NEW YORK (CNN/Money) - HealthSouth Corporation's chairman sold 94 percent of his company stock just weeks before the nation's biggest chain of rehabilitation hospitals revealed regulatory concerns that battered its stock price, according to a published report Friday.

On July 31, chairman Richard M. Scrushy sold 2,506,770 shares, or about 94 percent of his holdings, to the company at $10.06 each, according to a filing with the Securities and Exchange Commission. The sale was to repay a $25 million company loan. He had also sold 5,275,360 shares for about $14 each on May 14, The New York Times reported.

On August 27, HealthSouth (HRC: down $0.12 to $5.26, Research, Estimates) said that a recent ruling by Medicare, the federal program for the elderly, might reduce its pretax earnings by $175 million a year. Shares of the stock plunged 44 percent to $6.71, and 25 percent the next day.

The ruling, which Medicare said reaffirmed a longstanding policy, determined that the agency would limit rehabilitations payments for walk-in patients to a group rate, rather than an individual one, when two or more patients received therapy together, directed by a single therapist.

Some analysts said that the timing of Mr. Scrushy's sales raised concerns, the paper said.

John Hindelong, a health care analyst at Credit Suisse First Boston, told the paper that it was "very disappointing" that HealthSouth did not "at least suggest the potential for what appears to be a major adverse change in their business" when the company discussed its second-quarter earnings in a conference call on Aug. 7.

Mr. Scrushy could not be reached for comment, the paper said. However, he said in an interview last week that HealthSouth executives didn't realize the scope of the ruling until this summer, following an interpretation by the American Physical Therapy Association, a professional group.

However, the Association's chief executive said that his group had been aware of discussion over the past couple of years within the industry and government about the group-billing code and that the code had been standard practice since Medicare first announced it in 1994 and repeated the ruling in 1996, the paper said.

Mr. Scrushy said last week that he sold HealthSouth stock in May to cash out options that were going to expire. He said that he still holds about 14.5 million shares, including options. But according to Securities and Exchange Commission filings, he has about 129,000 shares, plus 40,000 held for him by the company and in a trust. The rest are options, most of which have exercise prices above the stock's current price.

Investors, government officials and other market watchers have paid particular attention to the timing of sales of stock and options by executives amid the fallout from companies such as Enron and WorldCom.