Audit report, for the year ended June 30, 1996, Nursecare of Atlanta, Inc., Medicaid provider no. 00142183A, Nursing Facilities Services Program

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Aioo.M1 Rl
N7f> (115~1 DEPARTMENT OFAUDITS AND ACCOUNTS
Medicaid and'LocalGovernment Audits
AUDIT.REPORT
FOR THE YEAR ENDED JUN:E 30, 1996
NURSECAREOF AT:LANTA.. INC.
MEDICAID PROVIDER NUMBER 00142183A NURSING FACILITIES 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 14 Schedule of Allowable Costs and Patient Day Statistics 16

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

January 26, 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

.y.; Ladies and Gentlemen:
(j-'

:s

This report provides the results of our audit of Nursecare of Atlanta, Inc., provider number

~ 00142183A, a participant in the Nursing Facilities Services Program for the year ended

June 30, 1996. This report is intended to be used solely in connection with the administration of the

Georgia Department ofMedical Assistance Nursing Facilities Services Program and is not to be used

or relied upon for any other purpose.

Respectfully Submitted,

CLV/jrj/bw

Claude L. Vickers State Auditor

1996 Audit Report: Nursecare of Atlanta, 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 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

Nursecare of Atlanta, Inc., a 220-bed long-term health care facility located in Atlanta, Georgia, is a provider enrolled 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 was operated as a freestanding nursing home for the year ended June 30, 1996.

The purpose of this audit was to determine whether Nursecare of Atlanta, 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, 1996; and to determine whether Nursecare of Atlanta, Inc., 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; and



recommend appropriate action based on the results of

our audit.

1996 Audit Report: Nursecare of Atlanta, Inc.

3

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 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.
The Department ()f Audits and Accounts is responsible for providing the Department ofMedical Assistance with information regarding the accuracy of cost and patient data for Nursecare of Atlanta, Inc., for
the year ended June 30, 1996. ff 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 Facilities Services Program

FINDINGS AND RECOMMENDATIONS

Finding No. J

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

Administrative Expenses

$

Administrative Salaries.and Benefits

Education

Employee Benefits

Oxygen

Special Services

Activities Supplies

$

Administrative Expenses

Administrative Salaries and Benefits

Dietary Supplements and Related Fees

Employee Benefits

Oxygen

Dietary

Administrative Expenses

$

Dietary Supplements and Related Fees

Dietary Supplies

Education

Employee Benefits

Holiday Meal

(4,360) (110,748)
(1,925) 6,924 (1,134) $
1,576 (162) (53,150) (19,386) 3,503 1,134
(1,259) 19,386
78 (205) 2,469 254

(111,243) (66,485) 20,723

1996 Audit Report: Nursecare of Atlanta, Inc.

5

Laundry and Housekeeping

Administrative Expenses

$

(548)

Employee Benefits

1,181

Operation and Maintenance ofPlant

Activities Supplies

$

(1,440)

Administrative Expenses

(438)

Maintenance

2,363

Administrative and General

Activities Supplies

$

(136)

Administrative Expenses

6,767

Administrative Salaries and Benefits

163,898

Communication Expenses

676

Deferred Loan Charges

(6,420)

Dietary Supplies

(78)

Education

2,130

Employee Benefits

(14,077)

Holiday Meal

(254)

Liability Insurance

20,762

Maintenance

(2,363)

Vehicle Tag Fee

(50)

Property and Related Expenses

Communication Expenses

$

(676)

Deferred Loan Charges

6,420

Liability Insurance

(20,762)

Vehicle Tag Fee

50

Total Adjustment to Allowable Costs

$

633 485
170,855 (14,968)
0

Finding No.2

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 of Medical Assistance

6

Nursing Facilities Services Program

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 Accounts:

Allowable Costs

June 30, 1996 Balance Accounts Payable Prepaid Insurance

$ (22,444) (169)

Total Adjustment to Allowable Costs

$==(2=2=,6=13==)

COST CENTER Routine Services Special Services Dietary Laundry and Housekeeping Operation and Maintenanc~ of Plant Administrative and General Property and Related Expenses
Total Adjustment to Allowable Costs

$ (13,316) (819)
(1,844) (2,049)
(205) (2,253) (2,127)
$===={2==2===,6==13==)

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 of Medical Assistance make the following adjustment to remove the non-patient care expenses from allowable costs.
(HCFA Pub.IS-I Sections 902.2, 2102.1, 2102.3, 2122.2, 2136.2, 2139, 2160A, DMA Policies and Procedures Section 1002.l(k))

1996 Audit Report: Nursecare of Atlanta, Inc.

7

ITEMS Advertising Donations Gifts and Flowers Loss Not Submitted to Insurance Company Owner Compensation Physician Services Political Contributions Reimbursement to Patients Tax Penalties and Late Fees
COST CENTER Routine Services Special Services Administrative and General Property and Related Expenses
Total Adjustment to Allowable Costs

$

(7,443)

(70)

(647)

(151)

(834)

(7,878)

(300)

(136)

(1,800)

$=====(=19==25=9=)

$

(613)

(7,878)

(10,617)

(151)

$==(1==9=.2===59=)

Finding No.4

Recalculation ofAncillary Services Cost Adjustment
The provider received revenues from the sale of ancillary services to patients; therefore, allowable costs for special services are limited to the maximum allowable cost calculated on Schedule B-lA of the cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on Schedule B-1 A as total cost per books, total charges, Medicaid charges, total patient days, and Medicaid patient days. These findings required the recalculation of Schedule B-1 A. A copy of this recalculation has been furnished to the provider. We recommend that the provider implement policies and procedures to ensure that all information used to calculate the ancillary services cost adjustment is correct. We recommend that the Department of Medical Assistance make the following adjustment to decrease allowable costs for the net effect of the recalculation.
(General Instructions to the Cost Report)

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Nursing Facilities Services Program

Ancillary Services
Physical Therapy Speech Therapy Oxygen Occupational Therapy Medical Supplies Tube Feeding

Adjustment Per Cost Report

Recalculated Adjustment Audit Finding

$ (124,916) $ (144,202) $

(139,482)

(113,683)

(14,262)

(15,396)

(201,498)

(179,199)

0

(9,748)

0

(19,386)

(19,286) 25,799 (1,134) 22,299 (9,748) (19,386)

$ (480=158) $ (481=614) $

(1=456)

COST CENTER Special Services Dietary
Total Adjustment to Allowable Costs

$

17,930

(19,386)

$==<==1==A===56==)

Finding No.5

Excess Compensation
Allowable costs claimed included compensation to employees which exceeded DMA maximum limitations. The Department ofMedical Assistance annually calculates allowable salary ceilings for various positions as well as maximum fees allowable for medical and corporate directors. We recommend that the provider implement policies.and procedures to ensure that compensation to its employees which exceeds the DMA maximum limitations is excluded from allowable costs claimed. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs by the amount of compensation paid in excess of the DMA guidelines, plus related employer's share of payroll taxes.
(DMA Compensation Ceilings; HCFA 15-906)

1996 Audit Report: Nursecare of Atlanta, Inc.

9

Position Title
Dietary Supervisor Payroll Taxes
Administrator (B) Payroll Taxes
Assistant Administrator (B) Payroll Taxes
Office Supervisor (B) Payroll Taxes
Bookkeeper (B) Payroll Taxes

Total

Guideline

Compensation Ceiling (A)

Excess

$

45,933 $ 35,638 $ (10,295)

3,316

2,726

(590)

81,294

80,179

(1,115)

5,127

5,127

0

48,215

47,529

(686)

3,518

3,518

0

39,598

28,655

(10,943)

2,896

2,192

(704)

35;175

32,677

(2,498)

2,507

2,500

(7)

$ 267,579 $ 240)41 $

(26,838)

(A) Ceilings have been adjusted to percentage of full-time, where applicable. (B) Includes amounts paid on behalf of employee.

COST CENTER Dietary Administrative and General
Total Adjustment to Allowable Costs

$ (10,885) (15,953)
$====(2=6=,8=38=)

Finding No. 6

Expense Reimbursements
Documentation examined during the audit showed that amounts shown on the cost report as revenues were from sales of materials and/or services, the cost of which were included in allowable costs claimed. Federal regulations provide that amounts received for discounts, allowances, refunds and rebates are not to be considered a form of income but should be used to reduce the specific costs to which they apply. We recommend that the provider implement policies and procedures to ensure that allowable costs claimed are reduced by any expense reimbursements received. We

10

Nursing Facilities Services Program

recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs claimed by expense reimbursements shown as revenues.
(HCFA Pub. 15-1 Section 800)

COST CENTER Dietary

$===(==29:::::::::6=)

Finding No. 7

Allocation ofIndirect Expenses to Non-Patient Care Areas

The provider uses a portion of its building for purposes which are not related to patient care. Indirect expenses related to the non-patient care use of the building are calculated on Schedule B-5 of the cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on Schedule B-5 as allowable costs and square footage. These findings required the
recalculation of Schedule B-5. A copy of this recalculation has been furnished to the
provider. We recommend that the provider implement policies and procedures to ensure that all information used to allocate indirect expenses to non-patient care areas is correct. We recommend that the Department of Medical Assistance make the following adjustment to decrease allowable costs for the net effect of the recalculation.
(HCFA Pub. 15-1 Section 2102.3; General Instructions to the Cost Report)

COST CENTER Laundry and Housekeeping Operation and Maintenance of Plant Property and Related Expenses

$

(1,240)

(1,007)

(1,665)

Total Adjustment to Allowable Costs

$==(:!::::3::!::::::::,9::::::12==)

1996 Audit Report: Nursecare of Atlanta, Inc.

11

Finding No.8

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; OMA Policies and Procedures, Appendix D)

COST CENTER

Operation and Maintenance of Plant

Cost of Fixed Equipment

$

(934)

Cost of Major Moveable Equipment

(1,825) $

Property and Related Expenses

Allowable Depreciation Expense

(2,759) 46

Total Adjustment to Allowable Costs

$==(==2:!::::::7:=. =13=)

Finding No. 9

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)

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Nursing Facilities Services Program

COST CENTER Administrative and General

$====(2='=04=8=)

Finding No. 10

Excess Depreciation

Documentation examined during the audit in support of fixed assets and depreciation showed that either the property was not included in the proper class or depreciation was not calculated in accordance with DMA guidelines. DMA Policies and Procedures require the use ofminimum required asset lives. We recommend that the provider implement policies and procedures to ensure that depreciation expense is calculated in accordance with DMA guidelines. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs claimed by the amount of depreciation expense claimed in excess of the total allowable.
(DMA Depreciation Guidelines, DMA Policies and Procedures Section 1002.l(k))

COST CENTER Property and Related Expenses

$==(=3=,5=37=)

Finding No.11

Patient Day Statistics
Census records examined during the audit showed that the nursing home had 78,373 patient days of service rather than the 78,185 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 188 days to correct the statistical information.
(HCFA Pub. 15-1 Section 2304)

1996 Audit Report: Nursecare of Atlanta, Inc.

13

Finding No.12

Patient Trust Fund Not in Balance
Documentation examined during the audit showed that the provider manages funds belonging to its patients. The assets ofthe patient trust fund at June 30, 1996, totaled $38,595.06; patient trust fund liabilities were $39,846.46. Federal law requires that the provider establish and maintain a system that assures a full and complete and separate accounting, according to generally accepted accounting principles, of each resident's personal funds. During the audit we recommended that the provider reimburse the patient trust fund for this shortage and further recommended that the provider implement policies and procedures to maintain a balanced, reconciled patient trust fund. It should be noted that prior to the completion of the audit, the provider reimbursed the shortage in the patient trust fund. We recommend that the Department ofMedical Assistance ensure that the provider implements the policies and procedures necessary to maintain a balanced, reconciled patient trust fund.
(42 CFR 483.10C(4))

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Nursing Facilities Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

1

Incorrect Expense Classifications

2

Accrual Basis of Accounting

3

Costs Not Related to Patient Care

$ (111,243) (13,316) (613) $ (125,172)

Special Services

1

Incorrect Expense Classifications

$ (66,485)

2

Accrual Basis of Accounting

(819)

3

Costs Not Related to Patient Care

(7,878)

4

Recalculation of Ancillary Services Cost

Adjustment

17,930

(57,252)

Dietary

1

Incorrect Expense Classifications

$

20,723

2

Accrual Basis of Accounting

(1,844)

4

Recalculation of Ancillary Services Cost

Adjustment

(19,386)

5

Excess Compensation

- (10,885)

6

Expense Reimbursements

(296)

(11,688)

Laundry and Housekeepine

1

Incorrect Expense Classifications

$

633

2

Accrual Basis of Accounting

(2,049)

7

Allocation oflndirect Expenses to Non-Patient

Care Areas

(1,240)

(2,656)

1996 Audit Report: Nursecare of Atlanta, Inc.

15

FINDING NUMBER

ALLOWABLE COSTS

Operation and Maintenance ofPlant

1

Incorrect Expense Classifications

$

485

2

Accrual Basis of Accounting

(205)

7

Allocation oflndirect Expenses to Non-Patient

Care Areas

(1,007)

8

Fixed Asset Purchases Claimed as Expense

(2,759)

Administrative and General

1

Incorrect Expense Classifications

2

Accrual Basis of Accounting

3

Costs Not Related to Patient Care

5

Excess Compensation

9

Lack of Sufficient Documentation

$ 170,855 (2,253)
(10,617) (15,953)
(2,048)

Property and Related Expenses

1

Incorrect Expense Classifications

.$

(14,968)

2

Accrual Basis of Accounting

(2,127)

3

Costs Not Related to Patient Care

(151)

7

Allocation of Indirect Expenses to Non-Patient

Care Areas

(1,665)

8

Fixed Asset Purchases Claimed as Expense

46

10

Excess Depreciation

(3,537)

Total Audit Findings Affecting Allowable Costs

$

(3,486) 139,984
(22,402) (82,672)

PATIENT DAY STATISTICS

11 Patient Day Statistics

188

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Nursing Facilities Services Program

SCHEDULEOF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

ALLOWABLE COSTS

Routine Services

$ 3,000,665 $ (125,172) $ 2,875,493

Special Services

289,459

(57,252)

232,207

Dietary

708,526

(11,688)

696,838

Laundry and Housekeeping

439,434

(2,656)

436,778

Operation and Maintenance of Plant

358,082

(3,486)

354,596

Administrative and General

664,833

139,984

804,817

Property and Related Expenses

581,262

(22,402)

558,860

Total Allowable Costs

$ 6,042,261 $ (82,672) $ 5,959,589

PATIENT DAY STATISTICS

78,185

188

78,373