The Villages Health Agrees to Pay $542M for Medicare Advantage Overbilling

The Villages Health System in central Florida, part of the world’s largest retirement community, has agreed to pay almost $542 million to settle civil claims stemming from its disclosure that it submitted false diagnosis codes to boost payments from the Medicare Advantage program.

The U.S. Department of Justice announced the settlement Wednesday, closing another chapter in the health care system’s troubled recent history.

“Today’s settlement reflects that we will hold accountable entities that inflate payments through invalid diagnoses,” Assistant U.S. Attorney General Brett Shumate said in a statement. “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 Villages Health System filed for Chapter 11 bankruptcy protection in July 2025, seven months after it self-disclosed the invalid diagnosis codes, the DOJ explained. The U.S. Bankruptcy Court for central Florida approved the $542 million settlement this week.

In September, the bankrupt health system was purchased by CenterWell, a subsidiary of health insurer and health services company Humana, for $50 million.

The Justice Department explained how the Medicare Advantage program works and how the Villages Health System tried to take advantage of extra payments from 2020 through 2024. Under Medicare Advantage, 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 and general pays out more for sicker beneficiaries. 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. Providers submit diagnosis codes to MAOs that are, in turn, submitted to CMS to increase payments, the DOJ said.

The department noted that as The Villages Health examined its finances in 2024, examiners uncovered the massive overbilling and alerted the federal Health and Human Services Department’s Office of Inspector General.

“TVH promptly took remedial actions and self-disclosed the invalid diagnoses to HHS-OIG,” the Justice Department statement noted. “TVH also provided the government with a detailed and thorough written disclosure and cooperated with the government throughout its investigation.”

The DOJ officials noted that the department seeks to hold fraudulent actors accountable, but the department decided to pursue civil False Claims Act violations and recovery rather than criminal charges against The Villages Health leadership or staff. The status of the health system officials’ directors and officers insurance coverage was not explained.

The settlement agreement can be seen here.