Question-and-Answer Session
Operator
(Operator Instructions).
Our first question comes from Arthur Henderson from Jefferies & Company.
Arthur Henderson - Jefferies & Company
In your prepared remarks, you referenced some cost savings initiatives that you could employ or that you are putting into place that would offset the downside from some of the reimbursement changes. Could you talk a little bit more in detail as to what you’re doing on that front?
Howard Berger
We began looking, probably at least one quarter ago, at the various components in the expenses of the operation and there is initiatives involved right now which will allow us, as a result of enhancing the company size and leverage with its various vendors, to decrease expenses related to items such as service, medical supplies, office supplies and other facets of our variable expenses that we look at.
In addition to that, we’re looking at efficiencies in staffing models that will allow us either to increase our volumes at our centers or more efficiently operate our staffing throughout the organization, including corporate.
Arthur Henderson - Jefferies & Company
Your sense is you can offset it entirely?
Howard Berger
Yes.
Arthur Henderson - Jefferies & Company
Then on the charge took] for the quarter, how comfortable should we be that you kind of got enough allowances in place, enough reserves there now that we won’t see that kind of happen again. Mark, do you have any thoughts on that for us?
Mark Stolper
Sure. The valuation of accounts receivable in our contractuals is a monthly process that we go through, and this past quarter we consolidated the reimbursement operations underneath my Chief Accounting Officer so that the connection between the billing and collection operations, the accounts receivable valuation operations, the management of our outside collection houses is more aligned with accounting and finance and we think that we’re going to see some benefits from that with respect to our operational performance, but also the ability to analyze and manage the valuation of accounts receivable.
The receivable or the charge that we took this quarter relates to prior fiscal years meaning 2008, 2007 and prior and was across the board with respect to payer classes. We had a couple of buckets that we have been tracking very closely over the past six months with respect to some holds we had, credentialing holds that were aging, as well as issues with respect to denials in one of our regions up in Northern California that was being managed by an outside vendor. We and our auditors, Ernst & Young, felt that necessary to put an additional reserve on the collectability of these accounts.
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