Troubles continue to mount for HealthSouth Corp., as the House Energy and Commerce Committee on Tuesday opened an investigation into accounting irregularities and possible Medicare and Medicaid billing fraud at the rehabilitation and ambulatory surgery center giant.
In a Tuesday letter to acting HealthSouth Chairman Joel Gordon, committee leadership compares recent revelations and allegations of massive accounting trickery at HealthSouth to the scandals that have rocked Enron Corp., WorldCom, Global Crossing and Qwest Communications International.
The company stands accused of overstating earnings by $2.5 billion since 1997, and 10 former executives have admitted to wrongdoing. The Securities and Exchange Commission has accused recently ousted HealthSouth Chairman and CEO Richard Scrushy of insider trading.
In light of recent court filings and company statements, "it appears that HealthSouth has now joined this list of companies and will undertake a massive restatement of reported revenues and earnings spanning several years due to fraudulent accounting practices," the letter says.
Energy and Commerce leadership also says that the Birmingham, Ala.-based company "may have submitted hundreds of thousands of claims for reimbursement to Medicare and Medicaid based on improper billing of certain rehabilitative therapy claims." The letter cites evidence collected by Blue Cross and Blue Shield of Alabama, the CMS billing intermediary in HealthSouth's home state.
HealthSouth settled a Medicare fraud lawsuit in 2001 with federal officials, but CMS issued a directive in May 2002 telling HealthSouth to alter its billing practices. According to the House panel, Alabama Blues found that 50% of the claims it studied did not have the mandatory physician's plan of care.
A Blues spokesperson was not immediately available for comment.
The letter is signed by committee Chairman Billy Tauzin (R-La.), ranking minority member John Dingell (D-Mich.) and Subcommittee on Oversight and Investigations leaders James Greenwood (R-Pa.) and Peter Deutsch (D-Fla.). The four sent a similar, though shorter, document to James Turley, chairman of accounting firm Ernst & Young, HealthSouth's independent auditor.
The congressmen ask HealthSouth to turn over 29 key pieces of information, including records related to Scrushy's other business relationships, the identities of all members of the so-called HealthSouth "family" who allegedly conspired to cook the books, and a summary of the status of a federal whistleblower suit pending against the company in San Antonio.
Ernst & Young is asked to respond to 21 separate requests about its dealings with HealthSouth.
The committee wants all the evidence by May 6.