Editor’s note (August 18, 2026): This post was originally published April 17, 2026. It has been updated to reflect developments through August 2026, including the final CY2027 Rate Announcement, the resolution of the CMS sanction proceeding against Elevance Health, and CMS’s pending CRUSH rulemaking. Allegations resolved by settlement are identified as allegations throughout. Neither the Aetna nor the Kaiser settlement included any determination of liability.

On March 11, 2026, the U.S. Department of Justice announced that Aetna, a subsidiary of CVS Health, agreed to pay $117.7 million to resolve allegations under the False Claims Act. The government alleged that Aetna submitted unsupported diagnosis codes to Medicare in order to obtain higher payments, and that it failed to delete codes its own chart reviews had already shown were not supported by the medical records.

Aetna did not admit liability. CVS stated that Aetna continues to disagree with the government’s industry-wide allegations and that the settlement should not be seen as an acknowledgment of wrongdoing.

That distinction matters for how you read everything that follows. These cases resolve without adjudication, which means the government’s legal theory was never tested at trial. What the settlements do establish is the theory itself, and the theory runs directly through your medical records.

If your hospital treats patients enrolled in Medicare Advantage plans, this settlement has implications for your billing team, your documentation practices, and your legal exposure.

First: How Medicare Advantage Payments Work

Medicare Advantage, also called Medicare Part C, is the private-plan alternative to traditional Medicare. More than half of all Medicare beneficiaries are now enrolled in a Medicare Advantage plan. Rather than paying doctors and hospitals directly for each service, the federal government pays private insurers a fixed monthly amount for each enrollee, and that amount goes up based on how sick the patient is.

To determine how sick a patient is, the insurer collects diagnosis codes from hospitals, physicians, and other providers. More diagnoses, and more serious diagnoses, mean higher payments from the government to the insurer.

This is called risk adjustment, and the logic is sound: plans covering genuinely sicker patients should be paid more. The problem is that it creates a financial incentive to make a patient population look sicker on paper than it actually is. When that happens, it is called upcoding.

The Aetna Case: What the Government Alleged

The case against Aetna had two parts, and the difference between them is instructive.

The larger part, $106.2 million, involved payment year 2015. Aetna engaged outside coders to review patient medical records obtained from providers, looking for additional diagnoses that could be submitted for higher payments. The government alleged that those same reviews also surfaced codes Aetna had already submitted that the records did not support, and that Aetna added the new codes without deleting the unsupported ones.

One detail in this half of the case deserves more attention than it has received: it did not come from a whistleblower. Arnold & Porter’s analysis notes that the $106.2 million settlement did not arise from a qui tam action and may reflect the Department’s own review of agency data. The government found it by looking.

The remaining $11.5 million covered payment years 2018 through 2023. The government alleged that Aetna submitted or retained diagnosis codes for morbid obesity, a condition with strict clinical thresholds, for members whose own recorded body mass index was inconsistent with that diagnosis. This portion did come from a whistleblower: a former Aetna risk-adjustment coding auditor, who filed suit under the False Claims Act and will receive $2,012,500. The qui tam is captioned United States ex rel. Thomas v. Aetna Inc., No. 24-cv-339 (E.D. Pa.).

Note what that whistleblower did for a living. She was not a clinician who noticed something odd. She audited risk-adjustment coding, which is to say she held the job your compliance department holds.

This Is Not an Isolated Case

Kaiser Permanente, January 14, 2026: $556 million. Five affiliated entities settled what is, to date, the largest Medicare Advantage False Claims Act recovery. The government alleged that physicians were pressured to add diagnoses to patient charts after encounters had closed, producing roughly 500,000 unsupported diagnoses and approximately $1 billion in payments between 2009 and 2018. The relators received about $95 million. Kaiser denied the allegations, said it settled to avoid the delay, uncertainty, and cost of litigation, and characterized the matter as a dispute over how risk-adjustment documentation requirements should be interpreted.

Here is the fact that makes this a provider story rather than an insurer story: three of the five settling entities were physician groups, not health plans. The Permanente Medical Group, the Southern California Permanente Medical Group, and the Colorado Permanente Medical Group all signed. The government’s theory reached the organizations that produced the documentation, not only the organization that submitted it to CMS.

Elevance Health, February 27, 2026. CMS issued a Notice of Imposition of Intermediate Sanctions covering 45 Medicare Advantage-Prescription Drug contracts and one additional contract. CMS found that Elevance had submitted diagnosis data corrections on encrypted USB flash drives, from November 2018 through October 2025, rather than through the required electronic systems, for dates of service running from 2015 through 2023. Submitting corrections outside the required channels makes it difficult for auditors to verify the data or recover overpayments.

The sequence after the notice matters as much as the notice, and it is where most coverage stopped. In March, CMS granted Elevance’s request to move the sanction date from March 31 to May 30, and exempted employer group retiree plans and eleven named contracts. On May 29, 2026, CMS wrote that it would not impose intermediate sanctions at that time, after Elevance attested that it had completed its initial submissions through the Risk Adjustment Processing System, the Encounter Data Processing System, and the Risk Adjustment Overpayment Reporting module, and had wired the total overpayment based on all auditable estimates. CMS attached two further conditions: completion of Steps 3 and 4 of the corrective action plan by June 30 to avoid sanctions effective July 1, and completion of the remaining Step 2 tasks by July 31 to avoid sanctions effective August 1.

Elevance did not disclose the amount it wired. In April financial filings it sized the related liability at roughly $935 million, with a stated range running from about $350 million to $1.5 billion. Its chief financial officer characterized the matter as a broader policy and payments dispute about how retroactive corrections should be treated, rather than a data submission failure. As of this writing, CMS has published no further notice indicating whether sanctions were imposed after the June 30 or July 31 milestones, and no release of the February 27 notice. The matter should be treated as open.

So the sanctions were announced and, to date, never imposed. That correction does not weaken the point for hospitals. It sharpens it, because of the language CMS used. The February 27 notice states that Elevance’s conduct violated multiple statutory and regulatory requirements, including the obligation to report and return overpayments within 60 days of identification. That is the same 60-day rule discussed below, applied to an insurer at scale. Faced with it, Elevance wired the money rather than litigate whether it owed it.

The enforcement backdrop. In fiscal year 2025, the Department of Justice recovered more than $6.8 billion under the False Claims Act, the highest annual total in the statute’s history. More than $5.7 billion of that, roughly 84 cents of every dollar, came from healthcare matters. New qui tam filings reached 1,297, also a single-year record. The Department has publicly identified Medicare Advantage as a priority for aggressive enforcement, and the revived DOJ-HHS False Claims Act Working Group lists it first among its enforcement priorities.

Why Hospital Billing Departments Are at the Center of This

Here is what is easy to miss when these headlines are read as insurance-industry news: the medical records that insurers use to support their diagnosis submissions come from your hospital. Your physicians documented those encounters. Your coders assigned those codes. Your compliance team is responsible for the accuracy of that documentation.

When a Medicare Advantage plan runs a chart review program, it is reviewing records your organization produced. If an insurer submits or retains a diagnosis code that your records do not support, federal auditors will trace that code back to the source documentation. That puts your team in the audit chain.

The government’s audit program for Medicare Advantage, Risk Adjustment Data Validation (RADV), has expanded substantially. CMS is now on track to audit every Medicare Advantage contract annually, moving from roughly 60 plans per year to roughly 550, and it is working through a backlog going back to 2018. Payment Year 2020 audits began in February 2026, with new cycles launching roughly every three months.

In a RADV audit, every diagnosis code submitted for risk adjustment must be supported by a medical record showing that the condition was actively managed during that visit. Not mentioned in a patient history. Not carried forward from a prior year. Documented as a condition the physician monitored, evaluated, addressed, or treated during that specific encounter. Missing physician signatures, incomplete documentation of chronic conditions, and diagnoses listed in a history but not addressed at the visit are among the most common findings.

What Your Billing Team Needs to Do Now

Calibrate documentation standards to audit standards. Chronic conditions such as diabetes, heart failure, and COPD must be re-documented and shown as actively managed at each annual encounter rather than carried forward. If a condition is not addressed during a visit, it should not appear as an active diagnosis for that date of service. Billing and clinical documentation improvement staff need these rules as they apply to Medicare Advantage specifically, which is not the same as traditional Medicare.

Build a written protocol for insurer chart review requests. When a Medicare Advantage plan requests records for a chart review, log the following before anything leaves your organization:

• Scope. Which patients, which encounters, which providers.
• Payment years. Which risk-adjustment years the review covers.
• Stated purpose. What the plan says it is doing with the records, in writing.
• Internal flags. Whether compliance has open findings touching any record in the set.
• Custody. What was sent, when, to whom, and who authorized it.

Producing records for a chart review without first checking your own documentation findings against the request is an avoidable risk.

Correct unsupported codes you identify internally. Under the federal 60-day rule, any person who identifies a Medicare overpayment they have received has 60 days to report and return it or face potential False Claims Act exposure. For hospitals, that obligation runs directly to overpayments the hospital itself received under traditional Medicare or through direct billing.

For Medicare Advantage risk-adjustment overpayments, the 60-day repayment duty runs to the plan that received the payment from CMS, not to the hospital whose documentation supported the code. But if your internal review finds that documentation you submitted does not support a diagnosis code a plan later used to obtain payment, handle that finding with counsel. It can create downstream exposure through the plan’s own return obligation, through whistleblower risk from staff who observe the issue, and potentially through reverse-false-claims theories where the provider knew the code was unsupported. Elevance is the live illustration of what the front end of that obligation looks like in practice.

If your billing audits have surfaced documentation issues that were never corrected, that is the item to address first.

Treat whistleblower risk as an internal control problem. The False Claims Act allows private individuals to sue on the government’s behalf and collect a share of any recovery. In the Kaiser matter the relators were physicians; in the Aetna morbid-obesity matter, a risk-adjustment coding auditor. A billing department employee who observes unsupported diagnosis coding, or who raises a concern internally and is dismissed or retaliated against, has both the legal framework and the financial incentive to go to the Department of Justice instead. The recoveries in these cases were large enough that the incentive is not theoretical.

What Is Changing in the Rules

On April 6, 2026, CMS finalized the CY2027 Rate Announcement, adopting a policy it had proposed in January: diagnoses identified through chart reviews that are not linked to a clinical encounter will no longer count toward Medicare Advantage risk score calculations. Plans may still submit those diagnoses, but beginning in 2027 they will not generate payment, subject to a narrow exception for beneficiaries who switch from one Medicare Advantage organization to another. CMS put the Sources of Diagnoses impact at negative 1.53 percent, and estimated net savings of roughly $6.84 billion from the unlinked chart review and audio-only exclusions combined.

That is the piece of the announcement most relevant to the conduct in these cases. It is not the whole announcement, and hospital leadership should understand the rest of it.

The same Rate Announcement finalized an overall payment increase to Medicare Advantage plans of 2.48 percent, more than $13 billion, up sharply from the 0.09 percent and roughly $700 million CMS had proposed in January. Including expected risk score trend, the increase is about 4.98 percent, or roughly $26 billion. CMS also declined to finalize the updated 2027 risk adjustment model, citing the need to give plans more time to absorb the model phased in between 2024 and 2026. Independent analysts described the final announcement as a retreat from the January proposal, and one advocacy organization headlined it as CMS caving to the industry.

Both things are true at once, and the combination is what should shape your planning. CMS has tightened the rules on where a diagnosis may come from while simultaneously raising the rates. Plans lose a documentation shortcut and gain revenue. A plan that can no longer manufacture risk score from unlinked chart reviews has one remaining lever for maintaining its risk scores, which is the diagnosis data it collects from providers during real encounters. Expect the pressure on your documentation, and the volume of record requests, to increase rather than ease.

In Congress. The bipartisan No UPCODE Act (S. 1105), reintroduced in March 2025 after an essentially identical 2023 bill, would go further than the CMS rule by barring diagnoses sourced from chart reviews generally, both linked and unlinked, as well as from health risk assessments, and by requiring CMS to use two years of diagnostic data instead of one. A Congressional Budget Office budget options analysis estimated that addressing overcoding through the two-year lookback and the health risk assessment exclusion would save $124 billion over ten years. Other estimates of the bill’s total effect are considerably higher, ranging up to $200 billion to $270 billion. The bill has not advanced, and it drew opposition from within the majority and from the insurance industry when senators sought to attach it to reconciliation.

At CMS, the next rulemaking. On February 25, 2026, the administration announced a package of anti-fraud actions, and on February 27 CMS published a Request for Information previewing a proposed rule titled Comprehensive Regulations to Uncover Suspicious Healthcare, or CRUSH (CMS-6098-NC). The RFI expressly solicited input on preventing fraudulent billing in Medicare Advantage and on using artificial intelligence for Medicare Advantage coding oversight. Comments closed March 30, 2026, and a proposed rule is expected. CMS has described the shift as moving from pay-and-chase recovery to real-time detection, using predictive analytics on incoming claims data.

For hospitals, CRUSH is the item to watch next. The RADV expansion changes how you are audited after the fact. A real-time analytics regime changes which claims are flagged before payment, and providers whose data reveals unusual patterns will be reviewed whether or not anyone alleges fraud.

The Bottom Line for Hospital Leadership

The Aetna settlement is not the end of this enforcement wave. It is a marker in the middle of it. Every major Medicare Advantage insurer is under scrutiny, the audit infrastructure is funded and accelerating, and the False Claims Act gives both the government and private whistleblowers strong financial incentives to pursue what they find. The Department located the larger half of the Aetna case on its own, without a whistleblower, which tells you something about the analytic capability now pointed at this data.

Your hospital’s exposure comes from two directions: your own documentation practices, and your role as the record source for insurer chart reviews. Both require active management.

If your billing team has not run a documentation audit calibrated to Medicare Advantage risk adjustment standards, that is the first step. If your compliance program has no written protocol for responding to insurer chart review requests, it needs one. And if internal audits have surfaced unsupported codes that were never corrected, that is a legal question to take to counsel now rather than after a request arrives.

Sources and References

(Links verified as of August 18, 2026. Primary government sources are generally permanent; law firm and policy sources are subject to each organization’s web management. If a link is unavailable, search the source organization’s website using the title provided).

Primary Government Sources

1. DOJ Press Release, Aetna Settlement. U.S. Department of Justice, Office of Public Affairs, March 11, 2026. Source for all Aetna settlement figures, the government’s allegations, the payment year breakdown, and the relator award. https://www.justice.gov/opa/pr/aetna-agrees-pay-1177-million-resolve-false-claims-act-allegations
2. DOJ Press Release, Kaiser Permanente Settlement. U.S. Department of Justice, Office of Public Affairs, January 14, 2026. Source for the $556 million settlement, the five settling entities including the three Permanente medical groups, the allegations regarding post-encounter chart additions, and the approximately $1 billion in payments at issue. https://www.justice.gov/opa/pr/kaiser-permanente-affiliates-pay-556m-resolve-false-claims-act-allegations
3. CMS Notice of Imposition of Intermediate Sanctions, Elevance Health. Centers for Medicare & Medicaid Services, February 27, 2026. Ten-page notice documenting the contracts covered, the dates of service at issue, and the USB flash drive submission method. https://www.cms.gov/files/document/elevancehealthsanction02272026.pdf
4. CMS letter to Elevance Health, “Corrective Action Progress, Step 2,” May 29, 2026. CMS notice that it will not impose intermediate sanctions at this time following Elevance’s attestation that it completed submissions through RAPS, EDPS, and the RAOR module and wired the total overpayment. Also the source for the June 30 and July 31 corrective action deadlines. https://www.cms.gov/files/document/elevancesanctioncap05292026.pdf
5. CY2027 Medicare Advantage and Part D Rate Announcement. Centers for Medicare & Medicaid Services, April 6, 2026. Primary source for the unlinked chart review exclusion, the switcher exception, the negative 1.53 percent Sources of Diagnoses impact, the 2.48 percent overall increase, and the decision not to finalize the updated risk adjustment model. https://www.cms.gov/files/document/2027-announcement.pdf and fact sheet at https://www.cms.gov/newsroom/fact-sheets/2027-medicare-advantage-part-d-rate-announcement
6. DOJ False Claims Act Statistics, FY2025. U.S. Department of Justice, January 2026. Source for the $6.8 billion recovery total, the healthcare share, and the 1,297 new qui tam matters. https://www.justice.gov/d9/2026-01/fy2025_false-claims-act-statistics.pdf
7. CMS Request for Information, Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH). Federal Register, February 27, 2026, CMS-6098-NC, RIN 0938-AV97. Comments closed March 30, 2026. Source for the scope of the contemplated rulemaking, including Medicare Advantage billing and AI-assisted coding oversight. https://www.federalregister.gov/documents/2026/02/27/2026-03968/request-for-information-rfi-related-to-comprehensive-regulations-to-uncover-suspicious-healthcare
8. HHS-OIG Work Plan, Medicare Advantage Risk Adjustment Audits. HHS Office of Inspector General, ongoing series. Documents active RADV audit projects, completed audits, and audit scope. https://oig.hhs.gov/reports/work-plan/browse-work-plan-projects/w-00-24-35079/
9. No UPCODE Act, S. 1105, 119th Congress. Introduced March 25, 2025. Bill text and status. https://www.congress.gov/bill/119th-congress/senate-bill/1105 Sponsor summary and the CBO budget options figure: https://www.cassidy.senate.gov/newsroom/press-releases/cassidy-merkley-introduce-bill-to-stop-overpayments-in-the-medicare-advantage-program/

Law Firm Analysis

1. Arnold & Porter, Aetna Settles; Government Intensifies MA Scrutiny. Arnold & Porter Kaye Scholer LLP, FCA Qui Notes Blog, March 2026. Source for the observation that the $106.2 million settlement did not arise from a qui tam action. https://www.arnoldporter.com/en/perspectives/blogs/fca-qui-notes/posts/2026/03/aetna-pays-settlements-government-intensifies-ma-scrutiny
2. DLA Piper, False Claims Act Year in Review: 2025 Trends. DLA Piper LLP, February 2026. Covers the DOJ-HHS FCA Working Group relaunch and its enforcement priorities, with Medicare Advantage listed first. https://www.dlapiper.com/en-us/insights/publications/2026/02/false-claims-act-year-in-review-2025
3. Foley Hoag, FCA Trends and Expectations for 2026. Foley Hoag LLP, March 4, 2026. Covers the CRUSH announcement and the 2026 enforcement trajectory. https://foleyhoag.com/news-and-insights/blogs/white-collar-law-and-investigations/2026/march/false-claims-act-trends-and-expectations-for-2026/

Policy and Research Sources

1. Georgetown University CHIR, CMS Takes Aim at Upcoding: Ending Unlinked Chart Reviews in Medicare Advantage. Medicare Policy Initiative, February 4, 2026. Plain-language analysis of the January 2026 proposal, with the MedPAC $76 billion figure and No UPCODE Act background. Note that its payment-reduction estimate describes the proposed rule; figures in this post are stated against the April 6 final. https://medicare.chir.georgetown.edu/cms-takes-aim-at-upcoding-ending-unlinked-chart-reviews-in-medicare-advantage/
2. KFF, Medicare Advantage Insurers Will See Higher Payments as CMS Backs Off a Key Payment Update. KFF Quick Insights, April 8, 2026. Independent analysis of the CY2027 final Rate Announcement, including the roughly $26 billion increase, the delayed risk model update, and the MedPAC estimate that Medicare Advantage payments run 14 percent, or $76 billion, above comparable traditional Medicare spending. https://www.kff.org/quick-insights/medicare-advantage-insurers-will-see-higher-payments-as-cms-backs-off-a-key-payment-update/
3. MedPAC, March 2026 Report to Congress, Chapter 12. Source for the $76 billion / 14 percent estimate of Medicare Advantage payments relative to traditional Medicare. https://www.medpac.gov/wp-content/uploads/2026/03/Mar26_Ch12_MedPAC_Report_To_Congress_SEC.pdf
4. Committee for a Responsible Federal Budget, New Data Suggests MA Overpayments of $1.3 Trillion Over the Next Decade. CRFB, March 5, 2026. Current ten-year overpayment projection, superseding CRFB’s earlier $1.2 trillion estimate. https://www.crfb.org/blogs/new-data-suggests-ma-overpayments-13-trillion-over-next-decade
5. Committee for a Responsible Federal Budget, CMS Takes Important Steps to Recover Overpayments from Medicare Advantage. CRFB, June 5, 2025. Source for the RADV backlog dating to 2018 and the expansion from approximately 60 to approximately 550 plans audited per year. https://www.crfb.org/blogs/cms-takes-important-steps-recover-overpayments-medicare-advantage

This article is provided for general informational purposes and does not constitute legal advice. Enforcement priorities, payment rules, and agency guidance change, and application depends on specific facts and jurisdiction.