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Comprehensive Care Corporation

September 21, 2005

VIA EDGAR AND FACSIMILE

(202) 772-9217

Mr. Jim B. Rosenberg,
   Senior
Assistant Chief Accountant

Securities and Exchange Commission

Division of Corporation Finance

450 Fifth Street NW

Washington, D.C. 20549

    Re:

    Comprehensive Care Corporation

    Form 10-K for the fiscal year ended May 31, 2005

    File Number 1-9927

Dear Mr. Rosenberg:

On behalf of Comprehensive Care Corporation (the “Company”), the following are the Company’s
responses to the Staff’s letter of September 7, 2005, containing the Staff’s comments regarding the
Company’s Form 10-K filed with the Commission on August 23, 2005. If acceptable, we propose to
address these comments in our Form 10-Q for the quarter ended August 31, 2005 and in future filings
with the Commission in the manner described below. For your convenience, the text of each Staff
comment is set forth below, and the Company’s response follows each comment.

Managements Discussion and Analysis

Critical Accounting Estimates, page 14

    1.

    Disclosure providing investors with a fuller understanding of the uncertainties in applying
critical accounting policies and explaining the likelihood that materially different amounts
would be reported under different conditions or using different assumptions is consistent with
the objective of Management’s Discussion and Analysis. This disclosure should include
quantification of the related variability in operating results that you expect to be
reasonably likely to occur. We were unable to find this disclosure in your filing. Please
provide us in disclosure-type format information about the uncertainties in applying your
critical accounting policies, the historical accuracy of these critical accounting estimates,
a quantification of their sensitivity to changes in key assumptions and the expected
likelihood of material changes in the future.

Securities and Exchange Commission

September 21, 2005

Page 2

RESPONSE: In response to the Staff’s comment, the Company proposes to revise its critical
accounting policies disclosure as follows:

Revenue Recognition

We provide managed behavioral healthcare and substance abuse services to recipients, primarily
through subcontracts with HMOs. Revenue under the vast majority of these agreements is earned
and recognized monthly based on the number of covered members as reported to us by our clients
regardless of whether services actually provided are lesser or greater than anticipated when
we entered into such contracts (generally referred to as capitation arrangements). The
information regarding the number of covered members is supplied by the Company’s clients and
the Company relies extensively on the accuracy of this information when calculating the amount
of revenue to be recognized. Consequently, the vast majority of the Company’s revenue is
determined by the monthly receipt of covered member information and the associated payment
from the client, thereby removing uncertainty and precluding the Company from needing to make
assumptions to estimate monthly revenue amounts.

We may experience adjustments to our revenues to reflect changes in the number and eligibility
status of members subsequent to when revenue is recognized. Subsequent adjustments to the
Company’s revenue have not been material.

Accrued Claims Payable and Claims Expense

Healthcare operating expenses are composed of claims expense and other healthcare expense.
Claims expense includes amounts paid to hospitals, physician groups and other managed care
organizations under capitated contracts. Other healthcare expense includes items such as
information systems, case management and quality assurance, attributable to both capitated and
non-capitated contracts.

The cost of behavioral health services is recognized in the period in which an eligible member
actually receives services and includes an estimate of IBNR (as defined below). The Company
contracts with various healthcare providers including hospitals, physician groups and other
managed care organizations either on a sub-capitated, a discounted fee-for-services, or a
per-case basis. The Company determines that a member has received services when the Company
receives a claim within the contracted timeframe with all required billing elements correctly
completed by the service provider. The Company then determines whether (1) the member is
eligible to receive such services, (2) the service provided is medically necessary and is
covered by the benefit plan’s certificate of coverage, and (3) the service has been authorized
by one of our employees. If all of these requirements are met, the claim is entered into the
Company’s claims system for payment and the associated cost of behavioral health services is
recognized.

Accrued claims payable consists primarily of reserves established for reported claims and
claims incurred but not yet reported (“IBNR”), which are unpaid through the respective balance
sheet dates. Our policy is to record management’s best estimate of IBNR. The IBNR liability
is estimated monthly using an actuarial paid completion factor methodology and is continually
reviewed and adjusted, if necessary, to reflect any change in the estimated liability as more
information becomes available. The actuarial model primarily uses past claims

Securities and Exchange Commission

September 21, 2005

Page 3

payment experience, enrollment data and key assumptions such as trends in healthcare costs and
seasonality in deriving a range of estimates. The accrued claims payable ranges were between
$3.5 and $3.8 million at May 31, 2005, between $3.6 and $3.8 million at May 31, 2004, and
between $3.8 and $4.2 million at May 31, 2003. To determine the best estimates, management
reviews utilization statistics, authorized healthcare service data, calculated completion
factors and other data available at and subsequent to the balance sheet dates. The best
estimates for fiscal years ended May 31, 2005, 2004 and 2003 were $3.7 million, $3.6 million
and $4.1 million, respectively. The Company has used the same methodology and assumptions for
estimating the IBNR portion of the accrued claims liability for fiscal years 2005, 2004 and
2003.

     The following table provides a reconciliation of the beginning and ending balance of
accrued claims payable for the fiscal years ended May 31, 2005, 2004 and 2003:

    May 31,

    2005

    2004

    2003

    (Amounts in thousands)

    Beginning accrued claims payable

    $
    3,647

    $
    4,103

    $
    4,635

    Claims expense:

    Current year

    16,779

    18,005

    22,158

    Prior year

    (400
    )

    170

    160

    Total claims expense

    16,379

    18,175

    22,318

    Claims payments:

    Current year

    13,041

    14,117

    18,047

    Prior year

    3,255

    4,514

    4,803

    Total claims payments

    16,296

    18,631

    22,850

    Ending accrued claims payable

    $
    3,730

    $
    3,647

    $
    4,103

Accrued claims payable at May 31, 2005, 2004 and 2003 comprises approximately $1.8 million,
$1.6 million and $1.3 million, respectively, of submitted and approved claims which had not
yet been paid, and $1.9 million, $2.0 million and $2.8 million for each fiscal year presented,
respectively, for IBNR claims. Changes in prior year claims expense were primarily due to
changes in utilization patterns and changes in claim submission timeframes by providers.
Management considers these changes in claims expenses to be immaterial when compared to the
total claims expenses incurred in prior years.

Many aspects of our business are not predictable with consistency, and therefore, estimating
IBNR claims involves a significant amount of management judgment. Actual claims incurred
could differ from the estimated claims payable amount presented. The following are factors
that would have an impact on future operations and financial condition of the Company:

    •

    Changes in utilization patterns

    •

    Changes in healthcare costs

Securities and Exchange Commission

September 21, 2005

Page 4

    •

    Changes in claims submission timeframes by providers

    •

    Success in renegotiating contracts with healthcare providers

    •

    Occurrence of catastrophes

    •

    Changes in benefit plan design

A 5% increase in assumed healthcare cost trends from those used in our calculations of IBNR at
May 31, 2005, could increase our claims expense for the fiscal year ended May 31, 2005 by
approximately $92,000 and decrease our earnings per share by $0.02 per diluted share as illustrated in the table below:

Change in Healthcare Costs:

    (Decrease)

    (Decrease)

    Increase

    Increase

    In Claims Expense

    (5%)

    ($94,000)

    5%

    $92,000

Marketable Securities

In assessing the carrying value of a marketable security classified as “available for sale”
where the security’s market value is less than its carrying value, we will make a
determination if the decline is “other than temporary” by considering:

    •

    The financial condition of the issuer.

    •

    The length of time the investment has been in a continuous unrealized loss position.

    •

    The Company’s ability to hold the security for a period of time sufficient to
allow for any anticipated recovery.

The Company’s experience in applying the above considerations extends only to the security
existing at May 31, 2005, and resulted in the recording of an impairment loss based on the
determination that the decline in value occurring since acquisition in November 2004 was other
than temporary.

Goodwill

The Company evaluates at least annually the amount of its recorded goodwill by performing an
impairment test that compares the carrying amount to an estimated fair value. In estimating
the fair value, management makes its best assumptions regarding future cash flows and a
discount

Securities and Exchange Commission

September 21, 2005

Page 5

rate to be applied to the cash flows to yield a present, fair value of equity. As a result of
such tests, management believes there is no material risk of loss from impairment of goodwill.
However, actual results may differ significantly from management’s assumptions, resulting in
potentially adverse impact to the Company’s financial statements.

    2.

    Your disclosure regarding accrued claims payable does not adequately explain how you compute
this estimate, particularly the impact of changes in judgments and uncertainties on operating
results. We note that the impact of changes in the ratio of healthcare operating expenses to
operating revenue appeared to be significant. Accordingly, please provide us the following
information for each line of business in disclosure-type format.

RESPONSE: The Company proposes to revise its critical accounting policy disclosure to
address this comment in the manner set forth under “Accrued Claims Payable and Claims Expense”
included in the Company’s response to comment number one above. The Company does not have
reportable business segments.

Consolidated Financial Statements

Consolidated Statements of Operations, page 22

    3.

    We note that at May 31, 2005 fully integrated capitated lives and combined MSO and ASO lives
totaled 679,000 and 245,000, respectively. Because of the potential variability on a company’s
earnings arising from capitated arrangements, we believe that separate line item presentation
is appropriate for revenue and cost of revenue related to capitated and noncapitated
arrangements. At a minimum, the amount of capitated revenue earned should be disclosed in the
notes to your financial statements and MD&A should separately disclose and discuss the amount
of revenue and cost of revenue for capitated and non-capitated arrangements. Please provide
us this information in disclosure-type format.

RESPONSE: In response to the Staff’s comment, the Company proposes to include the following
disclosure regarding sources of revenue in the notes to its financial statements and to revise the
MD&A section of its future filings with the Commission as follows. Please note that claims expense
includes amounts paid to hospitals, physician groups and other managed care organizations under
capitated contracts. Other healthcare expense includes items such as information systems, case
management and quality assurance, attributable to both capitated and non-capitated contracts.

Securities and Exchange Commission

September 21, 2005

Page 6

The Company’s revenue may be segregated into the following significant categories:

    Fiscal Year Ended May 31,

    2005

    2004

    2003

    (Amounts in thousands)

    Capitated contracts

    $
    22,062

    $
    23,580

    $
    28,189

    Non-capitated contracts

    2,411

    4,003

    3,915

    Total

    $
    24,473

    $
    27,583

    $
    32,104

Revised MD&A disclosure:

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

     The following table sets forth our operating income (loss) for the fiscal years ended May
31, 2005 and 2004:

    Consolidated

    Consolidated Operations

    Operations

    Fiscal 2005

    Fiscal 2004

    Revenues:

    Capitated contracts

    $
    22,062

    $
    23,580

    Non-capitated sources

    2,411

    4,003

    Total Revenues

    $
    24,473

    $
    27,583

    Healthcare operating expense:

    Claims expense(1)

    16,379

    18,175

    Other healthcare operating expense(1)

    4,919

    6,003

    Total healthcare operating expense

    21,298

    24,178

    General and administrative expenses

    3,078

    3,385

    Other operating expenses

    92

    100

    24,468

    27,663

    Operating income (loss)

    $
    5

    $
    (80
    )

    (1)

    Claims expense reflects the cost of revenue of capitated contracts, and
other healthcare operating expense reflects the cost of revenue of capitated and non-capitated
contracts. The Company does not segregate other healthcare operating expenses between
capitated and non-capitated contracts.

Securities and Exchange Commission

September 21, 2005

Page 7

Results of Operations —Year Ended May 31, 2005 as Compared to the Year Ended
May 31, 2004.

The Company reported operating income of $5,000 and a net loss of $268,000, or $0.05 loss
per share (basic and diluted), for the fiscal year ended May 31, 2005, compared to an
operating loss of $80,000 and a net loss of $777,000, or $0.18 loss per share (basic and
diluted), for the fiscal year ended May 31, 2004. Capitated (at risk) revenue decreased by
6.4% or approximately $1.5 million to $22.1 million for the fiscal year ended May 31, 2005
due to the loss of one major customer in Florida that accounted for $4.4 million of revenue
in the prior fiscal year, offset by increases in revenues from existing clients in
Connecticut and Texas. Non-capitated revenues decreased by 40% or approximately $1.6
million to $2.4 million for the fiscal year ended May 31, 2005 due to the loss of two
clients in Texas and one client in Michigan.

Claims expense on at risk contracts decreased by 9.9% or approximately $1.8 million for the
fiscal year ended May 31, 2005 as compared to the fiscal year ended May 31, 2004 due to
revenue reductions and clinical program improvements resulting in reduced costs of care.
Claims expense as a percentage of capitated revenues decreased 2.9% from 77.1% for the
twelve months ended May 31, 2004 to 74.2% for the twelve months ended May 31, 2005, due to
the loss of the aforementioned Florida client, which consistently incurred a high medical
loss ratio. Other healthcare expenses, which are attributable to servicing both capitated
and non-capitated contracts, decreased 18.1% or approximately $1.1 million for the fiscal
year ended May 31, 2005 compared to the fiscal year ended May 31, 2004. The decrease is due
to lower rev