New York City public schools have effectively walked away from as much as $431.6 million in federal Medicaid reimbursements over three fiscal years, according to a follow-up audit released Thursday by the Office of the New York City Comptroller. Across fiscal years 2023–2025, auditors estimate that at least $273.4 million was left unclaimed for occupational, physical and speech therapy alone, with another $25.4 million tied to services the city still chooses not to bill. Missing documentation could drive the total even higher. The report also finds that a sizable chunk of mandated therapy sessions either was never recorded or may not have been provided at all, raising uncomfortable questions about both student services and the city’s bottom line.
The follow-up audit found that NYC Public Schools submitted claims for only 54% of eligible occupational therapy (OT), physical therapy (PT) and speech therapy (ST) service encounters. In raw numbers, the district filed about 9.3 million Medicaid claims while roughly 7.9 million documented encounters went unclaimed, which auditors say translated into at least $273.4 million in lost revenue, according to the Office of the NYC Comptroller. On top of that, auditors reported that NYCPS either failed to record or failed to provide about 16.2% of mandated therapy services in their sample. If those sessions actually took place but were never documented, that gap could represent up to $132.8 million more in missed claims.
How Claims Fell Through The Cracks
School-based Medicaid billing is a paperwork obstacle course. To get reimbursed, claims need valid parental consent, a written order or referral, properly licensed providers with National Provider Identifiers (NPIs), certified session notes and the right CPT codes. The state’s School Supportive Health Services Program (SSHSP) Provider Policy and Billing Handbook spells out these rules and warns that a single missing detail can sink a claim, according to NYSED’s SSHSP handbook. In practice, auditors say they ran into exactly that sort of problem across thousands of encounters, including missing consents, incomplete provider records and session certifications that were never reconciled with actual services.
Audit Recommendations And The City’s Response
The comptroller’s team did not sound impressed with the pace of fixes since its last deep dive. According to the follow-up, NYCPS has fully implemented only 3 of 30 recommendations from a 2021 audit and left 19 still outstanding. Auditors urged the department to put an interim action plan in place, adopt sample-based monitoring, perform regular license checks on providers and speed up the collection of parental consents so the city can actually claim what it is owed.
The report also notes that NYCPS is working on a new Medicaid-claiming platform called MedSys, with a limited rollout planned for July 2026 and full implementation expected in December 2026, according to the Office of the NYC Comptroller. Comptroller Mark Levine highlighted the main findings and shared the full report link in a social media post, which is available on X.
What’s At Stake For Students And Taxpayers
The auditors stress that this is not just a story about lost federal dollars. When therapy sessions go missing from the record, it raises the possibility that students are not receiving the services guaranteed in their Individualized Education Programs (IEPs), a core protection under the Individuals with Disabilities Education Act. The U.S. Department of Education notes that IDEA entitles eligible children to a free appropriate public education that includes related services such as OT, PT and speech. With the audit finding that roughly one in six mandated therapy sessions had no records, pressure is likely to mount for closer clinical review and faster fixes.
For city finances, the stakes are equally obvious. Every unclaimed Medicaid dollar is funding that cannot be used to offset local education costs or reinvested into special education services. Auditors recorded delays in getting requested records from NYCPS and pointed out that many of the 2021 recommendations remain unimplemented, which they say has weakened the city’s ability to collect federal funds that are already on the table.
What happens next is largely in the city’s hands: whether NYCPS can track down missing documentation, whether the MedSys rollout actually reduces claim validation failures once it finally launches and whether the comptroller continues to press the district on the open recommendations and the audit’s implementation tracker. For now, a massive pile of federal money, and the services it is meant to help support, remains in limbo.
