##### Table of Contents



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 1934For the quarterly period ended
    September 30, 2006ORo

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

(I.R.S. Employerincorporation or
    organization)

Identification No.)1145 Sanctuary Parkway,
    Suite 200

30004Alpharetta, Georgia

(Zip code)(Address of principal executive
    offices)    (770) 237-4300 (Registrants
    telephone number, including area code)
   Not
    Applicable (Former
    name, former address and former fiscal year, if changed since
    last report)
  þ o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
    Title of Class

Shares Outstanding at October 31, 2006Common Stock $0.01 Par Value

39,227,739 sharesNon-voting Common Stock
    $0.01 Par Value

0 shares




---



##### 



PER-SE
    TECHNOLOGIES, INC.
  FORM 10-Q
 For the Fiscal Quarter Ended September 30, 2006
  PagePART I:
    FINANCIAL INFORMATIONItem 1.


Financial
    Statements


2Consolidated
    Balance Sheets as of September 30, 2006 and
    December 31, 2005 (Unaudited)


2Consolidated
    Statements of Income for the three and nine months ended
    September 30, 2006 and 2005 (Unaudited)


3Consolidated
    Statements of Cash Flows for the nine months ended
    September 30, 2006 and 2005 (Unaudited)


4Notes to
    Consolidated Financial Statements (Unaudited)


5Item 2.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


25Item 3.


Quantitative and
    Qualitative Disclosures about Market Risk


36Item 4.


Controls and
    Procedures


36PART II:
    OTHER INFORMATIONItem 1.


Legal
    Proceedings


38Item 1A.


Risk
    Factors


39Item 6.


Exhibits


46EX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32.1 SECTION 906 CERTIFICATION OF CEOEX-32.2 SECTION 906 CERTIFICATION OF CFO   1




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##### Table of Contents



PART I:
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS (UNAUDITED)
  September 30,


December 31,2006


2005(In thousands, exceptpar value data)Current Assets:Cash and cash equivalents

$
52,453


$
61,161Accounts receivable (less
    allowances of $5,731 and $3,348 as of September 30, 2006,
    and December 31, 2005, respectively)


96,768



54,397Deferred income taxes 
    current, net


4,507



4,056Prepaid expenses


13,004



3,004Other


7,541



3,555Total current assets


174,273



126,173Property and equipment, net of
    accumulated depreciation


40,726



16,843Goodwill


380,656



38,199Other intangible assets, net of
    accumulated amortization


298,496



21,946Deferred income taxes, net


29,151



26,238Other


18,036



10,124Total assets

$
941,338


$
239,523Current Liabilities:Accounts payable

$
10,625


$
5,982Accrued compensation


23,573



15,265Accrued expenses


53,218



17,002Current portion of long-term debt
    and capital lease obligations


209



135Deferred revenue 
    current


41,077



25,821Total current liabilities


128,702



64,205Long-term debt and capital lease
    obligations


510,411



125,490Deferred revenue


8,678



Other obligations


21,419



5,312Total liabilities


669,210



195,007Stockholders
    Equity:Preferred stock, no par value,
    20,000 shares authorized; none issued






Common stock, voting,
    $0.01 par value, 200,000 shares authorized, 42,187 and
    33,511 issued and 39,199 and 30,523 outstanding as of
    September 30, 2006, and December 31, 2005, respectively


422



335Common stock, non-voting,
    $0.01 par value, 600 shares authorized; none issued






Paid-in capital


1,025,730



804,875Accumulated deficit


(713,784
)


(719,759
)Treasury stock at cost,
    2,988 shares as of September 30, 2006, and
    December 31, 2005


(41,912
)


(41,817
)Deferred stock unit plan obligation


1,566



1,429Accumulated other comprehensive
    income (loss)


106



(547
)Total stockholders equity


272,128



44,516Total liabilities and
    stockholders equity

$
941,338


$
239,523    2




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF INCOME
    (UNAUDITED)
  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005(In thousands, except per share data)Revenue

$
148,871


$
94,006


$
447,785


$
279,336Operating expenses:Cost of services


86,007



63,089



274,358



185,596Selling, general and administrative


41,514



19,918



130,504



63,032Operating income


21,350



10,999



42,923



30,708Interest expense


8,925



1,431



26,000



4,360Interest income


(535
)


(427
)


(1,649
)


(1,075
)Income from continuing operations
    before income taxes


12,960



9,995



18,572



27,423Income tax expense


5,984



172



12,305



623Income from continuing operations


6,976



9,823



6,267



26,800Loss from discontinued operations,
    net of tax


(218
)






(292
)


Net income

$
6,758


$
9,823


$
5,975


$
26,800Net income per common
    share  basic:Income from continuing operations

$
0.18


$
0.33


$
0.16


$
0.89Loss from discontinued operations,
    net of tax


(0.01
)






(0.01
)


Net income per common
    share  basic

$
0.17


$
0.33


$
0.15


$
0.89Weighted average shares used in
    computing basic earnings per share


39,134



29,994



38,861



30,019Net income per common
    share  diluted:Income from continuing operations

$
0.16


$
0.29


$
0.14


$
0.81Loss from discontinued operations,
    net of tax














Net income per common
    share  diluted

$
0.16


$
0.29


$
0.14


$
0.81Weighted average shares used in
    computing diluted earnings per share


43,203



33,792



43,535



32,917    3




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
    (UNAUDITED)
  Nine Months EndedSeptember 30,2006


2005(In thousands)Cash Flows from Operating
    Activities:Net income

$
5,975


$
26,800Adjustments to reconcile net
    income to net cash provided by operating activities:Depreciation and amortization


49,310



11,233Stock-based compensation expense


4,525



Amortization of deferred financing
    costs


1,655



1,011Loss from discontinued operations


292



Deferred income taxes


11,009



Changes in assets and liabilities,
    excluding effects of acquisitions and divestitures:Accounts receivable


(6,645
)


(7,067
)Accounts payable


(2,918
)


342Accrued compensation


1,909



3,957Accrued expenses


(28,856
)


(2,024
)Deferred revenue


19,908



2,489Other, net


4,692



(1,204
)Net cash provided by continuing
    operations


60,856



35,537Net cash used for discontinued
    operations


(484
)


Net cash provided by operating
    activities


60,372



35,537Cash Flows from Investing
    Activities:Acquisitions, net of cash acquired


(429,834
)


Purchases of property and equipment


(8,802
)


(6,098
)Software development costs


(12,540
)


(4,544
)Capitalized acquisition costs






(1,484
)Other






(216
)Net cash used for investing
    activities of continuing operations


(451,176
)


(12,342
)Cash Flows from Financing
    Activities:Treasury stock purchases






(15,404
)Proceeds from the exercise of
    stock options


4,312



5,967Proceeds from borrowings


435,000



Payments of debt


(50,202
)


(32
)Deferred financing costs


(7,662
)


Other


648



(18
)Net cash provided by (used for)
    financing activities of continuing operations


382,096



(9,487
)Cash and Cash
    Equivalents:Net change


(8,708
)


13,708Balance at beginning of period


61,161



42,422Balance at end of period

$
52,453


$
56,130Supplemental
    Disclosures:Cash paid for:Interest

$
23,415


$
2,387Income taxes


11,001



487Non-cash investing activity:Common Stock issued in connection
    with the acquisition of NDCHealth

$
197,915


$
    4




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Note 1 
    Basis of Presentation
    Form 10-K Form 10-K). Form 10-K.
    Note 2 
    Stock-Based Compensation Plans
  Share-Based Payment Accounting for Stock-Based
    Compensation Accounting for Stock
    Issued to Employees Statement of Cash Flows.
      
    A modified prospective method in which compensation
    cost is recognized beginning with the effective date
    (a) based on the requirements of SFAS No. 123(R)
    for all share-based payments granted after the effective date,
    and (b) based on the requirements of SFAS No. 123
    for all awards granted to employees prior to the effective date
    of SFAS No. 123(R) that remain unvested on the
    effective date.
    A modified retrospective method which includes the
    requirements of the modified prospective method described above,
    but also permits entities to restate based on the amounts
    previously recognized under SFAS No. 123 for purposes
    of pro forma disclosures either (a) all periods presented
    or (b) prior interim periods of the year of adoption.     5




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
        Three Months


Nine MonthsEnded September 30, 2006Income before income taxes

$
(950
)

$
(3,363
)Income from continuing operations

$
(591
)

$
(2,071
)Net income

$
(591
)

$
(2,071
)Net income per common share:Basic

$
(0.02
)

$
(0.05
)Diluted

$
(0.01
)

$
(0.05
)     Three Months


Nine MonthsEnded September 30, 2005Net income as reported

$
9,823


$
26,800Deduct: total stock-based employee
    compensation expense determined under fair value based method
    for all awards, net of related tax effects


(1,088
)


(3,686
)Pro forma net income

$
8,735


$
23,114Net income per common share:Basic  as reported

$
0.33


$
0.89Basic  pro forma

$
0.29


$
0.77Diluted  as reported

$
0.29


$
0.81Diluted  pro forma

$
0.26


$
0.70  6




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
  Stock
    Option Plans
  three-to-five
      Weighted-AverageWeighted-Average


Remaining


Aggregate IntrinsicShares


Exercise Price


Contractual Term


ValueOptions outstanding as of
    January 1


5,386


$
10.86Granted


655


$
26.59Exercised


(411
)

$
10.49Canceled


(75
)

$
15.19Options outstanding as of
    September 30


5,555


$
12.69



6.64 years


$
56,243Options exercisable as of
    September 30


4,066


$
10.23



5.65 years


$
51,157Options vested and expected to
    vest as of September 30


5,257


$
12.31



6.49 years


$
55,226      7




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
    2006


2005Expected life (years)


3.58



4.57Risk-free interest rate


4.5
%


3.9
%Dividend rate


0
%


0
%Expected volatility


46.8
%


50.0
%       Long
    Term Incentive Plan
    one-for-one one-for-one
 8




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
  Performance-based restricted stock units.
  Weighted-Average


Weighted-AverageGrant-Date


RemainingUnits


Fair Value


Contractual TermNonvested units as of Plan
    inception





$
Granted


256.1



31.57Canceled


(0.9
)


31.57Nonvested units as of
    September 30


255.2


$
31.57



2.3 years     2006Market value of the Companys
    Common Stock on the grant date

$
25.53Risk-free interest rate


5.0
%Dividend rate


0
%Expected volatility


40.0
%     31-month
    Service-based restricted stock units.
  Weighted-Average


Weighted-AverageGrant-Date


RemainingUnits


Fair Value


Contractual TermNonvested units as of Plan
    inception





$
Granted


144.6



25.53Canceled


(0.6
)


25.53Nonvested units as of
    September 30


144.0


$
25.53



2.7 years    9




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
      Note 3 
    Acquisitions
          (In thousands)Cash paid to NDCHealth Stockholders

$
515,996Fair value of Per-Se Common Stock
    issued


197,915Transaction costs


13,891$
727,802       Preliminary
    Purchase Price Allocation
   10




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
      (In thousands)Cash

$
99,997Accounts receivable


36,475Deferred income tax asset


96,793Other current assets


13,064Property and equipment


25,102Identifiable intangible assets


289,400Goodwill  Physician
    Solutions


81,050Goodwill  Hospital
    Solutions


174,022Goodwill  Pharmacy
    Solutions


87,361Other long-term assets


8,229In-process research and development


13,300Accounts payable


(7,686
)Accrued expenses


(54,106
)Accrued compensation


(6,287
)Deferred revenue


(3,643
)Accrued restructuring and merger
    costs


(11,135
)Deferred income taxes


(96,793
)Other long-term obligations


(17,341
)Total purchase price

$
727,802   Accounting for
    Business Combinations
   11




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
    Identifiable
    Intangible Assets
    Accumulated


Net BookIntangible Asset

Fair Value


Amortization


Value


Useful LifeCustomer lists and agreements

$
180,900


$
8,647


$
172,253



11 - 22 yearsDeveloped technology


105,900



11,823



94,077



5 - 8 yearsTrademarks


1,500



56



1,444



20 yearsNoncompete agreements


1,100



413



687



2 years$
289,400


$
20,939


$
268,461     In-Process
    Research and Development
  .
  Deferred
    Revenue
  build-up build-up
 12




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
    Accrued
    Restructuring and Merger Costs
        TotalReserve balance, January 6,
    2006

$
11,135Cost applied against the reserve


(9,547
)Reserve balance,
    September 30, 2006

$
1,588   Pre-Acquisition
    Contingencies
    Pro
    Forma Financial Information
   13




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
      Three Months Ended


Nine Months EndedSeptember 30, 2005


September 30, 2005(1)(In thousands, except per share data)Revenue

$
150,070


$
445,384Net loss

$
6,853


$
(175
)Net loss per common
    share  basic

$
0.18


$
0.00Net loss per common
    share  diluted

$
0.18


$
0.00     (1)
    
    Includes approximately $13.3 million of in-process research
    and development expense  Note 4 
    Earnings Per Share
    Three Months


Nine MonthsEnded September 30,


Ended September 30,2006


2005


2006


2005(In thousands, except per share data)Net income

$
6,758


$
9,823


$
5,975


$
26,800Common shares outstanding:Shares used in computing net
    income per common share  basic


39,134



29,994



38,861



30,019Effect of potentially dilutive
    stock options and other equity-based awards


4,069



3,798



4,674



2,898Shares used in computing net
    income per common share  diluted


43,203



33,792



43,535



32,917Net income per common share:Basic

$
0.17


$
0.33


$
0.15


$
0.89Diluted

$
0.16


$
0.29


$
0.14


$
0.81    14




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
    Note 5 
    Comprehensive Income
      Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Net income

$
6,758


$
9,823


$
5,975


$
26,800Change in cumulative foreign
    currency translation adjustment


(86
)


(58
)


(20
)


(43
)Change in cash flow hedging
    activities


(1,842
)






673



Comprehensive income

$
4,830


$
9,765


$
6,628


$
26,757     September 30,


December 31,2006


2005Cumulative foreign currency
    translation adjustment

$
(567
)

$
(547
)Cumulative cash flow hedging
    activities


673



Accumulated other comprehensive
    income (loss)

$
106


$
(547
)     Note 6 
    Legal Matters
  class-action,
 15




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
  Rule 10b-5 en banc and/or
  Rule 10b-5 and/or
        Note 7 
    Long-Term Debt
   16




---



##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
          Accounting for Derivative Instruments
    and Hedging Activities
    Note 8 
    Income Taxes
     17




---



##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
      paid-in-capital
    No. FAS 123R-3, Transition Election Related to Accounting for Tax
    Effects of Share-Based Payment Awards.
  with-and-without with-and-without paid-in-capital
 18




---



##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
  Note 9 
    Restructuring Expenses
    Reserve Balance


Costs Applied


Reserve BalanceDecember 31, 2005


Against Reserve


September 30, 2006(In thousands)Lease termination costs

$
807


$
(169
)

$
638   Note 10 
    Segment Reporting
      business-to-business
 19




---



##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
  percentage-of-completion
  point-of-service point-of-service
        Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005(In thousands)Revenue:Physician Solutions

$
77,835


$
69,805


$
235,344


$
206,063Hospital Solutions


44,083



27,860



132,173



84,032Pharmacy Solutions


31,015







92,482



Eliminations


(4,062
)


(3,659
)


(12,214
)


(10,759
)$
148,871


$
94,006


$
447,785


$
279,336 20




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005(In thousands)Segment operating expenses:Physician Solutions

$
65,578


$
61,430


$
202,743


$
181,633Hospital Solutions


32,217



21,720



100,616



66,202Pharmacy Solutions


26,090







85,368



Corporate


7,698



3,516



28,349



11,552Eliminations


(4,062
)


(3,659
)


(12,214
)


(10,759
)$
127,521


$
83,007


$
404,862


$
248,628Segment operating income:Physician Solutions

$
12,257


$
8,375


$
32,601


$
24,430Hospital Solutions


11,866



6,140



31,557



17,830Pharmacy Solutions


4,925







7,114



Corporate


(7,698
)


(3,516
)


(28,349
)


(11,552
)$
21,350


$
10,999


$
42,923


$
30,708Interest expense

$
8,925


$
1,431


$
26,000


$
4,360Interest income


(535
)


(427
)


(1,649
)


(1,075
)Income from continuing operations
    before income taxes

$
12,960


$
9,995


$
18,572


$
27,423Depreciation and amortization(1):Physician Solutions

$
2,265


$
1,996


$
8,901


$
6,153Hospital Solutions


3,757



1,616



14,406



4,827Pharmacy Solutions


5,371







24,520



Corporate


521



82



1,483



253$
11,914


$
3,694


$
49,310


$
11,233Capital expenditures and
    capitalized software development costs:Physician Solutions

$
2,415


$
1,734


$
6,061


$
5,223Hospital Solutions


2,306



958



9,369



5,008Pharmacy Solutions


1,371







4,425



Corporate


343



48



1,487



411$
6,435


$
2,740


$
21,342


$
10,642   21




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
  As ofSeptember 30,


December 31,2006


2005(In thousands)Identifiable assets:Physician Solutions

$
189,881


$
66,380Hospital Solutions


342,242



71,482Pharmacy Solutions


283,971



Corporate


125,244



101,661$
941,338


$
239,523     (1)
    
    For the nine months ended September 30, 2006, depreciation
    and amortization expense includes $13.3 million of
    in-process research and development that was purchased as part
    of the NDCHealth acquisition and expensed during the first three
    months of 2006. By segment, Physician Solutions includes
    approximately $1.9 million, Hospital Solutions includes
    approximately $2.8 million and Pharmacy Solutions includes
    approximately $8.6 million of in-process research and
    development expense.  Note 11 
    Retirement
    Benefits      Three Months Ended


January 6, 2006September 30, 2006


Through September 30, 2006(In thousands)Interest cost on projected benefit
    obligation

$
536


$
1,608Expected return on plan assets


(500
)


(1,500
)Net periodic pension cost

$
36


$
108     Note 12 
    Physician
    Solutions Agreement   22




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
      Note 13 
    Recent Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes
    Fair Value Measurements
  Employers Accounting for
    Defined Benefit Pension and Other Postretirement Plans
  Note 14 
    Subsequent Event
     23




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##### Table of Contents



PER-SE
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (UNAUDITED)  (Continued)
           24




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Description
    of Business
        business-to-business percentage-of-completion
 25




---



##### Table of Contents



point-of-service point-of-service
  General
    Overview
  Key Performance Indicators.
  NDCHealth Acquisition.
  Atypical Items.
  Adoption of
    SFAS No. 123(R).
     26




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##### Table of Contents



Long Term Incentive Plan.
  one-for-one one-for-one
      Overview of Operating Results.
  Cash Flow from Operations.
  Capitalization.
 27




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##### Table of Contents



Results
    of Operations
  Three
    months ended September 30, 2006, as compared to three
    months ended September 30, 2005
  Revenue.
  Three Months Ended September 30,2006


2005(In thousands)Physician Solutions

$
77,835


$
69,805Hospital Solutions


44,083



27,860Pharmacy Solutions


31,015



Eliminations


(4,062
)


(3,659
)$
148,871


$
94,006   year-over-year
         28




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##### Table of Contents



Segment Operating Income.
  Three Months Ended September 30,2006


2005(In thousands)Physician Solutions

$
12,257


$
8,375Hospital Solutions


11,866



6,140Pharmacy Solutions


4,925



Corporate


(7,698
)


(3,516
)$
21,350


$
10,999           Interest.
  Income Taxes.
 29




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##### Table of Contents



Accounting for
    Income Taxes.
  paid-in-capital
    No. FAS 123R-3, Transition Election Related to Accounting for Tax
    Effects of Share-Based Payment Awards.
  with-and-without with-and-without
 30




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##### Table of Contents



paid-in-capital
    Nine
    months ended September 30, 2006, as compared to nine months
    ended September 30, 2005
  Revenue.
  Nine Months EndedSeptember 30,2006


2005(In thousands)Physician Solutions

$
235,344


$
206,063Hospital Solutions


132,173



84,032Pharmacy Solutions


92,482



Eliminations


(12,214
)


(10,759
)$
447,785


$
279,336   year-over-year
       31




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##### Table of Contents



Segment Operating Income.
  Nine Months EndedSeptember 30,2006


2005(In thousands)Physician Solutions

$
32,601


$
24,430Hospital Solutions


31,557



17,830Pharmacy Solutions


7,114



Corporate


(28,349
)


(11,552
)$
42,923


$
30,708        32




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##### Table of Contents



Interest.
  Income Taxes.
      paid-in-capital
   33




---



##### Table of Contents



No. FAS 123R-3, Transition Election Related to Accounting for Tax
    Effects of Share-Based Payment Awards.
  with-and-without with-and-without paid-in-capital
    Liquidity
    and Capital Resources
    September 30,

December 31,2006

2005Unrestricted cash and cash
    equivalents

$
52,453


$
61,161   Nine Months EndedSeptember 30,2006


2005Cash provided by continuing
    operations

$
60,856


$
35,537Cash used for discontinued
    operations

$
(484
)

$
Cash used for investing activities
    from continuing operations

$
(451,176
)

$
(12,342
)Cash provided by (used for)
    financing activities from continuing operations

$
382,096


$
(9,487
)      34




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##### Table of Contents



35




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##### Table of Contents



Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk  Interest
    Rate Sensitivity
          Exchange
    Rate Sensitivity
    Item 4.
    Controls
    and Procedures  Conclusions
    Regarding Disclosure Controls and Procedures
  Rule 13a-15(b)
 36




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##### Table of Contents



Control
    System Limitations; NDCHealth Material Weaknesses
      Revenue
    Recognition and Billing Processes
      
    The lack of policy, procedures and personnel with the skills and
    experience to properly evaluate and record revenue for
    multi-element arrangements, specifically relating to the
    contract review process, evidence of delivery, and establishing
    fair value where applicable;
    Lack of controls over recording of certain credit card
    transactions relating to credit card chargebacks and rejects;
    Lack of controls over the authorization of credit memos and
    their classification between sales allowance and bad debt;
    Inconsistent management review and approval of journal entries
    and account reconciliations relating to recording of unbilled
    accounts receivable; and
    Lack of documented controls and review procedures over timely
    and accurate billing of customers.  Financial
    Statement Close Process
      
    Lack of adequate policies and procedures with respect to journal
    entries and account reconciliations, including insufficient
    supporting detail and inconsistent evidence of management review;
    Lack of sufficient personnel with appropriate skills and
    experience to properly prepare journal entries and account
    reconciliations and to do so in a timely manner; 37




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##### Table of Contents




    Lack of documented controls over the preparation of financial
    statement footnotes and the calculation of earnings per share,
    including consistent first level management review for accuracy,
    completeness, and compliance with generally accepted accounting
    principles; and
    Lack of policy, procedures, and controls including review and
    approval procedures to ensure that financial statements for
    external purposes were prepared in accordance with generally
    accepted accounting principles including periodic in-depth
    review of the proper application of generally accepted
    accounting principles to the specific facts and circumstances of
    each of NDCHealths businesses.  Income
    Taxes
      Remediation
    Measures for Identified NDCHealth Material
    Weaknesses
    
    The NDCHealth account reconciliation process was redesigned to
    provide better support for account balances and to ensure all
    significant accounts were reconciled as a part of the quarter
    end close process;
    Addition of accounting staff with the technical accounting skill
    and experience to review and properly record revenue for
    complex, multi-element agreements in accordance with generally
    accepted accounting principles;
    Performing daily reconciliations of credit card transactions;
    Enforcing company policy on authorization of credit memos and
    the completeness of information needed for proper classification;
    Expanding analytic and review procedures at each quarter end in
    support of footnote disclosures;
    Providing more focus on income taxes; and
    Implementing a
    cash-on-delivery
    recognition process with regard to revenue recognition in the
    physician practice management services and the pharmaceutical
    information businesses.      Changes
    in Internal Control Over Financial Reporting
  Rule 13a-15(d)
 38




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##### Table of Contents



PART II:
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Item 1A.
    Risk
    Factors  Cautionary
    Statement Regarding Forward-Looking Statements
    
    demand for and market acceptance of new and existing products
    and services;
    successful development of new products and services;
    the timing of new product and service introductions;
    pricing pressures and other competitive factors;
    product and service obsolescence;
    the ability to develop and implement new technologies and to
    obtain protection for the related intellectual property;
    the prospect of changes in laws and regulations governing the
    Companys business;
    the uncertainties of litigation; and
    costs related to integrating NDCHealths business practices
    and operations with those of the Company.   39




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##### Table of Contents



Factors
    That May Affect Future Results of Operations, Financial
    Condition or Business
      The
    Companys businesses are highly competitive, and an
    inability to successfully compete for business could adversely
    affect the Company.
        The
    markets for the Companys services and solutions are
    characterized by rapidly changing technology, evolving industry
    standards and frequent new product introductions and an
    inability to keep pace could adversely affect the
    Company.
    
    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.   40




---



##### Table of Contents



The
    healthcare marketplace is characterized by consolidation, which
    may result in fewer potential customers for the Companys
    services.
    The
    healthcare industry is highly regulated, which may increase the
    Companys costs of operation or have a material adverse
    effect on the Companys businesses.
       41




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##### Table of Contents



The
    trading price of the Companys common stock may be volatile
    and may negatively affect your investment.
    Per-Se
    has significantly increased its long-term debt as a result of
    the NDCHealth acquisition, which could limit funds available to
    Per-Se to finance other activities.
   42




---



##### Table of Contents



The
    agreements governing Per-Ses debt limit the Companys
    financial and operating flexibility.
    
    incurring additional indebtedness or guarantee obligations;
    declaring or paying dividends and other distributions;
    prepaying or modifying the terms of indebtedness;
    creating liens;
    making capital expenditures;
    making investments or acquisitions;
    entering into acquisitions or consolidations;
    making sales of assets; and
    engaging in transactions with affiliates.      Loss
    of key management could adversely affect the Companys
    business.
    Per-Se
    may be unable to successfully integrate the businesses of Per-Se
    and NDCHealth and may be unable to realize the anticipated
    benefits of the acquisition.
    
    the inability to achieve the cost savings and operating
    synergies anticipated in the acquisition, including a reduction
    in costs associated with the acquisition;
    complexities associated with managing the geographic scope of
    the combined businesses, coupled with those of consolidating
    multiple physical locations where management may determine
    consolidation is desirable;
    integrating personnel from diverse corporate cultures while
    maintaining focus on providing consistent, high quality customer
    service; and
    potential unknown liabilities and increased costs associated
    with the acquisition.  and/or
 43




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##### Table of Contents



If
    Per-Se is unable to manage its growth profitably, its business
    and financial results could suffer.
    As
    part of the acquisition, Per-Se and NDCHealth entered into, and
    are bound by the terms of, long-term data sharing agreements
    with Wolters Kluwer that place certain restrictions on the
    Companys ability to sell certain products to third parties
    and compete in certain markets.
    20-year
  The
    Company is regularly involved in litigation, which may expose it
    to significant liabilities.
    class-action Rule 10b-5 en banc and/or
 44




---



##### Table of Contents



class-action
    Per-Se
    and NDCHealth are each the subject of separate SEC
    investigations, the resolution of which could have a material
    adverse effect on the combined companies.
        Prior
    to its acquisition by Per-Se, NDCHealth identified material
    weaknesses in its internal control over financial reporting. If
    such deficiencies persist or if additional weaknesses are
    discovered, the combined company may not be able to accurately
    report its financial results and management may not be able to
    conclude that the Companys internal control over financial
    reporting is effective.
     45




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##### Table of Contents



Item 6.
    Exhibits    ExhibitNumber

Document2
.1



Agreement and Plan of Merger,
    dated as of August 26, 2005, among Registrant, Royal Merger
    Co. and NDCHealth Corporation (incorporated by reference to
    Exhibit 2.1 to Current Report on
    Form 8-K
    filed on August 30, 2005). (schedules and similar
    attachments to this exhibit have not been filed; Registrant
    agrees to furnish supplementally a copy of any of these
    materials to the Securities and Exchange Commission upon
    request).2
.2



Stock Purchase Agreement, dated as
    of August 26, 2005, among Wolters Kluwer Health, Inc., NDC
    Health Information Services (Arizona). Inc., and NDCHealth
    Corporation (incorporated herein by reference to
    Exhibit 2.1 to NDCHealth Corporations Current Report
    on
    Form 8-K
    filed on August 29, 2005). (schedules and similar
    attachments to this exhibit have not been filed; Registrant
    agrees to furnish supplementally a copy of any of these
    materials to the Securities and Exchange Commission upon
    request).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).3
.2



Restated By-laws of Registrant, as
    amended (incorporated by reference to Exhibit 3.2 to
    Current Report on
    Form 8-K
    filed on July 29, 2005).4
.1



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
.2



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 June 30, 2000).4
.3



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).4
.4



Third Amendment to Rights
    Agreement dated as of February 11, 1999, between Registrant
    and American Stock Transfer & Trust Company, entered
    into as of March 10, 2003 (incorporated by reference to
    Exhibit 4.13 to Annual Report on
    Form 10-K
    for the year ended December 31, 2002).4
.5



Fourth Amendment to Rights
    Agreement dated as of February 11, 1999, between Registrant
    and American Stock Transfer & Trust Company, entered
    into as of February 18, 2005 (incorporated by reference to
    Exhibit 4.1 to Current Report on
    Form 8-K
    filed on February 22, 2005).4
.6



Fifth Amendment to Rights
    Agreement dated as of February 11, 1999, between Registrant
    and American Stock Transfer & Trust Company, entered
    into as of August 26, 2005 (incorporated by reference to
    Exhibit 4.1 to Current Report on
    Form 8-K
    filed on August 26, 2005).4
.7



Indenture dated as of
    June 30, 2004, between Registrant and U.S. Bank
    National Association, as Trustee, relating to Registrants
    3.25% Convertible Subordinated Debentures Due 2024
    (incorporated by reference to Exhibit 4.5 to Quarterly
    Report on
    Form 10-Q
    for the quarter ended June 30, 2004).31
.1



Certification of Chief Executive
    Officer pursuant to Exchange Act
    Rules 13a-14(a).
    and
    15d-14(a).,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.31
.2



Certification of Chief Financial
    Officer pursuant to Exchange Act
    Rules 13a-14(a).
    and
    15d-14(a).,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.32
.1



Certification of Chief Executive
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32
.2



Certification of Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  46




---



##### Table of Contents



SIGNATURES
    Per-Se Technologies, Inc.
   By:
    /s/  Stephen
    M. Scheppmann   Executive Vice President and
 Chief Financial Officer
  By:
    /s/  Richard
    A. Flynt   Senior Vice President and Corporate Controller
 (Principal Accounting Officer)
   47




---



##### Table of Contents



INDEX TO
    EXHIBITS
  ExhibitNumber

Document2
.1



Agreement and Plan of Merger,
    dated as of August 26, 2005, among Registrant, Royal Merger
    Co. and NDCHealth Corporation (incorporated by reference to
    Exhibit 2.1 to Current Report on
    Form 8-K
    filed on August 30, 2005) (schedules and similar
    attachments to this exhibit have not been filed; Registrant
    agrees to furnish supplementally a copy of any of these
    materials to the Securities and Exchange Commission upon
    request).2
.2



Stock Purchase Agreement, dated as
    of August 26, 2005, among Wolters Kluwer Health, Inc., NDC
    Health Information Services (Arizona) Inc., and NDCHealth
    Corporation (incorporated herein by reference to
    Exhibit 2.1 to NDCHealth Corporations Current Report
    on
    Form 8-K
    filed on August 29, 2005) (schedules and similar
    attachments to this exhibit have not been filed; Registrant
    agrees to furnish supplementally a copy of any of these
    materials to the Securities and Exchange Commission upon
    request).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).3
.2



Restated By-laws of Registrant, as
    amended (incorporated by reference to Exhibit 3.2 to
    Current Report on
    Form 8-K
    filed on July 29, 2005).4
.1



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
.2



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 June 30, 2000).4
.3



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).4
.4



Third Amendment to Rights
    Agreement dated as of February 11, 1999, between Registrant
    and American Stock Transfer & Trust Company, entered
    into as of March 10, 2003 (incorporated by reference to
    Exhibit 4.13 to Annual Report on
    Form 10-K
    for the year ended December 31, 2002).4
.5



Fourth Amendment to Rights
    Agreement dated as of February 11, 1999, between Registrant
    and American Stock Transfer & Trust Company, entered
    into as of February 18, 2005 (incorporated by reference to
    Exhibit 4.1 to Current Report on
    Form 8-K
    filed on February 22, 2005).4
.6



Fifth Amendment to Rights
    Agreement dated as of February 11, 1999, between Registrant
    and American Stock Transfer & Trust Company, entered
    into as of August 26, 2005 (incorporated by reference to
    Exhibit 4.1 to Current Report on
    Form 8-K
    filed on August 26, 2005).4
.7



Indenture dated as of
    June 30, 2004, between Registrant and U.S. Bank
    National Association, as Trustee, relating to Registrants
    3.25% Convertible Subordinated Debentures Due 2024
    (incorporated by reference to Exhibit 4.5 to Quarterly
    Report on
    Form 10-Q
    for the quarter ended June 30, 2004).31
.1



Certification of Chief Executive
    Officer pursuant to Exchange Act
    Rules 13a-14(a)
    and
    15d-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.31
.2



Certification of Chief Financial
    Officer pursuant to Exchange Act
    Rules 13a-14(a)
    and
    15d-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.32
.1



Certification of Chief Executive
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32
.2



Certification of Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.