The Department of Justice closed the summer of 2026 with its largest Medicare Advantage risk-adjustment settlement yet. On August 26, 2026, The Villages Health System agreed to pay $541.5 million to resolve False Claims Act allegations over invalid Hierarchical Condition Category (HCC) diagnosis codes submitted for 2020 through 2024. It followed a $117.7 million Aetna resolution in March and a $36.5 million Matrix Medical Network settlement in June, both tied to unsupported or one-sided HCC coding. For a compliance officer, the pattern is direct: DOJ now treats unsupported diagnosis codes as False Claims Act violations, and CMS's expanded RADV audits are generating the referrals.
How HCC Coding Drives Risk Adjustment Payments
Medicare Advantage plans receive a risk-adjusted capitation payment per enrollee, calculated in part from Hierarchical Condition Category (HCC) diagnosis codes submitted to CMS. Each HCC maps to a risk score; a higher score means a higher monthly payment. The system depends on codes reflecting conditions actually supported in the medical record, not codes carried forward from a prior year or added through a chart review with nothing behind them. Chart review programs are legitimate when they check both directions, codes to add and codes on file to delete. The exposure begins when a review only looks one way.
RADV Audits and the Push Toward Extrapolation
CMS's Risk Adjustment Data Validation (RADV) program is the audit mechanism behind that exposure: it samples an MA contract's HCC codes against the medical record and collects the overpayment on any code it cannot verify. In May 2025, CMS announced it would audit roughly 550 MA plans annually, up from about 60, and grow its coding staff from 40 to approximately 2,000. CMS also intended to use statistical sampling to extrapolate a sample's error rate contract-wide, but a federal court in Texas vacated that extrapolation rule on procedural grounds in Humana Inc. v. Becerra on September 25, 2025 (CMS appealed November 1). Only the extrapolation math is paused; RADV reviewers keep producing unsupported-code findings, each a potential DOJ referral.
The One-Sided Review Theory Under the False Claims Act
The theory that converts a coding error into False Claims Act exposure traces to the Ninth Circuit's 2016 decision in Swoben v. United Healthcare Insurance Co. A chart review can support FCA liability when it is designed to find diagnoses that increase payment while deliberately avoiding diagnoses that would decrease it, the one-sided review pattern. Because CMS requires plans to certify their submitted data is accurate, a review built to find only upcoding, never to delete unsupported codes on file, can turn that certification into a false statement. FCA liability does not require intent to defraud. Actual knowledge, deliberate ignorance, and reckless disregard each satisfy the knowledge standard.
A chart review program built to find only the diagnoses that increase payment, and never the ones that should come off a claim, is the exact pattern the Ninth Circuit found actionable under the False Claims Act.
Recent Settlements Target Unsupported HCC Codes
The 2026 settlements apply that theory at scale. The Villages Health System's $541.5 million settlement resolved invalid HCC codes for 2020 through 2024, some based on record amendments the rendering provider never approved; the company self-disclosed under HHS-OIG's protocol before the government intervened. Aetna paid $117.7 million in March 2026 to resolve a qui tam suit over inaccurate diagnosis codes, including morbid obesity codes, for 2018 through 2023. Matrix Medical Network paid $36.5 million in June 2026 over false and invalid diagnosis codes submitted to Medicare Advantage plans. None went to trial; each resolved a coding program DOJ characterized as producing diagnoses the medical record did not support. What happens between a RADV finding and a settlement of that size runs through its own investigation timeline, one a compliance team controls only if counsel is engaged early.
Why Early Legal Counsel Is Critical
It is critical that compliance officers promptly retain experienced healthcare defense counsel upon receiving a RADV audit notice, a CMS or OIG inquiry, or an internal finding of one-sided review. Early counsel can protect the organization's rights, guide the self-disclosure decision within the 60-day overpayment window, ensure chart review protocols withstand scrutiny, and communicate with investigators on the organization's behalf. Delaying representation can significantly affect the outcome and expose the organization, and the compliance officer, to unnecessary risk.
How Health Law Alliance Can Help
Health Law Alliance defends Medicare Advantage organizations, medical groups, and their compliance teams against RADV findings, self-disclosure decisions, and False Claims Act investigations built on unsupported or one-sided HCC coding. Our bench includes a former federal prosecutor and a former senior compliance executive at a major health plan, a background that shapes how we evaluate a chart review program before the government does. If your organization is facing a RADV audit or a coding-program question, contact us today for a free consultation.
