Tenet Healthcare Corp. wasn't the only for-profit healthcare company to end a long-running legal dispute last week.
HealthSouth Corp., Birmingham, Ala., reached a nonprosecution agreement with the Justice Department and, if followed, the rehabilitation giant won't face charges for the multibillion-dollar accounting fraud that occurred from 1996 to 2003. The agreement means the investigation, which began in 2003, has come to an end.
It could be reopened, however, if HealthSouth violates the agreement or if evidence of other wrongdoing is found. The only new payment HealthSouth has to make is $3 million to the U.S. Postal Inspection Services Consumer Fraud Fund.
In the nonprosecution agreement, the government also commended HealthSouth for putting internal controls in place to guard against accounting fraud, hiring a new management team and auditor, and cooperating with the investigation.
HealthSouth did make a significant concession in agreeing to extend any statute of limitations not yet expired until Nov. 17, 2009, said William Maruca, a partner with the law firm Fox Rothschild. Maruca, who is not affiliated with the case, said HealthSouth is probably confident there are no other violations to be found.
HealthSouth had already agreed to pay $100 million in a settlement with the Securities and Exchange Commission and $325 million in a settlement with the CMS over Medicare fraud claims. It also will pay $215 million of a $445 million settlement of shareholders' class-action litigation. Insurers are paying the remainder. Also, the company recorded $891 million in refinancing and restructuring costs after the fraud.
Another large expense related to the fraud could have pushed HealthSouth into bankruptcy, according to a statement issued by Birmingham U.S. Attorney Alice Martin.
Last week, HealthSouth reported a net loss of $435 million on operating revenue of $792 million for its first quarter ended March 31.