north carolina desk reviews, field reviews and o/p settlements presentation for the north carolina...

North Carolina Desk North Carolina Desk Reviews, Field Reviews Reviews, Field Reviews

and O/P Settlementsand O/P Settlements

Presentation for the

North CarolinaHealthcare Financial Management Association

Clifton Gunderson LLP

November 9, 2006

Who is Clifton Gunderson?

• 13th largest CPA and consulting firm

• Over 1,600 total personnel

• Offices in 15 states and Washington, DC

Who is Team Health Care?

Team Health Care (THC) is the health care compliance and consulting practice of CG which focuses on services delivered to federal and state government agencies.

Who is Team Health Care?

THC offices include:

• Baltimore, MD

• Richmond, VA

• Raleigh, NC

• Indianapolis, IN

• Austin, TX

• Des Moines, IA

Areas of Expertise

• Compliance Services

• Health Care Consulting

• Fraud and Abuse

Services Performed

• Cost report audits/reviews (all provider types)

• Cost settlements

• Performance audits (MCOs)

• MMIS audits (IT based)

• DSH audits

• Litigation support (DOJ/FBI)

• Other consulting

Clients

We serve clients in each of the states in which we have THC offices (MD, VA, NC, IN, IA, TX). In addition, we count the following among our clients:

• CMS

• Department of Justice

• Federal Bureau of Investigation

• Ohio Medicaid

• Illinois Medicaid

• Mississippi Medicaid

• South Carolina Medicaid

Raleigh Office: Key Staff

Bob Bullen, Contract Partner• Based in Baltimore

Chuck Smith, Senior Manager-in-Charge• Based in Raleigh• Also oversee hospital reviews

Raleigh Office: Additional Staff

• David McMahon, Manager

• Raymond Johnson, Manager

• Cheryl Morant, Senior Associate

• Vivian Shi, Associate

• Evelyn Massey, Associate

Staff from Other Offices

• Tim Forry, Sr. Manager, Baltimore

• Lucille Devore, Manager, Baltimore

• Betty Morgan, Manager, Baltimore

• Marcia Cole, Manager, Richmond

• Others may assist depending on scheduling needs.

Staff from Other Offices

All individuals from other offices have been/will be trained on North Carolina specifics.

In addition, all work is reviewed by Raleigh office prior to issuance.

Review Process: Desk Reviews

Desk Reviews (Issuing Agreed Upon Procedures Report)

1. DMA notification

2. CG initial request for information

3. Perform procedures on submitted information

– Develop follow questions and requests


4. Communicate follow up questions and requests

5. Incorporate additional information into desk review/complete procedures

6. Develop draft adjustments and communicate to provider

– Give provider time to respond

– Communicate changes to provider


7. Management Review process– Detailed review performed by Manager or Senior

Manager

– Second review performed by Senior Manager or Partner

– Sometimes lead to requests for additional information.

– Any changes to adjustments will be communicated with opportunity to respond.

8. Prepare draft report and submit to DMA


9. DMA reviews

– DMA review could require further procedures.

– In most instances, draft report “cleared” for final product.

10. Final report issued

Review Process: Field Reviews

Field Reviews (Issuing Agreed Upon Procedures Report)

1. DMA notification

2. CG scheduling

– Dina Pickens

– Attempt to be a two/three months ahead

3. CG scheduling letter/initial documentation request


4. Contact from in-charge auditor

– A week or two prior to fieldwork start date

– Set-up time for arrival

– Give information regarding audit team

– Request GL detail (and AP if necessary) for accounts selected for substantive testing

Objective is to be able to select GL transactions for vouching (reviewing invoices) prior to arrival so those items may be available on the first day of field work.


5. Fieldwork

– Will range from one-week to two weeks depending on complexity of procedures

– Audit team will consist of one in-charge auditor and one or two assistants


6. Exit Conference

– Typically to be held on the last day of field work

At times the exit conference may be delayed if significant test work has not been completed during the course of our on-site visit.

Arrangements will be made for alternate date based on circumstances.

– Will discuss each proposed adjustment


– Will provide you with copies of workpapers supporting adjustments or will send them the next working day

– Will provide you a list of outstanding information requests

– Will agree on a date when outstanding information is due


7. Upon receipt of outstanding information, will incorporate into workpapers, making any necessary changes.

– Revised adjustments will be communicated, with an explanation of why any adjustment for which information was sent was not changed.

– Will give a period of time to review and offer any additional evidence - typically two weeks


8. Any additional submissions will be incorporated

– If adjustments changed, the revised adjustments will be communicated.


9. Final Steps

– Draft report issued to DMA

– DMA reviews workpapers DMA review could require further

procedures.

In most instances, draft report “cleared” for final product.

– Final report issued

Review Process: Field Review

Goal is to complete this process 2-3 months after exit conference

1. Depends on schedule of in-charge auditor

2. Depends on any outstanding information to be considered.

3. Unpredictable items

Desk Reviews: Materiality

Investigation Threshold

1. Used to determine what changes from the prior year are material

– Will request an explanation from provider as to why there was a material change

– Will review explanation for reasonableness

Desk Reviews: Materiality

Adjustment Threshold

1. Used as a guide on what questionable accounts need to be pursued further

2. Also used as a guide to determine which as-filed A-6 reclassifications and A-8 adjustments require further review.

Desk Reviews: Reconciliation

Reconcile w/s A to WTB

1. Will ask for both summary WTB grouped by cost center and a detailed WTB

Reconcile w/s C to WTB

1. Will ask for both summary WTB grouped by cost report cost center and a detailed WTB

2. Any material reclassifications of charges between cost centers will be reviewed to ensure proper matching of costs and charges

Desk Reviews: Reconciliation

Reconcile w/s A and w/s C to audited financial statements

1. Purpose – To identify any costs that should not have been included on the cost report, and/or any cost items that should have been included as a NRCC. To identify any charges to have been omitted from the cost report.

2. We may request this be performed by the provider if we are unable to reconcile within tolerable limits.

Desk Reviews: WTB Review

Will review the WTB for the following:

1. Any questionable material departments.

– Inquiries will be made regarding the nature of these departments

– Response to inquires will be reviewed for reasonableness

– Further information may be requested

Desk Reviews: WTB Review

2. Any questionable accounts

– Inquiries will be made regarding the nature of these accounts

– Response to inquiries will be reviewed for reasonableness

– Further information may be requested

Desk Reviews: Cost-to-Charge Ratios

1. Will question any cost-to-charge ratios that either very high or very low that have large Medicaid charges associated with them

– May inquire, or may perform additional procedures

2. Will perform an analysis of a sample of cost centers to ensure that costs and charges are matched

– This is done utilizing department numbers and/or descriptions

– May lead to questions

Desk Reviews: Worksheets A-6, A-8, and A-8-1

1. Material reclassifications and adjustments will be reviewed

2. Will trace to supporting workpaper

3. Supporting workpaper will be reviewed for mathematical accuracy, traced to WTB, and reviewed for overall reasonableness

Desk Reviews: Worksheets A-6, A-8, and A-8-1

4. Inquires will be made regarding any significant discrepancies

5. The prior year adjustments and reclassification will be compared against current year to determine if there are any material items that were not made in the current year

Desk Reviews: Other Income

1. Other income from WTB, or other listing, will be reconciled to audited financial statements to ensure completeness

2. Any material items not offset on as-filed cost report for which the reason is not clearly evident will be questioned

Desk Reviews: Other Income

3. Responses to inquiry will be reviewed for reasonableness

4. This includes investment income - CMS Pub. 15-1: Section 202.2(C):

– “Investment income for offset is the aggregate net amount realized from all investments of patient care funds in non-patient care related activities and may include interest, dividends, operating profits and losses, and gains and losses on sale or disposition of investments.”

Desk Reviews: Statistics

1. Any material changes from the prior year will be questioned

2. Response to inquiry will be reviewed for reasonableness

Desk Reviews: W/S A-8-2

1. Will reconcile total remuneration to the WTB to ensure that all physician fees have been accounted for

2. Will inquire as to why certain accounts that appear to be physician fees have been excluded

– Will review response for reasonableness. May request additional documentation such as Medical Director Agreement


3. Any splits between professional and provider components will be compared to signed time summaries submitted with CMS-339

– If nothing submitted with CMS-339, alternate information will be requested and reviewed.

– If CMS-339 information is not signed, we may request other supporting information.

– Any remuneration considered 100% provider component will be questioned. May request additional documentation to support such treatment (if not CAH).

Medical Director

ER Stand-by fees


4. Provider component hours will be agreed to CMS-339 or any alternate documentation obtained. They will be reviewed for reasonableness.

5. RCE limits will be compared to the Federal Register

Desk Reviews: Depreciation

1. As-filed depreciation expense will be reconciled to a summary depreciation schedule

– Verifies that such expenses are supported by a fixed asset accounting system

2. A schedule of fixed-asset additions for the fiscal year under review will be reviewed to ensure proper treatment

– Year of acquisition depreciation methods are consistent

– Useful lives are reasonable

Desk Reviews: PS&R Data

1. Days, charges and payments (both inpatient and outpatient) will be agreed to the updated PS&R

2. To extent possible, provider crosswalk will be utilized

3. If Outpatient settlement had been previously performed, then that will be used

Desk Reviews: PS&R Data

4. Lab fee schedule charges and payments will be included

5. Zero-paid claims will not be included

6. CRNA charges and payments should be excluded

Field Reviews: Materiality

Investigation Threshold

1. Used to determine what changes from the prior year are material.

Field Reviews: Materiality

Adjustment Threshold

1. Used as a guide on what questionable accounts need to be pursued further

2. Also used as a guide to determine which as-filed A-6 reclassifications and A-8 adjustments require further review

Field Reviews: Reconciliation

Reconcile w/s A to WTB

1. Will ask for both summary WTB grouped by cost center and a detailed WTB

Reconcile w/s C to WTB

1. Will ask for both summary WTB grouped by cost report cost center and a detailed WTB

2. Any material reclassifications of charges between cost centers will be reviewed to ensure proper matching of costs and charges

Field Reviews: Reconciliation

Reconcile w/s A and w/s C to audited financial statements

1. Purpose – To identify any costs that should not have been included on the cost report, and/or any cost items that should have been included as a NRCC. To identify any charges to have been omitted from the cost report.

2. We may request this be performed by the provider if we are unable to reconcile within tolerable limits.

Field Reviews: Prior Year Comparison

Will review material changes from the prior year

1. Used to determine accounts to vouch and departments to review

2. May also include inquiries of the provider

Field Reviews: Prior Year Review Results

Review any prior desk and/or field reviews and determine if same adjustments apply to the current year

Field Reviews: Cost-to-Charge Ratios

Same as desk reviews, except can be used to identify expenses and/or charges that warrant substantive testing

Field Reviews: Worksheet A-6 and A-8

1. Done to ensure accuracy and validity of as-filed adjustments and reclassifications

2. Same as desk reviews except supporting workpaper will be audited. Where applicable, information will be traced to source documentation. This includes an audit of any percentages used to determine amount to reclassify and/or adjust.

Field Reviews: Entrance Conference

Designed to the following:

1. Introduce audit team to provider

2. Discuss the process

3. Answer any provider questions/concerns

4. Determine the availability of previously requested information

5. Set protocol for obtaining additional information and answering questions

Who

When

Field Reviews: Tour

Designed to review the following:

1. Questioned areas after review of square feet information

2. Identify existence of sampled asset additions

3. Obtain general knowledge concerning provider facilities

Should occur towards the middle of fieldwork to allow time for audit team determine what needs to be reviewed, and to allow time to follow-up on any issues that might have come up as a result of the tour.

Field Reviews: Board of Directors Minutes

1. Purpose to is identify any activities that may have a reimbursement impact, and where further procedures are necessary

2. Can affect the extent of procedures to be performed

3. Will request that they be reviewed on the first day of the on-site visit

Field Reviews: Internal Control Questionnaire

1. Will be sent with initial request package

2. Ask that it be completed

3. Will be used to assess control environment and assist in the determination of the extent of substantive testing

Field Reviews: Patient Days

1. Objective: To ensure that patient days are accumulated properly and accurately.

2. Obtain an understanding of the patient days accumulation process.

3. Will request a summary supporting reported patient days, showing information by month.

Field Reviews: Patient Days

4. A sample month will be selected and detailed census information will be requested. The detail will be reconciled to the summary. The detail will be reviewed for any unusual items.

Field Reviews: Charges

1. Will obtain an understanding of provider practices and processes

2. Routine

– Request charge master

– Analytical procedures will be performed by dividing routine charges per WTB by patient days and comparing the resulting per diem to charge master for reasonableness

– Any unreasonable results will be discussed

Field Reviews: Charges

3. Ancillary– Based on risk analysis (comparison to prior

year, unusual cost-to-charge ratios), a sample of departments will be chosen

– For those departments, the charge master and revenue and usage reports will be requested

– Revenue and usage reports will be reconciled to WTB and will be reviewed for reasonableness, taking into consideration charge master

– Any discrepancies will be discussed

Field Reviews: Other Income

1. Other income from WTB, or other listing, will be reconciled to audited financial statements to ensure completeness

2. Any material items not offset on as-filed cost report for which the reason is not clearly evident will be questioned

Field Reviews: Other Income

3. Responses to inquiry will be reviewed for reasonableness. Further information may be requested.

4. This includes investment income. CMS Pub. 15-1: Section 202.2(C):

– “Investment income for offset is the aggregate net amount realized from all investments of patient care funds in non-patient care related activities and may include interest, dividends, operating profits and losses, and gains and losses on sale or disposition of investments.”

Field Reviews: Expense Vouching

1. Purpose is to verify that reported expenses are accurate, allowable, and supported by adequate documentation.

2. GL accounts will be selected for expense vouching based on the following:

– Prior year comparisons

– Critical review of WTB

– Prior year review results

– Cost-to-charge ratio review

– Materiality


3. At least a 17% sample (equivalent of two months) of GL transactions will be selected.

– If GL system summarizes AP transactions to GL, will request AP for several sample months and use it to select sample for vouching.

– If selected account involves inventory transactions, will request GL detail for inventory account. Should be able to agree credit entries in inventory to debit entries in expense. Will vouch a sample of debit entries in inventory account.


4. Sampled GL transactions will be traced to vendor invoices or other appropriate source documentation.


1. Some routinely selected accounts that involve alternative procedures:

– Self-insured health insurance

We would audit a sample of claims paid from plan administrator.

– Property and liability insurance

We would like to obtain premium information from insurance company.

– Retirement/pension, etc.

We would like to obtain actuary report, if one exists.

Field Reviews: Salaries

1. Objective is to ensure that payroll system is accurately reporting salaries

2. 941 reconciliation

– Used to identify the possibility that salaries, in total, are overstated on the cost report

– If 941s are consolidated, can use provider-prepared breakdown, if available.

– If we are unable to reconcile, we will ask provider to assist.

– No response = adjustment

Field Reviews: Salaries

– Payroll Testing Will select two pay periods for a

sample of departments Request payroll register, labor

distribution, or equivalent Register will be traced to the GL A sample of employees will be

selected and payroll information will be verified against personnel files

• Pay rate

• Classification

• Existence

Field Reviews: Use of Financial Auditor’s Payroll Testing

4. Use of financial auditor’s payroll testing

– Can be done in certain situations

– Notify us in advance of field work

– We will want to review auditor’s workpapers to assess the extent of testing performed and conclusions reached to determine if reliance can be placed on work.

– May only lead to a reduction of substantive testing

Field Reviews: Depreciation

1. Trace depreciation schedule to the WTB.

2. Obtain capitalization and depreciation policies

3. Select a representative sample of current year fixed asset additions from the additions listing

– Agree amount to vendor invoice

– Agree lives to AHA guidelines

– Ensure consistent application of year of acquisition depreciation determination

– Verify existence during tour

Field Reviews: Interest Expense and Income

1. Expense

– Will only review further if after offset of interest income a material amount of expense remains

– Tie amount per GL to debt documents (notes, bonds)

– Will review current interest rates for reasonableness

– Any current year borrowings will be reviewed for necessity Funded depreciation activity will be reviewed to

ensure that those funds were applied before borrowing.


2. Income

– Determine the extent of interest and investment income (dividends, receipts from sale of investments, etc.)

– Verify the amount of any board designated funds for capital improvements

– Reconcile amounts to investment account statements


– Perform analytical procedure comparing such income against restricted funds

– Verify that the board indeed designated such funds

Board minutes

Audited financial statements

Written assertions from board member

Field Reviews: Statistics

1. First step is to identify the bases used and determine that they are acceptable

2. Compare statistics to the prior year

– Change in basis must be supported by prior approval

Field Reviews: Statistics

3. For those statistics for which further substantive testing is necessary, will obtain supporting documentation:

– Square Feet – Square feet survey – to be reviewed during tour

– Dollar Value – Should be able to reconcile to depreciation schedule

– Meals Served – Should agree to meal counts/ system to track meals

– FTE’s – Should be supported by payroll system

– Nursing Hours – Should be supported by time studies or payroll system

– Others – Should be supported in similar manner

Field Reviews: Worksheet A-8-2

Same as desk review, except extent of procedures are greater

– Hours will be audited to system of tracking physician hours

– ER stand-by fees will be audited against logs

Field Reviews: Related Parties

1. Prior to fieldwork, research potential related parties on the Secretary of State Corporations Web site.

2. Will inquire about extent of transactions with related parties

3. Will also review audited financial statements for any disclosures concerning related parties

Field Reviews: Related Parties

1. If material transactions with related parties are identified, we will ask for one of two items:

– Financial information necessary to determine profit percentage of related party which will be used to reduce expense on cost report. In the instance of related party rent, we will request information to support the cost of ownership.

– Information to support an assertion that the related party should be treated as an exception to the related party rule

Field Reviews: Medicaid Days and Charges

• Same as Desk Reviews

Field Reviews: Interns and Residents

1. Objective is to ensure that non-allowable rotations have been accounted for

2. If accomplished through step-down, we will want to verify the statistics against detailed supporting documentation

Field Reviews: Transplants

Will verify information reported on worksheet D-6, with respect to Medicaid transplants, against logs

Outpatient Settlements

1. As-filed CMS 2552-96 and NCDMA E-5 are sent to Clifton Gunderson

2. PS&R information is also obtained

3. Submitted documentation is reviewed for provider-prepared outpatient cross-walk

– If cross-walk not found, one will be requested from the provider.


4. Outpatient ancillaries per updated PS&R’s will be mapped according to provider cross-walk

– If cross-walk cannot be obtained, the total outpatient ancillary charges will be allocated based on as-filed charges.


5. Updated mapped charges are applied to as-filed cost-to-charge ratios, unless a desk/field review for the same fiscal year has been performed

• If the turnaround is greater than $50,000, the provider will be contacted to review the proposed outpatient settlement calculation.

Other Items: CG Issues

1. New management structure now allows for adequate guidance and oversight

– Should make audit process more efficient and effective

2. Adequate resources now being given

– Asking for more than a week of field work for more complex audits.

– Adjusting staffing levels based on perceived complexity of review

– Utilizing available resources from other office to help correct any backlog

Other Items: CG Issues

3. Planning more timely and effective

– Goal is to be able to select samples prior to fieldwork to minimize any idle time while in the field

4. NC-specific knowledge gained through experience

Other Items: Common Adjustments

1. Lack of documentation/response

2. Marketing as a NRCC as opposed to being removed

3. Outpatient pharmacies to a NRCC instead of income offset

4. Investment income as opposed to just interest income

Thank you!!

Questions?

Contact Information

Chuck Smith, CPASenior Manager-in-Charge

Clifton Gunderson LLP3200 Beechleaf Court, Suite 900

Raleigh, North Carolina 27604

Phone: 919-790-2499/ Fax: 919-790-2684

[email protected]

www.cliftoncpa.com

north carolina desk reviews, field reviews and o/p settlements presentation for the north carolina...

Documents

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