Coast CEO Ted Cain takes stand as witness in $13 million Medicare fraud case
U.S. attorneys subpoenaed South Mississippi businessman Ted Cain as an adverse witness Friday in federal court as they try to prove he and three cohorts defrauded Medicare of more than $13 million through Stone County Hospital.
Cain received most of the money as CEO of a company that he owns, Corporate Management Inc. in Gulfport. CMI oversaw management at the 25-bed rural hospital, which Cain also owned. From 2004-2013, he drew $15.2 million in pay from the hospital. Medicare reimbursed $10.4 million of the total.
Cain’s attorneys have not disputed the figures. Instead, they argue he worked hard for the hospital and reported the income to a Medicare contractor that allowed the payments.
In daylong cross-examination Friday, U.S. attorney Tom Morris of the Justice Department in Washington set out to prove Cain’s defense was bogus. Cain grew testy at times. He accused Morris of trying to deceive the jury and said the attorney was interrupting as Cain tried to expand on his answers.
Cain in some years claimed that he worked for the hospital about 40 hours a week, yet he admitted:
▪ He was able to produce no notes, reports, emails or phone records showing hospital work.
▪ He said that he and a CMI executive talked about and set Cain’s salary, but claimed he did not know how much he was paid, or even whether the amount was more than $100,000.
“It made no difference what I was being paid,” Cain said, “It only matters what they (the Medicare contractor) allow.”
▪ He said he went to the hospital three or four times a month for meetings, working mostly out of his office at CMI, but admitted that he did not meet “regularly” with a former Stone County Hospital CEO expected to testify for the government.
“Regular to me is daily or hourly,” Cain said. “That didn’t happen, but I had weekly meetings with him.”
Cain also admitted he never met or spoke with a primary consultant studying whether it was financially feasible to build a new hospital. The answer turned out to be no.
Morris suggested the hospital’s position would have been much better if corporate management fees — primarily Cain’s salary — had not driven up operating costs. Cain countered that Medicare reimbursements to the hospital climbed when management fees went up.
Morris then pointed out that the goal would seem to be charging more to Medicare. He said CMI management fees increased 140% in 2004-05, with the consultant’s report produced in 2006. Cain did not lower his salary as a result of the report, instead increasing it again.
Government records in the case show Cain earned a total of about $1 million in 2004, with more than $900,000 charged to the hospital.
In 2009, the year before Cain learned he was under investigation, his CMI compensation had climbed to $3.3 million, the records show. The hospital paid almost $2.8 million of the total, with Medicare reimbursing 62.6%. In some years, testimony showed, the Medicare reimbursement was 80 percent.
Cain’s testimony is expected to continue when court resumes Tuesday. U.S. District Judge Henry T. Wingate of Jackson is presiding over the jury trial.
This story was originally published January 17, 2020 at 6:16 PM.
