Audit report, for the year ended June 30, 1998, The Retreat Nursing Home, Medicaid provider no. 00142733A, Nursing Facilities Services Program [June 30, 1998]

TABLE OF CONTENTS

LETTER OF TRANSMITTAL

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Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 10

Schedule of Allowable Costs and Patient Day Statistics

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Report PreparedBy:
State ofGeorgia DepartmentofAudits and Accounts Medicaidand Local Government Audits Division
254 Washington Street. S.w.. Suite 322
Atlanta. Georgia 30334-8400 (404) 656-2006
MichaelA. 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 16, 1999

MICHAEL A. PLANT
DIRECTOR

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 The Retreat Nursing Home, provider number 00142733A, 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,
~w.~ Russell W. Hinton State Auditor
RWH/cdb/ds

1998 Audit Report: The Retreat Nursing Home

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

The Retreat Nursing Home, a 55-bed long-term health care facility located in Monticello, 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 is owned and operated by Jasper Memorial Hospital Authority, which operated both Jasper Memorial Hospital and The Retreat

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Nursing Facility Services Program

Audit Objectives

Nursing Home in the same physical facility during the year under review.

The purpose of this audit was to determine whether The Retreat Nursing Home 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 The Retreat Nursing Home 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



determine 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: The Retreat Nursing Home

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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 the provider's internal control structure to the extent necessary to plan our
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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 The Retreat Nursing Home 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 The Retreat Nursing Home, our audit did not include a review of these costs.

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Nursing Facility Services Program

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 Jasper Memorial Hospital. 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 determine net expenses for cost allocation on the Medicare cost report worksheets. These costs are subject to audit by the Medicare intermediary. Any audit findings by the Medicare intermediary 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 [mal-settled.
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 The Retreat Nursing Home 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: The Retreat Nursing Home

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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 Policiesand Procedures, AppendixD)

COST CENTER Routine Services Dietary Supplements Supplies Dietary Dietary Supplements Administrative and General Rental Expense Supplies Property and RelatedExpenses Rental Expense

$

(5,275)

(345) $

$

(1,379)

345

(5,620) 5,275
(1,034) 1,379

Total Adjustment to Allowable Costs

$ = = = = =o

1998 Audit Report: The Retreat Nursing Home

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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
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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)

ITEMS Hospice Expense Insurance Expense

$

(553)

(9,119)

Total Adjustment to Allowable Costs

$=====(=9,=67=2=)

COST CENTER Routine Services Administrative and General
TotalAdjustment to Allowable Costs

$

(553)

(9,119)

$ ==. =====:::(::9::,=6:7=2==)

Accounts Receivable Credit Balances

Finding No.4

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 $269.86 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of June 30, 1998. We recommend that the provider review its credit accounts receivable

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Nursing Facility Services Program

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

Balance

Dance, Josie Gardner III, J
Hardy, Mary

$

139.42

5.24

125.20

Total

$

269.86

Patient Trust Fund Not in Balance

Finding No.5

Documentation examined during the audit showed that the provider manages funds belonging to its patients. The assets of the patient trust fund at June 30, 1998, totaled $1,724.74; patient trust fund liabilities were $1,263.07. 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. We recommend that the provider return these excess funds to the appropriate parties. We further recommend that the provider implement policies and procedures to maintain a balanced, reconciled patient trust fund. We also recommend that the Department of Medical Assistance ensure that the provider returns the excess funds and implements the policies and procedures necessary to maintain a balanced, reconciled patient trust fund.
(42 CFR483.10C(4

1998 Audit Report: The Retreat Nursing Home

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Patient Day Statistics

Finding No.6

The provider stated on the cost report that it furnished 19,410 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate.

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Nursing Facility Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

2 Incorrect Expense Classifications 3 Costs Not Related to Patient Care

$ (5,620) (553) $

(6,173)

Dietary
2 Incorrect Expense Classifications

5,275

Administrative and General
2 Incorrect Expense Classifications 3 Costs Not Related to Patient Care

$ (1,034) (9,119)

(10,153)

ProperlY and Related Expenses
2 Incorrect Expense Classifications

1,379

Total Adjustment to Allowable Costs

$ (9,672)

1998 Audit Report: The Retreat Nursing Home

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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
Total Allowable Costs
PATffiNTDAYSTATISTICS

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS'

$ 782,398 $

(6,173)$ 776,225

78,851

78,851

346,545

5,275

351,820

70,968

70,968

98,194

98,194

163,622

(10,153)

153,469

112,015

1,379

113,394

$ 1,652,593 $

(9,672) $ 1,642,921

19,410

19,410 .