Exhibit 10.1

 

SETTLEMENT AGREEMENT1

 

I. PARTIES

 

This Settlement Agreement (“Agreement”) is entered into among the United States
of America, acting through the United States Department of Justice; the Office
of Inspector General (“OIG-HHS”) of the Department of Health and Human Services
(“HHS”); the Department of Labor (“DOL”), through the Employment Standards
Administration’s Office of Workers’ Compensation Programs, Division of Federal
Employees’ Compensation (OWCP-DFEC); and the TRICARE Management Activity (TMA)
through its General Counsel (collectively, the “United States”); James Devage
(“Devage”), DeWayne Manning (“Manning”), John J. Darling (“Darling”), [**], and
Brupbacher & Associates and Michael Freeman (“Brupbacher and Freeman”)
(collectively, the “Relators”); and, with respect to the entities identified on
Attachment A, HealthSouth Corporation, its predecessors and current and former
subsidiaries, divisions, affiliates, and in its capacity as a joint venture
participant and its capacity as an owner or manager (collectively,
“HealthSouth”), all of the above may be referred to as “the Parties”), through
their authorized representatives.

 

II. PREAMBLE

 

As a preamble to this Agreement, the Parties agree to the following:

 

A. HealthSouth is a corporation organized under the laws of the State of
Delaware with its headquarters in Birmingham, Alabama. HealthSouth provides
outpatient and inpatient rehabilitation health care services in over 1,400
facilities throughout the United States.

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1 [**] Denotes language for which HEALTHSOUTH Corporation has requested
confidential treatment pursuant to the rules and regulations of the Securities
Exchange Act of 1934, as amended.

 

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B. Relator Devage is an individual resident of the State of Texas. On April 24,
1998, Devage filed a qui tam action in the United States District Court for the
Western District of Texas captioned United States ex rel. James Devage v.
HealthSouth Corporation, et al., No. SA-98-CA-0372-DWS (W.D. Tex.) (hereinafter,
“the Devage Case”) in which Devage alleged that HealthSouth billed for excessive
units of one-on-one therapy. Relator Manning is an individual resident of the
State of Alabama. On August 18, 1999, Manning filed a qui tam action in the
United States District Court for the Northern District of Alabama captioned
United States ex rel. Manning v. HealthSouth Corporation, et al., No. 02-CV-676
(W.D. Tex.) (originally filed N.D. Ala.) in which Manning alleged that
HealthSouth billed for services provided by unlicensed providers. Relator
Darling is an individual resident of the State of Florida. On February 29, 2000,
Darling filed a qui tam action in the United States District Court for the
Middle District of Florida captioned United States ex rel. Darling v.
HealthSouth Sports and Rehabilitation Center of Clearwater, No. 02-cv-667 (W.D.
Tex.) (originally filed M.D. Fla.) in which Darling alleged that HealthSouth
billed for excessive units of one-on-one therapy and for services provided by
unlicensed providers. The Darling case was subsequently transferred to the
Western District of Texas. The complaint filed in one other qui tam case was
transferred to the Western District of Texas. That case is United States ex rel.
Mandel v. HealthSouth Corporation, No. 02-cv-751 (W.D. Tex.) (originally filed
E.D.N.Y.). The United States intervened in the Devage, Manning, Darling, and
Mandel Cases on January 23, 2002 and filed the United States’ Complaint in the
Devage action on May 23, 2002 (hereinafter referred to as “the United States’
Complaint in Intervention”). Relator Devage was afforded the opportunity to
proceed on the claims

 

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brought in the Devage Case that were not contained in the United States’
Complaint in Intervention, but Relator Devage opted on June 7, 2002 not to
proceed and the claims were dismissed with prejudice as to Relator Devage. The
United States’ Complaint in Intervention superseded the Complaint in the Devage
Case. The Manning, Darling and Mandel cases were administratively closed by
Court Order dated June 24, 2003. The case that went forward upon the filing of
the United States’ Complaint in Intervention is hereinafter referred to as the
“United States’ Case.”

 

C. [**]

 

D. Relator Brupbacher & Associates is a professional accounting firm doing
business in the State of Louisiana. Relator Michael Freeman is an individual
resident of the State of Louisiana. On May 10, 1998, these relators filed a qui
tam action in the United States District Court for the District of New Mexico
captioned United States ex rel. Brupbacher & Associates et al. v. National
Institutional Pharmacy Services, Inc., et al., No. 98-523LH (D. N.M.)
(hereinafter, “the Brupbacher Case”) in which Brupbacher and Freeman alleged
that the National Institutional Pharmacy Services, Inc. (“NIPSI”), which, from
November 1, 1997 through January 1, 1998 was owned by HealthSouth, and numerous
skilled nursing facilities (“SNFs”), which were also owned or operated by
HealthSouth during the same time period, fraudulently bundled the costs of
skilled labor for infusion therapy services into the prices charged for infusion
drugs, solutions, and equipment in order to avoid routine cost limitations for
reimbursement in Medicare regulations.

 

E. The United States’ Case and the Devage, Manning, Darling, Mandel, [**] and
Brupbacher Cases shall be collectively referred to hereinafter as the “Civil
Actions.”

 

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F. HealthSouth submitted or caused to be submitted claims for payment to the
Medicare Program (Medicare), Title XVIII of the Social Security Act, 42 U.S.C.
§§ 1395-1395ggg; the TRICARE Program (also known as the Civilian Health and
Medical Program of the Uniformed Services (CHAMPUS)), 10 U.S.C. §§ 1071-1109;
and to the Federal Employees’ Compensation Act (FECA), administered by the
United States Department of Labor, 5 U.S.C. §§ 8101-8193.

 

G. The United States contends that it has certain civil claims, as specified in
Article III, Paragraph D below, against HealthSouth for engaging in the
following conduct during the periods specified (hereinafter referred to as the
“Covered Conduct”).

 

  1. The United States’ Case

 

(a) HealthSouth submitted claims for reimbursement for outpatient physical
therapy services rendered to Medicare, TRICARE, or Department of Labor FECA
beneficiaries without a properly certified or recertified plan of care between
January 1, 1992 and December 31, 2002 in Outpatient Rehabilitation Facilities
(“ORFs”), Comprehensive Outpatient Rehabilitation Facilities (“CORFs”), or
outpatient departments of HealthSouth hospitals. Such plans of care did not
contain one or more of the following: 1) proper or timely signatures of
physicians or other authorized signators; 2) proper certifications or
recertifications; and/or 3) proper descriptions of the frequency, duration,
goals or other plan of care criteria required to meet Medicare, TRICARE or DOL
standards.

 

(b) HealthSouth submitted claims for reimbursement for outpatient skilled
physical therapy services rendered to Medicare, TRICARE, or Department of Labor
FECA beneficiaries by supportive personnel, such as physical

 

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therapy aides, technicians, athletic trainers, students, interns, or unlicensed
and non-credentialed persons between January 1, 1992 and December 31, 2002 in
ORFs, CORFs, or outpatient departments of HealthSouth hospitals.

 

(c) HealthSouth submitted claims for reimbursement for outpatient physical
therapy services rendered to Medicare, TRICARE, or Department of Labor FECA
beneficiaries which sought reimbursement for improper physical therapy claims
between January 1, 1992 and December 31, 2002 in ORFs, CORFs, or outpatient
departments of HealthSouth hospitals. These improper claims for physical therapy
services were for billing for one-on-one services when one-on-one services were
not provided, billing for excessive physical therapy services (i.e., billing
excessive units of physical therapy services), and billing direct contact CPT
codes when providing group physical therapy.

 

  2. HealthSouth Bakersfield

 

HealthSouth and its subsidiary, HealthSouth Bakersfield Rehabilitation Hospital
(“Bakersfield”), sought reimbursement for various categories of unallowable
costs on its 1991 and 1992 Medicare cost reports. Specifically, Bakersfield
filed cost reports with its Medicare Fiscal Intermediary (“FI”) which contained
the following items of unallowable costs:

 

(a) Bakersfield allocated the square footage of a non-reimbursable hospital
department (physician office space) as reimbursable;

 

(b) Bakersfield used an improper methodology for allocating equipment costs;

 

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(c) Bakersfield mishandled certain lease expense payments by treating them as a
capital expense instead of an operating expense;

 

(d) Bakersfield improperly grouped miscellaneous Medicare charges into the
physical therapy cost center which receives the highest Medicare reimbursement
of any Bakersfield cost center, instead of allocating the charges to their
respective cost centers as required;

 

(e) Bakersfield ignored the provider-based physician Reasonable Compensation
Equivalents limit (a per hour dollar limit for physician services);

 

(f) Bakersfield claimed guest meals that are unallowable for Medicare
reimbursement;

 

(g) Bakersfield failed to credit Medicare with payments made by other insurers
(secondary payers);

 

(h) Bakersfield claimed non-allowable marketing expenses;

 

(i) Bakersfield allocated tax expenses to the incorrect cost center;

 

(j) Bakersfield allocated cafeteria costs incorrectly;

 

(k) Bakersfield failed to set up a separate cost center for recreational therapy
as required, and instead grouped the costs of this therapy into the adults and
pediatrics cost center; and

 

(l) Bakersfield failed to disclose interim payments received from Medicare.

 

  3. The Brupbacher Case

 

From November 1, 1997 to January 1, 1998, NIPSI and SNFs owned or operated by
HealthSouth fraudulently bundled the costs of skilled labor for infusion

 

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therapy services into the prices charged for infusion therapy drugs, solutions,
and equipment to avoid routine cost limitations for reimbursement in Medicare
regulations. NIPSI provided infusion therapy drugs, solutions, equipment, and
skilled nursing labor for infusion therapy to SNFs. The SNFs were not directly
billed for the nursing labor because NIPSI bundled that cost into the other,
inflated prices. The SNFs then termed all of the charges “ancillary costs” and
unlawfully billed them to Medicare.

 

  4. Other Cost Report Claims

 

The United States alleges that HealthSouth knowingly submitted claims to
Medicare Part A for costs which were improper or not reimbursable as specified
below, thereby wrongfully claiming Medicare reimbursement for these costs. The
United States contends that these mischarged, improper or nonreimbursable costs
were as follows:

 

(a) Fraudulent Financial Accounting Practices. The United States alleges that
HealthSouth engaged in a number of fraudulent financial accounting practices,
some of which, as specified below, resulted in claims on cost reports, cost
statements, and other requests for federal payment, or payments made with
respect thereto, to which HealthSouth was not entitled. Specifically, the United
States alleges that the conduct described in Subparagraphs (a) (1), (2), (3),
(4), (5) and (6) of this Article II, Paragraph G(4) resulted from HealthSouth’s
fraudulent financial accounting practices, and caused claims to be submitted to
Medicare on cost reports, cost statements and otherwise which resulted in
HealthSouth receiving payments to which it was not entitled.

 

(1) Bonuses. HealthSouth paid bonuses to executives, corporate employees,
facility administrators and other management personnel based in

 

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part on HealthSouth’s achieving specific financial objectives. Between 1995 and
2002, the financial objectives which triggered the bonuses were met and the
bonuses paid because of HealthSouth’s fraudulent financial accounting practices.
Nineteen of the corporate executives who received bonus payments between 1995
and 2001 have since pled guilty to criminal charges arising from their roles in
the fraudulent financial accounting practiced by HealthSouth. Richard Scrushy,
HealthSouth’s former CEO, who received over $50 million in bonuses from
1995-2001 and directed the payment of bonuses to others, has been indicted for
his role in the accounting fraud. In its Medicare Home Office Cost Statements
for cost report periods ending between January 1, 1995 and December 31, 2001,
from which costs are allocated to individual provider Medicare cost reports,
HealthSouth improperly claimed portions of the bonuses paid to Mr. Scrushy,
executives who pled guilty, other corporate employees, facility administrators
and other management personnel despite the fact that these bonuses had been
earned as a result of HealthSouth’s fraudulent financial accounting practices.

 

(2) Fictitious Fixed Assets. HealthSouth recorded over $1.1 billion in
fictitious fixed assets on its books, which resulted in claims on cost reports,
cost statements, and other requests for payment, or payments made with respect
thereto, to which HealthSouth was not entitled. Most of the fictitious asserts
were described as “AP Summary,” and were usually assigned a zero year useful
life for Medicare depreciation purposes. Other fictitious assets were recorded
with a variety of other descriptions, such as “Cap Internet,” “CIP Reclass,”
“Dev Implementation,” “HCAP,” “HealthSouth.com,” “RTN,” and “Software
Implementation” (collectively, the “Non-AP Summary fixed assets”) and recorded
in accounts for the Home Office, including the

 

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Corporate Office and Home Office Mini-Branches, and in accounts for individual
providers. The Non-AP Summary fixed Assets were assigned various useful life
terms for Medicare purposes. HealthSouth fraudulently claimed depreciation costs
for some of the AP Summary and non-AP Summary fixed assets on its Home Office
Cost Statements and Medicare cost reports filed by individual providers for cost
reporting periods ending between January 1, 1998 and December 31, 2001.

 

(3) Aircraft Expenses. HealthSouth maintained a fleet of up to thirteen aircraft
and one helicopter which were used for both patient care and non-patient care
business, and for non-business purposes. In addition to improperly claiming
expenses associated with fictitious assets and unallowable contributions, and
non-patient care usage of the aircraft on its Home Office Cost Statements,
portions of which were allocated to the individual provider cost reports for
cost reporting periods ending between January 1, 1995 and December 31, 2001,
HealthSouth also claimed depreciation and operating costs for the aircraft on
the same Home Office Cost Statements and provider cost reports. The claims for
depreciation and operating expenses were improper because (1) the number of
aircraft and associated overhead claimed for was excessive; (2) the most
expensive aircraft (and therefore the aircraft having the largest amount of
cost) were primarily used for non-patient care purposes; and (3) in 2000 and
2001, HealthSouth continued to claim reimbursement for depreciation for two
aircraft that it had sold in 1999.

 

(4) Gain on Sale of Caremark Stock. In the spring of 2001, HealthSouth sold its
stock in Caremark, a publicly held company, at a $19.3 million gain. HealthSouth
did not report the gain on sale resulting from the Caremark

 

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transaction on its 2001 Medicare Home Office Cost Statement or its individual
provider cost reports, and did not offset the gain against interest expense, nor
was this corrected in subsequent years, which caused HealthSouth to be overpaid
by Medicare on its Home Office Cost Statements and individual provider cost
reports for cost reporting periods including 2001.

 

(5) Depreciation Claims for Assets from Closed Facilities. HealthSouth
improperly claimed depreciation costs for assets which were assigned to certain
facilities which had been closed. These claims were made on individual provider
cost reports for cost reporting periods ending between January 1, 1997 and
December 31, 2001. A list of the affected facilities and cost report years is
identified on Attachment B.

 

(6) Improperly Capitalized Leases. Between January 1, 1997 and December 31,
2001, HealthSouth inappropriately capitalized certain lease expenses in its
accounting records; these lease expenses were recorded as fixed assets in
HealthSouth’s accounting records. A number of these incorrectly recorded
expenses resulted in improper claims for Medicare reimbursement on individual
provider cost reports. The relevant facilities and assets, and affected cost
report years are identified on Attachment C.

 

(b) Other Unallowable Costs Included in Medicare Home Office Cost Statements and
Individual Provider Cost Reports. In addition to fraudulent financial accounting
in the Home Office Cost Statement costs described in Subparagraphs (a)(1), (2),
(3), (4), (5) and (6) of this Article II, Paragraph G(4), HealthSouth improperly
claimed or caused to be claimed, the following improper costs described in

 

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Subparagraphs (b)(1), (2), (3), (4) and (5) of this Article II, Paragraph G(4)
on its Home Office Cost Statements, with an allocation of those costs to
individual provider cost reports for the cost reporting periods indicated below
in those Subparagraphs. Further, HealthSouth made false claims in certain
provider cost reports for favorable lease costs, as described in Subparagraph
(b)(6) of this Article II, Paragraph G(4).

 

(1) Disney World Annual Administrators’ Meeting. HealthSouth held its annual
Administrators’ Meeting at Disney World in Florida from at least 1996 through
2002. From 1998 through 2001, each attendee was permitted to bring a spouse or
guest, and children. For the meetings held in the years 1996-2001, HealthSouth
improperly claimed on its Medicare Home Office Cost Statement and individual
provider cost reports for reimbursement certain non-allowable costs of the
Annual Administrators’ Meeting, including the costs of entertainment. For the
meetings held in the years 1998-2001, HealthSouth also improperly claimed on its
Medicare Home Office Cost Statement and individual provider cost reports for
reimbursement non-allowable travel expenses of spouses and guests.

 

(2) Board of Director Fees. HealthSouth improperly claimed Board of Director
fees on its Home Office Cost Statements and, by allocation, on its individual
provider cost reports, for cost reporting periods ending from January 1, 1995
through December 31, 2001, despite the fact that those same costs had been
disallowed by the fiscal intermediary on Home Office Cost Statements filed for
cost report periods ending December 31, 1993 and December 31, 1994.

 

(3) Travel Expenses. HealthSouth claimed travel expenses on its Home Office Cost
Statements and, by allocation, on its individual provider cost

 

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reports, which were not associated with patient care for cost reporting periods
ending between January 1, 1995 and December 31, 1995, January 1, 1997 and
December 31, 1998, and January 1, 2001 and December 31, 2001.

 

(4) Public Information Expenses. HealthSouth improperly claimed non-allowable
marketing expenses on its Home Office Cost Statements and, by allocation, to
individual provider cost reports, by placing them in an account known as “Public
Information” for cost reporting periods ending between January 1, 1995 and
December 31, 1996.

 

(5) Tax Penalty Expenses. HealthSouth improperly claimed tax penalty expenses on
its Home Office Cost Statements and, by allocation, to the individual provider
cost reports for cost reporting periods ending between January 1, 1995 and
December 31, 1996.

 

(6) Favorable Lease Claims. On December 31, 1993, HealthSouth acquired
rehabilitation facilities from National Medical Enterprises (“NME”). On February
6, 1995, HealthSouth acquired rehabilitation facilities from NovaCare. In each
of these acquisitions, many of the facilities acquired operated in buildings
leased from third-party owners. HealthSouth characterized the leases as
favorable leases; a lease is favorable if the rent required under the lease is
less than market rent. Next, HealthSouth allocated large portions of the prices
in both acquisitions as amounts paid to acquire these favorable leases. Then,
HealthSouth claimed portions of these favorable lease amounts on a number of
Medicare cost reports between 1994 and 2001 (“Favorable Lease Claims”). However,
HealthSouth made no effort to determine if the leases acquired were in fact
favorable, nor is there any evidence that the leases were

 

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in fact favorable. As a result, these favorable lease claims were false and
nonreimbursable pursuant to the relevant Medicare program guideline, Medicare
Provider Reimbursement Manual (PRM) § 111. The specific facilities and cost
report years are identified on Attachment D.

 

  5. Other Part A Claims

 

The United States alleges that HealthSouth submitted claims on forms UB-92 for
inpatients at certain hospitals identified in Subparagraphs (a) and (b) of this
Paragraph and Attachment E hereto which were false for the reasons identified
below. These false claims resulted in HealthSouth receiving payments to which it
was not entitled. The specific claims are as follows:

 

(a) Outlier Payments. HealthSouth received outlier payments from January 1, 2002
through September 30, 2003 for eleven inpatient facilities acquired by
HealthSouth from NME in 1993. The outlier payments were based on the Medicare
cost-to-charge ratios contained in the 1994 cost reports for those facilities.
Those 1994 cost reports contained false Favorable Lease Claims as described in
Article II, Paragraph G(4)(b)(6). The false Favorable Lease Claims inflated the
cost-to-charge ratios in the 1994 cost reports, resulting in outlier
overpayments between January 1, 2002 and September 30, 2003. The relevant
facilities are identified on Attachment E.

 

(b) Doctor’s Hospital Arthritis Unit Admissions. Between January 1, 1999 and
December 31, 2001, HealthSouth’s Doctor’s Hospital in Coral Gables, Florida,
Medicare Provider Number 10-0022, submitted Part A claims to Medicare for
inpatient admissions to its Arthritis Unit that were not medically necessary.
These claims include the individual UB-92 claims and Doctor’s Hospital’s cost
reports for 1999, 2000,

 

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and 2001. HealthSouth also failed to report the billing errors to the hospital’s
fiscal intermediary when detected in 2001 and to offer repayment as required by
its May 17, 2001 Corporate Integrity Agreement with OIG-HHS.

 

H. The United States also contends that it has certain administrative claims, as
specified in Article III, Paragraphs D through H below, against HealthSouth for
engaging in the Covered Conduct.

 

I. This Agreement is neither an admission of liability by HealthSouth nor a
concession by the United States that it claims are not well founded. HealthSouth
denies the allegations of the Relators in the Civil Actions, and the allegations
of the United States in Article II, Paragraph G. Nothing in this Agreement shall
constitute evidence or an admission that any Relator has a valid claim.

 

J. HealthSouth has entered into an Administrative Settlement Agreement with HHS
to mutually resolve the obligations specified therein for HealthSouth and the
HealthSouth Providers for cost reporting periods ending on or before December
31, 2003.

 

K. To avoid the delay, uncertainty, inconvenience, and expense of protracted
litigation of the above claims, the Parties reach a full and final settlement
pursuant to the Terms and Conditions below.

 

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III. TERMS AND CONDITIONS

 

A. HealthSouth agrees to pay the sum of $325,000,000, plus accrued interest from
November 4, 2004, at an annual rate of 4.125% (the “Settlement Amount”) to the
United States calculated as reflected in Article III, Paragraph B, Subparagraph
(2). The $325,000,000 principal Settlement Amount represents the total of the
following principal settlement amounts:

 

1. $169,042,080 for the United States’ Case, of which $49,576,944 is for the
Devage case and $24,418,495 is for the Manning case;

 

2. $736,410 for the [**] case;

 

3. $1,000,000 for the Brupbacher case;

 

4. $65,082,887 for the Cost Report Claims for Fraudulent Financial Accounting
Practices described in Article II, Paragraph G(4)(a)(1)-(6); and

 

5. $89,138,623 for the Other Unallowable Costs Included in Medicare Home Office
Cost Statements and Individual Provider Cost Reports described in Article II,
Paragraph G(4)(b)(1)-(6) and the Other Part A Claims described in Article II,
Paragraph G(5).

 

B. The Settlement Amount shall be paid as follows:

 

1. HealthSouth will make an initial payment to the United States in the amount
of $77,203,767.12 ($75,000,000 principal plus accrued interest between November
4, 2004 and the date of payment) on January 3, 2005, provided this Agreement is
effective on or prior to that date.

 

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2. HealthSouth will make quarterly payments to the United States in the amount
of $22,256,078.10 (principal and interest) beginning on or before March 31, 2005
and continuing through December 31, 2007

 

3. All payments made by HealthSouth to the United States will be made by ACH
transaction pursuant to written instructions to be provided by the United
States.

 

4. The entire balance of the Settlement Amount, or any portion thereof, due to
the United States under this Agreement, may be prepaid without penalty.

 

C. Relators’ Shares

 

1. The United States agrees to pay Relators Devage and Manning a combined total
of 16.5% of the $73,995,439 principal settlement amount for the Devage and
Manning cases in satisfaction of 31 U.S.C. § 3730(d). Relators Devage and
Manning will receive a total principal amount of $12,209,247 as their share of
the False Claims Act (FCA) proceeds recovered in the Devage and Manning cases.
Payments to Relators Devage and Manning will be made pursuant to the terms of
this Settlement Agreement on a pro rata basis including a pro rata share of
interest. Each payment by the United States to Relators Devage and Manning will
occur within a reasonable time of payments being received by the United States
from HealthSouth. Payments by the United States to Relators Devage and Manning
will be done by ACH transaction.

 

2. The United States agrees to pay Relators Brupbacher & Associates and Michael
Freeman a combined total of 15% of the $1,000,000 principal settlement

 

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amount for the Brupbacher case in satisfaction of 31 U.S.C. § 3730(d). Relators
Brupbacher & Associates and Michael Freeman will receive a total principal
amount of $150,000 as their share of the FCA proceeds allocated to the
Brupbacher case. Payments to Relators Brupbacher & Associates and Michael
Freeman will be made pursuant to the terms of this Settlement Agreement, on a
pro rata basis including a pro rata share of interest. Each payment by the
United States to Relators Brupbacher & Associates and Michael Freeman will occur
within a reasonable time of payments being received by the United States from
HealthSouth. Payments by the United States to Relators Brupbacher & Associates
and Michael Freeman will be done by ACH transaction.

 

3. The United States agrees to pay Relator [**]. Payments to Relator [**] will
be made pursuant to the terms of this Settlement Agreement, on a pro rata basis
including a pro rata share of interest. Each payment by the United States to
Relator [**] will occur within a reasonable time of payments being received by
the United States from HealthSouth. Payments by the United States to Relator
[**] will be done by ACH transaction.

 

D. Subject to the exceptions in Article III, Paragraph I below, in consideration
of the obligations of HealthSouth in this Agreement, conditioned upon
HealthSouth’s full payment of the Settlement Amount, and subject to Article III,
Paragraph W below (concerning bankruptcy proceedings commenced within 91 days of
the Effective Date of this Agreement or any payment under this Agreement), the
United States (on behalf of itself, its officers, agents, agencies, and
departments) agrees to release HealthSouth as identified in Attachment A from
any civil or administrative

 

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monetary claim the United States has or may have for the Covered Conduct under
the False Claims Act, 31 U.S.C. §§ 3729-3733; the Civil Monetary Penalties Law,
42 U.S.C. § 1320a-7a; the Program Fraud Civil Remedies Act, 31 U.S.C. §§
3801-3812; or the common law theories of payment by mistake, unjust enrichment,
restitution, fraud, and disgorgement of illegal profits. No individuals are
released by this Agreement.

 

E. Subject to the exceptions in Article III, Paragraph I below, in consideration
of the obligations of HealthSouth in this Agreement, conditioned upon
HealthSouth’s full payment of the Settlement Amount, and subject to Article III,
Paragraph W below (concerning bankruptcy proceedings commenced within 91 days of
the Effective Date of this Agreement or any payment under this Agreement), and
subject to the Relators Devage, [**], and Brupbacher Associates/Freeman’s
reservation of rights to seek payment of any fees and costs under 31 U.S.C. §
3730(d)(1) set forth in Article III, Paragraph K, Relators Devage, Manning,
Darling, [**], and Brupbacher Associates and Freemen, for himself or itself, and
for his or its heirs, successors, attorneys, agents, assigns, officers,
employees, partners, and members, agree to release HealthSouth from any and all
claims asserted and unasserted, known and unknown, based upon any transaction or
incident occurring prior to the Effective Date of this agreement, and including
but not limited to all claims that have been or could have been asserted in his
or its respective Civil Action, and from any civil monetary claim the United
States has or may have under the False Claims Act, 31 U.S.C. §§ 3729-3733, for
the Covered Conduct that is pled in his or its respective Civil Action, with the
single exception that Relator Darkling is not agreeing to release HealthSouth
for the claims asserted or which may be asserted in the pending case styled
Darling v. HealthSouth Sports Medicine &

 

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Rehabilitation Center of Clearwater Limited Partnership and HealthSouth
Rehabilitation Corporation, Case No. 98-6110-CI-20 (Fla. Pinellas County Ct.).

 

F. In consideration of the obligations of HealthSouth in this Agreement and the
December 2004 Corporate Integrity Agreement (“CIA”) that is attached hereto as
Attachment F and incorporated by reference, conditioned upon HealthSouth’s full
payment of the Settlement Amount, and subject to Article III, Paragraph W below
(concerning bankruptcy proceedings commenced within 91 days of the Effective
Date of this Agreement or any payment under this Agreement), the OIG-HHS agrees
to release and refrain from instituting, directing, or maintaining any
administrative action seeking exclusion from Medicare, Medicaid, and other
Federal health care programs (as defined in 42 U.S.C. § 1320a-7b(f)) against
HealthSouth under 42 U.S.C. § 1320a-7a (Civil Monetary Penalties Law) or 42
U.S.C. § 1320a-7(b)(7) (permissive exclusion for fraud, kickbacks, and other
prohibited activities) for the Covered Conduct, except as reserved in Article
III, Paragraph I below, and as reserved in this Paragraph. The OIG-HHS expressly
reserves all rights to comply with any statutory obligations to exclude
HealthSouth from Medicare, Medicaid, and other Federal health care programs
under 42 U.S. C. § 1320a-7(a) (mandatory exclusion) based upon the Covered
Conduct. Nothing in this Paragraph precludes the OIG-HHS from taking action
against entities or persons, or for conduct and practices, for which claims have
been reserved in Article III, Paragraph I below.

 

G. In consideration of the obligations of HealthSouth set forth in this
Agreement, conditioned upon HealthSouth’s full payment of the Settlement Amount,
and subject to Article III, Paragraph W below (concerning bankruptcy proceedings

 

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commenced within 91 days of the Effective Date of this Agreement or any payment
under this Agreement), OWCP-DFEC agrees to release and refrain from instituting,
directing, or maintaining any administrative action seeking exclusion from the
FECA Program against HealthSouth under Paragraphs (c) through (h) of 20 C.F.R. §
10.815 (permissive exclusion) for the Covered Conduct, except as reserved in
Article III, Paragraph I, below, and as reserved in this Paragraph. OWCP-DFEC
expressly reserves authority to exclude HealthSouth from the FECA Program under
Paragraphs (a) and (b) of 20 C.F.R. § 10.815 (automatic exclusion) based upon
the Covered Conduct. Nothing in this Paragraph precludes OWCP-DFEC from taking
action against entities or persons, or for conduct and practices, for which
civil claims have been reserved in Article III, Paragraph I below.

 

H. In consideration of the obligations of HealthSouth set forth in this
Agreement, conditioned upon HealthSouth’s full payment of the Settlement Amount,
and subject to Article III, Paragraph W below (concerning bankruptcy proceedings
commenced within 91 days of the Effective Date of this Agreement or any payment
under this Agreement), TMA agrees to release and refrain from instituting,
directing, or maintaining any administrative action seeking exclusion from the
TRICARE Program against HealthSouth under 32 C.F.R. § 199.9 for the Covered
Conduct, except as reserved in Article III, Paragraph I below, and as reserved
in this Paragraph. TMA expressly reserves authority to exclude HealthSouth from
the TRICARE Program under 32 C.F.R. §§ 199.9 (f)(1)(i)(A), (f)(1)(i)(B), and
(f)(1)(iii), based upon the Covered Conduct. Nothing in this Paragraph precludes
TMA or the TRICARE Program from taking action

 

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against entities or persons, or for conduct and practices, for which civil
claims have been reserved in Article III, Paragraph I below.

 

I. Notwithstanding any term of this Agreement, specifically reserved and
excluded from the scope and terms of this Agreement as to any entity or person
(including HealthSouth and Relators Devage, Manning, Darling, [**], Brupbacher &
Associates and Freeman) are the following claims of the United States:

 

1. Any civil, criminal, or administrative liability arising under Title 26, U.S.
Code (Internal Revenue Code);

 

2. Any criminal liability;

 

3. Except as explicitly stated in this Agreement, any administrative liability,
including mandatory exclusion from Federal health care programs;

 

4. Any liability to the United States (or its agencies) for any conduct other
than the Covered Conduct;

 

5. Any liability based upon such obligations as are created by this Agreement;

 

6. Any liability for express or implied warranty claims or other claims for
defective or deficient products or services, including quality of goods and
services.

 

7. Any liability for personal injury or property damage or for other
consequential damages arising from the Covered Conduct; and

 

8. Any liability of individuals, including officers and employees.

 

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J. Each Relator agrees that the Settlement Amount as it pertains to each
Relator’s Civil Action identified in this Article III, Paragraph A is fair,
adequate and reasonable under the circumstances, under 31 U.S.C. § 3730(c)
(2)(B).

 

K. Relators Devage, [**], and Brupbacher Associates/Freeman reserve their rights
to seek payment of any fees and costs under 31 U.S.C. § 3730(d)(1). Relators
Manning and Darling waive their rights to fees and costs under 31 U.S.C. §
3730(d)(l). HealthSouth specifically reserves the right to challenge the payment
of any fees to Relators’ attorneys and/or the amounts thereof under 31 U.S.C. §
3730(d)(l). If HealthSouth and any of the Relators are unable to reach an
agreement regarding reasonable attorneys’ fees and costs, in conjunction with
the stipulation of dismissal referenced in Article III, Paragraph CC, the
involved parties will request that the appropriate Court retain jurisdiction
over such matter, and those parties agree that any such disagreement will be
resolved by the United States District Court for the District in which the qui
tam action is pending.

 

L. Conditioned upon receipt of their Relator’s share identified in Article III,
Paragraphs C (1), (2), and (3), Relators Devage, Manning, [**], Brupbacher &
Associates and Freeman, each agree for themselves, and for their heirs,
successors, agents and assigns, to fully and finally release, waive, and forever
discharge the United States, its officers, agents, and employees, from any
claims arising from or relating to 31 U.S.C. § 3730, including 31 U.S.C. §§
3730(b), (c), (c)(5), (d), and (d)(1), from any claims arising from the filing
of the Civil Action, and from any other claims for a share of the Settlement
Amount, and in full settlement of any claims Relators Devage, Manning,
Brupbacher & Associates and Freeman may have under this Agreement. This
Agreement

 

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does not resolve or in any manner affect any claims the United States has or may
have against the Relator arising under Title 26, U.S. Code (Internal Revenue
Code), or any claims arising under this Agreement. Relator Darling waives his
right to any claims arising from or relating to 31 U.S.C. § 3730, including 31
U.S.C. §§ 3730(b), (c), (c)(5), (d), and (d)(1), from any claims arising from
the filing of the Civil Action, and from any other claims for a share of the
Settlement Amount.

 

M. The CIA shall be effective immediately upon execution in accordance with the
terms thereof.

 

N. HealthSouth agrees that it will not raise as a legal defense in any way the
releases provided in the Administrative Settlement Agreement, the closing and
settlement of cost reports, or any other terms of the Administrative Settlement
Agreement in response to any False Claims Act or other civil fraud claims of the
United States that are not released by this Agreement.

 

O. HealthSouth waives and will not assert any defenses HealthSouth may have to
any criminal prosecution or administrative action relating to the Covered
Conduct that may be based in whole or in part on a contention that, under the
Double Jeopardy Clause in the Fifth Amendment of the Constitution, or under the
Excessive Fines Clause in the Eighth Amendment of the Constitution, this
Agreement bars a remedy sought in such criminal prosecution or administrative
action. HealthSouth agrees that this Agreement is not punitive in purpose or
effect. Nothing in this Paragraph or any other provision of this Agreement
constitutes an agreement by the United States concerning the characterization of
the Settlement Amount for purposes of the Internal Revenue laws, Title 26 of the
United States Code.

 

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P. HealthSouth fully and finally releases the United States, its agencies,
employees, servants, and agents form any claims (including attorney’s fees,
costs, and expenses of every kind and however denominated) which HealthSouth has
asserted, could have asserted, or may assert in the future the United States,
its agencies, employees, servants, and agents, related to the Covered Conduct
and the United States’ investigation and prosecution thereof.

 

Q. HealthSouth fully and finally releases Relators Devage, Manning, Darling,
[**], and Brupacher Associates and Freeman and his or its heirs, successors,
attorneys, agents, assigns, officers, employees, partners and members from any
and all claims asserted and unasserted, known and unknown, based upon any
transaction or incident occurring prior to the Effective Date of this agreement,
and including but not limited to, all claims that have been or could have been
asserted in connection with any of the relators’ respective Civil Actions, or
for the Covered Conduct that is pled in the United States’ Complaint in
Intervention.

 

R. The Settlement Amount will not be decreased as a result of the denial of
claims for payment now being withheld from payment by any Medicare carrier or
intermediary, TRICARE carrier or payor, or the Department of Labor (for FECA
claims) or any State payor, related to the Covered Conduct; and HealthSouth
shall not resubmit to any Medicare carrier or intermediary, TRICARE carrier or
payor, or the Department of Labor (for FECA claims) or any State payor any
previously denied claims related to the Covered Conduct, and shall not appeal
any such denials of claims.

 

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S. Unallowable Costs

 

1. Unallowable Costs Defined: all costs (as defined in the Federal Acquisition
Regulation, 48 C.F.R. § 31.205-47, and in Titles XVIII and XIX of the Social
Security Act, 42 U.S.C. §§ 1395-1395ggg and §§ 1396 – 1396v, and the regulations
and official program directives promulgated thereunder) incurred by or on behalf
of HealthSouth, its present or former officers, directors, employees,
shareholders, and agents in connection with the following shall be “unallowable
costs” on government contracts and under the Medicare Program, Medicaid Program,
the TRICARE Program, the FECA Program of the Department of Labor, the Veteran’s
Administration (VA), and the Federal Employee Health Benefits Program (FEHBP):

 

(a) the matters covered by this Agreement,

 

(b) the United States’ audit(s) and civil and criminal investigation of the
matters covered by this Agreement,

 

(c) HealthSouth’s investigation, defense, and corrective actions undertaken in
response to the United States’ audit(s) and civil and criminal investigation(s)
in connection with the matters covered by this Agreement (including attorney’s
fees),

 

(d) the negotiation and performance of this Agreement,

 

(e) the payment HealthSouth makes to the United States pursuant to this
Agreement and any payments that HealthSouth may make to Relators, including
costs and attorneys fees,

 

(f) the negotiation of, and obligations undertaken pursuant to the December 2004
CIA to:

 

(i) Retain an independent review organization to perform annual reviews as
described in Section III of the CIA; and

 

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(ii) prepare and submit reports to the OIG-HHS.

 

However, nothing in this Paragraph that may apply to the obligations undertaken
pursuant to the CIA affects the status of costs that are not allowable based on
any other authority applicable to HealthSouth; and

 

(g) the negotiation of, and obligations undertaken pursuant to the
Administrative Settlement Agreement. (All costs described or set forth in this
Paragraph are hereafter, “unallowable costs”.)

 

2. Future Treatment of Unallowable Costs: These unallowable costs shall be
separately determined and accounted for in nonreimbursable cost centers by
HealthSouth, and HealthSouth shall not charge such unallowable costs directly or
indirectly to any contracts with the United States or any state Medicaid
program, or seek payment for such unallowable costs through any cost report,
cost statement, information statement, or payment request submitted by
HealthSouth or any of its subsidiaries or affiliates to the Medicare, Medicaid,
TRICARE, FECA, VA or FEHBP Programs.

 

3. Treatment of Unallowable Costs Previously Submitted for Payment: HealthSouth
further agrees that within 90 days of the Effective Date of this Agreement it
shall identify to applicable Medicare and TRICARE fiscal intermediaries,
carriers, and/or contractors, and Medicaid, FECA, VA, and FEHBP fiscal agents,
any unallowable costs (as defined in this Paragraph) included in payments
previously sought from the United States, or any State Medicaid Program,
including, but not limited to, payments sought in any cost reports, cost
statements, information reports, or payment requests already

 

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submitted by HealthSouth or any of its subsidiaries or affiliates, and shall
request, and agree, that such cost reports, cost statements, information
reports, or payment requests, even if already settled, be adjusted to account
for the effect to of the inclusion of the unallowable costs. HealthSouth agrees
that the United States, at a minimum, shall be entitled to recoup from
HealthSouth any overpayment plus applicable interest and penalties as a result
of the inclusion of such unallowable costs on previously-submitted cost reports
information reports, cost statements, or requests for payment.

 

Any payments due after the adjustments have been made shall be paid to the
United States pursuant to the direction of the Department of Justice, and/or the
affected agencies. The United States reserves its rights to disagree with any
calculations submitted by HealthSouth on the effect of inclusion of unallowable
costs (as defined in this Paragraph) on Health South or any of its subsidiaries
or affiliates’ cost reports, cost statements, or information reports.

 

4. Nothing in this Agreement shall constitute a waiver of the rights of the
United States to audit, examine, or re-examine HealthSouth’s books and records
to determine that no unallowable costs have been claimed in accordance with the
provisions of this Paragraph.

 

T. This Agreement is intended to be for the benefit of the Parties only. The
Parties do not release any claims against any other person or entity, except to
the extent provided for in Article III, paragraph U below.

 

U. HealthSouth waives and shall not seek payment for any of the health care
billings covered by this Agreement from any health care beneficiaries or their
parents,

 

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sponsors, legally responsible individuals, or third party payors based upon the
claims defined as Covered Conduct.

 

V. HealthSouth warrants that it has reviewed its financial situation and that it
currently is solvent within them earning of 11 U.S.C. §§ 547(b)(3) and
548(a)(1)(B)(ii)(I), and will remain solvent following payment to the United
States of the Settlement Amount. Further, the Parties warrant that, in
evaluating whether to execute this Agreement, they (1) have intended that the
mutual promises, covenants, and obligations set forth constitute a
contemporaneous exchange for new value given to HealthSouth, within the meaning
of 11 U.S.C. §§ 547(c)(1); and (2) conclude that these mutual promises,
covenants, and obligations do, in fact, constitute such a contemporaneous
exchange. Further, the Parties warrant that the mutual promises, covenants, and
obligations set forth herein are intended and do, in fact, represent a
reasonably equivalent exchange of value which is not intended to hinder, delay,
or defraud any entity to which HealthSouth was or became indebted to on or after
the date of this transfer, within he meaning of 11 U.S.C. § 548(a)(1).

 

W. If within 91 days of the Effective Date of this Agreement or of any payment
made hereunder, HealthSouth commences, or a third party commences, any case,
proceeding, or other action under any law relating to bankruptcy, insolvency,
reorganization, or relief of debtors (1) seeking to have any order for relief of
HealthSouth’s debts, or seeking to adjudicate HealthSouth as bankrupt or
insolvent; or (2) seeking appointment of a receiver, trustee, custodian, or
other similar official for HealthSouth or for all or any substantial part of
HealthSouth’s assets, HealthSouth agrees as follows:

 

1. HealthSouth’s obligations under this Agreement may not be avoided pursuant to
11 U.S.C. § 547, and HealthSouth will not argue or otherwise take the position
in any such case, proceeding, or action that: (a) HealthSouth’s obligations
under this Agreement may be avoided under 11 U.S.C. § 547; (b) HealthSouth was
insolvent at the time this Agreement was entered into, or became insolvent as a
result of the payment made to the United States; or [c] the mutual promises,
covenants, and obligations set forth in this Agreement do not constitute a
contemporaneous exchange for new value given to HealthSouth.

 

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2. If HealthSouth’s obligations under this agreement are avoided for any reason,
including, but not limited to, through the exercise of a trustee’s avoidance
powers under the Bankruptcy Code, the United States, at its sole option, may
rescind the releases in this agreement, and bring any civil and/or
administrative claim, action, or proceeding against HealthSouth for the claims
that would otherwise be covered by the releases provided in Article III,
Paragraphs D through H above. HealthSouth agrees that (a) any such claims,
actions or proceedings brought by the United States (including any proceedings
to exclude HealthSouth from participation in Medicare, Medicaid, or other
Federal health care programs) are not subject to an “automatic stay” pursuant to
11 U.S.C. § 362(a) as a result of the action, case, or proceeding described in
the first clause of this Paragraph, and that HealthSouth will not argue or
otherwise contend that the United States’ claims, actions, or proceedings are
subject to an automatic stay; (b) Healthsouth will not plead, argue, or
otherwise raise any defenses under the theories of statute of limitations,
laches, estoppel, or similar theories, to any such civil or administrative
claims, actions, or proceedings which are brought by the United States within 90
calendar days of

 

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written notification to HealthSouth that the releases have been rescinded
pursuant to this Paragraph, except to the extent such defenses were available on
the Effective Date of the Settlement Agreement; and (c) the United States has a
valid claim against HealthSouth in the amount of $675,000,000, and the United
States may pursue its claim in the cases, actions, or proceedings referenced in
the first clause of this Paragraph, as well as in any other cases, actions, or
proceedings.

 

3. HealthSouth acknowledges that its agreements in this Paragraph are provided
in exchange for valuable consideration provided in this Agreement.

 

X. Payment Default Provision. In the event that Healthsouth fails to pay any
amount as provided in Article III, Paragraph A within ten (10) business days of
the date upon which such payment is due HealthSouth shall be in Default of its
payment obligations under this Settlement Agreement (“Default”). The United
States will provide written notice of the Default, and HealthSouth shall have an
opportunity to cure such Default within fifteen (15) business days from the date
of receipt of the written notice. Notice of Default will be delivered to Gregory
L. Doody, Executive Vice President, General Counsel and Secretary, HealthSouth
Corporation, One HealthSouth Parkway, Birmingham, AL 35243, Telephone
205-970-5917, Fax 205-966-8218, or to such other representative as HealthSouth
shall designate in advance in writing. Written notice shall be provided via
Federal Express or facsimile, with proof of receipt via Federal Express tracking
or the retention of an internal facsimile transmission receipt being sufficient.
If HealthSouth fails to cure the Default within fifteen (15) business days of
receiving the Notice of Default, the remaining unpaid balance of the settlement
Amount shall become

 

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immediately due and payable, and interest shall accrue at the Medicare interest
rate set by CMS in accordance with 42 C.F.R. § 405.378 compounded daily from the
date of Default on the remaining unpaid total (principle and interest balance).
HealthSouth shall consent to a Consent Judgment in the amount of the unpaid
balance (in the form attached), and the United States, at its sole option, may:
(1) offset the remaining unpaid balance from any amounts due and owing to
HealthSouth by any department, agency, or agent of the United States at the time
of the Default; or (2) exercise any other rights granted by law or in equity,
including the option of referring such matters for private collection.
HealthSouth agrees not to contest any offset imposed and not to contest any
collection action undertaken by the United States or other department, agency,
or agent of the United States pursuant to this Paragraph, either
administratively or in any state or federal court. HealthSouth shall pay the
United States all reasonable costs of collection and enforcement under this
Paragraph, including attorney’s fees and expenses. The lack of written notice of
default provided by the United States shall not constitute a waiver by the
United States of the default, or of any prior or subsequent defaults, and shall
not constitute a waiver of any of the rights or obligations of any party to this
Agreement, including HealthSouth’s obligations to make future payments in
accordance with the provisions of Article III, Paragraphs A and B.

 

Y. Exclusion. In the event of Default and the failure of HealthSouth to cure the
Default within 15 calendar days of receiving written notice of the Default, the
OIG-HHS may exclude HealthSouth from participating in all Federal health care
programs until HealthSouth pays the Settlement Amount and reasonable costs as
set forth in Article III, Paragraph X above. Such exclusion shall have national
effect and shall also apply to

 

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all other federal procurement and non-procurement programs. Federal health care
programs shall not pay anyone for items or services, including administrative
and management services, furnished, ordered, or prescribed by HealthSouth in any
capacity while HealthSouth is excluded. This payment prohibition applies to
HealthSouth, anyone who employs or contracts with HealthSouth, any hospital or
other provider where HealthSouth provides services, and anyone else. The
exclusion applies regardless of who submits the claims or other request for
payment. HealthSouth shall not submit or cause to be submitted to any Federal
health care program any claim or request for payment for items or services,
including administrative and management services, furnished, ordered, or
prescribed by HealthSouth during the exclusion. Violation of the conditions of
the exclusion may result in criminal prosecution, the imposition of civil
penalties and assessments, and an additional period of exclusion. HealthSouth
further agrees to hold the Federal health care programs, and all federal
beneficiaries and/or sponsors, harmless from any financial responsibility for
items or services furnished, ordered, or prescribed to such beneficiaries or
sponsors after the effective date of the exclusion. HealthSouth waives any
further notice of the exclusion and agrees not to contest such exclusion either
administratively or in any state or federal court. Reinstatement to program
participation is not automatic. If at the end of the period of exclusion
HealthSouth wishes to apply for reinstatement, HealthSouth must submit a written
request for reinstatement in accordance with the provisions of 42 C.F.R. §§
1001.3001-.3005. HealthSouth will not be reinstated unless and until the OIG-HHS
approves such request for reinstatement.

 

The provisions of this Paragraph Y (Exclusion) of this Article III shall not
become effective if HealthSouth has become subject to a case, proceeding, or
other action

 

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under any law relating to bankruptcy, insolvency, reorganization, or relief of
debtors for so long as HealthSouth either (1) continues to make the payments as
provided in Paragraph A of this Article III, or (2) in such case, proceeding or
other action HealthSouth (a) concurrent with commencing the case, proceeding or
other action (or in its first filing, if the case, proceeding or action is
involuntary), requests any and all Court orders and approvals needed to allow
HealthSouth to make such payments in full, (b) such orders and approvals are
agreed to by the Court and effective within 30 days of such filing and (c) such
payments in full are made within 30 days of the issuance of the Court order or
approval.

 

Z. Except as expressly provided to the contrary in this Agreement, each Party
shall bear its own legal and other costs incurred in connection with this
matter, including the preparation and performance of this Agreement.

 

AA. This Agreement is governed by the laws of the United States. Except as other
wise provided in Article III, Paragraph K above, the Parties agree that the
exclusive jurisdiction and venue for any dispute arising between and among the
Parties under this Agreement will be the United States District Court for the
Western District of Texas, San Antonio Division, except that disputes arising
under the CIA, shall be resolved exclusively under the dispute resolution
provisions in the CIA, and venue for disputes arising under the Administrative
Settlement Agreement shall be the United States District Court for the District
of Columbia.

 

BB. This Agreement and the CIA constitute the complete agreement between the
Parties. These Agreements may not be amended except by written consent of the

 

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Parties, except that only HealthSouth and OIG-HHS must agree in writing to
modification of the CIA.

 

CC. Upon receipt of the initial payment described in Article III, Paragraph B
above, the United States shall file a Notice of Intervention in the [**] and
Brupbacher cases. The United States and each of these Relators shall promptly
sign and file in each of their Civil Actions a Joint Stipulation of Dismissal
with prejudice of the Civil Action against HealthSouth pursuant to the terms of
the Agreement. Upon receipt of the initial payment described in Article III,
Paragraph B above, the United States and Devage shall promptly sign and file in
that Civil Action a Joint Stipulation of Dismissal with prejudice of the United
States’ Complaint pursuant to the terms of this Agreement. In addition, upon
receipt of the initial payment described in Article III, Paragraph B above, the
United States and Relators Manning and Darling shall promptly sign and file
Joint Stipulations of Dismissal with prejudice of the Manning and Darling
actions. Each of these aforementioned Stipulations shall request that the Court
retain jurisdiction as set forth in Article III, Paragraph K, and shall be
subject to the rights of the United States and the OIG-HHS as set forth in
Article III, Paragraph X.

 

DD. The individuals signing this Agreement on behalf of HealthSouth represent
and warrant that they are authorized by HealthSouth to execute this Agreement.
The individuals signing this Agreement on behalf of the Relators represent and
warrant that they are authorized by the Relators to execute this Agreement. The
United States signatories represent that they are signing this Agreement in
their official capacities and that they are authorized to execute this
Agreement.

 

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EE. This Agreement may be executed in counterparts, each of which constitutes an
original and all of which constitute one and the same agreement.

 

FF. This Agreement is binding on HealthSouth’s and Relators’ successors,
transferees, heirs, and assigns.

 

GG. All Parties consent to the United States’ disclosure of this Agreement, and
information about this Agreement, to the public.

 

HH. Facsimiles of signatures shall constitute acceptable, binding signatures for
purposes of this Agreement. This Agreement is effective on the date of signature
of the last signatory to the Agreement (the “Effective Date”).

 

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THE UNITED STATES OF AMERICA

 

DATED:

      BY:   

/s/ Laurence J. Freedman

               

Laurence J. Freedman, Esq.

Assistant Director

Commercial Litigation Branch

Civil Division

United States Department of Justice

DATED:

      BY:   

/s/ Lewis Morris

               

Lewis Morris

Chief Counsel to the Inspector General

Office of Inspector General

United States Department of Health and

Human Services

DATED:

      BY:   

/s/ Laurel C. Gillespie

               

Laurel C. Gillespie

Deputy General Counsel

TRICARE Management Activity

United States Department of Defense

DATED:

      BY:   

/s/ Edward G. Duncan

               

Edward G. Duncan

Deputy Director for Federal Employees’

    Compensation, Office of Workers’

Compensation Programs

United States Department of Labor

 

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HEALTHSOUTH CORPORATION

 

DATED:

      BY:   

/s/ Gregory L. Doody

               

Gregory L. Doody, Esq.

Executive Vice President

General Counsel and Secretary

DATED:

      BY:   

/s/ Thomas C. Fox

               

Thomas C. Fox, Esq.

Scot T. Hasselman, Esq.

Reed Smith LLP

 

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RELATOR JAMES DEVAGE

 

DATED:

      BY:   

/s/ James Devage

               

Relator James Devage

DATED:

      BY:  

/s/ John E. Clark

               

John E. Clark, Esq.

Goode Casseb Jones Riklin Choate & Watson

Counsel for James Devage

            BY:  

/s/ Glenn Grossenbacher

               

Glenn Grossenbacher

Counsel for James Devage

            BY:  

/s/ Richard Tinsman

               

Richard Tinsman

Tinsman, Scott & Sciano

Counsel for James Devage

DATED:

      BY:  

/s/ DeWayne Manning

               

Relator DeWayne Manning

DATED:

      BY:  

/s/ David Shelby

               

David Shelby, Esq. Shelby & Cartee

Counsel for DeWayne Manning

 

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RELATOR JOHN J. DARLING

 

DATED:

      BY:   

/s/ John J. Darling

               

Relator John J. Darling

DATED:

      BY:  

/s/ Christopher Jayson

               

Christopher Jayson

               

Cohen Jayson & Foster

               

Counsel for John J. Darling

 

United States’ and HealthSouth False Claims Act Settlement Agreement

December 30, 2004

 

39

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RELATOR [**]

 

DATED:

      BY:                     

[**]

DATED:

      BY:                    

[**]

 

United States’ and HealthSouth False Claims Act Settlement Agreement

December 30, 2004

 

40

--------------------------------------------------------------------------------

RELATORS BRUPBACHER AND ASSOCIATES AND MICHAEL FREEMAN

 

DATED:

     

BY: 

 

/s/ Scott Brupbacher

               

Scott Brupbacher, on behalf of

Relator Brupbacher & Associates

       

BY:

 

/s/ Michael Freeman

                Michael Freeman        

BY:

 

/s/ Robert Vogel

               

Robert Vogel, Esq.

Counsel for Relators Brupbacher &

Associates and Michael Freeman

 

United States’ and HealthSouth False Claims Act Settlement Agreement

December 30, 2004

 

41