In the wake of its recent Medicare billing problems, reduced operating earnings projections and dozens of shareholder lawsuits contending investors were defrauded by executives who made misleading statements, HealthSouth today disclosed the company is being investigated by the Securities and Exchange Commission.
Company founder and Chairman Richard Scrushy said HealthSouth voluntarily contacted the SEC this week and offered to provide the commission with "any information" that might aid the SEC in evaluating recent events.
"We did this on our own in advance of any contact from the SEC," Scrushy said in a morning conference call scheduled to quell investors' fears. "We have since received a notice from the SEC and are cooperating." He later added: "The company is in solid financial health and we continue to lead the industry."
When reached, SEC officials would not comment on the investigation.
Scrushy also announced the company has appointed an independent member to its board of directors. And in light of recent pending litigation -- including at least one stockholder derivative lawsuit -- the board has appointed a special litigation committee to review shareholders' claims. In addition the company has hired the law firm of Fulbright & Jaworski as special counsel to conduct "a review of issues related to the litigation and other matters." Findings of the review will be presented to the board and shared with regulatory authorities, HealthSouth said.
Dozens of shareholder lawsuits have been filed in the past week alleging HealthSouth executives made misleading statements and issued misleading news releases and SEC filings that defrauded investors between Jan. 14 -- when the company confirmed its earnings estimates for 2002-and Aug. 27.
"These suits are without merit," Scrushy told investors on the call this morning.
On Aug. 27, HealthSouth stunned its investor community by announcing it would take a $175 million hit on operating earnings in 2003 because of a change in Medicare reimbursement policy for outpatient therapy services. In an interview with Modern Healthcare last week, his first extensive interview since the Aug. 27 announcement, Scrushy said he still could not calculate the long-term financial effect of the new billing rule.
He told investors this morning the company intends to "minimize the impact of this rule change and work with the system that's been handed to us now to continue to do a very fine of job taking care of our patients."