Richard M. Scrushy - Legal Battles

Legal Battles

Although HealthSouth grew tremendously throughout the 1990s, becoming the largest comprehensive rehabilitative services company in the United States, ethical and financial questions began to arise as early as 1989. An internal auditor alleged that he was fired for drawing attention to HealthSouth's financial problems and that he was pressured to meet certain earnings targets. Two years later, in 1991, HealthSouth was accused by Medicare of illegally adding costs to reports for outpatient physical therapy and inpatient rehabilitation admissions at the corporation's Bakersfield Rehabilitation Hospital. In 1998, Medicare changed its funding arrangements in an attempt to reduce exploitation and payments by $100 billion. Scrushy insisted that the change would not affect HealthSouth's bottom line but profits dropped by 93 percent by the end of the year. Around this same time, HealthSouth began facing additional accusations of fraud. An investigation by the insurance company Blue Cross Blue Shield of Alabama determined that HealthSouth had "improperly billed Medicare for therapy by students, interns, athletic trainers, and other unlicensed aides".

Additional lawsuits alleged HealthSouth had committed widespread abuse of Medicare by "billing for services it never provided, delivering poor care, treating patients without a formal plan of care, and using unlicensed therapists". In March 2003, the U.S. Securities and Exchange Commission filed a civil suit against Scrushy and HealthSouth alleging the company had falsified at least $2.7 billion worth of profit between 1996 and 2002. HealthSouth agreed to pay the United States government $325 million on December 30, 2004, in order to "settle allegations that the company defrauded Medicare and other federal healthcare programs".