HealthSouth to Settle Fraud Charges
HealthSouth Corp., the largest U.S. operator of rehabilitation hospitals, agreed to pay $325 million to settle charges that it overbilled the government’s Medicare program, the Justice Department said Thursday.
HealthSouth is seeking to recover from an alleged $2.7-billion accounting fraud in which 17 ex-officers have been indicted. Former Chief Executive Richard Scrushy faces trial next week on charges of directing the fraud.
The government had alleged that from 1996 to 2002, Birmingham, Ala.-based HealthSouth “systematically” submitted Medicare claims without proper plans for patient care from physicians. Investigators reviewed 5,000 Medicare claims at 60 outpatient facilities and cited problems at centers in California, Colorado, Arizona and Illinois.
“For a company in the rehab business, this is a big step toward recovery,” said Jacob Frenkel, a former federal prosecutor. “It may be a sign that DOJ is recognizing HealthSouth’s cooperation and steering away from criminal prosecution of the corporation.”
“The resolution of this matter is an important step toward moving forward and resolving the issues inherited by our new management team,” said Jay Grinney, HealthSouth’s CEO.
This month, Grinney said that settling the federal case would be a key step toward clearing the company’s name. Grinney, 53, is seeking to win back investor confidence in the operator of 1,380 rehabilitation centers and physical-therapy clinics.
HealthSouth shares slipped 12 cents to $6.30 in over-the-counter trading. Before Thursday, they gained 40% this year.
The $325-million HealthSouth settlement would be the seventh-largest over allegations of false claims with the U.S., said James Moorman, president of Taxpayers Against Fraud.
“It’s a lot of money because it’s a lot of fraud,” he said. “These companies have big plans to rip off Medicare on a grand scale.”
The Securities and Exchange Commission alleged in March 2003 that HealthSouth routinely faked financial reports under founder Scrushy. U.S. prosecutors said Scrushy inflated profit to meet analysts’ estimates and boost the stock’s value.
