Essay about Healthsouth

1313 Words 6 Pages
INTRODUCTION

HEALTHSOUTH Corporation (HEALTHSOUTH) began its rise in 1984 when Richard Scrushy, Aaron Beam, and other close associates formed the HEALTHSOUTH Empire with venture capital from New Enterprise Associates of Baltimore. In the beginning, Richard Scrushy was the chief executive officer (CFO), Aaron Beam was named the chief financial officer (CFO) and William Owen, an accountant from Ernst and Young, assumed the position of comptroller. HEALTHSOUTH went public in 1986 and began rapidly growing through the acquisition and construction of new rehabilitation hospitals, outpatient clinics, and diagnostic service centers. HEALTHSOUTH was commonly referred to as the “Pacman” of rehabilitation and outpatient surgery due to
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According to Maron Webster, a former HEALTHSOUTH internal auditor, he observed improper accounting for accounts receivable. Michael D. Martin, the CFO that replaced Aaron Beam in 1997, testified that earnings calculations were manipulated to cover shortfalls in analyst projections. In 1997, HEALTHSOUTH increases the acquisition of medical companies beginning with Columbia/HCA with acquisitions included in Australia and the United Kingdom. HEALTHSOUTH acquired Health Images, ReadiCare and Horizon/CMS. The irony of the whole thing is that a lot of the companies acquired by HEALTHSOUTH during this time were in the process of resolving fraud scandals of their own. In an effort to justify the decline in share prices, Richard Scrushy uses the fact that many of the companies he acquired were involved in litigation. This marks the beginning of the end of the massive accounting fraud of HEALTHSOUTH. HEALTHSOUTH’S Medicare fraud was achieved by billing for medical services that were never provided, reducing or eliminating patient care, and using unskilled or unlicensed professionals. The empire began to topple in the midst of allegations of insider stock sales, the independence of the board of directors, and finally the financial practices were beginning to be questioned in 2002. By April 2003, eleven past and present senior executives pled guilty to fraud. HEALTHSOUTH appeared to have overstated earnings by $1.4

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