😷New Chapter 11 Bankruptcy Filing - The Villages Health System, LLC😷
Operator of ten primary and specialty care centers files to pursue sale.
On July 3, 2025, Florida-based The Villages Health System, LLC (“TVH”) filed a chapter 11 bankruptcy case in the Middle District of Florida (Judge Vaughan). TVH is “… a premier health care provider in North Central Florida that operates primary and specialty care centers … in the fields of cardiology, neurology, rheumatology, podiatry, urology, gynecology, pain intervention and management, and behavioral and mental health.” To put a number on it, it’s ten care centers.
TVH has been working a good while to find a buyer, employing Evercore Group, LLC ($EVR) back in September ‘22, although CRO and first day declarant Neil Luria, of GBH SOLIC Holdco, LLC (“SOLIC”), never bothered to tell us what was driving that. (PETITION NOTE: keep reading because, lol, we could guess). In any event, for the first year, TVH and EVR focused on “… evaluating ad hoc in-bound interest from a select group of counterparties with either affiliations with TVH and its owners, or managed care health plans that were present within the TVH network.”
But apparently that yielded bupkis because in September ‘23, EVR started soliciting interest from strategics. Seven months later, in April ‘24, Humana, Inc. ($HUM)-affiliate CenterWell Senior Primary Care (Vitality), Inc. (“Centerwell”) put its John Hancock on a term sheet, which contemplated an out-of-court equity purchase and going through all the third-party rigamarole that entails.
Alas, “… coding issues …” surfaced. To make a long story short, TVH’s care centers are located smack dab in the eponymous The Villages, Florida, a monster 80k-populated, age-restricted (read: full of geezers) community. Because of that last adjective, basically every resident is a Medicare patient, and TVH receives monthly payments per member for each Medicare Advantage (“MA”) plan beneficiary it treats. How much? It depends. The Centers for Medicare and Medicaid Services (“CMS”) pays out to MA plans based on a risk adjustment model that combines clinical risk factors with so-called hierarchical condition categories (“HCCs”) to output a score meant to reflect a patient’s relative level of illness. The higher the score, the more complex the patient and the higher the payment. The perverse incentive is painstakingly obvious (🤑🤑🤑). We’ll let Mr. Luria step in here:
“In approximately August 2024, TVH became aware of a potential issue with respect to its HCC guidance. At that time, TVH learned that it may have submitted HCC diagnosis codes that were not clinically supported or otherwise did not meet Medicare coding and payment guidance.”
“Potential.” “May have.” We salute the caginess, Neil. Anyway, TVH conducted an investigation with the help of Foley & Lardner LLP, Goodwin Procter LLP, and FTI Consulting Inc. ($FCN)(“FTI”), which unveiled “… codes TVH submitted that did not appear to be supported by a sufficiently documented clinical basis.” Because three profs weren’t enough, TVH also onboarded Alvarez and Marsal (“A&M”) “… to advise on its compliance functions” and “recently” poached A&M’s Christina Steiner to serve as chief compliance officer, demoting the prior CCO in the process.*
In December ‘24, TVH voluntarily came clean with the Office of Inspector General (“OIG”) for the Department of Health & Human Services and, since late January ‘25, has been in communications with OIG and the Department of Justice (the “DOJ”) regarding the fraud issues. In April ‘25, TVH provided FTI’s preliminary analysis to OIG and DOJ, which indicated “potential” coding-driven overpayments from ‘20 to ‘24 totaling at least THREE HUNDRED AND FIFTY MILLION DOLLARS.
Here’s a live shot of CEO Bob Trinh:
And let’s roll the tape on CenterWell’s equity deal.
Like, no sh*t. Someone better be wearing an orange jumpsuit before this is all over. In fairness to CenterWell, though, it didn’t peace out, choosing instead to rework the docs into a stalking horse asset purchase agreement (“APA”),** which contemplates a 🥜-by-comparison headline $50mm purchase price and the following postpetition timeline:
To get to the sale, TVH got a $39mm DIP loan from its totes-not-sus affiliate PMA Lender, LLC (“PMA”), composed of $24mm in new money ($5mm interim) and a final order roll-up of $15mm that PMA lent back in April ‘25 to fund budget shortfalls and other opex, which is TVH’s only funded debt.*** The DIP carries interest on the new money only at a flat 12% and, aside from payment of lender professionals, doesn’t have any fees. It has a few sale milestones of its own too …
… which, you know, ain’t really pressing. Kinda makes sense: the bankruptcy clearly has bigger issues.
The court held a 1.75-hour first-day hearing on July 9, 2025, at which all requested relief was granted. But during the hearing, Sullivan & Cromwell LLP’s Andy Dietderich got up on behalf of UnitedHealthcare Insurance Company of America (“UHICA”), the largest Medicare Advantage payer in TVH’s system, to preview an upcoming issue. Recall that $350mm. CMS wants it back, and UHICA faces contingent exposure since the CareWell sale falls a few bucks short. $300mm, give or take. Given that, UHICA ain’t at all chill with PMA being the bankruptcy’s long-term DIP lender. DIPs confer too much debtor control to lenders and for UHICA to avoid getting stuck with a huge slice of the tab, TVH is going to have to get litigious with its affiliates. But because the DIP’s economics are well below market and there ain’t no fees, Mr. Dietderich, echoed by the US trustee, saved the battle for another day.
Judge Vaughan scheduled the second-day hearing for July 23, 2025 at 10am ET, where she’ll consider all first-day relief other than the DIP on a final basis and TVH’s proposed bidding procedures. Due to its non-pressing milestones and Mr. Dietderich’s spiel ☝️ there, the DIP will simmer until August 11, 2025 at 2pm ET. Plenty of time to stock up on 🍿.
TVH is represented by Baker & Hostetler LLP (Elizabeth Green, Jimmy Parrish, Andrew Layden, Elyssa Kates, Michael Delaney, Scott Prince, Ben Taylor) as legal counsel, SOLIC (Neil Luria) as financial advisor and CRO, and EVR (Neal Patel) as investment banker. Anna Phillips is TVH’s independent director. CenterWell is represented by Latham & Watkins LLP (Caroline Reckler, Andrew Sorkin, Brian Mangino, Amber Banks) and Venable LLP (Paul Battista, Eric Jacobs) as legal counsel. PMA is represented by Frye, O’Neill & Mullis, P.A. (Lara Roeske Fernandez, Rhys Leonard) as legal counsel. UHICA is represented by Sullivan & Cromwell LLP (Andy Dietderich) as legal counsel.
*We haven’t a clue what happened to these profs. Perhaps the mandates simply ended, but regardless, they ain’t around for the BK. None appear in TVH’s top 20 either.
**If approved as stalking horse and an alternative transaction closes, CenterWill will receive a $1.5mm break-up fee and an up-to $1.5mm expense reimbursement.
***TVH also owes (i) ~$200k spread across ~100 vendors and (ii) an aggregate ~$15-22.5k to 200-300 patients on account of uncashed checks, but they may as well write off the debt now.
Company Professionals:
Legal: Baker & Hostetler LLP (Elizabeth Green, Jimmy Parrish, Andrew Layden, Elyssa Kates, Michael Delaney, Scott Prince, Ben Taylor)
Financial Advisor: GBH SOLIC Holdco, LLC (Neil Luria)
Investment Banker: Evercore Group, LLC (Neal Patel)
Independent Director: Anna Phillips
Claims Agent: Stretto (Click here for free docket access)
Other Parties in Interest:
Stalking Horse Purchaser: CenterWell Senior Primary Care (Vitality), Inc.
Legal: Latham & Watkins LLP (Caroline Reckler, Andrew Sorkin, Brian Mangino, Amber Banks) and Venable LLP (Paul Battista, Eric Jacobs)
Debtor Affiliate and Prepetition and DIP Lender: PMA Lender, LLC
Legal: Frye, O’Neill & Mullis, P.A. (Lara Roeske Fernandez, Rhys Leonard)
Medicare Advantage Counterparty: UnitedHealthcare Insurance Company of America
Legal: Sullivan & Cromwell LLP (Andy Dietderich)