Beverly Says It Is Subject of Federal Probe

Beverly Enterprises Inc., the nation’s largest nursing home operator, said it is the subject of a federal probe into whether it improperly billed Medicare. The announcement sent its shares down $5.19 to close at $9.44, after earlier hitting a 52-week low of $8.44, on the NYSE. The company said the Justice Department and the office of the inspector general of the Health and Human Services Department are conducting the investigation. Beverly said it received subpoenas for information as did its auditor, Ernst & Young. Beverly said the investigation concerns some nursing labor costs allocated to Medicare from 1990 to 1997. The Fort Smith, Ark.-based company also reported nearly flat earnings of $21.5 million, or 20 cents a diluted share, for the second quarter, a penny higher than forecasts, as costs and expenses fell. Revenue fell 13% to $717.6 million.