Attorney General James Recovers Over $5 Million From Nonprofit for Failing to Serve New York City Residents with Developmental Disabilities

NEW YORK – New York Attorney General Letitia James today secured over $5 million from Community Options, Inc. and Community Options NY, Inc. (Community Options) for failing to properly provide services for people with developmental disabilities and knowingly submitting false claims to Medicaid for services. Community Options is a nonprofit that provides “day habilitation” services to adults with developmental disabilities in New York City, ensuring they have enriching and educational community-based activities. A joint investigation between the Office of the Attorney General’s (OAG) Medicaid Fraud Control Unit (MFCU), and the United States Attorney’s Office for the Southern District of New York (USAO-SDNY) revealed that Community Options failed to follow regulations and requirements designed to ensure the people it serves are receiving safe and adequate care. Under settlements with OAG and USAO-SDNY, Community Options will repay Medicaid over $5 million in reimbursements it received for day habilitation services that it failed to provide and document in compliance with state regulations.

“New Yorkers with developmental disabilities rely on quality, community-based activities to lead fulfilling and independent lives,” said Attorney General James. “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.”

Community Options’ services include the Day Habilitation Without Walls Program, where recipients can take part in activities, cultural events, and volunteer opportunities in their community. Medicaid and the New York Office for People with Developmental Disabilities (OPWDD) set requirements for day habilitation service providers to follow in order to receive Medicaid reimbursement. These requirements ensure organizations are providing an adequate number of services for enough time, are providing the correct types of services, and are documenting the services they provide.

The OAG’s investigation found that Community Options violated the law by failing to meet these requirements for day habilitation services for which it billed New York’s Medicaid Program from January 1, 2017 to September 13, 2023. Community Options employees routinely failed to provide and document services in accordance with the OPWDD requirements. As a result, the adults with developmental disabilities that Community Options served did not receive the full benefits that the organization promised.

The investigation also revealed that in January 2022, Community Options violated the law by failing to return overpayments it received from New York’s Medicaid program for services that it knew did not meet the state’s requirements. During a non-routine review, Community Options determined that it had failed to create and maintain monthly summary documents for dozens of day habilitation clients in Manhattan, Brooklyn, and Queens, affecting hundreds of claims for reimbursement. Despite a Community Options employee stating that these failures required Community Options to return payments for these claims, the senior Community Options employee overseeing day habilitation services instructed their subordinate to fraudulently create and back-date all of the missing monthly summary notes, in many instances up to a year after the services in question were purportedly provided.

As a result of Attorney General James’ enforcement, Community Options will repay the over $5 million it improperly billed Medicaid, including paying approximately $2.8 million back to New York’s Medicaid program. The case against Community Options was initiated by a former employee, who will receive a portion of the settlement because the former employee filed a whistleblower lawsuit under the federal and New York False Claims Acts, which allow people to file civil actions under seal on behalf of the government and share in any recovery.

The investigation and settlements were the result of a coordinated effort between OAG and USAO-SDNY. Attorney General James thanks USAO-SDNY for their partnership and assistance.

For OAG’s MFCU, the investigation was conducted by Deputy Regional Chief Auditor Matthew Tandle, Auditor-Investigator Doni Corso, and Auditor-Investigator Che Cass, under the supervision of Chief Auditor Dejan Budimir, and Detective-Investigator Natalie Shifrin, under the supervision of Detective Supervisor Dominick DiGennaro. The settlement was handled by Special Assistant Attorney General Tiffany Castleman-Smith of the Civil Enforcement Division, under the supervision of Deputy Chief Diana Elkind. The Civil Enforcement Division is led by Chief Alee Scott. MFCU is led by Director Amy Held and Assistant Deputy Attorney General Paul J. Mahoney. MFCU is part of the Division for Criminal Justice, which is led by Chief Deputy Attorney General José Maldonado and overseen by First Deputy Attorney General Jennifer Levy.

Reporting Medicaid Provider Fraud: MFCU defends the public by addressing Medicaid provider fraud and protecting nursing home residents from abuse and neglect. If an individual believes they have information about Medicaid provider fraud or about an incident of abuse or neglect of a nursing home resident, they can file a confidential complaint online or call the MFCU hotline at (800) 771-7755. If the situation is an emergency, please call 911.

New York MFCU’s total funding for federal fiscal year (FY) 2025 is $70,502,916. Of that total, 75 percent, or $52,877,188, is funded from the U.S. Department of Health and Human Services. The remaining 25 percent, totaling $17,625,728 for FY 2025, is funded by New York State.