TABLE OF CONTENTS 
 
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Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics  12 
 
Schedule of Allowable Costs and Patient Day Statistics 
 
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 Report Prepared By: 
State ofGeorgia Department ofAudits and Accounts Medicaid and Local Government Audits Division 
254 Washington Street, S. w., Suite 322 
Atlanta, Georgia 30334-8400 (404) 656-2006 
Michael A. Plant, Director 
 
 RUSSELL W. HINTON 
STATE AUDITOR 
 
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 
July 14, 1999 
 
MICHAEL A. PLANT 
DIRECTOR 
 
Members of the Board of Medical Assistance, and The Honorable Dr. William R. Taylor, 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 Sunrise Nursing Home of Georgia, Inc., provider number 00143173A, a participant in the Nursing Facility Services Program for the year ended June 30, 1998. This report is intended to be used solely in connection with the administration of the Georgia Department of Medical Assistance Nursing Facility Services Program and is not to be used or relied upon for any other purpose. 
Respectfully Submitted, 
~4"~ lJ.~ Russell W. Hinton State Auditor 
RWHlks/bw 
 
 1998 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 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 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 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 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, 1998. 
 
 Nursing Facility Services Program 
 
Audit Objectives 
 
The purpose of this 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, 1998; and to determine whether Sunrise Nursing Home of Georgia, 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 lm10unts and disclosures 
 
 1998 Audit Report: Sunrise Nursing Home of Georgia. Inc. 
 
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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 
 
. 
 
0 
 
(HCFA Pub. 15-1) and DMA Policies and Procedures for Nursing 
 
Facility Services. 
 
In accordance with Section 1002 of Policies and Procedures for Nursing Facility Services, the Department of Medical Assistance has calculated the payment rate for Sunrise Nursing Home of Georgia, .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 the Department of Medical Assistance when calculating the payment rate for Sunrise Nursing Home of Georgia, Inc., our audit did not include a review of these costs. However, because property taxes and insurance are used by the Department of Medical Assistance 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 the Department of Medical Assistance with information regarding the accuracy of cost and patient data for Sunrise Nursing Home of 
 
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Nursing Facility Services Program 
 
Georgia, Inc., for the year ended Jupe 30, 1998. 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. 
 
 1998 Audit Report: Sunrise Nursing Home of Georgia, Inc. 
 
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FINDINGS AND RECOMMENDATIONS 
 
Finding No.1 
 
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 periog. 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 increase allowable costs claimed for expenses applicable to the year under review. 
(HCFA Pub. 15-1 Section 2302.1) 
 
Adjustments to Balance Sheet Accounts: 
 
Allowable Costs 
 
June 30, 1997 Balance Prepaid Insurance 
 
$ 
 
(8.6.). 
 
June 30, 1998 Balance Accrued Payroll Taxes Prepaid Insurance 
Total Adjustment to Allowable Costs 
 
$ 
 
4,835 
 
(2,953) 
 
$ 
 
1,882 
 
$ 
 
1.-,7.9...6_ 
 
COST CENTER Routine Services Special Services Dietary Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General Property and Related Expenses 
 
$ 
 
1,109 
 
176 
 
154 
 
123 
 
72 
 
419 
 
(257) 
 
Total Adjustment to Allowable Costs 
 
$......._ ....1...,.7..9..6.. 
 
 6 
 
Nursing Facility Services Program 
 
Incorrect Expense Classifications 
 
Finding No.2 
 
Documentation examined during the audit showed that some ofthe expenses were not classified in accordance with the Uniform Chart ofAccounts prescribed by the 
Department of Medical 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 Dietary Salaries Employee Benefits Professional Licenses Supplies Expense Special Services Employee Benefits Professional Licenses Dietary Dietary Salaries Employee Benefits Professional Licenses Laundry and Housekeeping Employee Benefits Professional Licenses Supplies Expense Operation and Maintenance ofPlant Administrative Equipment Employee Benefits Professional Licenses Supplies Expense 
 
$ 
 
2,081 
 
(1,620) 
 
(95) 
 
(546) $ 
 
$ 
 
663 
 
(14) 
 
$ (2,081) (761) (13) 
 
$ 
 
89 
 
(11) 
 
212 
 
$ 
 
(5,745) 
 
472 
 
(6) 
 
45 
 
(180) 649 (2,855) 290 
(5,234) 
 
 1998 Audit Report: Sunrise Nursing Home of Georgia, Inc. 
 
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Administrative and General Administrative Equipment Employee Benefits Insurance Expense Professional Licenses Supplies Expense 
Property and Related Expenses Insurance Expense 
Total Adjustment to Allowable Costs 
 
$ 
 
5,745 
 
1,157 
 
6,378 
 
139 
 
289 
 
13,708 
 
(6,378) 
 
$ 
 
-=0 
 
Non-Vesting Sick Leave Costs 
 
Finding No.3 
 
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 adjustments to allowable costs for the expense applicable to the period. (HeFA Pub. 15-1 Section 2144.SA) 
 
COST CENTER Routine Services Dietary Laundry and Housekeeping Operation and Maintenance of Plant Administrative and General 
Total Adjustment to Allowable Costs 
 
$ 
 
(3,891) 
 
(225) 
 
(280) 
 
(224) 
 
(1,009) 
 
$-========(5..,6..=2.9.). 
 
 8 
 
Nursing Facility Services Program 
 
Excess Compensation 
 
Finding No.4 
 
Allowable costs claimed included compensation to employees that 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 Activities Director(A) 
 
Total Compensation 
 
Guideline Ceiling 
 
Excess 
 
$ 
 
39,479 $ 
 
37,449 $ 
 
(2,030) 
 
(A) Includes director's fees and owner's profit sharing contributions. 
 
COST CENTER Special Services 
 
$_ _.(2.,.0.._3.0). 
 
Costs Not Related to Patient Care 
 
Finding No.5 
 
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 
 
 1998 Audit Report: Sunrise Nursing Home of Georgia, Inc. 
 
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following adjustment to remove the non-patient care expenses from allowable costs. 
(HCFA Pub.IS-1 Section 2102.3; DMA Policies and Procedures Section 1002.1(k)) 
 
ITEMS Personal Purchases 
 
$ 
 
(9.,.3._19_) 
 
COST CENTER Operation and Maintenance of Plant Administrative and General Property and Related Expenses .. 
Total Adjustment to Allowable Costs 
 
$ 
 
(2,430) 
 
(4,835) 
 
(2,054) 
 
$ 
 
(9.,.3._1.9). 
 
Cost Report Adjustment Reversal 
 
Finding ,No.6 
 
An adjustment was made during cost report preparation to remove excess compensation. Documentation examined during the audit showed that the provider removed allowable compensation paid to the assistant administrator. 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 repo.rt preparation are accurate. We recommend that the Department of Medical Assistance make the following adjustment to reverse a portion of the provider adjustment. 
(HCFAPub.IS-1 Section 2304) 
 
COST CENTER Administrative and General 
 
$_ _...1...3.,._69_9 
 
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Nursing Facility Services Program 
 
Lack ofSufficient Documentation. 
 
Finding No.7 
 
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. 
(ReFA Pub. 15-1 Section 2304) 
 
COST CENTER Administrative and General 
 
-_ ---- $ .....(.3,618) 
 
Patient Day Statistics 
 
Finding No.8 
 
The provider stated on the cost report that it furnished 21,755 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate. 
 
Accounts Receivable Credit Balances 
 
Finding No.9 
 
Documentation examined during the audit showed that the provider had one credit balance in its individual accounts receivable. Credit balances in the facility's accounts receivable result from overpayments for services provided to its patients. The $4,654.70 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of April 29, 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 
 
 1998 Audit Report: Sunrise Nursing Home of Georgia. Inc. 
 
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the Department of Medical Assistance review this matter and recover any overpayments identified. 
 
Patient Name Timothy Lodge 
 
Balance $ 4_,6_54...,,7_0 
 
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Nursing Facility Services Program 
 
SCHEDULE OF ALLOWABLE COSTS AND PATIENT'DAY STATISTICS 
 
ALLOWABLE COSTS 
 
COST REPORT TOTALS 
 
FIELD AUDIT FINDINGS 
 
~ 
AUDITED TOTALS 
 
Routine Services Special Services 
 
$ 522,904 $ 
,. 
92,031 
 
(2,962) $ (1,205) 
 
519,942 90,826 
 
Dietary 
 
142,503 
 
(2,926) 
 
139,577 
 
Laundry and Housekeeping 
 
74,544 
 
133 
 
74,677 
 
Operation and Maintenance of Plant 
 
118,400 
 
(7,816) 
 
110,584 
 
Administrative and General 
 
178,861 
 
18,364 
 
197,225 
 
Property and Related Expenses 
 
108,492 
 
(8,689) 
 
99,803 
 
Total Allowable Costs 
 
$ 1,237,735 $ (5,101) $ 1,232,634 
 
PATIENT DAY STATISTICS 
 
21,755 
 
21,755