Interim management at HealthSouth Corp., Birmingham, Ala., said the troubled rehabilitation chain has made "tremendous progress" over the past two months in positioning itself for a return to financial health and is generating a positive cash flow from operations. Management also addressed reports of investors being organized to buy the company, the possible involvement of former HealthSouth CEO Richard Scrushy and Scrushy's attempt to have his legal fees covered by the company under previous contract terms. In a letter to employees, acting Chairman Joel Gordon and interim CEO Robert May said, "Let us assure you that the board, by a unanimous vote of the outside directors, determined that the former CEO's employment contract was null and void, and we do not foresee any circumstance under which he will be welcome again at HealthSouth."
Gordon and May also said that PricewaterhouseCoopers expects to have largely completed its forensic audit of the company by the end of June. Once the accounting firm and the turnaround firm Alvarez & Marsal have finished their reviews, HealthSouth will be in a position to develop a restructuring plan, Gordon and May said in the letter. "Whatever course we take to fix the financial side of our business, in or out of bankruptcy court, we expect -- and you should expect -- that HealthSouth will continue to operate uninterrupted," they told employees. -- by Julie Piotrowski