NOTE E — REVENUE RECOGNITION AND CONTRACTUAL ADJUSTMENTS

The Company recognizes revenues when (a) the price is fixed or determinable, (b) persuasive evidence of an arrangement exists, (c) the service is performed and (d) collectability of the resulting receivable is reasonably assured.

The Company’s specialized diagnostic services are performed based on a written test requisition form or electronic equivalent and revenues are recognized once the diagnostic services have been performed, and the results have been delivered to the ordering physician. These diagnostic services are billed to various payers, including Medicare, commercial insurance companies, other directly billed healthcare institutions such as hospitals and clinics, and individuals. The Company reports revenues from contracted payers, including Medicare, certain insurance companies and certain healthcare institutions, based on the contractual rate, or in the case of Medicare, published fee schedules. The Company reports revenues from non-contracted payers, including certain insurance companies and individuals, based on the amount expected to be collected. The difference between the amount billed and the amount estimated to be collected from non-contracted payers is recorded as an allowance to arrive at the reported net revenues. The expected revenues from non-contracted payers are based on the historical collection experience of each payer or payer group, as appropriate. The Company records revenues from patient pay tests net of a large discount and as a result recognizes minimal revenue on those tests. The Company regularly reviews its historical collection experience for non-contracted payers and adjusts its expected revenues for current and subsequent periods accordingly.

The table below shows the adjustments made to gross service revenue to arrive at net revenues (in thousands), the amount reported on our statement of operations.


	Three Months Ended March 31,
	2014			2013
Gross Service Revenues	$	41,200		$	41,325
Total Contractual Adjustments and Discounts		(23,018	)		(25,668	)

Net Revenues	$	18,182		$	15,657

We were able to grow revenue by 16% on a year over year basis and this revenue growth was achieved despite a $700,000 reduction in revenue recorded to account for a conservative interpretation of the unresolved National Correct Coding Initiative (“NCCI”) edits relating to billing Medicare for FISH testing. The National Correct Coding Initiative “NCCI” FISH testing edits came about from new guidelines issued in the fourth quarter of 2013 which created a contradiction with respect to billing practices. These guidelines reduced the amount of units we could bill Medicare on certain FISH tests. The Company and The American Clinical Laboratory Associaion (“ACLA”) have asked Medicare to provide further guidance with respect to these edits and a favorable outcome on guidance from Medicare could result in us recognizing this $700,000 of revenue in a future period.