The Villages Health lawsuit is really a cluster of proceedings inside a single Chapter 11 bankruptcy: The Villages Health System filed for bankruptcy in July 2025 after self-reporting about $361 million in Medicare overpayments, sold its clinics to Humana’s CenterWell Senior Primary Care, and has since reached a $541.5 million claim resolution with the Department of Justice and a separate $80 million settlement with the Morse family developer entities that controlled the company. The case is still open, and a liquidation plan is pending confirmation in the U.S. Bankruptcy Court for the Middle District of Florida.1
What Triggered the Bankruptcy
In late 2024, an internal review at The Villages Health uncovered what the CEO later described as “a problem with some of our Medicare billing practices.” The issue involved Hierarchical Condition Category codes, the diagnostic codes Medicare Advantage plans use to set per-patient payments. When providers record more or sicker diagnoses, the government pays more; when those diagnoses lack clinical support, the payments are overpayments.
The company self-reported to the Department of Health and Human Services and the Department of Justice. It estimated the liability at roughly $361 million, a figure that dwarfed its own assets of $50 million to $100 million.
Private insurers piled on with their own allegations. In an August 2025 filing, Florida Blue accused TVH of falsely adding diagnostic codes over a four-year period, pointing specifically to codes for coagulation defects and heart arrhythmias, and claiming $25 million in overpayments to Florida Blue alone, $8 million of that in 2024. UnitedHealthcare reported similar overpayments from what it called “erroneous billing.”
The Chapter 11 Filing
TVH filed its voluntary Chapter 11 petition on July 3, 2025, in the Middle District of Florida, before Judge Lori V. Vaughan. The petition listed estimated liabilities of $100 million to $500 million against assets of $50 million to $100 million. The company called the filing a “strategic restructuring” and announced at the same time a stalking-horse asset purchase agreement with CenterWell Senior Primary Care to keep the clinics open through the case.
Within a week, Judge Vaughan gave preliminary approval to $39 million in debtor-in-possession financing from PMA Lender LLC, a subsidiary of Citizens First, the bank of The Villages. An interim order on July 11 released $5 million in immediate operating funds. The DIP facility included $24 million in new money and a $15 million roll-up of a pre-petition line of credit that TVH had drawn from PMA in April 2025.
UnitedHealthcare objected. It argued that a debtor financed by an affiliate of its own controlling family had an insider conflict, and it asked the court to appoint an independent trustee and reject the DIP plan. UHC also alleged that between 2022 and 2024, TVH had distributed roughly $183 million to the Morse family to pay down a line of credit. A DOJ attorney pegged total outflows during that period even higher, at $216.2 million once rent, the line-of-credit paydown, and tax distributions to the majority shareholder were counted. Florida Blue, the DOJ, and the U.S. Trustee filed their own objections, several of them focused on sale language they said was overly broad in shielding insiders from potential liability.
The Sale to CenterWell
Judge Vaughan approved bidding procedures on July 28, 2025. CenterWell’s opening stalking-horse bid was reported at $50 million. On September 9, the court approved CenterWell’s winning bid at $68 million in cash, plus up to $1 million in cure costs and the assumption of certain liabilities, after sale language was modified to address the federal government’s concerns about insider releases.
The transaction closed on November 7, 2025. TVH stopped providing healthcare, and CenterWell took over all ten locations, keeping the same care teams and buildings under a new brand. Patients were told that “nothing will change because of these branding changes.”
What the Sale Meant for Patients
For the roughly 55,000 patients, the sale solved only half the problem. Most carried UnitedHealthcare Medicare Advantage plans, and as of mid-November 2025 CenterWell and UHC had not agreed on 2026 in-network terms. Without a deal, CenterWell would have stopped accepting UHC plans on January 1, 2026, leaving patients to choose between switching insurers and switching doctors. Medicare’s open enrollment window closed December 7, which made the timing especially tight.
TVH opened nine health insurance resource centers and directed patients to the Medicare State Health Insurance Assistance Program for counseling. The standoff ended on November 25, 2025, when CenterWell and UnitedHealthcare reached an agreement keeping UHC plans in-network. By 2026, the rebranded clinics were accepting Aetna, CarePlus, Florida Blue, Humana, and UnitedHealthcare plans.
The DOJ Settlement
In January 2026, TVH and the Department of Justice reached an agreement in principle to resolve the Medicare overpayment liability. The DOJ’s allowed general unsecured claim was set at $541.5 million, notably higher than the roughly $361 million originally disclosed, reflecting the overpayments together with associated penalties or interest. The DOJ holds approximately 97 percent of all general unsecured claims in the case, which effectively gives it control over creditor voting. As of spring 2026, the settlement was folded into TVH’s liquidating plan and was pending court approval.
The $80 Million Developer Settlement
In March 2026, TVH filed a separate settlement agreement with the “Developer” group, which includes PMA Lender LLC, The Villages Health Holding Company, and related Morse family entities. The developer agreed to pay the bankruptcy estate $80 million.
That settlement resolved a broad set of claims the estate could have pursued: about $108 million in net repayments on the holding company’s line of credit, roughly $69 million in pass-through tax distributions, and about $268 million in affiliate payments for rent and services. TVH’s legal team concluded that actually litigating those claims would be expensive and uncertain given the difficulty of proving insolvency for fraudulent transfer purposes and overcoming Florida’s business judgment rule protections for managers.
In exchange for the $80 million, the estate released the developer entities, their affiliates, and company managers and officers from all claims. The DOJ, controlling nearly all of the unsecured claims, agreed to support the deal. News reporting noted that the settlement could also spare the Morse family from disclosing sensitive financial information that unsecured creditors had been seeking.
Scrutiny of Insiders
The Official Committee of Unsecured Creditors extended its investigation beyond the developer entities. In early 2026, the committee issued a notice of examination under Bankruptcy Rule 2004 to Dr. Elliot Sussman, TVH’s founding chairman and an 8 percent equity holder. The examination sought documents about his awareness of the Medicare overbilling, his potential financial interests in coding vendors hired by TVH, specifically KAID Health, Inc. and its successor PurpleLab, and whether he received distributions while the company was insolvent or facing the overpayment liability. The committee also asked for records on lease agreements between TVH and Morse-affiliated landlords to test whether the terms were arm’s length.
No formal avoidance actions or fraudulent transfer lawsuits against the Morse family or Dr. Sussman had been publicly filed as of the most recent available court records.
Where the Case Stands Now
With clinics sold and operations wound down, TVH shifted to a Chapter 11 liquidation. On March 20, 2026, the debtor filed a First Amended Plan of Liquidation that proposes creating a liquidating trust managed by an independent trustee. The trust would monetize remaining assets and claims and distribute proceeds to creditors. The plan offers a 90 percent recovery for small claims up to $9,000 through a “Convenience Class” provision.
In April 2026, Judge Vaughan conditionally approved the disclosure statement and scheduled a combined hearing on the disclosure statement and plan confirmation, along with objection deadlines and a trial date for motions to approve the DOJ and developer settlements. The unsecured creditors’ committee formally recommended that creditors vote to accept the plan.
As of June 2026, the case remained active. Monthly operating reports were still being filed, the plan had not yet been confirmed, and the liquidating trust had not yet been established. Patients continue to receive care at the same clinic locations, now under the CenterWell name, with a broader mix of Medicare Advantage plans accepted than TVH offered before the bankruptcy.