The Villages Health: $361 Million Medicare Liability Drives 363 Sale

The Villages Health System, LLC—a senior-focused healthcare provider operating eight primary care centers and two specialty care centers serving more than 55,000 patients in Florida's largest retirement community—filed for chapter 11 bankruptcy on July 3, 2025, with the United States government holding the largest claim at approximately $361 million arising from allegations of Medicare overbilling totaling at least $350 million. The filing came after an internal investigation revealed that a retrospective chart review program initiated around 2020 was inconsistent with Medicare guidelines, resulting in diagnostic codes submitted without proper clinical documentation and patient charts amended after the 90-day CMS deadline for modifications.

The company entered bankruptcy with a $50 million stalking horse agreement from CenterWell Senior Primary Care (Vitality), Inc., a subsidiary of Humana and the nation's largest senior-focused, value-based primary care provider. The 363 sale process ultimately yielded $68 million, with the bankruptcy court approving CenterWell's winning bid on September 9, 2025. TVH secured up to $39 million in DIP financing to fund operations through the sale process, and CenterWell committed to offer employment to substantially all of the company's 800+ employees.

The case proceeded amid federal scrutiny of Medicare Advantage billing practices. Insurance company objections during the bankruptcy alleged additional misconduct: Florida Blue claimed $25 million in overpayments over four years from false diagnostic codes, while UnitedHealthcare alleged that TVH distributed $183 million to the controlling Morse family between 2022 and 2024 to pay down a line of credit.

The Villages Community and TVH Background

The Villages Health served as the primary healthcare provider for the nation's largest retirement community, serving a predominantly retirement-age patient population dependent on Medicare and Medicare Advantage coverage.

The Villages Community. The Villages is a census-designated place spanning 57 square miles across Sumter, Lake, and Marion counties in central Florida. The community holds the distinction of being the largest retirement community in the United States, with a population that grew 39% from 93,000 residents in 2010 to more than 130,000 by 2020—making it the fastest-growing metro area in the country during that period. The development traces its origins to 1983 when Harold Schwartz brought his son H. Gary Morse into the business, with the community rebranded from Orange Blossom Gardens to The Villages in 1992. By the early 1990s, The Villages had three golf courses, four restaurants, and over 8,000 residents; by 2025, it had grown to house more than 150,000 residents across its expansive footprint.

The community's demographics created a concentrated market for senior healthcare services. With a population largely comprising retirement-age individuals, The Villages had a patient base heavily dependent on Medicare and Medicare Advantage programs for healthcare coverage. This concentration of Medicare-eligible patients increased the importance of accurate coding and billing practices for providers operating in the community.

Morse Family Control. H. Gary Morse, an American billionaire who developed The Villages into the nation's largest retirement community, passed away on October 29, 2014. Control of the family enterprise passed to his three children—Mark Morse, Jennifer Parr, and Tracy Morse—each of whom owns and works for the Holding Company of the Villages Ltd. The ownership structure became a point of contention in the bankruptcy when UnitedHealthcare alleged that $183 million was distributed from TVH to the Morse family between 2022 and 2024.

TVH Formation and Scope. The Villages Health was formed in 2012 in collaboration with the University of South Florida to provide primary and specialty care services to the community's elderly population. By the time of the bankruptcy filing, TVH had grown to operate eight primary care centers and two specialty care centers, serving more than 55,000 patients with a workforce of over 800 employees. Many of TVH's patients were beneficiaries of Medicare or Medicare Advantage plans, linking the organization's financial viability to federal healthcare program reimbursements.

The organization's growth mirrored the expansion of The Villages community itself. As the population grew from 93,000 to over 130,000 residents between 2010 and 2020, TVH expanded its footprint to meet demand, adding facilities and staff to serve the influx of new residents. This growth coincided with the implementation of billing practices later found inconsistent with Medicare guidelines—a retrospective chart review program that began around 2020 and was later identified as a contributor to at least $350 million in alleged overpayments.

Medicare Billing Issues

The bankruptcy followed the discovery of billing practices that allegedly resulted in more than $350 million in Medicare overcharges. The United States government asserted a claim of approximately $361 million, making it the largest creditor.

Retrospective Chart Review Program. An internal investigation revealed that a retrospective chart review program initiated around 2020 was inconsistent with Medicare guidelines. The program reviewed patient charts for diagnoses tied to Medicare Advantage reimbursements. Under the Medicare Advantage risk adjustment system, insurers receive higher payments for patients with more severe diagnoses, creating financial incentives for healthcare providers to capture all documentable conditions.

However, legitimate risk adjustment coding requires contemporaneous clinical documentation supporting each diagnosis. The TVH investigation found that some submitted codes lacked sufficient clinical support, meaning diagnoses were coded without adequate medical records to justify them. Additionally, some codes involved inappropriate amendments to medical records beyond the 90-day CMS deadline for chart modifications. CMS regulations generally require that medical record amendments be made within 90 days of the original documentation, and amendments made after this window, particularly those that add diagnoses affecting risk adjustment, raise compliance concerns.

The retrospective nature of the program was a focus of the compliance concerns. Rather than capturing diagnoses through normal clinical encounters and contemporaneous documentation, the program reviewed historical charts to identify conditions that could be added to patient records and subsequently billed. When these additions occurred outside the permitted amendment window or without adequate clinical support, the filings characterized the practices as overbilling.

Discovery and Disclosure. TVH discovered the billing discrepancies internally in August 2024. The discovery came through internal audits that identified patterns of coding that were inconsistent with Medicare requirements. TVH engaged external consultants to conduct a comprehensive audit of its coding accuracy. The review reported that the retrospective chart review program had generated substantial overpayments.

In December 2024, TVH reported the issues to the Department of Health and Human Services. The scale of the alleged overcharges—at least $350 million based on inaccurately recorded patient diagnoses—led the United States government to assert a claim of approximately $361 million in the bankruptcy proceeding, making it the largest creditor.

Leadership Conduct. According to industry analysis, the CEO received a $200,000 "retention bonus" on July 2, 2025—the day before the bankruptcy announcement.

Insurance Company Objections and Allegations

Multiple insurance companies filed objections during the bankruptcy proceeding, alleging overbilling that extended beyond the Medicare claims to encompass commercial insurers. The objections provided additional detail about the scope of alleged billing misconduct.

Florida Blue Allegations. Florida Blue, a major commercial insurer in Florida, alleged that TVH added false diagnostic codes to patient files over a four-year period, resulting in $25 million in overpayments. The insurer's filing provided specific examples of allegedly improper coding practices. In 2024 alone, TVH allegedly falsely added codes for "Coagulation Defects and Other Specified Hematological Disorders" and "specified Heart Arrhythmias," leading to approximately $8 million in overpayments for that year.

Florida Blue's allegations went beyond a general assertion of coding errors to describe documentation practices the insurer said were improper. The insurer alleged that diagnoses were submitted without proper clinical documentation—meaning codes were added to claims without adequate medical record support to justify the diagnoses. Additionally, Florida Blue alleged that patient charts were amended after the 90-day CMS deadline, consistent with the findings of TVH's own internal investigation. The allegations named particular diagnosis categories and quantified year-by-year overpayments.

The Florida Blue claims indicated that the alleged coding issues at TVH were not limited to Medicare programs. Commercial insurers also use risk adjustment or condition-based payment models that can create incentives for diagnosis capture. When a provider implements retrospective coding practices, those practices can affect multiple payers, not just Medicare.

UnitedHealthcare Allegations. UnitedHealthcare filed objections alleging that TVH distributed $183 million to the Morse family between 2022 and 2024, with funds used to pay down a line of credit. UnitedHealthcare objected to the sale process based in part on these distribution allegations.

DIP Financing and 363 Sale Process

TVH entered bankruptcy with a stalking horse buyer in place and secured DIP financing to fund operations through an expedited sale process, ultimately achieving a 68-day timeline from petition to sale order.

DIP Financing Structure. TVH secured up to $39 million in DIP financing from PMA Lender LLC, comprising $24 million in new money advances and a $15 million roll-up of prepetition debt. The roll-up component converted prepetition obligations owed to PMA Lender into postpetition DIP debt, effectively priming other prepetition creditors while providing the lender with enhanced security and priority.

The court entered an interim DIP order on July 11, 2025—eight days after the petition—authorizing $5 million immediately to fund ongoing operations. This initial authorization allowed TVH to maintain patient care services and employee payroll while the full DIP facility moved through the approval process. The final DIP hearing was scheduled for August 11, 2025, approximately one month after filing. A final DIP order was ultimately entered on November 20, 2025, as the case continued toward closing the sale transaction.

The DIP facility provided liquidity to sustain operations through the sale process while providing the lender with the collateral protection and priority typical of DIP arrangements.

CenterWell Stalking Horse. TVH filed with a $50 million all-cash stalking horse asset purchase agreement with CenterWell Senior Primary Care (Vitality), Inc., a subsidiary of Humana Inc. The stalking horse structure allowed TVH to enter bankruptcy with deal certainty while still conducting a competitive process that could yield higher bids.

The company is the nation's largest senior-focused, value-based primary care provider, serving approximately 450,000 patients at 350 locations across 15 states, including 150 centers in Florida.

As part of the stalking horse agreement, CenterWell committed to offer employment to substantially all of TVH's 800+ employees.

Auction and Sale Order. The bidding procedures order was entered on July 28, 2025, establishing the framework for competing bids and the auction process. A notice of successful bid was filed on September 8, 2025, followed by the sale hearing and sale order approval on September 9, 2025. The final purchase price was $68 million—an $18 million increase from the $50 million stalking horse bid.

The final approved sale included assumption of cure costs and liabilities beyond the base purchase price, and CenterWell committed to maintain TVH's payor-agnostic structure.

The 68-day timeline from petition to sale order (July 3 to September 9) provides the case timeline for the 363 sale process.

Post-Sale Transition and Network Status

The sale to CenterWell raised questions about insurance network status heading into the Medicare open enrollment period when beneficiaries make coverage decisions for the following year.

Network Negotiations. The transition to CenterWell ownership required new network agreements with insurers who had previously contracted with TVH. Because CenterWell is a subsidiary of Humana, negotiations addressed whether TVH locations would remain accessible to patients enrolled in non-Humana Medicare Advantage plans. Negotiations with UnitedHealthcare continued through fall 2025, creating uncertainty during the Medicare open enrollment period when beneficiaries were selecting plans for 2026 coverage.

Patients reported feeling "duped" by the transition uncertainty, despite assurances from TVH leadership of a seamless transition. Some patients changed Medicare plans during open enrollment to ensure continued access to their physicians, while others waited for network negotiations to conclude.

2026 Network Resolution. CenterWell ultimately reached a long-term agreement with UnitedHealthcare, ensuring TVH locations would remain in network for UHC members for 2026.

For 2026, TVH locations will accept plans from Aetna, CarePlus, Florida Blue, Humana (CenterWell's parent company), and UnitedHealthcare. CenterWell committed to maintain TVH's payor-agnostic structure. By maintaining contracts with multiple major insurers, CenterWell kept TVH locations available to patients across those plans.

Key Timeline

Industry Implications

The TVH bankruptcy reflects scrutiny of retrospective chart review programs and Medicare Advantage risk adjustment practices.

Medicare Advantage Billing Scrutiny. The TVH case emerged against a backdrop of federal focus on Medicare Advantage billing accuracy. CMS has scrutinized retrospective chart reviews and other diagnosis optimization programs, and the TVH case included allegations of $350 million+ in overcharges. The investigation identified codes lacking clinical support and amendments made outside the 90-day window.

Value-Based Care Transition. The acquisition by CenterWell reflects consolidation in senior-focused primary care and the transition toward value-based care models. CenterWell is a senior-focused, value-based primary care provider. The acquisition expanded CenterWell's Florida footprint with TVH's facilities and patient base.

Frequently Asked Questions

Why did The Villages Health System file for bankruptcy?

TVH filed after an internal investigation revealed that a retrospective chart review program initiated around 2020 was inconsistent with Medicare guidelines, resulting in at least $350 million in Medicare overcharges from inaccurately recorded patient diagnoses. The United States government asserted a claim of approximately $361 million—making it the largest creditor. TVH discovered the discrepancies in August 2024 and reported them to HHS in December 2024, setting the stage for the July 2025 bankruptcy.

Who acquired The Villages Health?

CenterWell Senior Primary Care (Vitality), Inc., a subsidiary of Humana Inc. and the nation's largest senior-focused, value-based primary care provider, acquired TVH's assets. CenterWell initially entered as a $50 million stalking horse bidder and ultimately paid $68 million. CenterWell serves approximately 450,000 patients at 350 locations across 15 states, including 150 centers in Florida.

What were the specific allegations of improper billing practices?

Multiple issues were alleged: some submitted diagnostic codes lacked sufficient clinical support; patient charts were amended after the 90-day CMS deadline; and retrospective chart reviews added diagnoses used in risk adjustment payments without proper documentation. Florida Blue alleged $25 million in overpayments from false codes for "Coagulation Defects and Other Specified Hematological Disorders" and "specified Heart Arrhythmias" without clinical documentation.

What did UnitedHealthcare allege about distributions to the Morse family?

UnitedHealthcare accused TVH of distributing $183 million to the Morse family (which controls The Villages through several companies) between 2022 and 2024, with funds used to pay down a line of credit. The allegation focused on distributions to controlling insiders while the company accumulated liabilities to insurers and the federal government.

What is the DIP financing structure?

TVH secured up to $39 million in DIP financing from PMA Lender LLC, comprising $24 million in new money advances and a $15 million roll-up of prepetition debt. The interim order authorized $5 million immediately upon filing, with full availability after the final hearing. The final DIP order was entered in November 2025.

Will patients be able to keep their insurance coverage?

Yes. CenterWell committed to maintain TVH's payor-agnostic structure. For 2026, TVH locations will accept plans from Aetna, CarePlus, Florida Blue, Humana, and UnitedHealthcare. CenterWell reached a long-term agreement with UnitedHealthcare to ensure network continuity for UHC members.

What happens to employees?

CenterWell agreed to offer employment to substantially all of TVH's 800+ employees as part of the stalking horse agreement. This commitment was maintained through the sale process and final order.

What is The Villages?

The Villages is the largest retirement community in the United States, spanning 57 square miles across Sumter, Lake, and Marion counties in central Florida. The community has more than 130,000 residents and grew 39% between 2010 and 2020—the fastest-growing metro area in the country during that period. It is controlled by the Morse family through several holding companies.

What was the significance of the CEO retention bonus?

The CEO received a $200,000 retention bonus on July 2, 2025—the day before the bankruptcy announcement.

What is the current case status?

The sale order was approved September 9, 2025, with closing expected in Q4 2025. CenterWell resolved network agreements with major insurers for 2026 coverage. The Final DIP Order was entered November 20, 2025, and a second exclusivity extension was granted December 22, 2025. Post-sale administration continues as the transaction moves toward closing.

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