Health 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit of Middle Georgia Nursing Home, Inc., provider number 00141974A, 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,
<,....... ffl ~. 4J..:is Russell W. Hinton State Auditor
RWHldrp/ds

1998 Audit Report: Middle Georgia 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 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

Middle Georgia Nursing Home, Inc., a 1DO-bed long-term health care facility located in Eastman, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facility Services Program. The facility provides both skilled and intermediate care services to resident patients. The facility was operated as a component of Pine Care Management, Inc., a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1998.

2

Nursing Facility Services Program

Audit Objectives

The purpose of this audit was to determine whether Middle Georgia 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, 1998; and to determine whether Middle Georgia 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 govermng 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.

Scope and Methodology

To accomplish these objectives, we performed 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 determine the adequacy of amounts and disclosures included in the Nursing Home Cost Report. We also reviewed, on a

1998 Audit Report: Middle Georgia Nursing Home, Inc.

3

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 Middle Georgia Nursing Home, Inc., using a method often called the "Dodge Index SystenI". 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 Middle Georgia Nursing Home, Inc., 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.
As a result of audit procedures related to other (non-property) costs, we noted adjustments which should be made by the Department of Medical Assistance related to depreciation and amortization expense; and lease expense. We have included fmdings related to these matters in our report.

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Nursing Facility Services Program

The Department of Audits and Accounts is responsible for providing the Department of Medical Assistance with information regarding the accuracy of cost and patient data for Middle Georgia Nursing Home, Inc., for the year ended June 30, 1998. If the Department of Medical Assistance implements the recommendations in this report by adjusting the allowable costs 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.

1998 Audit Report: Middle Georgia Nursing Home, Inc.

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FINDINGS AND RECOMMENDATIONS

Incorrect Expense Classifications

Finding No.1

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 Pre-Employment Expense Waste Disposal

$

(485)

(3,397) $

(3,882)

Operation and Maintenance ofPlant Lease Expense Waste Disposal

$

(1,089)

3,397

2,308

Administrative and General Insurance Expense Pre-Employment Expense

$

6,112

485

6,597

Property and Related Expenses Insurance Expense Lease Expense
Total Adjustment to Allowable Costs

$

(6,112)

1,089

(5,023)

$

o

=====

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Nursing Facility Services Program

Lack ofSufficient Documentation

Finding No.2

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 Routine Services

$ ==~(3=,1=11~)

Fixed Asset Purchases Claimed as Expense

Finding No.3

Allowable costs claimed included purchases of assets which are considered to be capital additions to property under generally accepted accounting principles. The Uniform Chart of Accounts 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 of purchased assets claimed as expense and to increase allowable costs by depreciation allowable.
(HCFA Pub. 15-1 Section 108; DMA Policies and Procedures, Appendix D)

COST CENTER Administrative and General Cost ofMajor Moveable Equipment Property and Related Expenses' Allowable Depreciation Expense

$

(1,095)

146

Total Adjustment to Allowable Costs

$ ===(~94=9:f::)

1998 Audit Report: Middle Georgia Nursing Home, Inc.

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Finding No.4

Allocationsfrom Home Office

The provider was a component of a chain organization for the year ended June 30, 1998. 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 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

$ (1,621)

Patient Day Statistics

Finding No.5

The provider stated on the cost report that it furnished 33,107 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate.

Accounts Receivable Credit Balances

Finding No.6

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 $6,888.65 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of February, 1999. We recommend that the provider review its credit accounts

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Nursing Facility Services Program

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
Beals, Mary Hamilton, Melvin Johnson, Mattie L. Moore, James Travis Pace, Lula Williams, Vernoh Young, Bertha M.
Total Credit Balances in Accounts Receivable

Balance

$

237.36

479.31

709.79

1,057.74

3,567.16

70.67

766.62

$ ===6=,8=88=.65=

1998 Audit Report: Middle Georgia Nursing Home, Inc.

9

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER
Routine Services

ALLOWABLE COSTS

1 Incorrect Expense Classifications 2 Lack of Sufficient Documentation

$

(3,882)

(3,111) $

(6,993)

Operation and Maintenance ofPlant
1 Incorrect Expense Classifications

2,308

Administrative and General

I

Incorrect Expense Classifications

3 Fixed Asset Purchases Claimed as Expense

4

Allocations From Home Office

$

6,597

(1,095)

(1,621)

3,881

Property and Related Expenses

1 Incorrect Expense Classifications

3

Fixed Asset Purchases Claimed as Expense

Total Adjustment to Allowable Costs

$

(5,023)

146

(4,877)

$

(5,681)

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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 of Plant Administrative and General Property and Related Expenses

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

$ 1,121,552 $ 100,029 361,045 193,728 153,295 260,737 47,163

(6,993) $
2,308 3,881 (4,877)

1,114,559 100,029 361,045 193,728 155,603 264,618 42,286

Total Allowable Costs

$ 2,237,549 $

(5,681) $ 2,231,868

PATIENT DAY STATISTICS

33,107

33,107