The Department of Justice (“DOJ”) announced last Friday that after a nine-week trial, a federal jury sitting in Gulfport, Mississippi found several individual and corporate defendants guilty of submitting false claims to Medicare totaling $10.85 million.  The DOJ described the case as “one of the most egregious cases of Medicare fraud” it has litigated in Mississippi.  The case centered on millions in fraudulent Medicare reimbursement for the compensation for individuals who purportedly ran a small critical access hospital in rural Mississippi, when in fact, those individuals did little to no work for the hospital.

The fraud was brought to DOJ’s attention by whistleblower James Aldridge through the qui tam provisions of the False Claims Act (“FCA”), a federal statute aimed at recovering all fraudulently paid out federal taxpayer dollars.  Under these qui tam provisions, private citizens can file lawsuits on behalf of the Government when they are aware of fraudulent claims for payment submitted to the Government.

A whistleblower who files a successful qui tam FCA case is entitled to an award between 15-30% of the total amount ultimately collected by the Government. The total amount to be awarded to Mr. Aldridge in this case for his brave and committed effort to hold the fraudsters responsible is not yet known.  Before the court can calculate the final amount of the whistleblower award, it needs to treble the $10.58 million in damages and determine any other FCA civil penalties.

The jury found three individuals, Ted Cain, Julie Cain, and Tommy Kuluz, submitted fraudulent Medicare claims through two corporate entities they owned, operated, and controlled, Stone County Hospital and Corporate Management, Inc.  Stone County Hospital, a 25-bed hospital in Wiggins, was considered a “critical access hospital” which provides healthcare services to rural, underserved areas of the country and for which Medicare has special reimbursement principles for executive compensation.

In this case, the jury found that the defendants improperly billed Medicare for Ted Cain’s multi-million dollar annual salary from 2004-2015.  In total, Medicare reimbursed over $11 million in compensation for Mr. Cain’s work at Stone County Hospital, when in fact, defendants presented no evidence at trial that Mr. Cain performed any reimbursable work for Stone County Hospital.  Additionally, Mr. Cain’s wife, Julie Cain, who was nominally named the Administrator of Stone County Hospital and later was a paid as a consultant through Corporate Management, Inc., was also found to have fraudulently received nearly $1 million in Medicare reimbursement.

The jury concluded that she rarely actually worked at Stone County Hospital, and other individuals were in charge of its operation.  Importantly, the total amount these individuals and corporations will ultimately owe the Government will grow as the FCA requires that all damages are trebled and that defendants pay civil penalties between $5,500 to $11,000 for each false claim they submitted to the Government.  The court will handle these calculations based upon the jury’s finding of $10.58 million in damages to the Government.  Once this total number is determined, the whistleblower James Aldridge, who initially filed the qui tam lawsuit, will be eligible to receive his share.

Federal healthcare fraud is a pervasive threat to taxpayer-funded programs such as Medicare, Medicaid, and TRICARE.  Such fraud makes up the vast majority of recoveries under the FCA.  It is important for all who are aware of such fraud to know the proper procedures for alerting the Government.  It is also imperative that such individuals do what they can to hold those committing such frauds responsible through effective legal tools like the FCA.