HealthSouth Settles Medical Fraud Cases for $325M

HealthSouth Corp. (search) has agreed to pay the U.S. government $325 million to settle numerous allegations that the company defrauded Medicare and other government health programs, the Justice Department announced Thursday.

"HealthSouth's fraud on Medicare was driven both by long-standing business practices in its outpatient physical therapy business and improprieties in its inpatient rehabilitation business," said Assistant Attorney General Peter Keisler, head of the Justice Department's (search) civil division.

HealthSouth, based in Birmingham, Ala., is the nation's largest provider of medical rehabilitation services and has been struggling to emerge from a criminal investigation into an alleged accounting fraud that inflated company earnings by some $2.6 billion. Seventeen people have been charged in that investigation, including the former chief executive officer, Richard Scrushy (search), whose trial is scheduled to begin next week.

The settlement announced Thursday grew out of a lawsuit filed in San Antonio by several whistleblowers under the federal False Claims Act (search). One of the whistleblowers will receive $8.1 million of the settlement, with others receiving lesser amounts.

"Today's settlement should send a strong message that the government will be persistent in pursuing those who engage in fraud and making sure that they pay a high price for their misdeeds," said U.S. Attorney Johnny Sutton of San Antonio.