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Stone County Hospital, management face fraud lawsuit

Stone County Enterprise of Wiggins, Mississippi

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STONE COUNTY — A lawsuit filed Friday by the U.S. Attorney's Office claims Stone County Hospital, its Chief Executive Officer Ted Cain and his wife, Julie Cain and its management company defrauded Medicare of millions of dollars over the past several years.

Originally filed in 2007 and under seal, the suit was brought by former Chief Operating Officer James Aldridge as a whistleblower complaint.

Once an investigation was complete, the U.S. Attorney's office brought its own suit in United States District Court.

The lawsuit, which is being heard in U.S. District Court in Jackson, will be overseen by Judge Henry T. Wingate.

It is alleged that the Cains, listed as residents of Ocean Springs, supported an extravagant lifestyle, including millions of dollars in salary and luxury cars, by taking advantage of Medicare as it applies to rural hospitals.

The lawsuit claims the Cains, "contributed little of value to this endeavor and nothing to justify their exorbitant salaries."

It also claims fraudulent reimbursements by Medicare had little or nothing to do with hospital operations or Medicare beneficiaries.

"The Medicare reimbursement rules for critical access hospitals are intended to ensure that Medicare beneficiaries living in rural areas receive access to the health care services they need," said Principal Deputy Assistant Attorney General Benjamin C. Mizer in a news release. "We will aggressively pursue providers who try to take advantage of these rules to line their own pockets."

The lawsuit claims Ted Cain received $21.4 million from the management company over a nine-year period and $10.4 million of that was reimbursed by Medicare.

It claims Ted Cain spent most of that time operating his cattle business.

It also alleges Julie Cain was compensated $2.5 million over a 10-year period with nearly $1.7 million of that paid by Medicare.

"Notwithstanding this exorbitant compensation," the lawsuit said, "... Julie Cain did not function as an administrator at, or provide valuable management services to, the hospital."

Medicare also paid $47,635 in expenses on two luxury vehicles. The lawsuit claimed those expenses were not allowable.

Cain has also owned and/or controlled Stone County Nursing and Rehabilitation Center, Stone County Rural Health Clinic, Quest Medical Inc., Quest Pharmacy Inc., Quest Rehab Inc. and Woodland Village Nursing Center.

All of those entities paid fees to Corporate Management, Inc. of Gulfport, the company purportedly running the far-flung medical empire of Ted Cain.

"This fraud was so pervasive that it infected every cost report and statement that defendants presented to Medicare from 2002 through present," the government claimed.

The lawsuit seeks to recoup all money fraudulently obtained by the defendants and is legally allowed to claim three times that amount as a punitive measure.

The lawsuit says staff members ran the hospital, and the management company also was paid millions for its services, which included submitting the Medicare reports.

Medicare reimbursements rose with expenses, including patient bed rates that in 2005 were $1,200 a day, compared with an industry average of $350 to $450 a day.

"In a state like ours where nearly a third of the hospitals are critical access hospitals, many of our citizens depend on this very important system, and we will protect it by ferreting out fraud where it exists," said Gregory K. Davis, U.S. attorney for Mississippi's Southern District.

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Original Publication Date: September 23, 2015

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