Hospital owner cheated Medicare out of $10.8 million, federal jury says

Posted at 9:26 AM, Mar 14, 2020
and last updated 2020-03-14 09:26:50-04

GULFPORT, Miss. -- A Mississippi hospital owner cheated Medicare out of $10.8 million, and his wife and the former chief financial officer of another company are liable for slightly less, a federal jury hearing a whistleblower lawsuit has found.

Jurors returned their verdicts Thursday evening against Ted and Julie Cain, Tommy Kuluz, Stone County Hospital and Corporate Management Inc., for which Kuluz worked, the Sun Herald of Biloxi reported.

The verdicts are not the end of the eight-week trial. Judge Henry Wingate will hear arguments March 26 in Gulfport about whether to triple the damages under the federal whistleblower law.

James Aldridge filed the suit under seal 13 years ago, after about two months as the hospital's chief operating officer. After a federal investigation that took more than eight years, federal prosecutors tried the case.

The only defendant cleared by the nine-person jury was Starann Lamier, former chief operating officer at Corporate Management. She had signed one of 12 Medicare cost reports submitted to reimburse the Cains' hospital pay from 2004 through 2015 but testified that she did so because it was late and nobody else was available. Kuluz completed the other 11 reports.

The hospital, like Ted Cain, is liable for $10.8 million; Julie Cain and the hospital for $10.4 million, and Kuluz and Corporate Management for $9.9 million, jurors found.

Criminal charges were not involved; the trial was aimed at recovering Medicare’s money, plus damages and fines.

During the trial, Ted Cain testified that he earned a salary which climbed to more than $1,000 an hour at one point. He said he has invested more than $30 million in the rural hospital, almost half in loan guarantees and the rest from his pocket.

He received a total of $15.2 million as CEO of the 25-bed rural hospital, charging his management fee through CMI. Julie Cain was paid a total of $2.3 million as hospital administrator. Testimony indicated that she was often away from the hospital, and Ted Cain could produce little documentation of his work. The defendants will appeal, said Cain's lead attorney, former Gov. Ronnie Musgrove.

“Despite the outcome, Ted and Julie are still proud of the investment they made into bringing quality healthcare to Stone County and Ted’s home town of Wiggins. They would do it again, and they are proud of what they accomplished for the community,” he wrote in a statement emailed to the Sun Herald.

Musgrove described Aldridge as a disgruntled former employee.

Aldridge's attorney, John Hawkins of Jackson, said the Cains and Kuluz “were fleecing the system. This shows us the power of the jury system. They spoke today on behalf of the community.”

He said Aldridge should get 15% to 25% of the damages under the whistleblower law.

The hospital had closed three times before Cain bought it in 2001. Gulfport Memorial Hospital is running it under a lease with a Cain company which owns the land; the government is seeing to garnish those payments to cover part of the damages.