Audit report, for the year ended June 30, 1995, Ross Memorial Health Care Center, Medicaid provider no. 00142942A, Nursing Facilities Services Program [June 30, 1995]

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R.S4
1994 _9;- DEPARTMENT OF AUDITS AND ACCOUNTS Medicaid and Local Government Audits.

. AUDIT REPORT

FOR THE YEAR ENDED JUNE 30, 1995 -

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ROSS MEMORIAL HEALTH CARE CENTER

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MEDICAID PROVIDER NUMBER 00142942A

NURSING FACILITIES SERVICES PR.OGRAM

TABLE OF CONTENTS
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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 .Hedicaid and Local Government Audits Division 254 /Vas'1i11gto11 Sheet, S. W., Suite 322
A1lm11a, Georgia 30334-8400 r-10./J 656-2006
Micl,ael .l Plant. Direclor

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

June 24, 1997

Members of the Board of Medical Assistance, and The Honorable Marge Smith, 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 Ross Memorial Health Care Center, provider number 00142942A, a participant in the Nursing Facilities Services Program for the year ended June 30, 1995. This report is intended to be used solely in connection with the administration of the Georgia Department of Medical Assistance Nursing Facilities Services Program and is not to be used or relied upon for any other purpose.
Respectfully Submitted,

CLV/gg/by

Claude L. Vickers State Auditor

1995 Audit Report: Ross Memorial Health Care 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 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 b~formation

Ross Memorial Health Care Center, a 100-bed long-term health care facility located in Kennesaw, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facilities Services Program. The facility provides both skilled and intermediate care services to resident

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Nursing Facilities Services Program

Audit Objectives

patients. The facility was operated as a freestanding nursing home by Shady Grove Rest Home, Inc., for the year ended June 30, 1995.

The purpose of this audit was to determine whether Ross Memorial Health Care 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, 1995; and to determine whether Ross Memorial Health Care Center 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.

1995 Audit Report: Ross Memorial Health Care Center

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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 of Audits and Accounts is responsible for providing the Department ofMedical Assistance with information regarding the accuracy of cost and patient data for Ross Memorial Health Care Center for the year ended June 30, 1995. 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 report. In all other respects, this audit was conducted in accordance with generally accepted government auditing standards.

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Nursing Facilities Services Program

FINDINGS AND RECOMMENDATIONS

Finding No.1

Incorrect Expense Classifications

Documentation examined during the audit showed that some ofthe expenses were not classified in accordance with the Uniform Chart of Accounts prescribed by the Department ofMedical 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, Appendi:-.: D)

COST CENTER

Routine Services

Dietary Supplements

$ (1,447)

Forms

(379)

License

(100)

Office Supplies

{279} $

Special Services

Forms

$

(296)

Linen

(5,028)

Office Supplies

(89)

Subscriptions

{45}

Dietary

Dietary Supplements

$

1,447

Office Supplies

{227}

Laundry and Housekeeping

Linen

Operation and Maintenance of Plant

Administrative Salaries and Employee

Benefits

$ (19,145)

Legal Fees

(665)

Office Supplies

{30}

(2,205)
(5,458) 1,220 5,028
(I 9,840)

1995 Audit Report: Ross Memorial Health Care Center

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Administrative and General

Administrative Salaries and Employee

Benefits

$ 19,145

Automobile Insurance

(614)

Forms

675

Legal Fees

665

Liability Insurance

6,084

License

100

Mortgage Insurance Premium

(15,299)

Office Supplies

625

Subscriptions

45

Property and Related Expenses

Automobile Insurance

$

614

Liability Insurance

(6,084)

Mortgage Insurance Premium

15 299

Total Adjustment to Allowable Costs

$

11,426 9 829

Finding No. 2

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.15-1 Sections 2102.3, 2122.2, 2160k DMA Policies and Prm:edures Sections 902, 1002.l(k)l

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Nursing Facilities Services Program

ITEMS Advertising Contributions Patients' Personal Expenses Personal Purchases Political Contributions Prescription Drugs Tax Penalties
COST CENTER Routine Services Special Services Administrative and General
Total Adjustment to Allowable Costs

$

(313)

(50)

(311)

(2,102)

(150)

(381)

(335)

$

(3 642)

$

(2,313)

(381)

(948)

$==='~3===6~4~2!:t:)

Finding No.3

Office Audit Adjustment Reversal
An adjustment was made during the office audit to reclassify contracted services expense from the Routine Services cost center to the Administrative and General cost center. Documentation examined during the audit showed that this expense was for a contracted director of nursing and not for "training" as 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 ensure that information on the cost report is complete and accurate. We recommend that the Department of Medical Assistance make the following adjustment to reverse the office audit adjustment.
(HCFA Pub. 15-1 Section 2304)

1995 Audit Report: Ross Memorial Health Care Center

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

$

5,060

(5,060)

$====~

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 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 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, 1994 Balance Accounts Payable

$===='c::!:7::=0:::!:::7-:i:::.)

COST CENTER Special Services

Finding No. 5

Recalculation ofAncillary Services Cost Adjustn1e11t
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-1 A of the cost report. Documentation examined

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Nursing Facilities Services Program

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 ofMedical Assistance make the following adjustment to increase allowable costs for the net effect of the recalculation.
(General Instructions to the Cost Report)

Ancillary Services

Adjustment Per Office
Audit

Recalculated Adjustment Audit Finding

Pharmacy

$ (32 211) $ (22 260) $

]6 2:Z3

COST CENTER Special Services

$=====]6~2::!:::Z~3=

Finding No. 6

Fixed Asset Purchases Clainied 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 of Accounts issued by DMA provides for inclusion of such assets in property accounts. We recommend that the provider implen-i"ent 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 SectJon I08: DMA Policies and Procedures, Appendi:-.; D)

1995 Audit Report: Ross Memorial Health Care Center

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COST CENTER

Dietary

Cost of Major Moveable Equipment

Operation and Maintenance of Plant

Cost of Major Moveable Equipment

Administrative and General

Cost of Major Moveable Equipment

Property and Related Expenses

Allowable Depreciation Expense

$

Cost of Major Moveable Equipment

Total Adjustment to Allowable Costs

$
576 (610)
$

(605) (2,007) (5,000)
(34)
rz M6}

Finding No. 7

Expense Reinihursenients

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 recommend that the Department ofMedical Assistance make the following adjustment to reduce allowable costs claimed by expense reimbursements shown as revenues.
(HCFA Pub. l 5-1 Section 800)

COST CENTER Dietary Administrative and General

$

(89)

(94)

Total Adjustment to Allowable Costs

$===='==)==8~1=)

Nursing Facilities Services Program

Finding No. 8

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.
(HCF A 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

$

(863)

(1,339)

(3,070)

Total Adjustment to Allowable Costs

Finding No. 9

Lack ofSufficient Docunientation
Some of the expenses included in allowable costs were not supp<?_rted 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.
(HCF \ l'ub I 5- l Sectiun 2304)

1995 Audit Report: Ross Memorial Health Care Center

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COST CENTER Administrative and General

$===='ce!8::::7:!!:0:c)

Finding
No. JO

Excess Conipensation

Allowable costs claimed included compensation to employees which exceeded DMA maximum limitations. The Department of Medical 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)

Position Title

Total

Guideline

Compensation Ceiling (A)

Excess

Personnel Manager Payroll Taxes

$

19,500 $

7,921 $

11,579

1 492

606

886

$

20 222 $ 8 527 $

]2 465

(A) Ceilings have been adjusted to percentage of full-time, where applicable.

COST CENTER Administrative and General

$====1(==]~2==46~S:::)

Finding No. 11

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

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Nursing Facilities Services Program

was not calculated in accordance with DMA guidelines. DMA Policies and Procedures require the use of minimum 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 I002.1 (k))

COST CENTER Property and Related Expenses

$===='=(2~6~5=)

Finding No.12

Patient Day Statistics
Census records examined during the audit showed that the nursing home had 35,715 patient days of service rather than the 35,684 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 31 days to correct the statistical information.
(HCFA Pub. 15-1 Section 2304)

Finding No. 13

Patient Trust Fund Not in Balance
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, 1996, totaled $601.57; patient trust fund liabilities were $622.28. 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

1995 Audit Report: Ross Memorial Health Care Center

13

personal funds. We recommend that the provider reimburse the patient trust fund for this shortage. We further recommend that the provider implement policies and procedures to maintain a balanced, reconciled patient trust fund.
(42 CFR483.J0C(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

Costs Not Related to Patient Care

,..,
.)

Office Audit Adjustment Reversal

$

(2,205)

(2,313)

5 060 $

Special Services

1

Incorrect Expense Classifications

2

Costs Not Related to Patient Care

4

Accrual Basis of Accounting

5

Recalculation of Ancillary Services

Cost Adjustment

$

(5,458)

(381)

(707)

16 973

Dietarv

1

Incorrect Expense Classifications

$

1,220

6

Fixed Asset Purchases Claimed as Expense

(605)

7

Expense Reimbursements

(89)

Laundrv and Housekeeping

l

Incorrect Expense Classifications

8

Allocation of Indirect Expenses to

Non-Patient Care Areas

$

5,028

(863)

542 10,427
526 4,165

1995 Audit Report: Ross Memorial Health Care Center

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FINDING NUMBER

ALLOWABLE COSTS

Operation and Maintenance ofPlant

1

Incorrect Expense Classifications

$ (19,840)

6

Fixed Asset Purchases Claimed as Expense

(2,007)

8

Allocation of Indirect Expenses to Non-Patient

Care Areas

(1,339)

Administrative and General

1

Incorrect Expense Classifications

$

11,426

2

Costs Not Related to Patient Care

..,

.)

Office Audit Adjustment Reversal

(948) (5,060)

6

Fixed Asset Purchases Claimed as Expense

(5,000)

7

Expense Reimbursements

(94)

9

Lack of Sufficient Documentation

(870)

10

Excess Compensation

(12,465)

Propertv and Related Expenses

1

Incorrect Expense Classifications

$

9,829

6

Fixed Asset Purchases Claimed as Expense

(34)

8

Allocation oflndirect Expense to

Non-Patient Care Areas

(3,070)

11

Excess Depreciation

(265)

Total Audit Findings Affecting Allowable Costs

$

(23,186)
(13,011) 6 460
(14,077)

PATIENT DAY STATISTICS

12 Increase in Patient Day Statistics

..,

....

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

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COST REPORT TOTALS

OFFICE AUDIT
FINDTNGS ill

FIELD AUDIT FTNDTNGS

AUDITED TOTALS

ALLOWABLE COSTS

Routine Services

$ 1,227,804 $

(5,060) $

542 $ 1,223,286

Special Services

102,474

(15,223)

10,427

97,678

Dietary

366,438

5,962

526

372,926

Laundry and Housekeeping

142,546

4,165

146,711

Operation and Maintenance of Plant

247,971

(23,186)

224,785

Administrative and General

325,237

(1,902)

(13,011)

310,324

Property and Related Expenses

511,904

(2,014)

6,460

516,350

2'!

C.,

Total Allowable Costs

$ 2,924,374 $

(18,237) $ (14,077) $__2,892,060_

~"=-'

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PATI ENT DAY STATIS TICS

35,684

31

35,715_

I~.

I")
~
.""",'d

0

(I) An ntlice audit of the provider was perfo1med before this field audit. The results of the office audit are included in this column for infomrntional purposes.

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