Via Facsimile and U.S. Mail
Mail Stop 6010
June 22, 2005
Mr. Don Waite
Chief Financial Officer and Secretary
Dialysis Corporation of America
27 Miller Avenue
Lemoyne, PA 17043
Re: Dialysis Corporation of America
Form 10-K for the Fiscal Year Ended December 31, 2004
Filed March 30, 2005
File No. 000-08527
Dear Mr. Waite:
We have limited our review of your filing to those issues we
have addressed in our comments. In our comments, we ask you to
provide us with information so we may better understand your
disclosure. Please be as detailed as necessary in your
explanation.
After reviewing this information, we may raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and ..., page 36
Results of Operations, page 39
1. Please provide to us the following about your accounting for
revenue and accounts receivable:
* The steps you take in collecting accounts receivable, including
patient co-payments;
* Your policy with respect to determining when a receivable is
recorded as a bad debt and when a write off is recorded, including
any thresholds (amount and age); and,
* State whether your billing system generates contractual
adjustments
based on fee schedules for the patient`s insurance plan for each
patient encounter or if an estimate of contractual allowances is
made; if an estimate is made, state what factors are considered in
determining the estimate.
2. Please explain to us the following: (a) why your receivables
balance at December 31, 2004 increased substantially higher than
your
total sales for 2004, (b) why your allowance increased during 2004
and (c) why bad debt expense decreased during 2003 as compared to
2002, and increased during 2004 as compared to 2003.
3. Please provide to us the following information about your
accounts
receivable:
* For each period presented, tell us and quantify the amount of
changes in estimates of prior period contractual adjustments that
you
recorded during the current period. For example, for 2004, this
amount would represent the amount of the difference between
estimates
of contractual adjustments for services provided in 2003 and the
amount of the new estimate or settlement amount that was recorded
during 2004.
Explain and quantify the reasonably possible effects that a change
in
estimate of unsettled amounts from 3rd party payors as of the
latest
balance sheet date could have on financial position and
operations.
Disaggregate self-payors from the commercial insurers and private
payors in your comparative tabular format for payor mix
concentrations and include the related aging of accounts
receivable.
The aging schedule may be based on management`s own reporting
criteria (i.e. unbilled, less than 30 days, 30 to 60 days etc.) or
some other reasonable presentation. At a minimum, indicate the
past
due amounts and a breakdown by payor classification (i.e.
Medicare,
Medicaid, managed care and other, and self-pay). We would expect
self-pay to be separately classified from any other grouping. If
your billing system does not have the capacity to provide an aging
schedule of your receivables, explain to us that fact and clarify
how
this affects your ability to estimate your allowance for bad
debts.
* If you have amounts that are pending approval from third party
payors (i.e. Medicaid pending), please provide the balances of
such
amounts, where they have been classified in your aging buckets,
and
what payor classification they have been grouped with. If amounts
are classified outside of self-pay, tell us why this
classification
is appropriate, and provide the historical percentage of amounts
that
get reclassified into self-pay.
* The days sales outstanding for each period presented.
Notes to Consolidated Financial Statements, page F-8
4. Please tell us the nature, terms and amounts of the put and
call
options on the assets of the Georgia facility and tell us how you
have accounted for them. In addition, please explain to us
whether
the options are subject to the requirements of SFAS 133 and how
your
accounting and disclosures comply with SFAS 133. If you believe
that
the options are not subject to SFAS 133, please cite the specific
literature (by pronouncement and paragraph) that supports your
accounting.
Note 1 - Summary of Significant Accounting Policies, page F-8
Estimates, page F-8
5. Please explain to us how you account for vendor volume
discounts,
where you present them on your statements of operations, and tell
us
how both comply with EITF 02-16.
Accrued Expenses, page F-10
6. Please explain to us what "due to insurance companies"
represents
and how you account for it.
Item 9A. Controls and Procedures, page 45
7. Please tell us the conclusion that your President and Chief
Executive Officer and the Principal Financial Officer reached
about
the effectiveness of your disclosure controls and procedures. In
addition, please tell us how your disclosures comply with Item 307
of
Regulation S-K.
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please furnish
a
letter that keys your responses to our comments and provide the
requested information. Detailed letters greatly facilitate our
review. Please file your letter on EDGAR under the form type
label
CORRESP. Please understand that we may have additional comments
after reviewing your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in your letter, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company 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.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Tabatha Akins, Staff Accountant, at (202)
551-
3658 or Oscar Young, Senior Staff Accountant, at (202) 551-3622 if
you have questions regarding comments on the financial statements
and
related matters. Please contact me at (202) 551-3679 with any
other
questions.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief Accountant
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Mr. Don Waite
Dialysis Corporation of America
June 2022, 2005
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