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corresp

August 12, 2005

Via EDGAR

United States Securities and Exchange Commission

Division of Corporation Finance

100 First Street, N.E.

Washington, D.C. 20549

    Attn:

    Jim B. Rosenberg, Senior Assistant Chief Accountant

Mail Stop 6010

    Re:

    Radiologix, Inc.

Form 10-K for the Fiscal Year Ended December 31, 2004

Filed March 15, 2005

File No. 001-15861

Dear Mr. Rosenberg:

     The following are Radiologix, Inc.’s (the “Company’s”) responses to the comments of the staff
of the Commission’s Division of Corporation Finance in its letter to Michael N. Murdock, Senior
Vice President and Chief Financial Officer of Radiologix, dated July 13, 2005, with respect to
Radiologix’s 2004 Annual Report on Form 10-K. For convenience, the staff’s comments are stated
below in their entirety, in bold, with the Company’s responses to a particular comment set out
immediately under the comment.

Item 6. Selected Financial Data, page 14

    1.

    Please explain to us why you did not include five years of balance sheet information in the
table on page 15. Refer to Item 301(b)(2) of Regulation S-K.

    Response: Our 2004 Form 10-K included the three most recent years of balance sheet
information (fiscal years 2004, 2003 and 2002). The balance sheet information for fiscal
years 2001 and 2000 was inadvertently omitted. We have added the balance sheet information
for fiscal years 2001 and 2000 as presented below and will ensure that we provide the five
most recent years of balance sheet information pursuant to Item 301(b)(2) of Regulation S-K
in our 2005 Form 10-K filing:

    As of December 31,

    2004

    2003

    2002

    2001

    2000

    (in thousands)

    Balance Sheet Data:

    Working capital

    $
    65,387

    $
    74,050

    $
    60,450

    $
    55,214

    $
    36,682

    Total assets

    254,071

    279,514

    296,091

    284,725

    268,636

    Long-term debt and capital
lease obligations

    158,519

    162,075

    166,249

    172,947

    175,836

    Convertible notes

    11,980

    11,980

    11,980

    24,205

    20,000

    Stockholders’ equity

    42,916

    60,684

    60,684

    44,476

    29,719

United States Securities and Exchange Commission

Division of Corporation Finance

August 12, 2005

Page 2

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 15

Liquidity and Capital Resources, page 25

    2.

    It is unclear based on your discussion related to your operating cash flows what resulted in
the decrease in the current period. Please explain to us in greater detail the activities
that generate and use cash in operations. Include which of these activities specifically
caused the significant changes in the current period. Please note that a reiteration of the
cash flow statement is not sufficient to this end. Also include a discussion of what resulted
in the significant changes to your days’ sales outstanding in accounts receivable between
these periods.

    Response: Our operating cash flows are primarily impacted by the amount of service
fee revenue we generate and ultimately collect, offset by the amount and timing of our
payment obligations for resources used to generate service fee revenues, such as costs for
payroll, supplies, equipment operating leases, equipment maintenance contracts, equipment
repairs, utilities, facility rent, marketing, interest and general and administrative costs.

    In 2004, the primary reasons for our decrease in operating cash flows relative to the
comparable period in 2003 were: (1) higher costs of services in 2004 compared to 2003
resulting in a lower gross profit in 2004, as discussed on pages 20 and 21 in Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
of our 2004 Form 10-K; (2) substantially higher corporate general and administrative costs
as described on page 21 in Item 7 in our 2004 MD&A of our 2004 Form 10-K; (3) higher
estimated federal and state tax payments in 2004; and (4) higher payments made for federal
income taxes and physician technical bonuses in 2003 compared to 2004 and 2002.

    Our days sales outstanding decreased as a result of: (1) the $9.1 million charge we recorded
in the 2004 fourth quarter, which increased contractual adjustments and correspondingly
decreased service fee revenue and accounts receivable at December 31, 2004; and (2) our
reduced denial rates and overall improved collections in fiscal 2004.

    3.

    Please revise your contractual obligations table to include the estimated interest payments,
since these payments appear to represent material future obligations based on your statement
of cash flows. Refer to Financial Reporting Release 72.

    Response:

    We have added our estimated interest payments to the contractual obligations table below:

United States Securities and Exchange Commission

Division of Corporation Finance

August 12, 2005

Page 3

    As of December 31, 2004, long-term debt, including capital lease obligations and
non-cancelable operating leases as well as corresponding interest payments are as follows
(in thousands):

    Total

    Less than 1 Year

    1 to 3 Years

    4 to 5 Years

    After 5 Years

    Long Term Debt

    170,250

    170,250

    Capital Lease Obligations

    249

    157

    66

    26

    Operating Leases

    103,456

    22,185

    37,158

    25,741

    18,372

    273,955

    22,342

    37,224

    196,017

    18,372

    Interest Obligations:

    Senior Notes

    66,335

    16,618

    33,237

    16,480

    Convertible Notes

    4,392

    958

    1,917

    1,517

    Other

    24

    13

    10

    1

    70,751

    17,589

    35,164

    17,998

    —

We will include a similar table in our 2005 Form 10-K.

Critical Accounting Policies, page 26

Revenue Recognition, Contractual Allowances, and Allowances for Doubtful Accounts, page 26

    4.

    Please describe to us in greater detail the comprehensive “retrospective collection analysis
of [your] accounts receivable” that took place in the fourth quarter of 2004. Include a
discussion of how this allowed you to feel comfortable with the amounts recorded as accounts
receivable at year-end. Also explain how you determined that the $9.1 million charge in the
fourth quarter was appropriate.

    Response:

    Prior to using the retrospective collection analysis model, the Company utilized a “Payment
Versus Revenue” or “PVR” model and aging reports to estimate collection rates in arriving at
the estimated net realizable value for accounts receivable. The PVR model reflected gross
charges and cash collections attributable to each month. Because the receipt of cash
collections typically trailed the timing of initial charges, we would compare revenue from
the PVR model recorded 60 days earlier to the current cash collection month in an effort to
better match charges to collections. We would also average this calculation over a
six-month period to arrive at an estimated collection rate for the current period (i.e. we
would compare six months of collections to six months of revenue, with the revenue on a
60-day lag).

    In the summer of 2004, we began the development of a retrospective model to replace the PVR
model. This development involved our collaboration with our revenue cycle IT vendor to (1)
convert our major subsidiaries to a single common billing system platform and (2) develop a
program that matched cash collections to the original gross charges

United States Securities and Exchange Commission

Division of Corporation Finance

August 12, 2005

Page 4

    recorded in our billing
system. We worked with our vendor and continued our implementation process throughout the
third and fourth quarters of 2004. We disclosed in our September 30, 2004 Form 10-Q on page
31, the following: “In the fourth quarter of 2004, we expect to finalize a retrospective collection analysis of accounts receivable”
(see the Revenue Recognition, Contractual Allowances and Allowances for Doubtful Accounts
paragraph under the Critical Accounting Policies section on page 31 of our September 30,
2004 Form 10-Q).

    Management completed the final review of the retrospective model and the results generated
by this model subsequent to December 31, 2004, but prior to the finalization of our 2004
consolidated financial statements. This review involved the preparation of a retrospective
report for each of our major subsidiaries. We believe the retrospective methodology
provides greater objective evidence with which to estimate the collectability of accounts
receivable because it allows us to match cash collections to gross charges by month of
service over at least an 18-month period and consequently develop collection percentages and
collection trends that are substantially complete. In other words, the retrospective
analysis allows us a better method to track the run out of cash on a population of charges
over an extended period of time. Moreover, the retrospective analysis also allows us to
better estimate how much we have left to collect on a receivable balance at any point in
time and consequently assess the likelihood of collecting the remaining balance given
established collection trends.

    The $9.1 million charge was appropriate in the fourth quarter of 2004 because the Company
could not reasonably determine what periods the charge related to. The retrospective
analysis, while providing us with a more accurate picture of the Company’s current
collection rates and accounts receivable, does not provide the necessary data to determine
the correct collection rates for periods prior to 2003. We cannot compare the Company’s
historical collection rates before 2003 with those as determined by the retrospective
analysis due to the Company’s legacy billing systems and accounting records. A comparison
of the collection rates as determined by the retrospective analysis and the Company’s
historical rates in 2003 and 2004 shows that none of the $9.1 million charge relates to
periods in those years. Because we cannot reasonably determine when the $9.1 million charge
accrued (other than determining that the charge accrued sometime prior to 2003), we recorded
the adjustment in the fourth quarter of 2004, which was the closest period to when the
charge was discovered.

    5.

    Please provide to us a discussion of the following items in a format that represents
potential disclosure to be added in these areas in future Forms 10-K or identify for us in
your current disclosure how these items are addressed:

    a.

    For each period presented, quantify and disclose 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.

United States Securities and Exchange Commission

Division of Corporation Finance

August 12, 2005

Page 5

Response: The primary change in estimate is the $9.1 million charge taken for fiscal 2004.
The basis for our estimation of contractual adjustments prior to December 2004 was the use of the
PVR model as described above. Effective with our 2004 year-end close, we began utilizing the
retrospective model. Both the PVR and the retrospective model generate collection
percentages that we apply to gross charges to arrive at service fee revenue. Because the
retrospective model provides us greater objective evidence with which to estimate the
collectibility of accounts receivable and because we closely monitor the retrospective model on a
monthly basis, we do not anticipate significant changes in contractual adjustment estimates going
forward. However, in the event the retrospective model generates a significant change in estimate,
we will disclose the amount and the underlying reasons for the change in the appropriate period.

    b.

    Clarify for us why the 1.0% threshold disclosed related to your sensitivity
analysis is appropriate.

    Response: As noted in the above response, the recording of service fee revenue
(excluding capitation revenue and certain management fee revenue) is based on estimated
collection percentages. Accordingly, we believe it is useful and appropriate to reflect the
sensitivity of a change of 1% in our collection rate to the financial statement user.

    c.

    Quantify and disclose the reasonably possible effects that a change in estimate
of unsettled amounts from 3rd party payers as of the latest balance sheet date could
have on financial position and operations.

    Response: Our operations are different from those of hospitals and other
cost-based providers in that we do not file cost reports nor do we have any
“cost-reimbursed” or “retrospective” settlement arrangements. We file claims with various
payers and receive reimbursement based on either the current Medicare fee schedule, a
multiple of the current Medicare fee schedule, some other negotiated managed-care terms
(such as “fee-for-service”), and, in the case of capitation, negotiated per-member-per-month
rates. Consequently, we have no unsettled retrospective amounts or cost report settlements
due to or from third-party payors.

    d. Disclose 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.

United States Securities and Exchange Commission

Division of Corporation Finance

August 12, 2005

Page 6

    Response: The table below reflects our consolidated gross accounts receivable
(before any reduction for contractual allowances) aging report, which is used to review
accounts receivable aging patterns.

    0-30

    31-60

    61-90

    91-120

    121-150

    151-180

    >180

    Payor

    Total

    Days

    Days

    Days

    Days

    Days

    Days

    Days

    Medicare

    20,136,246

    9,094,149

    4,665,621

    1,343,859

    916,123

    617,563

    422,285

    3,076,646

    Medicaid

    5,922,365

    1,277,235

    1,250,995

    869,931

    605,174

    368,395

    296,823

    1,253,812

    Indemnity

    3,735,177

    1,147,880

    941,452

    455,350

    321,571

    171,592

    114,906

    582,426

    Managed Care

    40,285,983

    17,466,945

    8,995,201

    3,112,589

    2,135,424

    1,264,522

    841,583

    6,469,719

    Self Pay

    13,709,030

    1,381,837

    2,366,044

    2,335,793

    2,113,913

    1,649,004

    1,334,750

    2,527,689

    Workers Comp

    5,748,873

    867,713

    1,154,760

    954,974

    599,322

    327,022

    230,233

    1,614,849

    Other

    3,803,494

    784,599

    419,768

    595,901

    400,306

    265,684

    107,821

    1,229,415

    TOTAL by PAYOR

    93,341,168

    32,020,358

    19,793,841

    9,668,397

    7,091,833

    4,663,782

    3,348,401

    16,754,556

    Other subsidiary(1)

    5,329,085

    2,280,687

    634,868

    417,345

    485,697

    283,745

    177,399

    1,049,344

    98,670,253

    34,301,045

    20,428,709

    10,085,742

    7,577,530

    4,947,527

    3,525,800

    17,803,900

    (1)