Former HealthSouth Partner Tells All in Book
ENT Doc Details Fall of the HealthSouth Empire and Rise of Corporate Message Boards
William Cast, MD, knew nothing of Richard Scrushy until 1998, when his freestanding Fort Wayne, Ind., surgical center suddenly became a HealthSouth partner. "The news seemed good, or so I thought at the time," says the 68-year-old ENT surgeon.

But as Dr. Cast chronicles in his book, Going South (Dearborn Trade Publishing, $25.95, hardcover), which was released in bookstores Dec. 1, it was a brief and painful partnership that ended when Dr. Cast and his fellow surgeons could no longer stand HealthSouth's meddlesome, micromanaging ways, not to mention its mysteriously declining profits.

"None of the revenue-producing factors had changed at our facility," says Dr. Cast. "The case loads, margins, costs and collection rates should have produced the same cash flows as in the past. Only the people running the ledgers had changed."

Shrinking revenues and salaries, confounding accounting (quarterly instead of monthly financial statements), and mounting complaints from banks and suppliers were not what drove Dr. Cast's group to ask out of the partnership. It was the unrelenting attention HealthSouth management was paying to seemingly trivial details, like making sure Mr. Scrushy's photo was straight and prominently positioned in offices, parking lots were clean and vending machines were stocked with Coca-Cola products (HealthSouth was partnered with Coca-Cola Co. at the time).

"Then, HealthSouth's bizarre intrusion began to cross the grain of our intrinsic organizational culture, as the company began meddling in surgical routines," writes Dr. Cast. "To make the business brutally lean, Scrushy demanded conformity in all matters, including surgical supplies. Without warning, new supplies and equipment were supplied to our surgical suites."

Much of the 309-page book details how Dr. Cast and a group of stock traders, disgruntled HealthSouth employees and investors banded together on a simple Internet-based message board to share insights and opinions on the company in the wake of the $2.7 billion accounting fraud. He describes his book as a modern story of fraud in healthcare told by strangers who met in a very modern setting: the Web.

"After we separated from HealthSouth, I'm saying to myself, How the hell could this happen?" says Dr. Cast, a HealthSouth stockholder to date. "I began digging and stumbled upon a Yahoo message board, and very quickly met up with others who also were trying to figure out how things had gone so very wrong. We were able to reconstitute the books for HealthSouth."

The book is his summary of an ongoing Internet exchange ("a six-year conversation between aliases," he says) that tells the company story. At the height of it all, about 200 regulars met on the message board. Dr. Cast says he used to log on four times daily. One reviewer describes the message board as "a sort of organic central character ? that is repeatedly ahead of corporate media in relaying inside news about HealthSouth."

"You can?t surrender your critical judgement," says Dr. Cast. "There are ways to get good investment information. There's no substitute for what you can learn on the Internet. You can see things happening well before they're obvious to other people."

Dr. Cast credits the message board's "voices in the wilderness" with helping many HealthSouth stockholders who might have otherwise lost everything through difficult times.

- Dan O'Connor !BREAK3!>

Obesity Surgery Coverage
Medicare Weighs in on Weight-loss Surgery
Government officials proposed expanding coverage of bariatric surgery for beneficiaries ages 64 and younger and eliminating coverage of the procedure for beneficiaries ages 65 and older. Currently, Medicare covers the cost if the surgery is recommended to treat other health problems. The proposed expansion would allow for the treatment of obesity before associated health problems set in. The agency says, however, that "in light of recent studies indicating significant surgical risks particularly in seniors aged 65 and over," it is proposing non-coverage in Medicare beneficiaries older than 65.

A study in the Journal of the American Medical Association showed that the death rates after weight-loss surgery for patients age 65 and older were two to three times higher than they were for younger people. The study tracked 16,155 Medicare patients who had obesity-related surgery. About 13 percent of men and 6 percent of women 65 to 74 who underwent the procedure died within a year of the surgery. In patients 75 and older, half of the men and 40 percent of the women died within the year.

"Whilte the best proven ?treatment' is a nutritious diet and regular exercise, and medical treatments are also available, some beneficiaries may significantly reduce their health risks through surgery," says CMS Administrator Mark B. McClellan, MD, PhD. "We are seeking public comment on the best way to provide coverage for this surgery, to reduce the complications of obesity while limiting the risks of the surgical treatments."

About 8,000 Medicare beneficiaries had weight-loss surgery covered through the program in 2004. About three-quarters of those procedures were for the disabled and one-quarter were for the elderly. Overall, the government paid about $13,000 per procedure, officials say.

- Stephanie Wasek

AAAHC: Facilities Must ID Who May Administer Propofol
The Accreditation Association for Ambulatory Health Care adopted revisions to its standards for 2006 that require facilities providing sedative, hypnotic or analgesic drugs that do not have an antagonist medication (for example, propofol) to identify who in the organization is privileged to administer these drugs, and to have a written protocol for responding in the event that a deeper than intended level of anesthesia is needed. This standards revision will be incorporated into the 2006 version of the AAAHC Accreditation Handbook for Ambulatory Health Care and will take effect in March 2006.

MGMA Report: Smaller ASCs Report Higher Net Income Than Their Larger Counterparts
Smaller ASCs reaped higher net incomes than larger ones in 2004, according to the Medical Group Management Association, but larger facilities reported lower supply and total operating costs per case.

In its annual Ambulatory Surgery Center Performance Study, the Englewood, Colo., organization cites data from more than 160 ASCs showing that facilities performing fewer than 3,000 cases a year made an average of $473.02 per case, while facilities with 3,000 or more cases per year made $341.32.

In terms of case costs, however, ASCs hosting fewer than 2,000 cases per year paid an average of $228 per case for supplies and $802 in total operating costs, as compared to $185 for supplies and $614 in operating costs for facilities hosting 5,000 or more cases a year.