HealthSouth Shares Plunge Nearly 44%

HealthSouth Corp. shares plunged Tuesday after the rehabilitation giant announced a major reorganization that includes spinning off its surgery centers into a new public company, warned of lower earnings and disclosed that founder Richard M. Scrushy is being replaced as its chief executive.

The move to separate the surgery centers from the company’s rehabilitation services operations was blamed on a reduction in Medicare reimbursements that prompted HealthSouth to lower its earnings estimates by $175 million.

The company said it no longer would issue earnings forecasts for the rest of this year and 2003 because of uncertainties caused by the Medicare changes.

Shares of HealthSouth plummeted $5.26, or 43.9%, to $6.71 on the New York Stock Exchange.

HealthSouth is the nation’s largest provider of outpatient surgery, diagnostic imaging and rehabilitation services with about 1,900 locations in all 50 states, Britain, Australia, Puerto Rico and Canada.

The company had revenue of about $4.3 billion last year.

Scrushy, who started the company as a rehabilitation provider 18 years ago, will be replaced as CEO by Bill Owens, president and chief operating officer.

But Scrushy will continue as chairman of HealthSouth and will be chairman of the new surgery center company, Surgical Care Affiliates, which will operate 209 outpatient surgery centers in 37 states.

The new surgical company should have annual revenue of about $1 billion, Scrushy said.

HealthSouth has hired UBS Warburg to help it evaluate other possible divestitures announced in the restructuring.

Owens was named chief financial officer in 2000, and he became president and chief operating officer a year ago.