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     <!-- Control Number: ny12969                                                          -->
     <!-- Rev Number:     8-K                                                              -->
     <!-- Client Name:    HealthSouth Corporation                                          -->
     <!-- Project Name:   NY12969                                                          -->
     <!-- Firm Name:      HealthSouth Corp                                                 -->
     <TITLE>8-K</TITLE>
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<TD><H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
UNITED STATES<BR>SECURITIES AND EXCHANGE COMMISSION</font><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Washington, D.C. 20549  </FONT></H1></TD></TR>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4>FORM 8-K  </FONT></H1></TD></TR>
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<TD><H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CURRENT REPORT</font>
<BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 </FONT></H1></TD></TR>
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<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date of Report (date of earliest event reported):&nbsp;&nbsp; June 1, 2004 </FONT></TD></TR>
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     <TD WIDTH="600" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>HEALTHSOUTH Corporation</U></FONT></TD></TR>
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     <TD WIDTH="600" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Exact Name of Registrant as Specified in its Charter)</FONT></TD></TR>
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<td Align=CENTER Width=30%><Font Face="Times New Roman, Times, Serif" Size=2>&nbsp; </font></td>
<td Align=CENTER Width=40%><Font Face="Times New Roman, Times, Serif" Size=2><U>Delaware</U> </font></td>
<td Align=CENTER Width=30%><Font Face="Times New Roman, Times, Serif" Size=2><U>&nbsp;</U> </font></td>
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<td Align=CENTER><Font Face="Times New Roman, Times, Serif" Size=2>&nbsp;</font></td>
<td Align=CENTER><Font Face="Times New Roman, Times, Serif" Size=2>(State or Other Jurisdiction of Incorporation) </font></td>
<td Align=CENTER><Font Face="Times New Roman, Times, Serif" Size=2> &nbsp; </font></td>
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<td Align=CENTER Width=40%><Font Face="Times New Roman, Times, Serif" Size=2><U>1-10315</U> </font></td>
<td Align=CENTER Width=10%><Font Face="Times New Roman, Times, Serif" Size=2> </font></td>
<td Align=CENTER Width=45%><Font Face="Times New Roman, Times, Serif" Size=2><U>63-0860407</U> </font></td>
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<td Align=CENTER><Font Face="Times New Roman, Times, Serif" Size=2> </font></td>
<td Align=CENTER><Font Face="Times New Roman, Times, Serif" Size=2> (Commission File Number) </font></td>
<td Align=CENTER><Font Face="Times New Roman, Times, Serif" Size=2>&nbsp;</font></td>
<td Align=CENTER><Font Face="Times New Roman, Times, Serif" Size=2>(IRS Employer Identification No.) </font></td>
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     <TD WIDTH="600" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U> One HEALTHSOUTH Parkway, Birmingham, Alabama 35243</U></FONT></TD></TR>
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     <TD WIDTH="600" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Address of Principal Executive Offices, Including Zip Code)</FONT></TD></TR>
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     <TD WIDTH="600" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U> (205) 967-7116</U></FONT></TD></TR>
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     <TD WIDTH="600" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Registrant's Telephone Number, Including Area Code)</FONT></TD></TR>
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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ITEM
9. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regulation FD Disclosure. </FONT></TD></TR></TABLE><BR>

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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June 1, 2004, representatives of HEALTHSOUTH Corporation will begin providing to
HEALTHSOUTH employees a letter to be used to update employees on recent developments at
HEALTHSOUTH. We are furnishing the text of this letter pursuant to the Securities and
Exchange Commission&#146;s Regulation FD. This information is furnished pursuant to Item
9 of Form 8-K and shall not be deemed to be &#147;filed&#148; for purposes of Section 18
of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that
Section, unless we specifically incorporate it by reference in a document filed under the
Securities Act of 1933 or the Securities Exchange Act of 1934. By filing this report on
Form 8-K and furnishing this information, we make no admission as to the materiality of
any information in this report that is required to be disclosed solely by reason of
Regulation FD.  </FONT></TD></TR>
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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information contained in the letter is summary information that is intended to be
considered in the context of our SEC filings and other public announcements that we may
make, by press release or otherwise, from time to time. We undertake no duty or
obligation to publicly update or revise the information contained in this report,
although we may do so from time to time as our management believes is warranted. Any such
updating may be made through the filing of other reports or documents with the SEC,
through press releases or through other public disclosure.  </FONT></TD></TR>
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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information presented in this report (including the letter) includes forward-looking
statements in addition to historical information. These statements involve known and
unknown risks and relate to future events, our future financial performance or our
projected business results. In some cases, you can identify forward-looking statements by
terminology such as &#147;may,&#148; &#147;will,&#148; &#147;should,&#148;&#147;expects,&#148; &#147;plans,&#148; &#147;anticipates,&#148; &#147;believes,&#148;&#147;estimates,&#148; &#147;predicts,&#148; &#147;targets,&#148; &#147;potential&#148; or
&#147;continue&#148; or the negative of these terms or other comparable terminology. Such
forward-looking statements are necessarily estimates based upon current information,
involve a number of risks and uncertainties and are made pursuant to the &#147;safe harbor&#148; provisions
of the Private Securities Litigation Reform Act of 1995. Actual events or results may
differ materially from the results anticipated in these forward-looking statements as a
result of a variety of factors. While it is impossible to identify all such factors,
factors which could cause actual results to differ materially from those estimated by us
include: the investigations by the Department of Justice, the SEC and other governmental
agencies into our financial reporting and related activity calling into question the
accuracy of our previously filed financial statements; our statement that, as a result of
the investigations, our previously filed financial statements should no longer be relied
upon and we may restate our prior financial statements; the withdrawal by our former
accountants of their audit reports on all of our previously filed financial statements;
the outcome of pending litigation filed against us; significant changes in our management
team; our ability to successfully amend, restructure and/or renegotiate our existing
indebtedness or cure or receive waivers of the events of default under such agreements,
the failure of which may result in our filing of a voluntary petition for bankruptcy; our
ability to continue to operate in the ordinary course and manage our relationships with
our creditors, including our lenders, bondholders, vendors and suppliers, employees and
patients; changes, delays in or suspension of reimbursement for our services by
governmental or private payors; changes in the regulation of the healthcare industry at
either or both of the federal and state levels; changes to or delays in the
implementation of the prospective payment system for inpatient rehabilitation services;
competitive pressures in the healthcare industry and our response thereto; our ability to
obtain and retain favorable arrangements with third-party payors; general conditions in
the economy and capital markets; and other factors which may be identified from time to
time in our SEC filings and other public announcements.  </FONT></TD></TR>
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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
text of the letter is as follows:  </FONT></TD></TR>
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<TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>[LOGO
OMITTED] </FONT></TD></TR>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>June
1, 2004 </FONT></P></TD></TR>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dear Fellow
Employees,&nbsp; </FONT></P></TD></TR>
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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Earlier
today, HealthSouth announced that the Special Audit Review Committee, assisted by legal
counsel Balch &amp; Bingham LLP and a forensic accounting team from PricewaterhouseCoopers
LLP (PwC), has completed and delivered its forensic accounting report to our Special
Committee of the Board of Directors. </FONT></TD></TR></TABLE><BR>

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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Special Audit Review Committee was established to conduct an independent investigation of
accounting irregularities at HealthSouth, and its report is the result of an extensive
review conducted over approximately 14 months. The completion of the report represents yet
another step in putting the past behind us and will help lay the foundation for a new
beginning at HealthSouth. </FONT></TD></TR></TABLE><BR>

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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
findings of the report are consistent with our previous estimates of the fraudulent and
inappropriate accounting. As you may remember, on January 20, 2004, HealthSouth estimated
that the cumulative effect of the accounting errors in the Company&#146;s prior financial
statements (including fraudulent entries, acquisition accounting inaccuracies and non-GAAP
accounting) was approximately between $3.8 billion and $4.6 billion. </FONT></TD></TR></TABLE><BR>

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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We
have provided copies of the report to Alice H. Martin, United States Attorney for the
Northern District of Alabama, and to the staff of the Securities and Exchange Commission
(the &#147;SEC&#148;). The full text of the report also is being filed with the SEC today
by HealthSouth, so it will be publicly available. A link to the SEC filing will be
available on inside.healthsouth.com. </FONT></TD></TR></TABLE><BR>

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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>It
is important to note that the forensic review concerns itself with HealthSouth&#146;s
<I>historical</I> financial statements. The findings of the report do not have any affect
whatsoever on HealthSouth&#146;s day-to-day business of providing outstanding care to our
patients. Our operations and cash flow continue to be strong and we remain focused on
building a future of solid growth and profitability. </FONT></TD></TR></TABLE><BR>

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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
just 14 months, HealthSouth has put in place procedures and committed substantial
resources to reinforce our dedication to high standards of business conduct now and into
the future. </FONT></TD></TR></TABLE><BR>

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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Some
of the numerous steps taken include: </FONT></TD></TR></TABLE>

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<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
change in the composition of the Board of Directors, with five long-standing members
agreeing to voluntarily resign as part of a board transition plan. Since September 2003,
four new directors have joined the board;</FONT></TD>
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<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
appointment of a Chief Executive Officer, Chief Compliance Officer, General Counsel,
Controller, Senior Vice President of Internal Audit and numerous other managers in the
Corporate Compliance, Finance and Internal Audit areas;</FONT></TD>
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<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
revision of our Corporate Governance Guidelines to take into account not only legal and
regulatory requirements, but also current corporate governance best practices;</FONT></TD>
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<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
adoption of a revised compliance program, including revised Standards of Business
Conduct, which has been distributed to all employees;</FONT></TD>
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<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an
increase in the size and the scope of both the Compliance Department and the Internal
Audit Department, with direct reporting responsibilities to the Compliance and Audit
Committees of the Board of Directors, respectively;</FONT></TD>
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<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
implementation of various technology solutions to enhance our internal control
environment, including systems integration, account reconciliation applications,
procurement and data integration systems and patient accounting systems; </FONT></TD>
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<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o</FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
adoption of more disciplined financial policies, procedures and controls that we believe
will result in more efficient and appropriate reporting of financial and operating
results; and</FONT></TD>
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<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=8%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>o </FONT></TD>
<TD WIDTH=84%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
elimination of opportunities for any individual or group of individuals to make
unilateral decisions. </FONT></TD>
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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As
we reconstruct our accounting records, the new management team and the Special Committee
of the Board of Directors will carefully review the forensic accounting report and the
supporting documentation and will implement any additional appropriate measures to address
the findings of the report. </FONT></TD></TR></TABLE><BR>

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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
be sure, the fundamentals already are in place at numerous levels of HealthSouth for
renewed success, and we will continue to improve our corporate culture to ensure that
appropriate principles are effectively put into practice. We will continue to build a
culture characterized by integrity, quality, compliance, execution, cost-effectiveness and
open communication. You deserve nothing less. </FONT></TD></TR></TABLE><BR>

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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
look forward to continuing to focus on our important, day-to-day business of providing
outstanding care to our patients throughout the country. </FONT></TD></TR></TABLE><BR>

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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Once
again, thank you for your continued support and hard work. </FONT></TD></TR></TABLE><BR>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sincerely, <BR><BR>
/s/ Jay Grinney<BR><BR>
Jay Grinney <BR>
President  <BR>
Chief Executive Officer <BR>
</FONT></P></TD></TR>
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<TD><H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES </FONT></H1></TD></TR>
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<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned hereunto duly
authorized.  </FONT></TD></TR>
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    <TD WIDTH="44%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp; </FONT></TD>
    <TD WIDTH="48%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"> HEALTHSOUTH CORPORATION </FONT></TD>
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    <TD WIDTH="39%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp; <!-- DATE--> </FONT></TD>
    <TD WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp; </FONT></TD>
    <TD WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">By: </FONT></TD>
    <TD WIDTH="43%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;/s/ Gregory L. Doody   </FONT></TD>
  </TR>
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    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp; </FONT></TD>
    <TD>&nbsp; </TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp; </FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp; </FONT></TD>
    <TD> <HR NOSHADE SIZE="1"> </TD>
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    <TD WIDTH="57%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp; </FONT></TD>
    <TD WIDTH="8%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Name:</FONT></TD>
    <TD WIDTH="35%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Gregory L. Doody </FONT></TD>
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  <TR VALIGN="BOTTOM">
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp; </FONT></TD>
    <TD VALIGN="TOP"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Title:</FONT></TD>
    <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Executive Vice President, <BR>
&nbsp;&nbsp;&nbsp;&nbsp;General Counsel and Secretary</FONT></TD></TR>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated:
June 1, 2004 </FONT></P></TD></TR>
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8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported):   June 1, 2004
HEALTHSOUTH Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-10315
63-0860407
(Commission File Number)
(IRS Employer Identification No.)
One HEALTHSOUTH Parkway, Birmingham, Alabama 35243
(Address of Principal Executive Offices, Including Zip Code)
(205) 967-7116
(Registrant's Telephone Number, Including Area Code)
ITEM
9.      Regulation FD Disclosure.
On
June 1, 2004, representatives of HEALTHSOUTH Corporation will begin providing to
HEALTHSOUTH employees a letter to be used to update employees on recent developments at
HEALTHSOUTH. We are furnishing the text of this letter pursuant to the Securities and
Exchange Commission's Regulation FD. This information is furnished pursuant to Item
9 of Form 8-K and shall not be deemed to be "filed" for purposes of Section 18
of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that
Section, unless we specifically incorporate it by reference in a document filed under the
Securities Act of 1933 or the Securities Exchange Act of 1934. By filing this report on
Form 8-K and furnishing this information, we make no admission as to the materiality of
any information in this report that is required to be disclosed solely by reason of
Regulation FD.
The
information contained in the letter is summary information that is intended to be
considered in the context of our SEC filings and other public announcements that we may
make, by press release or otherwise, from time to time. We undertake no duty or
obligation to publicly update or revise the information contained in this report,
although we may do so from time to time as our management believes is warranted. Any such
updating may be made through the filing of other reports or documents with the SEC,
through press releases or through other public disclosure.
The
information presented in this report (including the letter) includes forward-looking
statements in addition to historical information. These statements involve known and
unknown risks and relate to future events, our future financial performance or our
projected business results. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should,""expects," "plans," "anticipates," "believes,""estimates," "predicts," "targets," "potential" or
"continue" or the negative of these terms or other comparable terminology. Such
forward-looking statements are necessarily estimates based upon current information,
involve a number of risks and uncertainties and are made pursuant to the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995. Actual events or results may
differ materially from the results anticipated in these forward-looking statements as a
result of a variety of factors. While it is impossible to identify all such factors,
factors which could cause actual results to differ materially from those estimated by us
include: the investigations by the Department of Justice, the SEC and other governmental
agencies into our financial reporting and related activity calling into question the
accuracy of our previously filed financial statements; our statement that, as a result of
the investigations, our previously filed financial statements should no longer be relied
upon and we may restate our prior financial statements; the withdrawal by our former
accountants of their audit reports on all of our previously filed financial statements;
the outcome of pending litigation filed against us; significant changes in our management
team; our ability to successfully amend, restructure and/or renegotiate our existing
indebtedness or cure or receive waivers of the events of default under such agreements,
the failure of which may result in our filing of a voluntary petition for bankruptcy; our
ability to continue to operate in the ordinary course and manage our relationships with
our creditors, including our lenders, bondholders, vendors and suppliers, employees and
patients; changes, delays in or suspension of reimbursement for our services by
governmental or private payors; changes in the regulation of the healthcare industry at
either or both of the federal and state levels; changes to or delays in the
implementation of the prospective payment system for inpatient rehabilitation services;
competitive pressures in the healthcare industry and our response thereto; our ability to
obtain and retain favorable arrangements with third-party payors; general conditions in
the economy and capital markets; and other factors which may be identified from time to
time in our SEC filings and other public announcements.
The
text of the letter is as follows:
[LOGO
OMITTED]
June
1, 2004
Dear Fellow
Employees,
Earlier
today, HealthSouth announced that the Special Audit Review Committee, assisted by legal
counsel Balch & Bingham LLP and a forensic accounting team from PricewaterhouseCoopers
LLP (PwC), has completed and delivered its forensic accounting report to our Special
Committee of the Board of Directors.
The
Special Audit Review Committee was established to conduct an independent investigation of
accounting irregularities at HealthSouth, and its report is the result of an extensive
review conducted over approximately 14 months. The completion of the report represents yet
another step in putting the past behind us and will help lay the foundation for a new
beginning at HealthSouth.
The
findings of the report are consistent with our previous estimates of the fraudulent and
inappropriate accounting. As you may remember, on January 20, 2004, HealthSouth estimated
that the cumulative effect of the accounting errors in the Company's prior financial
statements (including fraudulent entries, acquisition accounting inaccuracies and non-GAAP
accounting) was approximately between $3.8 billion and $4.6 billion.
We
have provided copies of the report to Alice H. Martin, United States Attorney for the
Northern District of Alabama, and to the staff of the Securities and Exchange Commission
(the "SEC"). The full text of the report also is being filed with the SEC today
by HealthSouth, so it will be publicly available. A link to the SEC filing will be
available on inside.healthsouth.com.
It
is important to note that the forensic review concerns itself with HealthSouth's
historical
financial statements. The findings of the report do not have any affect
whatsoever on HealthSouth's day-to-day business of providing outstanding care to our
patients. Our operations and cash flow continue to be strong and we remain focused on
building a future of solid growth and profitability.
In
just 14 months, HealthSouth has put in place procedures and committed substantial
resources to reinforce our dedication to high standards of business conduct now and into
the future.
Some
of the numerous steps taken include:
o
a
change in the composition of the Board of Directors, with five long-standing members
agreeing to voluntarily resign as part of a board transition plan. Since September 2003,
four new directors have joined the board;
o
the
appointment of a Chief Executive Officer, Chief Compliance Officer, General Counsel,
Controller, Senior Vice President of Internal Audit and numerous other managers in the
Corporate Compliance, Finance and Internal Audit areas;
o
the
revision of our Corporate Governance Guidelines to take into account not only legal and
regulatory requirements, but also current corporate governance best practices;
o
the
adoption of a revised compliance program, including revised Standards of Business
Conduct, which has been distributed to all employees;
o
an
increase in the size and the scope of both the Compliance Department and the Internal
Audit Department, with direct reporting responsibilities to the Compliance and Audit
Committees of the Board of Directors, respectively;
o
the
implementation of various technology solutions to enhance our internal control
environment, including systems integration, account reconciliation applications,
procurement and data integration systems and patient accounting systems;
o
the
adoption of more disciplined financial policies, procedures and controls that we believe
will result in more efficient and appropriate reporting of financial and operating
results; and
o
the
elimination of opportunities for any individual or group of individuals to make
unilateral decisions.
As
we reconstruct our accounting records, the new management team and the Special Committee
of the Board of Directors will carefully review the forensic accounting report and the
supporting documentation and will implement any additional appropriate measures to address
the findings of the report.
To
be sure, the fundamentals already are in place at numerous levels of HealthSouth for
renewed success, and we will continue to improve our corporate culture to ensure that
appropriate principles are effectively put into practice. We will continue to build a
culture characterized by integrity, quality, compliance, execution, cost-effectiveness and
open communication. You deserve nothing less.
I
look forward to continuing to focus on our important, day-to-day business of providing
outstanding care to our patients throughout the country.
Once
again, thank you for your continued support and hard work.
Sincerely,
/s/ Jay Grinney
Jay Grinney
President
Chief Executive Officer
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned hereunto duly
authorized.
HEALTHSOUTH CORPORATION
By:
/s/ Gregory L. Doody
Name:
Gregory L. Doody
Title:
Executive Vice President,
General Counsel and Secretary
Dated:
June 1, 2004