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HealthSouth To Face Congressional Probe

Apr 23, 2003 | Bloomberg News

Health-South Corp., the rehabilitationhospital company accused of accounting fraud, and its auditor Ernst & Young LLP face a congressional investigation into the company’s financial reporting and Medicare billing practices.

The House Energy and Commerce Committee has asked HealthSouth and Ernst & Young to turn over records related to alleged financial irregularities at the company, the committee said Tuesday in a statement.

The Securities and Exchange Commission on March 19 accused HealthSouth and then-Chief Executive Officer Richard Scrushy of inflating earnings by $1.4 billion since 1999. The lawmakers’ interest widens the investigation into whether HealthSouth improperly billed the government for rehabilitative services.

"It appears that HealthSouth may have submitted hundreds of thousands of claims for reimbursement to Medicare and Medicaid based on improper billing of certain rehabilitativetherapy claims," Committee Chairman Billy Tauzin said in a statement.

The committee, which has investigated accounting scandals at Enron Corp. and World-Com Inc., demanded an extensive list of documents from HealthSouth, including records provided to the SEC in its investigation, communications between company directors and executives, and written policies on Medicare billing procedures.

House investigators also asked for all internal auditing records, as well as a list of all nonauditing work done by Ernst & Young for HealthSouth. The committee also is examining HealthSouth’s ties to a dozen companies, including Capstone Capital Trust, HealthTronics Surgical Services Inc. and Healthcare Realty Trust.

HealthSouth officials didn’t return a phone call Monday seeking comment. "We take seriously our responsibilities as public auditors and will continue to assist in the ongoing HealthSouth investigations," Ernst & Young said in a statement.

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