Federal officials are probing whether HealthSouth Corp., the nation’s largest operator of rehabilitation hospitals, cheated Medicare out of tens of millions of dollars or more, people involved in the case said.

The investigation of possible Medicare fraud is the latest blow to HealthSouth, which is the subject of an accounting scandal set off by a company executive who admitted to participating for years in accounting schemes with HealthSouth’s top officers.

Investigators are looking into whether HealthSouth falsified the value of certain hospitals and healthcare facilities to obtain a significant reimbursement benefit from Medicare for expenses associated with suspect plant and equipment assets and other questionable accounting entries.

Prosecutors in the accounting case have already obtained guilty pleas from Weston L. Smith, a former chief financial officer, and William T. Owens. Both men said they participated in the accounting conspiracy with the company’s chief executive, Richard M. Scrushy, including members of the company’s accounting team.

(via New York Times)