DOJ Touts Settlement Agreement with Healthcare Provider Group for $541.5 Million to Resolve False Claims Act Allegations Related to Medicare Advantage Diagnosis Coding

On August 26, 2026, the Department of Justice (DOJ) announced that The Villages Health System, LLC (TVH), a healthcare provider group located within The Villages retirement community in central Florida, agreed to pay $541.5 million to resolve allegations that it violated the False Claims Act by knowingly submitting improper diagnosis codes to Medicare Advantage Organizations (MAOs), including UnitedHealthcare Insurance Company, Blue Cross Blue Shield of Florida, Inc., and Humana. According to the settlement agreement, the conduct in question by TVH included making retrospective amendments and edits to patient medical records that were not initiated by the rendering provider and were not timely or were not approved by the rendering provider. Under DOJ’s theory, TVH’s conduct caused CMS to make inflated payments to the MAOs, which inflated the MAOs’ payments to TVH.

As background, TVH provided primary care and specialty care physician services to beneficiaries enrolled in Medicare Advantage plans. Under the Medicare Advantage program, CMS makes risk-adjusted capitated payments to MAOs based, in part, on the diagnosis codes submitted for enrolled beneficiaries—meaning that more severe diagnoses result in higher payments from CMS to the MAOs, which in turn affect payments from the MAOs to providers like TVH.

According to the settlement agreement, TVH’s conduct between 2020 and 2024 involved making retrospective amendments and edits to patient medical records—a practice known as “amendment-based coding.” Under the retrospective amendments, TVH employees allegedly inserted additional diagnosis codes into patients’ medical records and sometimes added language purporting to document monitoring, evaluation, assessment, or treatment of those additional diagnoses. These amendments were not initiated by the rendering provider and sometimes occurred months to over a year after the patient visit. Similarly, TVH employees allegedly edited patient medical records to add specific diagnosis codes that were not previously included in the records—either by adding the code without any amendment to the patient file or by adding the code along with additional language to the medical record. As with the retrospective amendments, the edits were allegedly not initiated by the rendering provider and sometimes occurred months to over a year after the patient’s visit.

In August 2024, TVH hired outside counsel and consultants to investigate its conduct and determined that significant percentages of Hierarchical Condition Category (HCC) codes reviewed were unsupported across multiple service years, with unsupported rates ranging from 28.6% for 2020 to 50.7% for 2024. In total, consultants estimated that the MAOs received $416 million from CMS in payments for unsupported codes, and of that amount, TVH received an estimated $361 million from the MAOs.

On December 27, 2024, TVH made a submission pursuant to the HHS OIG's Health Care Fraud Self-Disclosure Protocol whereby TVH relayed that it had submitted invalid diagnosis codes to the MAOs for certain beneficiaries enrolled in their plans and these diagnosis codes increased the capitated payments made by CMS to the MAOs under the MA program. In a December 30, 2024 letter to its patients, TVH stated that “beginning in 2020, TVH implemented certain billing processes and practices that were not consistent with Medicare payment policies. This resulted in TVH receiving more money from the Medicare program than if billed correctly.”

The False Claims Act, codified at 31 U.S.C. §§ 3729–3733, imposes civil liability on any person who submits or causes the submission of false or fraudulent claims to the federal government. Under the DOJ’s theory that TVH’s conduct violated the False Claims Act, TVH knowingly submitting improper diagnoses to MAOs or knowingly causing the MAOs to submit false claims to Medicare Part C. TVH submitted or caused to be submitted diagnosis codes that were improper because they were not initiated by the rendering provider and were based on amendments to the patient record that were not timely or were approved by a non-rendering provider.

TVH received credit under DOJ’s guidelines for taking disclosure, cooperation, and remediation into account in False Claims Act cases, pursuant to Justice Manual §4-4.112. In consideration of TVH's cooperation and self-disclosure, OIG-HHS agreed to release and refrain from instituting any administrative action seeking exclusion from Medicare, Medicaid, and other federal health care programs against TVH under the Civil Monetary Penalties Law or permissive exclusion authority for the covered conduct.

The DOJ Press Release is available here. The Settlement Agreement is available here. 

Reporter, Michael L. LaBattaglia, Washington, D.C., +1 202 626 5579, mlabattaglia@kslaw.com

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