Via Facsimile and U.S. Mail
Mail Stop 6010
August 24, 2005
Mr. John R. Potapchuk
Senior Vice President, Chief Financial Officer, Treasurer and
Secretary
(Principal Financial and Accounting Officer)
Gentiva Health Services, Inc.
3 Huntington Quadrangle, Suite 200S
Melville, NY 11747-4627
Re: Gentiva Health Services, Inc.
Form 10-K for the Fiscal Year Ended January 2, 2005
Forms 10-Q for Fiscal Quarters Ended
April 3, 2005 and July 3, 2005
File No. 001-15669
Dear Mr. Potapchuk:
We have reviewed your filings and have the following
comments.
We have limited our review of the above referenced filings to only
those issues addressed. Where indicated, we think you should
revise
your documents in response to these comments. If you disagree, we
will consider your explanation as to why our comment is
inapplicable
or a revision is unnecessary. Please be as detailed as necessary
in
your explanation. In some of our comments, we may ask you to
provide
us with information so we may better understand your disclosure.
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
filings.
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.
January 2, 2005 Form 10-K, filed March 17, 2005
Liquidity and Capital Resources, page 26
Please disclose the reason for the decrease in current liabilities
from fiscal 2003 to fiscal 2004.
Critical Accounting Policies and Estimates, pages 32 - 34
1. Please note that Critical Accounting Polices should supplement,
not duplicate, the description of accounting policies that are
disclosed in the notes to the financial statements. Please revise
your critical accounting policies which we believe should be
described as critical accounting "estimates" to disclose the
uncertainties involved in applying each principle and discuss the
variability that is reasonably likely to result from the
application.
For each policy identified, ensure that management has analyzed
and
disclosed to the extent possible the following factors:
a. How management arrived at the estimate;
b. How accurate management`s estimate/assumption has been in the
past, quantify changes in estimate in each period;
c. Whether the estimate/assumption is reasonably likely to change
in
the future;
d. Evaluate the sensitivity to change of critical accounting
policies; and
e. Disclose the amount of expense recognized in each period and
where
on the statement of operations the expense is reported.
Revenue Recognition, page 32
2. We note your disclosure regarding revenue recognition and the
allowance for doubtful accounts. Please expand your discussion to
include the following disclosures:
a. State if 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.
b. Your policy for collecting co-payments.
c. For each period presented, 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.
d. 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.
e. In a comparative tabular format, the payor mix concentrations
and
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, the disclosure should 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, disclose that fact and clarify how
this
affects your ability to estimate your allowance for bad debts.
f. If you have amounts that are pending approval from third party
payors (i.e. Medicaid Pending), 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 disclose the historical percentage of amounts
that
get reclassified into self-pay.
Collectibility of Accounts Receivable, page 33
3. Please state the steps you take in collecting accounts
receivable.
Disclose your policy with respect to determining when a receivable
is
recorded as a bad debt and when a write off is recorded. Lastly,
please clarify the threshold (amount and age) for account balance
write-offs.
Litigation, pages F-20 - F-22
4. Please disclose the amount of the settlement reached in the
Cooper
v. Gentiva CareCentrix case.
Forms 10-Q for Quarters Ended April 3, 2005 and July 3, 2005
5. We note that cash flows from operating activities varied
significantly in 2005 as compared to 2004. Please revise your
MD&A
disclosure to address the specific sources and uses of cash during
these periods in order to explain the change in cash flows from
operating activities from 2004 to 2005 rather than disclosing
changes in balance sheet accounts such as current liabilities that
merely recites the changes that are readily available from the
balance sheet. Refer to Section IV of Financial Reporting Release
72.
6. Please explain the reason for the significant change in your
balance sheet line item current liabilities in 2005 including why
it
decreased when revenues have been increasing.
7. Please more fully disclose the reason for processing delays in
payment of your claims from TriWest Healthcare which is one of the
factors that increased accounts receivable in 2005, and explain
to
us why you believe revenue was recognized in the appropriate
period
following GAAP.
* * * *
As appropriate, please amend your filings and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. You should file the letter on EDGAR under
the
form type label CORRESP. Please understand that we may have
additional comments after reviewing your amendment and 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 Lisa Vanjoske, Assistant Chief Accountant, at (202) 551-
3614
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
??
??
??
??
John R. Potapchuk
Gentiva Health Services, Inc.
August 24, 2005
Page 1