Healthsouth Accounting Irregularities

health south accounting irregularities: A Presentation and Overview As a part of this presentation, I, as an independent auditor commissioned by the committee of the firm representing the HealthSouth Corporation, wish to make clear that the company I have just audited, though tarred and feathered by the modern media, is not nearly at fault as one might initially believe, given the nature of the following components peculiar to the health services and health care industry.

Although HealthSouth's supposed irregularities may have been elided in the public imagination with corporations such as Enron, it is not an 'imaginary corporation.' Mistakes were made, but these mistakes should not cause individuals to forget the ongoing quality of care still provided by the company. The company's former CEO Richard M. Scrushy never told the company's primary accountants to falsify financial reports. Furthermore, these accountants would have reported accounting irregularities had they known about them.

Scrushy has stated openly that he was not heavily involved in the finances of the company at its outset. Mr. Scrushy was the idea man who came up with the concept of a rehabilitation company, not its financial mastermind. This lack of financial awareness reflects the often-divided nature of health care companies, where the founders of health service and rehabilitation companies are not accountants or financially astute individuals in terms of bookkeeping.

There is a substantial division between accounting, and the actual ideas and management of the health care company's mission itself. ("Executives Say they were not aware of accounting problems," MSNBC.com.) HealthSouth is currently seeking a 300 million dollar refund from the Federal Government on the over inflated profits it reported on its assets. As part of the auditing regarding its refund, it has been noted that the "important news I heard is there are no immediate or glaring Medicare fraud violations," said Thomas H.

Shinkle, a health care analyst at Imperial Capital LLC in Beverly Hills, Calif. "The core business remains intact and is doing well... It does give the company some maneuvering room vis-a-vis its creditors to repay debt." (Johnson, 2003) The reasons over inflated profits are thus at least being openly addressed. Nor is Medicare fraud, affecting the most vulnerable individuals in the health care industry the main people part of the alleged financial irregularities.

Rather, what is in question is that the company over inflated its profits, a concern one might think is mainly of impact to shareholders.

However, this over inflation, reporting projected assets the company did not truly expect to incur, as well as a refusal to take into consideration the costs of the company (reporting only money accrued, rather than actual profits) was facilitated by the bureaucratic nature of the medical industry, where reporting of costs, payment of bills, and administrative costs are often delayed, because of the nature of healthcare providers.

Healthcare consumers themselves often find that they must pay for services, only to be reimbursed later by their insurance company, after the service has been approved. Thus, what appears to be a profit or a loss for a particular healthcare company is often in a state of flux, since reimbursement may occur upon a variable scale that is not commensurate with the time care is actually given. HealthSouth has not been as negatively impacted as some companies where there are problems with securities fraud.

Although one might expect a mass exodus to its competitors, to quote one employee "our patients are reading the papers," said Kraig Britton who oversees nine of HealthSouth's thirty-six facilities in the Washington area. "I tell our patients: No accountant has ever treated a patient. Our clinicians are the ones who actually treat patients. And we can't control.