HealthSouth Reaches Settlement With the Department of Justice

HealthSouth Corporation (OTC Pink Sheets: HLSH) today announced that it has signed a
definitive global settlement agreement with the U.S. Department of Justice -
Civil Division (DOJ), the Office of Inspector General of the Department of
Health and Human Services (OIG), and the Centers for Medicare & Medicaid
Services (CMS) to resolve issues associated with various Medicare billing
practices. The settlement agreement includes a total cash payment of
$325 million (plus interest) with an initial payment of $75 million and the
balance to be paid quarterly over the course of three years.

"The resolution of this matter is an important step toward moving forward
and resolving the issues inherited by our new management team," said
HealthSouth President and CEO Jay Grinney. "HealthSouth's new management team
is dedicated to developing a corporate culture characterized by integrity,
quality and compliance - supporting our employees in their ongoing efforts to
provide high quality care to patients across the country."

HealthSouth said provisions for these settlement amounts have been
incorporated in HealthSouth's long-term financial projections. "We have been
in negotiations on this settlement for some time and have taken these payments
into account as we plan for the future. As I have mentioned in the past, I
believe we will be able to make these payments without compromising the
resources necessary to manage our facilities in a quality manner," Grinney
said.

The global settlement agreement resolves litigation brought by the DOJ in
2002 regarding certain outpatient physical therapy practices (including issues
concerning "group therapy" or "concurrent therapy" billing). In addition, the
settlement will close an investigation -- begun in April 2003 after the
Company's financial accounting was called into question -- into prior Medicare
cost reporting practices. As part of the settlement, the Company has signed an
amended corporate integrity agreement with the OIG.

The settlement also includes the resolution of all Medicare cost report,
home office cost statement, and appeal issues between HealthSouth and CMS for
cost report periods ending on or before December 31, 2003.

HealthSouth was represented in the settlement negotiation by
Reed Smith LLP.

Statements contained in this press release which are not historical facts
are forward-looking statements. In addition, HealthSouth, through its senior
management, may from time to time make forward-looking public statements
concerning the matters described herein. Such forward-looking statements are
necessarily estimates based upon current information, involve a number of
risks and uncertainties and are made pursuant to the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995. HealthSouth's actual
results may differ materially from the results anticipated in these forward-
looking statements as a result of a variety of factors. While it is impossible
to identify all such factors, factors which could cause actual results to
differ materially from those estimated by HealthSouth include, but are not
limited to: the investigations by the Department of Justice and the Securities
and Exchange Commission into HealthSouth's financial reporting and related
activity calling into question the accuracy of the Company's previously filed
financial statements; HealthSouth's statement that as a result of the
investigations, the Company's previously filed financial statements should no
longer be relied upon and may result in the Company restating its prior
financial statements; the withdrawal by HealthSouth's former accountants of
their audit reports on all of the Company's previously filed financial
statements; the outcome of pending litigation relating to these matters;
significant changes in HealthSouth's management team; HealthSouth's ability to
successfully amend, restructure and/or renegotiate its existing indebtedness
or cure or receive a waiver of the events of default under such agreements,
the failure of which may result in HealthSouth filing a voluntary petition for
bankruptcy; HealthSouth's ability to continue to operate in the ordinary
course and manage it's relationships with its creditors, including it's
lenders, bondholders, vendors and suppliers, employees and customers; changes,
delays in or suspension of reimbursement for HealthSouth's services by
governmental or private payors; changes in the regulation of the healthcare
industry at either or both of the federal and state levels; changes to or
delays in the implementation of the prospective payment system for inpatient
rehabilitation services; competitive pressures in the healthcare industry and
HealthSouth's response thereto; HealthSouth's ability to obtain and retain
favorable arrangements with third-party payors; general conditions in the
economy and capital markets; and other factors which may be identified from
time to time in the Company's SEC filings and other public announcements.

Media Contact Andy Brimmer, 205-410-2777