A majority of the Company's revenues consist of fees for services provided under contracts obligating clients to pay a fixed monthly charge for each covered employee based on anticipated case volume experience, a percentage of savings, a transaction or case fee, or on an hourly basis. In addition, each new client is typically charged a one-time set-up fee to cover the related set-up costs incurred by the Company. Such revenue is recognized as services are rendered under each contract.
The Company's expenses are comprised of its cost of services (consisting primarily of compensation of personnel, including nurses and physicians, telephone expenses, rent, costs related to the Company's computer operations, costs related to customer service, and costs related to development of new services), selling and marketing expenses (including sales commissions, advertising, and account management personnel), general and administration expenses (including bad debts and compensation of personnel in the corporate finance, human resources, and general administration departments) and depreciation and amortization (primarily capitalized leased equipment and software costs).
Revenues for care review and case management services increased 18%, or $3,863,000, from fiscal 1996 to fiscal 1997 (increasing from $21,935,000 to $25,798,000) and increased 1%, or $295,000, from fiscal 1995 to fiscal 1996 (increasing from $21,640,000 to $21,935,000). In fiscal 1996, growth in revenue came from disability management services, with an overall decrease in care review revenue in general. In fiscal 1996, there was a decrease in revenue in the fourth quarter, from approximately $1.5 million of growth for the first three quarters of fiscal 1996, down to $.3 million growth for the year principally because a significant client transitioned services to itself during the fourth quarter. The client continues to use HRM's QualityFIRST(R) software. In fiscal 1997, growth was mainly the result of adding a large customer.
Selling and Marketing: Selling and marketing expenses increased 9% from fiscal 1996 to fiscal 1997 (from $6,767,000 to $7,346,000), and increased 12% from fiscal 1995 to fiscal 1996 (from $6,064,000 to $6,767,000). Selling and marketing expenses as a percentage of revenue remained unchanged at 12% for fiscal 1997, fiscal 1996, and fiscal 1995. The increase in fiscal 1997 and fiscal 1996 was primarily due to changes in marketing, sales and account management personnel, sales commissions and travel expenses.
Interest income was $187,000, $158,000, and $128,000 for fiscal years 1997, 1996 and 1995, respectively, and increased in fiscal 1997 and fiscal 1996 because of additional available funds invested in short-term investments.
Forward looking statements in this report reflected as expectations, plans, anticipations, prospects or future estimates are subject to the risks and the uncertainties present in the Company's business and the competitive healthcare market place where clients and vendors commonly experience mergers or acquisitions, reconciliations, volume fluctuations, participant enrollment fluctuations, fixed price contracts, contract disputes, contract modifications, contract renewals and non-renewals, various business reasons for delaying contract closings, and the operational challenges of matching case volume with optimum staffing, having fully trained staff, having computer and telephonic supported operations and managing turnover of key employees and outsourced services to performance standards. While occurrences of these risks, and others detailed in this report and the Company's other SEC reports can not be predicted exactly, such occurrences can be expected to have an impact on the Company's anticipated level of revenue growth or profitability.