SecProbe.io

<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
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                   [Curative Health Services, Inc. Letterhead]

September 30, 2005

VIA EDGAR

Ms. Christine Allen
Staff Accountant
Division of Corporate Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C.  20549

Re:     Curative Health Services, Inc.
        Form 10-K for the fiscal year ended December 31, 2004
        File No. 000-50371

Dear Ms. Allen:

     Curative Health Services, Inc. ("Curative" or the "Company") transmits
herewith for filing via EDGAR under the form type label CORRESP its response to
the comment contained in a letter from Jim Rosenberg, Senior Assistant Chief
Accountant dated August 22, 2005 (the "Comment Letter"). For ease of reference,
each lettered paragraph of the Staff's comment is repeated below directly above
the Company's response to that paragraph.

Form 10-K for fiscal year ended December 31, 2004 filed March 16, 2005

Critical Accounting Policies and Estimates, page 25

1.   Please provide to us the following information:

     Comment:

     a. For each period presented, quantify 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.

                                     - 1 -
<PAGE>

     Response:

     The Company's Specialty Infusion business unit's revenues and related
accounts receivable are recorded, net of any contractual allowances, when the
product is shipped to a patient or physician's office, or when the service is
provided. The Company records contractual allowances on a payor-by-payor basis
in accordance with its interpretation of contractual terms, applicable
regulations or payor requirements. Reimbursement rates may be subject to
adjustments by payors that could result in payments that differ from the
Company's estimates. Additionally, any health care regulation changes or
contract amendments may require the Company to review the estimation process.
Curative is reimbursed for the products and services it provides from
third-party payors, including managed care organizations and Medicare and
Medicaid programs, as well as private payors.

     Generally, the Company records any required contractual allowances at
the time it records revenue and applies amounts against those allowances when
cash is received. This process is completed at the transaction level and on a
transaction-by-transaction basis. The Company does not track its contractual
reserves by date of service nor does it track the amount of increased or
decreased reserve recorded when a transaction is closed out. Therefore, the
Company cannot provide an analysis of estimate changes by transaction or year.
On a consolidated basis, the Company had a contractual reserve balance of $1.0
million at the end of 2002, reduced reserves by $2.8 million and added reserves
of $3.0 million during 2003, a net increase of $0.2 million, for a balance of
contractual reserves at the end of 2003 of $1.2 million. In 2004, the Company
reduced reserves by $6.5 million and added reserves of $9.6 million, a net
increase of $3.1 million, for a balance of contractual reserves at the end of
2004 of $4.3 million. The increase in the Company's contractual allowance was
primarily attributed to the acquisition of Critical Care Systems, Inc. in April
of 2004. Additionally, included in the net change for 2004 is an increase of
$1.0 million recorded in the second quarter of 2004 related to a retroactive
reimbursement change the Company experienced. This was previously disclosed in
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
and Current Report on Form 8-K filed on August 4, 2004 because of the unique
nature of the adjustment.

     The Company's Wound Care Management business unit's revenues are
recognized after the management services are rendered and are billed monthly in
arrears, thus no contractual allowances are required for this portion of the
Company's business.

     Comment:

     b. In a comparative tabular format, please provide 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. Please 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, confirm that
fact for us and clarify how this affects your ability to estimate your allowance
for bad debts.

                                     - 2 -
<PAGE>

     Response:

     The following table breaks down the Company's gross accounts receivable
as of December 31, 2004 and 2003 into approximate percentages by payor group and
aging classification:

                                      As of December 31, 2004
                        ----------------------------------------------------
                              0 -       91 -      181 -
Payor Group                 90 Days   180 Days  365 Days  > 365 Days   Total
----------------------------------------------------------------------------
Commercial and other(1)       33%       8%         9%          8%       58%
Medicaid                      16%       6%         5%          4%       31%
Medicare                       7%        *         2%          2%       11%
Self-pay(2)                     *        *          *           *         *

   Total(3)                   56%      14%        16%         14%      100%

                                      As of December 31, 2003
                        ----------------------------------------------------
                              0 -       91 -      181 -
Payor Group                 90 Days   180 Days  365 Days  > 365 Days   Total
----------------------------------------------------------------------------
Commercial and other(1)       29%       8%         7%          5%       49%
Medicaid                      30%       9%         5%          2%       46%
Medicare                       1%       1%         2%           *        4%
Self-pay(2)                    1%        *          *           *        1%

   Total(3)                   61%      18%        14%          7%      100%

(1)  Excludes allowances for contractual adjustments of approximately $4.3
     million and $1.2 million as of December 31, 2004 and 2003, respectively.

(2)  Self-pay amounts primarily consist of patient co-payments, deductibles and
     self-pay balances on accounts that have not been paid by the primary payor.
     The Company considers the patient's potential payment obligation in its
     evaluation of the allowance for doubtful accounts based on the current
     financial condition of the customer, age of the receivable and the
     relationship with the customer.

(3)  Amounts are calculated as percent of accounts receivable, and excludes
     allowances for doubtful accounts of $4.6 million and $4.0 million as of
     December 31, 2004 and 2003, respectively, which are not specifically
     tracked by payor group and aging classification.

 *   Less than 1%.

     Comment:

     c. If you have amounts that are pending approval from third party
payors (i.e. Medicaid Pending), please provide the balances of such amounts,
where they have been classified in your aging buckets, and what payor
classification they have been grouped with. If amounts are classified outside of
self-pay, tell us why this classification is appropriate, and tell us the
historical percentage of amounts that get reclassified into self-pay.

                                     - 3 -
<PAGE>

     Response:

     The Company verifies benefits with third-party payors and obtains
authorization prior to shipping products or rendering services and, as such, the
Company does not have accounts receivable pending approval from third-party
payors.

     Comment:

     d. Tell us why you do not believe that the above information should be
disclosed in your filing.

     Response:

     With respect to disclosure of the information requested in Comment a.
above, the Company did not previously disclose any changes in estimates of prior
period contractual allowances, with the exception of the $1.0 million adjustment
described above, because such amounts recorded in the Company's consolidated
financial statements as of December 31, 2004 and 2003 were an accumulation of
routine transactions and were not considered material items for separate
disclosure by management based on the following analysis (dollars in thousands):
<TABLE>
<CAPTION>
                                                                    December 31,
                                                              2004               2003
                                                          -----------         -----------
<S>                                                         <C>                 <C>
Specialty Infusion revenue, as reported                     $255,443            $185,843

Decrease in Specialty Infusion reserves                     $  6,522            $  2,847
Decrease as a percentage of Specialty Infusion revenues          2.6%                1.5%

Increase in Specialty Infusion reserves                     $  9,602            $  2,996
Increase as a percentage of Specialty Infusion revenues          3.8%                1.6%

Net change in Specialty Infusion reserves                   $  3,079            $    148
Net change as a percentage of Specialty Infusion revenues        1.2%                0.1%
</TABLE>

     With respect to disclosure of the information requested in Comment b.
above, the Company did not include a comparative table of the payor mix
concentrations and related aging of accounts receivable under "Critical
Accounting Policies and Estimates," as certain similar information was
disclosed under the heading "Specialty Infusion - Payors" on page 8 of the
Company's 2004 Form 10-K. However, the Company will disclose its payor mix
concentrations and related aging of gross accounts receivable in its Annual
Report on Form 10-K for fiscal year ended December 31, 2005.

     With respect to disclosure of the information requested in Comment c.
above, the Company did not have any amounts pending approval from third-party
payors as of December 31, 2004 and 2003. Therefore, such disclosure was not
considered necessary.

                                     - 4 -
                                     <PAGE>

     As requested in the Comment Letter, the Company hereby acknowledges the
following statements:

     o  The Company is responsible for the adequacy and accuracy of the
        disclosure in its filings;

     o  Staff comments, and changes made to the Company's disclosure in
        its filings in response to staff comments, do not foreclose the
        Commission from taking any action with respect to the Company's
        filings; and

     o  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.

     The Company believes this letter responds completely to the
Commission's comment in the Comment Letter. If you have any questions regarding
this letter, please feel free to contact me at (603) 888-1500.

Sincerely,

/s/  Thomas Axmacher
----------------------------
     Thomas Axmacher
     Chief Financial Officer

                                      -5-

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