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HealthSouth Faces Medicare Fraud Investigation
By Milt Freudenheim
The New York Times, September 11, 2003
Violations of federal Medicare regulations, if proved, could be punished by fines and even loss of Medicare accreditation. Government investigators said they were looking for patterns of wrongdoing in the extensive system of HealthSouth hospitals and centers after obtaining admissions of fraudulent behavior by former executives at the company's headquarters in Birmingham, Ala. In a civil lawsuit asserting wrongful dismissal, the former medical director, Dr. Helen Schilling, said HealthSouth fired her after she did not follow orders to admit patients who did not meet Medicare criteria. A jury in a district court in Montgomery County, Tex., voted 10 to 2 late Monday to require HealthSouth to pay Dr. Schilling $400,000 for lost pay, $65,000 for mental anguish and $1.05 million in punitive damages. Dr. Schilling said in the suit that she was fired as medical director after HealthSouth executives admonished her for failing to keep 20 beds filled in the company's 79-bed Houston Rehabilitation Institute. HealthSouth said it would ask the judge in the case, Mike Mayes, to overturn the verdict. A lawyer for HealthSouth, Jeffrey S. Davis, said Dr. Schilling had misunderstood the orders. He added that she did not have grounds to sue for wrongful dismissal because she was an independent contractor, not an employee, in her 10 years as medical director. Mr. Davis said HealthSouth would appeal to an appellate court if Judge Mayes did not set aside the verdict. Carol Adolph, a former director of nursing at the hospital, said in a deposition supporting Dr. Schilling that she had quit after the staff was asked to admit ineligible patients. "We had psychiatric patients," Ms. Adolph said, "who were clearly catatonic and belonged in a psychiatric facility, not a rehab facility, but we had a bed available and we were encouraged to take them." In a related action, the House Energy and Commerce Committee has sent three investigators to HealthSouth's headquarters to look for Medicare fraud and other possible violations, Ken Johnson, a committee spokesman, said yesterday. A spokesman for HealthSouth, Andrew Brimmer, said the company "takes all matters related to Medicare seriously and is cooperating with all government inquiries." The House committee has issued subpoenas requesting documents from several former aides of Richard M. Scrushy, the founder and ousted chief executive of HealthSouth. James Goodreau, a former security chief at HealthSouth, and Anthony Tanner, a former corporate secretary, were called to testify at a closed hearing on accusations of fraud involving the timing of Mr. Scrushy's sales of stock and public disclosures, which sent the share price tumbling. Mr. Tanner did not respond to a telephone request for comment last night. Ron Wise, a lawyer in Montgomery, Ala., for Mr. Goodreau, said he and his client would not comment. The committee also released letters from its chairman, Representative Billy Tauzin, Republican of Louisiana, requesting records and information from three Washington firms that advised and worked for Mr. Scrushy, and from Jason Hervey, a one-time television actor and former senior aide to Mr. Scrushy. The recipients included Patton Boggs, the Washington lobbying firm that had sent Lanny Davis, a former White House media adviser, to Birmingham; Fulbright & Jaworski, a Washington law firm that issued a report on Mr. Scrushy's stock transactions; and U.S. Strategies of Alexandria, Va., a lobbying concern. Spokesmen for Patton Boggs, Fulbright & Jaworski and Mr. Hervey said they would cooperate. Eric Hanson, chief executive of U.S. Strategies and a former Washington lobbyist for HealthSouth, did not respond to a request for comment. An interim management group, which has been maintaining medical operations and paring costly projects and practices, won a reprieve from HealthSouth creditors despite a default in payments. Bondholders recently granted the company extra time to fend off bankruptcy. Mr. Scrushy was fired in March after regulators accused HealthSouth of misleading investors by overstating earnings by $2.5 billion. Copyright ©
2002 Global Action on Aging
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