The settlement resolves allegations that the Humana-owned provider submitted unsupported diagnosis codes that increased federal payments.
The Villages Health System has reached a $541.5 million settlement over claims that it used unsupported diagnosis codes to boost Medicare Advantage payments. The provider group, owned by CenterWell Senior Primary Care (a Humana subsidiary), reached the agreement through The Villages Health System LLC, the pre-sale legal entity currently in Chapter 11.
The settlement doesn’t require an immediate lump-sum payment. Instead, the federal government gets an allowed, nondischargeable claim of $541.5 million against the bankruptcy estate. Any payments Medicare Advantage insurers return to CMS will reduce that claim, and the government will otherwise collect proportional distributions from the estate as the bankruptcy proceeds.
The Justice Department’s Civil Division framed the case around protecting the integrity of Medicare Advantage’s payment system, which depends on accurate diagnosis coding to calculate risk-adjusted reimbursements. The court approved the settlement on August 25, and the Justice Department has been clear these are allegations only, with no liability determination made.
What actually happened
The conduct covered runs from 2020 through 2024 and involves diagnosis codes submitted to three insurers: Humana, UnitedHealthcare, and GuideWell (Florida Blue’s parent company). The Villages Health self-reported the issue in December 2024 through HHS-OIG’s Health Care Fraud Self-Disclosure Protocol, telling regulators that invalid codes had inflated the capitated payments CMS sent to insurers, which in turn inflated what those insurers paid The Villages Health.
By the provider’s own consultant’s estimate, the unsupported codes generated $416 million in extra CMS payments to insurers, of which about $361 million flowed to The Villages Health. Because the provider self-disclosed, took corrective action, and cooperated with the investigation, it received credit that shaped the settlement terms.
How the codes got there
Between April 2020 and August 2024, employees made what the settlement calls “Retrospective Amendments” to patient records, adding diagnosis codes and sometimes language describing monitoring, evaluation, or treatment for those conditions. These weren’t made by the clinician who saw the patient, and some amendments happened over a year after the original visit. Changes went to the treating clinician for sign-off, or if that clinician had left, to another provider such as a medical director or the chief medical officer.
Separately, the organization ran coding “sprints” from March 2021 through August 2024, during which staff added specified diagnosis codes to records, sometimes with supporting documentation attached after the fact.
The Villages Health brought in outside counsel to investigate in August 2024 and shut down both practices. A follow-up review of four years of records found the share of unsupported diagnoses had grown sharply, from 28.6% in 2020 to 50.7% in 2024. The provider then submitted those codes to insurers for deletion.
Insurers are paying too
UnitedHealthcare separately agreed to pay the federal government roughly $125.5 million tied to the affected codes. Florida Blue will pay close to $12 million and get credit for about $9.2 million in codes it had already deleted or reported to CMS on its own.
Part of a bigger pattern
The Villages Health filed for Chapter 11 and agreed to sell its assets to Humana’s CenterWell in July 2025, with its CEO at the time linking the bankruptcy to expected Medicare overpayment penalties. The organization ran eight primary care centers and two specialty centers, serving more than 55,000 patients, a large share of them Medicare or Medicare Advantage enrollees.
This case lands amid broader federal scrutiny of Medicare Advantage risk-adjustment coding. In January, Kaiser Foundation Health Plan and several affiliates agreed to pay $556 million over similar allegations, and in March, Aetna agreed to pay $117.7 million to resolve claims that it submitted or failed to withdraw inaccurate diagnosis codes for its Medicare Advantage members.
Frequently Asked Questions (FAQs)
1.What is a Medicare Advantage risk-adjustment settlement?
It’s a resolution between a healthcare provider or insurer and the federal government over allegations that diagnosis codes submitted for risk-adjustment purposes weren’t supported by the medical record. Because Medicare Advantage pays plans more for sicker patients, unsupported codes can inflate payments even without any change in patient care.
2. Does this settlement mean The Villages Health admitted wrongdoing?
No. The Justice Department has stated these are allegations only, and there’s been no determination of liability. The Villages Health received credit for self-disclosing the issue, correcting its practices, and cooperating with the investigation, which shaped the settlement terms.
3. Why did the unsupported diagnosis rate increase so much (28.6% to 50.7%)?
The settlement points to two internal practices, “Retrospective Amendments” to records after the original visit and coding “sprints” where staff added specified diagnoses, both of which ran for years before the organization brought in outside counsel and stopped the practices in 2024.
4. How does this affect medical billing and coding compliance more broadly?
It reinforces that risk-adjustment coding needs a clean audit trail back to clinician documentation made at the time of care. Codes added retroactively, without the treating clinician’s original involvement, are a recurring theme across recent Medicare Advantage settlements, including this one, Kaiser’s $556 million settlement in January, and Aetna’s $117.7 million settlement in March.
5. What happens to the settlement money given the bankruptcy?
Rather than a single payout, the government holds an allowed, nondischargeable $541.5 million claim against The Villages Health’s bankruptcy estate. Amounts insurers return to CMS reduce that claim, and the rest is paid out proportionally as the estate distributes assets through the Chapter 11 process.
