In a substantial financial recovery effort, New York Attorney General Letitia James announced the recoupment of over $5 million from the nonprofit organization Community Options, Inc. The payout is a settlement for failing to adequately provide "day habilitation" services to New York City residents with developmental disabilities while fraudulently claiming Medicaid reimbursements. According to a joint investigation by the Attorney General's Medicaid Fraud Control Unit (MFCU) and the U.S. Attorney’s Office for the Southern District of New York (USAO-SDNY), these funds had been unjustly obtained through non-compliance with state regulations.

"New Yorkers with developmental disabilities rely on quality, community-based activities to lead fulfilling and independent lives," Attorney General James stated in a report obtained from the official Attorney General's website. “Community Options ignored the rules meant to ensure it was delivering the services it promised, depriving vulnerable New Yorkers of opportunities to participate in valuable programs that meet their needs. I thank the U.S. Attorney’s Office for their assistance in this investigation that will ensure New Yorkers with developmental disabilities get the care and services they deserve.” Jointly, with the assistance of the U.S. Attorney's Office, the investigation navigated a path of discrepancies and regulatory non-compliance which led to this substantial settlement.

Specifics of the investigation unveiled that Community Options employees routinely failed to provide and document services according to the Office for People with Developmental Disabilities (OPWDD) regulations, compromising the intensity and quality of care promised to the adults they served. Moreover, in January 2022, it was discovered and subsequently ignored by Community Options that they were obligated to return Medicaid overpayments for services that were not up to par with the state’s stringent requirements.

In a related event, while conducting a non-routine review, it was found that monthly summary documents were not created or maintained for numerous clients, affecting hundreds of claims. A senior employee, overseeing the day habilitation services, instructed workers to fraudulently create and retroactively date these documents, stated the investigation results. This directive was issued despite clear indications from a subordinate that these overpayments should be returned, reflecting a serious lapse in ethical corporate governance, as detailed by the Attorney General's Office.

This enforcement action will lead Community Options to return the over $5 million it improperly billed Medicaid, with approximately $2.8 million funneled back directly into New York's Medicaid program. A portion of the settlement will be awarded to the whistleblower who initiated the lawsuit under the federal and New York False Claims Acts. Individuals who suspect Medicaid provider fraud or nursing home abuse and neglect can file a confidential complaint online or call the MFCU hotline, as New York's MFCU continues to safeguard public health funds, underscored by their significant federal and state funding for the fiscal year 2025.