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Medicare Compliance & Reimbursement

Long-Term Care:

Beware Of Blurring Lines Between Related Companies

Published on Thu Mar 18, 2004

Related party rules can make Medicaid audits tricky.

A recent HHS Office of Inspector General report illustrates the pitfalls of Medicaid cost reporting -- and the dangers of mishandling related party rules.
 
A Jan. 21 audit of Albuquerque Manor (A-06-03-00015), nabbed the facility for apparently overstating its 2000 Medicaid cost report by $518,492. Manor's laundry list included claiming costs not related to patient care, such as salaries for staff involved in patient recruitment, and unallowable retail gift certificates given to employees for showing up and "working well" during the week the facility was surveyed by the New Mexico Department of Health.

Payments for contracted nursing services were also unsupported, and accounting glitches were apparently to blame for duplicated consulting fees.

Manor also tripped up on related party transactions, since it regularly did business with related corporate companies -- Albuquerque Manor Medical Clinic and Albuquerque Manor Pharmacy, among others -- also owned by Manor's president, Danny Prince. According to the audit, The Manor did not reduce charges to the costs incurred by these related companies for over $100,000 in consulting services.

The nursing home also allegedly offset its cost report with fees that the OIG flagged as not allocable, such as office space, housekeeping and staff salaries for the related medical clinic and pharmacy.

The Manor did not fully agree with the recommended adjustments and was "not responsive," according to the report.

To see the audit, titled "Results of Our Audit of Albuquerque Manor's Medicaid Nursing Facility Cost Report for the Fiscal Year Ended December 31, 2000," go to: http://oig.hhs.gov/oas/reports/region6/60300015.htm.
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