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WASHINGTON, D.C. - HealthSouth Corporation, the nation's largest provider of rehabilitative medicine services, has agreed to pay the United States $325 million to settle allegations that the company defrauded Medicare and other federal healthcare programs, the Department of Justice announced today.

“Health care fraud impacts every American citizen. When a company defrauds our nation's health care programs, it steals from the American taxpayers,” said Assistant Attorney General Peter Keisler, head of the Justice Department’s Civil Division. “HealthSouth's fraud on Medicare was driven both by longstanding business practices in its outpatient physical therapy business and improprieties in its inpatient rehabilitation business.”

The allegations involving the outpatient therapy services were the subject of a federal lawsuit in San Antonio, Texas. “Today’s settlement should send a strong message that the government will be persistent in pursuing those who engage in fraud and making sure that they pay a high price for their misdeeds,” stated United States Attorney Johnny Sutton in San Antonio, Texas.

Under today's agreement, HealthSouth will pay $325 million to resolve a range of allegations involving outpatient physical therapy services and inpatient rehabilitation admissions.

Some of the civil issues resolved as part of today's settlement resolve allegations in lawsuits filed by relators, commonly known as "whistleblowers," under the False Claims Act. This law allows a relator who qualifies under the statute to receive a share of the settlement proceeds recovered in that lawsuit. Today's settlement resolves claims brought by relators in United States ex rel. James Devage v. HealthSouth Corporation, et al., (W.D. Tex.); United States ex rel. Manning v. HealthSouth Corporation, (W.D. Tex.); and United States ex rel. Brupbacher & Associates and Michael C. Freeman v. National Institutional Pharmacy Services, Inc., (D. N.Mex.). As the relator's award, James Devage will receive $8,139,498, DeWayne Manning will receive $4,069,749, and Brupbacher Associates and Micahel Freeman will share $150,000.

As part of today's agreement, HealthSouth entered into a Corporate Integrity Agreement (CIA) with the United States Department of Health and Human Services, Office of Inspector General, requiring the company to engage in significant compliance efforts over the next five years. Among other provisions, the CIA requires HealthSouth to engage independent review organizations to review the accuracy of the company's claims for inpatient and outpatient rehabilitation therapy furnished to Medicare beneficiaries.

Under a separate administrative agreement also executed today, HealthSouth and the Centers for Medicare & Medicaid Services agreed to a withdrawal of all pending administrative appeals and related federal court cases, and the administrative closure of all Medicare cost reports through December 31, 2003.

The investigation and resolution of these matters was achieved by the Department of Justice, Civil Division, Commercial Litigation Branch; the United States Attorneys' Offices for the Northern District of Alabama, the Western District of Texas, the Central District of California, the District of New Mexico and the Southern District of New York; the Department of Health and Human Services, Office of Inspector General and Office of Counsel to the Inspector General; the Department of Health and Human Services, Office of General Counsel (CMS Division); and the outstanding investigative efforts of the Department of Health and Human Services, Office of Inspector General, Atlanta Region (Birmingham Office).