Community Options and Community Options New York: Day-Habilitation Billing After Internal Warnings

In the Community Options Medicaid settlement, Community Options, Inc. and Community Options New York, Inc. agreed to pay $5,016,626 over day-habilitation billing and retained overpayments. Their own reviews had identified money Medicaid should get back. The companies admitted they failed to report and return it. For someone inside a day program, billing office or healthcare compliance team, that is the revealing part: the service records, the claims and the internal findings tell different parts of the same story.

The Justice Department announced the settlement on March 26, 2025. The agreement allocated $2,148,540 to the United States and $2,868,086 to New York. Each government had its own settlement agreement. A whistleblower brought the case, and the government joined it.

Local Services, Centralized Billing

Community Options New York operated residential and non-residential programs for adults with developmental or intellectual disabilities across New York. Community Options, a New Jersey nonprofit, oversaw those operations and supplied administrative support, including the centralized team that submitted the New York provider’s Medicaid claims.

The federal settlement describes that division of work. The New York provider delivered day habilitation at certified sites and in the community. Community Options handled reimbursement submissions. The local service records and the centralized claims show different sides of the same Medicaid payment.

That arrangement gives this Medicaid provider fraud case its practical importance. The case connects the local documentation failures to the corporate billing function and then to what the companies did after reviews identified overpayments.

What New York Required for Day Habilitation

Day habilitation helps adults with developmental or intellectual disabilities build independence and skills for daily activities. In this case, it meant face-to-face services outside the person’s home, usually at a certified site or in the community. New York Medicaid paid for the services under a home and community-based services waiver.

The New York State Office for People With Developmental Disabilities oversaw the program. The settlement identifies its requirements for both delivering the service and documenting it. Program-day duration and face-to-face delivery mattered. So did records made at the time, rather than an account assembled long afterward.

Daily service documentation and monthly summaries were part of the payment requirements. The provider also had to maintain and review Life Plans, Day Habilitation Staff Action Plans and annual Level of Care Eligibility Determinations. Those records put the day’s activity beside the person’s planned support and eligibility for the service. Calling all of that paperwork misses why a billing or program employee might recognize a serious gap: a claim can reach Medicaid while the supporting records remain inaccurate, late or unapproved.

The state agreement adds another connection to payment. Community Options executed annual Medicaid billing certifications stating that its claims complied with applicable requirements.

What the Companies Admitted

Both companies accepted responsibility for inadequate policies, inadequate employee training and claims for services that failed New York’s requirements. The covered period ran from January 1, 2017 through September 13, 2024.

The federal agreement specifies the New York provider’s failures. In many instances, it did not accurately complete and adequately maintain the daily records, monthly summaries, plans and eligibility determinations. It completed records late or failed to obtain the required review and approval of plans and eligibility determinations on a semiannual or annual basis.

The state agreement is particularly direct about the consequences of the policy and training failures. Its admitted-conduct section says:

Routinely. Their word. That admission reaches the delivery of services as well as the records describing them. The companies also admitted submitting claims and receiving reimbursement to which they were not entitled for day-habilitation services that did not meet the requirements.

The federal agreement also bars the companies from publicly contradicting their admissions or suggesting that the admitted conduct was not wrongful. They agreed to stand behind that account outside the courtroom, too.

We see the wrong plainly: Medicaid was paying to help people gain independence, and the provider accepted money for services that failed the conditions attached to that payment. The adults the program served depended on the support. Taxpayers funded it. The companies acknowledged failures in delivering and documenting it while taking the reimbursement.

Internal Reviews Found Overpayments That Went Unreturned

The companies admitted that non-routine reviews identified their receipt and retention of day-habilitation overpayments, and that they failed to report and return those payments. The federal government’s allegations identify January 2022 as the point when the companies recognized the particular overpayments listed in the settlement’s claims exhibit.

The admissions also explain what routine oversight had missed. Community Options New York had failed to implement an effective compliance program for day habilitation. It did not routinely audit service documentation and conducted no audits of daily service records.

We find this the striking part: the companies’ own reviews identified the overpayments, and the companies kept the money. Finding the overpayment did not get it back to Medicaid.

For someone who works with internal reviews, the important connection is between the finding and the response. Which claims did the review identify? Who received its findings? What happened to the payments afterward? We examine that sequence with the insider who understands it. The False Claims Act case can turn on what the organization knew after payment as well as what it represented before payment.

What the Settlement Changed

The companies entered a Corporate Integrity Agreement with the Department of Health and Human Services’ Office of Inspector General. HHS-OIG lists a five-year term, effective March 25, 2025. The Justice Department’s announcement says the agreement requires a compliance program covering federal health care requirements and an independent organization to review Medicaid claims for compliance with the applicable requirements.

That outside review addresses a failure the companies admitted: the provider’s own oversight had not reliably checked the service documentation behind its billing. The settlement also requires reasonable steps to bring New York day-habilitation services into compliance.

HHS-OIG investigated the case. The U.S. Attorney’s Office for the Southern District of New York handled the federal resolution, working with the New York Attorney General’s Medicaid Fraud Control Unit. The state agreement describes a joint state and federal investigation into the whistleblower’s allegations.

What Evidence Is Needed to Prove Fraud?

Evidence of day-habilitation fraud connects the service, the records, the claim and what the organization knew. We work through those connections with you.

The federal agreement’s claims exhibit identifies service dates, a billing provider identifier, paid amounts and rate codes. The underlying daily records, summaries, plans and approvals explain the service side of those claims.

An employee familiar with the program may understand why a note fails to describe the service actually delivered. Someone in centralized billing may understand what information the team used when submitting a claim. Someone involved in a review may know how its conclusions reached the people responsible for reporting and returning money. Those are different views of the same conduct, and each can matter.

Our work starts with that connection between operational knowledge and payment. We examine how the required records, the billing process and the response to identified overpayments fit together. You can discuss the part you know with us without having to resolve every question about the organization yourself.

Unsupported Day-Habilitation Billing Has Appeared Before

The Los Lunas Community Program agreed to a $446,135 settlement with New Mexico’s Medicaid Fraud Control Unit over allegations that it failed to support its day-habilitation billing. HHS-OIG described the case in its Medicaid Fraud Control Units Fiscal Year 2014 Annual Report, published in April 2015.

The report describes day habilitation as helping a person acquire, keep or improve communication and daily-living skills. Community Options adds the centralized billing role and an admitted failure to return payments after internal reviews identified them.

Can You Get Paid for Reporting Medicaid Fraud?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. In this case, the New York settlement sets the Medicaid whistleblower reward at 19% of the payment the state receives under its agreement.

You Know What the Review Found

If you know how day-service records reached billing, or what happened after an internal review identified overpayments, speak to one of our whistleblower experts about the billing and overpayments you know. We develop the case with you and bring in Medicaid home and community-based services whistleblower lawyers who understand service documentation, centralized billing and retained payments. We stay beside you through the case, turning your knowledge of the provider into its strongest evidence.