\11\ A~OD.m4 RI T4b lnb~ DEPARTMENT OF AUDITS AND ACCOUNTS Medicaid and Local Government Audits . '. AUDITltEPORT FOR THE YEARENDEj) JUNE 30,1997 THOMAS.TO.N.<>HE.ALT.H. A.N....'.D. REH...A..B .. ' .. ' . . ...... :'., :- .-: - ~. '" . :.-.- -'. .: -'.: .-. -. . .. - :.- '. MEDICAlD.PROVIDERNUM:BER 00140621A NURSING FACILITY SERVICES PROGRAM TABLE OF CONTENTS LETTER OF TRANSMITTAL i INTRODUCTION 1 FINDINGS AND RECOMMENDATIONS 4 Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 12 Schedule of Allowable Costs and Patient Day Statistics 14 Report Prepared By: State ofGeorgia Department ofAudits and Accounts Medicaid and Local Government Audits Division w., 254 Washington Street, S. 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 August 7, 1998 Members of the Board of Medical Assistance, and The Honorable Dr. William R. Taylor, 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 Thomaston Health and Rehab, provider number 00140621A, a participant in the Nursing Facility Services Program for the year ended June 30, 1997. This report is intended to be used solely in connection with the administration of the Georgia Department ofMedical Assistance Nursing Facility Services Program and is not to be used or relied upon for any other purpose. CLV/km/bw Claude L. Vickers State Auditor 1997 Audit Report: Thomaston Health and Rehab 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 infonnation. Infonnation 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 Thomaston Health and Rehab, a 119-bed long-tenn health care facility located in Thomaston, Georgia, is a provider enrolled in the Georgia Medicaid Nursing Facility Services Program. The facility provides both skilled and intennediate care services to resident 2 Nursing Facility Services Program Audit Objectives patients. The facility was owned by Beverly Health and Rehabilitation Services, Inc., and operated as a component ofBeverly Enterprises, Inc., a chain organization which filed a Home Office Cost Report with DMA for the year ended June 30, 1997. The purpose of this audit was to determine whether Thomaston Health and Rehab 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, 1997; and to determine whether Thomaston Health and Rehab 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. 1997 Audit Report: Thomaston Health and Rehab 3 Scope and Methodology To accomplish these objectives, we perfonned 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 detennine 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 Procedures for Nursing Facility Services. The Department of Audits and Accounts is responsible for providing the Department ofMedical Assistance with infonnation regarding the accuracy ofcost and patient data for Thomaston Health and Rehab for the year ended June 30, 1997. 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 Facility Services Program FINDINGS AND RECOMMENDATIONS Finding No.1 Incorrect Expense Classifications Documentation examined during the audit showed that some of the expenses were not classified in accordance with the Uniform Chart of Accounts 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 Supplies Special Services Recruitment Supplies Dietary Supplies Laundry and Housekeeping Supplies Administrative and General Equipment Rental Recruitment Supplies Property and Related Expenses Equipment Rental $ (1,128) $ (64) (226) (290) 226 403 $ (488) 64 725 301 488 Net Adjustment to Allowable Costs $ = = = = 0..... 1997 Audit Report: Thomaston Health and Rehab 5 Finding No.2 Allocationsfrom Home Office The provider was a component of a chain organization for the year ended June 30, 1997. As a result of our 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 of the adjustments made to the home office cost report. (HCFA Pub. 15-1 Section 2150) COST CENTER Routine Services Directly Allocated Costs Special Services Directly Allocated Costs Dietary Directly Allocated Costs Administrative and General Functionally Allocated Costs Pooled Costs Administrative Expenses $ $ (1,602) (22,191) (588) (263) (311) (23,793) Total Adjustment to Allowable Costs $ (24,955) 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 6 Nursing Facility Services Program 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. 15-1 Section 2304) COST CENTER Routine Services Administrative and General $ (1,314) (450) Total Adjustment to Allowable Costs $==(=:1=,7:::64:=) Finding No.4 Costs Misclassijied as Nurse Aide Testing and Training Costs An adjustment was made during cost report preparation to remove nurse aide testing and training expenses from allowable costs. Documentation examined during the audit showed that some ofthese costs were not incurred to provide nurse aide testing and training services. 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 costs shown on the cost report as nurse aide testing and training expenses were incurred to provide nurse aide testing and training services. We recommend that the Department of Medical Assistance make the following adjustment to reverse a portion of the provider's adjustment. (HCFA Pub. 15-1 Section 2304) COST CENTER Routine Services Administrative and General $ 6,531 29 Total Adjustment to Allowable Costs $===6=,56=:0,== 1997 Audit Report: Thomaston Health and Rehab 7 Finding No.5 Nurse Aide Testing and Training Costs Documentation examined during the audit showed that the provider did not remove nurse aide testing and training costs from allowable costs claimed as required by the Department of Medical Assistance in General Instructions to Cost Report. We recommend that the provider implement policies and procedures to ensure that nurse aide testing and training costs are not included in allowable costs. We recommend that the Department of Medical Assistance make the following adjustment to decrease allowable costs by the amount of nurse aide testing and training costs. (DMA General Instructions to Cost Report) COST CENTER Routine Services $===(=3=37:::) 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.l5-1 Sections 2102.1,2102.3; DMA Policies and Procedures Sections 902, 1002.1(k)) ITEMS Advertising Prescription Drugs $ (605) (109,101) $ 009,706) 8 Nursing Facility Services Program COST CENTER Special Services Administrative and General Total Adjustment to Allowable Costs $ (109,101 ) (605) $ 009,706) Finding No.7 Recalculation ofAncillary Services Cost Adjustment The provider received revenues from the sale of ancillary services to patients; therefore, allowable costs for special services are limited to the maximum allowable cost calculated on Schedule B-1A ofthe cost report. Documentation examined during the audit showed that certain corrections were necessary to amounts reported on Schedule B-1A as total cost per books, total charges, Medicaid charges, total patient days, and Medicaid patient days. These findings required the recalculation of Schedule B-1A. A copy ofthis recalculation has been furnished to the provider. We recommend that the provider implement policies and procedures to ensure that all information used to calculate the ancillary services cost adjustment is correct. We recommend that the Department of Medical Assistance make the following adjustment to increase allowable costs for the net effect of the recalculation. (General Instructions to the Cost Report) Ancillary Services Adjustment Per Cost Report Recalculated Adjustment Audit Finding Physical Therapy Pharmacy Oxygen Occupational Therapy $ (101,614) $ (101,551) $ (97,798) 0 (13,499) (14,033) (134,042) (130,869) 63 97,798 (534) 3,173 $ (346,953) $ (246.453) $ 100,500 1997 Audit Report: Thomaston Health and Rehab 9 COST CENTER Special Services $====10=0=,5:=00,= Finding No.8 Excess Compensation Allowable costs claimed included compensation to employees which 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 Total Guideline Compensation Ceiling (A) Excess Dietary Supervisor Payroll Taxes Bookkeeper Payroll Taxes $ 44,563 $ 36,472 $ 3,409 2,790 38,847 33,442 2,972 2,559 (8,091) (619) (5,405) (413) $ 89.791 $ 75,263 $ (14,528) (A) Ceilings have been adjusted to percentage of full-time, where applicable. COST CENTER Dietary Administrative and General Adjustment to Allowable Costs $ (8,710) (5,818) $,===(1==:4=,5=:28:=) 10 Nursing Facility Services Program Finding No.9 Cost Report Adjustment Reversal An adjustment was made during cost report preparation to adjust depreciation expense to that allowable per DMA guidelines. Documentation examined during the audit showed that the adjustment was calculated incorrectly. 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 a portion ofthe provider adjustment. (HCFA Pub. 15-1 Section 2304) COST CENTER Property and Related Expenses $===4=,5=:62= Finding No. 10 Patient Day Statistics Census records examined during the audit showed that the nursing home had 42,159 patient days of service rather than the 42,156 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 3 days to correct the statistical information. (HCFA Pub. 15-1 Section 2304) 1997 Audit Report: Thomaston Health and Rehab 11 Finding No. 11 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 $1,946.50 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of June 30, 1998. 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 the Department of Medical Assistance review this matter and recover any overpayments identified. Patient Name Benefield, Annie Dawson, Clevie Jordan, Nettie Lattimore, Clara Savage, Daisy Youngblood, Marvin Total Balance $ 214.50 585.00 62.72 6.00 604.50 474.00 $ 1,946.72 12 Nursing Facility Services Program SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS FINDING NUMBER ALLOWABLE COSTS Routine Services 1 Incorrect Expense Classifications $ (1,128) 2 Allocations From Home Office (588) 3 Lack of Sufficient Documentation (1,314) 4 Costs Misclassified as Nurse Aide Testing and Training Costs 6,531 5 Nurse Aide Testing and Training Costs (337) $ Special Services 1 Incorrect Expense Classifications $ (290) 2 Allocations From Home Office (263) 6 Costs Not Related To Patient Care (109,101) 7 Recalculation of Ancillary Services Cost Adjustment 100,500 Dietary 1 Incorrect Expense Classifications 2 Allocations From Home Office 8 Excess Compensation $ 226 (311) (8,710) Laundry and Housekeepinfl 1 Incorrect Expense Classifications 3,164 (9,154) . (8,795) 403 1997 Audit Report: Thomaston Health and Rehab 13 FINDING NUMBER ALLOWABLE COSTS Administrative and General 1 Incorrect Expense Classifications $ 301 2 Allocations From Home Office (23,793) 3 Lack of Sufficient Documentation (450) 4 Costs Misclassified as Nurse Aide Testing and Training Costs 29 6 Costs Not Related To Patient Care (605) 8 Excess Compensation (5,818) (30,336) Property and Related Expenses I Incorrect Expense Classifications 9 Cost Report Adjustment Reversal $ 488 4,562 5,050 Total Audit Findings Affecting Allowable Costs $========== PATIENT DAY STATISTICS 10 Patient Day Statistics 3 14 Nursing Facility Services Program SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS ALLOWABLE COSTS COST REPORT TOTALS FIELD AUDIT FINDINGS AUDITED TOTALS Routine Services $ 1,441,816 $ 3,164 $ 1,444,980 Special Services 181,300 (9,154) 172,146 Dietary 408,558 (8,795) 399,763 Laundry and Housekeeping 187,381 403 187,784 Operation and Maintenance ofPlant 221,383 221,383 Administrative and General 505,803 (30,336) 475,467 Property and Related Expenses 223,915 5,050 228,965 Total Allowable Costs $ 3,170,156 $ (39,668) $ 3,130,488 PATIENT DAY STATISTICS 42,156 3 42,159