The fate of a $300-million, state-of-the-art hospital under construction in Birmingham, Ala., by HealthSouth Corp. is unclear as the company grapples with federal securities fraud charges.

Work has stopped on the project, about 40% complete, except to put on a roof to protect the structure until a deci-sion can be made, says a spokesman for HealthSouth, also based there.

CAUGHT UP New Birmingham facility, 40% done, is halted. (Photo by Mary B. Powers for ENR)

General contractor Brasfield & Gorrie, Birmingham, is negotiating with HealthSouth, says Jack Darnall, the contractor's vice president of healthcare business. He says the owner has not missed a payment, but would not say how much B&G is owed on progress payments. HealthSouth is likely facing bankruptcy as a payment to corporate bondholders looms. J.P. Morgan Chase says the firm is in default of a $1.25 billion line of credit.

Darnall says construction also has stopped at a surgery center in Charlotte, N.C., and at a regional rehabilitation hospital in Phoenix City, Ala., that Brasfield & Gorrie is building for HealthSouth. An outside spokesman for the owner did not know if it had other hospitals and surgery centers under construction.

The 219-bed "digital hospital" in Birmingham was touted as a future healthcare model. It is a partnership among HealthSouth and 15 medical equipment makers and system designers. It was to be a paperless system with medical staff able to monitor patients from anywhere in the hos-pital, and families able to monitor patients over the Internet. But the project has been controversial. HealthSouth bypassed state regulatory approval that could have delayed construction for years. Instead, it received an expedited review from the legislature in 2001. Two Alabama healthcare systems sued to stop the project, but an Alabama circuit court ruled last month that the challenge was filed late and that HealthSouth had already spent significantly to develop it.

In a civil complaint, the Securities and Exchange Commission says HealthSouth overstated earnings by $1.4 billion since 1999. Federal agents are also probing insider training and Medicare fraud.