August 28, 2002

HealthSouth, nation's biggest chain of rehabilitation hospitals, surprises investors by withdrawing its 2002 profit estimate and offering explanation that some analysts say is incomplete; says new Medicare payment limit on outpatient rehabilitation charges could reduce its pretax profit by $175 million per year, about 13 percent of its projected $1.3 billion of annual pretax earnings; HealthSouth shares plunge $5.26, or 44 percent, to $6.71; two competing chains, Rehabcare Group and US Physical Therapy, are also battered; HealthSouth also announces that it is reviving plans to spin off its surgery centers operations, its most lucrative unit, later this year; chief executive Richard M Scrushy says $175 million is 'worst case' number and could be lower if company increases its portion of nonMedicare patients; says he is stepping down as chief executive to become chief of independent surgery company, but will remain chairman of HealthSouth; Salomon Smith Barney health-care analyst Deborah J Lawson says she is 'absolutely shocked' at size and effect on profits of Medicare reimbursement change; Tom Scully, head of federal Centers for Medicare and Medicaid, says he is 'just amazed' that HealthSouth did not bring matter directly to him; Scully headed Federation of American Hospitals, which lobbies for HealthSouth in Washington, before taking Medicare post; photo (M)

Delegation from European Union says differences in price of ships made in South Korea from those made in Europe has widened since June 2001; says Korean side has lowered its price by 10 percent; Europe says South Korean shipbuilders receive government subsidies that more than compensate for losses they take in making ships and might bring issue to World Trade Organization (S)

R W Apple Jr article on Jean-Pierre Xiradakis's restaurant in Bordeau, La Tupina, and the unpretentious but authentic Bordelaise specialties that have made it famous; photos (M)

TV Azteca will spin off its stake in Unefon, mobile phone operator, to its shareholders, who will be asked to approve move next month (S)

Fourth article in Running Dry series on competition for water around the world focuses on farmers who depend on Ogallala aquifer, which spans eight American states, from South Dakota to Texas, and has declined sharply in some areas over last 50 years; farmers began saving water through technology and conservation even before recent years of drought, and they, together with industrial users, are largely responsible for significant decline in America's per-capital water use; farmers have primary water rights in most of country, but competition from fast-growing cities and suburbs is intensifying; Ronnie Hopper, who grows cotton in Petersburg, Tex, argues like many farmers that cities have no claim on aquifers at all; photos; map; graph (L)

Only small number of children will benefit this year from No Child Left Behind law enacted in January, which gives 3.5 million children in failing public schools right to select better school this September; school superintendents say that parents seem to want to keep their children close to home, in schools they already know, that they have been given only brief window in which to apply before classes begin and that good schools draw most applicants and therefore have fewest slots available; say that school districts have had insufficient time to carry out law and that some southern school districts must also ensure that compliance with law does not lead to conflict with desegregation court orders, which assign students to schools on basis of race; educators on both sides of political spectrum complain that law demands that they find slots in better schools but does not give them means to create them; photo (M)

Enron Corp announces detailed plans to sell dozen major businesses by end of year, big step toward generating cash that company needs to settle more than $50 billion in claims against it; among assets Enron plans to auction are Portland General Electric, Transwestern Pipeline Co and 50 percent stake in Citrus Corp, joint venture with El Paso Corp; Enron spokesman Mark Palmer says company expects final bids in November and will decide by December which to accept, pending approval by bankruptcy court (M)

George Vecsey Sports of The Times column argues that New York City, just chosen as one of two US cities to compete for rights to host 2012 Summer Olympics, will needlessly spend exorbidant amount of money and crowd already-packed streets if Olympics come to New York City; photo (M)

New York Yankees defeat Boston Red Sox, 6-0; photo (M)

Michiko Kakutani Critic's Notebook column on plethora of books, estimated by Publishers Weekly to be as high as 65 to 150, that are being published to mark first anniversary of September 11 terrorist attacks; photos (M)

Marat Safin defeats Nicolas Kiefer in first-round match of US Open lasting more than four hours; photos (M)

Dutch consumer confidence reached record low in August as consumers grew more reluctant to make major purchases; consumer confidence index fell to minus 29 from minus 27 in July (S)