Feds probe HealthSouth
The government has launched a securities investigation of HealthSouth Corp., Birmingham, Ala. The company acknowledged being hit with a subpoena by the U.S. attorney's office for the Northern District of Alabama for documents related to trading of company stock. HealthSouth said it had already provided many of the requested documents to the Securities and Exchange Commission, which began an investigation in September 2002 regarding the timing of stock trades by Chairman and CEO Richard Scrushy. Scrushy sold significant stock holdings a few months before the company disclosed that its earnings would be hurt. "As we have said before, we do not believe that HealthSouth or anyone associated with HealthSouth has done anything wrong," Scrushy said in a written statement. HealthSouth is among several public healthcare companies that have announced efforts to improve governance in the wake of scandal (See related story, p. 22).
Digital hospital prevails
HealthSouth announced a favorable ruling in a case challenging the construction of its "digital" hospital in Birmingham. HealthSouth said a Montgomery County, Ala., judge found that Tenet Healthcare Corp.'s Brookwood Health Services and Baptist Health System had waited too long to file suit to challenge a law that provided an expedited certificate-of-need review for the project, after HealthSouth had incurred substantial expense and begun development of the project site. The plaintiffs could not be reached for comment at deadline.
Bill to cap pain and suffering
Rep. James Greenwood (R-Pa.) reintroduced a bill that would cap pain-and-suffering damages in medical malpractice suits at $250,000 and punitive damages at $250,000 or twice the award for economic damages, whichever is greater (See related stories, pp. 12 and 26). Generally, the statute of limitations would be set at three years. The bill, supported by physician groups, failed to pass Congress last year. Meanwhile, New Jersey regulators ordered medical malpractice insurer Zurich American Insurance Co., New York, to roll back "excessive" premiums, which soared 108% in 2003, to no more than 30% above the previous base rate. In Tennessee, Paula Flowers, commissioner of the Tennessee Department of Commerce and Insurance, expressed doubt about the state's ability to financially rehabilitate two local medical malpractice insurers that it placed in receivership: Doctors' Insurance Reciprocal and the Reciprocal Alliance.
The Federal Trade Commission is conducting an antitrust investigation of the 2001 purchase of Magella Healthcare Corp., Dallas, by Pediatrix Medical Group, Fort Lauderdale, Fla. Pediatrix said the $190 million purchase gave it about 17% of the neonatology physician market. Pediatrix manages about 625 neonatal physicians nationwide. The company said it received a subpoena from the FTC, after an informational request last June. Magella employed 100 physicians at the time of its acquisition.
IRS review settled
Texas Health Resources, Arlington, settled an Internal Revenue Service review of $635 million in bonds issued in 1997 to pay for the system's formation from the merger of Presbyterian Healthcare Resources and Harris Methodist Health System. The agreement ends an investigation begun in May 2000. THR will not pay a penalty or restructure its debt under the agreement. THR is one of six hospital systems whose merger financing bonds were under IRS scrutiny to determine if they merited tax-exempt status, and is the fourth system to settle.
Trinity to pay into foundation
Trinity Health, Novi, Mich., agreed to pay $6 million to a healthcare foundation related to 205-bed Saint John's Health System, Anderson, Ind., that claimed it deserved a share of the proceeds from Trinity's sale of the system. Trinity filed the settlement in Madison County (Ind.) Superior Court one day after the expiration of a restraining order that barred Trinity from transferring any of the proceeds out of Indiana. Saint John's board claimed Trinity was making $35 million from the sale to St. Vincent Hospitals and Health Services, Indianapolis, and asked for |$12 million for the charitable foundation. Trinity said it actually recorded a loss on the sale of $7 million to $9 million. A Trinity spokesman was unavailable for comment.
SCHIP would share wealth
States would have through fiscal 2004 to spend unused State Children's Health Insurance Program funds under a bill introduced by Reps. Billy Tauzin (R-La.) and John Dingell (D-Mich.). The proposal would extend the availability of $1.2 billion allocated for 1998 and 1999 and $1.5 billion allocated for 2000 and 2001. States that have not spent their 2000-2001 funds would retain half of the money, while the other half would be distributed to states that have spent their allotment. Sens. Olympia Snowe (R-Maine) and John Rockefeller IV (D-W.Va.) are expected to introduce a companion bill in the Senate.
Second bidder for HealthMont
SunLink Health Systems, Atlanta, said a second bidder has emerged for HealthMont, Franklin, Tenn., four months after SunLink signed a definitive agreement to buy two of the system's three hospitals for $15.3 million. SunLink did not identify the new bidder. SunLink said it disagrees with HealthMont on the value of the competing offer. HealthMont officials were not immediately available for comment. For its second quarter ended Dec. 31, 2002, SunLink, which operates six hospitals, lost $986,000, or 20 cents per share-including a $411,000 charge for costs related to the HealthMont deal. By comparison, the company had a profit of $781,000, or 15 cents per share, in the year-ago quarter. Revenue was up 9.7%, to $23.7 million.