Comptroller Audit Finds NYC Schools Failed to Collect Up to $431M in Medicaid Reimbursements for Special Education Services

Missed Federal Reimbursements Over Three Fiscal Years Comes as Big Apple Faces Continued Budget Challenges

New York, NY - A new audit by the Office of Comptroller Mark Levine found New York City Public Schools (NYCPS) failed to collect as much as $431.6 million in Medicaid reimbursements over three fiscal years for a host of services for students with disabilities. In many cases, auditors found NYCPS did not claim hundreds of millions of dollars in reimbursements, and in many cases it did not appear to document mandatory services provided to these students.

"Failing to collect Medicaid reimbursements the City is entitled to is more than a fiscal problem - it raises serious questions about whether government is operating as effectively as New Yorkers need it to," said City Comptroller Mark Levine. "When NYCPS cannot reliably claim federal dollars for services it already provides, and cannot consistently document whether mandated services were delivered, students, families, and taxpayers all lose. The City must strengthen these systems, improve accountability, and ensure every eligible dollar is claimed and every required service is tracked."

The audit released today follows a 2021 examination of NYCPS' efforts to seek eligible reimbursements on services rendered. NYCPS can seek Medicaid reimbursements for up to 10 services it provides to students with Individualized Education Programs (IEPs). Past audits have found the system only sought payment for some of the Occupational Therapy (OT), Physical Therapy (PT), and Speech Therapy (ST) services it provided. The latest audit found NYCPS still failed to seek reimbursement for any of the other seven Medicaid-eligible services.

NYCPS successfully claimed less than half of the total services it intended to claim reimbursement from Medicaid for over the three-year fiscal period. Under Medicaid rules, failure to meet just one documentation requirement prevents a claim of reimbursement. NYCPS also lacks any record of providing 16.2% of OT, PT or ST services required in IEPs. Auditors concluded that either those mandated services for students with IEPs were not performed or the documentation to track their results was not kept.

Auditors found that NYCPS failed to claim as much as $431.6 million in reimbursements, including:

• $273.4 million in OT, PT and ST services delivered to Pre-K to 12th grade students

• $132.8 million in which mandated services that may have been provided lacked documentation

• $25.4 million in unclaimed services delivered across medical, OT, PT and ST evaluations and reevaluations, as well as psychological counseling

Because NYCPS does not or could not provide the necessary information, auditors were unable to determine how much the system may have been reimbursed for Special Transportation and Skilled Nursing services.

Only three of the 25 corrective recommendations NYCPS agreed to in 2021 were fully implemented, and another eight were partially implemented across Fiscal Years 2023, 2024, and 2025.

To maximize the amount of money NYCPS recoups from Medicaid, the Comptroller's Office made several updated recommendations, including:

• Develop and implement an interim action plan, with milestones and timelines, to strengthen existing claim validation controls and reduce unclaimed service encounters.

• Establish routine monitoring controls, such as sample-based reviews, to ensure that all OT, PT, and ST service encounters are supported by required written orders or referrals prior to submission for Medicaid reimbursement.

• Continue efforts to obtain parental consent forms, and again, establish monitoring controls, such as sample-based reviews, to monitor compliance.

• Record all sessions in the two systems used to track all mandatory services sessions for students with disabilities. NYCPS should also review which mandatory services were conducted but lacked adequate documentation and which were not provided at all. If mandated services were not provided, NYCPS should investigate why not and take appropriate action.

• Perform a cost-benefit analysis to assess the sources of foregone Medicaid reimbursement revenue, determine resources needed to expand claims, determine whether it is fiscally reasonable to do so, and develop a plan for staged expansion of claims.

• Reassess the feasibility of implementing the 2021 recommendations that have not been implemented once the Medicaid claims team is fully staffed and operational and the new Special Education system has been rolled out.

• Promptly provide information and documents that are necessary for the auditors to complete legally authorized audits, in the interest of ensuring transparency for all New Yorkers.

To read the full audit, click here: https://comptroller.nyc.gov/reports/follow-up-audit-report-on-new-york-city-public-schools-efforts-to-maximize-medicaid-reimbursement-claims-for-special-education-services/