UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-34435

EMDEON INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)		20-5799664 (I.R.S. Employer Identification No.)

3055 Lebanon Pike, Suite 1000 Nashville, TN (Address of Principal Executive Offices)		37214 (Zip Code)

(615) 932-3000
(Registrant’s Telephone Number, Including Area Code)

     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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesþ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

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

Class		Outstanding as of August 5, 2011
Class A common stock, $0.00001 par value		91,208,582
Class B common stock, $0.00001 par value		24,689,142

 

 

Emdeon Inc.

Table of Contents

Part I. Financial Information
Item 1. Financial Statements			2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
Item 4. Controls and Procedures			42
Part II. Other Information
Item 1. Legal Proceedings			43
Item 1A. Risk Factors			43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			43
Item 3. Defaults Upon Senior Securities			43
Item 4. Removed and Reserved			43
Item 5. Other Information			43
Item 6. Exhibits			43
Signatures			44
Exhibit Index			45
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Emdeon Inc.
Condensed Consolidated Balance Sheets
(unaudited and amounts in thousands, except share and per share amounts)

		June 30,				December 31,
		2011				2010
ASSETS
Current assets:
Cash and cash equivalents		$	122,460			$	99,188
Accounts receivable, net of allowance for doubtful accounts of $5,523 and $5,394 at June 30, 2011 and December 31, 2010, respectively			184,992				174,191
Deferred income tax assets			7,811				7,913
Prepaid expenses and other current assets			25,410				25,020
Total current assets			340,673				306,312
Property and equipment, net			230,979				231,307
Goodwill			926,164				908,310
Intangible assets, net			1,007,194				1,035,886
Other assets, net			8,825				9,750
Total assets		$	2,513,835			$	2,491,565
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	6,379			$	4,732
Accrued expenses			105,429				112,245
Deferred revenues			12,547				12,130
Current portion of long-term debt			12,492				12,494
Total current liabilities			136,847				141,601
Long-term debt, excluding current portion			936,222				933,749
Deferred income tax liabilities			201,528				200,357
Tax receivable agreement obligations to related parties			137,964				138,533
Other long-term liabilities			15,165				22,037
Commitments and contingencies
Equity:
Preferred stock (par value, $0.00001), 25,000,000 shares authorized and 0 shares issued and outstanding			—				—
Class A common stock (par value, $0.00001), 400,000,000 shares authorized and 91,208,582 and 91,064,486 shares outstanding at June 30, 2011 and December 31, 2010, respectively			1				1
Class B common stock, exchangeable (par value, $0.00001), 52,000,000 shares authorized and 24,689,142 shares outstanding at June 30, 2011 and December 31, 2010			—				—
Additional paid-in capital			749,536				738,888
Contingent consideration			1,955				1,955
Accumulated other comprehensive loss			(1,280	)			(2,569	)
Retained earnings			63,444				53,250
Emdeon Inc. equity			813,656				791,525
Noncontrolling interest			272,453				263,763
Total equity			1,086,109				1,055,288
Total liabilities and equity		$	2,513,835			$	2,491,565

See accompanying notes to unaudited condensed consolidated financial statements.

Emdeon Inc.
Condensed Consolidated Statements of Operations
(unaudited and amounts in thousands, except share and per share amounts)

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2011				2010				2011				2010
Revenue		$	282,110			$	243,289			$	553,608			$	480,568
Costs and expenses:
Cost of operations (exclusive of depreciation and amortization below)			174,757				148,444				344,011				292,430
Development and engineering			9,358				8,695				18,260				17,248
Sales, marketing, general and administrative			31,498				26,243				63,145				52,362
Depreciation and amortization			38,934				29,278				76,956				57,053
Operating income			27,563				30,629				51,236				61,475
Interest income			(3	)			(5	)			(6	)			(8	)
Interest expense			12,653				15,919				25,282				31,584
Other			(2,235	)			(2,060	)			(3,638	)			(1,770	)
Income before income tax provision			17,148				16,775				29,598				31,669
Income tax provision			7,920				9,520				13,095				20,152
Net income			9,228				7,255				16,503				11,517
Net income attributable to noncontrolling interest			3,427				3,026				6,309				5,399
Net income attributable to Emdeon Inc.		$	5,801			$	4,229			$	10,194			$	6,118
Net income per share Class A common stock:
Basic		$	0.06			$	0.05			$	0.11			$	0.07
Diluted		$	0.06			$	0.05			$	0.11			$	0.07
Weighted average common shares outstanding:
Basic			91,057,293				90,061,975				91,022,516				89,879,916
Diluted			91,341,309				90,759,030				91,294,114				90,648,401

See accompanying notes to unaudited condensed consolidated financial statements.

Emdeon Inc.
Condensed Consolidated Statements of Equity
(unaudited and amounts in thousands, except share amounts)

		Class A								Class B								Additional												Other				Non-
		Common Stock								Common Stock								Paid-in				Contingent				Retained				Comprehensive				Controlling				Total
		Shares				Amount				Shares				Amount				Capital				Consideration				Earnings				Income (Loss)				Interest				Equity
Balance at January 1, 2010			90,423,941			$	1				24,752,955			$	—			$	730,941			$	—			$	33,704			$	(11,198	)		$	226,421			$	979,869
Equity-based compensation expense			—				—				—				—				6,260				—				—				—				1,587				7,847
Issuance of shares in connection with equity compensation plans, net of taxes			39,582				—				—				—				113				—				—				(1	)			(80	)			32
Exchange of units of EBS Master for Class A common stock, net of taxes			36,829				—				(36,829	)			—				425				—				—				(4	)			(339	)			82
Cancellation of Class B common stock, net of taxes			—				—				(26,984	)			—				127				—				—				(2	)			(197	)			(72	)
Issuance of Class A common stock in connection with acquisitions, net of taxes			361,558				—				—				—				4,279				2,667				—				(7	)			874				7,813
Tax receivable agreement with related parties, net of taxes			—				—				—				—				(89	)			—				—				—				—				(89	)
Contribution of data sublicense intangible to EBS Master			—				—				—				—				(861	)			—				—				—				1,358				497
Other			—				—				—				—				100				—				—				—				—				100
Comprehensive income:
Net income			—				—				—				—				—				—				6,118				—				5,399				11,517
Change in the fair value of interest rate swap, net of taxes			—				—				—				—				—				—				—				3,058				834				3,892
Foreign currency translation adjustment			—				—				—				—				—								—				41				10				51
Other comprehensive income amortization, net of taxes			—				—				—				—				—				—				—				1,997				544				2,541
Total comprehensive income																																							18,001
Balance at June 30, 2010			90,861,910			$	1				24,689,142			$	—			$	741,295			$	2,667			$	39,822			$	(6,116	)		$	236,411			$	1,014,080
Balance at January 1, 2011			91,064,486			$	1				24,689,142			$	—			$	738,888			$	1,955				53,250			$	(2,569	)		$	263,763			$	1,055,288
Equity-based compensation expense			—				—				—				—				9,116				—				—				—				2,367				11,483
Issuance of shares in connection with equity compensation plans, net of taxes			144,096				—				—				—				1,590				—				—				—				(335	)			1,255
Tax receivable agreements with related parties, net of taxes			—				—				—				—				(58	)			—				—				—				—				(58	)
Comprehensive income:
Net income			—				—				—				—				—				—				10,194				—				6,309				16,503
Foreign currency translation adjustment			—				—				—				—				—				—				—				(4	)			(1	)			(5	)
Other comprehensive income amortization, net of taxes			—				—				—				—				—				—				—				1,293				350				1,643
Total comprehensive income																																							18,141
Balance at June 30, 2011			91,208,582			$	1				24,689,142			$	—			$	749,536			$	1,955			$	63,444			$	(1,280	)		$	272,453			$	1,086,109

See accompanying notes to unaudited condensed consolidated financial statements.

Emdeon Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited and amounts in thousands)

		Six Months Ended June 30,
		2011				2010
Operating activities
Net income		$	16,503			$	11,517
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			76,956				57,053
Equity compensation expense			11,483				7,847
Deferred income tax expense			2,058				7,250
Amortization of debt discount and issuance costs			6,945				6,300
Amortization of discontinued cash flow hedge from other comprehensive loss			1,879				2,918
Change in contingent consideration			(3,638	)			(1,770	)
Change in fair value of interest rate swap (not subject to hedge accounting)			(5,163	)			—
Other			16				(50	)
Changes in operating assets and liabilities:
Accounts receivable			(8,819	)			814
Prepaid expenses and other			2,360				1,909
Accounts payable			3,925				(1,550	)
Accrued expenses and other liabilities			399				(456	)
Deferred revenues			417				(1,190	)
Tax receivable agreement obligations to related parties			(2,913	)			(1,480	)
Net cash provided by operating activities			102,408				89,112
Investing activities
Purchases of property and equipment			(34,088	)			(35,772	)
Payments for acquisitions, net of cash acquired			(39,758	)			(41,991	)
Other			—				(3,000	)
Net cash used in investing activities			(73,846	)			(80,763	)
Financing activities
Debt principal payments			(4,275	)			(3,775	)
Other			(1,015	)			(104	)
Net cash used in financing activities			(5,290	)			(3,879	)
Net increase in cash and cash equivalents			23,272				4,470
Cash and cash equivalents at beginning of period			99,188				211,999
Cash and cash equivalents at end of period		$	122,460			$	216,469

See accompanying notes to unaudited condensed consolidated financial statements.

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

1. Nature of Business and Organization

Nature of Business

     Emdeon Inc. (the “Company”), through its subsidiaries and affiliates, is a provider of revenue and payment cycle management and clinical exchange solutions, connecting payers, providers and patients of the U.S. healthcare system. The Company’s solutions integrate and automate key business and administrative functions for payers and providers throughout the patient encounter, including pre-care patient eligibility and benefits verification and enrollment, clinical exchange capabilities, claims management and adjudication, payment integrity, payment distribution, payment posting and denial management and patient billing and payment processing.

Organizational Structure

     Prior to November 2006, the group of companies that comprised Emdeon Business Services (“EBS”) was owned by HLTH Corporation, currently known as WebMD Health Corp. (“WebMD”). EBS Master LLC (“EBS Master”) was formed by WebMD to act as a holding company for EBS. EBS Master, through its 100% owned subsidiary, Emdeon Business Services LLC (“EBS LLC”), owns EBS.

     In September 2006, EBS Acquisition LLC (“EBS Acquisition”) was formed as a Delaware limited liability company by affiliates of General Atlantic LLC (“General Atlantic”). In November 2006, EBS Acquisition acquired a 52% interest in EBS Master from WebMD (the “2006 Transaction”).

     In February 2008, WebMD sold its 48% noncontrolling interest in EBS Master to affiliates of General Atlantic and Hellman & Friedman LLC (“H&F”) (the “2008 Transaction”). As a result, following the 2008 Transaction, EBS Master was owned 65.77% by affiliates of General Atlantic (including EBS Acquisition) and 34.23% by affiliates of H&F.

     In connection with the Company’s August 2009 initial public offering (“IPO”), EBS Acquisition was converted into a Delaware corporation, changed its name to Emdeon Inc. and completed a corporate restructuring.

2. Basis of Presentation and Summary of Significant New Accounting Policies

Principles of Consolidation

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. The results of operations for the interim period are not necessarily indicative of the results to be obtained for the full fiscal year. All material intercompany accounts and transactions have been eliminated in the unaudited condensed consolidated financial statements.

Reclassifications

     Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation.

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

Recent Accounting Pronouncements

     On December 31, 2010, the Company early adopted the clarification and additional disclosure provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2010-29, an update to FASB Accounting Standards Codification (“ASC”) Business Combination Topic. This update, which is applicable to public entities, clarifies that required pro forma financial information should be presented with an assumption that any current period acquisition occurred as of the beginning of the comparable prior annual reporting period only. Additionally, this update expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The adoption of this update had no material impact on the Company’s consolidated financial statements.

     On January 1, 2010, the Company adopted the clarification and additional disclosure provisions of FASB Accounting Standards Update No. 2010-06, an update to FASB ASC Fair Value Measurements and Disclosures Topic. On January 1, 2011, the Company adopted the remaining provisions of this update with respect to the separate disclosure of purchases, sales, issuances and settlements relating to Level 3 fair value measurements. This update clarifies that companies must provide fair value measurement disclosures for each class of assets and liabilities and expands the requirements to include disclosure of amounts and reasons for transfers among different levels within the fair value hierarchy and information within a reconciliation about purchases, sales, issuances and settlements on a gross basis. The adoption of this update had no material impact on the Company’s consolidated financial statements. The disclosures required by this update are presented within Note 8 to the unaudited condensed consolidated financial statements.

     On January 1, 2011, the Company adopted FASB Accounting Standards Update No. 2009-13, an update to FASB ASC Revenue Recognition Topic, which amends existing accounting standards for revenue recognition for multiple-element arrangements. To the extent a deliverable within a multiple-element arrangement is not accounted for pursuant to other accounting standards, the update establishes a selling price hierarchy that allows for the use of an estimated selling price to determine the allocation of arrangement consideration to a deliverable in a multiple-element arrangement where neither vendor-specific objective evidence nor third-party evidence is available for that deliverable. The adoption of this update had no material effect on the Company’s consolidated financial statements.

     In June 2011, the FASB issued Accounting Standards Update No. 2011-04, an update to FASB ASC Fair Value Measurements Topic, which clarifies the intent of the FASB regarding existing requirements, changes certain principles for measuring fair value and expands the disclosure requirements related to fair value measurements. Specifically, this update expands the restriction on the use of block discounts to all fair value measurements and provides conditions which must be satisfied prior to the application of other premiums and discounts (e.g., control premiums and discounts for lack of marketability) to fair value measurements. Additionally, this update requires the disclosure of quantitative information about significant unobservable inputs, the valuation processes in place for Level 3 measurements, the sensitivity of fair value measurements to changes in unobservable inputs, the hierarchy classification for assets and liabilities whose fair value is disclosed only in footnotes, any transfers between Level 1 and Level 2 of the fair value hierarchy and the reason nonfinancial assets measured at fair value are being used in a manner that differs from the highest and best use. This update becomes effective in periods beginning after December 15, 2011 and is required to be adopted prospectively. Early adoption is not permitted. The Company is currently evaluating the impact that the pending adoption will have on the Company’s fair value measurements and related disclosures in its consolidated financial statements.

     In June 2011, the FASB issued Accounting Standards Update No. 2011-05, an update to FASB ASC Comprehensive Income Topic, which amends the existing accounting standards related to the presentation of comprehensive income in a company’s financial statements. This update requires that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two statement approach, the first statement would present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income and the total of comprehensive income. Under either presentation alternative, reclassification adjustments and the effect of those adjustments on net income and other comprehensive

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

income must be presented in the respective statement or statements, as applicable. This update becomes effective in periods beginning after December 15, 2011 and is required to be adopted retrospectively. Early adoption is permitted. The Company is currently evaluating which of the two presentation alternatives it will adopt, as well as the timing of such adoption (i.e., whether to adopt prior to the required effective date).

3. Concentration of Credit Risk

     The Company’s revenue is primarily generated in the United States. Changes in economic conditions, government regulations or demographic trends, among other matters, in the United States could adversely affect the Company’s revenue and results of operations.

     The Company maintains its cash and cash equivalent balances in either insured depository accounts or money market mutual funds. The money market mutual funds are limited to investments in low-risk securities such as United States or government agency obligations, or repurchase agreements secured by such securities.

4. Business Combinations

     2011 Acquisition

     In May 2011, the Company acquired all of the equity interests of EquiClaim, LLC (“EquiClaim”), a technology-enabled provider of healthcare audit and recovery solutions.

     2010 Acquisitions

     In January 2010, the Company acquired all of the voting interest of FutureVision Investment Group, L.L.C. and substantially all of the assets of two related companies, FVTech, Inc. and FVTech Arizona, Inc. (collectively, “FVTech”). FVTech is a provider of outsourced services specializing in electronic data conversion and information management solutions.

     In March 2010, the Company acquired Healthcare Technology Management Services, Inc. (“HTMS”), a management consulting company focused primarily on the healthcare payer market.

     In June 2010, the Company acquired all of the equity interests of Chapin Revenue Cycle Management, LLC (“Chapin”), a technology-enabled provider of accounts receivable denial and recovery services.

     In October 2010, the Company acquired all of the equity interests of Chamberlin Edmonds Holdings Inc. and Chamberlin Edmonds & Associates, Inc. (collectively, “CEA”), a technology-enabled provider of government program eligibility and enrollment services.

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

     The following table summarizes certain information related to these acquisitions:

		EquiClaim				FVTech				HTMS				Chapin				CEA
Total Consideration Fair Value at Acquisition Date:
Cash paid at closing		$	39,758			$	20,005			$	7,841			$	16,096			$	209,520
Class A common stock fair value			—				—				2,263				2,554				—
Estimated contingent consideration			—				13,850				8,230				3,885				2,364
Other			(247	)			303				409				398				85
		$	39,511			$	34,158			$	18,743			$	22,933			$	211,969
Allocation of the Consideration Transferred:
Cash		$	—			$	372			$	1,029			$	62			$	533
Accounts receivable			1,983				1,736				3,270				1,322				14,412
Prepaid expenses and other current assets			74				35				—				46				4,424
Property and equipment			2,331				18,423				—				3,065				26,371
Other assets			—				29				—				12				91
Indentifiable intangible assets
Tradename (1-5 years)			160				160				190				50				3,570
Noncompetition agreements (5 years)			100				—				3,150				3,350				1,560
Customer relationships (9-16 years)			13,680				560				—				4,640				77,710
Backlog (1 year)			3,670				—				1,630				—				16,820
Goodwill			18,418				14,038				12,414				10,895				167,382
Accounts payable			(98	)			(338	)			(1,786	)			(146	)			(4,198	)
Accrued expenses			(807	)			(550	)			(1,050	)			(363	)			(13,744	)
Current maturities of long-term debt			—				—				(104	)			—				(2,850	)
Long-term debt			—				—				—				—				(32,300	)
Deferred income tax liabilities			—				—				—				—				(46,980	)
Other long-term liabilities			—				(307	)			—				—				(832	)
Total consideration transferred		$	39,511			$	34,158			$	18,743			$	22,933			$	211,969

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

		EquiClaim				FVTech				HTMS				Chapin				CEA
Other Information:
Total consideration Class A common stock (in shares)			—				—				152,532				209,026				—
Gross contractual accounts receivable		$	2,094			$	1,774			$	3,286			$	1,720			$	15,873
Amount not expected to be collected		$	111			$	38			$	16			$	398			$	1,461
Goodwill expected to be deductible for tax purposes		$	39,483			$	18,834			$	9,339			$	18,020			$	—
Contingent Consideration Information:
Contingent consideration range			N/A			$	0 - 40,000			$	0 - 14,000			Maximum of 627,080 shares of Class A common stock					N/A
Remaining performance period applicable			N/A				2010-2012				2011-2012				2011-2012				N/A
Type of measurement			N/A			Level 3				Level 3				Level 3				Level 3
Key assumptions at the acquisition date:
Discount rate			N/A				11.60	%			20.50	%			N/A				12.60	%
Expected performance			N/A			$	1,500 - 27,000			90% probability				20% to 70%probability					N/A
Class A common stock price			N/A				N/A				N/A			$	13.28				N/A
Marketability discount			N/A				N/A				N/A				8	%			N/A
Increase (decrease) to net income:
Six months ended June 30, 2011		$	—			$	960			$	2,750			$	—			$	(33	)
Six months ended June 30, 2010		$	—			$	640			$	1,130			$	—			$	—

     The valuation and allocation of the consideration transferred related to the EquiClaim and CEA acquisitions is subject to further change based on the outcome of a working capital settlement and the finalization and evaluation of preacquisition period tax returns, respectively.

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

5. Goodwill and Intangible Assets

     Goodwill activity during the six months ended June 30, 2011 was as follows:

		Payer				Provider				Pharmacy				Total
Balance at December 31, 2010		$	322,101			$	502,227			$	83,982			$	908,310
Acquisitions			18,418				—				—				18,418
Changes in preliminary purchase price allocation			—				(564	)			—				(564	)
Balance at June 30, 2011		$	340,519			$	501,663			$	83,982			$	926,164

Intangible assets subject to amortization as of June 30, 2011 consist of the following:

		Weighted				Gross
		Average				Carrying				Accumulated
		Remaining Life				Amount				Amortization				Net
Customer relationships			14.4			$	1,062,113			$	(206,059	)		$	856,054
Trade names			14.3				121,678				(23,922	)			97,756
Non-compete agreements			3.8				19,656				(12,875	)			6,781
Data sublicense agreement			6.6				49,600				(10,056	)			39,544
Backlog			0.3				22,120				(15,061	)			7,059
Total						$	1,275,167			$	(267,973	)		$	1,007,194

Amortization expense was $46,301 and $33,153 for the six months ended June 30, 2011 and 2010, respectively.

Aggregate future amortization expense for intangible assets is estimated to be:

2011 (remainder)		$	43,741
2012			74,462
2013			73,789
2014			73,516
2015			71,896
Thereafter			669,790
		$	1,007,194

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

6. Long-Term Debt

As of June 30, 2011 and December 31, 2010, long-term debt consisted of the following:

		June 30,				December 31,
		2011				2010
Credit Facilities
$50 million Revolving Line of Credit facility, expiring on November 16, 2012 and bearing interest payable quarterly at a variable base rate plus a spread rate		$	—			$	—
$755 million First Lien Term Loan facility, expiring on November 16, 2013, bearing interest payable quarterly at a variable base rate (LIBOR) plus a spread rate (total rate 2.19% and 2.27% ) and net of unamortized discount of $23,797 and $28,628 at June 30, 2011 and December 31, 2010, respectively (effective interest rate of 3.92% at June 30, 2011)			651,228				650,172
$170 million Second Lien Term Loan facility, expiring on May 16, 2014, bearing interest at a variable base rate (LIBOR) plus a spread rate (total rate 5.19% and 5.27%) and net of unamortized discount of $10,529 and $12,136 at June 30, 2011 and December 31,2010, respectively (effective interest rate of 7.86% at June 30, 2011)			159,471				157,864
$100 million Incremental Borrowing on First Lien Term Loan facility, expiring on November 16, 2013, bearing interest at a variable base rate (LIBOR), subject to a floor, plus a spread rate (total rate 4.5% for both periods) and net of unamortized discount of $1,558 and $1,866 at June 30, 2011 and December 31, 2010, respectively (effective interest rate of 5.44% at June 30, 2011)			97,692				97,884
Obligation under data sublicense agreement			40,323				40,323
Less current portion			(12,492	)			(12,494	)
Long-term debt		$	936,222			$	933,749

     In November 2006, EBS LLC entered into two credit agreements with several lenders that provided a $755,000 term loan (“First Lien Term Loan”), a $50,000 revolving line of credit (“Revolver”) and a $170,000 term loan (“Second Lien Term Loan”). In October 2010, EBS LLC borrowed an additional $100,000 under an incremental term loan facility (“Incremental First Lien Term Loan”) through an amendment to the First Lien Term Loan.

     In connection with these credit agreements, EBS LLC paid fees of approximately $19,900 to the lenders of which the unamortized portion is classified as a reduction of the carrying value of the credit agreements in each period. Additionally, in connection with the 2008 Transaction, 48% of the carrying value of these credit agreements was adjusted to fair value which resulted in a discount of $66,395, the unamortized portion of which has similarly been classified as a reduction of the carrying value of the credit agreements.

     The Revolver expires November 2012 and provides for revolving loans not to exceed $50,000, of which $12,000 may be used for letters of credit in support of payment obligations of the Company. As of June 30, 2011, the Company had no borrowings outstanding and $50,000 available for future borrowings under the Revolver. The Company pays a quarterly commitment fee on the unused portion of the Revolver that fluctuates, based upon certain leverage ratios, between 0.375% and 0.5% per annum.

     The First Lien Term Loan and Incremental First Lien Term Loan are each payable in quarterly principal installments of approximately $1,800 and $250, respectively, plus accrued interest, through September 2013, with a balloon payment of the remaining

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

principal amount outstanding due upon maturity in November 2013. These installment payments are subject to adjustment based upon optional and mandatory prepayment activity. Mandatory prepayments of principal related to excess cash flow, as defined, and other circumstances are also required.

     The Second Lien Term Loan is subordinate to the First Lien Term Loan and Incremental First Lien Term Loan, and matures in May 2014.

     The credit agreements require EBS LLC to maintain certain financial covenants, including a maximum total leverage ratio and minimum interest coverage ratio. The credit agreements also impose restrictions related to capital expenditures, investments, additional debt or liens, asset sales, transactions with affiliates and equity interests, among other items. Additionally, the credit agreements include restrictions on the payment of dividends or distributions (other than to fund income tax liabilities) to or advances or loans to parties that are not party to the credit agreements. In the case of dividends, the credit agreements generally limit payments to non-loan parties (including the Company) with such limitations increasing based on achievement of certain leverage ratios. Transactions with affiliates are limited to those which are approved by a majority of the noninterested members of the EBS LLC board of directors and whose terms are no less favorable than those available to an unrelated person. Substantially all of the Company’s net assets are subject to the restrictions of these credit agreements. EBS LLC believes it was in compliance with all debt covenants at June 30, 2011. This debt is secured by substantially all of the assets of EBS LLC.

Obligation Under Data Sublicense Agreement

     In October 2009 and April 2010, the Company acquired certain additional rights to specified uses of its data from WebMD in order to broaden the Company’s ability to pursue business intelligence and data analytics solutions for payers and providers. The Company previously licensed exclusive rights to this data to WebMD pursuant to an Amended and Restated Data License Agreement in connection with the 2008 Transaction. In connection with these data rights acquisitions, the Company recorded amortizable intangible assets with an estimated life of approximately eight years and corresponding obligations at inception of approximately $37,606 (net of the initial required payment of $5,653 at contract execution) and $6,341 for the October 2009 and April 2010 data acquisitions, respectively, based on the present value of the scheduled annual payments through 2018, which totaled $65,000 in the aggregate (of which $52,486 remains payable at June 30, 2011).

7. Interest Rate Swap

     Derivative financial instruments are used to manage the Company’s interest rate exposure. The Company does not enter into financial instruments for speculative purposes. Derivative financial instruments are accounted for in accordance with FASB ASC Derivatives and Hedging Topic and are measured at fair value and recorded on the balance sheet. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings (for example, in “interest expense” when the hedged transactions are interest cash flows associated with floating-rate debt). The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in interest expense in current earnings during the period of change.

     The following table summarizes the fair value of the Company’s derivative instrument at June 30, 2011 and December 31, 2010:

		Fair Values of Derivative Instruments
		Asset (Liability) Derivatives
						June 30,				December 31,
		Balance Sheet Location				2011				2010
Derivatives designated as hedging instruments:
Interest rate swap		Accrued expenses				$	(5,575	)		$	(10,738	)

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

Cash Flow Hedging Relationships

     In December 2006, the Company entered into an interest rate swap agreement, which matures in December 2011, to reduce the variability of interest payments associated with its total long-term debt. The notional amount of the swap was $239,210 and $240,720 as of June 30, 2011 and December 31, 2010, respectively. Changes in the cash flows of the interest rate swap are intended to offset the changes in cash flows attributable to fluctuations in the variable base rates underlying the Company’s long-term debt obligations.

     The 2008 Transaction represented a redesignation event. As the Company’s interest rate swap did not meet all the criteria for hedge accounting at that time, changes in the fair value subsequent to the 2008 Transaction but prior to its redesignation as a cash flow hedge on September 30, 2008 were recorded within interest expense during the period from February 8, 2008 to September 30, 2008. In October 2010, the Company removed the designation of its interest rate swap as a cash flow hedge such that subsequent changes in fair value are similarly recorded within interest expense.

     The amortization of the amounts reflected in other comprehensive income related to the discontinued cash flow hedges are and continue to be reflected within interest expense in the accompanying unaudited condensed consolidated statements of operations. Amortization of amounts included in other comprehensive income related to discontinued hedges is expected to total approximately $1,925 over the next twelve months.

     The effect of the derivative instrument on the accompanying unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010, respectively, is summarized in the following table:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
Derivatives in Cash Flow Hedging Relationships
Gain related to effective portion of derivative recognized in other comprehensive loss		$	—			$	3,264			$	—			$	4,466
Loss related to effective portion of derivative reclassified from accumulated other comprehensive loss to interest expense		$	(3,769	)		$	(5,632	)		$	(7,485	)		$	(11,253	)
Derivatives Not Designated as Hedging Instruments
Gain recognized in interest expense		$	2,608			$	—			$	5,163			$	—

8. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

     The Company’s assets and liabilities that are measured at fair value on a recurring basis consist of the Company’s derivative financial instrument and contingent consideration associated with business combinations. The table below summarizes these items as of June 30, 2011, aggregated by the level in the fair value hierarchy within which those measurements fall.

														Significant
						Quoted in				Significant Other				Unobservable
		Balance at				Markets				Observable Inputs				Inputs
Description		June 30, 2011				Identical (Level 1)				(Level 2)				(Level 3)
Interest rate swap		$	(5,575	)		$	—			$	(5,575	)		$	—
Contingent consideration obligations			(10,995	)			—				—				(10,995	)
Total		$	(16,570	)		$	—			$	(5,575	)		$	(10,995	)

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

     The valuation of the Company’s derivative financial instrument is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair value of the interest rate swap is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The variable cash receipts (or payments) are based on an expectation of future interest rates derived from observable market interest rate curves.

     The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements.

     Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs to evaluate the likelihood of default by itself and by its counterparties. As of June 30, 2011, the Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

     The valuation of the Company’s contingent consideration obligations is determined using a probability weighted discounted cash flow method. This analysis reflects the contractual terms of the purchase agreements and utilizes assumptions with regard to future cash flows, probabilities of achieving such future cash flows and a discount rate.

     The table below presents a reconciliation of the fair value of the liabilities that use significant unobservable inputs (Level 3).

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
Balance at beginning of period		$	(13,529	)		$	(24,260	)		$	(16,046	)		$	—
Issuances of contingent consideration			230				325				479				(23,645	)
Settlement of contingent consideration			69				—				934				—
Total changes included in other income			2,235				2,060				3,638				1,770
Balance at end of period		$	(10,995	)		$	(21,875	)		$	(10,995	)		$	(21,875	)

Assets and Liabilities Measured at Fair Value upon Initial Recognition

     The carrying amount and the estimated fair value of financial instruments held by the Company as of June 30, 2011 were:

		Carrying
		Amount				Fair Value
Cash and cash equivalents		$	122,460			$	122,460
Accounts receivable		$	184,992			$	184,992
Long-term debt (credit facilities)		$	908,391			$	942,013
Cost method investment		$	3,000			$	3,016

     The carrying amounts of cash equivalents and accounts receivable approximate fair value because of their short-term maturities. The fair value of long-term debt is based upon market trades by investors in partial interests of these instruments. The fair value of the cost method investment is estimated using a probability-weighted discounted cash flow model.

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

9. Legal Proceedings

     On or about August 5, 2011, plaintiff Harold Litwin filed a putative class action in Delaware Chancery Court against the Company, its directors, Blackstone Capital Partners VI L.P., H&F and GA seeking to preliminarily enjoin the proposed merger of the Company and an entity formed by Blackstone Capital Partners VI L.P to acquire the Company. Plaintiff alleged that the Company’s directors breached their fiduciary duties in connection with the proposed transaction, and the Company allegedly aided and abetted those breaches. No amount of damages is stated in the complaint. The Company believes the allegations are without merit.

     In addition, in the normal course of business, the Company is involved in various claims and legal proceedings. While the ultimate resolution of these matters has yet to be determined, the Company does not believe that their outcomes will have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

10. Capital Stock

Common Stock

     Under the Company’s amended and restated certificate of incorporation, the Company is authorized to issue 400,000,000 shares of Class A common stock and 52,000,000 shares of Class B common stock, each with a par value of $0.00001 per share. The Class A common stock and Class B common stock each provide holders with one vote on all matters submitted to a vote of stockholders; however, the holders of Class B common stock do not have any of the economic rights (including rights to dividends and distributions upon liquidation) provided to the holders of the Class A common stock. Shares of Class B common stock, together with corresponding EBS Master Units, may be exchanged with the Company for shares of Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. All shares of Class A common stock and Class B common stock generally vote together, as a single class, on all matters submitted to a vote of the Company’s stockholders.

Preferred Stock

     Under the Company’s amended and restated certificate of incorporation, the Company is authorized to issue 25,000,000 shares of preferred stock, with a par value of $0.00001 per share.

Noncontrolling Interests

     The Company has executed transactions that both increased and decreased its ownership interest in EBS Master. These changes are summarized in the following table:

		Six Months Ended
		June 30,
		2011				2010
Net income attributable to Emdeon Inc.		$	10,194			$	6,118
Transfers from the noncontrolling interest:
Increase in Emdeon Inc. paid-in capital for the issuance of EBS Master Units in connection with acquisitions			—				4,279
Increase in Emdeon Inc. paid-in capital for issuance of EBS Master Units in connection with equity compensation plans			1,590				113
Increase in Emdeon Inc. paid-in capital for exchange of EBS Master Units to Class A common stock of Emdeon Inc.			—				425
Increase in Emdeon Inc. paid-in capital for cancellation of EBS Master Units			—				127
Net transfers from noncontrolling interest			1,590				4,944
Change from net income attributable to Emdeon Inc. and transfers from noncontrolling interest		$	11,784			$	11,062

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

11. Equity-Based Compensation Plans

     During the six months ended June 30, 2011, the Company issued 333,515 restricted Class A common stock units and 1,486,800 options to purchase Class A common stock under the Company’s 2009 Equity Incentive Plan, with an aggregate grant date fair value of $15,017. These restricted Class A common stock units and options to purchase Class A common stock generally vest ratably over a four-year period.

     During the six months ended June 30, 2011 and 2010, the Company recognized equity-based compensation expense of $11,483 and $7,847, respectively.

12. Income Taxes

     Income taxes for the six months ended June 30, 2011 and 2010 amounted to an expense of $13,095 and $20,152, respectively. The Company’s effective tax rate was 44.2% for the six months ended June 30, 2011 compared with 63.6% during the same period in 2010. The Company’s effective tax rate is affected by deferred tax expense resulting from differences between the book and income tax basis of its investment in EBS Master, noncontrolling interest, changes in the Company’s valuation allowances and other factors. Changes in valuation allowances resulted in $1,413 and $5,762 of additional income tax expense for the six months ended June 30, 2011 and 2010, respectively.

     A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:

Unrecognized benefit January 1, 2011		$	1,368
Decrease in six months ended June 30, 2011			(6	)
Unrecognized benefit June 30, 2011		$	1,362

     The Company decreased its liability for uncertain tax positions during the six months ended June 30, 2011 following the lapse of the statute of limitations on an open year. The Company does not currently anticipate that the total amount of uncertain tax positions will significantly increase or decrease in the next twelve months.

     The Company recognizes interest income and expense (if any) related to income taxes as a component of income tax expense. Interest of $42 has been included in the tax provision for the six months ended June 30, 2011.

     The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company’s U.S. federal and state income tax returns for the tax years 2007 and beyond remain subject to examination by the Internal Revenue Service. With respect to state and local jurisdictions and countries outside of the United States, the Company and its subsidiaries are typically subject to examination for a number of years after the income tax returns have been filed. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for in the accompanying unaudited condensed consolidated financial statements for any adjustments that may be incurred due to state, local or foreign audits.

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

13. Tax Receivable Agreement Obligation to Related Parties

     In connection with the IPO, the Company entered into tax receivable agreements which obligate the Company to make payments to certain entities affiliated with General Atlantic and H&F and certain senior management team members and directors who held profits interests in EBS Master, called Grant Units, prior to the IPO (“Former EBS Master Grant Unit Holders”) generally equal to 85% of the applicable cash savings that the Company realizes as a result of tax attributes arising from the 2006 Transaction, the 2008 Transaction and the exchange of EBS Master Units (along with corresponding shares of Class B common stock) for cash or shares of Class A common stock. The Company will retain the benefit of the remaining 15% of these tax savings.

     All future exchanges of EBS Master Units for cash or shares of Class A common stock related to the affiliates of General Atlantic, H&F and the Former EBS Master Grant Unit Holders who are parties to the tax receivable agreements are expected to result in an additional tax receivable obligation for the Company, with a corresponding offset to the Company’s additional paid in capital account. Subsequent adjustments of the tax receivable obligations due to certain events (e.g., realization of net operating losses, tax rate changes or the timing of cash settlement obligations) are expected to result in a corresponding adjustment of the Company’s net income. The Company recognized changes in estimate related to this obligation of approximately $226 (decrease to pretax income) for the six months ended June 30, 2011.

     The timing and/or amount of aggregate payments due may vary based on a number of factors, including the amount and timing of the taxable income the Company generates in the future and the tax rate then applicable, the use of loss carryovers and the portion of the payments under the tax receivable agreements constituting imputed interest or amortizable basis.

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

14. Net Income Per Share

     The following tables sets forth the computation of basic and diluted net income per share of Class A common stock:

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
Basic net income per share:
Numerator:
Net income attributable to Emdeon Inc.		$	5,801			$	4,229			$	10,194			$	6,118
Denominator:
Weighted average common shares outstanding			91,057,293				90,061,975				91,022,516				89,879,916
Basic net income per share		$	0.06			$	0.05			$	0.11			$	0.07
Diluted net income per share:
Numerator:
Net loss excluding EBS Master		$	(6,853	)		$	(6,774	)		$	(13,088	)		$	(13,503	)
Weighted average effect of dilutive securities
Add:
Emdeon Inc. allocation of EBS Master net income			12,690				11,005				23,357				19,589
		$	5,837			$	4,231			$	10,269			$	6,086
Denominator:
Number of shares used in basic computation			91,057,293				90,061,975				91,022,516				89,879,916
Weighted average effect of dilutive securities
Add:
Exchange of Class B common stock for Class A
Restricted Class A common stock units			166,380				103,360				161,691				89,046
Contingently issuable Class A common stock			117,636				593,695				109,907				679,439
			91,341,309				90,759,030				91,294,114				90,648,401
Diluted net income per share		$	0.06			$	0.05			$	0.11			$	0.07
Due to their antidilutive effect, the following securities have been excluded from diluted net income per share for the respective periods:
		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
Class B common stock			23,891,602				23,418,371				23,878,906				23,408,255
Options to purchase Class A common stock			7,571,933				5,844,226				7,123,096				5,371,146
Restricted Class A common stock units			411,809				474,745				351,937				399,035

     Additionally, 376,248 contingently issuable shares of Class A common stock have been excluded from diluted net income per share for the three and six month periods ending June 30, 2011 because the contingencies have not been resolved.

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

15. Segment Reporting

     Management views the Company’s operating results in three reportable segments: (a) payer services, (b) provider services and (c) pharmacy services. Listed below are the results of operations for each of the reportable segments. This information is reflected in the manner utilized by management to make operating decisions, assess performance and allocate resources. Segment assets are not presented to management for purposes of operational decision making, and therefore are not included in the accompanying tables. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in the notes to the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2010.

Payer Services Segment

     The payer services segment provides payment cycle solutions to healthcare payers, both directly and through the Company’s channel partners, that simplify the administration of healthcare related to insurance eligibility and benefit verification, claims filing, payment integrity and claims and payment distribution. Additionally, the payer services segment provides consulting services primarily to healthcare payers.

Provider Services Segment

     The provider services segment provides revenue cycle management solutions, patient billing and payment services, government program eligibility and enrollment services and clinical exchange capabilities, both directly and through the Company’s channel partners, that simplify providers’ revenue cycle and workflow, reduce related costs and improve cash flow.

Pharmacy Services Segment

     The pharmacy services segment provides electronic prescribing services and other electronic solutions to pharmacies, pharmacy benefit management companies and government agencies related to prescription benefit claim filing, adjudication and management.

Other

     Inter-segment revenue and expenses primarily represent claims management and patient statement services provided between segments.

     Corporate and eliminations includes personnel and other costs associated with the Company’s management, administrative and other corporate services functions and eliminations to remove inter-segment revenues and expenses.

Emdeon Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited and amounts in thousands, except share and per share amounts)

     The revenue and total segment contribution for the reportable segments are as follows:

Three Months Ended June 30, 2011

														Corporate &
		Payer				Provider				Pharmacy				Eliminations				Consolidated
Revenue from external customers
Claims management		$	52,972			$	—			$	—			$	—			$	52,972
Payment services			62,507				—				—				—				62,507
Patient statements			—				65,022				—				—				65,022
Revenue cycle management			—				72,945				—				—				72,945
Dental			—				7,871				—				—				7,871
Pharmacy services			—				—				20,793				—				20,793
Inter-segment revenues			864				124				—				(988	)			—
Net revenue			116,343				145,962				20,793				(988	)			282,110
Costs and expenses:
Cost of operations			77,545				89,268				8,872				(928	)			174,757
Development and engineering			2,869				4,713				1,776				—				9,358
Sales, marketing, general and administrative			7,058				9,439				1,287				13,714				31,498
Segment contribution		$	28,871			$	42,542			$	8,858			$	(13,774	)			66,497
Depreciation and amortization																			38,934
Interest income																			(3	)
Interest expense																			12,653
Other																			(2,235	)
Income before income tax provision																		$	17,148

Three Months Ended June 30, 2010

														Corporate &
		Payer				Provider				Pharmacy				Eliminations				Consolidated
Revenue from external customers
Claims management		$	49,695			$	—			$	—			$	—			$	49,695
Payment services			56,504				—				—				—				56,504
Patient statements			—				65,705				—				—				65,705
Revenue cycle management			—				43,511				—				—				43,511
Dental			—				7,947				—				—				7,947
Pharmacy services			—				—				19,927				—				19,927
Inter-segment revenue			680				72				—				(752	)			—
Net revenue			106,879				117,235				19,927				(752	)			243,289
Costs and expenses:
Cost of operations			69,947				71,963				7,254				(720	)			148,444
Development and engineering			2,992				3,898				1,805				—				8,695
Sales, marketing, general and administrative			6,206				6,810				1,503				11,724				26,243
Segment contribution		$	27,734			$	34,564			$	9,365			$	(11,756	)			59,907
Depreciation and amortization																			29,278
Interest income																			(5	)
Interest expense																			15,919
Other																			(2,060	)
Income before income tax provision																		$	16,775