HealthSouth suspends plan for spinoff surgery company

Posted 11:06AM on Thursday 17th October 2002 ( 22 years ago )

BIRMINGHAM, Ala. - HealthSouth Corp., which suffered a sharp drop in its stock price after announcing a change in its earnings outlook, is suspending plans to turn its surgery center division into a separate, publicly traded company. HealthSouth chairman and former CEO Richard Scrushy said Wednesday the split does not make economic sense now, based on comments from investors and lenders and conditions in the debt and equity markets. "We believe the enhanced focus we have brought to our surgery center operations during this process will help us to improve those operations while they continue as part of our national network," current CEO William T. Owens said in a company news release. HealthSouth, which operates the largest network of outpatient surgery facilities in the country, announced the plan to spin off the surgery center division in a conference call with investors and analysts on Aug. 27. In that same call, HealthSouth officials revealed that a clarification of Medicare billing policy would reduce the company's profit from its rehabilitative care divisions by up to $175 million. The stock of the company, which closed at $11.97 a share on Aug. 26, plummeted with the news, dropping 47 percent in value in the two days after the announcement. It closed Wednesday at $3.61. Scrushy had been tapped to serve as chairman of both HealthSouth and the new company, Surgical Care Affiliates, which would have operated 209 outpatient surgery centers in 37 states. Scrushy, who stepped down as CEO of HealthSouth with the Aug. 27 announcement, is under investigation by the Securities and Exchange Commission and the subject of several class-action lawsuits by investors. They question his sale of HealthSouth stock in the months and weeks prior to the Aug. 27 announcement that triggered the stock price plunge. A key issue is Scrushy's sale in late July - less than a month before the announcement - of 2.5 million shares at $10.06 each to pay off a debt to the company. But in September, after the suits were filed and the share price fell, Scrushy bought nearly 1.1 million shares of HealthSouth stock. HealthSouth is the nation's largest provider of outpatient surgery, diagnostic imaging and rehabilitation services with about 1,900 locations in all 50 states, Britiain, Australia, Puerto Rico and Canada. The company had revenues of some $4.3 billion last year.

http://accesswdun.com/article/2002/10/188791