H-0457.1                  _______________________________________________

                                                      HOUSE BILL 1725

                              _______________________________________________

State of Washington                              53rd Legislature                             1993 Regular Session

By Representative Silver

Read first time 02/05/93.  Referred to Committee on Health Care.

Changing audit provisions relating to nursing homes.

          AN ACT Relating to nursing homes; and amending RCW 74.46.105.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

        Sec. 1.  RCW 74.46.105 and 1985 c 361 s 10 are each amended to read as follows:

          Cost reports and patient trust accounts of contractors shall be field audited by ((the department, either by department staff or by)) auditors under contract to the department, in accordance with the provisions of this chapter.  The department when it deems necessary to assure the accuracy of cost reports may review any underlying financial statements or other records upon which the cost reports are based.  The department shall have the authority to accept or reject audits which fail to satisfy the requirements of this section or which are performed by auditors who violate any of the rules of this section.  Department audits of the cost reports and patient trust accounts shall be conducted as follows:

          (1) Each year the department will provide for field audit of the cost report, statistical reports, and patient trust funds, as established by RCW 74.46.700, of all or a sample of reporting facilities selected by profiles of costs, exceptions, contract terminations, upon special requests or other factors determined by the department.

          (2) Beginning with audits for calendar year 1983, up to one hundred percent of contractors cost reports and patient care trust fund accounts shall be audited:  PROVIDED, That each contractor shall be audited at least once in every three-year period.

          (3) Facilities shall be selected for sample audits within one hundred twenty days of submission of a correct and complete cost report, and shall be so informed of the department's intent to audit.  Audits so scheduled shall be completed within one year of selection.

          (4) Where an audit for a recent reporting or trust fund period discloses material discrepancies, undocumented costs or mishandling of patient trust funds, auditors may examine prior unaudited periods, for indication of similar material discrepancies, undocumented costs or mishandling of patient trust funds for not more than two reporting periods preceding the facility reporting period selected in the sample.

          (5) The audit will result in a schedule summarizing appropriate adjustments to the contractor's cost report.  These adjustments will include an explanation for the adjustment, the general ledger account or account group, and the dollar amount.  Patient trust fund audits shall be reported separately and in accordance with RCW 74.46.700.

          (6) Audits shall meet generally accepted auditing standards as promulgated by the American institute of certified public accountants and the standards for audit of governmental organizations, programs, activities and functions as published by the comptroller general of the United States.  Audits shall be supervised or reviewed by a certified public accountant.

          (7) No auditor under contract with or employed by the department to perform audits in accordance with the provisions of this chapter shall:

          (a) Have had direct or indirect financial interest in the ownership, financing or operation of a nursing home in this state during the period covered by the audits;

          (b) Acquire or commit to acquire any direct or indirect financial interest in the ownership, financing or operation of a nursing home in this state during said auditor's employment or contract with the department;

          (c) Accept as a client any nursing home in this state during or within two years of termination of said auditor's contract or employment with the department.

          (8) Audits shall be conducted by auditors who are otherwise independent as determined by the standards of independence established by the American institute of certified public accountants.

          (9) All audit rules adopted after March 31, 1984, shall be published before the beginning of the cost report year to which they apply.

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