HealthSouth pays settles U.S. probe

By Robert Schroeder

December 30, 2004

WASHINGTON (CBS.MW) -- Rehabilitation hospital operator HealthSouth will pay $325 million to settle charges that it improperly billed the government's Medicare system. The company (HLSH: news, chart, profile) will pay the federal government an initial sum of $75 million, according to a HealthSouth statement. The balance will be paid quarterly over three years. HealthSouth Chief Executive Jay Grinney said the settlement should not interfere with corporate operations. "I believe we will be able to make these payments without compromising the resources necessary to manage our facilities in a quality manner," he added. The settlement resolves a Justice Department suit against HealthSouth brought in 2002 about the company's outpatient physical-therapy billing practices. It also closes an investigation begun in April 2003 about prior Medicare cost reporting practices. The Securities and Exchange Commission alleged in March 2003 that HealthSouth falsified financial reports to meet estimates and pump up the stock's value. A trial for former Chief Executive Richard Scrushy is scheduled to begin next week. Shares of Birmingham, Ala.-based HealthSouth closed down 12 cents at $6.30 on Thursday.