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SEC Comment Letter

 September 1, 2005

 VIA EDGAR AND FACSIMILE

 Mr. Jeffrey P. Riedler

 Assistant Director

 Division of Corporation Finance

 Securities and Exchange Commission

 100 F Street, N.E.

 Washington, D.C. 20549

RE:
HealthSouth Corporation

 Form 10-K

 Filed June 27, 2005

 Dear Mr. Riedler:

 On behalf of HealthSouth Corporation (also referred to hereinafter as “HealthSouth,” “we,” “our” and the
“Company”), I submit this letter in response to the comments of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in your letter dated August 9, 2005 to the undersigned
regarding the above referenced Form 10-K (the “Form 10-K”). HealthSouth acknowledges (i) that it is responsible for the adequacy and accuracy of the disclosure in the filings, (ii) that Staff comments or changes to disclosure in response
to Staff comments in the filings reviewed by the Staff do not foreclose the Commission from taking any action with respect to the filing, and (iii) that HealthSouth may not assert Staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United States.

 To assist in your review, the numbered paragraphs and headings below correspond to those used in your letter of August 9, 2005. The text of each comment appears in bold and HealthSouth’s response immediately
follows. Capitalized terms used in this letter and not otherwise defined have the meanings given to them in the Form 10-K. Unless otherwise indicated, all references to page numbers and captions correspond to the page numbers and captions in the
Form 10-K.

 FORM 10-K

 Industry Trends, page 15

1.
Please provide us with copies of the documents you refer to in this section with respect to your use of statistical and dollar figures as well as disclosure concerning your
overall industry. Please mark the materials where it supports the claims and statements you make in this section.

 The supporting documentation is set forth in the attached Memorandum in Response to SEC Comment No. 1.

 Inpatient, page 16

 Surgery Centers, page 18

 Outpatient, page 19

 Diagnostic, page 20

2.
Please provide us with third party documentation supporting your disclosure on your ranking as a service provider in each of the industries listed in the above referenced
sections.

 The supporting documentation is
set forth in the attached Memorandum in Response to SEC Comment No. 2.

 Corporate and Other, page 20

3.
We note your disclosure that you are exploring the sale of your only remaining acute care hospital as opposed to renovating the hospital at a cost of approximately $200 million.
It is unclear why you are selling this facility and whether your future business plans include owning and operating acute care hospitals. Please consider and advise us as to what additional disclosure you should provide, if any, to further explain
your future business plans.

 In response to
the Staff’s comment, we inform the Staff that our future business plans do not include owning and operating acute care hospitals. We believe we have conveyed our corporate strategy in the disclosure on page 15 of the Form 10-K under the heading
“Our Business,” where we state “[w]e are primarily focused on continuing to evaluate our business, the broader health care market, and the specific geographic markets we serve, with the goal of repositioning HealthSouth as a leading
provider of post-acute care and select ambulatory services.” In addition, on page 20 we disclosed that between 2001 and 2004 we sold two general acute care hospitals and ceased providing services at another hospital leaving us with one acute
care hospital, as well as the Digital Hospital, which is currently under construction. As we also disclosed, we are exploring the sale of both of these facilities.

 There are several reasons why our future plans do not include owning and operating acute care facilities. First, our
business has not historically emphasized operation of acute care

facilities, and it is not one of our core competencies. Second (and related to the first reason), other operators of acute care facilities have the ability
to devote substantially more resources to the operation of acute care facilities than we can. Finally, the adoption by Congress of a prospective payment system that has resulted in lower overall reimbursement to acute care facilities, as disclosed
on page 24 of the Form 10-K, has made the acute care business less attractive. Consequently, we have decided to exit the acute care business entirely.

 In light of the foregoing, we believe we have conveyed that our future business plans do not include our continued presence in the acute care business,
but in acknowledgment of the Staff’s comment, we will clarify our intention to exit this business in our Form 10-K for the year ended December 31, 2004 and the reasons for that decision.

 Additionally, on July 26, 2005, the Company filed a current report on Form
8-K reporting that we had entered into an Asset Purchase Agreement with The Board of Trustees of The University of Alabama for the sale of the HealthSouth Medical Center located in Birmingham, Alabama, our remaining acute care hospital. We continue
to explore the sale of the Digital Hospital.

 Risk Factors, page 37

4.
We note your disclosure on page 61 relating to downward pricing pressures in your markets; the impacts they appeared to have had or you believe will have on your operations; and
your perceived need to increase efficiency in your surgery, outpatient and diagnostic divisions. Please advise us as to your consideration of a risk factor discussing the risks and consequences stemming from the following factors: (i) your need to
make operations more efficient or in the alternative, dispose of inefficient operations in response to competitive pressure or downward pressure pricing; (ii) the historical and potential adverse changes in revenue and profitability to your surgery
centers, outpatient and diagnostic divisions as well as the hospital you intend to sell; and (iii) the percentage of your business that these divisions and the hospital you intend to sell represent of your total business.

 We acknowledge the Staff’s comment,
and we will include in our 2004 Form 10-K under the Business, “Risk Factors – Risk Related to Our Business” section, a risk factor substantially in the form of the following:

 Downward pressure on pricing from commercial and government payors may
adversely affect the revenues and profitability of certain of our operations.

 We have experienced downward pressure on prices in our markets, from both commercial and government payors, and we anticipate continuing
price pressure in all our divisions. There can be no assurances that we will be able to maintain current prices in the face of continuing pricing pressures. We may be required to implement additional measures to mitigate these pressures and further
enhance the efficiency of our

operations, or in the alternative, dispose of inefficient operations. These pricing pressures have had, and if we are not successful in mitigating such
pressures in the future, may continue to have, an adverse effect on the revenues and profitability of our surgery centers and our outpatient and diagnostic divisions, including certain operations which we are currently considering divesting. In the
event that we decide to divest certain inefficient operations, we cannot assure you that we will be able to successfully do so at all, or on a timely basis or on terms acceptable to us. We believe that operations which we are currently seeking to
divest represent approximately [    ]% of our net operating revenue and [    ]% of our income (loss) from continuing operations before cumulative effect of accounting change for the fiscal year ended December
31, 200[  ].

5.
We note your disclosure on page 62 that this Form 10-K is your first periodic filing since 2002 and that you do not expect to become a current filer in compliance with SEC
regulations until 2006 and therefore, do not expect to be able to apply for relisting on a major securities exchange until that time. Please advise us as to your consideration of a risk factor regarding the adverse consequences to shareholders and
the company resulting from your lack of access to public markets and the consequences stemming from this risk.

 We respectfully acknowledge the Staff’s comment but wish to point out that our shares are actively traded and volume has averaged over 1.6 million
shares per day in 2005. However, we will include in our 2004 Form 10-K a risk factor substantially in the form of the following:

 We will not be able to apply to relist our common stock on a major securities exchange until at least 2006, and as a result, our ability to access the
capital markets prior to that time will be extremely limited. In addition, the prices at which our common stock trades in the over-the-counter market may be much more volatile than if it traded on a major securities exchange.

 We do not expect to become a “current filer” in compliance with
SEC regulations until at least 2006, and we will not be able to apply for relisting on a major securities exchange until that time. While our common stock is quoted on the OTC Bulletin Board and in the Pink Sheets, there is currently only a limited
trading market for our shares and the market price of these shares may be volatile for the foreseeable future. The limited trading market for our common stock may cause fluctuations in the price and volume of our shares to be more exaggerated than
would occur on a major securities exchange. We cannot assure you that prior to relisting our shares on a major securities exchange, you will be able to sell shares of our common stock without a considerable delay or significant impact on the sale
price.

 In addition, until we relist our shares on a major securities exchange, we will have only limited access
to public capital markets. This could inhibit our ability to raise additional working capital on a timely basis, in sufficient amounts or on terms acceptable to us, which may, in turn, make it more difficult to grow our business.

 “Limitations of our director and officer liability insurance and
potential.…,” page 38

6.
Please tell us if you maintain director and liability insurance coverage for your current officers and directors. If so, please tell us the coverage amount and any restrictions
you may have under the insurance coverage. In addition, please tell us if you are having any difficulties obtaining director and liability insurance coverage for your current directors and officers not related to the pending actions referenced in
your risk factor.

 In response to the
Staff’s comment, the Company maintains director and officer liability insurance coverage for our current officers and directors in the amount of $200 million, which includes $50 million in Side A coverage. Side A coverage is coverage for
individual directors and officers in circumstances where the Company is legally or financially unable to indemnify these individuals. Examples of a company’s inability to indemnify would include derivative suits, bankruptcy/financial
restraints, and claims that are against public policy. Of the $200 million coverage, the Company has a self-insured retention of $10 million for claims against the Company. We will include a more thorough description of our director and officer
liability insurance coverage, including the amount of coverage, in our 2004 Form 10-K.

 In addition to the standard industry exclusions, the policy also includes exclusions of coverage for (1) our former Chairman and Chief Executive Officer, Richard M. Scrushy, and our former Chief Financial Officer,
William T. Owens and (2) a prior acts exclusion and a pending and prior litigation exclusion as of July 31, 2003. We believe we will be able to continue to secure comparable coverage for the coming insurance year.

 While the Company to date has not had extraordinary difficulty in obtaining
director and officer liability insurance coverage for our current directors and officers, the premium costs associated with this coverage have been dramatically higher than in the years prior to March 2003. We anticipate that, although the premium
costs associated with our director and officer liability insurance coverage will be reduced during the coming insurance year, such premium costs will remain higher than in the years prior to March 2003. Despite these increase premium costs, we do
not believe these costs are material to our results of operation or financial condition.

 “We depend on our relationships with the physicians who use our facilities, page 42

7.
Please advise us if you have experienced a decline in the number of physicians using your health care services due to recent negative events surrounding the company or otherwise.
If so, please describe to us the impact it has had on your operations.

 In response to the Staff’s comment, as we disclosed on page 42 of the Form 10-K, HealthSouth’s relationship with physicians generally involves physicians providing health care services at our facilities
and/or physicians referring their patients to our facilities. In addition, as we disclosed on pages 18 and 19 of the Form 10-K, in our Surgery Centers division, the majority of our ambulatory surgery centers are owned in partnership with physicians
who perform procedures at the centers.

 Shortly after March
2003, many physicians expressed concern regarding their confidence in the Company. We believe, based purely upon anecdotal evidence, that the decline in volumes we experienced in each of our segments immediately after March 2003 was due in part to
this lack of confidence. However, since then we have focused a significant amount of time and resources rebuilding the confidence of our physicians in HealthSouth. We believe HealthSouth now fundamentally enjoys good relationships with its
physicians.

 However, as we disclosed on page 81 of the Form
10-K, the number of cases handled by our surgery centers declined 2.9% from 2002 to 2003. While some of this decline may be attributable to the lack of confidence described above, we believe that decline is more likely attributable to our inability
to efficiently resyndicate our surgery center portfolio. Furthermore, we do not believe our resyndication difficulties are the result of poor physician relations. Rather, our inability to provide reliable financial information for our partnerships
on a stand-alone basis during the reconstruction period has been the primary obstacle to resyndicating our surgery centers.

 As we also disclosed on page 60 of the Form 10-K, since January 2005 our resyndication activity has improved. We believe this is due primarily to our
ability to now produce reliable financial information for our partnerships on a stand-alone basis.

 Securities Litigation, page 45

8.
For each of the litigation matters discussed in this section, please provide us the total dollar amount sought by the plaintiffs.

 In response to the Staff’s comment, we inform the Staff that the
complaints relating to the proceedings referenced in this section do not specify the dollar amount sought by the plaintiffs in those proceedings other than as disclosed therein. Accordingly, we do not have additional information to provide to the
Staff at this time, but we advise the Staff that we are sensitive to the comment and will supplement our disclosure when appropriate.

 Consolidated Adjusted EBITDA, pages 73-74

9.
We note your presentation of Consolidated Adjusted EBITDA. As stipulated in your filing, management’s primary intention is to provide “investors with additional
information about our ability to incur and service debt and make capital expenditures.” As such, please provide the following information regarding your compliance with Item 10 o