Jury deliberations in U.S. District Court, Birmingham, Ala., were expected to continue this week in the criminal trial of Richard Scrushy, founder and former chief executive officer of HealthSouth Corp. Jurors are considering 36 charges related to whether Scrushy knowingly participated in a $2.6 billion accounting fraud at HealthSouth. If he's found guilty, the jury would also consider money-laundering charges. The government contends Scrushy, the first CEO to be tried under the Sarbanes-Oxley Act of 2002, directed the faking of income to drive up the price of HealthSouth stock, which he then sold to enrich himself. Jurors asked Judge Karon Bowdre what would happen if they couldn't agree, to which she responded that they should keep working to reach an agreement. Jurors also reviewed tapes recorded when former HealthSouth Chief Financial Officer Bill Owens wore a hidden microphone during conversations with Scrushy. Separately, another U.S. District Court jury in Birmingham acquitted two former HealthSouth Corp. employees, Robert Thomson and James Reilly, on four charges each that they participated in an alleged bribery scheme that helped the company win a five-year, $50 million contract to manage a rehabilitation hospital in Riyadh, Saudi Arabia.
CMS seeks rate cuts
The CMS proposed an across-the-board 1.9% cut in reimbursement rates for rehabilitation hospitals in fiscal 2006, citing evidence of upcoding. But, the CMS said Medicare's overall payments for inpatient rehabilitation services would rise 2.9%, or $180 million, over fiscal 2005. The proposed regulations include a 3.1% increase for inflation, additional payments for rural providers and a lower outlier threshold-to $4,911 in fiscal 2006 from $11,211 in 2005. The CMS said an analysis of 2002 payments, the first year of the prospective payment system for rehabilitation hospitals, showed spending had risen at least 1.9% and perhaps as much as 5.8% compared with the previous year. The American Hospital Association said the proposed reduction is unnecessary, although it is still reviewing the regulations. They will be published in the May 25 Federal Register. Comments will be accepted until July 18.
Mich. hospital, HHS settle case
HHS' inspector general's office announced a $4 million settlement with St. Joseph Mercy-Oakland, Pontiac, Mich., to resolve allegations the hospital illegally contracted with physicians. The hospital, now part of Trinity Health, Novi, Mich., voluntarily disclosed the relationships with 14 physicians and groups after Trinity's 2000 purchase of the hospital. The alleged violations of the Stark physician self-referral and anti-kickback laws included office-management services, medical equipment leases and purchase agreements, loans and income guarantees. Trinity spokesman Steve Shivinsky said the organization's integrity program detected the problems. "While it was unfortunate they existed, we were pleased our organizational integrity program brought the issues to light," he said.