The Emerson Firm Announces Class Action Lawsuit Against HealthSouth Corporation on Behalf of Investors -- HRC

Little Rock, Arkansas, UNITED STATES

HOUSTON, Sept. 19, 2002 (PRIMEZONE) -- The Emerson Firm, a securities class action trial law firm, announced today that a class action has been filed in the United States District Court for the Northern District of Alabama, Southern Division, on behalf of purchasers of HealthSouth Corporation ("HealthSouth" or the "Company") (NYSE:HRC) publicly traded securities during the period between January 14, 2002 and August 26, 2002, inclusive (the "Class Period"). The complaint alleges that HealthSouth's Chief Executive Officer admitted that HealthSouth knew of problems with its Medicare billing practices as early as June 6, 2002, two full months before the date the Company previously disclosed. A copy of the complaint filed in this action is available from the Court or can be obtained from the Firm's Investor Relations Department by making a toll free call.

The complaint alleges widespread securities fraud and charges that defendants HealthSouth, Richard M. Scrushy (CEO, Chairman), Weston L. Smith (CFO, Executive VP), William Owens (Chief Operating Officer) and George Strong (director) violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between January 14, 2002 and August 27, 2002. According to the complaint, throughout the Class Period, HealthSouth issued press releases and filed reports with the SEC announcing impressive revenue and earnings growth and repeatedly assuring the market that the Company was well on its way to meeting its financial targets for the year 2002 and that its fundamentals were strong. According to the complaint, on August 27, 2002, HealthSouth shocked the market by issuing a press release announcing that CMS directives issued on July 1, 2002 concerning reimbursements may result in a $175 million shortfall in EBITDA from previously issued financial guidance for 2002 and that it could not provide further guidance for 2002 and 2003 because of uncertainties posed by the directives. In addition, the Company announced that it would spin-off its surgery-center division as part of a massive restructuring undertaken to deal with the developments and that defendant Scrushy would be replaced as CEO by defendant Owens. In response to this disclosure, HealthSouth stock plummeted by over 43% to close at $6.71 per share in a single day on extremely high trading volume. The Complaint further alleges that defendants failed to disclose the facts concerning the CMS directives and EBITDA shortfalls, which had been known to them for many months, in order to allow defendants Scrushy and Strong to sell (collectively) millions of shares of the Company's stock at artificially inflated prices and so that the Company could commence a $998 million note exchange/offer on more favorable terms than if the truth regarding the CMS directives and their impact on the Company was known publicly. On August 27, 2002, when HealthSouth announced that certain Medicare "billing changes" would cause HealthSouth's earnings to fall well below guidance, defendant Scrushy claimed that the full impact of this "new" information was only learned by HealthSouth on August 15, 2002, which explained why HealthSouth did not disclose the information to HealthSouth investors earlier. These statements were false as William Owens, HealthSouth's Chief Executive Officer, has now admitted that HealthSouth knew of a potential problem by at least June 6, 2002, and defendant George Strong sold nearly $2 million worth of HealthSouth stock between June 7- 11, 2002. HealthSouth and Scrushy's assertion that they disclosed this adverse information timely is further undermined by the fact that the Centers for Medicare and Medicaid ("CMS") have stated that the "new" information "identified" by HealthSouth and Scrushy was not "new" information at all, but a mere clarification of existing policy. Moreover, CMS had never permitted healthcare providers to seek payment for individual services when such services were, in fact, provided not to an individual but to a group of individuals, and HealthSouth was seeking such improper reimbursement nonetheless. Investors lost millions while defendant Scrushy sold over $50 million worth of HealthSouth stock at artificially inflated prices before the collapse.

If you bought HealthSouth publicly traded securities between January 14, 2002 and August 27, 2002, inclusive, and you wish to serve as lead plaintiff, you must move the Court no later than October 28, 2002. If you are a member of this class, you can join this class action by contacting Ms. Tanya Autry as indicated below. Any member of the purported class may move the Court to serve as lead plaintiff through The Emerson Firm or other counsel of their choice.

The Emerson Firm has significant experience prosecuting class actions on behalf of investors and litigating corporate governance cases. The Firm has offices in both Houston and Little Rock, Arkansas, and represents investors throughout the country. If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact the Investor Relations Department of The Emerson Firm by calling Ms. Tanya Autry toll free at (800) 663-9817 or by e-mail at the address below.

 Investor Relations Department:
 Ms. Tanya R. Autry
 830 Apollo Lane
 Houston, Texas 77058
 Toll Free: 1-800-663-9817
 Media Contact:
 John G. Emerson, Jr.

More information on this and other class actions can be found on the Class Action Newsline at


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