CSA
Summary
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REPORT BY THE STATE AUDITOR
OF CALIFORNIA
THE VETERANS HOME OF CALIFORNIA HAS NOT
MAXIMIZED REVENUE FROM RESIDENTS AND
REIMBURSEMENTS FROM THE FEDERAL GOVERNMENT
93027 APRIL 1994
The Veterans Home of California Has Not
Maximized Revenue From Residents and
Reimbursements From the Federal Government
93027, April 1994 Error! Reference source not found.
California State Auditor
Bureau of State Audits
Table of Contents
Page
Summary S-1
Introduction 1
Chapters
1 The Veterans Home of California Has Not
Maximized Revenue From Residents 5
Recommendations 11
2 The Veterans Home of California Has Not
Maximized Reimbursements From
the Federal Government 13
Recommendations 21
Appendices
A Veterans Home of California
Population by Age and Level of Care
As of June 30, 1993 23
B Veterans Home of California
Residents by Time of Admission to the Home
As of June 30, 1993 25
C Residents' Monthly Fees
Effective February 1, 1994 27
D Average Monthly General Fund Support
Per Resident for Different Levels of Care
If Fees Were Charged at the Maximum
Allowed by the 1993-94 Budget Act 29
E Third-Party Insurance Reimbursements 31
Table of Contents (continued)
Page
F Noncompliance With the State's
System of Internal Controls 33
Responses State and Consumer Services Agency 35
to the
Audit Department of Veterans Affairs 37
California State Auditor's Comments
on the Response From the
Department of Veterans Affairs 47
Summary
Results in Brief The 1993-94 Budget Act (Chapter 55, Statutes of 1993) required the
Bureau of State Audits to review the policies and procedures of the
state Department of Veterans Affairs (department) to maximize fees
paid by residents of the Veterans Home of California (home). The
Budget Act also required that the review evaluate the department's
efforts to exhaust all sources of reimbursements from both the residents
and the federal government. During our review, we noted the
following:
By not implementing adequate procedures and adopting policies
to recover all possible fees, the home has not maximized revenue
from residents. For example, the home can collect up to
$1.15 million more from residents if it assesses an estimated
$150,000 annually in fees on some social security income
received by residents and charges residents an additional
$1.0 million annually by raising fees to the maximum allowed by
the Budget Act, while assuring that residents do not pay more
than the state-funded cost of their care.
The home does not have the authority to collect the state-funded
cost of care provided to residents who leave the home to live
somewhere else. For example, the state-funded cost of care
provided to the approximately 100 residents who left the home in
1993 would have been approximately $787,000 if they had
resided in the home for only one year and had received
domiciliary care, the least costly level of care. The amount the
home might have recovered depends on the income and assets of
the residents who left the home.
By not implementing adequate procedures to recover all possible
reimbursements, the home has not maximized reimbursements
from the federal government. We reviewed the home's
reimbursements in fiscal year 1992-93 and found that the home
received $260,000 less in Medicare reimbursements for hospital
care than it would have if it had been reimbursed at rates similar
to comparable institutions. In addition, the home received
$200,000 less in reimbursements for outpatient clinic visits than it
would have if it had received reimbursements for the percentage
S-1
of residents who were eligible for Medicare. Also, the home
received approximately $293,000 less in reimbursements than
possible for certain therapy services.
The home received less in these reimbursements because its
manual procedures and automated systems do not adequately
accumulate all the possible charges to Medicare, do not properly
classify all the charges by complexity, and do not properly price
all the charges. Factors outside the home's control, such as
differences in facility size, complexity of cases, and patient
demographics between the home and the comparable institutions,
explain in part why the home received less in reimbursements.
In addition, according to its reimbursements officer, the home
provides residents with all medical services, including services
which are not covered by Medicare. Other institutions may not
provide these additional services. Moreover, according to the
home's administrator, the lack of staff resources is a major factor
in preventing the home from maximizing reimbursements.
The home could have received up to approximately $446,000
annually in aid and attendance allowances if the federal Department
of Veterans Affairs determines that 95 residents had been eligible to
receive the allowances and if the home had obtained the statutory
authority to receive the allowance for all veterans, including those
with dependents.
Because the information is not available, we could not quantify the
total lost revenue the home could have collected from residents if it had
consistently verified income information on which fees were
calculated. We also could not determine the total lost reimbursements
the home could have received from Medicare and Medi-Cal if it had
adequate manual billing procedures and automated systems. Because
the home did not maximize revenue from residents and reimbursements
from the federal government, support from the State's General Fund is
higher than it needs to be. In addition, the cost of care to be recovered
from residents is higher than it needs to be.
The home has implemented some corrective action to address these
issues. For example, on February 1, 1994, it implemented new fees
which we estimate will increase revenue annually by $1.1 million of
the $2.1 million in possible additional revenue based on the maximum
allowed by the Budget Act. In addition, on March 1, 1994, it began
S-2
assessing fees for February 1994 on the social security income not
previously assessed. Further, the home is presently analyzing and
implementing ways to improve its billing information system.
Background
The home at Yountville provides long-term residential care for aged
and/or disabled war-time veterans. To offset costs, the California
Military and Veterans Code allows the home to collect revenue from
residents, which the home generally assesses as fees based on a
percentage of the residents' income. The Budget Act for fiscal year
1993-94 allowed the home to collect fees of up to 70 percent of the
residents' income and limited the total amount collected from residents
to 40 percent of the State's general fund costs of the home for fiscal
year 1993-94, approximately $9 million. The home is also eligible to
receive reimbursements from the federal government and other third
parties. For example, it may receive reimbursements from Medicare,
Medi-Cal, the federal Department of Veterans Affairs, and third-party
insurance companies. These fees and reimbursements reduce the
home's costs that are supported by the General Fund.
The Home Has The home's procedures, policies, and statutory limitations have
Not Maximized prevented the home from maximizing revenue from residents. By not
implementing adequate procedures and adopting policies to recover all
Revenue From
possible fees, the home has not maximized revenue from residents, and
Residents
support from the State's General Fund may be higher than it needs to
be. For example, the home can collect up to $1.15 million more from
residents if it assesses an estimated $150,000 annually in fees on some
social security income received by residents and if it charges residents
an additional $1.0 million annually by raising fees to the maximum
allowed by the Budget Act.
In addition, the home does not have the authority to collect the
state-funded cost of care provided to residents who leave the home to
live somewhere else. For example, the state-funded cost of care
provided to the approximately 100 residents who left the home in 1993
would have been approximately $787,000 if they had resided in the
home for only one year and had received domiciliary care, the least
costly level of care. The amount that the home might have recovered
depends on the income and assets of the residents who left the home.
Further, because the information to determine all lost revenue is not
available, we could not quantify the total lost fees the home could have
collected from residents if it had consistently verified income
information on which fees were calculated. The home has
implemented some corrective action to address these issues. For
S-3
example, on February 1, 1994, it implemented new fees which we
estimate will increase revenue annually by $1.1 million of the
$2.1 million in possible additional revenue based on the maximum
allowed by the Budget Act. In addition, on March 1, 1994, it began
assessing fees for February 1994 on the social security income not
previously assessed.
The Home Has By not implementing adequate procedures to recover all possible
Not Maximized reimbursements, the home has not maximized reimbursements from the
federal government. To determine how effective the home was in
Reimbursements
maximizing Medicare reimbursements, we compared the home's
From the Federal
reimbursements with the reimbursements that comparable institutions
Government
received, with the reimbursements available based on its population of
residents eligible for Medicare, and with its possible reimbursements
for certain therapy services.
We reviewed the home's reimbursements in fiscal year 1992-93 and
found that the home received $260,000 less in Medicare
reimbursements for hospital care than it would have if it had been
reimbursed at rates similar to comparable institutions. In addition, the
home received $200,000 less in reimbursements for outpatient clinic
visits than it would have if it had received reimbursements for the
percentage of residents who were eligible for Medicare. Finally, the
home received approximately $293,000 less in reimbursements than
possible for certain therapy services.
The home received less in Medicare reimbursements because its
manual procedures and automated systems do not adequately
accumulate all the possible charges to Medicare, do not properly
classify all the charges by complexity, and do not properly price all the
charges. In addition, because the information to determine all lost
reimbursements is not available, we could not determine the total lost
reimbursements the home could have received from Medicare and
Medi-Cal if it had adequate manual billing procedures and automated
systems. Factors outside the home's control, such as differences in
facility size, complexity of cases, and patient demographics between
the home and the comparable institutions, explain in part why the home
received less in reimbursements. Also, the home may have received
less because, according to its reimbursements officer, the home
provides residents with all medical services, including services which
are not covered by Medicare. Other institutions may not provide these
additional services. Moreover, according to the home's administrator,
the lack of staff resources is a major factor in preventing the home from
maximizing reimbursements.
S-4
Finally, the home could have received up to approximately $446,000
annually in aid and attendance allowances if the federal Department of
Veterans Affairs determines that 95 residents had been eligible to
receive the allowances and if the home had obtained the statutory
authority to receive the allowance for all veterans, including those with
dependents. Because the home did not maximize reimbursements, the
cost of care to be recovered from residents and the State's General Fund
is higher than it needs to be. The home has implemented some
corrective action to address these issues. For example, the home is
presently analyzing and implementing ways to improve its billing
information system.
Recommendations
To further its efforts in maximizing revenue from residents and
reimbursements from the federal government, the home should take the
following actions:
Continue to assess and collect fees on the social security income
it reimburses the residents;
Raise fees to residents to the maximum allowed by the Budget
Act, while assuring that residents do not pay more than the
state-funded cost of their care;
Seek statutory authority to collect the state-funded cost of care
from residents who leave the home to live somewhere else;
Consistently verify income information from the residents;
Develop an action plan for improving manual procedures that will
capture all patient care charges;
Continue analyzing and procuring a cost-effective management
information system capable of supporting all aspects of the
home's activities, including patient care, reimbursements, and
general management information beneficial to the overall
cost-efficient management of the home;
Continue to develop procedures to ensure that aid and attendance
allowances are received for all eligible residents; and
Seek legislation to allow the home to receive aid and attendance
allowances for residents with dependents who do not provide
regular assistance to the residents.
S-5
Agency The Department of Veterans Affairs responded that it believes that the
Comments findings and recommendations contained in the report will help the
home be more effective in providing services to California's aged and
disabled veteran population. However, the department is concerned
that raising fees to the maximum allowed by the Budget Act while
assuring that residents do not pay more than their cost of care will have
a negative impact on the quality of residents' lives. The department
also notes that some amounts in our report, which we included for
illustrative purposes, do not necessarily represent revenue or
reimbursements that are attainable by the home. In addition, the
department believes that the home will incur some costs to increase
reimbursements.
S-6
Introduction
The Veterans Home of California (home) at Yountville, established in
1884, provides long-term residential care for aged and/or disabled
war-time veterans. The home's mission is to provide an environment
for veterans that improves overall health, reduces the incidence and
severity of disabilities, increases social interaction, and promotes
self-reliance and self-worth.
The home has a budgeted staff of approximately 860 employees and
has 1,419 beds available in five levels of care. According to the home,
some of the beds are currently vacant because some buildings are under
construction. The levels of care provided at the home are domiciliary,
licensed residential, intermediate, skilled nursing, and acute care.
Residents in domiciliary care are self-sufficient and able to adequately
perform all the activities of daily living. Residents in licensed
residential care are self-sufficient and able to adequately perform daily
living activities with minimal assistance. Residents in intermediate
care receive some nursing care and supervision. Residents in skilled
nursing care receive 24-hour inpatient care including medical, nursing,
dietary, and pharmaceutical services. Residents in acute care receive
hospital services, such as medical, psychiatric, or surgical services.
Residents of the home are honorably discharged war-time veterans,
California residents, and over 62 years old or disabled. In addition, if
space is available, spouses of eligible veterans who meet certain
requirements may also live at the home.
The home is organized under the state Department of Veterans Affairs
(department). The department estimates that during fiscal year
1993-94, the home will provide care for 1,125 residents at a cost of
$45.6 million. Appendix A shows the population of residents by age
and level of care as of June 30, 1993, and Appendix B shows the
population of residents by time of admission to the home. In addition
to the $45.6 million, the home also draws from the post fund to provide
for the general welfare of its residents. The post fund pays the salaries
of residents in a therapeutic employment program who provide services
such as residential and restorative care. It also pays for other
expenses, such as recreational activities for the residents. The home
estimates that during fiscal year 1993-94, costs of $1.7 million will be
paid from the post fund, which is not part of the State's budget.
1
Historically, the State's General Fund has paid for about one half of the
home's costs. Residents' fees and charges (fees) as well as
reimbursements from Medicare, Medi-Cal, the federal Department of
Veterans Affairs (VA), and other third parties reduce the share of costs
paid by the General Fund. Appendix C shows the current residents'
fees, and Appendix D shows the average cost that would be paid by the
General Fund by level of care based on fees at the maximum allowed
by the 1993-94 Budget Act. In fiscal year 1992-93, the home reported
$5.5 million in residents' fees, $4.7 million in Medicare
reimbursements, $2.4 million in Medi-Cal reimbursements,
$7.0 million in VA per diem reimbursements, $3.8 million in funds for
construction, and $1.0 million in miscellaneous revenues. In fiscal
year 1992-93, the State's general fund support was approximately
$22.8 million, 48 percent of the home's $47.1 million operating cost.
The department plans to open a new veterans home in Barstow,
California in fiscal year 1995-96. The new home is planned to
accommodate a total of 400 residents, consisting of 220 residents in
domiciliary care, 120 residents in intermediate care, and 60 residents in
skilled nursing care. As a long-term goal, the department also hopes to
open three more new homes in Southern California, each
accommodating 400 residents. The information in this report should
help the department maximize revenue from residents and
reimbursements from the federal government in future veterans homes.
Scope and The 1993-94 Budget Act (Chapter 55, Statutes of 1993) required the
Methodology Bureau of State Audits to review the policies and procedures of the
department for maximizing fees paid by residents of the home. The
Budget Act required that the review evaluate the department's efforts to
exhaust all sources of reimbursements from both the residents and the
federal government. In addition, in August 1993, the Joint Legislative
Audit Committee asked the Bureau of State Audits to include in the
audit a review of the internal controls over the purchases of goods and
services.
Revenue From To determine whether the home's policies and procedures maximized
Residents revenue from the residents, we reviewed the policies and procedures
related to fees and interviewed staff at the home. Because the home
assesses fees based on residents' income, we reviewed a sample of
residents' files to determine whether the home verified the income
information when the resident first provided it. We also determined
whether the home assessed fees in accordance with its policies and
whether it properly collected and deposited selected payments in fiscal
year 1993-94. In addition, we estimated the increased revenue from
2
residents because of new fees implemented by the home as a result of
the 1993-94 Budget Act provisions. We also estimated the increased
revenue from residents if the home raises fees to the maximum allowed
by the Budget Act.
Reimbursements To ascertain whether the home's policies and procedures maximized
From the Federal reimbursements from Medicare, we analyzed statistics, based on
information from the Office of Statewide Health Planning and
Government
Development, for hospitals, and the home's Medicare cost reports. In
addition, we focused on Medicare reimbursements for hospital care,
outpatient clinic visits, and certain therapy services. We also reviewed
internal documents and interviewed staff about the home's efforts to
maximize reimbursements.
We reviewed reimbursements from the VA by analyzing significant
fluctuations in the monthly claims for reimbursement in fiscal year
1993-94 and by ascertaining whether the home maximized
reimbursements with certain waivers for veterans with large incomes.
Reimbursements The fiscal year 1993-94 Budget Act did not require that we evaluate the
From Other home's efforts to maximize reimbursements from other third parties.
However, we obtained some information on reimbursements from
Third Parties
third-party insurance companies which is discussed in Appendix E.
Internal Controls Our review of internal controls over cash receipts focused on the areas
Over Cash observed during our testing of residents' fees. To determine whether
the home has adequate internal controls over the purchases of goods
Receipts and
and services, we reviewed internal controls including the separation of
Purchases of
duties, the proper authorization for purchases and payments, the
Goods and
safekeeping of assets, and the reasonableness of expenditures from the
Services State's General Fund. We tested some expenses for food,
pharmaceuticals, minor equipment, and other operating expenses.
The results of our review are shown in Appendix F. Most of the issues
related to the purchases of goods and services were brought to our
attention by the home.
3
Blank page inserted for reproduction purposes only.
4
Chapter 1 The Veterans Home of California Has Not
Maximized Revenue From Residents
Chapter The procedures, policies, and statutory limitations of the Veterans
Summary Home of California (home) have prevented it from maximizing revenue
from residents. By not implementing adequate procedures and
adopting policies to recover all possible fees, the home has not
maximized revenue from residents, and the State's general fund support
may be higher than it needs to be. For example, the home can collect
up to $1.15 million more from residents if it assesses an estimated
$150,000 annually in fees on some social security income received by
residents and if it charges residents an additional $1.0 million annually
by raising fees to the maximum allowed by the Budget Act.
In addition, the home does not have the authority to collect the
state-funded cost of care provided to residents who leave the home to
live somewhere else. For example, the state-funded cost of care
provided to the approximately 100 residents who left the home in 1993
would have been approximately $787,000 if they had resided in the
home for only one year and had received domiciliary care, the least
costly level of care. The amount the home might have recovered
depends on the income and assets of the residents who left the home.
Further, because the information to determine all lost revenue is not
available, we could not quantify the total lost fees the home could have
collected from residents if it had consistently verified income
information on which fees were calculated. The home has
implemented some corrective action to address these issues. For
example, on February 1, 1994, it implemented new fees which we
estimate will increase revenue annually by $1.1 million of the
$2.1 million in possible additional revenue based on the maximum
allowed by the Budget Act. In addition, on March 1, 1994, it began
assessing fees for February 1994 on the social security income not
previously assessed.
Background The California Military and Veterans Code allows the home to collect
fees from residents, which the home generally assesses as a percentage
of residents' income. In calculating fees, the home considers all of a
resident's income except income used to support dependents, earnings
from an employment program at the home, and interest income on
money deposited at the home. The home does not assess fees on
employment program earnings to encourage residents to participate in
5
the therapeutic program, nor does it assess fees on interest income paid
by the home on deposits to encourage residents to maintain funds at the
home. When residents deposit money at the home, the home is able to
assist residents in paying fees when they are no longer able to function
independently, gain immediate access to the residents' money when
they die, and monitor the residents' eligibility for Medi-Cal.
The Budget Act for fiscal year 1993-94 allowed the home to collect
fees of up to 70 percent of the residents' income and limited the total
amount collected from residents to 40 percent of the State's general
fund costs for the home for fiscal year 1993-94, approximately
$9 million.
The Home Has The home cannot be certain it has maximized revenue from residents
Not Consistently because it has not consistently verified residents' income information
on which fees were calculated. During fiscal year 1992-93, the home
Verified Income
reported revenue of $5.5 million in fees. Instead of consistently
Information
verifying the residents' income information, the home has used the
From the
"honor system" and, generally, has verified income by requesting
Residents information from the Social Security Administration and by sending
confirmation letters to the federal Department of Veterans Affairs (VA)
only when it had questions regarding the income reported by residents.
We reviewed a judgmental sample of residents' files, regardless of
when the residents were admitted to the home. According to the
home's administrator, residents' income has been a factor in
determining fees since the early 1970's. For 12 of the 45 residents'
files reviewed, we found no evidence that the home verified income
information when the resident first provided it, as early as 1978. The
home verified some income information for some of the residents in
subsequent years. However, it did not consistently verify income
information, and we did not find evidence that any income information
was ever verified for 3 of the 12 residents. According to the home's
reimbursements officer, although the home has always requested
documentation from residents to support their income, the home has no
legal ability to obtain income information from outside sources when
residents do not have documentation available. Although the home
may not have the legal authority to obtain income information from
outside sources, the California Military and Veterans Code,
Section 1044, allows the home's administrator to prescribe conditions
upon which residents remain with the home, which could include
requiring that residents provide documentation of income.
Without consistent verification of income information, the home cannot
be assured that it is assessing residents' fees on the proper amount of
6
income. For example, in November 1993, the former reimbursements
officer identified 142 residents who, based on their low incomes, may
be eligible to receive pensions from the VA. It is possible that these
residents already receive pensions they did not report to the home.
Thus, the home may have lost fees on the unreported income or on
income that residents could have been receiving. The home is in the
process of developing new procedures for tracking residents'
applications for veterans' pensions. The discussion in Chapter 2 on aid
and attendance allowances was part of the same review by the former
reimbursements officer in November 1993.
It is not unusual for the government to verify income information. For
example, the federal Housing and Urban Development Department
provides housing assistance to individuals based on their income,
requiring documentation which may include income tax returns and
bank statements to support their alleged incomes. In addition, county
welfare offices ensure individuals report all income by reviewing
information from the Social Security Administration and tax, welfare,
employment, and other agencies.
The Home Has The home has not assessed fees on some social security income
Not Correctly received by residents. By statute, the home pays for the insurance
premiums for Medicare Part B, supplementary medical insurance
Assessed Fees on
coverage, on behalf of all residents. For residents who receive social
Social Security
security income, the insurance premiums are initially deducted from the
Income
benefit checks. The home subsequently reimburses the residents by
crediting their trust accounts maintained at the home. However, the
home has not assessed fees on the premiums reimbursed to the
residents. Based on our analysis of the home's data from July through
December 1993, the home has not assessed and collected estimated fees
of $150,000 annually from residents.
According to the reimbursements officer, the home did not previously
identify its repayment of the Medicare premiums to residents as income
for fee purposes. On March 1, 1994, the home began assessing fees
for February 1994 on the social security income not previously
assessed.
The Home Has Instead of raising fees to the maximum allowed by the Budget Act,
Not Raised Fees effective February 1, 1994, the home implemented new fees that
increased residents' fees based on the level of care received. As shown
to the Maximum
in Appendix C, the new fees are generally 55 percent of income for
Allowed by the
residents in domiciliary and residential care, 65 percent of income for
Budget Act
residents in intermediate care, and 70 percent of income for residents in
7
skilled nursing care. The new fees allow most residents to have
remaining income of at least $165 monthly, which may be used as
spending money. Spending money may be used for items besides
room, board, and medical care, which are provided by the home.
Residents with monthly incomes less than $165 are not assessed fees.
The previous fees were generally 50 percent of income for all levels of
care.
According to a memorandum dated December 28, 1993, the director of
the department indicated that the new fees were based on the different
levels of care so that no resident would pay more than the home's cost
for providing care for the resident, which is paid by the State's General
Fund. Appendix D displays the general fund support by level of care
based on fees at the maximum allowed by the 1993-94 Budget Act.
Based on the home's income information for December 1993 and
average cost information for July through December 1993, if the home
charges fees at 70 percent of income, as provided for in the Budget Act,
only some 14 residents in domiciliary care, one resident in residential
care, and 2 residents in intermediate care would be in a position to pay
more than the home's average cost of care that is not reimbursed by the
federal government.
Based on the home's records, we estimate that with the fees
implemented on February 1, 1994, revenue will increase by
approximately $1.1 million, from $6.1 million to $7.2 million annually.
The home estimated that the new fees would increase revenue by
$1.4 million annually. However, it overstated the increase because it
did not include in the estimate the effect of income used for purposes
such as alimony or dependent support, which the home exempts from
fees. Because the new fees will be in place only 5 months during the
year, we estimate that revenue will increase by approximately $460,000
for fiscal year 1993-94. These estimates are based on the population
of residents at the different levels of care and their incomes as of
December 1993. Any substantial changes in the levels of care
received by the residents or their incomes may affect the increase in
revenue.
In contrast, if the home had raised fees to the maximum allowed by the
Budget Act for fiscal year 1993-94 while assuring that residents did not
pay more than the state-funded cost of their care, we estimate that
revenue would have increased by approximately $2.1 million, to
$8.2 million annually. The state-funded cost of care is the home's cost
not covered by residents' fees and reimbursements from the federal
government or other third parties. By not increasing fees to the
maximum allowed by the Budget Act, the home is losing
approximately $1.0 million annually in revenue from residents.
8
In addition, if fees had been raised to the maximum, the average
monthly income remaining for residents to use as spending money
would have been at least $240. Currently, the average monthly
income remaining for residents is at least $336. Because the average
monthly income amounts do not include earnings from an employment
program at the home and interest income on money deposited at the
home, some residents have even more spending money available to
them. For example, in fiscal year 1992-93, approximately 180
residents in the employment program earned approximately $400
monthly.
According to the home's administrator, historically some residents have
responded to fee increases by leaving the home. However, residents
leave the home for many reasons other than increased fees. For
example, in 1993, approximately 100 residents left the home for
reasons including the home discharging them for disciplinary problems
or nonpayment of fees. Other residents found alternative living
arrangements. The estimated increase of $2.1 million does not
consider the potential decline in fees due to residents leaving the home.
However, based on the home's records, we estimate that if the home
raises fees to 70 percent of residents' income, regardless of the level of
care, the average monthly fee would be approximately $600. Further,
according to a survey of outside nursing facilities by the former
reimbursements officer, monthly fees for residents receiving licensed
residential, intermediate, and skilled nursing care ranged from $1,100
to $3,400 and did not include services provided by the home, such as
physicians' services, acute medical care, therapy services, pharmacy,
medical supplies, and transportation. Based on the survey results, we
believe that it would not be economical for residents to leave the home
instead of paying the increased fees.
The Home Does The home has not collected the state-funded cost of care from residents
Not Have the who leave the home to live somewhere else. For example, we estimate
that if the approximately 100 residents who left the home in 1993 had
Authority To
resided in the home for only one year and had received domiciliary
Collect the
care, the least costly level of care, the state-funded cost of care of
State-Funded
residents who left the home to live somewhere else would have been
Cost of Care From approximately $787,000. The amount that the home might have
Residents Who recovered for the state-funded cost of care depends on the income and
assets of the residents who left the home.
Leave the Home
According to its administrator, if the home's policy was to recover the
state-funded cost of care from residents who leave the home, some
veterans may not enter the home because they would not want to be
9
responsible for the state-funded cost of care if they decided to leave,
and others who could leave and resume their previous lives would be
unable to leave without incurring a significant liability. Currently, the
home is responsible for this liability because it is not able to collect the
state-funded cost of care, not covered by residents' fees or federal
reimbursements, unless residents remain at the home until their death.
The home has the statutory authority to collect the state-funded cost of
care from the estates of residents who remain at the home until their
death. By statute, these collections are deposited in the post fund,
which supplements the cost of care provided by the General Fund.
The post fund pays the salaries of residents in a therapeutic
employment program who provide services such as residential and
restorative care. It also pays for other expenses, such as recreational
activities for the residents. Although the home has the statutory
authority to collect from the estates of residents who remain at the
home until their death, it does not have the authority to collect the
state-funded cost of care from residents who leave the home to live
somewhere else. Because of this inconsistency in statutory authority,
the estates of residents who remain at the home until their death may
pay more for the residents' cost of care than residents who leave the
home to live somewhere else. In a memorandum dated September 9,
1992, the administrator indicated that in Connecticut, residents at the
veterans home retain $65 monthly for personal use, and the home bills
either the resident or the resident's estate the full cost of care when the
resident dies or leaves the home.
Conclusion Because the home has not assessed fees on some social security income
received by residents until recently and has not raised fees to the
maximum allowed by the Budget Act, the State's general fund support
may be up to $1.15 million higher than it needs to be. In addition,
because the home has not had the authority to collect the state-funded
cost of care provided to residents who leave the home to live
somewhere else, the general fund support may be higher than it needs
to be. For example, the state-funded cost of care provided to the
approximately 100 residents who left the home in 1993 would have
been approximately $787,000 if they had resided in the home for only
one year and had received domiciliary care, the least costly level of
care. The amount that the home might have recovered depends on the
income and assets of the residents who left the home to live somewhere
else. Further, because the information to determine all lost revenue is
not available, we could not quantify the total lost fees the home could
have collected from residents if it had consistently verified income
information on which fees were calculated. The home has
implemented some corrective action to address these issues. For
example, on February 1, 1994, it implemented new fees which we
10
estimate will increase revenue annually by $1.1 million of the
$2.1 million in possible additional revenue based on the maximum
allowed by the Budget Act. In addition, on March 1, 1994, it began
assessing fees for February 1994 on the social security income not
previously assessed.
Recommendations To further its efforts in maximizing revenue from residents, the home
should take the following actions:
Consistently verify income information from the residents;
Continue to assess and collect fees on the social security income it
reimburses residents for Medicare premiums;
Raise residents' fees to the maximum allowed by the Budget Act,
assuring that residents do not pay more than the state-funded cost of
their care; and
Seek statutory authority to collect the state-funded cost of care from
residents who leave the home to live somewhere else.
11
Blank page inserted for reproduction purposes only
12
Chapter 2 The Veterans Home of California Has Not
Maximized Reimbursements From
the Federal Government
Chapter By not implementing adequate procedures to recover all possible
Summary reimbursements, the Veterans Home of California (home) has not
maximized reimbursements from the federal government. To
determine how effective the home has been in maximizing Medicare
reimbursements, we compared the home's reimbursements with the
reimbursements that comparable institutions received, with the
reimbursements available based on its population of residents eligible
for Medicare, and with its possible reimbursements for certain therapy
services.
We reviewed the home's reimbursements in fiscal year 1992-93 and
found that the home received $260,000 less in Medicare
reimbursements for hospital care than it would have if it had been
reimbursed at rates similar to comparable institutions. In addition, the
home received $200,000 less in reimbursements for outpatient clinic
visits than it would have if it had received reimbursements for the
percentage of residents who were eligible for Medicare. Also, the
home received approximately $293,000 less in reimbursements than
possible for certain therapy services.
The home has received less in Medicare reimbursements because its
manual procedures and automated systems do not adequately
accumulate all the possible charges to Medicare, do not properly
classify all the charges by complexity, and do not properly price all the
charges. In addition, because the information to determine all lost
reimbursements is not available, we could not determine the total lost
reimbursements the home could have received from Medicare and
Medi-Cal if it had adequate manual billing procedures and automated
systems. Factors outside the home's control, such as differences in
facility size, complexity of cases, and patient demographics between
the home and the comparable institutions, explain in part why the home
has received less in reimbursements. In addition, the home may have
received less in Medicare reimbursements because, according to the
home's reimbursements officer, the home provides residents with all
medical services, including services that are not covered by Medicare.
Other institutions may not provide these additional services.
Moreover, according to the home's administrator, the lack of staff
resources is a major factor in preventing the home from maximizing
reimbursements.
13
Further, the home could have received up to approximately $446,000
annually in aid and attendance allowances if the federal Department of
Veterans Affairs (VA) determines that 95 residents had been eligible to
receive the allowances and if the home had obtained the statutory
authority to receive the allowance for all veterans, including those with
dependents. Because the home has not maximized reimbursements,
the cost of care to be recovered from residents and the State's General
Fund is higher than it needs to be. The home has implemented some
corrective action to address these issues. For example, it is presently
analyzing and implementing ways to improve its billing information
system.
Background The home receives reimbursements from Medicare for its eligible
residents. Medicare insurance consists of Part A, hospital insurance,
and Part B, supplementary medical insurance. Medicare Part A,
hospital insurance, reimburses some costs of hospitalization and certain
inpatient care, skilled nursing care related to short-term rehabilitation,
and home health services. Medicare provides higher reimbursements
for complex or difficult hospital procedures than for routine hospital
procedures. Medicare Part B, supplementary medical insurance,
reimburses the costs for most outpatient hospital services including
clinic visits, certain therapy services, and physicians' services.
Medicare reimburses the home for most of the cost of services. The
remaining cost is the co-payment, which is normally the responsibility
of the patient. However, the home does not collect the Medicare
co-payments from residents. Instead, the co-payments are included in
the cost of care, which is paid by the State's General Fund. Some of
this state-funded cost of care is collected from some estates of
residents, as discussed in Chapter 1.
The home also receives reimbursements from Medi-Cal for its eligible
residents. The State of California's Medi-Cal program is funded
50 percent by the State's General Fund and 50 percent by the federal
government. Medi-Cal reimburses the costs for both long-term and
short-term skilled nursing care and generally the costs for hospital care,
including inpatient care and outpatient care.
14
The Home Has
The home has not maximized reimbursements from Medicare. To
Not Maximized
determine whether it was effective in maximizing Medicare
Reimbursements
reimbursements, we compared the home's reimbursements in fiscal
From Medicare year 1992-93 for hospital care with the reimbursements that
comparable institutions received for fiscal years ending between
June 30, 1991, and June 29, 1992. In addition, we compared the
home's reimbursements with the reimbursements available for
outpatient clinic visits based on its population of residents eligible for
Medicare and with its potential reimbursements for certain therapy
services. Finally, we identified conditions that demonstrate the home's
inadequate manual billing procedures and automated systems.
The home was reimbursed $1.54 million for hospital care related to 350
patient discharges for an average reimbursement per discharge of
$4,400. We compared these reimbursements for hospital care with
reimbursements received by comparable institutions on a discharge
basis when a patient is released from the hospital. Comparable
institutions include co-payments in the reimbursements they report, so
we increased the home's average per discharge reimbursement to
$4,789 to include the co-payment. If the home had been reimbursed at
the rate that comparable institutions were reimbursed, $5,532 per
patient discharge, it would have received an additional $260,000 in
Medicare reimbursements. The home may have received less in
reimbursements for hospital care than comparable institutions because,
according to its health record technician, it determines the complexity
of hospital procedures billed to Medicare manually and by accessing
Medicare's computer system. According to the department's chief of
information technology services, in November 1993, the home installed
a computer program that enhanced its determination of the complexity
of hospital procedures billed to Medicare. The home may also have
received less in reimbursements than comparable institutions because it
does not perform complex hospital procedures.
In addition to the home's determination of the complexity of
procedures, according to its reimbursement analyst, its computer
system can record only one level of care per patient day, based on a
12:01 a.m. census. The different levels of care are discussed in the
introduction. For example, according to the reimbursement analyst, if
a patient uses a special room in the acute hospital for a specific
procedure but is transferred back to skilled nursing the same day, the
current patient day is recorded as a skilled nursing day, and the hospital
room charges are not billed to Medicare. Although the home may not
be billing all hospital room charges, it may be billing other charges to
Medicare.
15
The home was reimbursed $1.49 million for outpatient care, including
$990,000 for 15,096 outpatient clinic visits. In estimating the home's
potential reimbursements for outpatient clinic visits, we included the
effect of the average percentage of costs disallowed by Medicare for
comparable institutions. If it had received reimbursements for
outpatient clinic visits for the percentage of residents who were eligible
for Medicare, the home would have received an additional $200,000.
It may have received less in reimbursements because, according to the
reimbursement analyst, its procedures do not ensure that it bills
Medicare for the highest reimbursement possible based on the
complexity of clinic visits and procedures performed. For example,
according to the reimbursement analyst, the home may bill for an
examination for heart problems but not increase the billing for
complications related to an existing diabetes condition. Further, the
home may have received less in reimbursements because, according to
the home's reimbursements officer, it provides residents with all
medical services, including services which are not covered by
Medicare, such as necessary therapy maintenance, annual physicals,
and trimming residents' nails. Other institutions may not provide these
additional services.
Another reason the home received less in reimbursements is its
procedures do not ensure that it bills Medicare for all reimbursable
therapy visits and procedures. According to the home's chief of
rehabilitation services, 50 to 75 percent of physical therapy treatments
and 25 percent of both occupational and speech therapy treatments
provided to residents are not reimbursable by Medicare, but are
necessary to maintain the residents' current level of health. The
following table compares the home's actual Medicare reimbursements
with the potential reimbursements which have been reduced for the
estimated treatments not reimbursable by Medicare. Note that the
home's potential Medicare reimbursements for therapy services exceed
the actual Medicare reimbursements by approximately $293,000.
Potential Actual
Medicare Medicare
Reimbursements Reimbursements
Physical therapy $ 69,000 $4,246
Occupational therapy 175,000 1,735
Speech therapy 56,000 631
Total $ 300,000 $6,612
The difference results, at least in part, from the home's inadequate
procedures for billing therapy services. For example, based on a
16
memorandum dated November 22, 1993, from the former
reimbursements officer, the home has not billed all therapy visits
because it has not implemented procedures to ensure that the required
documentation, such as entries in the residents' medical records, is
completed by both the therapists and the referring physicians.
Although the home was reimbursed $700,000 for physician services,
related to 15,096 patient visits, its procedures do not ensure that all
physicians' services are billed. If the home would analyze the patient
visits compared with reimbursements for each physician, it would have
some assurance that all physicians' services are being billed.
However, the home prepares statistics on physicians' services only for
activity and related charges. These limited statistics do not provide the
home with information on the effectiveness of the physician and
medical staff to properly document the complexity of the patient's
diagnosis and report all charges in order to recover the highest possible
reimbursement. In addition, according to the department's chief of
information technology services, because the home does not use all
procedure codes and related prices allowed by Medicare, it sometimes
underbills Medicare for physicians' services. The chief of information
technology services further stated that the home has updated most of
the prices for physicians' services; however, many procedure codes for
services provided to residents are not entered into the home's billing
system.
The home has not maximized reimbursements from Medicare because
its manual procedures and automated systems do not adequately
accumulate all the possible charges to Medicare, do not properly
classify all the charges by complexity, and do not properly price all the
charges. In addition, according to the chief of information technology
services, procedure changes critical for correct billing that have been
recommended both internally and by outside consultants have not been
adequately and completely implemented, and although many changes
have been made to the automated systems, the home has not fully
implemented manual procedures to effectively use the modified
systems. Moreover, the home did not develop an action plan to
improve its manual billing procedures as discussed in a 1988 report by
Deloitte, Haskins and Sells. Also, the home has only recently adapted
procedures to bill certain therapy and restorative care services.
According to the reimbursements officer, before 1993, the staff focused
its efforts on the most recent Medicare billing changes imposed in
1990, which were required by 1993. According to the home's
administrator, the lack of staff resources is a major factor in preventing
the home from maximizing reimbursements. The administrator further
stated that before fiscal year 1993-94, some employees at the home felt
they had relatively little incentive to improve its reimbursements
17
because the home did not fully benefit from any increase in
reimbursements.
In addition to the home's not implementing adequate manual and
automated procedures, its computer system cannot process the
information necessary to maximize revenues. According to the chief
of information technology services, the present system lacks the
capacity to provide complete billing information for all services
provided.
The home has taken numerous steps to maximize the federal
reimbursements it receives from Medicare. For example, the home
contracted with Deloitte, Haskins and Sells for a review of its billing
procedures. In addition, because it lacks the in-house expertise,
beginning in 1991, the home contracted with an outside certified public
accountant to analyze and prepare the annual Medicare cost reports.
The accountant also provides recommendations for improving the
home's procedures for billing Medicare. Moreover, in June 1993, the
home established a part-time task force to discuss ways to increase
reimbursements. However, the staff members who comprise the task
force have other duties and are not able to focus all of their efforts on
increasing reimbursements. The home is also presently analyzing and
implementing ways to improve its billing information system. For
example, it has analyzed the possibility of procuring a new
management information system that would provide hospital, billing,
and general management information.
In the home's Feasibility Study Review submitted to the Department of
Finance in 1991, the home estimated that the proposed management
information system would increase all reimbursements by $900,000.
According to the chief of information technology services, patient care
would also be improved with the new system. For example, according
to the chief of information technology services, the system would allow
a doctor to enter information on a computer related to the procedures
performed on a patient, and the data would be automatically recorded
in both the patient's medical file and the hospital's billing system. The
chief of information technology services further stated that presently,
the doctor records information on one document for the patient file and
a second document for the billing system. Thus, the doctor's time is
diverted away from providing patient care.
The Department of Finance approved the proposed system under the
condition that the system be paid for with increased reimbursements.
However, according to the chief of information technology services,
additional analyses by the home determined that the projected
reimbursements of the proposed system were not achievable. As an
18
alternative plan, the home is also considering the purchase of an
information system that would cost less than a complete management
information system. According to the chief of information technology
services, the home is planning to seek approval for this alternative
system without the condition that the system be paid for with increased
reimbursements.
The Home Has The home's inadequate manual billing procedures and automated
Not Maximized systems that affect Medicare reimbursements also affect
reimbursements from Medi-Cal, resulting in unmaximized
Reimbursements
reimbursements from Medi-Cal. For example, the home's procedures
From Medi-Cal
have not ensured that all possible outpatient charges are billed to
Medi-Cal. However, the home has implemented procedures for billing
inpatient charges to Medi-Cal and has also increased the number of
residents enrolled in Medi-Cal by identifying residents who qualify for
the program.
The Home Has The home has not maximized reimbursements received indirectly from
Not Maximized the VA for aid and attendance allowances because it has not
implemented adequate procedures to ensure that it assists all eligible
Reimbursements
residents in applying for the allowances and it has not monitored the
From VA Aid
status of the applications. The VA provides an aid and attendance
and Attendance
allowance of $391 per month to residents who require the regular
Allowances assistance of another person. In fiscal year 1992-93, the home
reported approximately $746,000 from residents for aid and attendance
allowances. In accordance with the Military and Veterans Code,
Section 1012.2, the home collects the amount of the allowance from
residents, although it can only collect from those without dependents.
The amount collected is in addition to the fees. In November 1993,
the home's former reimbursements officer identified 95 residents who
may have been eligible to receive aid and attendance allowances from
the federal Department of Veterans Affairs. The home could have
received up to approximately $446,000 a year if those 95 residents had
qualified for aid and attendance allowances and if the home had
obtained the statutory authority to receive the allowance for all
veterans, including those with dependents.
19
In a letter dated November 10, 1993, the home's administrator indicated
that problems occur when residents do not report awards for aid and
attendance allowances to the home. Sometimes, residents do not
inform the home of large retroactive awards received. The
administrator believes that federal legislation is necessary before the
VA can pay the aid and attendance allowances directly to the home.
Until the home has the authority to directly receive aid and attendance
allowances, the administrator has requested that the VA send the home
copies of the award letters that are sent to residents. Then, the home
would receive early notification of aid and attendance awards. The
home is also working with the VA to determine whether the 95
residents not reporting aid and attendance allowances already receive
these benefits. In addition, the home is in the process of developing
new procedures for tracking residents' applications for aid and
attendance allowances. Finally, the home is developing proposed
legislation to revise the Military and Veterans Code so it will allow the
home to collect all aid and attendance allowances regardless of whether
a resident has dependents.
Another issue related to aid and attendance allowances concerns the
instances in which the VA pays aid and attendance allowances to
residents who are not eligible for the awards. According to the home's
internal memoranda in September 1993, the home did not have a policy
to address instances in which the home collected money from residents
who were not eligible to receive aid and attendance allowances.
According to the memoranda, when the VA realizes that the residents
are not eligible for aid and attendance allowances, it holds them liable
for repaying allowances even though the home collects the funds from
residents. According to the home's reimbursements officer, when
residents receive overpayment notices from the VA, the home must
gather missing information on aid and attendance allowances from the
resident or the VA to determine who is responsible for repayment.
VA Per Diem The home also receives per diem reimbursements from the VA for care
Reimbursements provided to residents who are eligible to receive care in a federal
facility. These reimbursements are limited to $13.25 per day for each
veteran receiving domiciliary care and $31.03 per day for each veteran
receiving nursing home or hospital care.
To review per diem reimbursements from the VA, we analyzed
significant fluctuations in the monthly claims for reimbursements in
fiscal year 1993-94. In addition, we reviewed a sample of residents
with incomes exceeding a certain amount to determine if the home
received or requested a waiver for these residents. The VA does not
20
allow reimbursements for veterans with incomes exceeding a certain
amount unless it approves a waiver based on the resident being
temporarily unable to earn a living and having no adequate means of
support. Based on our review, the home appears to be maximizing per
diem reimbursements from the VA.
Conclusion Because the home has not maximized reimbursements from the federal
government, the State's general fund support may be higher than it
needs to be. To determine how effective the home has been in
maximizing Medicare reimbursements, we compared the home's
reimbursements with the reimbursements that comparable institutions
received, with the reimbursements available based on its population of
residents eligible for Medicare, and with its possible reimbursements
for certain therapy services. We reviewed the home's reimbursements
in fiscal year 1992-93 and found that the home received $260,000 less
in Medicare reimbursements for hospital care than it would have if it
were reimbursed at rates similar to comparable institutions. In
addition, the home received $200,000 less in reimbursements for
outpatient clinic visits than it would have if it had received
reimbursements for the percentage of residents who were eligible for
Medicare. Also, the home received approximately $293,000 less in
reimbursements than possible for certain therapy services. The general
fund support may be even higher for the areas where we could not
determine the total lost reimbursements. In addition, the home could
have received up to approximately $446,000 annually in aid and
attendance allowances if the VA determines that 95 residents had been
eligible to receive the allowances and if the home had obtained the
statutory authority to receive the allowance for all veterans, including
those with dependents. Further, the effect of not maximizing
reimbursements is that the cost of care to be recovered from residents is
higher than it needs to be. The home has implemented some
corrective action to address these issues. For example, the home is
presently analyzing and implementing ways to improve its billing
information system.
Recommendations To further its efforts in maximizing reimbursements from the federal
government, the home should take the following actions:
Develop an action plan for improving manual procedures designed
to capture all patient care charges. This effort should address the
internal problems identified by the department as well as analyze
benefits that may result from implementing the systems and
procedures in the Deloitte, Haskins and Sells report and the
21
recommendations for improving the home's procedures for billing
Medicare made by the certified public accountant who prepares the
Medicare cost reports;
Continue analyzing and procuring a cost-effective management
information system capable of supporting all aspects of the home's
activities, including patient care, reimbursements, and general
management information beneficial to the overall cost-efficient
management of the home;
Seek the authority to receive aid and attendance allowances directly
from the VA. In addition, the home should collect unreported aid
and attendance allowances from residents;
Continue to develop procedures to ensure that aid and attendance
allowances are received for all eligible residents; and
Seek legislation allowing the home to receive aid and attendance
allowances for residents with dependents who do not provide
regular assistance to the residents.
22
We conducted this review under the authority vested in the state auditor
by Section 8543 et seq. of the California Government Code and
according to generally accepted governmental auditing standards. We
limited our review to those areas specified in the audit scope of this
report.
Respectfully submitted,
KURT R. SJOBERG
State Auditor
Date: April 19, 1994
Staff: Philip Jelicich, CPA, Audit Principal
Lisa Foo, CPA
23
Appendix A Veterans Home of California
Population by Age and Level of Care
As of June 30, 1993
Skilled
Age Domiciliary Residential Intermediate Nursing Acute Total
+100 1 4 5
95-99 2 1 10 24 37
90-94 5 7 10 20 42
85-89 28 9 12 27 1 77
80-84 39 12 13 58 1 123
75-79 95 22 33 34 1 185
70-74 169 18 26 65 1 279
65-69 129 15 35 22 2 203
60-64 74 13 8 26 121
55-59 23 2 1 1 27
50-54 9 1 2 12
45-49 14 1 1 16
40-44 2 2
Total 589 100 151 283 6 1,129
Source: Veterans Home of California
24
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25
Appendix B Veterans Home of California
Residents by Time of Admission to the Home
As of June 30, 1993
Year of Admission Number of Residents
1952 to 1959 7
1960 to 1969 23
1970 to 1979 109
1980 to 1989 606
1990 131
1991 113
1992 31
1993 109
Total 1,129
Source: Veterans Home of California
26
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27
Appendix C Residents' Monthly Fees
Effective February 1, 1994
Residents With Monthly Incomes of $165 or Less - No fees are
assessed.
Domiciliary and Residential Care - Fees are 55 percent of monthly
income up to a maximum fee of $1,200. For those residents with
monthly incomes between $166 and $367, fees are the amount in
excess of $165.
Intermediate Care - Fees are 65 percent of monthly income up to a
maximum fee of $2,300. For those residents with monthly incomes
between $166 and $471, fees are the amount in excess of $165.
Skilled Nursing Care - Fees are 70 percent of monthly income up to a
maximum fee of $2,500. For those residents with monthly incomes
between $166 and $550, fees are the amount in excess of $165.
Acute Care - Fees are based on the level of care to which the residents
return after the hospital stay. For those residents who return to skilled
nursing care, there is a 60-day period for which the home does not
charge the resident fees based on 70 percent of the monthly income.
The home provides this grace period because Medicare reimburses the
home for the first 60 days after an acute hospital stay.
Married Couples - Fees are based on the current fee schedule with
income defined as 50 percent of the couple's combined income with a
minimum monthly fee of $600 for nonveteran spouses. If a resident is
survived by a nonveteran spouse, the fees for the nonveteran spouse are
based on the current fee schedule.
Income - All income a resident receives except income used to support
dependents, earnings from an employment program at the home, and
interest income earned on money deposited at the home.
Source: Veterans Home of California
28
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29
Appendix D Average Monthly General Fund Support
a
Per Resident for Different Levels of Care
If Fees Were Charged at the Maximum
Allowed by the 1993-94 Budget Act
Average Average
Average Average Monthly Monthly
Monthly Monthly Fees At General
Cost of Federal 70 Percent Fund
Level of Care Careb Reimbursementsb,c of Income Support
Domiciliary $1,851 $ 610 $565 $ 676
Residential 1,987 610 612 765
Intermediate 3,825 1,349 753 1,723
Skilled
Nursing 4,766 1,956 784 2,026
a Does not include the acute level of care because it is not a residential level of care.
b Based on information from July through December 1993 from the Veterans Home of
California.
c
Reimbursements from Medicare, Medi-Cal, and the federal Department of Veterans Affairs.
30
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31
Appendix E Third-Party Insurance Reimbursements
The Veterans Home of California (home) does not bill third-party
insurance companies because it does not have the manual billing
procedures or automated systems to bill them. In addition, according
to the home's reimbursements officer, the home receives
reimbursements from insurance companies for charges which Medicare
automatically forwards to insurance companies.
The home does not know whether implementing manual and automated
procedures for billing third-party insurance companies will be
cost-effective. According to the reimbursements officer, although the
home is currently analyzing the potential increased reimbursements
from insurance companies, it is concentrating available resources in
areas in which there may be higher reimbursements.
Moreover, the reimbursements officer believes that many residents do
not maintain their insurance because the home provides medical care
and because there is no financial incentive, such as reducing the
monthly fees of residents who maintain insurance coverage. Further,
residents who retain health insurance are generally limited to residents
who have retirement plan coverage, residents who travel, or residents
who feel they may leave the home because most residents do not want
to pay monthly insurance premiums when the home provides the care
regardless of coverage.
32
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33
Appendix F Noncompliance With the State's
System of Internal Controls
The Veterans The State Administrative Manual, Section 8030.1, states that agencies
Home of California will not withhold receipts for the purpose of establishing or augmenting
change funds but will deposit all funds received intact. However, the
Did Not Always
Veterans Home of California (home) sometimes deposited the cash
Deposit Cash
receipts from residents' fees over a period of two to three days instead
Receipts From
of depositing the receipts in total for each day. Not depositing receipts
Residents' Fees in in total for each day makes the cash receipts vulnerable to misuse.
Total for Each Day According to the home's reimbursements officer, the home began
depositing cash receipts from residents' fees in total for each day after
March 1, 1994.
The Home Did The California Public Contract Code, Section 10295, states that all
Not Always contracts, unless otherwise exempt, entered into by any state agency for
the purchase of equipment, supplies, materials, services, or construction
Comply With
are void unless or until approved by the Department of General
the Law in
Services (DGS). The State Administrative Manual, Section 1215,
Establishing and
requires that contracts exceeding $15,000 and interagency agreements
Maintaining exceeding $35,000 be approved by the DGS. In addition, the State
Contracts With Administrative Manual, Section 1254, requires that evidence of
Vendors insurance for hazardous activities be approved by the DGS, the Office
of Insurance and Risk Management, and the Office of Legal Services.
Further, the State Administrative Manual, Section 1216, states that any
contracts in which the State holds another party harmless must be
approved by the DGS.
However, the home entered into contracts for goods and services from
two state agencies and one pharmaceutical supplier of medical
equipment before the contracts, for the period in which the goods and
services were to be received, were signed and approved by the DGS.
Each interagency agreement exceeded $35,000, and the contract with
the supplier exceeded $15,000.
In addition, the home entered into agreements for services from
14 physicians and physician groups and 5 institutions that provided
special care to residents without contracts including the required DGS
approval. The home did not obtain the required DGS approval for
malpractice insurance and hold-harmless clauses indemnifying the
contractor against any legal action by the State. The home has begun
converting the agreements to standard contracts approved by the DGS.
34
As part of the conversion, the home requested that the internal law
office at the state Department of Veterans Affairs review whether the
home inappropriately required the physicians to waive Medicare
co-payments.
The Home Has The California Government Code, Section 12410, requires that the state
Exchanged Goods controller audit all claims against the State and gives it the authority to
audit the disbursement of any state money for correctness, legality, and
for Services and
sufficient provisions of law for payment. However, the home has not
Equipment
allowed the state controller to audit claims against the State for certain
services and medical equipment worth more than $15,000 from a
pharmaceutical vendor. The home has circumvented the State's
internal controls over payments to vendors by exchanging bulk dietary
supplements for services and medical equipment. The home has
begun working on proposals for requests for bids for a new contract
that does not provide for the exchange of goods for services and
equipment.
The Home Is Not The State Administrative Manual, Section 10860.1, requires that the
Properly accounting office maintain the official inventory records. In addition,
Section 10860 describes the procedures for taking physical inventories
Recording and
and reconciling the differences between the actual physical inventories
Safeguarding All
and the inventory records. However, the accounting office does not
Inventory
maintain the inventory records for the central and maintenance
warehouses. In addition, the accounting office does not verify the
results of physical inventories taken by the central and maintenance
warehouses.
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