DEPARTMENT OF AUDITS AND ACCOUNTS Medicaid and Local Government Audits AunlTREPORT FOR THE YEAR ENDED JUNE 30, 1997 TIFT HEALTH CARE, INC. M....E. DIC.. .AID PROV..I.DER N.UM. BE.R 00143.283A NURSING FACILITY SERVIC:ESPROGRAM TABLE OF CONTENTS LETTER OF TRANSMITTAL i INTRODUCTION 1 0 FINDINGS AND RECOMMENDATIONS 5 Summary of Audit Findings Affecting Allowable Costs and Patient Day Statistics 13 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 July 16, 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 Tift Health Care, Inc., provider number 00143283A, 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. Respectfully Submitted, CLV/cjh/bw Claude L. Vickers State Auditor 1997 Audit Report: Tift Health Care, 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 Tift Health Care, Inc., a I 78-bed long-term health care facility located in Tifton, 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 2 Nursing Facility Services Program Audit Objectives operated as a freestanding nursing home for the year ended June 30, 1997. The purpose of this audit was to detennine whether Tift Health Care, 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, 1997; and to detennine whether Tift Health Care, 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 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 Facility Services Program; compare patient day statistics included in the cost report to provider records to detennine if the patient day statistics are accurately reported; and recommend appropriate action based on the results of our audit. 1997 Audit Report: Tift Health Care, 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 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 Tift Health Care, 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 Tift Health Care, 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. 4 Nursing Facility Services Program As a result of audit procedures related to other (non-property) costs, we noted an adjustment which should be made by the Department of Medical Assistance related to depreciation. We have included a finding related to this matter in our report. 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 Tift Health Care, Inc., 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 ofthe 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. 1997 Audit Report: Tift Health Care, Inc. 5 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 Administrative Supplies Dietary Supplies Nursing Supplies Dietary Dietary Supplies Operation and Maintenance of Plant Administrative Supplies Administrative and General Administrative Supplies Nursing Supplies $ (1,248) (246) 40 $ $ 1,435 (40) (1,454) 246 (187) 1,395 Total Adjustment to Allowable Costs $====0,== 6 Nursing Facility Services Program Finding No.2 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. 15-1 Section 2304) COST CENTER Routine Services Operation and Maintenance of Plant Administrative and General $ (3,606) (2,230) (3,025) Total Adjustment to Allowable Costs $==(=::8=,86=1=) Finding No.3 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) 1997 Audit Report: Tift Health Care, Inc. 7 Position Title Total Guideline Compensation Ceiling Excess Maintenance Supervisor (A) $ Payroll Taxes Administrator Payroll Taxes Assistant Administrator Payroll Taxes Office Supervisor Payroll Taxes 43,002 $ 3,198 86,339 5,307 54,720 4,186 41,359 3,164 39,527 $ 3,024 82,055 5,245 48,641 3,721 33,442 2,558 (3,475) (174) (4,284) (62) (6,079) (465) (7,917) (606) $ 241,275 $ 218,213 $ (23,062) (A) Includes director's fees. COST CENTER Operation and Maintenance ofPlant Administrative and General Total Adjustment to Allowable Costs $ (3,649) (19,413) $====:!::::(2:=3=,0=:62:=:) Finding No.4 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 of Medical Assistance make the following adjustment to reduce allowable costs by the amount ofpurchased assets claimed as expense and to increase allowable costs by depreciation allowable. (HCFA Pub. 15-1 Section 108; DMA Policies and Procedures, Appendix D) 8 Nursing Facility Services Program Cost ofMajor Moveable Equipment Property and Related Expenses Allowable Depreciation Expense Total Adjustment to Allowable Costs $ (1,860) 78 $ = = = ( 1=7'=82=::) Finding No.5 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 Administrative and General $=====1,=:20=5= Finding No.6 Patient Day Statistics The provider stated on the cost report that it furnished 62,582 patient days of service. Census records examined during the audit showed that the patient days shown on the cost report were accurate. 1997 Audit Report: Tift Health Care, Inc. 9 Finding No.7 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 $30,446.03 shown in the following table represents overpayments from the Department of Medical Assistance that had not been resolved as of March 31, 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 Anderson, Ira Anderson, Lois J Baldy, Willie Louise Barrentine, Ruth Beard, Ruby G. Brinson, Ella Mae Bryant, Maude L Clements, Mary A Cliett, Eunice Clyatt, Lott W Collins, Ruth E Conoly, Maude B Cooper, John Corbett, Alma Corbett, Vera Crumpton, John Daniel, Lawton Dennard, Queen Esther Dillard, Flora Evers, Lavada Felts, Arrie Balance $ 392.56 3.90 8.00 68.33 17.45 341.00 185.00 13.43 480.98 3,169.90 75.74 7.90 42.05 254.32 16.64 44.04 359.77 8.00 1.00 331.00 16.00 10 Findley, Hannon Fletcher, Clifford Fletcher, Lucy Foster, Jessie Fowler, Ethel Fullington, Anna Gibbs, Edna Gibbs, Lillian Gibbs, Lois Goodwill, Lillian Gordon, Lillian Greer, Daphene W. Griffin, Maybelle Hamilton, Cornelia Hanford, James Hardy, Jessie Harris, Annie Hendley, Evelene Herb, Donie Hesketh, A Leslie Hester, Charlie Hill, Emma Edith Hill, Susie Houston, Jim Isley, Lindsey Johnson, Ennis Johnson, Herman Johnson, Ruby Johnston, Allie Jones,Omie Jones, Rebecca King, Carnell King, David King, Lula Marlowe, Ludie McCall, William McGuire, Ethel Martin, Lindsey Nursing Facility Services Program 46.43 381.15 484.50 22.90 12.00 295.93 225.63 20.90 30.26 325.42 377.65 485.26 68.32 12.00 2,583.00 46.96 17.00 809.53 12.28 60.00 60.20 122.00 311.86 130.14 239.23 17.00 33.00 12.00 302.05 208.66 201.21 14.30 64.49 9.00 2.00 29.66 24.00 336.17 1997 Audit Report: Tift Health Care, Inc. McMillan, Betty Mullis, James Musselwhite, Mina Nonnan, Evelyn Middleton, Ruby Monk, Pearl Moore, Josie Morris, Elicabeth Pheil, Lome Oliver, Leroy 0'Quinn, Mildred Pade, Mildred Parramore, Zilla Parrish, Mamie Patten, Clarence Rivers, Emma Pearce, Grady Pierce, Charlie Pitts, Lora Mae Pitts, Jake Pitts, Riley Robinson, Pansy Ross, Annie Rowe, Bruce Rushing, Thomas Russell, Gene Scott, John Sears, Eddie Simpkins, Queeno Smith, Cathryn Smith, Eldora Smith, Gladys Smith, Richard Smith, Thomas Spradlin, James Stafford, Bessie Stripling, Eddie Stubbs, Williams Swain, Verna 11 669.16 45.00 12.00 8.00 81.68 111.32 28.00 1,695.63 79.45 1,732.90 21.80 258.60 119.00 374.21 27.35 29.00 146.62 165.21 3.00 150.05 481.60 16.00 11.52 28.90 321.00 34.80 76.00 44.24 150.50 10.50 144.36 12.00 991.20 3,180.86 202.48 2,860.67 63.00 25.21 12.00 12 Terry, Janie Thomas, Wilda Tillery, Grace Usina, America S Eidson Walker, Leonard Wallace,Arthur Walls, Roxie Walsh, Lena Welch, Martha West, Forest Williams, Lou D Wood, Otis C Young, Georgia Total Nursing Facility Services Program 145.90 23.00 216.54 8.00 17.00 10.00 10.00 651.36 63.23 186.16 131.58 242.44 44.90 $ 30,446.03 1997 Audit Report: Tift Health Care, Inc. 13 SUMMARY OF AUDIT FINDINGS AFFECTING ALLOWABLE COSTS AND PATIENT DAY STATISTICS FINDING NUMBER ALLOWABLE COSTS Routine Services 1 Incorrect Expense Classifications 2 Lack of Sufficient Documentation $ (1,454) (3,606) $ (5,060) Dietary 1 Incorrect Expense Classifications 246 Operation and Maintenance olPlant 1 Incorrect Expense Classifications $ (187) 2 Lack of Sufficient Documentation (2,230) 3 Excess Compensation (3,649) 4 Fixed Asset Purchases Claimed as Expense (1,860) (7,926) Administrative and General 1 Incorrect Expenses Classifications $ 1,395 2 Lack of Sufficient Documentation (3,025) 3 Excess Compensation (19,413) 5 Costs Misclassified as Nurse Aide Testing and Training Costs 1,205 (19,838) Property and Related Expenses 4 Fixed Asset Purchases Claimed as Expense 78 Total Audit Findings Affecting Allowable Costs $ (32,500) 14 Nursing Facility Services Program SCHEDULE OF ALLOWABLE COSTS AND PATIENT DAY STATISTICS COST REPORT TOTALS FIELD AUDIT FINDINGS AUDITED TOTALS ALLOWABLE COSTS Routine Services $ 1,649,141 $ (5,060) $ 1,644,081 Special Services 119,138 119,138 Dietary 577,443 246 577,689 Laundry and Housekeeping 359,174 359,174 Operation and Maintenance ofPlant 177,298 (7,926) 169,372 Administrative and General 443,489 (19,838) 423,651 Property and Related Expenses 375,977 78 376,055 Total Allowable Costs $ 3,701,660 $ (32,500) $ 3,669,160 PATIENT DAY STATISTICS 62,582 62,582