The U.S. Attorney’s office has joined a whistleblower lawsuit against Stone County Hospital in Mississippi, alleging that the hospital owners falsely submitted claims to Medicare.

The whistleblower lawsuit names owners Ted and Julie Cain and the management company they own that also runs the hospital, Corporate Management Inc., as defendants.

Stone County Hospital is considered a critical access hospital, which is certified differently under Medicare than an acute care hospital. Certain requirements for patient stay and capacity must be met, and the hospital must service a rural area where there is at least a 35 mile drive distance to the next nearest hospital.

Critical access hospitals receive more reimbursement from Medicare (101 percent of allowable costs) instead of the customary fixed reimbursement rates.

The original lawsuit was filed as a qui tam lawsuit under seal back in 2007 by the hospital’s former COO, James Aldridge. The lawsuit was recently unsealed and the federal government has now joined the case.

What is a Whistleblower Lawsuit?

A whistleblower, or qui tam, lawsuit is filed by an individual who has witnessed fraud against the government. After filing of a qui tam lawsuit, the government has 60 days to decide if they will join. When the federal government joins the lawsuit, typically there are better outcomes for plaintiffs. If the government decides not to join, plaintiffs can still pursue legal action on their own.

Under the False Claims Act, whistleblowers have protection against being fired, harassed or demoted because of the filing of the lawsuit.

Medicare Fraud Allegations

Aldridge alleged that he rarely saw the owners performing any management duties, despite the claim that Ted Cain spent over 65 hours a week working on health care duties from 2004 to 2009. The suit claims that the management company paid Ted $21.3 million from 2004-2013, with $10.4 million in Medicare reimbursement and Julie was paid $2.3 million with Medicare reimbursing $1.7 million.

The Cains were allegedly inflating the costs to charge patients $1200 a day for their hospital stay when other hospitals in the area ranged from $350 to $450 a day.

Cain also has owned several other facilities, including Stone County Nursing and Rehabilitation Center, Woodland Village Nursing Center, Stone County Rural Health Clinic, Quest Medical Inc., Quest Pharmacy Inc. and Quest Rehab Inc. All the facilities paid fees to the management company Cain owns.

The Medicare billing fraud lawsuit also claimed that Cain received $47,635 from Medicare from 2002 to 2009 to cover the costs of two automobiles which turned out to be his personal BMW vehicles.

Former Mississippi Governor Ronnie Musgrove is one of the lawyers currently defending the Cains. He has stated that the couple’s expertise in running hospitals, nursing homes and other care facilities has led to an improvement in care at a lower cost to taxpayers.

Cain was a financial supporter of Musgrove’s campaigns and donated tens of thousands of dollars. Cain also served on the state Board of Health. During legislative hearings, Cain was accused of bragging about buying his seat, which he denied. Cain no longer had a seat when lawmakers reconstituted the board.