Per Se (PSTI) 10-Q 2002 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2002
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from           to

Commission file number 000-19480

Per-Se Technologies, Inc.

(Exact name of Registrant as specified in its charter)

Delaware	58-1651222
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2840 Mt. Wilkinson Parkway Atlanta, Georgia (Address of principal executive offices)	30339 (Zip code)

(770) 444-5300

Registrant’s telephone number, including area code:

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ  No o

     Indicate the number of shares of stock outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Title of Class	Shares Outstanding as May 7, 2002
Common Stock $0.01 Par Value	30,042,455 shares
Non-voting Common Stock $0.01 Par Value	0 Shares

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION
	Item 1. Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II: OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EX-10.1 NON-QUALIFIED DEFERRED COMPENSATION PLAN
EX-10.2 DEFERRED STOCK UNIT PLAN TRUST AGREEMENT

PER-SE TECHNOLOGIES, INC.

FORM 10-Q

For the Fiscal Quarter Ended March 31, 2002

		Page
PART I: FINANCIAL INFORMATION
Item 1:	Financial Statements
	Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001		2
	Consolidated Statements of Operations for the three months ended March 31, 2002 and 2001		3
	Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2001		4
	Notes to Consolidated Financial Statements		5
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
PART II: OTHER INFORMATION
Item 1:	Legal Proceedings		19
Item 6:	Exhibits and Reports on Form 8-K		19

1

PART I: FINANCIAL INFORMATION

Item 1.     Financial Statements

PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value data)

			March 31,			December 31,
			2002			2001
			(Unaudited)
Current Assets:
	Cash and cash equivalents		$	24,478		$	36,493
	Restricted cash			4,444			4,419
		Total cash		28,922			40,912
	Accounts receivable, billed (less allowances of $4,935 and $5,144, respectively)			50,231			45,719
	Accounts receivable, unbilled (less allowances of $948 and $1,345, respectively)			6,102			4,150
	Other			7,226			5,000
		Total current assets		92,481			95,781
Property and equipment, net				24,299			25,012
Other intangible assets				38,942			42,108
Goodwill				37,442			35,160
Other				4,469			4,830
			$	197,633		$	202,891
Current Liabilities:
	Accounts payable		$	5,054		$	6,085
	Accrued compensation			21,390			23,884
	Accrued expenses			19,537			21,705
				45,981			51,674
	Deferred revenue			18,916			19,800
		Total current liabilities		64,897			71,474
Long-term debt				175,004			175,091
Other obligations				6,247			6,456
		Total liabilities		246,148			253,021
Stockholders’ Deficit:
	Preferred stock, no par value, 20,000 authorized; none issued			—			—
	Common stock, voting, $0.01 par value, 200,000 authorized, 30,021 and 29,969 issued and outstanding as of March 31, 2002 and December 31, 2001, respectively			300			300
	Common stock, non-voting, $0.01 par value, 600 authorized; none issued			—			—
	Paid-in capital			775,337			774,983
	Warrants			1,495			1,495
	Accumulated deficit			(825,647	)		(826,908	)
		Total stockholders’ deficit		(48,515	)		(50,130	)
			$	197,633		$	202,891

See notes to consolidated financial statements.

2

PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

				Three Months Ended
				March 31,
				2002			2001
Revenue				$	85,436		$	80,296
Salaries and wages					49,727			50,004
Other operating expenses					23,780			24,256
Depreciation					2,969			3,249
Amortization					2,847			3,177
Interest expense, net					4,461			4,015
Process improvement project expenses					—			965
Non-recurring and other expenses					—			641
			Total expenses		83,784			86,307
Income (loss) before income taxes					1,652			(6,011	)
Income tax expense					252			176
Income (loss) from continuing operations					1,400			(6,187	)
Loss from discontinued operations, net of tax					(101	)		(31	)
			Net income (loss)	$	1,299		$	(6,218	)
Basic net income (loss)��per common share:
	Income (loss) from continuing operations			$	0.04		$	(0.21	)
	Loss from discontinued operations, net of tax				—			—
		Net income (loss)		$	0.04		$	(0.21	)
Weighted average shares used in computing basic earnings per share					29,990			29,902
Diluted net income (loss) per common share:
	Income (loss) from continuing operations			$	0.04		$	(0.21	)
	Loss from discontinued operations, net of tax				—			—
		Net income (loss)		$	0.04		$	(0.21	)
Weighted average shares used in computing diluted earnings per share					32,527			29,902

See notes to consolidated financial statements.

3

PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

				Three Months Ended
				March 31,
				2002			2001
Cash Flows From Operating Activities:
Net income (loss)				$	1,299		$	(6,218	)
Adjustments to reconcile net income (loss) to net cash used for operating activities:
	Depreciation and amortization				5,816			6,426
	Loss from discontinued operations				101			31
	Changes in assets and liabilities, excluding effects of acquisitions and divestitures:
		Restricted cash			(19	)		273
		Accounts receivable, billed			(4,037	)		1,492
		Accounts receivable, unbilled			(1,952	)		1,129
		Accounts payable			(1,031	)		(3,414	)
		Accrued compensation			(1,994	)		(2,562	)
		Accrued expenses			(2,985	)		(4,656	)
		Accrued litigation settlements			—			(1,602	)
		Deferred revenue			(451	)		1,699
		Other, net			(2,729	)		(1,215	)
			Net cash used for continuing operations		(7,982	)		(8,617	)
			Net cash used for discontinued operations		(101	)		—
			Net cash used for operating activities		(8,083	)		(8,617	)
Cash Flows From Investing Activities:
Purchases of property and equipment					(2,295	)		(1,021	)
Software development costs					(1,957	)		(1,377	)
Proceeds from sale of property and equipment					4			1,544
Acquisitions, net of cash acquired					(20	)		(226	)
Other					—			(31	)
			Net cash used for investing activities		(4,268	)		(1,111	)
Cash Flows From Financing Activities:
Proceeds from the exercise of stock options					353			—
Payments of debt					(17	)		—
Deferred financing costs					—			(227	)
			Net cash provided by (used for) by financing activities		336			(227	)
Cash and Cash Equivalents:
Net change					(12,015	)		(9,955	)
Balance at beginning of period					36,493			30,970
Balance at end of period				$	24,478		$	21,015

See notes to consolidated financial statements.

4

PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 — Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements of Per-Se Technologies, Inc. (the “Company”) are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. For further information, the reader of this Form 10-Q may wish to refer to the audited consolidated financial statements of the Company for the fiscal year ended December 31, 2001, included in the Company’s Annual Report on Form 10-K filed March 27, 2002, with the Securities and Exchange Commission.

     The unaudited condensed financial information has been prepared in accordance with the Company’s customary accounting policies and practices. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation of results for the interim period, have been included.

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates.

     Activity related to the Medaphis Services Corporation (“Hospital Services”) and Impact Innovations Group (“Impact”) businesses, which were sold in 1998 and 1999, respectively, has been presented as discontinued operations for all periods presented.

Note 2 — Earnings (Loss) Per Share

     Basic earnings per share (“EPS”) is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options. The following sets forth the computation of basic and diluted earnings (loss) per share for the periods ended March 31, 2002 and 2001 (in thousands, except per share data):

		Three Months Ended
		March 31,
		2002		2001
Net income (loss)		$	1,299	$	(6,218	)
Common shares outstanding:
	Weighted average shares used in computing basic earnings per share		29,990		29,902
	Effect of potentially dilutive stock options		2,537		—
	Weighted average shares used in computing diluted earnings per share		32,527		29,902
Earnings (loss) per common share:
	Basic	$	0.04	$	(0.21	)
	Diluted	$	0.04	$	(0.21	)

     Options to purchase 2.8 million shares of common stock outstanding during the three months ended March 31, 2002 were excluded from the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares, and therefore, the effect would have been antidilutive.

     Options to purchase 1.6 million shares of common stock outstanding during the three months ended March 31, 2001 were excluded from the computation of diluted earnings per share due to their antidilutive effect as a result of the Company’s loss from continuing operations for the period.

5

PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

Note 3 — Restricted Cash

     At March 31, 2002, restricted cash principally represented restrictions on the Company’s cash as security for the Company’s letters of credit.

Note 4 — New Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 142Goodwill and Other Intangible Assets(“SFAS No. 142”). SFAS No. 142 requires goodwill and indefinite lived intangible assets to be reviewed periodically for impairment and no longer amortized. The Company adopted SFAS No. 142 on January 1, 2002.

     In accordance with SFAS No. 142, the Company discontinued the amortization of goodwill and indefinite lived intangible assets effective January 1, 2002. For the three months ended March 31, 2002, the Company had a reduction in amortization expense of approximately $0.5 million related to the adoption of SFAS No. 142. For the three months ended March 31, 2001, a reconciliation has been provided of previously reported net loss and net loss per share amounts. These amounts exclude the amortization expense recognized related to goodwill and intangible assets that are no longer amortized.

		Three Months Ended
		March 31,
		2002		2001
		(in thousands, except
		per-share data)
Reported net income (loss)		$	1,299	$	(6,218	)
Add back: Goodwill amortization, net of tax			—		573
	Trademark amortization, net of tax		—		14
	Workforce amortization, net of tax		—		11
Adjusted net income (loss)		$	1,299	$	(5,620	)
Basic earnings (loss) per share:
Reported net income (loss)		$	0.04	$	(0.21	)
	Goodwill amortization, net of tax		—		0.02
	Trademark amortization, net of tax		—		—
	Workforce amortization, net of tax		—		—
Adjusted net income (loss)		$	0.04	$	(0.19	)
Diluted earnings (loss) per share:
Reported net income (loss)		$	0.04	$	(0.21	)
	Goodwill amortization, net of tax		—		0.02
	Trademark amortization, net of tax		—		—
	Workforce amortization, net of tax		—		—
Adjusted net income (loss)		$	0.04	$	(0.19	)

     In December 2001, the FASB’s Emerging Issues Task Force (“EITF”) issued EITF 01-14Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred(“EITF 01-14”). The Company adopted EITF 01-14 on January 1, 2002. EITF 01-14 requires companies that provide services as part of their central ongoing operations to characterize the reimbursement of out-of-pocket expenses related to those services as revenue. In prior year periods, reimbursed out-of-pocket expenses were recorded as a reduction to other operating expenses. In accordance with EITF 01-14, the Company

6

PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

reclassified $0.3 million of reimbursed out-of-pocket expenses in the Application Software division for the three months ended March 31, 2001, from other operating expenses to revenue.

     In August 2001, the FASB issued SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets(“SFAS No. 144”). SFAS No. 144 replaces SFAS No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of(“SFAS No. 121”). SFAS No. 144 requires that long-lived assets to be disposed of by sale, including those of discontinued operations, be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet been incurred. SFAS No. 144 also broadens the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. The Company adopted the standard on January 1, 2002. There has been no asset impairment as a result of adoption.

Note 5 — Acquisitions

     On April 27, 2001, the Company acquired all of the assets of Virtual Information Systems, Inc. (“VIS”) for consideration of $7.0 million in cash. The purchase agreement also provided for a purchase price adjustment of up to $1.5 million payable in cash should VIS meet certain financial targets over the twelve months following the date of acquisition. As of December 31, 2001, the Company had recorded the purchase price adjustment of $1.5 million. During the three months ended March 31, 2002, VIS met the financial targets in the purchase agreement. On May 10, 2002, the payment for the purchase price adjustment of $1.5 million was paid. VIS’s core product, Virtual Remittance Processing System, is an automated remittance processing solution, which ensures accurate and efficient processing of cash collections.

     Additionally, on April 27, 2001, the Company acquired all of the assets of Officemed.com LLC (“OfficeMed”) for consideration of $3.25 million in cash. OfficeMed offers a Web-based application service provider (“ASP”) solution, which gives healthcare and payer organizations the ability to perform secure, realtime benefits inquiries against patients’ insurance plans, ensuring eligibility at the point of care.

     Both the VIS and OfficeMed acquisitions were recorded using the purchase method of accounting and, accordingly, the purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair market value at the date of acquisition. Approximately $5.0 million of the combined purchase price was allocated to goodwill and other indefinite-lived assets that are not being amortized. Approximately $5.2 million of the combined purchase price was allocated to finite-lived assets with lives ranging from 5 to 10 years. The operating results of VIS and OfficeMed are included in the Company’s Consolidated Statements of Operations from the date of acquisition in the e-Health Solutions division.

Note 6 — Discontinued Operations and Divestitures

     In 1998, management initiated a plan to focus the Company’s financial and management resources on its three core healthcare segments in an effort to return the Company to profitability. Management defined these segments as: Physician Services, Application Software and e-Health Solutions. Management began to seek alternatives for the remaining non-core business segments: Hospital Services and Impact. On November 30, 1998, the Company completed the sale of Hospital Services. In 1999, the Company completed the sale of both divisions of Impact.

     During the three months ended March 31, 2002, and March 31, 2001, the Company incurred expenses, primarily legal costs, associated with these discontinued business segments. Pursuant to Accounting Principles Board Opinion No. 30,Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, the

7

PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

consolidated financial statements of the Company have been presented to reflect the activity associated with Hospital Services and Impact as discontinued operations for all periods presented.

Note 7 — Legal Matters

     The Company is subject to claims, litigation and official billing inquiries in the ordinary course of its business. Within the Company’s industry, federal and state civil and criminal laws govern medical billing and collection activities. These laws provide for various fines, penalties, damages, assessments and sanctions for violations, including possible exclusion from federal and state healthcare programs.

     In February 2002, the Company settled claims for alleged breach of contract arising out of a 1997 contract for emergency room billing services to be provided by the Physician Services division to a former client. The Company and its insurance carrier each paid the plaintiff $2.0 million in cash in exchange for a release of all claims asserted against the Company. The Company is seeking reimbursement of the $2.0 million from its insurance carrier.

     The Company believes that it has meritorious defenses to the claims and other issues asserted in pending legal matters. There can be no assurance that pending or future claims, government investigations, or other legal matters will not have an adverse effect on the Company. Since the Company is often unable to estimate a range of awards or losses, if any, in pending legal matters, amounts thereof have not been reflected in the financial statements unless estimable and probable.

Note 8 — Process Improvement Project

     The Company is currently implementing a process improvement project within the Physician Services division (the “Project”). The Project installs a formalized set of productivity and quality measures, workflow processes and a management operating system in the Company’s major processing centers. The Project focuses on productivity improvements that result in both improved client service for the division’s clients as well as improved profitability for the division. The costs associated with the Project during 2001 primarily consisted of professional fees paid to outside consultants retained exclusively for implementation of the Project.

     The Company incurred approximately $1.0 million of expense in the three months ended March 31, 2001, during the first phase of the Project, which involved implementation in twelve processing centers. The first phase of the Project was completed in the third quarter of 2001 with all external project costs for this phase incurred as of September 30, 2001. The Company began the second phase of the Project in the first quarter of 2002. The second phase will be implemented with internal resources, and therefore the Company will not incur any external project costs. As of March 31, 2002, the second phase had been implemented in three of the projected fifteen offices, with no external project costs.

Note 9 — Non-Recurring and Other Expenses

     During the first quarter of 2001, the Company recorded a severance expense of approximately $0.6 million associated with former executive management.

Note 10 — Long-Term Debt

     Under the Indenture governing the 9 1/2% $175 million of Senior Notes due 2005 (the “Notes”), the balance of net proceeds, as defined by the Indenture governing the Notes, from the sale of any assets having a fair value in excess of $1.0 million must be invested in the Company’s business within 360 days of receipt of proceeds related to the sale or they become excess proceeds. If the aggregate of excess proceeds is greater than $10.0 million, the Company is required to offer to repurchase the Notes at par with such excess proceeds. As

8

PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

of March 31, 2002, the Company did not have excess proceeds (as defined by the Indenture governing the Notes) in excess of $10.0 million related to the sale of non-core operations or other assets.

     The Company entered into a $50 million credit facility (the “Credit Facility”) on April 6, 2001. Availability under the Credit Facility is determined by a Borrowing Base calculated based on eligible billed accounts receivable of the Company’s Physician Services and e-Health Solutions divisions, as defined in the Credit Facility. The Company has the option of entering into LIBOR based loans or index rate loans, each as defined in the Credit Facility. LIBOR based loans bear interest at LIBOR plus amounts ranging from 1.85% to 2.65% based on the Company’s leverage ratio, as defined in the Credit Facility. Index rate loans bear interest at rates approximating Prime plus amounts ranging from 0.35% to 1.15% based on the Company’s leverage ratio, as defined in the Credit Facility. In addition, the Company pays a quarterly commitment fee on the unused portion of the Credit Facility of 0.375% per annum.

     The Credit Facility contains financial and other restrictive covenants, including, without limitation, those restricting the incurrence of additional indebtedness, creation of liens, payment of dividends, sales of assets, stock offerings, capital expenditures and prepayment of the Notes and those requiring maintenance of minimum EBITDA and minimum fixed charge coverage, each as defined in the Credit Facility. The initial term of the Credit Facility is 42 months expiring on October 6, 2004. The Company and the lender can mutually agree to extend this term by 18 months if certain conditions have been met. The Company intends to use the Credit Facility, as needed, for future investments in its operations including capital expenditures, acquisitions and other general corporate purposes. The Company did not have any borrowings outstanding under the Credit Facility at March 31, 2002.

Note 11 — Income Taxes

     As of March 31, 2002, the Company had a net deferred tax asset, which was fully offset by a valuation allowance. Realization of the net deferred tax asset is dependent upon the Company generating sufficient taxable income prior to the expiration of the federal net operating loss carryforwards. The Company will adjust this valuation reserve accordingly, if during future periods, management believes the Company will generate sufficient taxable income to realize the net deferred tax asset.

Note 12 — Segment Reporting

     The Company’s reportable segments are operating units that offer different services and products. Per-Se provides its services and products through its three operating divisions: Physician Services, Application Software and e-Health Solutions.

     Physician Services provides business management outsourcing services to the hospital-affiliated physician practice market, physicians in academic settings and other large physician practices. Services include clinical data collection, data input, medical coding, billing, contract management, cash collections and accounts receivable management. These services are designed to assist healthcare providers with the business management functions associated with the delivery of healthcare services, allowing physicians to focus on providing quality patient care. These services also assist physicians in improving cash flows and reducing administrative costs and burdens.

     The Application Software division provides enterprise-wide financial, clinical and administrative software, including patient financial management software, clinical information software and patient and staff scheduling systems, to acute care healthcare organizations. These applications enable healthcare organizations to simultaneously optimize the quality of care while improving profitability and the efficiency of their business operations.

     The e-Health Solutions division provides healthcare providers and payers with connectivity and business intelligence solutions that help reduce administrative costs and enhance revenue cycle management. Solutions

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PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

include electronic claims processing, referral submissions, eligibility verification and other electronic and paper transaction processing. In addition, e-Health Solutions offers physician practice management software as an ASP to physician practices and offers managed care solutions to payers in ASP, turnkey or outsourced formats.

     The Company evaluates each division’s performance based on segment operating margin. The e-Health Solutions division revenue includes intersegment revenue for services provided to the Physician Services division, which is shown in Eliminations to reconcile to total consolidated revenue. Certain prior year amounts have been reclassified to conform to current year presentation.

     Information concerning the Company’s reportable operating segments is as follows:

		Three Months Ended
		March 31,
		2002			2001
		(in thousands)
Revenue:
	Physician Services	$	56,505		$	55,141
	Application Software		16,008			15,186
	e-Health Solutions		15,785			12,682
	Eliminations		(2,862	)		(2,713	)
		$	85,436		$	80,296
Segment operating expenses(1):
	Physician Services	$	51,922		$	54,253
	Application Software		13,730			13,948
	e-Health Solutions		13,553			12,710
	Corporate		2,980			2,488
	Eliminations		(2,862	)		(2,713	)
		$	79,323		$	80,686
Segment operating margin(1):
	Physician Services	$	4,583		$	888
	Application Software		2,278			1,238
	e-Health Solutions		2,232			(28	)
	Corporate		(2,980	)		(2,488	)
		$	6,113		$	(390	)
Interest expense, net		$	(4,461	)	$	(4,015	)
Non-recurring and other expenses (including process improvement project expenses)
	Physician Services	$	—		$	(965	)
	Corporate		—			(641	)
		$	—		$	(1,606	)
Income (loss) before income taxes		$	1,652		$	(6,011	)

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PER-SE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

		Three Months Ended
		March 31,
		2002		2001
		(in thousands)
Depreciation and amortization:
	Physician Services	$	2,700	$	2,930
	Application Software		1,636		1,843
	e-Health Solutions		1,255		1,320
	Corporate		225		333
		$	5,816	$	6,426
Capital expenditures:
	Physician Services	$	1,074	$	451
	Application Software		177		165
	e-Health Solutions		845		404
	Corporate		199		1
		$	2,295	$	1,021

		As of
		March 31,		December 31,
		2002		2001
Identifiable Assets:
	Physician Services	$	59,488	$	55,812
	Application Software		35,167		33,172
	e-Health Solutions		66,907		65,713
	Corporate		36,071		48,194
		$	197,633	$	202,891

(1)  Excludes process improvement project, non-recurring and other expenses and net interest expense.

11

Item  2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

     Per-Se Technologies, Inc. (“Per-Se” or the “Company”), a corporation organized in 1985 under the laws of the State of Delaware, is a provider of integrated business management outsourcing services, application software, and Internet-enabled connectivity for the healthcare industry. Per-Se delivers its services and products through its three operating divisions: Physician Services, Application Software and e-Health Solutions.

     Physician Services provides business management outsourcing services to the hospital-affiliated physician practice market, physicians in academic settings and other large physician practices. Services focus on the management of revenue cycle and include clinical data collection, data input, medical coding, billing, contract management, cash collections and accounts receivable management. These services are designed to assist healthcare providers with the business management functions associated with the delivery of healthcare services, allowing physicians to focus on providing quality patient care. These services also assist physicians in improving cash flows and reducing administrative costs and burdens.

     The Application Software division provides enterprise-wide financial, clinical and administrative software, including patient financial management software, clinical information software and patient and staff scheduling systems, to acute care healthcare organizations. These applications enable healthcare organizations to simultaneously optimize the quality of care while improving profitability and the efficiency of their business operations.

     The e-Health Solutions division provides healthcare providers and payers with connectivity and business intelligence solutions that help reduce administrative costs and enhance revenue cycle management. Solutions include electronic claims processing, referral submissions, eligibility verification and other electronic and paper transaction processing. In addition, e-Health Solutions offers physician practice management software as an application service provider (“ASP”) to physician practices and offers managed care solutions to payers in ASP, turnkey or outsourced formats.

     Per-Se markets its products and services to constituents of the healthcare industry, including hospital-affiliated physician practices, integrated healthcare delivery networks (“IDNs”), hospitals and office-based physicians.

Results of Operations

Three months ended March 31, 2002 as compared to three months ended March 31, 2001

     Revenue. Revenue classified by the Company’s reportable segments (“divisions”) is as follows:

	Three Months Ended
	March 31,
	2002			2001
	(in thousands)
Physician Services	$	56,505		$	55,141
Application Software		16,008			15,186
e-Health Solutions		15,785			12,682
Eliminations		(2,862	)		(2,713	)
	$	85,436		$	80,296

     Revenue for the Physician Services division increased 2.5% in the three months ended March 31, 2002, as compared to the same period in 2001, even though there was one less business day in the three months ended March 31, 2002, as compared to the three months ended March 31, 2001. Revenue per business day increased by approximately 4%. The Company continued to experience high client retention in the three months ended March 31, 2002, consistent with full-year 2001 levels. Net backlog at March 31, 2002 was approximately $2 million, compared to approximately $3 million at December 31, 2001. Net backlog represents the

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annualized revenue related to new contracts signed with the business still to be implemented, net of the annualized revenue related to client discontinuance notifications received with the business still to ramp down.

     Revenue for the Application Software division increased approximately 5% for the three months ended March 31, 2002, as compared to the same period in 2001. Revenue in the division is recognized using the percentage-of-completion method of accounting, and the increase over the prior-year period was primarily the result of large implementation projects that were sold in the first quarter of 2001. The division ended March 31, 2002 with a backlog of approximately $39 million as compared to approximately $43 million at December 31, 2001.

     Revenue for the e-Health Solutions division increased $3.1 million or 24% for the three months ended March 31, 2002, as compared to the same period in 2001. Excluding the impact of the April 2001 acquisitions of Virtual Information Systems, Inc. (“VIS”) and Officemed.com LLC (“OfficeMed”), the year-over-year increase in revenue would have been 18%. The increase in the base business is due to demand for the division’s hospital and physician transaction processing services in the marketplace. The division ended the first quarter of 2002 with a backlog of approximately $7 million, which was the same level as of December 31, 2001.

     In December 2001, the Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force (“EITF”) issued EITF 01-14Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred(“EITF 01-14”). The Company adopted EITF 01-14 on January 1, 2002. EITF 01-14 requires companies that provide services as part of their central ongoing operations to characterize the reimbursement of out-of-pocket expenses related to those services as revenue. In prior year periods, reimbursed out-of-pocket expenses were recorded as a reduction to other operating expenses. In accordance with EITF 01-14, the Company reclassified $0.3 million of reimbursed out-of-pocket expenses in the Application Software division for the three months ended March 31, 2001 from other operating expenses to revenue.

     Segment Operating Margin.Segment operating margin is net income/(loss) excluding net interest expense, income taxes and discontinued operations, net of taxes, for all periods presented. For the three months ended March 31, 2001, segment operating margin also excluded the process improvement project expenses and non-recurring and other expenses. Segment operating margin, classified by the Company’s divisions, is as follows:

	Three Months Ended
	March 31,
	2002			2001
	(in thousands)
Physician Services	$	4,583		$	888
Application Software		2,278			1,238
e-Health Solutions		2,232			(28	)
Corporate		(2,980	)		(2,488	)
	$	6,113		$	(390	)

     Physician Services’ segment operating margin increased $3.7 million in the three months ended March 31, 2002, compared to the same period in 2001. The increase is due to efficiencies and cost savings realized from the productivity initiatives implemented during 2001, as well as revenue gains in the division.

     Application Software’s segment operating margin increased $1.0 million or 84% in the three months ended March 31, 2002, compared to the same period in 2001. The increase is attributable to the revenue increase previously discussed, as well as a reduction in operating expenses that resulted from management’s continued focus on productivity improvements in the implementation process and on cost containment.

     e-Health Solutions’ segment operating margin increased $2.3 million in the three months ended March 31, 2002, compared to the same period in 2001. This increase is the result of a 33% increase in transaction volume, the impact of the VIS and OfficeMed acquisitions and the decrease in goodwill amortization expense related to the Company’s adoption of the FASB Statement of Financial Accounting

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Standards No. 142Goodwill and Other Intangible Assetson January 1, 2002 (for more information refer to “Note 4 — New Accounting Pronouncements” in the Company’s Notes to Consolidated Financial Statements).

     The Company’s corporate overhead expenses increased in the three months ended March 31, 2002, compared to the same period in 2001; however, the corporate overhead expense levels are consistent with annualized 2001 expenses.

     Interest.Net interest expense was $4.5 million for the three months ended March 31, 2002, as compared to $4.0 million for the same period in 2001. The 11% increase is attributable to a reduction in interest income due to a decrease in investment rates available.

     Process Improvement Project.The Company is currently implementing a process improvement project within the Physician Services division (the “Project”). The Project installs a formalized set of productivity and quality measures, workflow processes and a management operating system in the Company’s major processing centers. The Project focuses on productivity improvements that result in both improved client service for the division’s clients as well as improved profitability for the division. The costs associated with the Project during 2001 primarily consisted of professional fees paid to outside consultants retained exclusively for implementation of the Project.

     The Company incurred approximately $1.0 million of expense in the three months ended March 31, 2001 during the first phase of the Project, which involved implementation in twelve processing centers. The first phase of the Project was completed in the third quarter of 2001 with all external project costs for this phase incurred as of September 30, 2001. The Company began the second phase of the Project in the first quarter of 2002. The second phase will be implemented with internal resources, and therefore the Company will not incur any external project costs. As of March 31, 2002, the second phase had been implemented in three of the projected fifteen offices, with no external project costs.

     Non-recurring and Other Expenses.During the first quarter of 2001, the Company recorded severance expense of approximately $0.6 million associated with former executive management.

     Income Taxes.Income tax expense, which was primarily related to state income taxes, was $0.3 million for the three months ended March 31, 2002, as compared to income tax expense of $0.2 million for the same period in 2001. As of March 31, 2002, the Company had a net deferred tax asset, which was fully offset by a valuation allowance. Realization of the net deferred tax asset is dependent upon the Company generating sufficient taxable income prior to the expiration of the federal net operating loss carryforwards. The Company will adjust this valuation reserve accordingly if, during future periods, management believes the Company will generate sufficient taxable income to realize the net deferred tax asset.

Liquidity and Capital Resources

     As of March 31, 2002, the Company had working capital of $27.6 million compared to $24.3 million at December 31, 2001. The increase in working capital is primarily related to the increase in accounts receivable. Restricted cash totaled $4.4 million as of March 31, 2002, and as of December 31, 2001. Restricted cash principally represents restrictions on the Company’s cash as security for the Company’s letters of credit. Cash and cash equivalents totaled $24.5 million at March 31, 2002, a decrease of $12.0 million compared to December 31, 2001.

     Cash used for continuing operations was $8.0 million in the three months ended March 31, 2002, compared to cash used for continuing operations in the three months ended March 31, 2001, of $8.6 million. This improvement in cash flow was driven by improvements in operations, net of depreciation and amortization, that resulted in net income of $1.3 million in the three months ended March 31, 2002, versus a net loss of $6.2 million in the same period in 2001. The improvement in cash flow from operations was partially offset by the changes in current assets and current liabilities.

     The Company used $4.3 million in cash for investing activities during the three months ended March 31, 2002, compared to $1.1 million during the same period in 2001. The increase was primarily driven by

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normalized capital spending in the three months ended March 31, 2002, as compared to reduced levels in the same period in 2001.

     Cash provided by financing activities was $0.3 million in the three months ended March 31, 2002, compared to cash used for financing activities of $0.2 million in the same period in 2001. These amounts were primarily attributable to proceeds from the exercise of stock options in the three months ended March 31, 2002, compared to deferred financing costs incurred in the same period in 2001.

     For more information about the Company’s long-term debt, refer to “Note 10 — Long-Term Debt” in the Company’s Notes to Consolidated Financial Statements.

     Cash flow in the first and third quarters is negatively impacted by the semi-annual interest payments required under the $175 million 9 1/2% Senior Notes due 2005. The Company believes that its current cash flow will be sufficient to meet working capital needs and capital expenditures for the next twelve months.

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Forward-Looking Statements

     Certain statements included in the Notes to Consolidated Financial Statements, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this report including certain statements set forth under the captions “Note 7 — Legal Matters,” “Note 8 — Process Improvement Project,” “Note 10 — Long-Term Debt,” “Results of Operations” and “Liquidity and Capital Resources,” are “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include the Company’s expectations with respect to meritorious defenses to the claims and other issues asserted in pending legal matters, the effect of industry and regulatory changes on the Company’s customer base, the impact of revenue backlog on future revenue, the impact of operational improvement or cost reduction initiatives, operating margins, overall profitability and the availability of capital. Although the Company believes that the statements it has made are based on reasonable assumptions, they are based on current information and beliefs and, accordingly, the Company can give no assurance that its expectations will be achieved. In addition, these statements are subject to factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These factors include, but are not limited to, factors identified below under the caption “Factors That May Affect Future Results of Operations, Financial Condition or Business.” The Company disclaims any responsibility to update any forward-looking statements.

Factors That May Affect Future Results of Operations, Financial Condition or Business

Competition with Business Management Outsourcing Services Companies and In-house Providers

     The business management outsourcing business, especially surrounding the areas of billings and collections, is highly competitive. The Company competes with regional physician reimbursement organizations, national information and data processing organizations, and physician groups that provide their own business management services. Successful competition within this industry is dependent on numerous industry and market conditions.

     Potential industry and market changes that could adversely affect the Company’s ability to compete for business management outsourcing services include an increase in the number of competitors providing comparable services, and new alliances between healthcare providers and third-party payers in which healthcare providers are employed by such third-party payers.

Competition with Information Technology Companies

     The business of providing application software, information technology and consulting services is also highly competitive. The Company competes with national and regional companies in this regard. Some competitors have longer operating histories and greater financial, technical and marketing resources than that of the Company. The Company’s successful competition within this industry is dependent on numerous industry and market conditions.

Major Client Projects

     The Company’s Application Software division involves projects designed to reengineer customer operations through the strategic use of imaging, client/server and other advanced technologies. Failure to meet customers’ expectations with respect to a major project could have adverse consequences, including but not limited to the following: damage the Company’s reputation and standing in this marketplace; impair its ability to attract new client/server information technology business; inhibit its ability to collect for services performed on a project; and inhibit its ability to collect for services to be performed on a project.

Changes in the Healthcare Industry

     The markets for the Company’s software and e-commerce products and services as well as our business management outsourcing services are characterized by rapidly changing technology, evolving industry

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standards and frequent new product introductions. The Company’s ability to keep pace with changes in the healthcare industry may be dependent on a variety of factors, including its ability to enhance existing products and services; introduce new products and services quickly and cost effectively; achieve market acceptance for new products and services; and respond to emerging industry standards and other technological changes.

     Competitors may develop competitive products that could adversely affect the Company’s operating results. It is possible that the Company will be unsuccessful in refining, enhancing and developing our software and billing systems going forward. The costs associated with refining, enhancing and developing its software and billing systems may increase significantly in the future. Existing software and technology may become obsolete as a result of ongoing technological developments in the marketplace.

Consolidation in the Marketplace

     In general, consolidation initiatives in the healthcare marketplace may result in fewer potential customers for the Company’s services. Some of these types of initiatives include but are not limited to employer initiatives such as creating group purchasing cooperatives (GPOs); provider initiatives, such as risk-sharing among healthcare providers and managed care companies through capitated contracts; and integration among hospitals and physicians into comprehensive delivery systems.

     Continued consolidation of management and billing services through integrated delivery systems may result in a decrease in demand for the Company’s business management outsourcing services for particular physician practices.

Government Regulations

     The healthcare industry is highly regulated and is subject to changing political, economic and regulatory influences. Federal and state legislatures have periodically considered programs, such as the Balanced Budget Act, to reform or amend the U.S. healthcare system at both the federal and state level and to change healthcare financing and reimbursement systems. These programs may contain proposals to increase governmental involvement in healthcare, lower reimbursement rates or otherwise change the environment in which healthcare industry participants operate. Current or future government regulations or healthcare reform measures may affect our business. Healthcare industry participants may respond by reducing their investments or postponing investment decisions, including investments in the Company’s products and services.

     Medical billing and collection activities are governed by numerous federal and state civil and criminal laws. Federal and state regulators use these laws to investigate healthcare providers and companies that provide billing and collection services. In connection with these laws, the Company may be subjected to federal or state government investigations and possible penalties may be imposed upon the Company, false claims actions may have to be defended, private payers may file claims against the Company, and the Company may be excluded from Medicare, Medicaid and/or other government-funded healthcare programs.

     In the past, the Company has been the subject of federal investigations, and it may become the subject of false claims litigation or additional investigations relating to its billing and collection activities. Any such proceeding or investigation could have a material adverse effect on the Company’s business.

     The final Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) rules for the standards for electronic transactions and standards of privacy of individually identifiable health information were published in 2000. The implementation deadline for the standards for electronic transactions is October 2002 with the possibility of a one-year delay for healthcare providers, healthcare clearinghouses and large health plans upon filing an extension. The implementation deadline for the standards of privacy is April 2003. These rules set new or higher standards for the healthcare industry as to handling healthcare transactions and information and will require changes to the manner in which the industry handles such information. One of the most contentious areas of HIPAA reform is in the area of privacy and security.

     Currently in the area of privacy and security of health information, numerous federal and state civil and criminal laws govern the collection, use, storage and disclosure of health information. Penalties for noncompliance, both criminal and civil, may be brought by federal or state governments. Persons who believe

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their health information has been misused or disclosed improperly may bring claims and payers who believe instances of noncompliance with privacy and security standards have occurred may bring administrative sanctions or remedial actions against offending parties.

     Passage of HIPAA is part of a wider healthcare reform initiative. The Company expects that healthcare reform will continue to be widely debated. The Company also expects that the federal government as well as state governments will pass laws and issue regulations addressing healthcare issues and reimbursement of healthcare providers. The Company cannot predict whether new legislation and regulations will be enacted and, if enacted, whether such new developments will affect its business.

Debt

     The Company has a significant amount of long-term indebtedness and, as a result, obligations to make interest payments on that debt. If unable to make the required debt payments, the Company could be required to reduce or delay capital expenditures, sell certain assets, restructure or refinance its indebtedness, or seek additional equity capital. The Company’s ability to make payments on its debt obligations will depend on future operating performance, which will be affected by certain conditions that are beyond the Company’s control.

Litigation

     The Company is involved in litigation arising in the ordinary course of its business, which may expose it to loss contingencies. These matters include, but are not limited to, claims brought by former customers with respect to the operation of our business. The Company has also received written demands from customers and former customers that have not yet resulted in legal action. Many of the Company’s software products provide data for use by healthcare providers in providing care to patients. Although no claims have been brought against the Company to date regarding injuries related to the use of its products, such claims may be made in the future.

     The Company may not be able successfully to resolve such legal matters, or other legal matters that may arise in the future. In the event of an adverse outcome with respect to such legal matters or other legal matters in which the Company may become involved, its insurance coverage, product liability coverage or otherwise, may not fully cover any damages assessed against the Company. Although the Company maintains all insurance coverage in amounts that it believes is sufficient for its business, there can be no assurance that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. A successful claim brought against the Company, which is uninsured or under-insured, could materially harm its business, results of operations or financial condition.

Stock Price Volatility

     The trading price of the Company’s common stock may be volatile. The market for the Company’s common stock may experience significant price and volume fluctuations in response to a number of factors, including actual or anticipated quarterly variations in operating results, changes in expectations of future financial performance or changes in estimates of securities analysts, government regulatory action, healthcare reform measures, client relationship developments and other factors, many of which are beyond the Company’s control. Furthermore, the stock market in general and the market for software, healthcare and high technology companies in particular, has experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of the Company’s common stock, regardless of actual operating performance.

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PART II: OTHER INFORMATION

Item 1.      Legal Proceedings

     The information required by this Item is included in “Note 7 — Legal Matters” of Notes to Consolidated Financial Statements in Item 1 of Part I.

Item 6.      Exhibits and Reports on Form 8-K

     (A) Exhibits

Exhibit
Number			Document
	2.1	—	Stock Purchase Agreement dated as of October 15, 1998, between Registrant and NCO Group, Inc. (incorporated by reference to Exhibit 2.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1998).
	2.2	—	Stock Purchase Agreement dated as of April 20, 1999, among Complete Business Solutions, Inc., E-Business Solutions.com, Inc., Impact Innovations Holdings, Inc. and Registrant (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on May 5, 1999).
	2.3	—	Stock Purchase Agreement dated as of November 4, 1999, among J3 Technology Services Corp., Impact Innovations Holdings, Inc., Impact Innovations Government Group, Inc. and Registrant (incorporated by reference to Exhibit 2.3 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1999).
	2.4	—	Stock Purchase Agreement dated as of December 8, 2000, among Registrant, Health Data Services, Inc., Patient Account Management Services, Inc., and Marc Saltzberg, Raymond DelBrocco, Charles Moore, and Larry Shaw (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on December 20, 2000).
	2.5	—	Asset Purchase Agreement dated as of April 27, 2001, among Registrant, Health Data Services, Inc., Virtual Information Systems, Inc., and Paul M. Helmick and William T. Adams (incorporated by reference to Exhibit 2.5 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2001).
	2.6	—	Asset Purchase Agreement dated as of April 27, 2001, among Registrant, Per-Se Transaction Services, Inc., officemed.com LLC, SoftLinc, Inc., and Daniel Mansfield (incorporated by reference to Exhibit 2.6 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2001).
	3.1	—	Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 1999 (the “1999 Form 10-K”)).
	3.2	—	Restated By-laws of Registrant (incorporated by reference to Exhibit 3.2 to the 1999 Form 10-K).
	4.1	—	Indenture dated as of February 20, 1998, among Registrant, as Issuer, the Subsidiary Guarantors named in the Indenture and State Street Bank and Trust Company, as Trustee (including form of note) (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on March 3, 1998).
	4.2	—	Warrant Agreement dated as of July 8, 1998, between Registrant and SunTrust Bank, Atlanta, as Warrant Agent (including form of warrant certificate) (incorporated by reference to Exhibit 4.2 to Registration Statement on Form 8-A filed on July 21, 1998).
	4.3	—	Settlement Agreement dated as of June 24, 1999, by and among Lori T. Caudill, William J. DeZonia, Carol T. Shumaker, Alyson T. Stinson, James F. Thacker, James F. Thacker Retained Annuity Trust, Paulanne H. Thacker Retained Annuity Trust and Borrower (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1999).
	4.4	—	Rights Agreement dated as of February 11, 1999, between Registrant and American Stock Transfer & Trust Company (including form of rights certificates) (incorporated by reference to Exhibit 4 to Current Report on Form 8-K filed on February 12, 1999).
	4.5	—	First Amendment to Rights Agreement dated as of February 11, 1999, between Registrant and American Stock Transfer & Trust Company, entered into as of May 4, 2000 (incorporated by reference to Exhibit 4.4 to Quarterly Report of Form 10-Q for the quarter ended March 31, 2000).

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Exhibit
Number			Document
	4.6	—	Second Amendment to Rights Agreement dated as of February 11, 1999, between Registrant and American Stock Transfer & Trust Company, entered into as of December 6, 2001, to be effective as of March 6, 2002 (incorporated by reference to Exhibit 4.12 to Annual Report on Form 10-K for the year ended December 31, 2001).
	10.1	—	The Per-Se Technologies, Inc. Non-Qualified Deferred Compensation Plan Trust Agreement dated as of February 12, 2002, between Registrant and Merrill Lynch Trust Company, FSB.
	10.2	—	The Per-Se Technologies, Inc. Deferred Stock Unit Plan Trust Agreement dated as of May 1, 2002, between Registrant and Merrill Lynch Trust Company, FSB.

     (B) Reports on Form 8-K

     The Company did not file any reports on Form 8-K during the quarter ended March 31, 2002.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PER-SE TECHNOLOGIES, INC.

(Registrant)

By:  /s/ CHRIS E. PERKINS

Chris E. Perkins

Executive Vice President and

Chief Financial Officer

Date: May 14, 2002

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INDEX TO EXHIBITS

Exhibit
Number			Document
	2.1	—	Stock Purchase Agreement dated as of October 15, 1998, between Registrant and NCO Group, Inc. (incorporated by reference to Exhibit 2.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1998).
	2.2	—	Stock Purchase Agreement dated as of April 20, 1999, among Complete Business Solutions, Inc., E-Business Solutions.com, Inc., Impact Innovations Holdings, Inc. and Registrant (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on May 5, 1999).
	2.3	—	Stock Purchase Agreement dated as of November 4, 1999, among J3 Technology Services Corp., Impact Innovations Holdings, Inc., Impact Innovations Government Group, Inc. and Registrant (incorporated by reference to Exhibit 2.3 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1999).
	2.4	—	Stock Purchase Agreement dated as of December 8, 2000, among Registrant, Health Data Services, Inc., Patient Account Management Services, Inc., and Marc Saltzberg, Raymond DelBrocco, Charles Moore, and Larry Shaw (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on December 20, 2000).
	2.5	—	Asset Purchase Agreement dated as of April 27, 2001, among Registrant, Health Data Services, Inc., Virtual Information Systems, Inc., and Paul M. Helmick and William T. Adams (incorporated by reference to Exhibit 2.5 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2001).
	2.6	—	Asset Purchase Agreement dated as of April 27, 2001, among Registrant, Per-Se Transaction Services, Inc., officemed.com LLC, SoftLinc, Inc., and Daniel Mansfield (incorporated by reference to Exhibit 2.6 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2001).
	3.1	—	Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 1999 (the “1999 Form 10-K”)).
	3.2	—	Restated By-laws of Registrant (incorporated by reference to Exhibit 3.2 to the 1999 Form 10-K).
	4.1	—	Indenture dated as of February 20, 1998, among Registrant, as Issuer, the Subsidiary Guarantors named in the Indenture and State Street Bank and Trust Company, as Trustee (including form of note) (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on March 3, 1998).
	4.2	—	Warrant Agreement dated as of July 8, 1998, between Registrant and SunTrust Bank, Atlanta, as Warrant Agent (including form of warrant certificate) (incorporated by reference to Exhibit 4.2 to Registration Statement on Form 8-A filed on July 21, 1998).
	4.3	—	Settlement Agreement dated as of June 24, 1999, by and among Lori T. Caudill, William J. DeZonia, Carol T. Shumaker, Alyson T. Stinson, James F. Thacker, James F. Thacker Retained Annuity Trust, Paulanne H. Thacker Retained Annuity Trust and Borrower (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1999).
	4.4	—	Rights Agreement dated as of February 11, 1999, between Registrant and American Stock Transfer & Trust Company (including form of rights certificates) (incorporated by reference to Exhibit 4 to Current Report on Form 8-K filed on February 12, 1999).
	4.5	—	First Amendment to Rights Agreement dated as of February 11, 1999, between Registrant and American Stock Transfer & Trust Company, entered into as of May 4, 2000 (incorporated by reference to Exhibit 4.4 to Quarterly Report of Form 10-Q for the quarter ended March 31, 2000).
	4.6	—	Second Amendment to Rights Agreement dated as of February 11, 1999, between Registrant and American Stock Transfer & Trust Company, entered into as of December 6, 2001, to be effective as of March 6, 2002 (incorporated by reference to Exhibit 4.12 to Annual Report on Form 10-K for the year ended December 31, 2001).
	10.1	—	The Per-Se Technologies, Inc. Non-Qualified Deferred Compensation Plan Trust Agreement dated as of February 12, 2002, between Registrant and Merrill Lynch Trust Company, FSB.
	10.2	—	The Per-Se Technologies, Inc. Deferred Stock Unit Plan Trust Agreement dated as of May 1, 2002, between Registrant and Merrill Lynch Trust Company, FSB.