The Villages Health System LLC Agrees to $541.5M Settlement to Resolve False Claims Act Allegations

Tampa, FL — The Villages Health System LLC (TVH), 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 causing the submission of false diagnosis codes in order to increase payments that they received from the Medicare Advantage program. “The Villages Health System LLC knowingly submitted false diagnosis codes to increase their payments from the Medicare Advantage program and increase their profits,” said U.S. Attorney Gregory W. Kehoe for the Middle District of Florida. “Our Office will continue protecting the integrity of the Medicare program and hold those who seek to defraud federal health care programs accountable.” “The Medicare Advantage program relies on accurate diagnoses to protect the federal fisc,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “Today’s settlement reflects that we will hold accountable entities that inflate payments through invalid diagnoses; at the same time, we will continue to credit organizations that disclose wrongdoing, take appropriate remedial actions, and fully cooperate with the government’s investigation.” “The accuracy of diagnosis information submitted to Medicare Advantage is vital to protecting taxpayer dollars,” said Acting Deputy Inspector General for Investigations Miranda L. Bennett of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “This case underscores that entities will be held accountable when they submit unsupported information that inflates payments. The provider’s use of the OIG Self Disclosure Protocol and its cooperation were important factors in resolving this matter, and the protocol remains available for managed care entities and other providers that bill managed care entities that seek to disclose potential liability.” Under the Medicare Advantage (MA) Program, also known as Medicare Part C, Medicare beneficiaries may opt out of traditional Medicare and enroll in private health plans offered by insurance companies known as Medicare Advantage Organizations, or MAOs. The Centers for Medicare & Medicaid Services (CMS) 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 expected health expenditures for the beneficiary. 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 have required or affected patient care, treatment, or management at the visit. Providers generally submit diagnosis codes to MAOs that are, in turn, 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 Dec. 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 did not have adequate support in the patient’s medical record or were based on amendments to the medical record that were not initiated by the rendering provider and 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 a number of significant steps entitling them 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.