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Dive Brief:
- The Villages Health, a healthcare provider in Central Florida, has agreed to pay $541.5 million to settle allegations that it overbilled Medicare, the Department of Justice announced Wednesday.
- From 2020 to 2024, the company submitted false diagnosis codes for Medicare Advantage patients in order to increase its reimbursement in the privatized Medicare program, according to federal regulators.
- TVH identified and notified the government of its overbilling at the end of 2024, before filing for bankruptcy last summer. Humana purchased the provider for $68 million in a deal that closed late last year.
Dive Insight:
In MA, the government pays insurers a fixed payment per member each month that’s adjusted higher or lower based on the health needs of their enrollees. The CMS calculates this adjustment based on seniors’ medical diagnoses, with a more severe diagnosis or more expensive treatment boosting a member’s risk score — and the corresponding reimbursement for their insurer.
That creates an incentive for MA organizations to exaggerate their members’ health needs to inflate their revenue, a practice called upcoding. It’s a big problem, especially as Medicare buckles under sustained financial stress: Upcoding is expected to drive $22 billion in additional MA spending compared to traditional Medicare this year, according to congressional advisory group MedPAC.
Though major MA insurers are most frequently criticized for upcoding, smaller entities haven’t been immune — including providers that contract with insurers to care for their MA members, which also benefit from higher risk adjustment payments if they care for sicker patients. This summer, the DOJ settled with home health provider Monogram Health for $2.4 million and secured a $14 million settlement with Complete Health, a value-based primary care provider in three states.
TVH filed for bankruptcy last summer after discovering it owed Medicare hundreds of millions of dollars as a result of longstanding overbilling. The provider sized its bill to the federal government at $361 million.
For four years, TVH submitted codes to Humana, UnitedHealthcare and Blue Cross Blue Shield of Florida for their MA patients that weren’t backed up by medical records, the DOJ said.
The company, which serves some 55,000 people, changed patients’ medical records and inserted additional diagnosis codes, sometimes years after a patient’s actual visit, according to the settlement. Unsupported codes include those for severe obesity, blood defects and immunodeficiency.
By 2024, about half of the company’s patient codes were unsupported, according to an analysis by an outside consultant.
TVH’s settlement could have been steeper. But the company got credit for self-disclosing the overpayments to a government portal for reporting healthcare fraud, and for working with regulators throughout their investigation, the DOJ said.
The government will receive the settlement through a claim against the company’s bankruptcy estate. The insurers that profited as a result of the Villages’ activity are also returning the overpayments to the government, and those dollars will be credited against the settlement amount.
As of March, Humana had refunded almost $151,000, while Blue Cross Blue Shield of Florida, which is operated by GuideWell, had returned more than $3 million, according to the settlement.
Humana’s health services division CenterWell agreed to acquire TVH last July for $50 million, adding the provider’s eight primary care centers and two specialty care centers to its growing network of medical offices nationwide. Humana’s bid set off an auction for the 13-year-old company, and the purchase price later increased to $68 million after a bankruptcy court approved the deal last fall.
Humana did not respond to a request for comment on the settlement by time of publication.
