Yn 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) 8 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) 12 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)) 14 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 16 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