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HEALTHSOUTH: THE SCRUSHY WAY

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HEALTHSOUTH: THE SCRUSHY WAY
TABLE OF CONTENTS
INTRODUCTION ………………………………………………… ……… 4
IMPACT ON SHAREHOLDER ………………………………………….. 5 .
OUTCOME AND FAIRNESS OF PUNISHMENT ……………………… 7
ETHICAL LEADERHSIP ………………………………………………… 8
CONCLUSION ……………………………………………………………. 9
REFERENCES ……………………………………………………………. 11

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HEALTHSOUTH: THE SCRUSHY WAY
INTRODUCTION
The purpose of this research is to examine the functioning of HealthSouth, a
healthcare provider company, the maneuvers of its former Chief Executive Officer (CEO)
Richard Scrushy to artificially advance its share prices and its ethical issues, the impact on
the shareholders, the outcome and fairness of punishment, the ethical leadership, and last but
not least, the concluding remarks about corporate frauds and the importance of business
ethics. Before initiating the research paper, it is of foremost necessity to understand the
definition of corporate fraud and corporate ethics. Corporate fraud comprises of activities
initiated by employees or companies that are carried on in a perfidious or prohibited manner,
and are purported to grant benefit to the executing employees or companies, which is
considered to be a white-collar crime and liable to be challenged in the court of law
(Investopedia, 2012). Business ethics is the study of appropriate business policies and
practices with respect to potentially disputatious topics, e.g., corporate management, insider
trading, corruption, injustice, corporate social responsibility, and fiduciary amenabilities, and
they are often administered by laws and regulations by providing a basic framework that
business should assign to its corporate structure to comply with, in order to attain public
confidence (Investopedia, 2012).
HealthSouth Corporation is a dominant provider of medical rehabilitation and
outpatient surgery services with hospitals in 26 states and Puerto Rico (HealthSouth, 2012).
It provides physical and other therapy services in its rehabilitation facilitates as well as
nonemergency surgical services at its outpatient surgery centers (HealthSouth, 2012).
HealthSouth Corporation has agreements with various medical insurance companies,
managed care plans, and major corporations, including Wal-Mart and Goodyear as well as
collaborations with professional sports schools and affiliations to furnish rehabilitative and
sports medicine services (HealthSouth, 2012). In the litigation case of HealthSouth

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HEALTHSOUTH: THE SCRUSHY WAY
Corporation, , it was found that its higher management and a few employees, at some point of
time during their service, transcended the bounds of the rules of law by transforming
themselves from law-abiding citizens to law-breaking criminals. Evidently, diminutive
accounting adjustments impelled them to deviate from ethics and integrity and ultimately
persuaded them to make bigger financial adjustments leading to absolute engagement to
chicanery.
The CEO, Richard Scrushy, established HealthSouth Corporation in 1984 and it
became a publicly traded company in 1986 (Matulich & Currie, 2008). His Prior experience
in the medical field convinced Richard Scrushy that government funded programs like
Medicare and Medicaid offered all-encompassing advantages for an enthusiastic businessman
(Heylar, Cherry, & Neering, 2003). Medicare and Medicaid programs proved to be a
guaranteed income source for the businesses specializing in healthcare services. Therefore,
this profit potential offered through Medicare and Medicaid programs was very crucial for
Richard Scrushy to enhance income generation. In the past, healthcare industry used to be the
symbol of nonprofit hospitals and was committed to the welfare of common citizens, but it
was swiftly revolutionized into an exceptionally highest earning industry of the future.
Richard Scrushy conceptualized a new business model for a chain of health service clinics
specializing in outpatient treatment and reclamation services and opposed to conventional
hospitals that consume considerable manpower to provide 24 hours medical care, but these
new clinics would only function as low cost health care services (Thomas, 2003).
IMPACT ON SHAREHOLDERS
HealthSouth’s acceleration to clinch the top position in the healthcare industry was
phenomenal at least until 1997. Between 1987 and 1997, the company’s stock price escalated
at an average rate of 31% per annum (Matulich & Currie, 2008). In 1989, HealthSouth

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TABLE OF CONTENTSINTRODUCTION 4IMPACT ON SHAREHOLDER .. 5.OUTCOME AND FAIRNESS OF PUNISHMENT 7ETHICAL LEADERHSIP 8CONCLUSION . 9REFERENCES . 11INTRODUCTIONThe purpose of this research is to examine the functioning of HealthSouth, a healthcare provider company, the maneuvers of its former Chief Executive Officer (CEO) Richard Scrushy to artificially advance its share prices and its ethical issues, the impact on the shareholders, the outcome and fairness of punishment, the ethical leadership, and last but not least, the concluding remarks about corporate frauds and the importance of business ethics. Before initiating the research paper, it is of foremost necessity to understand the definition of corporate fraud and corporate ethics. Corporate fraud comprises of activities initiated by employees or companies that are carried on in a perfidious or prohibited manner, and are purported to grant benefit to the executing employees or companies, which is considered to be a white-collar crime and liable to be challenged in the court of law (Investopedia, 2012). Business ethics is the study of appropriate business polic ...
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