Audit report, for the year ended June 30, 1995, Starcrest of Cartersville, Inc., Medicaid provider no. 00404995A, Nursing Facilities Services Program

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DEPARTMENT OF AUDITS AND ACCOUNTS .

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. Medicaid and Local Government Audits...

TABLE OF CONTENTS
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
IN"TRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FIN"DIN"GS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . 4
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 Department ofAudits and Accounts Medicaid andLocal Government Audits Division 254 Washington Street, S. W, Suite 322
Atlanta, Georgia 30334-8400 (404) 656-2006
Michael A. Plant, Director

CLAUDE L VICKERS
STA'IE AUDITOR

DEPARTMENT OF AUDITSANDACCOUNTS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
Telephone (404) 656-2006 Facsimile (404) 656-7535

January 9, 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 ofour audit of Starcrest ofCartersville, Inc., provider number 00404995A, 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 ofthe Georgia Department ofMedical Assistance Nursing Facilities Services Program and is not to be used or relied upon for any other purpose.
Respectfully Submitted,
t7~~
Claude L. Vickers State Auditor
CLV/tw/by

1995 Audit Report: Starcrest of Cartersville, Inc.

1

INTRODUCTION

General Informati.on

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 Nursin~ 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 has accepted the responsibility of auditing Medicaid providers.

Provider Information

Starcrest ofCartersville, Inc., a 124-bed long-term health care facility located in Cartersville, 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 Senrices Program

Audit Objectives

facility was operated as a component of Geriatric Health Services, Inc., a chain organization which filed a Home Office Cost Report with OMA for the year ended June 30, 1995.

The purpose of this audit was to determine whether Starcrest of Cartersville, 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, 1995; and to determine whether Starcrest of Cartersville, 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 ofthis 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: Starcrest of Cartersville, 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 Pb. 15-1) and DMA Policies and Procedures for Nursing Facility Services.
The Department of~udits is responsible for providing the Department
\
ofMedical Assistance with information regarding the accuracy of cost and patient data for Starcrest of Cartersville, Inc., 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

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 2102.1, 2106.1; DMA Policies and Procedures Section 1002.l(k))

ITEMS Advertising Association Dues (50%) Cable Television Non-Patient Care Areas Patient Personal Expenses Personal Care Home Expenses

$

(5,174)

(388)

(4,638)

(2,821)

(344)

(25,741)

$==:!i:!!(3=:!9::t::!::10~6!:o!::)

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

$

(344)

(4,638)

(25,741)

(794)

(5,562)

(2,027)

$===='-==3::19=: 10:!:!: !6:=!:)

1995 Audit Report: Starcrest of Cartersville, Inc.

5

Finding No. 2

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 ~t 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 Dietary Supplements Employee Benefits Medical Equipment Dietary Dietary Supplements Employee Benefits Lease Laundry and Housekeeping Employee Benefits Operation and Maintenance ofPlant Medical Equipment Administrative and General Employee Benefits Property and Related Expenses Lease

$

(426)

285

500 $

$

426

(359)

(2,588)

359
(2,521) 52
(500) 22
2,588

Total Adjustment to Allowable Costs

$.===~o=

Finding No. 3

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

6

Nursing Facilities Services Program

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 Operation and Maintenance ofPlant Administrative and General

$

(3,136)

(355)

(262)

Total Adjustment to Allowable Costs

$===(3~75!1!:!!3=!:::)

Finding No. 4

Liabilities Not Liquidated
Liabilities shown on Schedule\C ofthe cost reports for June 30, 1994, and June 30, 1995, included amounts which had not been paid at June 30, 1996. Federal regulations provide that short term liabilities must be liquidated within one year after the end of the cost reporting period in which the liability was incurred and must be made by check or other negotiable instrument, cash or legal transfer of other assets. Furthermore, where the liability is not liquidated within the I-year time limit or does not qualify under the exceptions specified in HCFA 15-2305.1, _the cost incurred for the related goods and services is not allowable in the cost reporting period when the liability is incurred, but is allowable in the cost reporting period when the liquidation of the liability occurs. We recommend that the provider implement policies and procedures to ensure that liabilities included in the cost report are liquidated within the required time frame. We recommend that the Department of Medical Assistance make the following adjustment to reduce allowable costs for the expense relating to the unliquidated liability.
(HCFA Pub. 15-1 Section 2305A)

1995 Audit Report: Starcrest of Cartenville, Inc.

7

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

$

(160)

(31)

(7,811)

$,==='!i::!:8!:1::0~0~2!!:i!::)

Finding No. 5

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 of Accounts 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 ofMedical Assistance make the following adjustment to reduce allowable costs by the amount of purchased assets claimed as expense and to increase ~llowable costs by depreciation allowable.
(HCFA Pub. 15-1 Section I08; DMA Policies and Procedures, Appendix D)

COST CENTER Operation and Maintenance ofPlant Cost of Fixed Equipment Cost ofMajor Moveable Equipment Administrative and General Cost ofMajor Moveable Equipment Property and Related Expenses Allowable Depreciation Expense

$ (1,488) (3,074) $

(4,562) (709) 452

Net Adjustment to Allowable Costs

$==='!r::i4~8==]===9=)

Finding No. 6

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

8

. Nursing Facilities Services Program

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 of the adjustments made to the home office cost report.
(HCFA Pub. 15-1 Section 2 I50)

COST CENTER Administrative and General Pooled Costs Allocation Statistics Administrative Expenses Property and Related Expenses Allocation Statistics

$ (19,443) 817

(18,626) (221)

Total Adjustment to Allowable Costs

Finding No. 7

Insurance Expense
Documentation examined during the audit showed that the provider, its home office and other chain components were insured against certain losses under common policies. The costs of these policies were allocated among all of the organizations receiving the coverage; however, the allocations were not based on the cost attributable to each organization. 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 chain components implement policies and procedures to ensure that costsare appropriately allocated among the organizations benefitting from those costs. We recommend that the Department of Medical Assistance make the following adjustment to correct the allocation of insurance costs among the home office and its chain components.
(HCFA Pub. I5-1 Section 2304)

1995 Audit Report: Starcrest of Cartersville, Inc.

9

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

$

7,351

1 726

$====:::19:!!::07==7=

Finding No. 8

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 ofInipimum 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 l002.1 (k))
COST CENTER Property and Related Expenses

Finding No. 9

Accounts Receivable Credit Balances
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 $800.56 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of September 9, 1996. We recommend that the provider review its credit accounts receivable and refund overpayments to the appropriate party. We further recommend that the

10

Nursing Facilities Services Program

provider implement policies and procedures to ensure that overpayments on patients' accounts are promptly refunded to the payor. We also recommend that the Department ofMedical Assistance review this matter and recover any overpayments identified.

Patient Name
Brock, C. McEver, J. Smith, J. E. Stanfield, S.
Total

Balance

$

36.08

415.84

133.56

215.08

$

SQQ 56

1995 Audit Report: Starcrest of Cartersville, Inc.

11

SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS

FINDING NUMBER

ALLOWABLE COSTS

Routine Services

I

Costs Not Related to Patient Care

2

Incorrect Expense Classifications

3

Lack of Sufficient Documentation

4

Liabilities Not Liquidated

Special Services

I

Costs Not Related to Patient Care

Dietary

I

Costs Not Related to Patient Care

2

Incorrect Expense Classifications

Laundry and Housekeeping

2

Incorrect Expense Classifications

Operation and Maintenance o[Plant

I

Costs Not Related to Patient Care

2

Incorrect Expense Classifications

3

Lack of Sufficient Documentation

4

Liabilities Not Liquidated

5

Fixed Asset Purchases Claimed as Expense

$

(344)

359

(3,136)

(160) $

{3,281)

(4,638)

$ (25,741) (2,521)

(28,262)

52

$

(794)

(500)

(355)

(31)

(42562)

(6,242)

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Nursing Facilities Services Program

FINDING NUMBER

ALLOWABLE COSTS

Administrative and General

I

Costs Not Related to Patient Care

$

(5,562)

2

Incorrect Expense Classifications

22

3

Lack of Sufficient Documentation

(262)

4

Liabilities Not Liquidated

(7,811)

5

Fixed Asset Purchases Claimed as Expense

(709)

6

Allocations from Home Office

(18,626)

7

Insurance Expense

7 351

(25,597)

Property and Related Expenses

I

Costs Not Related to Patient Care

$

(2,027)

2

Incorrect Expense Classifications

2,588

5

Fixed Asset Purchases Claimed as Expense

452

6

Allocations from Home Office

(221)

7

Insurance Expense .

1,726

8

Excess Depreciation

(825)

I 693

Total Audit Findings Affecting Allowable Costs

$====(6=6=,2=75=)

1--1

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

\0 \0

UI

COST

FIELD

-.Q=>....

REPORT NATT AUDIT AUDIT

AUDITED

f

ALLOWABLE COSTS Routine Services Special Services

TOTALS FINDINGS (l} FINDINGS TOTALS

C)

:t

$ 1,369,015 $ 79,608

336 $

(3,281) $ 1,366,070

(4,638)

74,970

a=.r(.Ii...I
....

C)

Dietary Laundry and Housekeeping Operation and Maintenance of Plant

373,463 237,605 176,427

(28,262)

345,201

=("'""'.")
;:$.

52 (6,242)

237,657 170,185

~
--~
<
.~

Administrative and General

442,856

(25,597)

417,259

=t,,.t
r,

Property and Related Expenses

395,431

1,693

397,124

Total Allowable Costs

$ 3,074,405 $====3=36= $ (66,275) $ 3,008,466

PATIENT DAY STATISTICS

44,368

44,368

(I) 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 colwnn for informational purposes.