CORRESP: Correspondence
Published on December 8, 2010
5225
Katy Freeway, Suite 600
Houston,
Texas 77007
December
8, 2010
Jim B.
Rosenberg
Division
of Corporation Finance
United
States Securities and Exchange Commission
100 F.
Street NE
Washington,
D.C. 20549
Telephone
Number: (202) 551-3679
|
Re:
|
Spine
Pain Management, Inc.
|
Form
10-K for the Fiscal Year Ended December 31, 2009
Filed
March 31, 2010
Form
10-Q for the Quarterly Period Ended June 30, 2010
Filed
August 16, 2010
File
No. 000-27407
Dear Mr.
Rosenberg,
On behalf
of Spine Pain Management, Inc. (the “Company,” “we” and “us”), set forth below
are the Company’s responses to the comments of the Staff of the Securities and
Exchange Commission (the “Staff”) to the Company’s Form 10-K for fiscal year
ended December 31, 2009, filed March 31, 2010, and the Company’s Form 10-Q for
the quarterly period ended June 30, 2010, filed August 16, 2010. The
Staff’s original comments were contained in the letter to the Company dated
September 21, 2010. The Company responded on September 29,
2010. The responses below relate specifically to the Staff’s
follow-up letter to the Company dated November 24, 2010.
Form 10-K for Fiscal Year
Ended December 31, 2009
Item
7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Critical Accounting
Policies
Page 1 of
4
Revenue Recognition, page 20
1. In
response to the Staff’s comment 1, at the time we bill the patient, the
following conditions indicate that 1) persuasive evidence of an arrangement
exists between all the parties and 2) collectability is reasonably
assured:
|
·
|
The
patient has completed and signed medical and financial
paperwork. The paperwork includes an acknowledgement of the
patient’s responsibility of payment for the services
provided. Additionally, the patient is typically a plaintiff in
an accident lawsuit, and the paperwork includes an assignment of benefits
derived from any settlement or judgment of the patient’s
case.
|
|
·
|
The
patient's attorney has issued us a Letter of Protection that guarantees
payment for the medical services provided to the patient from proceeds of
any settlement or judgment in the accident case. This Letter of Protection
essentially precludes any case settlement without providing for payment of
the patient’s medical bill.
|
|
·
|
Typically,
an attorney has previously referred the patient to a doctor who performed
the initial treatment. Subsequently, the doctor will have
referred the patient to us. We only accept patients if the
initial referral is from a reputable plaintiff's attorney with adequate
experience in personal injury lawsuits. Before referring a
patient to a doctor, the attorney will have evaluated the patient’s
accident case, including the conditions that gave rise to the patient's
injuries and the extent and quality of general liability insurance held by
the defendant. The attorney will also have determined that a
settlement favorable to the patient/plaintiff is
probable. Accordingly, based on the attorney’s referral, we
have a reasonable expectation that the patient’s bill will be
paid.
|
2. In
response to the Staff’s comment 2, the 45% average discount applied to all cases
is an estimate developed by management based on the historical collection
experience of Northshore Orthopedics Assoc. (“NSO”), one of the independent
contractors that we engage to provide medical services. NSO, which is
owned by William Donovan, M.D., our Chief Executive Officer, has more than 20
years of experience in treating patients involved in spine injury
cases. Our average discount estimate is continually reviewed and will
be adjusted based on our operations.
The
discount factor we have applied is supported by our collection experience to
date. Through November 30, 2010, we have collected $382,736 on resolved cases
that arose in 2009, for which $771,803 was originally billed, representing a 50%
collection rate. Through November 30, 2010, we have collected $795,114 on all
resolved cases that have arose to date, for which $1,615,604 was originally
billed, representing a 49% collection rate. We anticipate our overall
collection rate will increase to approximately 55% upon resolution of the cases
underlying our remaining outstanding receivables. Cases are resolved
upon settlement or final judgment of the accident lawsuit.
Page 2 of
4
The
$32,006 of collections cited in the Staff's comment represents collections we
received on amounts billed from August 2009 (the month we opened our first
clinic) to December 2009. At December 31, 2009, all of our
receivables were between nine and 128 days old. As previously
disclosed in our filings, our collection is averaging over 220
days. Accordingly, as of December 31, 2009, we had only collected a
small percentage of amounts billed up to that date.
3. In
response to the Staff’s comment 3, gross revenue represents the amounts we
billed patients based on the CPT (Current Procedural Terminology) code for the
medical procedure performed. CPT codes are numbers assigned to every
task and service a medical practitioner may provide to a patient including
medical, surgical and diagnostic services. CPT codes are developed,
maintained and copyrighted by the American Medical Association. Since
medical practitioners use the same codes to mean the same things, they ensure
uniformity. We bill patients the normal billing amount, based on
national averages, for that particular CPT code.
We
believe presenting gross revenue with an offset for estimated discounts is the
most meaningful and transparent manner to present our operations. It
provides the reader with an understanding of the amount that we billed the
patient (based on CPT codes), which is the amount that we hope to ultimately
collect. If our statements of operations presented net revenue
without gross revenue, the reader would not have proper context to determine how
net revenues were determined and would have to take an added analytical step to
determine the amount of the estimated discount allowance. Presenting
gross revenue along with the estimated discount allowance also gives the reader
a better understanding of our business model by providing information for the
reader to understand improvements or deterioration in our case resolution
experience moving forward.
Please
note that in Exhibit 2 attached to our response letter dated September 29, 2010,
we used the terms “gross revenue” and “net revenue.” In our Form 10-Q
for the period ended September 30, 2010, we used the terms “revenue” and “net
revenue” in our statements of operations. “Gross revenue” and
“revenue” describe the same concept in both places.
In
responding to the Staff’s comments, the Company acknowledges that:
|
·
|
the
Company is responsible for the adequacy and accuracy of the disclosure in
the filing;
|
|
·
|
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
|
Page 3 of
4
|
·
|
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.
|
If you
should need clarification or any additional information in connection with your
inquiries, please contact me. Thank you for your help in this
matter.
|
Very
truly yours,
/s/
William F. Donovan, M.D.
William
F. Donovan, M.D.,
President
|
Page 4 of
4