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HealthSouth agrees to pay $325m to US

Action settles fraud allegations

WASHINGTON -- HealthSouth Corp. has agreed to pay the US government $325 million to settle numerous allegations that the company defrauded Medicare and other government health programs, the Justice Department said yesterday.

''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," said Assistant Attorney General Peter Keisler, head of the Justice Department's civil division.

HealthSouth, based in Birmingham, Ala., is the nation's largest provider of medical rehabilitation services. It has been struggling to overcome a criminal investigation into an alleged accounting fraud that inflated earnings by some $2.6 billion.

Seventeen people have been charged in that investigation, including former chief executive Richard Scrushy, whose trial is scheduled to begin next week.

The settlement disclosed yesterday grew out of a lawsuit filed in San Antonio by several whistle-blowers under the federal False Claims Act. One of the whistle-blowers will receive $8.1 million of the settlement, with others receiving lesser amounts.

''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," said US Attorney Johnny Sutton of San Antonio.

In a statement, HealthSouth said it would pay $75 million initially and the rest quarterly over the next three years. The settlement has been taken into account in the company's financial projections for the future, said Jay Grinney, president and chief executive.

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