L E G ISL A T IV E A U D IT O R

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1 ST A T E O F L O U ISIA N A L E G ISL A T IV E A U D IT O R N ew O rleans A dolescenth ospital O fice of M entalh ealth D epartm entof Health and H ospita ls Sta te oflouisiana New O rleans,louisiana A ugust25,1999 Financialand C om p liance A udit D ivision D anielg.k yle,ph.d.,c PA,C FE Legislative A uditor

2 LEG ISLATIVE A UDIT A DVISO RY CO UN CIL M EM B ERS Representative Francis C.Thom pson A cting C hairm an and V ice Chairm an SenatorRobert J.Barham SenatorW ilson E.Fields SenatorThom as A.G reene SenatorC raig F.Rom ero Senator J."Tom " Schedler Representative F.C harles M cm ains,jr Representative Edw in R.M urray Representative W arren J.Triche,Jr. LEG ISLATIV E A U D ITO R DanielG.Kyle,Ph.D.,C PA,C FE D IR EC TO R O F FINA NC IA L A N D C O M PLIA N C E A U D IT A lbertj.r obinson,jr.,c PA This docum ent is produced by the Legislative A uditor,state of Louisiana,Post Ofice Box 94397, Baton Rouge, Louisiana in accordance w ith Louisiana Revised Statute 24:513. Tw enty-tw o copies ofthis public docum ent were produced atan approximate costof$ This materialwas produced in accordance w ith the standards for state agencies established pursuantto R.S. 43:31. A copy ofthis docum entis available on the Legislative Auditor's W eb site atwww.la.state.la.us. In com pliance with the Am ericans W ith Disabilities Act, if you need special assistance relative to this docum ent,orany docum ents ofthe Legislative A uditor, please contactw ayne "Skip"Irw in,directorofadm inistration,at225/

3 N EW O R LEA N S A DO LESC ENT HO SPITA L O FFIC E O F M ENTA L H EA LTH DEPA RTM ENT O F HEA LTH A ND HO SPITA LS STA TE O F LO U ISIA NA New O rleans.louisiana M anagem entletter D ated A ugust3,1999 Underthe provisions ofstate law,this reportis a public docum ent. A copy ofthis report has been subm itted to the G overnor,to the Attorney G eneral,and to other public ofi cials as required by state law. A copy ofthis report has been m ade available forpublic inspection atthe Baton Rouge and New O rleans ofi ces ofthe Legislative A uditor. August25,1999

4 )ANIEI.G.KYLE,PH D,CPA,CFE LEGISI.ATIVE AUI)ITOR OFFICE OF LEG ISLA TIV E A U D ITOR STA TE O F LO U ISIAN A BATON ROUGE,LOUISIAN A A ugust3, N O It.T IT IIRI)S'IRI~I]' POS'IOFFICE BOX 9439"/ TEI.F,PIIONE:(225)33Q-3800 FACSIMILE: (225) NEW O RLEA NS A DO LESC ENT HO SPITA L O FFIC E O F M ENTA L HEALTH DEPA RTM ENT O F HEALTH A ND HOSPITA LS STATE O F LO UISIA NA New O rleans.louisiana As partofourauditofthe State oflouisiana's financialstatem ents forthe yearended June 30, 1999,w e conducted certain procedures at the New O rleans Adolescent Hospital, O ffice of MentalHealth,DepartmentofHealth and Hospitals. Ourprocedures included (1)a review of the hospital's internalcontrols;(2)tests offinancialtransactions forthe years ending June 30, 1999,and June 30,1998;(3)tests ofadherence to applicable laws,regulations,policies,and procedures governing financialactivities forthe years ended June 30,1999,and June 30,1998; and (4)a review ofcompliance with the prioryearreport recommendations. The A nnualfiscalreports ofthe New O rleans AdolescentHospitalare notw ithin the scope of ourwork,and,accordingly,we ofer no form ofassurance on those reports. The hospital's accounts,underthe Departm ent of Health and H ospitals,are an integralpart ofthe State of Louisiana's financialstatem ents, upon w hich the Louisiana Legislative A uditor expresses an opinion. O ur procedures included interview s w ith selected m anagem ent personneland other selected hospital personnel. W e also evaluated selected docum ents, files, reports, system s, procedures,and policies as w e considered necessary. Afteranalyzing the data,w e developed recom m endations for im provem ents. W e then discussed ourfindings and recom m endations w ith appropriate m anagem entpersonnelbefore subm itting this w ritten report. In ourpriorm anagem entletterdated June 23,1997,on the New O rleans A dolescenthospital, w e reported a finding relating to inadequate controls overaccounts receivable. This finding has notbeen resolved by m anagem entand is addressed again in this report. Based on the application ofthe procedures referred to previously,a lsignificantfindings are included in this report form anagem ent's consideration. nadequate C ontrols O vera ccounts Receivable Forthe second consecutive audit,the New O rleans Adolescent Hospitaldid nothave adequate controls overaccounts receivable and has notcom plied w ith the Departm ent ofhealth and Hospitals (DHH)policies forpatientbilings and colections.underdhh's

5 LEGISLATIVE A UDITOR NEW O RLEA NS A DO LESCENT HO SPITA L O FFICE O F M ENTA L H EA LTH DEPA RTM ENT O F HEA LTH A ND HO SPITA LS STATE O F LO UISIA NA M anagem entletter,dated A ugust3,1999 Page 2 policies,charges forservices rendered during a m onth should be biled the beginning of the succeeding m onth;invoices foroutstanding receivables should be sentm onthly;and co lections should be posted to the patient's accountatthe tim e a paym entis received. In addition,bilings thatcontain unalowable charges should be adjusted during the biling process.after90 days,delinquentaccounts should be subm itted to D H H C entral C o lections forfurtheraction. O urreview ofpatientbilings disclosed the fo low ing: Fourof14 patientfiles (29% )tested indicated thatthe patients were not biled until50 days to 11 m onths afterserv ices had been rendered. In addition, there is no docum entation that invoices w ere sent for outstanding receivables related to self-pay patients during Decem ber 1997 and June and July Two of 11 colections (18% ) tested accounts for 196 days and 2 years, paym ents w ere received. w ere not posted to the patients' 11 m onths, respectively,after the Nineteen of20 patientaccounts (95% )tested had unalowable charges thatshould have been adjusted forservices thatwere notcovered by M edicaid, private insurance, and/or self-pay patients. Una low able charges are caused by the hospitalnotobtaining pre-certification from the insurance or M edicaid provider, by parents or guardians ignoring past and/or current serv ice dates w hen obtaining M edicaid eligibility,or by a providerw ho approves and pays fora shorterhospitalstay fora patient w ho is confined for a long-term hospital stay. In addition, private insurance com panies w il deny paym ent because the policy does not coverthe type ofserv ices rendered. Nine of 12 patientreceivable accounts (75%) adjusted as a resultof una low able charges did not have m anagem ent approval or proper supporting documentation to explain the adjustments. Failure to com ply w ith D H H 's policies end procedures over accounts receivable m ay resultin errors and/orfraud notbeing detected in a tim ely m anner. The New O rleans Adolescent Hospital should com ply w ith DHH's policies and procedures to ensure the tim eliness of patient biling and co lections. M anagem ent concurred in part w ith the finding and recom m endation and outlined a plan ofcorrective action (see Appendix A,page 1).

6 LEGISLATIVE A UDITOR NEW O RLEANS A DO LESCENT HO SPITA L O FFIC E O F M ENTA L HEA LTH DEPA RTM ENT O F H EA LTH A ND HO SPITA LS STATE O F LO UISIA NA M anagem entletter,dated A ugust3,1999 Page 3 nadequate C ontrols O verpayrol The New O rleans A dolescent Hospitaldid not consistently fo low its internal control procedures related to the tim ely processing oftim e and attendance sheets. The O fi ce ofstate Uniform Payro lhas im plem ented an on-line tim e entry system to facilitate daily time and attendance entries,including a window oftime to permitadjustments on the M onday fo low ing the end ofeach pay period. Forthe pay period ended February 21, 1999,com pleted tim e and attendance sheets w ere noton hand for49 of384 em ployees (17% ).The folowing deficiencies were noted forthe 49 time and attendance sheets not on hand: O ne em ployee that w as tem porarily reassigned to another agency received a bi-w eekly salary although the em ployee had notsubm itted a tim e and attendance sheetsince Decem ber13,1998. Forthe February 21,1999,pay period,the payro lw as processed w ithout com pleted tim e and attendance sheets. Tim e and attendance sheets w ere subm itted 9 days late for 14 em ployees, 4 days late for 7 em ployees,3 days late for 6 em ployees,2 days late for 7 em ployees, and one day late for14 em ployees. These conditions exist because the hospital has not placed sufi cient em phasis on enforcing the controls overthe payro lsystem. Failure to m aintain an adequate system of internalcontrols to com ply w ith rules and regulations established by the O fi ce of State Uniform Payro lincreases the risk thaterrors and/orfraud m ay occurand notbe detected in a tim ely m anner. The New O rleans A dolescent H ospital should enforce the controls over the payrol system to ensure that the tim e and attendance sheets are processed tim ely M anagem entconcurred with ourfinding and recom mendation (see Appendix A,page 5) The recommendationsin this reportrepresent,in ourjudgment,those mostlikely to bring about beneficial im provem ents to the operations of the hospital. The vary ing nature of the recom m endations, the im plem entation costs, and the potential im pact on operations of the hospitalshould be considered in reaching a decision on a course ofaction.

7 LEGISLATIVE A UDITOR N EW O R LEA N S A D O LESC ENT HO SPITA L O FFIC E O F M ENTA L HEA LTH DEPA RTM ENT O F HEA LTH A ND HO SPITA LS STATE O F LO UISIA NA M anagem entletter,b ated A ugust3,1999 Page 4 This report is intended forthe inform ation and use ofthe hospitaland its m anagem ent. By provisions of state law, this report is a public docum ent, and it has been distributed to appropriate public ofi cials. EB:LW M :RC L:d Legislative A uditor

8 A ppendix A M anagem ent's C orrective A ction P lans and R esponses to the F indings and R ecom m endations

9 State of L ouisiana L O U IS IA N A D EPA R TM EN T O F HE A LTH A N D H O SPITA L S D epartm ent of H E A L T H a n d H O S P IT A L S M.L "M ike"foster,jr GO VERN OR David "7/.Ilood SECRETARY July 15,1999 D anielg.k yle,ph.d.,cpa,cfe Legislative Auditor 1600 N orth 3'~Street B aton R ouge,la R e: N ew OrleansA dolescenth ospital,1999 Audit R esponse To AuditFinding:Inadequate ControlO veraccountsr eceivable D eard r.k yle, Thisisto respond to the finding as a result& our1999 auditw herein itw asconcluded thatthe N ew O rleansa dolescenth ospitalhad inadequate controls overacco unts receivable. W e concurin part w ith the finding and oferthe followi ng asourco mm entsand co rrective plan of action forthe fourareasof co nce rn : Chargesforservicesrendered should be billed m onthly, Collectionsshould be posted to patient 's account atthe tim e paym entisreceived, Unalowable chargesshould be adjusted during the biling process, M anagement approvalorproperdocumentation isreq uired foraccountadjustmentswhich do notoccurin conjunction with patientaccount paymentordenialactions. In orderto corectitem one,the hospitalhasdeveloped a report(see attaclunent1)to be run by the A ccountsr eceivable Supervisor,D erek B eloney,on a sem i-m onthl y frequency w hich itemi zesallhospital discharges. Thisreport isused asa checklistforthe inspec tion of alldischarged patients'accountsto verify thatthe accountsare in orderand allnece ssary billing isco m plete. N ew Odeam AdolescentH ospital Office of the Chief Executive (504) ,FAX (504) State StreeL New Orleans,Louisiana "AN EQUAL OPPORTUNITY EM PLOYER"

10 D anielg.k yle,ph.d,cpa,cfe Legislative Auditor July 15,1999 Page 2 Item two resulted from two (2)paymentswhich were received butnotposted in a timely manner.in orderto preventthe recurrence of thi serrorallpaym entsw illbe posted atthe tim e of rece ipt. To verify thatallpaym entshave been posted,the amountof paym entsposted in thepatientaccountssystem (PIF) wi llbe reconciled by the FiscalD irector,d avid Adcock,to the am ountsof revenue posted in the AFS as indicated in the m onthly "2G 15"A ppropriation R eport. Item three cited ourfailure to make timely adjustmentsof unalowable chargesfrom them edicaid and Insurance ledgers.the posting policy hasbeen amended so thatnow alunalowablechargesare adjusted by theservicing Accounting Specialist(with the approvalof Derek Beloney,AccountsReceivable Supervisor)atthe time a partialpaymentisreceived orupon therece iptof notifica tion from a third party payorthatthe char gesare ineligible forreimbursem ent. Itshould be noted thatthese "unallow able charges" are a proceduraladjustmentin orderto shift the liability forservice srendered from onepayor source to anotherpayorsource. Item fourspeaksto the need form anagem entapprovaloradequate docum entation foraccount adjustmentswhich are delinquent.beca use we havechanged ourproce duresasnoted above to havevery timely accountadjustmentswe do notexpectdelinquency in ourproced ural adjustmentsto be a recurring problem,however,we wi lamend ourpolicies(see attachment2)to require CEO approval fordelinquent proce duraladjustments. A llof the indica ted corective actionshave already been im plem ented. W e wi sh to thank you and your staf foryourcom m entsand suggestionsw hi ch wi llred uce the possibility of lostrevenuesand im prove ourefectiveness,lfyou have any questionsorneed additionalinform ation please letm e know. rn.~ C hi ef Executive O fficer N ew O rleans AdolescentH ospital Ofice of the Chief Exoeutiv~ (504) ,FAX (504) State Street.New Or leans,louisiana "AN EQUAL OPPORTUNITY EM PIA3YER"

11 D anielg.k yle,ph.d,c PA,C FE Legislative A uditor July 15,1999 Page 3 N EW ORLEAI~S A D OLE SCENT H O SPITA L N ew O r lean s, LA D ISCHA R G E R E P O RT Period : Jun e 15, 1999 to June 30, 1999 H O S P NUM o00g l ~ lm 000~ oooamm l m ooo~ ooo~ lmmmp ooooam m lo ooo~ ooo~mm ~ ; ooo~n /h l8 oo00~ I ml O0004~ IW / 000~ 0000~ oooo~ oooo~ oooooq~ o000~ O R 9 ooo~q m m 3 PA T IENT N AM E s~ Lall l W. r~ ~s ~ z S A IE IE DRA V IN LL Y Y D C DA T E 06/16/99 06/16/99 06/17/ /18/99 06/22/ /21/99 06/22/99 06/22/99 06/23/99 06/23/99 06/25/99 06/28/ /29/99 06/29/99 06/30/99 06/30/99 A DM D A T E 06/02/99 05/20/99 05/28/99 o5/19/99 05/27/ /28/99 05/19/99 05/24/99 05/31/99 06/05/99 05/]7/ /24/99 06/]8/99 06/14/99 05/27/99 06/09/99 06/o7/99 N ew O rleans AdolescentHospital Ollioe of the Chief Executive (504) ,FAX (504) StateStreeL Hew Orleans,Louisiana "AN EQUAL OPPORTUNITY EM PLO YER"

12 D anid G.K ylc,ph.d,cpa,cfe L cg'nslative A uditor July 15,1999 Page 4 N ew O rleans A dolescenth ospital Ofi ce of the Chief Executive (504) ,FAX (504) StatcStrvcL Ncw Orlcans,Louisiana "AN EQUAL OPPORTUNITY EM PLOYER"

13 tate ot JLaui~iana D EPA R T M EN T O F I-I-EA LT H A N D H O SPITA LS L O U IS IA N A D ep artm en t o f H E A LT H an d H O S P IT A L S M.J."M ike" Foster,Jr GOVERNOR David W.flood SECRETARY M ay 27,1999 D anielg.k yle,ph.d,cpa,cfe Legislative A uditor X erox Center,suite V eterans Boulevard K enner,louisiana R E: Inadequate ControlsO ver Payroll D ear D r.k yle: A review of the policy and proceduresregarding subm ission of tim e sheets indicatesthatthey are sufficientan d need notbe revised.d epartm entheadsand supervisors,who ar e responsible forsubm ittalof tim e sheets,w illbe rem inded aboutthe im portance of subm iting tim e sheets by th e appropriate deadlines. A udits w illbe com pleted,and departm entheads/supervisorsnotin com plian ce w illbe counseled on an individualbasis.if counseling does notim prove th e deficiency,m ore serious action(s)willbe considered. Sincerely San dra tjoroaty,l~ire ctor H um an R esource D epartm ent SG :lc NEW ORLEANS ADOLESCENT HOSPITAL ~ 210 STATE STREET ~ PHONE -504/ NEW ORLEANS,LOUISIANA "AN EQUAL OPPORTUNITY EMPLOYER"

The,recommendation in this report represents,in ourjudgment,thatmostlikely to bring about

The,recommendation in this report represents,in ourjudgment,thatmostlikely to bring about LEGISLATIVE A UDITOR LO UISIA NA SYSTEM IC INITIATIVES PRO G RA M C O U NC IL STATE O F LO UISIA NA M anagem entletter,dated February 19,1997 Page 2 M anagem entattributes the noncom pliance to insta lation