November 2002

Industry Watch

HEALTHSOUTH ATTEMPTS TO EASE INVESTOR CONCERNS

HealthSouth Corp, Birmingham, Ala, has confirmed that it is being investigated by the Securities and Exchange Commission (SEC), amid increasing concerns over its Medicare billing practices and stock sales by its chairman. In a recent conference call with investors and analysts, HealthSouth officials said that the company’s businesses were fundamentally sound, and they outlined steps being taken to restore confidence in management. The officials also reported that the company initiated contact with the SEC and plans to cooperate fully with the regulators’ inquiry; it has hired the law firm of Fulbright and Jaworski to review recent events at the company, as well as claims made in a shareholder lawsuit that HealthSouth should have disclosed problems with its billing practices earlier. The company is also considering a number of corporate governance reforms, including a review of the independence of its outside directors, and has named a new director to oversee a special committee of the board to look into some of the claims. During the conference call, HealthSouth chairman Richard M. Scrushy argued that investors had overreacted to the company’s disclosure that what it considers a change in Medicare billing practices would cut into profits. However, investors reportedly remain skeptical, due to a recent 27% drop in the company’s stock.

MCFAUL AND LYONS GROUP ACQUIRED BY PRIVATE COMPANY

The McFaul and Lyons Group, Trenton, NJ, has been acquired from Johnson & Johnson, Somerville, NJ, by a private investment company based in Horsham, Pa. The McFaul and Lyons Group is a provider of resource and expense management services and consulting, and specializes in resource management and materials contracting areas that save costs for providers of health care.

BENCHMARK COMPLETES ACQUISITIONA

Benchmark Medical Inc, Malvern, Pa, a provider of musculoskeletal outpatient rehabilitation, has acquired Western Ohio Therapy Associates, Greenville, Ohio. Western offers comprehensive physical, occupational, and speech therapy programs. Benchmark operates more than 220 points of service in 14 states.

LINDQUIST SIGNS DEAL WITH TOTAL GYM

efi Sports Medicine/Total Gym, San Diego, has announced that triathlete Barb Lindquist has signed a 2-year sponsorship agreement to promote Total Gym. Lindquist is the second-ranked female triathlete in the United States and worldwide, and uses Total Gym for injury prevention, strength building, and sport-specific training. The sponsorship will include clothing, public appearances, and editorial opportunities.

US PHYSICAL THERAPY ANNOUNCES THIRD QUARTER EXPECTATIONS

US Physical Therapy Inc, Houston, has announced its expected results for the third quarter 2002, based on currently available data. The company believes patient visits will be down from the second quarter 2002 by 2%, though visits should be up from the third quarter 2001 by 13% to 15%. In addition, the company expects fully diluted earnings per share of $0.15 to $0.16 for the quarter, compared to $0.14 for the third quarter 2001 and $0.18 for the second quarter of 2002. For the 9 months ending September 30, fully diluted earnings per share are expected to be $0.49 to $0.50, compared to $0.40 for the same period in 2001.

REHABILICARE REPORTS OPERATING RESULTS

Rehabilicare Inc, New Brighton, Minn, has reported operating results for the fourth quarter and fiscal year ended June 30. Consolidated revenue for the fourth quarter was $20.1 million, up 17% from revenue of $17.2 million for the fourth quarter of fiscal 2001. US revenue increased 10% to $12.5 million from $11.3 million last year. The company’s operating income was $2.4 million for the quarter, compared with operating income of $1.1 million for the fourth quarter of fiscal 2001. Net income was $1.3 million, compared with $514,000 last year. For the 12 months ended June 30, revenue was $72.5 million, up 15% from revenue of $62.9 million for the 12 months ended June 30, 2001.

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