BY DANIEL GAITAN | daniel@lifemattersmedia.org

Four former high-level employees of shuttered Passages Hospice LLC entered a plea of not guilty to health fraud during an arraignment Monday in the U.S. District Court of the Northern District.

Seth Gillman, 45, a partial owner who founded the company in 2005, was first charged in January with health care fraud and conspiracy to defraud the government. According to prosecutors, Passages knowingly over-billed the government by millions of dollars on unnecessary hospice care for seniors.

In May, fraud charges were brought against Gwen Hilsabeck, who served as a co-administrator; Carmen Velez, who served as the director of clinical services and director of nurses for the Chicago region; and Angela Armenta, who served as director of certified nursing assistants for the Chicago region.

The defendants, each released on bond, appeared before U.S. Judge Thomas M. Durkin.

According to prosecutors, Gillman, Hilsabeck, Velez and Armenta participated in an elaborate scheme “to cause Passages Hospice LLC to submit false claims to Medicare and Medicaid for medically unnecessary hospice care, namely, hospice care for patients who were not terminally ill and hospice care that did not qualify for general inpatient care.”

Between August 2008 and January 2012, Medicare paid the for-profit hospice company more than $90 million for hospice services, including more than $20 million for general inpatient services. From 2006 to late 2011, Passages submitted claims for about 4,700 patients to Medicare and Medicaid.

Gillman, Hilsabeck, and Passages allegedly paid bonuses to nursing directors and certified nursing assistant directors employed at the company in order to increase the number of patients receiving general inpatient care. In 2012, Medicare’s daily reimbursement for general inpatient care was $671.84; the daily payment for routine care was much lower, $151.23.

One former employee told LMM she quit after realizing that something felt wrong.

“I left the company a few months before the indictment, after I couldn’t ignore my gut,” she said, asking not to be named as she continues to work in a similar industry. “I was in the dark about the fraud, but I knew deep down I couldn’t be a part of that company anymore. I was appalled to find out how many people were involved in the deceit. I was lucky enough to leave on my own for another job, but my coworkers and friends weren’t. They’re still fighting for pay, vacation time and 401K contributions owed to them.”

In February, Passages closed in light of the allegations against Gillman. The hospice operated in four states, yet the majority of services were provided to Illinois seniors. Earlier that month, employees told LMM that they vowed to continue operating for patients’ sake.

According to the FBI, federal agents have interviewed patients, family members and more than 30 former and current Passages employees. Several reported the allegedly fraudulent billing and marketing practices to Medicare and law enforcement.