HealthSouth Corp., Birmingham, Ala., will pay $325 million through 2007 under a tentative settlement of False Claims Act charges with the U.S. Justice Department and HHS' inspector general's office, a government source confirmed. The 36-page global settlement resolves civil charges stemming from several whistleblower lawsuits against the company. It does not resolve a Securities and Exchange Commission investigation into securities fraud at HealthSouth or criminal charges against HealthSouth personnel, including founder and former Chief Executive Officer Richard Scrushy. A final agreement on the civil charges is expected to be announced by year's end, sources close to the case said. HealthSouth declined to comment.
The civil allegations against HealthSouth include billing for unnecessary services, for services provided by uncredentialed providers and for individual physical therapy when group therapy was provided. HealthSouth also allegedly failed to report a $19.3 million gain from a 2001 sale of Caremark stock and allegedly falsified Medicare cost reports. The SEC, meanwhile, has accused HealthSouth of inflating earnings by $2.7 billion. And Scrushy is scheduled to go to trial in January on a 58-count criminal indictment alleging that he directed the fraud. Scrushy has pleaded not guilty. -- by Mark Taylor and Joseph Mantone