Federal and State authorities announced yesterday that Young Adult Institute (YAI) has agreed to pay $18 million in civil damages to settle claims that it had submitted false claims for Medicaid reimbursement. The government complaint alleged that during a period from FY1999-2000 through FY2008-2009, YAI improperly shifted and miscategorized its cost reports to the state in order to receive Medicaid funding to which it was not entitled. Also named in the complaint are CEO Philip H. Levy, former CEO Joel M. Levy, and CFO Karen Wegmann. The investigation reportedly began after a whistleblower – former YAI Budget Director Richard Faden -- filed a complaint that YAI had improperly inflated its expense reports.
YAI does not admit to the allegations in the complaint. “Under this settlement, YAI disclaims that it committed any wrongdoing with respect to these allegations,” the agency said in a formal statement. “YAI believes that there was no intention by YAI management to seek funding to which the organization was not entitled.” The agency stated that it had entered into the settlement because it believed that it would be “less costly -- and less disruptive to the continuation and quality of vital services that YAI provides to thousands of persons with disabilities – than engaging in prolonged litigation.”
The Government complaint alleges that over a ten-year period, YAI “knowingly” miscategorized personnel expenses on its annual Consolidated Fiscal Reports (CFRs) in order to increase the level of expenses for which it could submit appeals for reimbursement. These miscategorizations allegedly fell into three areas. According to the complaint:
- “YAI falsely reported and/or falsely allocated certain employees’ personal services expenses by allocating these expenses to facilities where the employees did not work, or among facilities where these employees did work but not correctly reflecting the proportion of their time where they worked at each facility:”
- “YAI falsely reported the personal services expenses of certain supervisory employees who were properly classified as ‘program administration’ as falling under ‘clinical care’; and
- “YAI falsely reported the personal services expenses of its employees who were involved in fund-raising as ‘agency administration’ instead of in a separate column designated for non-reimburseable costs.”
Of the $18 million YAI will pay in damages, $10.8 million will be returned to the New York State Medicaid program and $7.2 million to the federal government. A total of $5 million will be paid immediately. The $13 million balance will be paid in monthly installments through December 2015.
In his role as “relator” under the Federal False Claims Act, former YAI Budget Director Richard Faden is entitled to share in a portion of the $18 million settlement. While court papers do not disclose the amount of Faden’s share, “relators” typically receive between 15-25% of the settlement amount.
In addition to the $18 million payment, YAI also has agreed to hire an independent monitor and take numerous steps to ensure that its submissions to OPWDD are accurate in the future.
YAI is one of the largest nonprofit human service providers in the NYC metropolitan area. The U.S. Attorney described it as “the largest operator of residential facilities and other programs for developmentally disabled individuals in New York State.” For FY2008-2009, YAI reported revenues of $173.8 million. Its net assets and fund balances as of June 30, 2009 totaled $17.884 million, not quite the amount now owed to the federal and state governments under the settlement agreement.
"Medicaid has long been a lifeline for people with developmental disabilities, and every penny in that program must be put to its best and proper use,” said U.S. Attorney Preet Bharara. “As federal and state budgets continue to shrink, it is more important than ever that we vigilantly police the Medicaid program against overbilling and improper diversion of precious dollars.”
“Restoring New Yorkers' faith in their government and cracking down on those who try to defraud the taxpayers will be two of our top priorities in this office," said NYS Attorney General Eric Schneiderman. "Today’s announcement should send a clear message that we will leave no stone unturned in the fight against Medicaid fraud, waste and abuse in New York State.”
“The government has never quarreled with the fact -- well recognized in the community -- that YAI furnishes the highest standard of care to its clients, and has never suggested that YAI diverted any of the challenged reimbursements from its mission of serving consumers with developmental disabilities,” the agency said in its statement. “YAI prides itself on having the highest ethical standards and is committed to making sure that YAI complies with all applicable rules and regulations. As part of the settlement, YAI is repaying all amounts that it is alleged to have received in error, as well as additional amounts as a fine for the allegedly improper filings.”
Click here to view copies of the original complaint and settlement agreements with the State and Federal governments.