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U.S. Justice Department Joins Civil Suit Tied to HealthSouth

Mar 29, 2003 | Wall Street Journal

The Justice Department joined a civil lawsuit against HealthSouth Corp., alleging the company defrauded Medicare and other government programs in part by submitting false claims for physical-therapy services by "unqualified personnel" at its outpatient clinics.

The company, based in Birmingham, Ala., said it would defend itself "vigorously" against the accusations.

The government's complaint, filed May 23 in U.S. District Court in San Antonio, intervenes in a civil suit filed against the company by a HealthSouth patient under the False Claims Act, which essentially allows individuals to file suit on behalf of the government. The complaint alleges in part that from April 1992 to the present, HealthSouth improperly billed the government for physical-therapy services provided by "unqualified personnel."

The complaint also alleges the company sought reimbursement for patients treated without properly certified care plans.

According to the complaint, HealthSouth "systematically" uses supportive personnel, such as aides or trainees, to treat Medicare beneficiaries, but bills Medicare as though licensed therapists or assistants provided the care.

A spokesman for the company called the action a "nuisance suit" and said its lawyers have advised HealthSouth that it has done nothing wrong and need not change the way it does business.

In a Securities and Exchange Commission filing, HealthSouth said its practices are "consistent with accepted clinical standards and practices in physical therapy" and with current Medicare regulations.

A HealthSouth spokesman said the use of aides, or "extenders," is common and necessary to provide "concurrent" therapy, in which several patients with different ailments perform individualized therapy at the same time. The "extenders" assist patients under supervision of a licensed therapist, who is typically within eyesight of the aides, the spokesman said.

The complaint seeks unspecified damages and civil penalties.

HealthSouth is the nation's largest provider of outpatient physical-therapy services. But Medicare outpatient reimbursements represent roughly 1% of its total revenue, its spokesman said.

Analysts have said the suits don't appear to pose serious financial concerns for HealthSouth. "I don't think it's something that investors are overly concerned with," said Joel Ray, an analyst with Wachovia Securities.

The Justice Department earlier this year had said it would intervene in another, similar suit filed against HealthSouth in Alabama. But the department withdrew its intervention in that case earlier this month, HealthSouth said.

HealthSouth runs rehabilitation hospitals and outpatient rehabilitation, surgical and diagnostic clinics.

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