HealthSouth ups 2014 guidance with increased stake in UMass hospital

HealthSouth Corp. expects to surpass its year-end profitability guidance after increasing its ownership of a hospital in Massachusetts.

HealthSouth, the largest operator of inpatient rehabilitation hospitals in the country, increased its ownership of Fairlawn Rehabilitation Hospital in Worcester, Mass., to 80% from 50%. Fairlawn is a joint venture between HealthSouth and UMass Memorial Health Care.

The transaction will allow HealthSouth to add Fairlawn as a consolidated entity on its books, effective June 1, and could add $25 million to $30 million in profits to its second-quarter earnings this year. HealthSouth did not comment further on the deal and referred to a statement from Chief Operating Officer Mark Tarr, who said the increased ownership in Fairlawn “provides another opportunity for HealthSouth to grow by investing in its core business.”

In April, HealthSouth blamed the harsh winter weather as a primary factor in its 6.7% drop in net income in the first quarter. However, the company said it has already seen improved volumes. With the Fairlawn deal, HealthSouth expects year-end adjusted EBITDA will top $565 million.

The Birmingham, Ala.-based company is also facing scrutiny from the federal government. HHS' Office of the Inspector General and the U.S. Department of Justice are investigating 11 HealthSouth hospitals over alleged Medicare and Medicaid fraud.

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