HealthSouth Corp., Birmingham, Ala., said it can avoid bankruptcy provided creditors don't force the company into Chapter 11 in the short term and ongoing federal probes of alleged accounting fraud don't send it there in the long term. The company also said it likely will sell two of its acute-care hospitals, consider selling its diagnostic division if results don't improve and dissolve 15 physician practice management contracts. In a two-hour presentation to analysts and investors yesterday, Chief Restructuring Officer Bryan Marsal said HealthSouth has made "Draconian cuts" in nonpatient spending and curtailed capital projects to conserve the cash needed to stave off bankruptcy. The company also has reviewed about 90% of its Medicare-related accounting entries without finding any Medicare fraud issues of material size, Marsal said. HealthSouth now believes it will generate about $4.1 billion in revenue and $650 million in pretax operating earnings over the next 12 months, ending July 1, 2004. Marsal and others acknowledged HealthSouth faces many "rocks in the road" related to its alleged inflation of profits by $2.5 billion. The Securities and Exchange Commission sued the company and founder Richard Scrushy in March. Eleven HealthSouth executives have agreed to plead guilty to criminal charges in the case. Criminal charges have not been filed against Scrushy. -- by Vince Galloro
HealthSouth lays out strategy to avoid bankruptcy
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