HealthSouth reports quarterly loss of $406 million

Jay Reeves

Tuesday, March 4, 2003 | 9:40 a.m.

BIRMINGHAM, Ala. -- Already under the cloud of a federal investigation, HealthSouth Corp. said Monday it lost $405.8 million in the fourth quarter as a cut in Medicare payments helped send the rehabilitation company into the red.

HealthSouth, under review by the Securities and Exchange Commission and the FBI, said it lost $1.03 a share in the three months ended Dec. 31 in contrast to a profit of $67.9 million, or 17 cents a share, a year earlier.

Revenue fell more than 17 percent to $923.5 million from $1.12 billion a year earlier.

Excluding one-time items, the company said its operating earnings were 5 cents a share in the latest quarter. Analysts surveyed by Thomson First Call expected earnings of 11 cents a share before one-time items.

In trading on the New York Stock Exchange, HealthSouth shares fell 10 cents, or 2.8 percent, to close Monday at $3.48.

The SEC is investigating the timing of HealthSouth's announcement on Aug. 27 that reduced Medicare payments would slash the company's pretax profits by $175 million a year.

Chairman and Chief Executive Richard Scrushy had sold half his stake in the firm -- some $25 million worth of stock -- a few weeks before.

The stock's price declined sharply with the announcement and has languished ever since and the company was hit with more than two dozen shareholder lawsuits.

"We believe that the fourth quarter represents a bottom from which we can grow and produce positive results," Scrushy said in a statement.

For all of 2002, HealthSouth lost $270.1 million, or 68 cents a share, compared to a profit of $202.4 million, or 52 cents a share, in 2001. Revenue fell to $4.31 billion from $4.38 billion.

HealthSouth said last year that it would lay off about 1,000 of its 50,000 employees because of the cut in Medicare payments. It incurred an after-tax charge of about $175 million to close, sell or consolidate about 220 facilities, mainly outpatient rehabilitation centers.

HealthSouth describes itself as the largest U.S. provider of diagnostic imaging, outpatient surgery, and rehabilitation services. It has almost 1,700 locations nationwide plus Britain, Australia, Puerto Rico, Saudi Arabia and Canada.