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HEALTHSOUTH CORPORATION PAYS NEARLY $8 MILLION

WASHINGTON, DC -- HealthSouth Corporation, the nation's largest provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, has agreed to pay

$7.9 million to settle allegations of health care fraud, the Justice Department announced today.

The settlement resolves allegations that the Birmingham, Alabama-based company overcharged Medicare and the Defense Department's TRICARE program for equipment and supplies purchased from G.G. Enterprises, a corporation owned by the parents of HealthSouth's CEO, Richard Scrushy. The government alleged that HealthSouth improperly billed these items at a price above G.G. Enterprises' costs, in violation of Medicare's and TRICARE's rules for transactions with related entities.

The settlement also resolves allegations that HealthSouth overbilled the health care programs for rental payments and the costs of an abandoned computer system.

"This settlement again demonstrates the United States' commitment to protecting taxpayer funds from fraud and abuse," said Acting Assistant Attorney General Stuart E. Schiffer for the Civil Division. "The federal health care system operates on the good faith and honesty of its providers, and we will continue to guard against misuse of the reimbursement system for private gain."

Doug Jones, United States Attorney for the Northern District of Alabama said, "The laws that protect against health care fraud will be enforced by our office to protect the integrity of the American taxpayer dollars that go into these programs. It is the American taxpayer that suffers when health care providers are reimbursed for goods and services above what the law allows." Jones also noted, however, that HealthSouth had already changed the manner in which reimbursement was sought for equipment purchased through G.G. Enterprise and the company was forthcoming and cooperative in reaching this settlement."

The settlement arises, in part, from a lawsuit filed by Greg Madrid, a billing clerk formerly employed by HealthSouth. As part of the settlement, Madrid will receive $1.48 million. Under the False Claims Act, a private individual may sue on behalf of the government and receive a portion of the recovery.

The case was conducted jointly by the Civil Division of the Department of Justice and the United States Attorney's Office for the Northern District of Alabama, with the assistance of the Department of Health and Human Services Office of Inspector General and the Department of Defense Criminal Investigative Service.

The case is entitled US ex rel. Madrid v. HealthSouth, Civil No. CV-97-H-3206-S (N.D.-AL)

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