The Florida healthcare provider settles allegations involving inflated Medicare Advantage payments.
The Villages Health System LLC has agreed to pay $541.5 million to settle allegations that false medical diagnosis codes were used to increase payments from the federal Medicare Advantage program. The settlement was announced by the U.S. Department of Justice (DOJ) on August 26, 2026, and resolves claims tied to conduct that allegedly took place between 2020 and 2024. The Villages Health System, based in The Villages, Florida, reported the issue to the federal government through a health care fraud reporting process. The company told the Department of Health and Human Services Office of Inspector General in December 2024 that it had submitted invalid diagnosis codes for certain Medicare Advantage patients.
The DOJ alleged that some of those codes did not have enough support in patients’ medical records. Other codes were tied to changes made to medical records that were not properly completed, approved or entered on time by the health care provider who treated the patient. Medicare Advantage (also known as Medicare Part C) allows people enrolled in Medicare to receive coverage through private health insurance plans. The federal government pays those insurance companies a set monthly amount for each person enrolled. The amount can change based on a patient’s health because people with more serious medical conditions are generally expected to need more care.
Diagnosis information plays a major role in setting those payments. When a patient is reported as having more serious health problems, the insurance company can receive a higher payment from the Centers for Medicare & Medicaid Services. Health care providers may receive part of that money under agreements with insurance companies.
According to the DOJ, the diagnosis codes submitted by The Villages Health System caused Medicare Advantage insurers to receive higher payments than they should have received. The insurers involved were Humana, UnitedHealthcare and GuideWell, which includes Florida Blue. The agency said the false or unsupported codes were submitted to those insurers and then passed along to the Medicare Advantage program. The resulting payments were higher because the records made some patients appear to have health conditions that were not properly supported by their medical records.
The company received credit from the government for reporting the issue and helping with the investigation. Officials said The Villages Health System took steps to correct the problems, provided detailed information about what happened and cooperated with investigators. The case also comes after financial trouble for The Villages Health System. The company filed for Chapter 11 bankruptcy protection on July 3, 2025, in federal bankruptcy court in Florida. The bankruptcy court approved the settlement on August 25, 2026, one day before the DOJ announced the agreement.
The insurance companies involved in the case are returning money connected to the disputed diagnosis codes. That process includes removing invalid codes and entering agreements with the government to return payments that were made based on those codes.
The case shows just how important accurate medical records are when federal health programs pay private insurers based on patient health. Diagnosis information must be supported by records from patient visits and must meet federal requirements before it can be used to set Medicare Advantage payments. The government said cooperation and early reporting are key to ensuring the program works as it should and any deviation from this process can be promptly investigated.
Sources:
The Villages Health System LLC Agrees to $541.5M Settlement to Resolve False Claims Act Allegations
The Villages Health Settles $541.5M in Fraud Case
Villages Health System to $541 million settlement over false claims
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