The Villages Health System, a healthcare provider group headquartered in The Villages, Florida, has agreed to a $541.5 million settlement to resolve self-disclosed allegations that it violated the False Claims Act by submitting false diagnosis codes to increase payments it received from the Medicare Advantage programme.
Under the Medicare Advantage Programme, aka Medicare Part C, Medicare beneficiaries may opt out of traditional Medicare and enrol in private health plans offered by insurance companies known as Medicare Advantage Organisations.
The Centres for Medicare & Medicaid Services pays the MAOs a fixed monthly amount for each Medicare beneficiary enrolled in their plans. CMS adjusts these monthly payments to account for various “risk” factors that affect a beneficiary’s expected health expenditures.
In general, CMS pays MAOs more for sicker beneficiaries expected to incur higher healthcare costs and less for healthier beneficiaries expected to incur lower costs. To make these “risk adjustments”, CMS collects medical diagnosis codes from the MAOs.
The diagnoses must be supported by the medical record from a face-to-face visit between a patient and a provider and, for outpatient visits, must reflect required or affected patient care, treatment, or management at the visit.
Providers generally submit diagnosis codes to MAOs, which are then submitted to CMS to increase payments.
At times, MAOs agree to pay provider groups like TVH a set percentage of what the MAO receives from CMS. Under such agreements, the provider groups receive more reimbursement for sicker beneficiaries expected to incur higher healthcare costs and less reimbursement for healthier beneficiaries expected to incur lower costs.
On December 27, 2024, TVH made a submission pursuant to the HHS-OIG’s Health Care Fraud Self-Disclosure Protocol disclosing that it had submitted invalid diagnosis codes to multiple MAOs for certain beneficiaries enrolled in their plans and that these diagnosis codes increased the capitated payments made by CMS to the MAOs under the MA program.
The settlement announced today resolves allegations that, from 2020 through 2024, TVH violated the False Claims Act, 31 U.S.C. §§ 2729-3733, by knowingly submitting false diagnosis codes to MAOs and causing MAOs to submit false diagnosis codes to the MA program, resulting in inflated payments from CMS to MAOs.
The diagnosis codes were invalid because they lacked adequate support in the patient’s medical record, were based on amendments to the medical record not initiated by the rendering provider, were not timely, or were not approved by the rendering provider. TVH’s knowing submission of the unsupported and/or undocumented codes identified above caused CMS to make inflated payments to the MAOs, which inflated the MAOs’ payments to TVH.
In connection with the settlement, the United States acknowledged that TVH took several significant steps entitling it to credit for cooperating with the government. TVH promptly took remedial actions and self-disclosed the invalid diagnoses to HHS-OIG. TVH also provided the government with a detailed and thorough written disclosure and cooperated with the government throughout its investigation.
On July 3, 2025, TVH filed a Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court for the Middle District of Florida, in re Villages Health System, LLC, Case No. 6:25-bk-04156-LVV (Bankr. M.D. Fla.). The bankruptcy court approved the settlement announced today on Aug. 25.
TVH submitted the invalid diagnosis codes covered by the settlement announced today to three MAOs: Humana Inc., UnitedHealthcare (UnitedHealthcare Insurance Company, United Healthcare of Florida Inc., Preferred Care Partners Inc., and Care Improvement Plus South Central Insurance Company, Inc.), and GuideWell Mutual Holding Corporation (Blue Cross and Blue Shield of Florida Inc. and Florida Blue Medicare Inc.). Pursuant to their contracts with CMS, the MAOs are returning overpayments they received as a result of TVH’s conduct by deleting invalid codes and/or by entering into agreements with the Department of Justice and CMS to return the funds.
