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ACCREDO HEALTH, INCORPORATED

Alston & Bird LLP

One Atlantic Center

1201 West Peachtree Street

Atlanta, Georgia 30309-3424

404-881-7000

Fax: 404-881-7777

www.alston.com

    Kimberly Knight Phillips

    Direct Dial: 404-881-7593

    E-mail: kphillips@alston.com

April 22, 2005

VIA EDGAR AND UPS OVERNIGHT

Jim B. Rosenberg

Senior Assistant Chief Accountant

United States Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C. 20549

    Re:

    Accredo Health Inc.

    Form 10-K for the fiscal year ended June 30, 2004

    File No. 000-25769

Dear Mr. Rosenberg:

     This letter is a response of Accredo Health, Incorporated (“Accredo” or the “Company”) to the
staff’s comment letter dated April 13, 2005 with regard to the above filing.

Form 10-K for the year ended June 30, 2004, filed September 13, 2004 (the “2004 10-K”)

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

Critical Accounting Policies and Estimates, page 36

    1.
    Comment. Please revise your discussion of critical accounting estimates to be
consistent with Section V of our FR-72, Commission Guidance Regarding Management’s
Discussion and Analysis of Financial Condition and Results of Operations. For example,
please discuss how you arrived at the critical accounting estimate, how accurate the
estimate/assumption has been in the past, how much the estimate/assumption has changed in
the past, and whether the

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Jim B. Rosenberg

April 22, 2005

Page 2

estimate/assumption is reasonably likely to change in the future. In addition, please also
provide quantitative disclosure when it is reasonably available and will provide material
information for investors.

Response. The disclosures in the 2004 10-K under the caption, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Critical
Accounting Policies and Estimates” will be revised in response
to this comment and supplementally provided.

    2.
    Comment. We note your disclosure regarding the allowances for doubtful
accounts and for contractual discounts. We believe that your disclosure of these
estimates could be greatly enhanced by addressing the material implications of
uncertainties associated with the methods, assumptions and estimates underlying these
estimates. Please consider expanding your disclosure as follows:

    a)
    For each period presented, quantify and disclose the amount of changes in
estimates of prior period contractual discounts that you recorded during the current
period. For example, for fiscal 2004, this amount would represent the amount of the
difference between estimates of contractual adjustments for services provided in
fiscal 2003 and the amount of the new estimate or settlement amount that was recorded
during fiscal 2004.

    b)
    Quantify and disclose 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.

    c)
    Disclose in a comparative tabular format, the aging of accounts receivable by
payor. 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. major medical benefit plans, prescription card
benefits, other non-governmental, Medicare, Medicaid, 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.

    d)
    If you have amounts that are pending approval from third party payors (i.e.
Medicaid Pending), please disclose the balances of such amounts, where they have been
classified in your aging buckets, and what payor classification they have keen grouped
with. If amounts are classified

Jim B. Rosenberg

April 22, 2005

Page 3

outside of self-pay, tell us why this classification is appropriate, and disclose
the historical percentage of amounts that get reclassified into self-pay.

Response. a) As a specialty retail pharmacy, the Company records
contractual adjustments on an individual claim basis as services are rendered and claims
are submitted to third party payors. Although the Company bills third party payors based on
individual contracted rates that are maintained in its medical billing system,
reimbursement amounts for certain payors are often subject to interpretation that could result in actual
payments that differ from our estimates. Based on monthly analyses performed on historical
contractual adjustment experience, the Company calculates and records a reserve for
contractual adjustments to account for differences between actual payments received and
calculated expected payment amounts per the Company’s medical billing system. This
calculation is performed on the Company’s aggregated accounts receivable portfolio. As of
June 30, 2004, the Company’s recorded reserve for contractual adjustments totaled $5.7
million, or 1.4% of gross patient accounts receivable, and is netted against patient
accounts receivable in the Company’s consolidated balance sheet. The Company historically
has not had any significant changes in these estimates from reporting period to reporting
period and does not anticipate any significant changes in these estimates in future
reporting periods. Further, third party payors submit payments to the Company on an
individual claim basis and there are no annual or periodic retroactive settlements related
to the claims such as with hospital cost reporting or other retrospective settlement
processes (see response to comment 2(b) below). Because the Company’s accounts are paid on
an individual claim basis, the Company’s systems do not provide the ability to reconcile
changes in prior estimates as this would have to be performed on an individual claim basis,
which is not feasible given the Company’s volume of claims.

     The Company will disclose that changes in estimates of contractual adjustments have
not been material to date in its 2004 10-K under the caption, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Critical Accounting Policies
and Estimates – Allowance for Contractual Discounts”, and in subsequent filings as
applicable. Proposed amended disclosures will be supplementally
provided. In addition, the Company proposes to provide the requested disclosure regarding changes in
estimates of prior period contractual adjustments in future filings should it experience
material changes in those estimates from reporting period to reporting period.

     b) The Company interprets this comment to relate to unsettled amounts from third party
payors in the context of hospital cost reporting or other retrospective settlement
processes. Accredo provides specialty pharmacy services directly to its patients and is
licensed as a retail pharmacy in all states in which the Company conducts
business. From a billing perspective, the

Jim B. Rosenberg

April 22, 2005

Page 4

Company submits claims to payors (both government and commercial) on a per shipment
basis after an extensive insurance clearance and pre-certification process (see response to
Comment 2(d) below). Therefore, there is no retroactive settlement with third party
payors, and, likewise, there is no estimate for unsettled amounts
recorded in the
consolidated balance sheet as of June 30, 2004.

     The Company will disclose this fact in the discussion under the caption, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Critical
Accounting Policies and Estimates – Allowance for Contractual
Discounts” in its 2004

10-K and in subsequent filings, as
applicable. Proposed amended
disclosures will be supplementally provided.

     c)
The Company will add the requested
disclosure under the caption, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations —
Critical Accounting Policies and Estimates — Allowance for
Contractual Discounts” in its 2004 10-K and will include this
disclosure in subsequent filings, as applicable. Proposed amended
disclosures will be supplementally provided.

     d) The Company does not have accounts receivable that are pending approval from third
party payors. As discussed in the 2004 10-K, the Company only dispenses expensive products
with annual costs generally ranging from approximately $8,000 to $300,000 per patient. To
minimize the risk of non-collection of accounts receivable associated with such expensive
products, the Company rigorously adheres to a policy of (i) verifying pharmacy and/or major
medical benefits with third party payors and (ii) obtaining pre-certification or shipment
clearance for each patient order prior to each shipment. The Company’s verification and
pre-certification processes consist of a review of the patient’s pharmacy benefit plan(s)
with the third party payor and pre-certification prior to

Jim B. Rosenberg

April 22, 2005

Page 5

each shipment by the Company’s reimbursement department. Benefit verification and
pre-certification are performed electronically by the Company’s reimbursement department
whenever possible. Otherwise, they are performed telephonically by the Company’s
reimbursement department.

The Company will disclose this fact in the discussion under the caption, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Critical
Accounting Policies and Estimates – Allowance for Contractual
Discounts” in its 2004 10-K
and in subsequent filings, as applicable. Proposed amended
disclosures will be supplementally provided.

Fiscal Year Ended June 30, 2004 Compared to Fiscal Year Ended June 30, 2003, page 38

    3.
    Comment. Where you attribute material fluctuations in your revenues and
expenses to multiple factors, please ensure that you have quantified and explained those
factors that are significant in understanding these fluctuations, as required by Financial
Reporting Codification Section 501.04. Based on your existing disclosures, it appears
that your discussion of changes in revenues, costs of sales, general and administrative
expenses, and bad debts could have been better quantified.

Response. The disclosures under the heading “Fiscal Year Ended June 30, 2004
Compared to Fiscal Year Ended June 30, 2003” and “Fiscal Year Ended June 30, 2003 Compared
to Fiscal Year Ended June 30, 2002” in the 2004 10-K will be revised in response to this
comment and supplementally provided.

Fiscal Year Ended
June 30, 2003 Compared to Fiscal Year Ended June 30 2002, page 39

    4.
    Comment. In your discussion of general and administrative expenses, we note
that higher margin products have higher general and administrative expenses associated
with them. Please tell us the nature of these higher expenses, how they are associated
with these products, and why these amounts have not been classified as costs of sales.

Response. The Company distributes certain products with higher gross margins and
notes that fact in the Management’s Discussion and Analysis section of the 2004 10-K. The
Company also notes that the general and administrative expenses associated with these
products are also higher. On the other hand, the Company’s products with lower gross
margins generally have lower general and administrative costs
associated with them because they are primarily reimbursed as a
pharmacy benefit and adjudicated electronically. For all of the products
that we distribute, their respective operating margins are more
comparable than their gross margins.

Jim B. Rosenberg

April 22, 2005

Page 6

The most significant general and administrative expenses associated with the higher margin
products are product sales operations and third party reimbursement costs (order clearance,
billing and collection functions). The Company appropriately classifies all sales operations and third
party reimbursement expenses as general and administrative and classifies all pharmacy
expenses as cost of sales. The higher margin products are often reimbursed under a major
medical benefit, requiring significantly greater reimbursement expertise and cost by the
Company as patient clearance times are longer and many of the claims are paper-based (i.e.
rather than electronic). Further, many of the higher gross margin products are supported
through our decentralized branch pharmacy
locations. Maintaining these branch locations results in significant general and
administrative expenses, including, but not limited to, reimbursement
costs, rent, telephone, office supplies,
and insurance.

The disclosures under the heading “Fiscal Year Ended June 30, 2003 Compared to Fiscal Year
Ended June 30, 2002” in the 2004 10-K will be revised in
response to this comment and supplementally provided.

Liquidity and Capital Resources, page 40

    5.
    Comment. Please state the steps you take in collecting accounts receivable.
Please disclose your policy with respect to determining when a receivable is recorded as a
bad debt and when a write off is recorded. Please clarify the threshold (amount and age)
for account balance write-offs.

Response. The Company collects substantially all of its accounts receivable through
its internal reimbursement department. The Company’s reimbursement department is organized
along lines of expertise principally including therapy (product) and third party payor
type. Billing and collection efforts of our reimbursement personnel are driven by various
reporting and follow-up activities prompted by and executed through our medical billing
system. Historically, the Company has only utilized external agencies in the collection of
accounts receivable on a select basis and does not anticipate using such agencies on a
significant basis in the future.

The Company’s bad debt write-offs primarily result from uncollectible patient co-payments
and deductibles. Some of the drugs we distribute are primarily reimbursed by prescription
card benefit plans, which have lower patient co-payment and deductible amounts (typically
$15 -$30 per prescription). Other drugs we distribute are primarily reimbursed through
major medical benefit plans, which have higher patient deductible amounts. In terms of
identifying and reserving for bad debts, historical bad debt write-off experience is
analyzed and a

Jim B. Rosenberg

April 22, 2005

Page 7

quarterly specific claim review is conducted. In reviewing claims to determine when a
receivable is recorded as bad debt, the Company factors in various qualitative
considerations such as the age of the receivable, knowledge of the patient, collection
notes resulting from follow-up correspondence, and our historical experience collecting
co-payments and deductibles. Unlike most hospital settings, the Company does not write-off
accounts based on specific thresholds such as amount or age. Rather, write-offs occur
after the Company has exhausted its collection efforts and appropriate management approval
is obtained according to Company policy. Bad debt expense as a percent of consolidated
revenues was 2% for the year ended June 30, 2004.

The disclosures under the heading “Liquidity and Capital