SecProbe.io

Mail Stop 3561
        December 22, 2008

Terren S. Peizer
President and Chief Executive Officer
Hythiam, Inc.
11150 Santa Monica Boulevard
Suite 1500
Los Angeles, CA  90025

Re: Hythiam, Inc.
  Form 10-K for Fiscal Year Ended December 31, 2007
Filed March 17, 2008
Definitive Revised Proxy St atement on Schedule 14A
Filed June 3, 2008
Forms 10-Q for Fiscal Quarters Ended
March 31, 2008, June 30, 2008 and September 30, 2008
  File No. 001-31932

Dear Mr. Peizer:

We have reviewed your filings and have th e following comments.  Where indicated, we
think you should revise your document in response to these comments.  If you disagree, we will
consider your explanation as to why our commen t is inapplicable or a revision is unnecessary.
Please be as detailed as necessa ry in your explanation.  Please do so within the time frame set
forth below.  You should comply with the remaining comments in all future filings, as applicable.  Please confirm in writing that you w ill do so and also explain to us how you intend
to comply, within the time frame set forth below.   Please understand that after our review of all
of your responses, we may raise additional comments.

Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requir ements 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 fr ee to call us at the
telephone numbers listed at the end of th is letter.

Terren S. Peizer
Hythiam, Inc. December 22, 2008
Page 2
Form 10-K for Fiscal Year Ended December 31, 2007

Management’s Discussion and Analysis of Financ ial Condition and Results of Operations, page
36
Liquidity and Capital Resources, page 49

1. We note your disclosure on page 51 that your  cash operating expenditures average $2.5
million a month for the remainder of 2008.  Ca sh Operating expenditures does not appear
to be a GAAP measure, thus please incl ude the required disclosures for non-GAAP
measures under Item 10(e) of Regulation S-K.

Report of Independent Registered  Public Accounting Firm, F-2

2. We note that the reports of the independe nt registered public accounting firm are
unsigned.  Please amend to provide a signed ac countants report and a signed attestation
report on internal control over financial re porting in accordance with Item 3-02 of
Regulation S-T.

Notes to Consolidated Financial Statements
Note 1.  Summary of Significant Accounting Policies
Goodwill, F-15

3. We note that you recorded $10.8 million of goodwill in the acquisition of CompCare of
which you have allocated approximately 95% of the acquired goodwill to the healthcare
services segment while only 5% of goodwill is allocated to the segment which includes
CompCare.  Please disclose the methodologies you used to allocate goodwill to your reporting segments.

4. You state that your association with CompCare will create synergies and provide access
to an infrastructure for your planned di sease management product offerings.  Please
explain how the acquisition of CompCare will create synergies in your health care segment.  Also, tell us what the fair value of the healthcare services segment was prior to
and subsequent to the acquisi tion of CompCare using the guidance of paragraph 35 of
SFAS 142.

Note 11.  Share-based Compensation, F-27

5. We note that you transferred 695,000 options relate d to a status change from employee to
non-employee.  However, we did not find any disclosure of how you accounted for these
options.  Please tell us how you considered paragraph 51 of SFAS 123(R) in determining the amount of expense to record in th e period related to this modification.

Terren S. Peizer
Hythiam, Inc. December 22, 2008
Page 3
Part III

6. We note the statement on page 60.  General In struction G(3) to Form 10-K permits an
issuer to incorporate Part III informati on into the Form 10-K from its definitive proxy
material, if the definitive proxy material is filed within 120 days after the end of the
issuer’s fiscal year.  We note that your de finitive proxy statement was not filed within
120 days after the end of your fiscal year.  Please amend your filing accordingly.  Also,
see Question 104.09 of the Compliance and Disclo sure Interpretations for Exchange Act
Forms, which is available at http://www.sec.gov/divisions/corpfin/guidance/exchangeactforms-interps.htm.

Form 10-Q for the Period Ended September 30, 2008

Notes to Condensed Consolidated Financial Statements
Note 2.  Summary of Significant Accounting Policies
Goodwill and Other Intangible Assets, page 16

7. We note that you recorded $10.5 million of  goodwill related to the acquisition of
CompCare as of December 31, 2007.  You state that you evaluated $493,000 of goodwill related to CompCare for impairment with no exceptions as of September 30, 2008.  We
note on page 39 that under the current plan there is substa ntial doubt about CompCare’s
ability to continue as a going concern.   Tell us how you evaluated the remaining
goodwill of $9.8 million in the heal thcare services as of September 30, 2008.  As part of
your response, provide a reas onably detailed summary of the analysis.  Identify, and
explain the basis for, all si gnificant assumptions used.

Marketable Securities, page 14

8. We note that you were unable to complete auctions for $11.5 million of auction-rate
securities (ARS) and have recorded a te mporary decline in the fair value of
approximately $1.1 million.   Further, we note that UBS has offered to purchase the ARS from you at par plus accrued but unpaid in terest beginning on June 30, 2010 and ending
on July 2, 2012.  Tell us the factors you considered in determining that you have the
ability to hold these securities until June  30, 2010.  It appears inconsistent when you
consider footnote four, the loss of major contracts with Pennsylvania, Maryland and
Indiana which represented approximately 62.5% of your revenues for the nine-months
ended September 30, 2008, you continue to genera te net losses, negative operating cash
flows, and have a working capital deficit.

Note 5.  Debt Outstanding, page 21

9. We note that you amended your senior secure d note with Highbridge to extend the
optional redemption date by one year and re move certain restrictions and granted
additional redemption rights.  Please disclose whether the am ended debt instrument is

Terren S. Peizer
Hythiam, Inc. December 22, 2008
Page 4
considered to be “substantially differe nt” as defined by EITF 96-19 and how you
accounted for the costs incurred for the amendmen t and the costs of the original debt.

10. We note that as part of the amended seni or secured note you also amended the existing
warrant held by Highbridge for 285,185 shares  of your common stock at $10.52 per
share.  You state that the amended warrant expires five years from the amendment date
and is exercisable for 1,300,000 shares of your  common stock at $2.15 per share.  Please
explain if the original warrant is still outstanding and is being recorded as a liability in accordance with EITF 00-19.  As a result of th e modification, you state that you recorded
approximately $1.8 million of incremental costs, fair value of the costs of the warrants as
debt discount.  Please advise why you record ed the changes in the fair value of the
warrants as a debt discount a nd the guidance you relied upon.   On page 33, we also note
that you recorded $1.3 million gain to reclassi fy the warrants from additional-paid-in-
capital, and the changes in fa ir value from the issuance date to June 30, 2008 which was
recognized during the three months ende d September 30, 2008.  Tell us how this
accounting complies with paragraph 10 of EITF 00-19.

Management’s Discussion and Analysis
Liquidity and Capital Resources, page 37

11. We note your disclosure on page 39 that you are under no obligation to provide CompCare with any form of financing, and do not currently anticip ate making additional
cash investment in CompCare and there is s ubstantial doubt about CompCare’s ability to
continue as a going concern.  Pl ease disclose the affect to your financial statements in the
event CompCare is not able to continue as a going concern.  Please i ndicate the course of
action you have taken or propose to ta ke to remedy any deficiencies.

Critical Accounting Estimates, page 40
Accrued Claims Payable and Claims Expense, page 41

12. We note that your accrued claims payabl e is $6.4 million at September 30, 2008 and has
increased from $5.4 million since December 30, 2007.  Please disclose your obligations
to pay these claims if CompCare is unable to pay these liabilities.

Other Exchange Act Reports

13. Please revise your other Exchange Act repo rts, as necessary, to comply with our
comments above.

Definitive Revised Proxy Statement on Schedule 14A

Compensation Discussion and Analysis, page 14

14. In future filings, please clarify what the company’s performance objectives are for the
payment of incentive awards to the named ex ecutive officers.  We note that you indicate

Terren S. Peizer
Hythiam, Inc. December 22, 2008
Page 5
that the amount of any bonus is  discretionary.  To the extent  that you have targets to be
achieved for your named executive officers to earn their incentive aw ards, please disclose
the specific performance ta rgets used to determine in centive amounts or provide a
supplemental analysis as to why it is appr opriate to omit these targets pursuant to
Instruction 4 to Item 402(b) of Regulation S-K.   In addition, we note that part of this
compensation is based upon qualitative performan ce factors, in partic ular the individual
objectives.  Please note that qualitative goals generally need to be presented to conform
to the requirements of Item 402(b)(2)(v).  To the extent that it is  appropriate to omit
specific targets, please provide the disclosure  pursuant to Instruction 4 to Item 402(b).
General statements regarding the level of di fficulty, or ease, associated with achieving
performance goals either corporately or individually are not sufficient.  In discussing how
likely it will be for the company to achieve the target levels or othe r factors, provide as
much detail as necessary without providing in formation that poses a reasonable risk of
competitive harm.

Forms 10-Q for Fiscal Quarters Ended March 31, 2008, June 30, 2008 and September 30, 2008

15. We note that you deleted the language “(the regist rant’s fourth fiscal quarter in the case
of an annual report)” in para graph 4(d) of the certificati ons required by Exchange Act
Rule 13a-14(a).  In future filings, please  comply fully with Item 601(b)(31)(i) of
Regulation S-K.

* * * * *

As appropriate, please amend your filing 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 furn ish a cover letter with
your amendment that keys your responses to  our comments and pr ovides any requested
information.  Detailed cover lette rs greatly facilitate our review .  Please understand that we may
have additional comments afte r 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 filings to be certain that the filings includes all information re quired under the Securities
Exchange Act of 1934 and that they have provi ded all information investors require for an
informed investment decision.  Since the compa ny and its management are in possession of all
facts relating to a company’s disclosure, they are responsible for the acc uracy and adequacy of
the disclosures they have made.

 In connection with responding to our comme nts, please provide, in writing, a statement
from the company acknowledging that:

• the company is responsible for the adequacy  and accuracy of the disclosure in the
filings;

Terren S. Peizer
Hythiam, Inc. December 22, 2008
Page 6
• staff comments or changes to disclosure  in response to staff comments do not
foreclose the Commission from taking any action with respect to the filings; 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 advise d that the Division of Enfo rcement has access to all
information you provide to the sta ff of the Division of Corporati on Finance in our review of your
filings or in response to our  comments on your filings.

 You may contact Bill Kearns at (202) 551-3727 or Nasreen Mohammed, Assistant Chief
Accountant, at (202) 551-3773 if you have que stions regarding comments on the financial
statements and related matters.  Please cont act David Link at (202) 551-3356 with any other
questions.

Sincerely,

        John Reynolds
Assistant Director