HealthSouth Says It Is Target of SEC Probe

HEALTH CARE

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HealthSouth Corp., facing criticism for cutting earnings forecasts and shareholder accusations of insider trading by its top executive, said it is being investigated by the Securities and Exchange Commission.

The news sent HealthSouth’s stock down $1.11, or 27%, to $3.05 on the NYSE. The stock has lost more than $3 billion, or 70%, of its market value since Aug. 27, when HealthSouth said changes in Medicare reimbursement would cut its earnings by $175 million annually. The company also withdrew its earnings forecast for the year and said it would not provide 2003 guidance until December.

Public and investor scrutiny has focused on Chairman Richard Scrushy and his stock sales. Scrushy was reported to have sold more than 2.5 million shares back to the company in July, about a month before HealthSouth issued its earnings warning. He also sold nearly 5.3 million shares in May. Scrushy said he had no knowledge of the Medicare changes before he sold the stock.