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<SEC-DOCUMENT>0000893220-09-000620.txt : 20090515
<SEC-HEADER>0000893220-09-000620.hdr.sgml : 20090515
<ACCEPTANCE-DATETIME>20090320170250
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000893220-09-000620
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20090320

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			HEALTHCARE SERVICES GROUP INC
		CENTRAL INDEX KEY:			0000731012
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-TO DWELLINGS & OTHER BUILDINGS [7340]
		IRS NUMBER:				232018365
		STATE OF INCORPORATION:			PA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		2643 HUNTINGDON PIKE
		CITY:			HUNTINGDON VALLEY
		STATE:			PA
		ZIP:			19006
		BUSINESS PHONE:		2159381661

	MAIL ADDRESS:	
		STREET 1:		2643 HUNTINGDON PIKEE
		CITY:			HUNTINGDON VALLEY
		STATE:			PA
		ZIP:			19006
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Via EDGAR System
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">March&nbsp;20, 2009
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Ms Karen J. Garnett<BR>
Assistant Director<BR>
Securities and Exchange Commission<BR>
Division of Corporate Finance<BR>
100 F Street N.E.<BR>
Mail Stop 4561<BR>
Washington, D.C. 20549
</DIV>


<DIV align="center" style="margin-top: 12pt">
<TABLE width="95%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
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<TR valign="top">
    <TD nowrap align="left">RE:</TD>
    <TD>&nbsp;</TD>
    <TD>Healthcare Services Group, Inc.<BR>
Form&nbsp;10-K for Fiscal Year Ended December&nbsp;31, 2007<BR>
Filed February&nbsp;19, 2008<BR>
File No.&nbsp;0-12015<BR>
February&nbsp;24, 2009 Additional Comments</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dear Ms Garnett:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On behalf of Healthcare Services Group, Inc., a Pennsylvania corporation (the &#147;Company&#148;, &#147;our&#148;
or &#147;we&#148;), please find enclosed for filing with the Securities and Exchange Commission (the
&#147;Commission&#148;) the Company&#146;s responses to the comments received from the Commission&#146;s staff (the
&#147;Staff&#148;) of February&nbsp;24, 2009, regarding
the Company&#146;s Definitive Proxy Statement filed with the Commission on April&nbsp;7, 2008 (the &#147;Proxy
Statement&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For ease of reference, each comment has been repeated below in italics, with our responses set
forth below each comment. The numbering below corresponds to that used in the Staff&#146;s comment
letter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Definitive Proxy Statement filed April&nbsp;7, 2008</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Management Compensation, page 8</B></U>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>8.</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>We note your response to comment 8 in our letter dated December&nbsp;29, 2008. Please explain why
you concluded that Bryan McCartney, Kevin McCartney and Timothy McCartney are not executive
officers. For example, on page 18 under</I></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>&#147;Certain Relationships and Related Party Transactions,&#148; you disclose that Kevin McCartney
has the same title of &#147;Divisional Vice President&#148; as one of your named executive officers,
Joseph McCartney.</I></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Response</B></U><B>:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Staff is advised that the Company considers Mr.&nbsp;Joseph McCartney an executive officer, and
differentiates his status as such from all other Vice Presidents (to include Messrs.&nbsp;Bryan
McCartney and Kevin McCartney) because of his involvement in Company policy making decisions
resulting from his position as a director on our Board of Directors. As a director, Mr.&nbsp;Joseph
McCartney is involved in formulating overall corporate policy in addition to managing and
implementing corporate policy in the geographical area over which he is the Divisional Vice
President. The other Vice Presidents are not directly involved in the formulation and approval
process of corporate policies and procedures as Mr.&nbsp;Joseph McCartney is due to him being a
director. Generally, the scope of responsibilities and authorities of a Vice President are
specific to the operations within his respective geographical area, as well as his obligation to
follow corporate policies and procedures in managing such area. In the event a Vice President needs
to deviate from established corporate policy or procedure, he must review such with, and receive
authority for an exception from a corporate executive officer. Additionally, if the Vice President
encounters an issue which transcends his operational responsibility or authority, he will forward
it on to a corporate executive officer for his resolution. An example of such would be making a
determination whether to proceed with legal action against a client delinquent in fulfilling his
payment obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Elements of Compensation, page 9</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>2.</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>We note your response to comment 11 in our letter dated December&nbsp;29, 208. We do not agree
that your current disclosure about performance-based compensation sufficiently explains why
each named executive officer received the performance-based compensation that he did in 2007.
For example, it is not clear why you chose to base incentive compensation on a fixed
percentage of income from operations and how you determined that 2.3% was more appropriate
than the 3% you have historically paid. Furthermore, while you may not be able to quantify how
much any of the listed factors affected compensation decisions, we believe that you can
explain what specific aspects of a respective named executive officer&#146;s individual
responsibilities, performance and experience were considered</I></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>when making compensation determinations and how those elements were measured. Please expand
your discussion of compensation awards to explain specifically why each named executive
officer received the compensation awards that he did and tell us how you plan to comply.</I></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Response</B></U><B>:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Staff is advised that the Nominating, Compensation and Stock Option Committee (the
&#147;Committee&#148;) revised the fixed percentage that Messrs.&nbsp;Daniel McCartney and Cook received from 3%
of income from operations before income taxes to 2.3% of income from operations before income taxes
so that their compensation would more closely align with the compensation of the Company&#146;s other
executive and managerial employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When the percentage was originally set at 3%, the Company&#146;s income from operations before
income taxes was substantially below its current income from operations before income taxes. The
Committee believes the Company should provide a minimum base salary to Mr.&nbsp;Daniel McCartney and Mr.
Cook but believes that most of their total compensation should be tied directly to a financial indicator
of Company performance to ensure that their compensation aligns with the best interests of the
Company&#146;s shareholders. Because a significant portion of Mr.&nbsp;Daniel McCartney and Mr.&nbsp;Cook&#146;s
compensation is tied directly to the Company&#146;s performance, no specific aspects of their individual
responsibilities, performance and experience were considered when making compensation
determinations. As of July&nbsp;1, 2008, when Mr.&nbsp;Cook no longer served as Chief Operating Officer of
the Company, his compensation was revaluated to reflect a fixed salary amount to reflect the time
he spends on Company business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Staff is advised that, since Mr.&nbsp;Joseph McCartney&#146;s compensation is based on achieving
certain financial and non-financial measures attributable to the service locations (and operational
management groupings they roll up to) under his supervision in conjunction with the goals and
objectives of the business plans formulated for those groupings, Mr.&nbsp;Joseph McCartney&#146;s
compensation is also not specifically tied into his individual responsibilities, performance and
experience. As noted, his compensation above his base salary (which is related to the number of
service locations under his management) is earned as a result of the operational management
groupings within his
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">division of management achieving their respective financial business plans. The value attributed to
this component of Mr.&nbsp;Joseph McCartney&#146;s compensation above base salary (as it is with all
divisional vice presidents) represents the greater majority of such compensation. To a much lesser
extent, his compensation above base salary is earned based on a subjective evaluation of
performance in achieving non-financial goals and objectives, such as success in recruiting and
developing managerial personnel. The Staff is advised that disclosure will be added to the
Company&#146;s upcoming Proxy Statement to indicate that the base salary of Mr.&nbsp;Hudson was increased by
approximately $150,000 from 2007 to 2008 due to his performance as Chief Financial Officer as well
as his increased responsibilities as the result of serving as the Company&#146;s Chief Financial Officer
for the entire year. Additionally, we will incorporate the points of expansion regarding management
compensation discussed above in the upcoming Proxy Statement.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>3.</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>We note your statement that &#147;most&#148; of the salary paid to your named executive officers is
performance-based. Please clarify whether base salaries are determined by performance-based
measures and describe any such measures. Also, please disclose the percentage of total
compensation that is targeted for base salary as opposed to incentive payments and long-term
equity incentive awards.</I></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Response</B></U><B>:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Staff is advised that as indicated above that the Company has historically provided a
minimum base salary to Messrs.&nbsp;Daniel McCartney and Cook but believe most of their total compensation
should be tied directly to a financial indicator (income from operations before income taxes) that
reflected the Company&#146;s performance. Similarly in addition to a
minimum base salary, as with the compensation plans of all vice
presidents, all of Mr.&nbsp;Joseph McCartney&#146;s compensation is based on financial and non-financial
measures. The Staff is advised that the Committee does not specifically target the percentage of
total compensation that is targeted for base salary as opposed to incentive payments and long-term
equity incentive awards.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Grant of Plan-Based Awards, page 12</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><I>4.</I></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>We note your response to comment 11 in our letter dated December&nbsp;29, 2008. As we stated in
our comment, the amounts disclosed should reflect the possible amount payable to Mr.&nbsp;McCartney</I>
<B>(Joseph) </B><I>if the respective level of performance is achieved and you are not required to
disclose the specific performance goals, which you have noted are variable throughout the
year. Therefore, please disclose the target amount payable to Mr.&nbsp;McCartney.</I></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Response</B></U><B>:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Staff is advised that in the Company&#146;s upcoming proxy statement the references to
Threshold and Target in the Grants of Plan-Based Awards table will be deleted since there are no
threshold and target amounts with respect to Mr.&nbsp;Joseph McCartney&#146;s compensation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe this resolves your comments, and appreciate your consideration. If you have any
questions, please contact the undersigned at 215-639-4274 extension 119.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" align="left">Very truly yours,<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
</TR><TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Richard W. Hudson
&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Richard W. Hudson&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">cc:</TD>
    <TD>&nbsp;</TD>
    <TD>Mark Rakip<br>
Robert Telewicz<br>
Erin Martin</TD>
</TR>
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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