Audit report, for the year ended June 30, 1995, Sunrise Nursing Home of Georgia, Inc., Medicaid provider no. 00143173A, Nursing Facilities Services Program

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DEPARTMENT OF AUDITS A.ND ACCOUNTS

.. Medicaid and Local Government .A11dits .

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.' ' , ,. . 'AUDITREPORT,

.. . . . ... FORTHEYEAR ENDED JUNE 3(), 1995

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TABLE OF CONTENTS
LETTER OF TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
IN"TRODUCTION ....................................... 1
FINDINGS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . 4 Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 10 Schedule of.Allowable Costs and Patient Day Statistics 12

Report Prepared By:
State ofGeorgia Department ofAudits andAccounts Medicaid and Local Government Audits Division 254 Washington Street, S. W, Suite 322 . Atlanta, Georgia 30334-8400
(404) 656-2006
Michael A. Plant, Director

CLAUDE L VICKERS
STATEAUDnoR

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

October 22, 1996

Members ofthe Board of Medical 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 Sunrise Nursing Home of Georgia, Inc., provider number 00143173A, 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.

CLV/bc/by

Respectfully Submitted,
~~
Claude L. Vickers
State Auditor

1995 Audit Report: Sunrise Nursing Home of Georgia, Inc.

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 ofGeorgia 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

Sunrise Nursing Home of Georgia, Inc., a 60-bed long-term health care facility located in Moultrie, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facilities Services Program. The facility

2

Nursing Facilities Services Program

Audit Objectives

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, 1995.

The purpose ofthis audit was to determine whether Sunrise Nursing Home of Georgia, 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 Sunrise Nursing Home of Georgia, 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: Sunrise Nursing Home of Georgia, Inc.

3

Scope and Methodology

To accomplish these objectives, we performed a limited review ofthe 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 Proceduresfor 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 Sunrise Nursin~ Home of
Georgia, Inc., for the year ended June 30, 1995. Ifthe 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 ofM~cal 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 Employee Benefits Mattress Medical Records Medical Waste Disposal Special Services Employee Benefits Dietary Employee Benefits Repairs Laundry and Housekeeping Employee Benefits Mattress Operation and Maintenance ofPlant Employee Benefits Medical Waste Disposal Office Supplies Repairs Administrative and General Employee Benefits Insurance Expense Medical Records Office Supplies

$

2,638

(235)

(125)

(58) $

$

499

(127)

$

313

235

$

14

58

(262)

127

$ (3,781) 5,347 125 262

2,220 317 372 548
(63)
1,953

1995 Audit Report: Sunrise Nursing Home of Georgia, Inc.

5

Property and Related Expenses Insurance Expense
Total Adjustment to Allowable Costs

(5,347)
$======01!:::

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 provider implement policies and procedures to ensure that costs are recorded in the period in which they are incurred. We recommend that the Department ofMedical 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, 1995 Balance Prepaid Insurance

$====(7~3!:=:!3::c)

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

$

(413)

(50)

(78)

{49)

(3)

(140)

$====(7~3::!:!3::i!:::)

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Nursing Facilities Services Program

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 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.
(HCFA Pub. 15-I Section 2304)

COST CENTER Special Services Administrative and General Property and Related Expenses

$

(240)

{4,877)

(1,708)

Total Adjustment to Allowable Costs

$==='!1:!ii6!:l::!8~2~5=)

Finding No.4

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. IS-I Section 2102.3; DMA Policies and Procedures Section 1002. I(k))

1995 Audit Report: Sunrise Nursing Home of Georgia, Inc.

7

ITEMS Advertising Donations Pay Phone Personal Purchases
Total Adjustment to Allowable Costs
COST CENTER Operation and Maintenance ofPlant Administrative and General Property and Related Expenses
Total Adjustment to Allowable Costs

$

(95)

(200)

(673)

(11,088)

$ (]2 056)

$

(3,702)

(6,833)

(1,521)

$ (]2 056}

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 OMA 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 allowable costs by depreciation allowable.
(HCFA Pub. 15-1 Section 108; DMA Policies and Procedures, Appendix D)

COST CENTER Operation and Maintenance ofPlant Cost ofFixed Equipment Property and Related Expenses Allowable Depreciation Expense

$

(7,226)

'

189

Net Adjustment to Allowable Costs

$==='!!:=7:::t:0~3==7==)

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Nursing Facilities Services Program

Finding No. 6

Excess Vehicles

Documentation examined during the audit showed that expenses were claimed for four vehicles for the year under review. DMA 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 the Department of Medical Assistance make the following adjustment to reduce allowable costs claimed for the depreciation, insurance, taxes, interest and operating expenses of vehicles operated in excess ofthe maximum number allowable.
(DMA Vehicle Guidelines)

COST CENTER Administrative and General Operating Expenses Property and Related Expenses Lease Taxes

$

(4,988)

$ (9,307) (700)

(10,007)

Total Adjustment to Allowable Costs

$===(]==4=9==9::::!:!5=)

Finding No. 7

Cost Report Adjustment Reversal
An adjustment was made during cost report preparation to decrease vehicle depreciation. Documentation examined during the audit showed that the adjusted amount was not correct. 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 adjustments made during cost report preparation are accurate. We recommend that the Department of Medical Assistance make the following adjustment to reverse the provider adjustment.
(HCFA Pub. 15-1 Section 2304)

1995 Audit Report: Sunrise Nursing Home of Georgia, Inc.

9

COST CENTER Property and Related Expenses

$====]=92!!!:!8=

Finding No. 8

Audit Follow-up
Documentation examined during the audit showed that the provider included $11,088 for personal purchases in allowable costs claimed (see Finding No. 4). The audit report ofthe provider's 1993 cost report stated that the provider claimed $3,777 for similar costs in that year. Federal regulations state that the recording of personal expenses as provider costs for patient care is an example ofpotential fraud and abuse. We recommend that the provider implement policies and procediires to ensure that expenses claimed in the cost report do not include personal purchases. We recommend that the Department ofMedical Assistance, in accordance with federal regulations, notify the provider that further insistence on including the cost of personal purchases in future cost reports could result in referral ofthis situation to the State Health Care Fraud Control Unit for consideration of criminal and/or civil prosecution.
(Medicare Intermediary Manual [HCFA Pub. 13-4] Section 4101)

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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

I

Incorrect Expense Classifications

2

Accrual Basis ofAccounting

$

2,220

(413) $

Special Services

I

Incorrect Expense Classifications

2

Accrual Basis of Accounting

3

Lack of Sufficient Documentation

$

317

(50)

(240)

Dietary

I

Incorrect Expense Classifications

2

Accrual Basis of Accounting

$

372

(78)

Laundry and Housekeeping

I

Incorrect Expense Classifications

2

Accrual Basis of Accounting

$

548

(49)

Operation and Maintenance ofPlant

I

Incorrect Expense Classifications

$

(63)

2

Accrual Basis of Accounting

(3)

4

Costs Not Related to Patient Care

(3,702)

5

Fixed Asset Purchases Claimed as Expense

{7~226)

1,807 27
294 499 (10,994)

1995 Audit Report: Sunrise Nursing Home of Georgia, Inc.

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FINDING NUMBER

ALLOWABLE COSTS

Administrative and General

I

Incorrect Expense Classifications

2

Accrual Basis of Accounting

3

Lack of Sufficient Documentation

4

Costs Not Related to Patient Care

6

Excess Vehicle

Property and Related Expenses

I

Incorrect Expense Classifications

3

Lack of Sufficient Documentation

4

Costs Not Related to Patient Care

5

Fixed Asset Purchases Claimed as Expense

6

Excess Vehicle

7

Cost Report Adjustment Reversal

$

1,953

(140)

(4,877)

(6,833)

(4,988)

$

(5,347)

(1,708}

(1,521)

189 (10,007)
1,928

(14,885) (16,466)

Total Audit Findings Affecting Allowable Costs

$ (39,718)

SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS

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

COST REPORT TOTALS

OFFICE

FIELD

AUDIT

AUDIT

FINDINGS ill FINDINGS

AUDITED TOTALS

$ 483,916 69,402 166,569 71,038 73,830
211,277 $ 111,647

$
(31,348) (317)

1,807 $ 27
294 499 (10,994) (14,885) (16,466)

485,723 69,429 166,863 71,537 62,836 165,044 94,864

Total Allowable Costs

$_J,J~7!679 $

(31,665) $ (39,7182 $ 1,116,296

=::~Ir

:5-~ --n1

PATIENT DAY STATISTICS

~1,]33

211733

00

~

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n

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

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