HealthSouth: No comment on tentative settlement

HealthSouth Corp., Birmingham, Ala., declined to comment on a tentative, $325 million settlement of False Claims Act charges with the federal government, disclosed late Wednesday in a Modern Healthcare Alert and on modernhealthcare.com. Subsequently, Merrill Lynch & Co. said in a research note that the proposed settlement should not affect HealthSouth's near-term liquidity. According to the note, HealthSouth officials indicated at a recent investors' meeting that settling civil claims would cost between $200 million and $400 million. HealthSouth expected to secure short-term loans by year-end to pay the settlement, Merrill Lynch said. An ongoing Securities and Exchange Commission investigation into accounting fraud at HealthSouth could prove more costly but it is difficult to predict by how much, Merrill Lynch said. The civil settlement, to be paid over three years, would not cover SEC charges, criminal charges or shareholder lawsuits. A final settlement is expected by year-end. -- by Joseph Mantone and Mark Taylor