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Hythiam, Inc.

August 22, 2007

VIA EDGAR TRANSMISSION

Securities and Exchange Commission

Division of Corporation Finance

450 Fifth Street, N.W.

Washington, D.C. 20549

Attn: Jim B. Rosenberg, Senior Assistant Chief Accountant

    Re:

    Hythiam, Inc.

    Form 10-K for Fiscal Year Ended

    December 31, 2006 (“2006 Form 10-K”)

    Filed March 15, 2007

    Form 10-Q for the Period Ended

    March 31, 2007 (March 31, 2007 10-Q)

    Filed May 9, 2007

    File No. 001-31932

Ladies and Gentlemen:

Reference is made to the letter received by Hythiam, Inc. from Mr. Rosenberg,
Senior Assistant Chief Accountant of the Securities and Exchange Commission (the “Staff”), dated
August 8, 2007 (the “Comment Letter”) relating to the
Staff’s comments on our Form 10-Q for the
period ending March 31, 2007. Our responses to the Staff’s comments contained in the
Comment Letter are set forth below. For the convenience of the Staff, each of the Staff’s comments
has been duplicated below and is set forth in italics immediately prior to the corresponding
response.

Form 10-Q — Period Ending March 31, 2007

Part 1 — Financial Information, page 2

Item 1. — Financial Statements, page 3

Notes to Consolidated Financial Statements, page 6

Note 3-Acquisition of Woodcliff and Controlling Interest in CompCare, page 13

    1.

    Please tell us how your “corporate operations” qualifies as both a
Reporting Unit under FAS 142 paragraphs 30, 34 and 35 and an Operating
Segment under FAS 131 paragraphs 10 and 11 to allow it to be assigned
the Goodwill and Intangibles from the acquisition of Woodcliff
(CompCare).

    RESPONSE: In response to your letter, we reassessed our segment reporting practices for the
second quarter ended June 30, 2007 and determined that we will no longer use or refer to
“corporate operations” as an operating segment or reporting unit. Consequently, our footnote
and MD&A segment disclosures in Note 5 — Segment Information and Management’s Discussion and
Analysis (MD&A), ‘Results of Operations’ in our
June 30, 2007 Form 10-Q have been changed to
reflect the revised presentation.

    Initially, management determined that it would assess segment performance based on operating
income or loss, which excluded non-operating items like interest income and interest expense.
Additionally, CompCare’s results, which were included in the behavioral health managed care
segment, were being evaluated on a stand-alone reporting basis, excluding the effects of
purchase accounting. The goodwill and intangible assets acquired in the CompCare acquisition
and all remaining non-operating income and expenses, were retained in corporate operations. We
have revised our approach of evaluating segment performance to focus on income or loss before
taxes, including non-operating income and expenses. Also, intangible assets related to the
CompCare acquisition are now assigned to the behavioral health care services segment operations to
which they

    relate, and goodwill has been assigned to the healthcare services segment since
this is the segment that is expected to benefit from the synergies resulting from the
acquisition.

    2.

    With regard to the acquisition of Woodcliff, please provide in
disclosure-type format a discussion of how the estimated fair values
of the amortizable intangible assets were determined. Also explain why
the amount allocated to goodwill was so significant in relation to the
amounts allocated to intangible assets. Refer to paragraph 51B of FAS 141.

    RESPONSE: The allocation of the total acquisition cost is based primarily on a valuation of
identifiable intangible assets completed by an independent valuation
specialist, Actuarial Risk Management. We enhanced
our disclosure in Note 3 — ‘Acquisition of Woodcliff and Controlling Interest in CompCare’ in
our June 30, 2007 Form 10-Q to include such a statement and we also noted that the allocation of the
acquisition cost could change based on resolution of contingencies related to assumed
liabilities. We understand that references to the use of a specialist require the consent of
that person in 1933 Act filings and will include such consent in any subsequent 1933 Act
filing that incorporates by reference this Form 10-Q.

    We believe our association with CompCare creates synergies to facilitate the use of PROMETA
treatment programs by managed care treatment providers and to provide access to an
infrastructure for our planned disease management product offerings. CompCare’s infrastructure
is already in place to provide substance abuse/dependence disease management to accommodate
nationwide third party reimbursement that we expect will be driven by positive outcomes from
PROMETA pilots currently underway with managed care entities and various criminal justice
systems. These statements were included in Part 1, Item 1. Business on page 4 of our 2006 Form
10-K where we discussed the key strategies and benefits expected from our association with
CompCare. The first statement was repeated in Note 3 at the end of the second paragraph on
page 13 in our March 31, 2007 Form 10Q. The excess amount of purchase price allocated
to goodwill compared to the amounts allocated to identified intangible assets reflects the much greater
value that we placed on such synergies compared to the expected future value attributable to the managed
care contracts and other intangible assets acquired.  The lower amount of value attributed to
CompCare’s identified intangible assets was also partly driven by the existing accumulated
deficit in stockholders’ equity of CompCare at the time of the acquisition.

    We enhanced the disclosure in Note 2 — ‘Summary of Significant Accounting Policies’ under the
caption ‘Goodwill and Other Intangible Assets’ on page 11
in our June 30, 2007 Form 10-Q to
describe why our purchase price resulted in the recognition of goodwill in accordance with FAS
141. We will expand our disclosure in future filings to name the
valuation specialist and to explain why the amount allocated to
goodwill was so significant in relation to the amounts allocated to
the identified intangible assets.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations

Contractual Obligations and Commercial Commitments, page 28

    3.

    Please provide us in a disclosure-type format a revised contractual
obligations table that includes your Accrued Claims Payable and
Accrued Reinsurance Claims Payable as it would appear that these
liabilities represent future legal obligations of the Company and are
material. The purpose of Financial Reporting Release 67 is to obtain
enhanced disclosure concerning a registrant’s contractual payment
obligations and the exclusion of ordinary course items would be
inconsistent with the objective of the Item 303(a)(5) of Regulation
S-K.

    RESPONSE: In response to your letter, we included accrued claims payable and accrued
reinsurance claims payable in the contractual obligations table in
our June 30, 2007 Form 10-Q. We
did not include these items in the table for our March 31, 2007
Form 10-Q since there is typically
no minimum contractual commitment associated with such claims and because of the short-term
classification of these items on our balance sheet. Additionally, we noted that the practice
among companies in the managed care industry regarding the inclusion of these items in the
table is varied. The following revised table,

    along with the explanatory footnotes, was included in ‘Contractual Obligations and Commercial
Commitments’ on page 28 in our June 30, 2007 Form 10-Q:

    Less than

    More than

    Contractual Obligations

    Total

    1 year

    1 - 3 years

    3 - 5 years

    5 years

    Long-term debt obligations

    $
    15,712

    $
    1,246

    $
    14,466

    $
    —

    $
    —

    Claims payable (1)

    5,183

    5,183

    —

    —

    —

    Reinsurance claims payable (2)

    2,526

    2,526

    —

    —

    —

    Capital lease obligations

    633

    225

    318

    90

    —

    Operating lease obligations (3)

    4,866

    1,500

    2,636

    730

    —

    Contractual commitments for clinical studies

    3,907

    3,907

    —

    —

    —

    $
    32,827

    $
    14,587

    $
    17,420

    $
    820

    $
    —

    (1)

    These claim liabilities represent the best estimate of benefits to be paid under
capitated contracts and consist of reserves for claims and IBNR. Because of the nature of
such contracts, there is typically no minimum contractual commitment associated with
covered claims. Both the amounts and timing of such payments are estimates, and the actual
claims paid could differ from the estimated amounts presented.

    (2)

    This item represents a potential liability to providers relating to denied claims for
a terminated contract. Management believes no further unpaid claims remain, but has not
reduced the liability since the statutory time limits have not expired relating to such
claims (See Note 6 — Major Customer/Contracts).

    (3)

    Operating lease commitments for Hythiam and CompCare’s corporate office facilities
and two PROMETA Centers, including deferred rent liability.

Company Acknowledgement

     Pursuant to the Staff’s request, we hereby acknowledges that:

    •

    We are responsible for the adequacy and accuracy of the disclosure in the filings;

    •

    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

    •

    We 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.

If the Staff has any questions or comments regarding the foregoing or requires additional
information, please contact the undersigned at (310) 444-4320. Facsimile transmissions may also be
sent to the undersigned at (310) 444-5300.

    Very truly yours,

    /s/ Chuck Timpe

Chuck Timpe

    Chief Financial Officer