Document:

Settlement Agreement, dated as of  December 30, 2004

  
 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. 

	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. 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 1 

 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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 2 

 
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.” 
  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 3 

 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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 4 

 
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; 
  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 5 

 (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

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 6 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 7 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 8 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 9 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 10 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 11 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 12 

 
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, 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 13 

 
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. 
  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 14 

  
 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. 
  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 15 

 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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 16 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 17 

 
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 & 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 18 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 19 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 20 

 
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. 
  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 21 

 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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 22 

 
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. 
  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 23 

 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. 
  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 24 

 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 
  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 25 

 (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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 26 

 
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, 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 27 

 
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. 
  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 28 

 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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 29 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 30 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 31 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 32 

 
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 

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 33 

 
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. 
  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 34 

 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”). 
  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 35 

  
 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

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 36 

  
 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

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 37 

  
 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

  

 United States’ and HealthSouth False Claims Act Settlement Agreement 
 December 30, 2004 
  
 38 

 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 

 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 
  
 41Corporate Intregrity Agreement, dated as of December 30, 2004

  
 Exhibit 10.2

  
 ATTACHMENT
F                             
  
 CORPORATE INTEGRITY AGREEMENT 
 BETWEEN THE 
 OFFICE OF INSPECTOR GENERAL 
 OF THE 
 DEPARTMENT OF HEALTH AND
HUMAN SERVICES 
 AND 
 HEALTHSOUTH CORPORATION 
  

	I.	PREAMBLE 

  
 HealthSouth (as that term is defined herein) hereby enters into this Corporate Integrity Agreement (CIA) with the Office of Inspector General (OIG) of the
United States Department of Health and Human Services (HHS) to promote compliance with the statutes, regulations, and written directives of Medicare, Medicaid, and all other Federal health care programs (as defined in 42 U.S.C. § 1320a-7b(f))
(Federal health care program requirements). Contemporaneously with this CIA, HealthSouth is entering into a Settlement Agreement with the United States, and this CIA is incorporated by reference into the Settlement Agreement. 
  

	II.	TERM AND SCOPE OF THE CIA 

  

	 	A.	The period of the compliance obligations assumed by HealthSouth under this CIA shall be five years from the effective date of this CIA, unless otherwise specified. The effective
date shall be January 1, 2005 (Effective Date). Each one-year period, beginning with the one-year period following the Effective Date, shall be referred to as a “Reporting Period” or an “Audit Year.” 

  

	 	B.	Sections VII, VIII, IX, X, and XI shall expire no later than 120 days after OIG’s receipt of: (1) HealthSouth’s final annual report; or (2) any additional materials
submitted by HealthSouth pursuant to OIG’s request, whichever is later. 

  

	 	C.	The scope of this CIA shall be governed by the following definitions: 

  

	 	1.	“HealthSouth” or the “Company” includes: (i) HealthSouth Corporation and its wholly-owned subsidiaries; and (ii) any other corporation, limited liability
company, partnership or any other legal entity or organization that is engaged in furnishing health care items or services to beneficiaries of Federal health care programs through a rehabilitation hospital, an outpatient rehabilitation facility, or
the outpatient department of a rehabilitation hospital in which HealthSouth owns a direct or indirect equity interest of 5% or more and has the ability to control the day-to-day operations of the entity. 

  
 Corporate Integrity Agreement 
 HealthSouth Corporation 

	 	2.	“Covered Persons” includes all natural persons who are: (i) owners, officers, directors, and employees (including employed physicians) of HealthSouth; and (ii) agents,
physicians serving as medical directors, physicians with staff privileges at HealthSouth facilities, and other persons who furnish health care items or services to any Federal health care program beneficiary at a HealthSouth facility for which
HealthSouth claims reimbursement from any Federal health care program. Notwithstanding the above, this term does not include part-time or per diem employees or other persons who are not reasonably expected to work more than 160 hours per year,
except that any such individuals shall become “Covered Persons” at the point when they work more than 160 hours during the calendar year. HealthSouth employees working in lines of business which do not provide, support, or relate to the
provision of healthcare services shall not be considered “Covered Persons.” 

  

	 	3.	“Relevant Covered Persons” includes all Covered Persons engaged directly or in a supervisory role in the preparation or submission of claims for reimbursement from any
Federal health care program on behalf of HealthSouth for items or services furnished in a rehabilitation hospital, an outpatient rehabilitation facility, or the outpatient department of a rehabilitation hospital. 

  

	 	4.	“Covered Contractors” includes any independent contractor or subcontractor (who is not a Covered Person) and their employees that is engaged by HealthSouth on or after the
Effective Date to provide direct patient care services or that perform billing or coding functions on behalf of HealthSouth for more than 160 hours per year. Should HealthSouth at any time after the Effective Date renegotiate, modify, or renew a
contract entered into prior to the Effective Date for the functions described in this Paragraph, the contractor shall become a Covered Contractor as that term is used for purposes of this CIA. 

  

	III.	CORPORATE INTEGRITY OBLIGATIONS 

  
 HealthSouth shall establish and maintain a Compliance Program that includes the following elements: 
  

	 	A.	Compliance Officer and Committee. 

  

	 	1.	 Compliance Officer. To the extent not completed prior to the Effective Date, not later than 90 days after the Effective Date, HealthSouth shall appoint an
individual to serve as its Compliance Officer and shall maintain a Compliance Officer for the term of the CIA. The Compliance Officer shall be responsible for developing and implementing policies, procedures, and practices designed to ensure
compliance with the requirements set forth in this CIA and with Federal health care program requirements. The Compliance Officer shall report to the Chief Executive Officer and to the 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 2 

	 	 
Compliance Committee of the Board of Directors. The Compliance Officer shall be a member of senior management of HealthSouth, shall make periodic (at least
quarterly) reports regarding compliance matters directly to the Board of Directors of HealthSouth (i.e., to the Compliance Committee of the Board of Directors or to the full Board of Directors, as appropriate), and shall be authorized to
report on such matters to the Compliance Committee of the Board of Directors or to the full Board of Directors at any time. The Compliance Officer shall not be or be subordinate to the General Counsel or Chief Financial Officer. The Compliance
Officer shall be responsible for monitoring the day-to-day compliance activities engaged in by HealthSouth as well as for any reporting obligations created under this CIA. 

  
 HealthSouth shall report to OIG, in writing, any changes in the identity or
position description of the Compliance Officer, or any actions or changes that would affect the Compliance Officer’s ability to perform the duties necessary to meet the obligations in this CIA, within 15 days after such a change. 
  

	 	2.	Compliance Office. To the extent not completed prior to the Effective Date, not later than 90 days after the Effective Date, HealthSouth shall establish and maintain a
Compliance Office under the direction of the Compliance Officer that is responsible for developing and implementing policies, procedures, and practices designed to promote compliance with Federal health care program requirements and the requirements
set forth in this CIA. The Compliance Office shall also conduct audits of facilities and programs based upon an internal risk assessment process taking into account an evaluation of the integrity of internal management and control systems, Federal
health care program requirements, OIG’s annual work plan, issues identified through the Company’s Disclosure Program, as set forth in Section III.E below, and issues identified through the reviews described in Section III.D below.

  

	 	3.	Executive Compliance Committee. To the extent not completed prior to the Effective Date, not later than 90 days after the Effective Date, HealthSouth shall appoint and
maintain an Executive Compliance Committee (Executive Compliance Committee). The Executive Compliance Committee shall, at a minimum, include the Compliance Officer and other members of senior corporate management necessary to meet the requirements
of this CIA (e.g., senior executives of relevant departments and heads of HealthSouth’s principal operating divisions). The Compliance Officer shall chair the Executive Compliance Committee. The Executive Compliance Committee shall
participate in the formulation and implementation of HealthSouth’s compliance program and shall support the Compliance Officer in fulfilling his/her responsibilities (e.g., shall assist in the analysis of the organization’s risk
areas and shall oversee monitoring of internal and external audits and investigations). 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 3 

 HealthSouth shall report to OIG, in writing, any changes in the composition of the Executive Compliance
Committee, or any actions or changes that would affect the Executive Compliance Committee’s ability to perform the duties necessary to meet the obligations in this CIA, within 15 days after such a change. 
  

	 	4.	Compliance Committee of the Board of Directors. To the extent not completed prior to the Effective Date, not later than 90 days after the Effective Date, HealthSouth shall
establish and maintain a Compliance Committee of its Board of Directors (Board Compliance Committee). The Board Compliance Committee shall include no less than three (3) independent members of the Board of Directors. The Board Compliance Committee
shall oversee HealthSouth’s compliance program and shall evaluate the effectiveness of its operation. The Compliance Officer shall make periodic reports to the Board Compliance Committee (not less than quarterly) on issues relating to the
performance of the HealthSouth compliance program, including compliance with the requirements of this CIA. 

  

	 	B.	Written Standards. 

  

	 	1.	Code of Conduct. To the extent not completed prior to the Effective Date, within 90 days of the Effective Date, HealthSouth shall adopt and distribute a Code of Conduct to
all Covered Persons. HealthSouth shall make the promotion of, and adherence to, the Code of Conduct an element in evaluating the performance of all employees. The Code of Conduct shall, at a minimum, set forth: 

  

	 	a.	HealthSouth’s commitment to full compliance with all Federal health care program requirements, including its commitment to prepare and submit accurate claims consistent with
such requirements; 

  

	 	b.	HealthSouth’s requirement that all of its Covered Persons shall be expected to comply with all Federal health care program requirements and with HealthSouth’s internal
policies and procedures (including the requirements of this CIA); 

  

	 	c.	the requirement that all of HealthSouth’s Covered Persons shall be expected to report to the Compliance Officer or other appropriate individual designated by HealthSouth
suspected violations of any Federal health care program requirements or of HealthSouth’s own policies and procedures; 

  

	 	d.	the possible consequences to both HealthSouth and Covered Persons of failure to comply with Federal health care program requirements and with HealthSouth’s own policies and
procedures and the failure to report such noncompliance; and 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 4 

	 	e.	the right of all individuals to use the Disclosure Program described in Section III.E, and HealthSouth’s commitment to nonretaliation and to maintain, as appropriate,
confidentiality and anonymity with respect to such disclosures. 

  
 Within 90 days after the Effective Date, to the extent not already completed, each Covered Person shall certify, in writing, that he or she has received, read, understood, and shall abide by HealthSouth’s Code of
Conduct. New Covered Persons shall receive the Code of Conduct and shall complete the required certification within 30 days after becoming a Covered Person or within 90 days after the Effective Date, whichever is later. 
  
 HealthSouth shall periodically review the Code of Conduct to determine if
revisions are appropriate and shall make any necessary revisions based on such review. Any revisions to the Code of Conduct shall be communicated to Covered Persons and Covered Contractors within 30 days after the effective date of any revisions. In
the case of a significant change to the Code of Conduct, each Covered Person shall certify, in writing, that he or she has received, read, understood, and shall abide by the revised Code of Conduct within 60 days after the distribution of the
revised Code of Conduct. Distribution may include publishing the Code of Conduct on HealthSouth’s intranet or other internal web site available to all employees. If HealthSouth uses such an electronic method of distribution, it must notify the
individuals receiving the Code of Conduct that the Code of Conduct will be distributed in such a manner and it must monitor the distribution to ensure that all appropriate individuals received the Code of Conduct. 
  

	 	2.	Covered Contractor Requirements. 

  

	 	a.	If the Covered Contractor is an organization, HealthSouth shall require a Covered Contractor to: 

  

	 	(1)	agree to abide by HealthSouth’s Code of Conduct or adopt its own Code of Conduct addressing substantially all of the requirements of Section III.B.1; 

 

	 	(2)	distribute the following materials to its employees and subcontractors working on HealthSouth matters: (i) HealthSouth’s Code of Conduct or its own Code of Conduct; (ii) copies
of relevant HealthSouth policies and procedures relating to the work of the Covered Contractor; and (iii) information about HealthSouth’s Disclosure Program (including the hotline number); 

  

	 	(3)	 provide, either directly or through HealthSouth, Specific Training (as described in Section III.C.3 of this CIA) to employees or subcontractors engaged directly or
indirectly or in a supervisory role in the preparation or submission of claims for reimbursement from any Federal health care program on behalf of HealthSouth for items or services furnished in a rehabilitation hospital, an outpatient 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 5 

	 	 
rehabilitation facility, or the outpatient department of a rehabilitation hospital; and 

  

	 	(4)	certify to HealthSouth that all employees and subcontractors working on HealthSouth matters have: (i) been screened to exclude Ineligible Persons in accordance with the requirements
of Section III.F of this CIA; (ii) received a copy of HealthSouth’s Code of Conduct or its own Code of Conduct, copies of relevant HealthSouth policies and procedures, and information about HealthSouth’s Disclosure Program (including the
hotline number); and (iii) received Specific Training where required. 

  

	 	b.	If the Covered Contractor is an individual, HealthSouth shall treat the contractor as a Covered Person for purposes of this CIA. 

  

	 	3.	Policies and Procedures. To the extent not completed prior to the Effective Date, not later than 90 days after the Effective Date, HealthSouth shall implement written
policies and procedures regarding the operation of HealthSouth’s compliance program and its compliance with Federal health care program requirements. At a minimum, the policies and procedures shall address: 

  

	 	a.	Federal health care program requirements regarding physician certification or recertification of outpatient therapy plans of care for Medicare beneficiaries receiving care in
outpatient rehabilitation facilities or outpatient departments of HealthSouth rehabilitation hospitals; 

  

	 	b.	the proper use of group therapy and individual therapy codes for rehabilitation services furnished to Medicare beneficiaries in outpatient rehabilitation facilities or outpatient
departments of HealthSouth rehabilitation hospitals; 

  

	 	c.	compliance with Medicare coding rules applicable to outpatient therapy services including, but not limited to rules for timed therapy services; 

  

	 	d.	the use of licensed personnel to furnish services to Federal health care program beneficiaries; and 

  

	 	e.	 the preparation and filing of Medicare and Medicaid cost reports for HealthSouth rehabilitation hospitals and accurately calculating any separate Medicare or
Medicaid payments to such facilities (in addition to PPS payments) including payments for outlier claims, 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 6 

	 	 
bad debt, indirect medical education (IME), and low income patients. 

  
 Not later than 90 days after the Effective Date, the relevant portions of the policies and procedures described in
Paragraphs III.B.3.a through III.B.3.e above shall be distributed to all individuals whose job functions relate to those policies and procedures. Distribution may include publishing such policies and procedures on HealthSouth’s intranet or
other internal web site available to all employees. If HealthSouth uses such an electronic method of distribution, it must notify the individuals receiving the policies and procedures that the policies and procedures will be distributed in such a
manner and it must monitor the distribution to ensure that all appropriate individuals received the policies and procedures. Appropriate and knowledgeable staff shall be available to explain the policies and procedures. 
  
 At least annually (and more frequently, if appropriate), HealthSouth shall
assess and update as necessary all of the policies and procedures required by this Paragraph III.B.3, including but not limited to the policies and procedures described in Paragraphs III.B.3.a through III.B.3.e. The relevant portions of any such
revised policies and procedures shall be posted on the HealthSouth intranet and/or distributed to all Covered Persons and Covered Contractors whose job functions relate to those policies and procedures within 90 days of such revisions. 

 

	 	C.	Training and Education. 

  

	 	1.	General Training. To the extent not already completed, within 90 days after the Effective Date, HealthSouth shall provide reasonable and appropriate general training to each
Covered Person (General Training). This General Training, at a minimum, shall include: 

  

	 	a.	a description of HealthSouth’s regulatory compliance programs; 

  

	 	b.	a summary of HealthSouth’s Code of Conduct and internal policies and procedures as they pertain to general compliance issues); 

  

	 	c.	a description of the Disclosure Program, including the availability of a Compliance Hotline; 

  

	 	d.	a discussion of HealthSouth’s principal CIA requirements; 

  

	 	e.	an overview of the principal federal laws and regulations applicable to HealthSouth’s business operations; and 

  

	 	f.	a review of sanctions that may be applied to HealthSouth and individual Covered Persons for failure to comply with applicable statutes, regulations, and other Federal health care
program requirements. 

  
 New Covered Persons shall
receive the General Training described above within 30 days after becoming a Covered Person or within 90 days after the Effective Date, whichever is later. 
  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 7 

	 	2.	Refresher Training. After receiving the initial General Training described above, each Covered Person shall receive reasonable and appropriate General Training annually
(Refresher Training). Such Refresher Training shall reinforce the importance of the Company’s Compliance Program and shall address material changes in Federal health care program requirements, changes in HealthSouth compliance policies and
procedures, and other relevant compliance-related topics. 

  

	 	3.	Specific Training. Within 90 days after the Effective Date, each Relevant Covered Person shall receive at least four hours of Specific Training in addition to the General
Training required above. This Specific Training shall include a discussion of: 

  

	 	a.	the Federal health care program requirements regarding the accurate coding and submission of claims; 

  

	 	b.	policies, procedures, and other requirements applicable to the documentation of medical records; 

  

	 	c.	the personal obligation of each individual involved in the claims submission process to ensure that such claims are accurate; 

  

	 	d.	applicable reimbursement statutes, regulations, and program requirements and directives; 

  

	 	e.	if appropriate, the policies and procedures set forth in Section III.B.3 above; 

  

	 	f.	the legal sanctions for violations of the Federal health care program requirements; 

  

	 	g.	examples of proper and improper claims submission practices; and 

  

	 	h.	such other topics that will enable the Relevant Covered Person to use internal HealthSouth procedures and systems to perform his or her job responsibilities effectively and in
conformance with Federal health care program requirements. 

  
 New Relevant Covered Persons shall receive this training within 30 days after the beginning of their employment or becoming Relevant Covered Persons, or within 90 days after the Effective Date, whichever is later. A
HealthSouth employee who has completed the Specific Training shall review a new Relevant Covered Person’s work, to the extent that the work relates to the preparation or submission of claims for reimbursement from any Federal health care
program, until such time as the new Relevant Covered Person completes his or her Specific Training. 
  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 8 

 After receiving the initial Specific Training described in this Section, each Relevant Covered Person
shall receive at least four hours of Specific Training annually. Specific Training that meets the requirements of this Section III.C.3 and that was provided to Relevant Covered Persons during the twelve months immediately preceding the execution of
this CIA may be credited towards the training time requirements of this Section, provided that HealthSouth shall update such training with respect to the new policies and procedures required by Paragraphs III.B.3.a through III.B.3.e, above.

  

	 	4.	Certification. Each individual who is required to complete training shall certify, in writing, or in electronic form, if applicable, that he or she has received the required
training. The certification shall specify the type of training received and the date received. The Compliance Officer (or designee) shall retain the certifications, along with all course materials. These shall be made available to OIG, upon request.

  

	 	5.	Qualifications of Trainer. Persons designing or providing training shall be knowledgeable about the subject area. 

  

	 	6.	Update of Training. HealthSouth shall annually review its training programs, and, where appropriate, update such programs to reflect changes in Federal health care program
requirements, any issues discovered during internal audits or the IRO Claims Review, Unallowable Cost Review, and any other relevant information. 

  

	 	7.	Computer-based Training. HealthSouth may provide the training required under this CIA through appropriate computer-based training approaches. If HealthSouth chooses to
provide computer-based training, it shall make available appropriately qualified and knowledgeable staff or trainers to answer questions or provide additional information to the individuals receiving such training. 

  

	 	8.	Exception for Pre-existing Contractors. Notwithstanding any other provision of this CIA, the following are HealthSouth’s only obligations hereunder with respect to
Sections III.B and III.C for contractors who are not Covered Contractors pursuant to Section II.C.4 solely because there was a contract in place between HealthSouth and the contractor on the Effective Date. HealthSouth shall make the Code of Conduct
and information about the Disclosure Program available to all pre-existing contractors and shall make the General Training, and Specific Training, where appropriate, available to all pre-existing contractors, and shall use reasonable efforts to
encourage the contractor to distribute the materials to its employees and subcontractors. 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 9 

	 	D.	Review Procedures. 

  

	 	1.	General Description. 

  

	 	a.	Engagement of Independent Review Organization. Within 90 days after the Effective Date, HealthSouth shall engage an entity (or entities), such as an accounting, auditing, or
consulting firm (hereinafter “Independent Review Organization” or “IRO”), to perform reviews to assist HealthSouth in assessing and evaluating: (i) its billing, coding, and cost reporting practices with respect to its inpatient
rehabilitation facilities (IRFs); (ii) its billing and coding practices for outpatient items and services furnished by outpatient departments of HealthSouth IRFs and through other HealthSouth outpatient rehabilitation facilities (ORFs); and (iii)
certain other obligations pursuant to this Agreement and the Settlement Agreement. The applicable requirements relating to the IRO are outlined in Appendix A to this Agreement, which is incorporated by reference. 

  
 Each IRO engaged by HealthSouth shall have expertise in the billing,
coding, reporting, and other requirements applicable to IRFs and ORFs and in the general requirements of the Federal health care. program(s) from which HealthSouth seeks reimbursement. Each IRO shall assess, along with HealthSouth, whether it can perform the IRO review in a professionally independent and/or objective fashion, as appropriate to the nature of
the engagement, taking into account any other business relationships or other engagements that may exist. 
  

	 	b.	Types of Engagements. The IRO(s) shall conduct three separate engagements. One engagement shall address HealthSouth’s cost reporting to the Medicare program with respect
to its IRFs (Cost Reporting Engagement). The second engagement shall analyze whether HealthSouth sought payment for certain unallowable costs (Unallowable Cost Review). The third engagement shall evaluate and analyze HealthSouth’s coding,
billing, and claims submission to the Medicare program and the reimbursement received with respect to its IRFs, outpatient departments of IRFs, and ORFs (Billing Engagement). 

  

	 	c.	 Frequency of Cost Reporting Engagement. The Cost Reporting Engagement shall consist of two engagements which shall be performed as follows: (i) the Cost
Report Systems Review shall be performed for the CIA’s first Reporting Period only; and (ii) the Cost Report Review shall be performed for each of the CIA’s five one-year Reporting Periods beginning with the Effective Date of 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 10 

	 	 
this CIA. At any time after conclusion of the second Reporting Period, HealthSouth may request, in writing, that the Cost Reporting Engagement be removed
from the scope of the IRO’s Review Procedures for the remaining Reporting Periods. Any request by HealthSouth shall include the supporting rationale for such a modification to the Review Procedures and shall be granted solely at the OIG’s
discretion. 

  

	 	d.	Frequency of Unallowable Cost Review. The IRO shall perform the Unallowable Cost Review for the first Reporting Period only. 

  

	 	e.	Frequency of Billing Engagement. Elements of the Billing Engagement including Claims Reviews and, if applicable, Risk-Based Audits, shall be performed for each Reporting
Period as described herein. 

  

	 	f.	Retention of Records. The IRO and HealthSouth shall retain and make available to OIG, upon request, all work papers, supporting documentation, correspondence, and draft
reports (those exchanged between the IRO and HealthSouth) related to the reviews. 

  

	 	2.	Cost Reporting Engagement. The Cost Reporting Engagement shall consist of the following: 

  

	 	a.	Cost Report Systems Review. The IRO shall assess the systems and processes used by HealthSouth to prepare and submit Medicare cost reports for its IRFs. The assessment shall
review the methods and procedures used to prepare home office and facility cost reports including the effectiveness of controls designed to ensure that the proper information is being recorded on such reports and that only proper costs and dollar
amounts are being submitted. 

  

	 	b.	Cost Report Review. 

  

	 	(1)	Allowable Costs. The IRO shall select the cost reports for the preceding calendar year for the 12 IRFs selected for the Inpatient Rehabilitation Claims Review and as well as
HealthSouth’s home office Cost Report. The IRO shall utilize RAT-STATS to select and review 15 transactions for each facility cost report and for the home office cost report (a total of 195 transactions) to determine if the expense is allowable
and has been accurately reported. 

  

	 	(2)	 Medicare Bad Debts. The IRO shall select the six (6) HealthSouth IRFs with the highest amount of bad debt payments claimed on cost reports ending during the 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 11 

	 	 
preceding calendar year. The IRO shall utilize RAT-STATS to select and review 15 Medicare bad debts for each facility (a total of 90 bad debts). The IRO
shall determine whether reasonable efforts were made to collect the debt and whether the amount of the debt was accurately included in the amount claimed for bad debts on the cost report. 

  

	 	(3)	Medicare Low Income Patients. The IRO shall select the six (6) HealthSouth IRFs with the highest amount of reimbursement related to Medicare Low Income Patients (LIP) claimed on
cost reports ending during the preceding calendar year. The IRO shall utilize RAT-STATS to select and review 15 Medicaid eligible patients for whom the facility has claimed LIP reimbursement. The IRO shall verify the accuracy of admission and
discharge dates for such patients as well as documentation of their Medicaid eligibility. 

  

	 	c.	Cost Reporting Engagement Report. The IRO shall prepare a report based upon the Cost Report Review performed. The Report shall include the results of the Cost Report Review
and the Cost Report Systems Review including the IRO’s findings and supporting rationale regarding: (i) the strengths and weaknesses of the systems and processes used by HealthSouth to prepare and submit Medicare cost reports for its IRFs; and
(ii) any recommendations the IRO may have to improve any of these systems, operations, and processes. 

  

	 	3.	 Unallowable Cost Review. The IRO shall conduct a review of HealthSouth’s compliance with the unallowable cost provisions of the Settlement Agreement and
the Administrative Settlement Agreement entered into between HealthSouth and the Centers for Medicare & Medicaid Services contemporaneously with the Settlement Agreement. The IRO shall determine whether HealthSouth has complied with its
obligations not to charge to, or otherwise seek payment from, Federal or State payors for unallowable costs (as defined in the Settlement Agreement) and its obligation to identify to applicable Federal or State payors any unallowable costs included
in payments previously sought from the United States, or any State Medicaid program. This unallowable cost analysis shall include, but not be limited to, payments sought in any cost reports, cost statements, information reports, or payment requests
already submitted by HealthSouth or any affiliates. To the extent that such cost reports, cost statements, information reports, or payment requests, even if already settled, have been adjusted to account for the effect of the inclusion of the
unallowable costs, the IRO shall determine if such 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 12 

	 	 
adjustments were proper. In making this determination, the IRO may need to review cost reports and/or financial statements from the year in which the
Settlement Agreement was executed, as well as from previous years. 

  

	 	4.	Unallowable Cost Review Report. The IRO shall prepare a report based upon the Unallowable Cost Review performed. The Unallowable Cost Review Report shall include the
IRO’s findings and supporting rationale regarding the Unallowable Costs Review and whether HealthSouth has complied with its obligation not to charge to, or otherwise seek payment from, Federal or State payors for unallowable costs (as defined
in the Settlement Agreement) and its obligation to identify to applicable Federal or State payors any unallowable costs included in payments previously sought from such payor. 

  

	 	5.	Billing Engagement. The Billing Engagement shall assess the performance of billing systems at HealthSouth’s IRFs, outpatient departments of IRFs, and ORFs during the
term of this CIA. The engagement shall consist of three elements: (a) a review of Medicare Paid Claims to be performed by the IRO during each year of this CIA’s term (Claims Reviews); (b) if applicable, and subject to Section III.D.5.b.1 below,
annual risk-based audits to be performed by HealthSouth and the IRO during the third through fifth years of this CIA’s term as an alternative to the Claims Reviews; and (c) an assessment of billing system controls to be performed by HealthSouth
and the IRO during each year of this CIA’s term. The applicable definitions, procedures, and reporting requirements are outlined in Appendix B to this Agreement which is incorporated by reference. 

  

	 	a.	Claims Reviews. The IRO shall perform three separate Claim Reviews covering a 12-month period ending on December 31st of the relevant Reporting Period (the “Claims Review Period”). These reviews will evaluate Paid Claims for Medicare services furnished and paid
during the Claims Review Period for: (i) inpatient rehabilitation services furnished at IRFs; (ii) outpatient rehabilitation services furnished in the outpatient departments of HealthSouth IRFs; and (iii) outpatient rehabilitation services provided
by HealthSouth at ORFs. 

  

	 	(1)	Claims Review of Inpatient Rehabilitation Services. 

  

	 	(A)	 The IRO shall utilize RAT-STATS to select a random sample of twelve (12) HealthSouth IRFs. In selecting these facilities, the IRO shall randomly select two (2) IRFs
from each of HealthSouth’s six regions within its Inpatient Division. For each of the IRFs selected, HealthSouth shall provide the IRO with a listing of all Paid Claims, as defined in 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 13 

	 	 
Appendix B, during the Claims Review Period. The IRO shall utilize RAT-STATS to randomly select thirty (30) Paid Claims for each IRF.

  

	 	(B)	The IRO shall review the 360 Paid Claims (60 per region) selected for review to determine whether the claims were correctly coded, submitted, and reimbursed in accordance with
applicable law and Medicare program rules and regulations. 

  

	 	(C)	If the IRO identifies a Net Overpayment Rate of five (5) percent or more for any of the IRFs reviewed, the IRO shall follow the procedures described in Section III.D.5.a.(4) of this
CIA. 

  

	 	(2)	Claims Review of Outpatient Rehabilitation Services Furnished by Outpatient Departments of IRFs. 

  

	 	(A)	The IRO shall utilize RAT-STATS to select a random sample of eight (8) HealthSouth IRFs that billed Medicare for Outpatient Rehabilitation Services during the Claims Review Period.
In selecting these facilities, the IRO shall ensure that: (i) the facilities are randomly selected from a universe of the largest facilities that account for at least fifty (50) percent of the Inpatient Division’s outpatient Medicare revenue;
and (ii) all regions are represented in the sample. For each of the eight (8) facilities selected, HealthSouth shall provide the IRO with a listing of all Paid Claims for the Claims Review Period. The IRO shall utilize RAT-STATS to randomly select
thirty (30) Paid Claims for each facility. 

  

	 	(B)	The IRO shall review the 240 Paid Claims (30 per facility) selected for review to determine whether the claims were correctly coded, submitted, and reimbursed in accordance with
applicable law and Medicare program rules and regulations. 

  

	 	(C)	If the IRO identifies a Net Overpayment Rate of five (5) percent or more for any of the facilities reviewed, the IRO shall follow the procedures described in Section III.D.4.a.(4)
of this CIA. 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 14 

	 	(3)	Claims Review of Outpatient Rehabilitation Services Furnished by Outpatient Rehabilitation Facilities. 

  

	 	(A)	The IRO shall utilize RAT-STATS to select a random sample of eight (8) HealthSouth ORFs. The IRO shall ensure that these facilities are randomly selected from a universe of the
largest facilities that account for at least twenty-five (25) percent of the Medicare revenue received by ORFs operated by HealthSouth’s Outpatient Division. For each of the eight (8) facilities selected, HealthSouth shall provide the IRO with
a listing of all Paid Claims for the Claims Review Period. The IRO shall utilize RAT-STATS to randomly select thirty (30) Paid Claims for each facility. 

  

	 	(B)	The IRO shall review the 240 Billed Claims (30 per facility) selected for review to determine whether the claims were correctly coded, submitted, and reimbursed in accordance with
applicable law and Medicare program rules and regulations. 

  

	 	(C)	If the IRO identifies a Net Overpayment Rate of five (5) percent or more for any of the ORFs reviewed, the IRO shall follow the procedures described in Section III.D.5.a.(4) of this
CIA. 

  

	 	(4)	 Expanded Reviews. If the IRO identifies a Net Overpayment Rate of five (5) percent or greater for any claims sample reviewed as part of the Claims Reviews, the IRO
shall perform an additional sample of Paid Claims from that facility using commonly accepted sampling methods and in accordance with Appendix B (Full Sample). The Full Sample shall be designed to: (i) estimate the actual Overpayment in the
population with a 90% confidence level and with a maximum relative precision of 25% of the point estimate; and (ii) conform with the Centers for Medicare and Medicaid Services’ statistical sampling for overpayment estimation guidelines. The
Paid Claims shall be reviewed based on supporting documentation and applicable billing and coding regulations and guidance to determine whether the claim was correctly coded, submitted, and reimbursed. For purposes of calculating the size of the
Full Sample, the relevant 30-claim sample may serve as the probe sample, if statistically appropriate. Additionally, HealthSouth may use the 30 claims sampled and the corresponding findings for those 30 claims, as part of its Full Sample, if: (i)
statistically appropriate and (ii) HealthSouth selects the Full Sample Items using the seed 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 15 

	 	 
number generated by the 30-claim sample. OIG, in its sole discretion, may refer the findings of the Full Sample (and any related workpapers) received from
HealthSouth to the appropriate Federal health care program payor, including the Medicare contractor (e.g., carrier, fiscal intermediary, or DMERC), for appropriate follow-up by that payor. For each claim in the 30-claim sample and subsequent
Full Sample that resulted in an Overpayment, the IRO shall perform a “walk through” of the system(s) and process(es), that generated the claim to identify any problems or weaknesses that may have resulted in the identified Overpayments.
The IRO shall provide its observations and recommendations on suggested improvements to the system(s) and the process(es) that generated the claim. 

  

	 	(5)	Systemic Errors. If the IRO determines that the cause of some or all of the Overpayments identified in any of the Claims Reviews can be isolated to a specific defect in
HealthSouth’s billing systems or procedures, HealthSouth and the IRO shall contact OIG to determine whether the total Overpayment amount may be calculated using alternatives to the sampling methods described in Section III.D.5.a.(4).

  

	 	(6)	Additional Claims Reviews. If four (4) or more of the IRFs included in the Claims Reviews or three (3) or more of the outpatient departments of IRFs or ORFs included in such Reviews
have a Net Overpayment Rate of five (5) percent or greater, the IRO shall design and submit a plan to the OIG and HealthSouth for an expanded review of Billed Claims for the affected type(s) of facilities. 

  

	 	(7)	Repayment of Identified Overpayments. In accordance with Section III.H of this Agreement, HealthSouth shall repay within 30 days any Overpayment(s) identified in any 30-claim sample
or Full Sample (if applicable), regardless of the Net Overpayment Rate, to the appropriate payor and in accordance with payor refund policies. HealthSouth shall make available to OIG any and all documentation that reflects the refund of the
Overpayment(s) to the payor. 

  

	 	(8)	 Claims Review Report. The IRO shall prepare a report based on the Claims Reviews performed. The report shall contain the information described in Appendix B and
shall be submitted to HealthSouth’s Compliance Officer and the 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 16 

	 	 
Board Compliance Committee and included in the Annual Report required by Section V.B. of this CIA. 

  

	 	b.	Annual Risk-Based Audits. 

  

	 	(1)	OIG Approval of Risk-Based Audits and HealthSouth’s Development of an Annual Audit Plan. 

  

	 	(A)	 At any time after the conclusion of the second Reporting Period, HealthSouth may request, in writing, that a risk-based audit described herein (Risk-Based Audit) be
performed as an alternative to the Claims Review. Any such request by HealthSouth shall: (i) include the supporting rationale for such an alternative review; (ii) include an analysis of the results of the first two Claims Reviews to justify why a
Risk-Based Audit would be appropriate; and (iii) be granted solely at the OIG’s discretion. Contingent upon OIG’s approval as set forth above, during the third year of this CIA and during each subsequent Audit Year, HealthSouth shall
prepare an Annual Audit Plan (Audit Plan) to evaluate the integrity of claims for items and services furnished to beneficiaries of Federal health care programs by HealthSouth’s IRFs, outpatient departments of IRFs, and ORFs. The Audit Plan
shall test the effectiveness of systems design and management controls in ensuring compliance with applicable Federal health care program rules. Specific audit projects shall be selected on the basis of the following criteria: (i) quantification of
known or suspected overpayments to Federal health care programs based on systems reviews or probe audits; (ii) specific program areas that are deemed to pose special risks of claims error based upon information received from, or concerns expressed
by, Company employees, patterns of claims denials, audit findings by Federal health care programs, areas identified by the OIG or other investigative agencies as special audit priorities, program areas or geographic locations that have experienced
significant changes in management personnel or unusually high turnover of other personnel, or other relevant factors; (iii) confirmation of corrective actions in response to prior audit findings; (iv) evaluation of claims for 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 17 

	 	 
items or services being offered for the first time by the Company or by newly acquired facilities; and (v) general program integrity surveillance, including
baseline audits to establish and monitor claims systems error rates. 

  

	 	(B)	The Audit Plan shall include a specific project schedule, by calendar quarter, as well as the number and professional qualifications of internal and external audit personnel and
other resources required for implementation. The Audit Plan shall be submitted to the IRO not later than 45 days prior to the start of the relevant Audit Year. 

  

	 	(C)	The IRO shall review and prepare an assessment of the Audit Plan addressing: (i) the methodology used to identify and assess known or potential claims integrity risks; (ii) the
process used to prioritize audit projects based on known or potential claims integrity risks; (iii) the scope and content of audit procedures proposed to address specific claims risk areas; (iv) the professional qualifications of the personnel
designated to perform the audits; and (v) any other factors deemed to be relevant by the IRO to assess the integrity and effectiveness of the Audit Plan. 

  

	 	(D)	The IRO shall forward a written report of its assessment of the Audit Plan to HealthSouth’s Compliance Officer and to the Compliance Committee of the HealthSouth Board of
Directors not later than January 1st of the relevant Audit Year. The IRO report may include recommendations for
modification of the Audit Plan. Not later than thirty (30) days after receiving the IRO’s report, HealthSouth shall forward a copy of the Audit Plan and the IRO report to the OIG, incorporating each of the recommendations made by the IRO or
describing in detail the reasons for not doing so. 

  

	 	(2)	Implementation of the Audit Plan and Report 

  

	 	(A)	 Upon receipt of approval of the Audit Plan by the OIG, HealthSouth shall implement the Audit Plan as submitted to the OIG. Any material modifications to the Audit
Plan shall be 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 18 

	 	 
communicated to the IRO and to the OIG during the course of the year. HealthSouth shall review its progress in implementing the Audit Plan with the IRO and
the IRO may make additional recommendations concerning the Audit Plan and its implementation to HealthSouth and to the OIG. 

  

	 	(B)	All audit projects undertaken pursuant to the Audit Plan shall be performed and documented in accordance with accepted professional audit standards. Copies of all final audit
reports shall be made available to the IRO. The IRO shall be given access to all workpapers and other records prepared in connection with each audit. 

  

	 	(C)	Not later than 45 days following the close of the relevant Audit Year, HealthSouth shall prepare an Annual Audit Report (the “Annual Audit Report”) of the results of
audits undertaken pursuant to the Audit Plan. The Annual Audit Report shall include: (i) a description of all audit projects undertaken pursuant to the Audit Plan; (ii) the results of all audits performed; (iii) a summary of repayments made to
Federal health care programs during the course of the Audit Year as a result of audits undertaken pursuant to the Audit Plan; and (iv) a list of any other Reportable Events (as defined by Section III.H.2 of the Corporate Integrity Agreement)
identified as a result of audits undertaken pursuant to the Audit Plan. 

  

	 	(D)	 The IRO shall review the Annual Audit Report and prepare a written report no later than 90 days following the close of each Audit Year assessing the performance and
completeness of the audits performed based on the following elements: (i) whether HealthSouth employed professionally qualified personnel and used generally accepted professional standards and procedures in conducting and documenting audit projects
pursuant to the Audit Plan; (ii) identification of any elements of the Audit Plan that were not completed or that were not conducted in accordance with the audit scope and methodology described on the Audit Plan; (iii) recommendations for audit
projects or priorities to be undertaken during the following Audit Year; and 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 19 

	 	 
(iv) any other material finding or recommendations by the IRO based on its review of the Annual Audit Report and accompanying documentation. A copy of the
IRO report on the Annual Audit Report shall be forwarded to the Compliance Officer and to the Board Compliance Committee. The Annual Audit Report and a copy of the IRO’s report on its review of the Annual Audit Report shall be included in the
Annual Report by HealthSouth to the OIG pursuant to Section V.B. of this CIA. 

  

	 	(E)	The IRO shall undertake such fieldwork, interviews, process reviews, independent claims sampling, or review of work papers as may be necessary to carry out its responsibilities
pursuant to this Section III.D.5.b, including validation procedures on not less than ten (10) percent of sample claims or other items reviewed by HealthSouth. 

  

	 	c.	Assessment of Billing Systems Controls. HealthSouth and the IRO shall review the internal control structure and systems and processes used by HealthSouth’s IRFs,
outpatient departments of IRFs, and ORFs for the preparation and submission of claims for items and services to the Medicare program (Billing Systems). 

  

	 	(1)	As part of this review HealthSouth shall: (a) identify the key controls and control objectives for each Billing System; (b) assess the effectiveness of each key control in meeting
its control objective; (c) identify and assess the effect of any material control gaps or control deficiencies; and (d) determine the need for new controls or the improvement of existing controls for each Billing System. 

  

	 	(2)	The IRO shall evaluate the assessment made by HealthSouth of its Billing Systems and shall perform such additional procedures and reviews as it deems necessary to confirm the
effectiveness of the internal control structures and procedures for the Billing Systems. The IRO shall prepare a written report of its findings. Copies of the IRO’s report shall be forwarded to HealthSouth’s Compliance Officer and to the
Compliance Committee of the HealthSouth Board of Directors and shall be included in HealthSouth’s Annual Report to OIG pursuant to Section V.B. 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 20 

	 	(3)	Nothing in this CIA shall prevent the IRO from utilizing an assessment of key controls and control objectives for HealthSouth’s financial systems (including its Billing
Systems) prepared by HealthSouth pursuant to the Section 404(a)(1) of P.L. 107-204 (The Sarbanes-Oxley Act of 2002) to satisfy the requirements of Section III.D.5.c.(l) of this CIA. 

  

	 	(4)	Nothing in this CIA shall prevent the IRO from utilizing work performed pursuant to Section 404(a)(2) of P.L. 107-204, assessing the integrity of HealthSouth’s internal control
structure and procedures, to satisfy the requirements of Section III.D.5.c.(2) of this CIA. 

  

	 	6.	Validation Review. In the event OIG has reason to believe that: (a) HealthSouth’s Cost Reporting Engagement, Unallowable Cost Review, or Billing Engagement fails to
conform to the requirements of this Agreement; or (b) the IRO’s findings or Cost Reporting Engagement, Unallowable Cost Review, or Billing Engagement results are inaccurate, OIG may, at its sole discretion, conduct its own review to determine
whether the Cost Reporting Engagement, Unallowable Cost Review, or Billing Engagement complied with the requirements of the Agreement and/or the findings or Cost Reporting Engagement, Unallowable Cost Review, or Billing Engagement results are
inaccurate (Validation Review). HealthSouth shall pay for the reasonable cost of any such review performed by OIG or any of its designated agents. Any Validation Review of Reports submitted as part of HealthSouth’s final Annual Report must be
initiated no later than one year after HealthSouth’s final submission (as described in Section II) is received by OIG. 

  
 Prior to initiating a Validation Review, OIG shall notify HealthSouth of its intent to do so and provide a written explanation of why OIG believes such a
review is necessary. To resolve any concerns raised by OIG, HealthSouth may request a meeting with OIG to: (a) discuss the results of any Cost Reporting Engagement, Unallowable Cost Review, or Billing Engagement submissions or findings; (b) present
any additional information to clarify the results of the Cost Reporting Engagement, Unallowable Cost Review, or Billing Engagement or to correct the inaccuracy of the Cost Reporting Engagement, Unallowable Cost Review, or Billing Engagement; and/or
propose alternatives to the proposed Validation Review. HealthSouth agrees to provide any additional information as may be requested by OIG under this Section in an expedited manner. OIG will attempt in good faith to resolve any Cost Reporting
Engagement, Unallowable Cost Review, or Billing Engagement issues with HealthSouth prior to conducting a Validation Review. 
  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 21 

 However, the final determination as to whether or not to proceed with a Validation Review shall be made
at the sole discretion of OIG. 
  

	 	7.	Independence/Objectivity Certification. The IRO shall include in its report(s) to HealthSouth a certification or sworn affidavit that it has evaluated its professional
independence and/or objectivity, as appropriate to the nature of the engagement, with regard to the Cost Reporting Engagement, Unallowable Cost Review, or Billing Engagement and that it has concluded that it is, in fact, independent and/or
objective. 

  

	 	E.	Disclosure Program. 

  
 HealthSouth shall maintain a Disclosure Program that includes a mechanism (e.g., a toll-free compliance telephone line) to enable individuals to
disclose, to the Compliance Officer or some other person who is not in the disclosing individual’s chain of command, any identified issues or questions associated with HealthSouth’s policies, conduct, practices, or procedures with respect
to a Federal health care program believed by the individual to be a potential violation of criminal, civil, or administrative law. HealthSouth shall appropriately publicize the existence of the disclosure mechanism (e.g., via periodic e-mails
to employees or by posting the information in prominent common areas). 
  
 The Disclosure Program shall emphasize a nonretribution, nonretaliation policy, and shall include a reporting mechanism for anonymous communications for which appropriate confidentiality shall be maintained. Upon receipt of a disclosure,
the Compliance Officer (or designee) shall gather all relevant information from the disclosing individual. The Compliance Officer (or designee) shall make a preliminary, good faith inquiry into the allegations set forth in every disclosure relating
to a potential violation of Federal health care program requirements to ensure that he or she has obtained all of the information necessary to determine whether a further review should be conducted. For any disclosure that is sufficiently specific
so that it reasonably: (1) permits a determination of the appropriateness of the alleged improper practice; and (2) provides an opportunity for taking corrective action, HealthSouth shall conduct an internal review of the allegations set forth in
the disclosure and ensure that proper follow-up is conducted. 
  
 The Compliance Officer (or designee) shall maintain a disclosure log, which shall include a record and summary of each disclosure received (whether anonymous or not), the status of the respective internal reviews, and any corrective action
taken in response to the internal reviews. The disclosure log shall be made available to OIG upon request. 
  

	 	F.	Ineligible Persons. 

  

	 	1.	Definitions. For purposes of this CIA: 

  

	 	a.	an “Ineligible Person” shall include an individual or entity who: 

  

	 	i.	is currently excluded, debarred, suspended, or otherwise ineligible to participate in the Federal health care programs or in Federal procurement or nonprocurement programs; or

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 22 

	 	ii.	has been convicted of a criminal offense that falls within the ambit of 42 U.S.C. § 1320a-7(a), but has not yet been excluded, debarred, suspended, or otherwise declared
ineligible. 

  

	 	b.	“Exclusion Lists” include: 

  

	 	i.	the HHS/OIG List of Excluded Individuals/Entities (available through the Internet at http://oig.hhs.gov); and 

  

	 	ii.	the General Services Administration’s List of Parties Excluded from Federal Programs (available through the Internet at http://epls.arnet.gov). 

  

	 	c.	“Screened Persons” include HealthSouth’s prospective and current: (1) owners (other than shareholders who: (I) have an ownership interest of less than 5%; and (II)
acquired the ownership interest through public trading), (2) officers, (3) directors, (4) employees, and (5) physicians with staff privileges, contractors, and agents who furnish health care items or services at a HealthSouth facility that
participates in a Federal health care program or that perform billing or coding functions with respect to such items or services. 

  

	 	2.	Screening Requirements. HealthSouth shall ensure that all Screened Persons are not Ineligible Persons, by implementing the following screening requirements.

  

	 	a.	HealthSouth shall screen all Screened Persons against the Exclusion Lists prior to engaging their services and, as part of the hiring or contracting process, shall require such
persons to disclose whether they are an Ineligible Person. 

  

	 	b.	HealthSouth shall screen all Screened Persons against the Exclusion Lists within 90 days after the Effective Date and on an annual basis thereafter. 

  

	 	c.	HealthSouth shall implement a policy requiring all Screened Persons to disclose immediately any debarment, exclusion, suspension, or other event that makes that person an Ineligible
Person. 

  
 Nothing in this Section affects the responsibility of
(or liability for) HealthSouth to refrain from billing Federal health care programs for items or services furnished, ordered, or prescribed by an Ineligible Person. 
  

	 	3.	 Removal Requirement. If HealthSouth has actual notice that a Screened Person has become an Ineligible Person, HealthSouth shall remove such 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 23 

	 	 
person from responsibility for, or involvement with, HealthSouth’s business operations related to the Federal health care programs and shall remove such
person from any position for which the person’s compensation or the items or services furnished, ordered, or prescribed by the person are paid in whole or part, directly or indirectly, by Federal health care programs or otherwise with Federal
funds at least until such time as the person is reinstated into participation in the Federal health care programs. 

  

	 	4.	Pending Charges and Proposed Exclusions. If HealthSouth has actual notice that a Screened Person is charged with a criminal offense that falls within the ambit of 42 U.S.C.
§§ 1320a-7(a), 1320a-7(b)(l)-(3), or is proposed for exclusion during his or her employment or contract term, or, in the case of a physician, during the term of the physician’s medical staff privileges, HealthSouth shall take all
appropriate actions to ensure that the responsibilities of that person have not and shall not adversely affect the quality of care rendered to any beneficiary, patient, or resident, or the accuracy of any claims submitted to any Federal health care
program. 

  

	 	G.	Notification of Government Investigation or Legal Proceedings. 

  
 Within 30 days after discovery, HealthSouth shall notify OIG, in writing, of any ongoing investigation or legal proceeding known to HealthSouth conducted
or brought by a governmental entity or its agents involving an allegation that HealthSouth has committed a crime or has engaged in fraudulent activities. This notification shall include a description of the allegation, the identity of the
investigating or prosecuting agency, and the status of such investigation or legal proceeding. HealthSouth shall also provide written notice to OIG within 30 days after the resolution of the matter, and shall provide OIG with a description of the
findings and/or results of the investigation or proceedings, if any. 
  

	 	H.	Reporting. 

  

	 	1.	Overpayments. 

  

	 	a.	Definition of Overpayments. For purposes of this CIA, an “Overpayment” shall mean the amount of money: (1) HealthSouth and/or (2) any subsidiary, operating
division, joint venture, or affiliate of HealthSouth Corporation (i) that is beyond the scope of the defined term “HealthSouth” set forth in Section II.C.l above, and (ii) over which HealthSouth has the ability to control the day-to-day
operations, has received in excess of the amount due and payable under any Federal health care program requirements. 

  

	 	b.	 Reporting of Overpayments. If, at any time, HealthSouth identifies or learns of any Overpayment, HealthSouth shall notify the payor (e.g., Medicare
fiscal intermediary or carrier) within 30 days after identification of the Overpayment and take remedial steps within 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 24 

	 	 
60 days after identification (or such additional time as may be agreed to by the payor) to correct the problem, including preventing the underlying problem
and the Overpayment from recurring. Also, within 30 days after identification of the Overpayment, HealthSouth shall repay the Overpayment to the appropriate payor to the extent such Overpayment has been quantified. If not yet quantified, within 30
days after identification, HealthSouth shall notify the payor of its efforts to quantify the Overpayment amount along with a schedule of when such work is expected to be completed. Notification and repayment to the payor shall be done in accordance
with the payor’s policies, and, for Medicare contractors, shall include the information contained on the Overpayment Refund Form, provided as Appendix C to this CIA. Notwithstanding the above, notification and repayment of any Overpayment
amount that routinely is reconciled or adjusted pursuant to policies and procedures established by the payor should be handled in accordance with such policies and procedures. 

  

	 	2.	Reportable Events. 

  

	 	a.	Definition of Reportable Event. For purposes of this CIA, a “Reportable Event” means anything that involves: 

  

	 	i.	a substantial Overpayment; or 

  

	 	ii.	a matter that a reasonable person would consider a probable violation of criminal, civil, or administrative laws applicable to any Federal health care program for which penalties or
exclusion may be authorized. 

  
 A Reportable
Event may be the result of an isolated event or a series of occurrences. 
  

	 	b.	Reporting of Reportable Events. If HealthSouth and/or any subsidiary, operating division, joint venture, or affiliate of HealthSouth Corporation (i) that is beyond the scope
of the defined term “HealthSouth” set forth in Section II.C.1 above, and (ii) over which HealthSouth has the ability to control the day-to-day operations, determines (after a reasonable opportunity to conduct an appropriate review or
investigation of the allegations) through any means that there is a Reportable Event, HealthSouth shall notify OIG, in writing, within 30 days after making the determination that the Reportable Event exists. The report to OIG shall include the
following information: 

  

	 	i.	 If the Reportable Event results in an Overpayment, the report to OIG shall be made at the same time as the 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 25 

	 	 
notification to the payor required in Section III.H.l, and shall include all of the information on the Overpayment Refund Form, as well as:

  
 (A) the payor’s name, address, and
contact person to whom the Overpayment was sent; and 
  
 (B) the
date of the check or electronic transaction and identification number (or electronic transaction number) by which the Overpayment was repaid/refunded; 
  

	 	ii.	a complete description of the Reportable Event, including the relevant facts, persons involved, and legal and Federal health care program authorities implicated;

  

	 	iii.	a description of HealthSouth’s actions taken to correct the Reportable Event; and 

  

	 	iv.	any further steps HealthSouth plans to take to address the Reportable Event and prevent it from recurring. 

  

	IV.	NEW BUSINESS UNITS OR LOCATIONS 

  
 HealthSouth shall notify OIG on a quarterly basis of the purchase, sale, closure, establishment, or relocation of any HealthSouth facility furnishing
items or services that may be reimbursed by Federal health care programs. This notification shall include the address of the affected facility, phone number, fax number, Medicare Provider number, provider identification number and/or supplier
number, and the corresponding contractor’s name and address that has issued each Medicare number. Each new HealthSouth facility shall be subject to the requirements of this CIA. 
  

	V.	IMPLEMENTATION AND ANNUAL REPORTS 

  

	 	A.	Implementation Report. Within 120 days after the Effective Date, HealthSouth shall submit a written report to OIG summarizing the status of its implementation of the
requirements of this CIA (Implementation Report). The Implementation Report shall, at a minimum, include: 

  

	 	1.	the name, address, phone number, and position description of the Compliance Officer required by Section III.A, and a summary of other noncompliance job responsibilities the
Compliance Officer may have; 

  

	 	2.	the names and positions of the members of the Executive Compliance Committee and the Board Compliance Committee required by Section III.A; 

  

	 	3.	a copy of HealthSouth’s Code of Conduct required by Section III.B.1; 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 26 

	 	4.	a copy of all policies and procedures required by Sections III.B.3.a through III.B.3.e, and a summary of all other policies and procedures required by Section III.B;

  

	 	5.	the number of individuals required to complete the Code of Conduct certification required by Section III.B.1, the percentage of individuals who have completed such certification,
and an explanation of any exceptions (the documentation supporting this information shall be available to OIG, upon request); 

  

	 	6.	the following information regarding each type of training required by Section III.C: 

  

	 	a.	a description of such training, including a summary of the topics covered, the length of sessions and a training schedule; 

  

	 	b.	number of individuals required to be trained, percentage of individuals actually trained, and an explanation of any exceptions. 

  
 A copy of all training materials and the documentation supporting this information shall be
available to OIG, upon request. 
  

	 	7.	a description of the Disclosure Program required by Section III.E; 

  

	 	8.	the following information regarding the IRO(s): (a) identity, address, and phone number; (b) a copy of the engagement letter; (c) a summary and description of any and all current
and prior engagements and agreements between HealthSouth and the IRO; and (d) the proposed start and completion dates of the Cost Reporting Engagement, Unallowable Cost Review, and Billing Engagement during the first CIA year;

  

	 	9.	a certification from the IRO regarding its professional independence and/or objectivity with respect to HealthSouth; 

  

	 	10.	a description of the process by which HealthSouth fulfills the requirements of Section III.F regarding Ineligible Persons; 

  

	 	11.	the name, title, and responsibilities of any person who is determined to be an Ineligible Person under Section III.F; the actions taken in response to the screening and removal
obligations set forth in Section III.F; and the actions taken to identify, quantify, and repay any overpayments to Federal health care programs relating to items or services furnished, ordered or prescribed by an Ineligible Person;

  

	 	12.	 to the extent not already provided to OIG, a list of all of HealthSouth’s facilities furnishing items or services that may be reimbursed by Federal health care
programs including the address of each facility, phone number, 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 27 

	 	 
fax number, Medicare Provider number, provider identification number and/or supplier number, and the corresponding contractor’s name and address that
issued each Medicare number; 

  

	 	13.	to the extent not already provided to OIG, a description of HealthSouth’s corporate structure, including identification of any parent and sister companies, subsidiaries, and
their respective lines of business; and 

  

	 	14.	the certifications required by Section V.C. 

  

	 	B.	Annual Reports. HealthSouth shall submit to OIG annually a report with respect to the status of, and findings regarding, HealthSouth’s compliance activities for each of
the five Reporting Periods (Annual Report). 

  
 Each Annual Report shall include, at a minimum: 
  

	 	1.	any change in the identity, position description, or other noncompliance job responsibilities of the Compliance Officer and any change in the membership of the Executive Compliance
Committee or Board Compliance Committee described in Section III.A; 

  

	 	2.	a summary of any significant changes or amendments to the policies and procedures required by Section III.B and the reasons for such changes (e.g., change in contractor
policy) (copies of any such policies and procedures shall be available to OIG, upon request); 

  

	 	3.	the number of individuals required to complete the Code of Conduct certification required by Section III.B.1, the percentage of individuals who have completed such certification,
and an explanation of any exceptions (the documentation supporting this information shall be available to OIG, upon request); 

  

	 	4.	the following information regarding each type of training required by Section III.C: 

  

	 	a.	a description of such training, including a summary of the topics covered, the length of sessions and a training schedule; 

  

	 	b.	number of individuals required to be trained, percentage of individuals actually trained, and an explanation of any exceptions. 

  
 A copy of all training materials and the documentation supporting this information shall be
available to OIG, upon request. 
  

	 	5.	a complete copy of all reports prepared pursuant to Section III.D, along with a copy of the IRO’s engagement letter (if applicable); 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 28 

	 	6.	HealthSouth’s response and corrective action plan(s) related to any issues raised by the reports prepared pursuant to Section III.D; 

  

	 	7.	summary and description of any and all current and prior engagements and agreements between HealthSouth and the IRO, if different from what was submitted as part of the
Implementation Report; 

  

	 	8.	a certification from the IRO regarding its professional independence and/or objectivity with respect to HealthSouth; 

  

	 	9.	a summary of Reportable Events (as defined in Section III.H) identified during the Reporting Period and the status of any corrective and preventative action relating to all such
Reportable Events; 

  

	 	10.	a report of the aggregate Overpayments that have been returned to the Federal health care programs. Overpayment amounts shall be broken down into the following categories: inpatient
Medicare, outpatient Medicare, Medicaid (report each applicable state separately, if applicable), and other Federal health care programs. Overpayment amounts that are routinely reconciled or adjusted pursuant to policies and procedures established
by the payor do not need to be included in this aggregate Overpayment report; 

  

	 	11.	a summary of the disclosures in the disclosure log required by Section III.E that: (a) relate to Federal health care programs; or (b) allege abuse or neglect of patients;

  

	 	12.	any changes to the process by which HealthSouth fulfills the requirements of Section III.F regarding Ineligible Persons; 

  

	 	13.	the name, title, and responsibilities of any person who is determined to be an Ineligible Person under Section III.F during the Reporting Period; the actions taken by HealthSouth in
response to the screening and removal obligations set forth in Section III.F; and the actions taken to identify, quantify, and repay any overpayments to Federal health care programs relating to items or services relating to items or services
furnished, ordered or prescribed by an Ineligible Person; 

  

	 	14.	a summary describing any ongoing investigation or legal proceeding required to have been reported pursuant to Section III.G. The summary shall include a description of the
allegation, the identity of the investigating or prosecuting agency, and the status of such investigation or legal proceeding; and 

  

	 	15.	the certifications required by Section V.C. 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 29 

 The first Annual Report shall be received by OIG no later than 120 days after the end of the first
Reporting Period. Subsequent Annual Reports shall be received by OIG no later than the anniversary date of the due date of the first Annual Report. 
  

	 	C.	Certifications. The Implementation Report and Annual Reports shall include a certification by the Compliance Officer that: 

  

	 	1.	to the best of his or her knowledge, except as otherwise described in the applicable report, HealthSouth is in compliance with all of the requirements of this CIA;

  

	 	2.	he or she has reviewed the Report and has made reasonable inquiry regarding its content and believes that the information in the Report is accurate and truthful; and

  

	 	3.	HealthSouth has complied with its obligations under the Settlement Agreement and the Administrative Settlement Agreement entered into between HealthSouth and the Centers for
Medicare & Medicaid Services contemporaneously with the Settlement Agreement: (a) not to resubmit to any Federal health care program payors any previously denied claims related to the Covered Conduct addressed in the Settlement Agreement, and
not to appeal any such denials of claims; (b) not to charge to or otherwise seek payment from Federal or State payors for unallowable costs (as defined in the Settlement Agreement); and (c) to identify and adjust any past charges or claims for
unallowable costs. 

  

	 	D.	Designation of Information. HealthSouth shall clearly identify any portions of its submissions that it believes are trade secrets, or information that is commercial or
financial and privileged or confidential, and therefore potentially exempt from disclosure under the Freedom of Information Act (FOIA), 5 U.S.C. § 552. HealthSouth shall refrain from identifying any information as exempt from disclosure if that
information does not meet the criteria for exemption from disclosure under FOIA. 

  

	VI.	NOTIFICATIONS AND SUBMISSION OF REPORTS 

  
 Unless otherwise stated in writing after the Effective Date, all notifications and reports required under this CIA shall be submitted to the following
entities: 
  
 OIG: 
  
 Administrative and Civil Remedies Branch 
 Office of Counsel to the Inspector General 
 Office of Inspector General 
 U.S. Department of Health and Human Services 
 Cohen Building, Room 5527 
 330 Independence
Avenue, S.W. 
 Washington, DC 20201 
 Telephone: (202) 619-2078 
 Facsimile: (202) 205-0604 
  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 30 

 HealthSouth Corporation: 
  

John Markus 
 Executive Vice President and

 Chief Compliance Officer 
 HealthSouth Corporation 
 One HealthSouth Parkway 
 Birmingham, AL 35243 
 Telephone: (205) 970-8158 
 Facsimile: (205) 970-5858 
  
 Unless otherwise specified, all notifications and reports required by this CIA may be made by certified mail, overnight mail, hand delivery, or other
means, provided that there is proof that such notification was received. For purposes of this requirement, internal facsimile confirmation sheets do not constitute proof of receipt. 
  

	VII.	OIG INSPECTION, AUDIT, AND REVIEW RIGHTS 

  
 In addition to any other rights OIG may have by statute, regulation, or contract, OIG or its duly authorized representative(s) may examine or request
copies of HealthSouth’s books, records, and other documents and supporting materials and/or conduct on-site reviews of any of HealthSouth’s locations for the purpose of verifying and evaluating: (a) HealthSouth’s compliance with the
terms of this CIA; and (b) HealthSouth’s compliance with the requirements of the Federal health care programs in which it participates. The documentation described above shall be made available by HealthSouth to OIG or its duly authorized
representative(s) at all reasonable times for inspection, audit, or reproduction. Furthermore, for purposes of this provision, OIG or its duly authorized representative(s) may interview any of HealthSouth’s employees, contractors, or agents who
consent to be interviewed at the individual’s place of business during normal business hours or at such other place and time as may be mutually agreed upon between the individual and OIG. HealthSouth shall assist OIG or its duly authorized
representative(s) in contacting and arranging interviews with such individuals upon OIG’s request. HealthSouth’s employees may elect to be interviewed with or without a representative of HealthSouth present. However, if an employee,
consistent with the rights and privileges of such individual, refuses to be interviewed based upon an individual decision and/or advice of the employee’s counsel, HealthSouth will not be in breach of this Section if the interview does not
occur. 
  

	VIII.	DOCUMENT AND RECORD RETENTION 

  
 HealthSouth shall maintain for inspection all documents and records relating to reimbursement from the Federal health care programs, or to compliance with
this CIA, for six years (or longer if otherwise required by law). 
  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 31 

	IX.	DISCLOSURES 

  
 Consistent with HHS’s FOIA procedures, set forth in 45 C.F.R. Part 5, OIG shall make a reasonable effort to notify HealthSouth prior to any release
by OIG of information submitted by HealthSouth pursuant to its obligations under this CIA and identified upon submission by HealthSouth as trade secrets, or information that is commercial or financial and privileged or confidential, under the FOIA
rules. With respect to such releases, HealthSouth shall have the rights set forth at 45 C.F.R. § 5.65(d). HealthSouth asserts that nothing in this CIA, or any communication or report made pursuant to this CIA, shall by itself constitute or be
construed as a waiver by HealthSouth of its attorney-client, work product, peer review, or other applicable privileges, including the protections contained in 42 C.F.R. § 483.75(o) (related to quality assurance). Notwithstanding that fact, the
existence of any such privilege does not affect HealthSouth’s obligations to comply with the provisions of this CIA, including any reporting requirements. 
  

	X.	BREACH AND DEFAULT PROVISIONS 

  
 HealthSouth is expected to fully and timely comply with all of its CIA obligations. 
  

	 	A.	Stipulated Penalties for Failure to Comply with Certain Obligations. As a contractual remedy, HealthSouth and OIG hereby agree that failure to comply with certain obligations
as set forth in this CIA may lead to the imposition of the following monetary penalties (hereinafter referred to as “Stipulated Penalties”) in accordance with the following provisions. 

  

	 	1.	A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day HealthSouth fails to establish and implement any of the
following obligations as described in Section III: 

  

	 	a.	a Compliance Officer; 

  

	 	b.	an Executive Compliance Committee; 

  

	 	c.	a Board Compliance Committee; 

  

	 	d.	a written Code of Conduct; 

  

	 	e.	written policies and procedures pursuant to Section III.B.3; 

  

	 	f.	the training of Covered Persons; 

  

	 	g.	a Disclosure Program; 

  

	 	h.	Ineligible Persons screening and removal requirements; and 

  

	 	i.	Notification of Government investigations or legal proceedings pursuant to Section III.G. 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 32 

	 	2.	A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day HealthSouth fails to engage an IRO, as required in
Section III.D and Appendix A. 

  

	 	3.	A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day HealthSouth fails to submit the Implementation Report
or the Annual Reports to OIG in accordance with the requirements of Section V by the deadlines for submission. 

  

	 	4.	A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day HealthSouth fails to submit the annual Cost Reporting
Engagement Report, Unallowable Cost Review Report, Claims Review Report, or Annual Audit Report, if applicable, in accordance with the requirements of Section III.D and Appendix B. 

  

	 	5.	A Stipulated Penalty of $1,500 for each day HealthSouth fails to grant access to the information or documentation as required in Section VII. (This Stipulated Penalty shall begin to
accrue on the date HealthSouth fails to grant access.) 

  

	 	6.	A Stipulated Penalty of $5,000 for each false certification submitted by or on behalf of HealthSouth as part of its Implementation Report, Annual Report, additional documentation to
a report (as requested by the OIG), or otherwise required by this CIA. 

  

	 	7.	A Stipulated Penalty of $1,000 for each day HealthSouth fails to comply fully and adequately with any obligation of this CIA. OIG shall provide notice to HealthSouth, stating the
specific grounds for its determination that HealthSouth has failed to comply fully and adequately with the CIA obligation(s) at issue and steps HealthSouth shall take to comply with the CIA. (This Stipulated Penalty shall begin to accrue 10 days
after HealthSouth receives this notice from OIG of the failure to comply.) A Stipulated Penalty as described in this Subsection shall not be demanded for any violation for which OIG has sought a Stipulated Penalty under Subsections 1-6 of this
Section. 

  

	 	B.	 Timely Written Requests for Extensions. HealthSouth may, in advance of the due date, submit a timely written request for an extension of time to perform any
act or file any notification or report required by this CIA. Notwithstanding any other provision in this Section, if OIG grants the timely written request with respect to an act, notification, or report, Stipulated Penalties for failure to perform
the act or file the notification or report shall not begin to accrue until one day after HealthSouth fails to meet the revised deadline set by OIG. Notwithstanding any other provision in this Section, if OIG denies such a timely written request,

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 33 

 
Stipulated Penalties for failure to perform the act or file the notification or report shall not begin to accrue until three business days after HealthSouth
receives OIG’s written denial of such request or the original due date, whichever is later. A “timely written request” is defined as a request in writing received by OIG at least five business days prior to the date by which any act
is due to be performed or any notification or report is due to be filed. 
  

	 	C.	Payment of Stipulated Penalties. 

  

	 	1.	Demand Letter. Upon a finding that HealthSouth has failed to comply with any of the obligations described in Section X.A and after determining that Stipulated Penalties are
appropriate, OIG shall notify HealthSouth of: (a) HealthSouth’s failure to comply; and (b) OIG’s exercise of its contractual right to demand payment of the Stipulated Penalties (this notification is referred to as the “Demand
Letter”). 

  

	 	2.	Response to Demand Letter. Within 10 days after the receipt of the Demand Letter, HealthSouth shall either: (a) cure the breach to OIG’s satisfaction and pay the
applicable Stipulated Penalties; or (b) request a hearing before an HHS administrative law judge (ALJ) to dispute OIG’s determination of noncompliance, pursuant to the agreed upon provisions set forth below in Section X.E. In the event
HealthSouth elects to request an ALJ hearing, the Stipulated Penalties shall continue to accrue until HealthSouth cures, to OIG’s satisfaction, the alleged breach in dispute. Failure to respond to the Demand Letter in one of these two manners
within the allowed time period shall be considered a material breach of this CIA and shall be grounds for exclusion under Section X.D. 

  

	 	3.	Form of Payment. Payment of the Stipulated Penalties shall be made by certified or cashier’s check, payable to: “Secretary of the Department of Health and Human
Services,” and submitted to OIG at the address set forth in Section VI. 

  

	 	4.	Independence from Material Breach Determination. Except as set forth in Section X.D.l.c, these provisions for payment of Stipulated Penalties shall not affect or otherwise
set a standard for OIG’s decision that HealthSouth has materially breached this CIA, which decision shall be made at OIG’s discretion and shall be governed by the provisions in Section X.D, below. 

  

	 	D.	Exclusion for Material Breach of this CIA. 

  

	 	1.	Definition of Material Breach. A material breach of this CIA means: 

  

	 	a.	a failure by HealthSouth to report a Reportable Event, take corrective action, and make the appropriate refunds, as required in Section III.H; 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 34 

	 	b.	a repeated or flagrant violation of the obligations under this CIA, including, but not limited to, the obligations addressed in Section X.A; 

  

	 	c.	a failure to respond to a Demand Letter concerning the payment of Stipulated Penalties in accordance with Section X.C; or 

  

	 	d.	a failure to engage and use an IRO in accordance with Section III.D. 

  

	 	2.	Notice of Material Breach and Intent to Exclude. The parties agree that a material breach of this CIA by HealthSouth constitutes an independent basis for HealthSouth’s
exclusion from participation in the Federal health care programs. Upon a determination by OIG that HealthSouth has materially breached this CIA and that exclusion is the appropriate remedy, OIG shall notify HealthSouth of: (a) HealthSouth’s
material breach; and (b) OIG’s intent to exercise its contractual right to impose exclusion (this notification is hereinafter referred to as the “Notice of Material Breach and Intent to Exclude”). 

  

	 	3.	Opportunity to Cure. HealthSouth shall have 30 days from the date of receipt of the Notice of Material Breach and Intent to Exclude to demonstrate to OIG’s satisfaction
that: 

  

	 	a.	HealthSouth is in compliance with the obligations of the CIA cited by OIG as being the basis for the material breach; 

  

	 	b.	the alleged material breach has been cured; or 

  

	 	c.	the alleged material breach cannot be cured within the 30-day period, but that: (i) HealthSouth has begun to take action to cure the material breach; (ii) HealthSouth is pursuing
such action with due diligence; and (iii) HealthSouth has provided to OIG a reasonable timetable for curing the material breach. 

  

	 	4.	 Exclusion Letter. If, at the conclusion of the 30-day period, HealthSouth fails to satisfy the requirements of Section X.D.3, OIG may exclude HealthSouth
from participation in the Federal health care programs. OIG shall notify HealthSouth in writing of its determination to exclude HealthSouth (this letter shall be referred to hereinafter as the “Exclusion Letter”). Subject to the Dispute
Resolution provisions in Section X.E, below, the exclusion shall go into effect 30 days after the date of HealthSouth’s receipt of the Exclusion Letter. The exclusion shall have national effect and shall also apply to all other Federal
procurement and nonprocurement programs. Reinstatement to program participation is not automatic. After the end of the period of exclusion, HealthSouth may 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 35 

	 	 
apply for reinstatement by submitting a written request for reinstatement in accordance with the provisions at 42 C.F.R. §§ 1001.3001-.3004.

  

	 	E.	Dispute Resolution 

  

	 	1.	Review Rights. Upon OIG’s delivery to HealthSouth of its Demand Letter or of its Exclusion Letter, and as an agreed-upon contractual remedy for the resolution of
disputes arising under this CIA, HealthSouth shall be afforded certain review rights comparable to the ones that are provided in 42 U.S.C. § 1320a-7(f) and 42 C.F.R. Part 1005 as if they applied to the Stipulated Penalties or exclusion sought
pursuant to this CIA. Specifically, OIG’s determination to demand payment of Stipulated Penalties or to seek exclusion shall be subject to review by an HHS ALJ and, in the event of an appeal, the HHS Departmental Appeals Board (DAB), in a
manner consistent with the provisions in 42 C.F.R. §§ 1005.2-1005.21. Notwithstanding the language in 42 C.F.R. § 1005.2, the request for a hearing involving Stipulated Penalties shall be made within 10 days after receipt of the
Demand Letter and the request for a hearing involving exclusion shall be made within 25 days after receipt of the Exclusion Letter. 

  

	 	2.	Stipulated Penalties Review. Notwithstanding any provision of Title 42 of the United States Code or Title 42 of the Code of Federal Regulations, the only issues in a
proceeding for Stipulated Penalties under this CIA shall be: (a) whether HealthSouth was in full and timely compliance with the obligations of this CIA for which OIG demands payment; and (b) the period of noncompliance. HealthSouth shall have the
burden of proving its full and timely compliance and the steps taken to cure the noncompliance, if any. OIG shall not have the right to appeal to the DAB an adverse ALJ decision related to Stipulated Penalties. If the ALJ agrees with OIG with regard
to a finding of a breach of this CIA and orders HealthSouth to pay Stipulated Penalties, such Stipulated Penalties shall become due and payable 20 days after the ALJ issues such a decision unless HealthSouth requests review of the ALJ decision by
the DAB. If the ALJ decision is properly appealed to the DAB and the DAB upholds the determination of OIG, the Stipulated Penalties shall become due and payable 20 days after the DAB issues its decision. 

  

	 	3.	Exclusion Review. Notwithstanding any provision of Title 42 of the United States Code or Title 42 of the Code of Federal Regulations, the only issues in a proceeding for
exclusion based on a material breach of this CIA shall be: 

  

	 	a.	whether HealthSouth was in material breach of this CIA; 

  

	 	b.	whether such breach was continuing on the date of the Exclusion Letter; and 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 36 

	 	c.	whether the alleged material breach could not have been cured within the 30-day period, but that: (i) HealthSouth had begun to take action to cure the material breach within that
period; (ii) HealthSouth has pursued and is pursuing such action with due diligence; and (iii) HealthSouth provided to OIG within that period a reasonable timetable for curing the material breach and HealthSouth has followed the timetable.

  
 For purposes of the exclusion herein, exclusion shall take
effect only after an ALJ decision favorable to OIG, or, if the ALJ rules for HealthSouth, only after a DAB decision in favor of OIG. HealthSouth’s election of its contractual right to appeal to the DAB shall not abrogate OIG’s authority to
exclude HealthSouth upon the issuance of an ALJ’s decision in favor of OIG. If the ALJ sustains the determination of OIG and determines that exclusion is authorized, such exclusion shall take effect 20 days after the ALJ issues such a decision,
notwithstanding that HealthSouth may request review of the ALJ decision by the DAB. If the DAB finds in favor of OIG after an ALJ decision adverse to OIG, the exclusion shall take effect 20 days after the DAB decision. HealthSouth shall waive its
right to any notice of such an exclusion if a decision upholding the exclusion is rendered by the ALJ or DAB. If the DAB finds in favor of HealthSouth, HealthSouth shall be reinstated effective on the date of the original exclusion. 
  

	 	4.	Finality of Decision. The review by an ALJ or DAB provided for above shall not be considered to be an appeal right arising under any statutes or regulations. Consequently,
the parties to this CIA agree that the DAB’s decision (or the ALJ’s decision if not appealed) shall be considered final for all purposes under this CIA. 

  

	XI.	EFFECTIVE AND BINDING AGREEMENT 

  
 Consistent with the provisions in the Settlement Agreement pursuant to which this CIA is entered, and into which this CIA is incorporated, HealthSouth and
OIG agree as follows: 
  

	 	A.	This CIA shall be binding on the successors, assigns, and transferees of HealthSouth; 

  

	 	B.	This CIA shall become final and binding on the date the final signature is obtained on the CIA; 

  

	 	C.	Any modifications to this CIA shall be made with the prior written consent of the parties to this CIA; 

  

	 	D.	OIG may agree to a suspension of HealthSouth’s obligations under the CIA in the event of HealthSouth’s cessation of participation in Federal health care programs. If
HealthSouth withdraws from participation in Federal health care programs and is relieved of its CIA obligations by OIG, HealthSouth shall notify OIG at least 30 days in advance of HealthSouth’s intent to reapply as a participating provider or
supplier with any Federal health care program. Upon receipt of such notification, OIG shall evaluate whether the CIA should be reactivated or modified. 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 37 

	 	E.	The undersigned HealthSouth signatory represents and warrants that he is authorized to execute this CIA. The undersigned OIG signatory represents that he is signing this CIA in his
official capacity and that he is authorized to execute this CIA. 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 38 

  
 ON BEHALF OF HEALTHSOUTH
CORPORATION 
  

					
			
	 /s/ John Markus

	 	 	 	 12-30-04
 DATE

	 JOHN MARKUS
	 	 	 
	 Executive Vice President and
Chief Compliance Officer
	 	 	 	 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 39 

  
 ON BEHALF OF THE OFFICE OF
INSPECTOR GENERAL 
 OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES 
  

					
	 	 	 	 	 
			
	 /s/ Lewis Morris

	 	 	 	 12/30/04
 DATE

	 LEWIS MORRIS
	 	 	 
	 Chief Counsel to the Inspector General
	 	 	 	 
	 Office of Inspector General
	 	 	 	 
	 U. S. Department of Health and Human Services
	 	 	 	 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 40 

  
 APPENDIX A 

INDEPENDENT REVIEW ORGANIZATION 
  
 This Appendix contains the requirements relating to the Independent Review Organization (IRO) required by Section III.D of the CIA. 
  

	 	A.	IRO Engagement. 

  
 HealthSouth shall engage an IRO that possesses the qualifications set forth in Paragraph B, below, to perform the responsibilities in Paragraph C, below.
The IRO shall conduct the review in a professionally independent and/or objective fashion, as set forth in Paragraph D. Within 30 days after OIG receives written notice of the identity of the selected IRO, OIG will notify HealthSouth if the IRO is
unacceptable. Absent notification from OIG that the IRO is unacceptable, HealthSouth may continue to engage the IRO. 
  
 If HealthSouth engages a new IRO during the term of the CIA, this IRO shall also meet the requirements of this Appendix. If a new IRO is engaged,
HealthSouth shall submit the information identified in Section V.A.8 to OIG within 30 days of engagement of the IRO. Within 30 days after OIG receives written notice of the identity of the selected IRO, OIG will notify HealthSouth if the IRO is
unacceptable. Absent notification from OIG that the IRO is unacceptable, HealthSouth may continue to engage the IRO. 
  

	 	B.	IRO Qualifications. 

  
 The IRO shall: 
  

	 	1.	assign individuals to conduct the Cost Reporting Engagement, Unallowable Cost Review, and Billing Engagement who have expertise in the billing, coding, reporting, and other
requirements applicable to Medicare claims for inpatient and outpatient rehabilitation services and in the general requirements of the Federal health care program(s) from which HealthSouth seeks reimbursement; 

  

	 	2.	assign individuals to design and select the Claims Review samples who are knowledgeable about the appropriate statistical sampling techniques; 

  

	 	3.	assign individuals to conduct the coding review portions of the Claims Review who have a nationally recognized coding certification (e.g., CCA, CCS, CCS-P, CPC, RRA, etc.)
and who have maintained this certification (e.g., completed applicable continuing education requirements); and 

  

	 	4.	have sufficient staff and resources to conduct the reviews required by the CIA on a timely basis. 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 Appendix A-1 

	 	C.	IRO Responsibilities. 

  
 The IRO shall: 
  

	 	1.	perform each Cost Reporting Engagement, Unallowable Cost Review, and Billing Engagement in accordance with the specific requirements of the CIA; 

  

	 	2.	follow all applicable Medicare rules and reimbursement guidelines in making assessments in the Billing Engagement; 

  

	 	3.	if in doubt of the application of a particular Medicare policy or regulation, request clarification from the appropriate authority (e.g., fiscal intermediary or carrier);

  

	 	4.	respond to all OIG inquiries in a prompt, objective, and factual manner; and 

  

	 	5.	prepare timely, clear, well-written reports that include all the information required by Appendix B. 

  

	 	D.	IRO Independence/Objectivity. 

  
 The IRO must perform the Cost Reporting Engagement, Unallowable Cost Review, and Billing Engagement in a professionally independent and/or objective fashion, as
appropriate to the nature of the engagement, taking into account any other business relationships or engagements that may exist between the IRO and HealthSouth. 
  

	 	E.	IRO Removal/Termination. 

  

	 	1.	Provider. If HealthSouth terminates its IRO during the course of the engagement, HealthSouth must submit a notice explaining its reasons to OIG no later than 30 days after
termination. HealthSouth must engage a new IRO in accordance with Paragraph A of this Appendix. 

  

	 	2.	OIG Removal of IRO. In the event OIG has reason to believe that the IRO does not possess the qualifications described in Paragraph B, is not independent and/or objective as
set forth in Paragraph D, or has failed to carry out its responsibilities as described in Paragraph C, OIG may, at its sole discretion, require HealthSouth to engage a new IRO in accordance with Paragraph A of this Appendix.

  
 Prior to requiring HealthSouth to engage a new
IRO, OIG shall notify HealthSouth of its intent to do so and provide a written explanation of why OIG believes such a step is necessary. To resolve any concerns raised by OIG, HealthSouth may request a meeting with OIG to discuss any aspect of the
IRO’s qualifications, independence or performance of its responsibilities and to present additional information regarding these matters. HealthSouth shall provide any additional information as may be requested by OIG under this Paragraph in an
expedited manner. OIG will attempt in good faith to resolve any differences regarding the IRO with HealthSouth prior to requiring HealthSouth to terminate the IRO. However, the final determination as to whether or not to require HealthSouth to
engage a new IRO shall be made at the sole discretion of OIG. 
  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 Appendix A-2 

  
 APPENDIX B 

CLAIMS REVIEWS 
  

	 	A.	Claims Reviews. 

  

	 	1.	Definitions. For the purposes of the Claims Reviews, the following definitions shall be used: 

  

	 	a.	Overpayment: The amount of money HealthSouth has received in excess of the amount due and payable under any Federal health care program requirements.

  

	 	b.	Item: Any discrete unit that can be sampled (e.g., code, line item, beneficiary, patient encounter, etc.). 

  

	 	c.	Paid Claim: A code or line item submitted by HealthSouth and for which HealthSouth has received reimbursement from the Medicare program. 

  

	 	d.	Population: For the first Reporting Period, the Population shall be defined as all Items for which a code or line item has been submitted by or on behalf of HealthSouth and
for which HealthSouth has received reimbursement from Medicare (i.e., Paid Claim) during the 12-month period covered by the first Claims Review Period. 

  
 For the remaining Reporting Periods, the Population shall be defined as all Items for which HealthSouth has received
reimbursement from Medicare (i.e., Paid Claim) during the 12-month period covered by the Claims Review Period. 
  
 To be included in the Population, an Item must have resulted in at least one Paid Claim. 
  

	 	e.	Net Overpayment Rate: The Net Overpayment Rate shall be the percentage of net Overpayments identified in the sample. The net Overpayments shall be calculated by subtracting
all underpayments identified in the sample from all gross Overpayments identified in the sample. (Note: Any potential cost settlements or other supplemental payments should not be included in the net Overpayment calculation. Rather, only
underpayments identified as part of the Claims Reviews shall be included as part of the net Overpayment calculation.) 

  
 The Net Overpayment Rate is calculated by dividing the net Overpayment identified in the sample by the total dollar amount associated with the Items in
the sample. 
  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 Appendix B-1 

	 	2.	Other Requirements. 

  

	 	a.	Paid Claims without Supporting Documentation. For the purpose of appraising Items included in the Claims Reviews, any Paid Claim for which HealthSouth cannot produce
documentation sufficient to support the Paid Claim shall be considered an error and the total reimbursement received by HealthSouth for such Paid Claim shall be deemed an Overpayment. Replacement sampling for Paid Claims with missing documentation
is not permitted. 

  

	 	b.	Replacement Sampling. Considering the Population shall consist only of Paid Claims and that Items with missing documentation cannot be replaced, there is no need to utilize
alternate or replacement sampling units. 

  

	 	c.	Use of First Samples Drawn. For the purposes of all samples in the Claims Reviews, the Paid Claims associated with the Items selected in each first sample (or first sample
for each strata, if applicable) shall be used (i.e., it is not permissible to generate more than one list of random samples and then select one for use). 

  

	 	B.	Claims Review Report. The following information shall be included in the Claims Review Report for each 30-claim sample and Full Sample (if applicable).

  

	 	1.	Claims Review Methodology. 

  

	 	a.	Sampling Unit. A description of the Item as that term is utilized for the Claims Review. 

  

	 	b.	Claims Review Population. A description of the Population subject to the Claims Review. 

  

	 	c.	Claims Review Objective. A clear statement of the objective intended to be achieved by the Claims Review. 

  

	 	d.	Sampling Frame. A description of the sampling frame, which is the totality of Items from which the 30-claim sample and, if any, Full Sample has been selected and an
explanation of the methodology used to identify the sampling frame. In most circumstances, the sampling frame will be identical to the Population. 

  

	 	e.	 Source of Data. A description of the specific documentation relied upon by the IRO when performing the Claims Review (e.g., medical records, physician
orders, certificates of medical necessity, requisition forms, local medical review policies (including title and policy number), CMS program memoranda (including title and issuance number), Medicare carrier or intermediary manual or 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 Appendix B-2 

	 	 
bulletins (including issue and date), other policies, regulations, or directives). 

  

	 	f.	Review Protocol. A narrative description of how the Claims Review was conducted and what was evaluated. 

  

	 	2.	Statistical Sampling Documentation. 

  

	 	a.	The number of Items appraised in each 30-claim sample and, if applicable, in each Full Sample. 

  

	 	b.	A copy of the printout of the random numbers generated by the “Random Numbers” function of the statistical sampling software used by the IRO. 

  

	 	c.	A copy of the statistical software printout(s) estimating how many Items are to be included in the Full Sample, if applicable. 

  

	 	d.	A description or identification of the statistical sampling software package used to select the sample and determine the Full Sample size, if applicable. 

 

	 	3.	Claims Review Findings. 

  

	 	a.	Narrative Results. 

  

	 	i.	A description of HealthSouth’s billing and coding system(s), including the identification, by position description, of the personnel involved in coding and billing.

  

	 	ii.	A narrative explanation of the IRO’s findings and supporting rationale (including reasons for errors, patterns noted, etc.) regarding the Claims Review, including the results
of each 30-claim sample, and the results of each Full Sample (if any). 

  

	 	b.	Quantitative Results. 

  

	 	i.	Total number and percentage of instances in which the IRO determined that the Paid Claims submitted by HealthSouth (Claim Submitted) differed from what should have been the correct
claim (Correct Claim), regardless of the effect on the payment. 

  

	 	ii.	 Total number and percentage of instances in which the Claim Submitted differed from the Correct Claim and in 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 Appendix B-3 

	 	 
which such difference resulted in an Overpayment to HealthSouth. 

  

	 	iii.	Total dollar amount of all Overpayments in the sample. 

  

	 	iv.	Total dollar amount of paid Items included in the sample and the net Overpayment associated with the sample. 

  

	 	v.	Net Overpayment Rate in the sample. 

  

	 	vi.	A spreadsheet of the Claims Review results that includes the following information for each Paid Claim appraised: beneficiary health insurance claim number, date of service,
procedure code submitted, procedure code reimbursed, allowed amount reimbursed by payor, correct procedure code (as determined by the IRO), correct allowed amount (as determined by the IRO), dollar difference between allowed amount reimbursed by
payor and the correct allowed amount. (See Attachment 1 to this Appendix.). 

  

	 	4.	Expanded Review. In accordance with Section III.D.5.a.(4) of the CIA, if applicable, observations, findings, and recommendations on possible improvements to the system(s) and
process(es) that generated the Overpayment(s). 

  

	 	5.	Credentials. The names and credentials of the individuals who: (1) designed the statistical sampling procedures and the review methodology utilized for the Claims Review; and
(2) performed the Claims Review. 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 Appendix B-4 

  
 APPENDIX
C                     
  
 OVERPAYMENT REFUND 
  
 TO BE COMPLETED BY MEDICARE CONTRACTOR 
 Date:_________________ 
 Contractor Deposit Control #_____________     Date of Deposit: ________________ 
 Contractor Contact Name:______________________________ Phone #___________________ 
 Contractor Address: _____________________________________________________________ 
 Contractor Fax: ______________________________________

  
 TO BE COMPLETED BY PROVIDER/PHYSICIAN/SUPPLIER

  
 Please complete and forward to Medicare Contractor. This form, or a
similar document containing the following information, should accompany every voluntary refund so that receipt of check is properly recorded and applied. 
  
 PROVIDER/PHYSICIAN/SUPPLIER NAME ____________________________________ 
 ADDRESS ________________________________________________________________ 
 PROVIDER/PHYSICIAN/SUPPLIER # ______________ CHECK NUMBER# _________

 CONTACT PERSON: ____________________________ PHONE # __________________ AMOUNT OF CHECK 
 $______________ CHECK DATE ________________ 
  
 REFUND INFORMATION 
  
 For
each Claim, provide the following: 
  
 Patient Name
_____________________________________________ HIC # ______________________ 
 Medicare Claim Number __________________ Claim Amount Refunded $ ______________

 Reason Code for Claim Adjustment: ______ (Select reason code from list below. Use one reason per claim) 
  
 (Please list all claim numbers involved. Attach separate sheet,
if necessary) 
  

	Note:	If Specific Patient/HIC/Claim #/Claim Amount data not available for all claims due to Statistical Sampling, please indicate methodology and formula used to determine amount and
reason for overpayment: __________________________________________________ 

  
 For Institutional Facilities Only: 
  
 Cost Report Year(s) ____________________________ 
 (If multiple cost report years are involved, provide a breakdown by amount and corresponding cost
report year.) 
  
 For OIG Reporting Requirements: 
  
 Do you have a Corporate Integrity Agreement with
OIG?            Yes            No 
  

					
	Reason Codes:	  	 	  	 
	Billing/Clerical Error	  	MSP/Other Payer Involvement	  	Miscellaneous
	01 - Corrected Date of Service	  	 08 - MSP Group Health Plan
             Insurance
	  	13 - Insufficient Documentation
	02 - Duplicate	  	09 - MSP No Fault Insurance	  	14 - Patient Enrolled in an HMO
	03 - Corrected CPT Code	  	10 - MSP Liability Insurance	  	15 - Services Not Rendered
	04 - Not Our Patient(s)	  	 11 - MSP, Workers Comp.(Including
 Black Lung
	  	16 - Medical Necessity
	05 - Modifier Added/Removed	  	 	  	17 - Other (Please Specify)
	06 - Billed in Error	  	12 - Veterans Administration	  	____________________
	07 - Corrected CPT Code	  	 	  	 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation 
  
 Appendix C-1 

  
 Attachment 1 
  
 Claim Review Results 
  

																	
	 Federal
 Health Care
 Program
 Billed

	  	 Bene
 HIC
 #

	  	 Date of
 Service

	  	 Procedure
 Code
 Submitted

	  	 Procedure
 Code
 Reimbursed

	  	 Allowed
 Amount
 Reimbursed

	  	 Correct
 Procedure
 Code (IRO
 determined)

	  	 Correct
 Allowed Amt
 Reimbursed
 (IRO
 determined)

	  	 Dollar
Difference
 between Amt
 Reimbursed
and
 Correct
Allowed Amt

	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 
	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 
	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 
	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 
	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 
	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 
	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 
	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 
	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 
	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 
	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 
	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 

  

 Corporate Integrity Agreement 
 HealthSouth Corporation

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00076-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00076-of-00352.parquet"}]]