TABLE OF CONTENTS

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5

Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 11

Schedule of Allowable Costs and Patient Day Statistics 13

Report PreparedBy:
State ofGeorgia
Department0/Audits and Accounts
Medicaidand Local GovernmentAudits Division
254 Washington Street,S.w., Suite 322
Atlanta, Georgia 30334-8400 (404) 656-2006
MichaelA. Plant, Director

RUSSELL W. HINTON
STATE AUDrroR

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

MICHAEL A. PLANT
DIRECTOR

January 20, 2000

Members of the Board of Community Health, and The Honorable Russ Toal, Commissioner Department of Community Health 2 Peachtree Street, NW, 40th Floor Atlanta, Georgia 30303-3159
Ladies and Gentlemen:
This report provides the results of our audit of Smith Medical Nursing Care Center, Inc., provider number 00143008A, a participant in the Nursing Facility Services Program for the year ended June 30, 1999. This report is intended to be used solely in connection with the administration of Georgia Community Health Nursing Facility Services Program and is not to be used or relied upon for any other purpose.
Respectfully Submitted,

RWH/edm/bw

Russell W. Hinton State Auditor

1999 Audit Report: Smith Medical Nursing Care Center. Inc.

1

INTRODUCTION

General Information

The Georgia Community Health Program (Medicaid) is administered by Georgia Community Health 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. Georgia Community Health 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 GeorgiaCommunity Health or its agents. In an agreement with Georgia Community Health, the Department of Audits and Accounts has accepted the responsibility of auditing Medicaid providers.

Provider Information

Smith Medical Nursing Care Center, Inc., a 56-bed long-term health care facility located in Sandersville , 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 was operated as a freestanding nursing home for the year ended June 30, 1999.

2

Nursing Facility Services Program .

Audit Objectives

The purpose of this audit was to determine whether Smith Medical Nursing Care Center, 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, 1999; and to determine whether Smith Medical Nursing Care Center, Inc., 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



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 audit. We interviewed provider personnel and examined records and documentation to determine the adequacy of amounts and disclosures

1999 Audit Report: Smith Medical Nursing Care Center. Inc.

3

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 GCH Policies and Procedures for Nursing Facility Services.
In accordance with Section i002 of Policies and Procedures for Nursing Facility Services, Georgia Community Health has calculated the payment rate for Smith Medical Nursing Care Center, Inc., 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 Georgia Community Health when calculating the payment rate for Smith Medical Nursing Care Center, Inc., our audit did not include a review of these costs. However, because property taxes and insurance are used by Georgia Community Health to calculate the provider's payment rate, we have reviewed those costs as part of our audit.
The Department of Audits and Accounts is responsible for providing Georgia Community Health with information regarding the accuracy of cost and patient data for Smith Medical Nursing Care Center, Inc., for the year ended June 30, 1999. If Georgia Community Health

4

Nursing Facility Services Program

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 Georgia Community Health for reconsideration of the audit fmdings. 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.

1999 Audit Report: Smith Medical Nursing Care Center. Inc.

5

FINDINGS AND RECOMMENDATIONS

IncorrectExpense Classifications

Finding No.1

Documentation examined during the audit showed that some of the expenses were not classified in accordance with the Uniform Chart of Accounts prescribed by Georgia Community Health 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 Georgia Community Health make the following adjustment to reclassify costs to the appropriate cost centers.
(GCH Policies and Procedures, Appendix D)

COST CENTER Routine Services Employee Benefits Medical Forms Medical Supplies Special Services Employee Benefits Dietary Employee Benefits Medical Supplies Laundry and Housekeeping Employee Benefits Operation and Maintenance of Plant Employee Benefits Administrative and General Employee Benefits Medical Forms

$

1,258

(79)

72 $

1,251

(2,020)

$

202

(72)

130

(44)

20

$

584

79

663

Total Adjustment to Allowable Costs

$

0

6

Nursing Facility Services Program

Lack ofSufficient Documentation

Finding No.2

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 Georgia Community Health make the following adjustment to remove the undocumented expenses from allowable costs.
(HCFA Pub. 15-1 Section 2304)

COST CENTER Routine Services Dietary Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General
Total Adjustment to Allowable Costs

$

(3,302)

(494)

(166)

(11,852)

(5,294)

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 ensure that expenses claimed in the cost report do not include items not related to patient care. We recommend that Georgia Community Health make the following adjustment to remove the non-patient care expenses from allowable costs.
(HCFA Pub.15-1 Sections 202.2, 2102.3, 2105.10, GCH Policies and Procedures Section 1002.1(k

1999 Audit Report: Smith Medical Nursing Care Center. Inc.

7

ITEMS Fines and Penalties Interest on Unnecessary Borrowing Late Fees Life Insurance Premiums
COST CENTER Administrative and General Property and Related Expenses
Total Adjustment to Allowable Costs

$

(1,633)

(2,044)

(15)

(254)

$

(3,946)

$

(2,313)

(1,633)

$

(3,946)

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 proceduresto ensure that costs are recorded in the period in which they are incurred. We recommend that Georgia Community Health make the following adjustment to increase allowable costs claimed for expenses applicable to the year under review.
(HCFA Pub. 15-1 Section 2302.1)

Adjustments to Balance Sheet Accounts:
June 30, 1999 Balance Prepaid Insurance Prepaid Interest
Total Adjustment to Allowable Costs

Allowable Costs

$

731

177

$ - - - -908

8

Nursing Facility Services Program

COST CENTER Administrative and General Property and Related Expenses
Total Adjustment to Allowable Costs

$

177

731

Excess Compensation

Finding No.5

Allowable costs claimed included compensation to employees which exceeded GCH maximum limitations. Georgia Community Health 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 GCH maximum limitations is excluded from allowable costs claimed. We recommend that Georgia Community Health make the following adjustment to reduce allowable costs by the amount of compensation paid in excess of the GCH guidelines, plus related employer's share of payroll taxes.
(GCH Compensation Ceilings; HCFA 15-906)

Position Title
Assistant Administrator Payroll Taxes

Total Compensation

Guideline Ceiling

Excess

$

50,400 $

34,562 $

15,838

3,305

2,644

661

$

53,705 $

37,206 $

16,499

COST CENTER Administrative and General

$

(16,499)

1999 Audit Report: Smith Medical Nursing Care Center, Inc.

9

Excess Vehicles

Finding No.6

Documentation examined during the audit showed that expenses were claimed for two vehicles for the year under review. GCH guidelines allow a maximum of one vehicle for nursing homes of the size operated by the provider. We recommend that the provider implement policies and procedures to ensure that any costs incurred operating vehicles in excess of the maximum number allowable are
;)
excluded from reimbursable costs claimed. We recommend that Georgia Community Health make the following adjustment to reduce allowable costs claimed for the insurance expense of vehicles operated in excess of the maximum number allowable.
eGCH Vehicle Guidelines)

COST CENTER

Property and Related Expenses

(80)

Patient Day Statistics

Finding No.7

Census records examined during the audit showed that the nursing home had 19,786 patient days of service rather than the 19,823 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 Georgia Community Health make the adjustment of (37) days to correct the statistical information.
(HCFA Pub. 15-1 Section 2304)

Accounts Receivable Credit Balances

Finding No.8

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

10

Nursing Facility Services Program

its patients. Overpayments from Georgia Community Health totaling $1338.05 had not been resolved as of November 12, 1999. We recommend that the provider review its credit accounts receivable 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 Georgia Community Health review this matter and recover any overpayments identified.
(HCFA Pub. 15-1 Section 2304)

1999 Audit Report: Smith Medical Nursing Care Center. Inc.

11

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

12

Nursing Facility Services Program

Property and Related Expenses

3

Costs Not Related to Patient Care

4

Accrual Basis of Accounting

6

Excess Vehicles

$

(1,633)

731

(80)

(982)

Total Audit Findings Affecting Allowable Costs

$====(=4=0,=7=25=)

PATIENT DAY STATISTICS

7 Patient Day Statistics

(37)

1999 Audit Report: Smith Medical Nursing Care Center, Inc.

13

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

ALLOWABLE COSTS

COST REPORT TOTALS

FIELD AUDIT FINDINGS

AUDITED TOTALS

Routine Services

$ 454,228 $ (2,051) $ 452,177

Special Services

24,955

(2,020)

22~935

Dietary

140,375

(364)

140,011

Laundry and Housekeeping

83,088

(210)

82,879

Operation and Maintenance of Plant

102,861

(11,832)

91,029

Administrative and General

195,938

(23,266)

172,671

Property and Related Expenses

84,461

(982)

83,479

Total Allowable Costs

$ 1,085,906 $ (40,725) $ 1,045,181

PATIENT DAY STATISTICS

19,823

(37)

19,786