Businessman Seth Gillman was sentenced Tuesday to 6 1/2 years in federal prison for masterminding a $20 million hospice care fraud scheme that exploited some of Illinois’ most vulnerable residents.
"I am ashamed of what I did and I am sorry for it and I have no excuse," Gillman told the court, his voice hoarse and cracking.
By paying kickbacks to nursing homes and giving bonuses to employees who took part in the fraud, Gillman built his Passages Hospice LLC into the largest such company in Illinois, serving terminally ill patients in 89 counties and billing Medicare more than $90 million from 2008-2012, government records show.
But Passages didn’t provide much care to many of those patients, and Medicare was "paying huge sums of money for basically nothing," prosecutors wrote in one court filing. Gillman pocketed millions annually and enjoyed a lavish lifestyle that included corporate airplanes, luxury sports cars and "ingesting cocaine on a daily basis," as Gillman’s lawyers put it in one federal court pleading.
"I betrayed the trust of Medicare and I besmirched the integrity of hospice altogether," Gillman told U.S. District Judge Thomas Durkin. "I was stupid and I was wrong."
Noting Gillman’s privileged background — he was licensed as both an attorney and nursing home administrator — Durkin said: "There’s nothing that drove this other than greed."
Under Medicaid rules, hospice care is typically reserved for patients who are medically certified to have less than six months to live. But Passages colluded with nursing homes to designate their patients as close to death — including many who were not that sick and had years to live.
This higher level care, known as "general inpatient" services, or GIP, would boost Passages’ Medicare reimbursement from an average of about $150 per day to well over $600 for each patient.
Gillman then paid himself a $75-per-day "bonus" for each patient elevated to GIP — he took $1.2 million in bonuses in 2009 and 2010 alone, court records show, in addition to his $320,000 annual salary. And he passed out smaller bonuses to other key hospice managers who assisted in the scheme.
"They would cut deals with nursing homes to give them a share of the GIP rate," paying the homes about $250 per day for every patient upgraded to GIP, Assistant U.S. Attorney Stephen Lee said in court.
Federal investigators named several of those nursing home chains in court documents, but none has been charged. Lee said Tuesday that Gillman waited until last year to begin cooperating with authorities who were trying to build additional cases. "This was far too late to be effective."
Starting in 2008, Gillman berated and fired nurses who challenged his fraud attempts, and several former employees filed whistleblower lawsuits. Federal agents finally raided Passages’ Lisle offices in 2012, and Gillman was indicted two years later. The hospice firm collapsed financially and ceased operations. Several key Passages employees have also been convicted in the case.
In addition to Passages, Gillman also ran his family’s nursing home company, Asta Healthcare. The Tribune’s 2009 "Compromised Care" investigation found that Asta consistently failed to notify state officials that they were housing sex offenders who molested elderly and disabled patients.
In the wake of the Passages prosecution, Gillman gave up his stake in Asta as well, records show.
In court Tuesday, Lee recommended a 10-year sentence. Gillman’s attorney, Edward Genson, asked for three years in prison, asserting that Passages actually did provide extra assistance to hundreds of patients. He said Gillman got into the hospice business because he is religiously devout, altruistic and caring, but he "went out of control. … He was drinking. He was involved in drugs."
Previously, Gillman pleaded guilty to one count of felony health care fraud. Gillman on Tuesday also agreed to an $18 million civil judgment to be paid to the federal government, as well as to paying $9 million in restitution to Medicare.
Durkin, however, noted that authorities have little chance of collecting that money because Gillman says he is broke. "In my mind it’s fool’s gold," Durkin said.
Taxpayers weren’t the only victims of Gillman’s fraud scheme. In some cases, the families of former patients told the Tribune that Passages employees misled them into believing that their loved ones had serious or terminal illnesses — when they didn’t.
"They lied to me about everything. I could never comprehend anyone being that cruel," said Cynthia Chadwick, 65, of Watseka, Ill., who was told by Passages in 2012 that her younger sister needed hospice care because she had terminal cancer and would die in six to eight weeks.
"She never had cancer. Never ever," Chadwick told the Tribune. "It really indicated to me how low down they were, using a deaf and blind person. That’s despicable."
In addition, Passages employees told the Tribune they were not paid for their final months’ work.
"He owed a lot of people a lot of money," said Sonya Anderson, an assistant director of nursing at Passages. "Elderly people, people that are dying — and you take advantage of them? That’s low."
Another former Passages employee, clinical director and nurse Karen Wilson, said outside of the courtroom Tuesday that she was glad to see Gillman sentenced to prison, but added: "I think he deserved more."
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