Hanger Announces Investigation's Preliminary Findings

Hanger Orthopedic Group Inc., Bethesda, Maryland, has announced preliminary findings of an independent investigation of certain alleged billing discrepancies in a statement issued August 9.

On June 14, an employee at a Hanger patient care center in West Hempstead, New York, alleged in a television news story that there were instances of billing discrepancies and other noncompliant conduct at the facility. The company disclosed this news the next day, and on June 17, the Audit Committee of Hanger's Board of Directors engaged the law firm of McDermott, Will & Emery to serve as independent counsel to the committee and to conduct an independent investigation of the allegations, the company announced June 18.

"The scope of that independent investigation has been expanded to cover certain of the company's other patient-care centers," Hanger said in the August 9 statement. The statement continued, "In addition, the company also disclosed on June 18, 2004, that the US Attorney's Office for the eastern District of New York subpoenaed records of the company regarding various billing activities and locations on June 17, 2004, and that the Securities and Exchange Commission [SEC] had commenced an informal inquiry into the matter. The company is cooperating with the regulatory authorities."

The statement continued, "Based on the preliminary results of the independent investigation, management believes that the evidence gathered to date indicates that any billing discrepancies are likely to be primarily at the West Hempstead patient care center. The net sales of the West Hempstead facility for the years ended December 31, 2002, 2003, and the six months ended June 30, 2004, were $1.6, $1.9, and $0.9 million, respectively, or less than 0.5 percent of the company's net sales for each of the three periods.

"Based on the initial results of the investigation, management does not believe the resolution of the matters raised by the allegations will have a materially adverse effect on the company's financial statements," the statement said. "It should be noted that the investigation is not complete, and additional regulatory inquiries may be raised relating to other of the company's billing activities and/or other locations," the statement continued, adding, "No assurance can be given that the final results of the investigation will be consistent with the result to date or that any discrepancies identified during the ongoing investigation will not have a material adverse effect on the company's financial statements. Since the company presently cannot estimate the amount of any potential overpayments, penalties, or fines, nor can it estimate the costs and expenses that will be incurred in completing its investigation and the responses to any regulatory inquiries or proceedings, it plans to recognize such costs and expenses as they are incurred," the statement said.

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Hanger Announces Investigation’s Preliminary Findings

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