Health South Corporation Case Study Example | Topics and Well Written Essays - 750 words

Health South Corporation - Case Study Example d risks associated with buying various businesses from HealthSouth and deciding whether it would be prudent of White Rock Capital to make such an investment. Of particular interest is the ambulatory surgery division, diagnostic centers and rehabilitation facilities earmarked for disposal. He is responsible for determining the nature and extent of the fraud case and the repurcusions of fraud. The cases under investigation involve fraud allegations against Healthsouth. In particular, Healthsouth is alleged to have billed group therapy as concurrent therapy. The concurrent therapy system was later (2002) abolished by the CMS upon the issue of a clarification requiring that all concurrent therapy services be reimbursed at group therapy rates. This policy change by the CMS was important to Healthsouth’s business interests as the concurrent therapy program generated more capital than the group therapy program. For eample, Healthsouth lowered its EBITDA by $172 million in the fiscal year 2002 as a result of changes in medicare reimbursements for its outpatient rehabilitation services. It is important for Nair to thoroughly scrutinise the suspect transactions carried out by Scrushy. One suspicious transaction is Scrushy’s decision to sell $74 million of his stock in may 2002 despite having previously announced satisfaction with analyst’s estimates of 39% grofit growth in early 2002. Another suspect transaction was Scrushy’s sale of shares in July 2002 to repay an outstanding loan he owed the company before the company’s profit warning. Despite the transaction being approved by the company’s Compensation Committee the shares of Health South tumbled 44% on august 27 2002 closing at $6.69 per share (Ferrell, Fraedrich and Ferrell, 2013). Nair should also note that the initiative by Healthsouth to spin-off its ambulatory surgery division and the shedding of other assets was in the aftermath of a SEC request for documents. There was concern among analysts that