The settlement arrives amid a broader escalation in federal oversight. DOJ has identified unsupported diagnosis codes, one-directional chart reviews, significantly delayed queries and addenda, patient cherry-picking, and manipulation of medical loss ratios as enforcement priorities, while CMS has announced a significant expansion of Risk Adjustment Data Validation audits. Recent actions against plans, providers, and service companies confirm that the government is examining every participant capable of influencing Medicare Advantage payments. Providers should therefore act now to assess how their coding processes, financial incentives, consultant relationships, data patterns, and provider agreements impact their risk exposure.

Major Settlement with The Villages Health System

On Wednesday August 26, 2026, DOJ announced an eye-watering $541.5 million settlement with The Villages Health System LLC (“the Villages”) resolving allegations that the Villages submitted false diagnosis codes for patients in order to obtain increased payments from Medicare Advantage.

As set out in the settlement agreement, from 2016 to 2019, DOJ alleged that the Villages retained coding expert outside consultants who analyzed MA diagnosis coding at the Villages, and the consultants were in part paid for by a MAO. Those consultants advised the Villages that they were “undercoding” by not adding valid diagnosis codes that affected Medicare Advantage payments. The Villages took this outside consultant advice into account when considering some portions of its staff compensation. As a result of these activities, from 2020 through 2024, the Villages made amendments to certain patient records by inserting diagnosis codes and adding language to the medical records to document monitoring, evaluation, assessment/address, or treatment of those additional diagnoses, sometimes without the input of a rendering provider and sometimes over a year after the patient interaction. In some instances, these modifications were only sent for review by providers who “had previously indicated that they were willing to include the relevant Hierarchical Condition Category (‘HCC’) code in their records.”¹ The Villages investigation revealed that as a result of adding unsupported HCCs from 2020 to 2024, the MAOs received $416 million, and of that amount, the Villages received approximately $361 million from the MAOs.

The settlement did credit the Villages for its cooperation with the investigation, noting the Villages’ self-disclosure through HHS-OIG’s Health Care Fraud Self-Disclosure Protocol (“SDP”). Interestingly, the settlement amount ($541.5 million) indicates that a 1.5x multiplier was applied to the amount the Villages received under the scheme rather than the damages the government suffered in allegedly unwarranted payments to MAOs. The 1.5x multiplier also indicates damages were calculated in accordance with the terms of the SDP rather than the government using a different (and higher) multiplier that DOJ would typically require to receive a False Claims Act release.

Recent Medicare Advantage Enforcement

DOJ’s settlement with the Villages comes on the heels of several Medicare Advantage enforcement actions large and small over the past year and DOJ and CMS’s activity indicating it has been and will continue to be a priority for this administration. In February 2026, HHS-OIG released its Industry Segment-Specific Compliance Program Guidance setting out risk areas for participants in the Medicare Advantage program.² In a section regarding Risk Adjustment, the guidance states that OIG and others have identified fraudulent practices including that “MA Parties may be leveraging chart reviews and in-home HRAs³ to maximize risk adjustment payments. OIG’s work raises concerns about the appropriateness of risk-adjusted payments generated solely by diagnoses from HRAs and chart reviews, the quality of care for enrollees, and the completeness of encounter data. OIG has also audited specific diagnosis codes, which are at a high risk for being miscoded.” In that same month, at the Federal Bar Association’s Qui Tam conference, Deputy Attorney General Brenna Jenny described DOJ enforcement priorities, which included fraud on the Medicare Advantage program, specifically unsupported risk adjustment diagnosis codes, “one-way” adjustments to diagnoses based on chart reviews (i.e. only those that increase reimbursement rather than reducing it), the improper use of queries and addendums to add diagnosis codes, patient “cherry-picking,” marketing misrepresentations, and manipulation of medical loss ratios. And in May 2026, CMS announced a significant expansion of Risk Adjustment Data Validation audits of MAOs.⁴

These enforcement priorities have resulted in settlements with plans and providers in the past year, including Kaiser Permanente ($556 million plan and provider settlement for submitting invalid diagnosis codes),⁵ Aetna ($117.7 million plan settlement for submitting or failing to withdraw inaccurate and untruthful diagnosis codes for its Medicare Advantage Plan enrollees in order to increase its payments from Medicare),⁶ Community Care Health Network ($36.5 million services company settlement for causing the MAOs to submit to the Government false and invalid patient diagnoses),⁷ Monogram Health ($2.4 million provider settlement for causing the submission of false diagnosis codes to increase payments that they received from the Medicare Advantage program),⁸ and Complete Health Partners ($14.1 million provider settlement for causing the submission of false diagnosis codes in order to increase payments that they received from the Medicare Advantage program).⁹ This spate of enforcement actions against several categories of participants in the Medicare Advantage program are the efforts of a dedicated and creative DOJ team that is focusing on bringing cases against anyone who causes the federal government to pay out more than it otherwise would by influencing risk adjustment payouts to Medicare Advantage plans through changing diagnosis codes for patients.

Considerations for Providers to Minimize Risk

Based on DOJ and CMS activity, as well as the details of released settlements, providers can anticipate risk factors and fact patterns that may heighten investigation or enforcement risks.

Untimely Queries and Amendment by Non-Rendering Providers: For example, it is apparent that DOJ and OIG are focused on instances where patients are coded for diagnoses and where the medical record does not reflect or indicate corresponding treatment. Likewise, diagnoses added via query or an addendum that occurs a significant amount of time after a patient encounter or that are signed by non-treating providers are likely to attract DOJ interest.

One-Directional Coding: The government has grown highly skeptical of diagnosis coding programs that strongly emphasize the identification of additional diagnoses, but lack effective controls to test and remove unsupported diagnoses. While the additional codes may be supportable, from the government’s perspective, the failure to identify and remove unsupported diagnoses—particularly those that have been identified as high risk—can look like adverse information is being overlooked and invite scrutiny.

Incentive Based Compensation Theories: DOJ also continues to pursue kickback and false claims theories where physicians, outside consultants, or internal provider personnel responsible for adding diagnosis codes are incentivized or compensated based on their ability to capture additional revenue. As seen in the Villages, Monogram Health, and Complete Health Partners settlements, this can extend to providers themselves when they receive payments from MAOs that vary based on the premiums received by those MAOs or otherwise incentivize code capture. This was specifically called out in the DOJ Press Release accompanying the Villages settlement (“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”). And while such risk-sharing arrangements are increasingly commonplace and far from per se improper, the government is aware that such arrangements can also adversely influence diagnosis code reporting when providers and plans fail to implement appropriate controls. In addition, the Villages settlement focused on the utilization of consultants retained to add the necessary codes to increase reimbursement. This particular theory has been a concern for OIG going back at least 25 years to the 2001 Special Advisory Bulletin entitled “Practices of Business Consultants,” which highlighted as an example among others that a “reimbursement specialist may suggest that a client use inappropriate billing codes in order to elevate reimbursement and may describe methods to avoid detection.”¹⁰ That same factual predicate is now seeing renewed interest in the Medicare Advantage space, and providers would be well served to put in place procedural safeguards to address the potential for abuse these structures may incentivize.

Outlier Provider Data: DOJ and HHS-OIG are also focusing on detecting potential signals arising from data submitted by MAOs and providers, an area that is ripe for use of powerful AI tools and other advanced data analytic techniques that can comb through the government’s extensive databases to look for inconsistencies (e.g., denial of treatment while submitting that diagnosis for purposes of generating higher reimbursement) or outlier submissions (e.g., a provider with a significantly higher coding rate for a specific diagnosis). In recent years, HHS-OIG has secured access to higher quality encounter data, which—when paired with diagnosis data—has advanced their ability to detect patterns across plans, providers, and populations for further scrutiny. To reduce the potential of attracting unwarranted government attention, providers should perform an internal analysis of their own data with benchmarking. Where a variance or divergence from the industry is justified, providers should clearly document the explanation for their outlier status in case needed to respond to future government inquiries.

Potential Follow-On MAO-Provider Litigation: Though muted because the Villages is currently in bankruptcy and the settlement specifically addressed how contribution would work between the provider and impacted MAOs responsible for repaying government premiums, providers who face DOJ scrutiny for affecting risk adjustment scores and increasing MAO premiums also need to consider whether and to what extent they may face follow on litigation from MAOs seeking to recover for losses caused by alleged provider upcoding. In this respect, providers should understand their rights and obligations under their existing participation agreements with MAOs.

Other Areas of Potential Risk: Though recent settlements have not addressed the particular fact pattern, providers should also be wary of instances where they could be subject to DOJ scrutiny based on co-marketing of Medicare Advantage plans or what could be perceived as efforts to funnel or cherry-pick patients, as laid out by DAAG Jenny. DOJ is currently pursuing FCA enforcement actions against MAOs and insurance brokers for improper steering of patients and “discriminating” against certain Medicare patient populations. For example, see United States ex rel. Shea v. eHealth Inc. et al.¹¹ Providers should evaluate their agreements with MAOs to ensure that they are complying with Medicare marketing rules and prohibition on discrimination.