HealthSouth Fraud and the role of Ernst Young
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HealthSouth's History
Richard Scrushy was a young healthcare executive in the early 1980s. During that time, he had watched insurance companies reduce the amounts of reimbursements paid to traditional medical facilities and practitioners. To capitalize on this trend he had an idea to create a high-quality hospital-type outpatient rehabilitation center in a low-cost setting.1 In 1984, a Citicorp executive overheard Scrushy discussing his plan with a colleague over lunch. The executive offered Scrushy a $1 million dollar investment, which he used to found Amcare Inc in Birmingham, Alabama.
Amcare fed off of the idea that Medicare and insurance companies would fully reimburse for the outpatient physical therapy that they provided because it was cheaper than the alternativeextremely costly surgery and hospital stays. For instance, a four-week back treatment regiment at Amcare was priced at $3,700--far less than the cost of back surgery. In addition, physical therapy allowed injured workers to get back to work faster, which eliminated worker's compensation and disability costs.1 Scrushy also gave rehabilitation a new face by making the rehabilitation centers look more like health spas.
In 1985, the company changed its name to HealthSouth Rehabilitation Corporation...