Audit report, for the year ended June 30, 1995, Savannah Beach Nursing Center, Medicaid provider no. 00142876A, Nursing Facilities Services Program [June 30, 1995]

DEPARTMENT
.

OF

AUDITS-

AND

ACCOUNTS

Medicaid and LocalGovernmeritAudits

.

' .

AUDITREPORT.

FOR THE YEAR ENDED JUNE 30, 1995

SAVANNAHBEACHNURSINGcENTER



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'

!

MEDICAID PROVIDE.RNUMBER 00142876A

NURSING FACILITIES SERVICES :PROGRAM

TABLE OF CONTENTS
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
IN'TRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FINDIN'GS AND RECOMMENDATIONS ................... 4 Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 14 Schedule of Allowable Costs and Patient Day Statistics 17

Report Prepared By:
State ofGeorgia Department ofAudits andAccounts Medicaid andLocal GovernmentAudits 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 7, 1997

Members ofthe Board ofMedical Assistance, and The Honorable Marge Smith, Commissioner Department ofMedical Assistance 2 Peachtree Street, N.W., 40th Floor Atlanta, Georgia 30303
Ladies and Gentlemen:
This report provides the results of our audit of Savannah Beach Nursing Center, provider number 00142876A, 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 ofMedical Assistance Nursing Facilities Services Program and is not to be used or relied upon for any other purpose.
Respectfully Submitted,
~
Claude L. Vickers State Auditor
CLV/al/by

1995 Audit Report: Savannah Beach Nursing Center

1

INTRODUCTION

General lnformanon

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 Information

Savannah Beach Nursing Center, a 50-bed long-term health care facility located in Tybee Island, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facilities Services Program. The facility provides both skilled and intermediate care services to resident

2

Nursing Facilities Services Program

Audit Objectives

patients. The facility was operated as a component of Southeastern Medical Management Corporation, a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1995.

The purpose ofthis audit was to determine whether Savannah Beach Nursing 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 Savannah Beach Nursing 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 ifthe patient

day statistics are accurately reported; and



recommend appropriate action based on the results of

our audit.

1995 Audit Report: Savannah Beach Nursing Center

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 OMA 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 Savannah Beach Nursing 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.

4

Nursing Facilities Services Program

FINDINGS AND RECOMMENDATIONS

Finding No.1

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.
(HCFAPub. 15-1 Section2304)

COST CENTER Routine Services Special Services Dietary Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General Property and Related Expenses

$ (36,802) (684)
(5,148) (5,080)
(202) (3,475) (6,719)

Total Adjustment to Allowable Costs

$====='o!ii!:5:!:1!,18::!:::):!::!JO~)

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 proyJder 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

1995 Audit Report: Savannah Beach Nursing Center

5

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:
June 30, 1995 Balance Accounts Payable Accrued Employee Benefits Property Taxes Payable
Total Adjustment to Allowable Costs

Allowable Costs

$

(4,497)

(308)

(1,940)

$

(6 745)

COST CENTER Routine Services Special Services Dietary Operation and Maintenance ofPlant Administrative and General Property and Related Expenses
Total Adjustment to Allowable Costs

$

(3,303)

(1,014)

(122)

(294)

(72)

(1,940)

$

(6 745)

Finding No. 3

Expenses Claimed by Anotlter Cltain Component
Allowable costs claimed by another chain component included expenses applicable to this provider. 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, its home office, and all other components of the chain implement policies and procedures to ensure that all costs are included in allowable.costs of the chain component to which they apply. We recommend that the Department of Medical Assistance make the following adjustment to increase allowable costs by the amount of expense applicable

6

Nursing Facilities Services Program

to this provider which was claimed by the other chain component.
(HCFA Pub. 15-1 Section 2304)

COST CENTER Routine Services Special Services Laundry and Housekeeping Operation and Maintenance ofPlant Administrative and General

$

9,698

78

123

2,778

875

Total Adjustment to Allowable Costs

$===1==3~55~2~

COMPONENT FACILITY Oceanside Nursing Center

$===(1!::=!3:l:!51!:!:5~2!:t:)

Finding No. 4

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, Appendix D)

COST CENTER Routine Services Administrative Supplies Dietary Supplements Maintenance Supplies Dietary Dietary Supplements

$

(898)

(1,506)

(50) $

(2,454) 1,506

1995 Audit Report: Savannah Beach Nursing Center

7

Operation and Maintenance ofPlant Communication Expense Maintenance Supplies
Administrative and General Administrative Supplies Communication Expense Interest Expense Lease Expense
Property and Related Expenses Interest Expense Lease Expense
Total Adjustment to Allowable Costs

$

(335)

50

$

898

335

548

(34)

$

(548)

34

$

(285)
1,747 (514)
Q

Finding No. 5

Self-insurance Reserve Fund

Documentation examined during the audit showed that allowable costs claimed included contributions to a self-funded trust for workers' compensation insurance. Federal regulations provide that contributions for any period in excess ofthe amount oflosses paid by the fiduciary ofthe self-insurance fund plus expenses related to these losses are not allowable. We recommend that the provider implement policies and procedures to ensure that contributions to the self-insurance reserve fund in excess of allowable expenses are not included in the cost report. We recommend that the Department of Medical Assistance make the following adjustment to remove from allowable costs the contributions made to the self-insurance reserve fund in excess of the allowable expenses.
(HCFA Pub. 15-1 Sections 2161)

COST CENTER Routine Services Dietary Operation and Maintenance ofPlant Administrative and General

$ (21,681) 902
(8,427) 798

Total Adjustment to Allowable Costs

$==:!=!(2~8~4:!::::!0i::l!8=!::)

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Nursing Facilities Services Program

Finding No. 6

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, 2102.1, OMA Policies and Procedures Sections 902, I002.1 (k))

ITEMS Advertising Prescription Drugs V.A. Patient Expense

$

(280)

(4,867)

{1,058)

$==='!1::l:6:=t::!2~0!:!:!5=)

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

$

(5,708)

(217)

(280)

$==='!1::l:6!:=2~0!:!:5=)

Finding No. 7

Expense Applicable to Anotlter Cltain Component
Allowable costs claimed included a copier maintenance contract, copier purchase, pharmacy charges, salary expense, and employee benefits expense applicable to another chain component. 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, its home office, and all other components of the chain implement policies

1995 Audit Report: Savannah Beach Nursing Center

9

and procedures to ensure that all costs are included in allowable costs of the chain component to which they apply. We recommend that the Department of Medical Assistance make the following adjustment to remove from allowable costs the expenses applicable to another chain component.
(HCFA Pub. 15-1 Section 2304)

COST CENTER Routine Services Dietary Administrative and General

$

(1,732)

(4,450)

(7,668)

Total Adjustment to Allowable Costs

$===()i!::=3::l:::8!i!::1151::li0!::c:)

RELATED FACILITY Oceanside Nursing Center

$==:::!:::1=:13c!:!::85~0=

Finding No. 8

Non-vesting Sick Leave Costs

Documentation examined during the audit showed that allowable costs claimed included the cost of sick pay earned by, but not paid to employees. Federal regulations provide that the reasonable cost of sick leave taken by an employee is recognized as a fringe benefit and includable in allowable cost in the cost reporting period when paid. We recommend that the provider implement policies and procedures to ensure that only costs applicable to allowable sick pay are included in allowable costs claimed. We also recommend that the Department of Medical Assistance make the following adjustment to decrease allowable costs for the changes in actual expense applicable to the period.
(HCFA Pub. 15-1 Section 2144.8A)

Accrued Sick Leave Cost, 6/30/94 Accrued Sick Leave Cost, 6/30/95

$

0

(3,171)

Changes in Actual Expense

$.===(3~17!:::!1::c)

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Nursing Facilities Services Program

COST CENTER Routine Services Laundry and Housekeeping
Total Adjustment to Allowable Costs

$

(2,374)

(797)

Finding No. 9

Allocationsfrom Home Office

The provider was a component of a chain organization for the year ended June 30, 1995. As a result ofour audit of the home office cost report filed in connection with the Medicaid Nursing Home Facilities Program, we recommended that the Department ofMedical 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 ofthe adjustments made to the home office cost report.
(HCFA Pub. 15 I Section 2150)

COST CENTER Administrative and General Pooled Costs Administrative Expenses

$==='1i:::!1::ll::6~0!:!:!3:::)

Finding No. JO

Home Office Costs Paid by Cltain Component
Allowable costs claimed by this component of a chain organization included amounts incurred for the benefit ofthe entire chain. Federal regulations provide that allowable costs incurred for the benefit of, or directly attributable to, a specific provider must be allocated directly to the chain entity for which they were incurred; however, federal regulations also provide that allowable costs that have not been directly assigned to specific chain components must be allocated among the providers on a basis to

1995 Audit Report: Savannah Beach Nursing Center

11

equitably allocate the costs over the chain components or activities receiving the benefits ofthe costs. We recommend that the provider and its home office implement policies and procedures to ensure that costs incurred for the benefit of the entire chain organization are included in home office allowable costs rather than in the provider's allowable costs. We recommend that the Department of Medical Assistance make the following adjustment to remove the costs benefiting the entire chain from this provider's allowable costs.
(HCFAPub. 15-1 Section2150.3)

COST CENTER Administrative and General

$====='8~5=:!9=)

Finding No.11

Excess Compensation

Allowable costs claimed included compensation to employees which exceeded OMA 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 OMA 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 ofcompensation paid in excess of the OMA guidelines, plus related employer's share of payroll taxes.
(DMA Compensation Ceilings; HCFA I5-906)

Position Title
Administrator Payroll Taxes

Total

Guideline

Compensation Ceiling (A)

Excess

$

9,454 $ 9,386 $

(68)

723

718

(5)

$

]Q l 11 $ ]Q ]Qt! $

(13}

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

12

Nursing Facilities Services Program

COST CENTER Administrative and General

$===::::::!1'=7~3}=

Finding No.12

Excess Depreciation

Documentation examined during the audit in support offixed 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 Procedure~ 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 OMA 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

$====='~8:!::::14!::t:::)

Finding No.13

Patient Day Statistics
Census records examined during the audit showed that the nursing home had 17,360 patient days of service rather than the 17,417 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 57 days to correct the statistical information.
(HCFAPub. 15-1 Section2304)

1995 Audit Report: Savannah Beach Nursing Center

13

Finding No.14

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, 1995, totaled $10,887.56; patient trust fund liabilities were $10,787.56. 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 CFR 483.I0C(4))

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Nursing Facilities Services Program

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Roufine Services

I

Lack of Sufficient Documentation

2

Accrual Basis ofAccounting

3

Expenses Claimed by Another Chain

Component

4

Incorrect Expense Classifications

5

Self-insurance Reserve Fund

6

Costs Not Related to Patient Care

7

Expense Applicable to Another Chain

Component

8

Non-vesting Sick Leave Costs

$ (36,802) (3,303)
9,698 (2,454) (21,681) (5,708)
(1,732) (2,374) $

Special Services

I

Lack of Sufficient Documentation

2

Accrual Basis ofAccounting

3

Expenses Claimed by Another Chain

Component

6

Costs Not Related to Patient Care

$

(684)

(1,014)

78 (217)

Dietary

1

Lack of Sufficient Documentation

2

Accrual Basis ofAccounting

4

Incorrect Expense Classifications

5

Self-insurance Reserve Fund

7

Expense Applicable to Another Chain

Component

$

(5,148)

(122)

1,506

902

(4,450)

(64,356) (1,837) (7,312)

1995 Audit Report: Savannah Beach Nursing Center

15

FINDING NUMBER

ALLOWABLE COSTS

Laundry and Housekeeping

1

Lack of Sufficient Documentation

3

Expenses Claimed by Another Chain

Component

8

Non-vesting Sick Leave Costs

$

(5,080)

123 (797)

Operation and Maintenance ofPlant

1

Lack of Sufficient Documentation

2

Accrual Basis of Accounting

3

Expenses Claimed by Another Chain

Component

4

Incorrect Expense Classifications

5

Self-insurance Reserve Fund

$

(202)

(294)

2,778 (285) (8,427)

Administrative and General

1

Lack of Sufficient Documentation

$

(3,475)

2

Accrual Basis of Accounting

(72)

3

Expenses Claimed by Another Chain

Component

875

4

Incorrect Expense Classifications

1,747

5

Self-insurance Reserve Fund

798

6

Costs Not Related to Patient Care

(2'80)

Expense Applicable to Another Chain

7

Expense Applicable to Another Chain

Component

(7,668)

9

Allocations from Home Office

(1,603)

10

Home Office Costs Paid by Chain Component

(859)

11

Excess Compensation

(73)

(5,754) (6,430)
(10,610)

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Nursing Facilities Services Program

FINDING NUMBER

ALLOWABLE COSTS

Property and Related Expenses

I

Lack of Sufficient Documentation

2

Accrual Basis of Accounting

4

Incorrect Expense Classifications

12

Excess Depreciation

$

(6,719)

(1,940)

(514)

(814)

Total Audit Findings Affecting Allowable Costs

$

(9,987) (106,286)

PATIENT DAY STATISTICS

13 Decrease in Patient Day Statistics

(57)

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS Ii

UI

COST

OFFICE

FIELD

-Q=>.....

REPORT

AUDIT

NATT AUDIT

AUDIT

AUDITED

f

ALLOWABLE COSTS Routine Services Special Services Dietary Laundry and Housekeeping

TOTALS FINDINGS ill_ FINDINGS (2) FINDINGS TOTALS

e
:l

$ 596,190 58,174 129,523 80,746

Cl.I

$

112 $ (64,356) $ 531,946

1g:<0;

(1,837)

56,337

1==-

~

(7,312) (5,754)

122,211 74,992

I!

Operation and Maintenance of Plant Administrative and General Property and Related Expenses

68,602 121,431 $ 210,288

(2,139)

(6,430) (10,610)
(9,987)

62,172 108,682 200,301

~~;I
.=...

Total Allowable Costs

$ 1,264,954 $

(2,139) $

112 $ (106,286) $ 1,156,641

PATIENT DAY STATISTICS

17!417

(5?)

17!360

(I) An office audit ofthe provider was performed before this field audit. The results of the office audit are included in this column for informational purposes.

(2) A Nurse Aide Testing and Training (NATT) audit of the provider was performed before this field audit. The results of the NATT audit are included in this

column for informational purposes.

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