INDUSTRY: Healthsouth–Scrushy speaks out

I’ve commented (perhaps too much) about the Healthsouth affair and how the vagaries of Medicare reimbursement led many different types of for-profit (and probably also non-profit) providers to go well over the top in attempting to cash in. The difference between the for-profits and the non-profits is that Wall Street demands continual growth in the numbers for the for-profits, and once the initial savings an ancillary company makes moving care out of hospitals to lower overhead facilities are assumed, growing "same-store" revenues and profits is very hard. See my earlier synopsis of that problem here.

The reason I bring this up again is that yesterday Richard Scrushy went on 60 Minutes to defend himself. Remember for a second that this wasn’t just a case like at Tenet of unnecessary upcoding (although they were billing group sessions as individual sessions so Healthsouth was doing that).  This was straight fraud–telling investors and the world that revenues and profits were one number while knowing that in reality they were lower, and changing thousands of documents so that the lies added up. Scrushy’s story is that all FIVE of his CFOs and a bunch of other senior staff lied directly to him about the numbers, and are lying now when they say Scrushy told them to alter them. Furthermore, he say that his stock sales at 3-4 times the current market price, netting him around $100 million, were mere coincidence, even though they did happen a month before the numbers finally started to tell the truth. (Actually this reminds me a little of another southern CEO’s protestations).

How will he do in court? Well, the fact that he hired a former actor from The Wonder Years who was 29 years old and had no corporate experience as his Chief Marketing honcho, and allegedly funded a series of Christian rock groups (see the third story down here!) and his wife’s habadashery company with Healthsouth money does look a touch suspicious. Meanwhile he was suing not only one poor sap on the Yahoo message board who claimed to have had an affair with his wife (he lied), but also Kim Landry, an ex-employee who suggested that Healthsouth’s stock would collapse.  Sounds like she had it about right! However, OJ Simpson is still walking the streets.

About the only thing I can think of in Scrushy’s defense is that there doesn’t seem to have been anyone prepared to go to the Feds to become a protected whistleblower.  I guess one of those CFOs wishes he’d thought of that now! Anyway, enough from me on this whole appalling issue, even if it is quite funny.  There’s a whole lot more here

Disclaimer: I had surgery at a Healthsouth ASC facility in San Francisco in March 2002, everyone treated me very well, there was no sign of the Wonder Years or any Christian rock at any time, and the drugs were great!

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