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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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FORM 10-Q

|           |  |                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                 
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended
    September 30, 2002                                           
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                                 

Commission file number 000-19480



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Per-Se Technologies, Inc.

(Exact name of Registrant as specified in its
charter)


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

(770) 444-5300

Registrants telephone number, including
area code:


Not Applicable

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


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

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

|                                                                         |  |                                       
|------------------------------------------------------------------------ |  | --------------------------------------
|Title of Class                                                           |  | Shares Outstanding at October 29, 2002
|                                                                         |  |                                       
|Common Stock $0.01 Par Value
    Non-voting Common Stock $0.01 Par Value |  | 30,102,895 shares
    0 Shares        



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TABLE OF CONTENTS



|                                                       |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                                       | Item 1. Financial Statements                                                                 
|CONSOLIDATED BALANCE SHEETS                           
|CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)     
|CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|                                                       | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                       | Item 4. Controls and Procedures                                                              
|PART II: OTHER INFORMATION                            
|                                                       | Item 1. Legal Proceedings                                                                    
|                                                       | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                            
|INDEX TO EXHIBITS                                     
|EX-10.1 FIRST AMENDMENT TO CREDIT AGREEMENT           
|EX-10.2 FOURTH AMENDMENT TO EMPLOYEES' RETIREMENT     



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##### Table of Contents



PER-SE TECHNOLOGIES, INC.

FORM 10-Q

For the Fiscal Quarter Ended
September 30, 2002


|                              |  |                                                                                                           |  |      |    | 
|----------------------------- |  | --------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                              |  |                                                                                                           |  | Page
|                              |  |                                                                                                           |  |     
|PART I: FINANCIAL INFORMATION
|Item 1:                       |  | Financial Statements                                                                                      |  |      |    | 
|                              |  | Consolidated Balance Sheets as of
    September 30, 2002 and December 31, 2001                            |  |      | 2  | 
|                              |  | Consolidated Statements of Operations for the
    three and nine months ended September 30, 2002 and 2001 |  |      | 3  | 
|                              |  | Consolidated Statements of Cash Flows for the
    nine months ended September 30, 2002 and 2001           |  |      | 4  | 
|                              |  | Notes to Consolidated Financial Statements                                                                |  |      | 5  | 
|Item 2:                       |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                 |  |      | 15 | 
|Item 4:                       |  | Controls and Procedures                                                                                   |  |      | 23 | 
|PART II: OTHER INFORMATION   
|Item 1:                       |  | Legal Proceedings                                                                                         |  |      | 25 | 
|Item 6:                       |  | Exhibits and Reports on Form 8-K                                                                          |  |      | 25 | 

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

(in thousands, except par value
data)


|                            |                                                                                                                                                                           |                             |         |              |         |   |         |          |         |  
|--------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ------- | ------------ | ------- | - | ------- | -------- | ------- | -
|                            |                                                                                                                                                                           | September 30,               |         | December 31,
|                            |                                                                                                                                                                           | 2002                        |         | 2001        
|                            |                                                                                                                                                                           |                             |         |             
|                            |                                                                                                                                                                           | (Unaudited)                 |         |             
|Current Assets:             |                                                                                                                                                                           |                             |         |              |         |   |         |         
|                            | Cash and cash equivalents                                                                                                                                                 |                             | $       | 28,839       |         |   | $       | 36,493   |        
|                            | Restricted cash                                                                                                                                                           |                             |         | 4,348        |         |   |         | 4,419    |        
|                            |                                                                                                                                                                           |                             |         |              |         |   |         |         
|                            |                                                                                                                                                                           | Total cash                  |         |              | 33,187  |   |         |          | 40,912  |  
|                            | Accounts receivable, billed (less allowances of
    $4,078 and $5,144, respectively)                                                                                      |                             |         | 51,691       |         |   |         | 45,719   |        
|                            | Accounts receivable, unbilled (less allowances of
    $884 and $1,345, respectively)                                                                                      |                             |         | 7,809        |         |   |         | 4,150    |        
|                            | Other                                                                                                                                                                     |                             |         | 11,509       |         |   |         | 5,000    |        
|                            |                                                                                                                                                                           |                             |         |              |         |   |         |         
|                            |                                                                                                                                                                           | Total current assets        |         |              | 104,196 |   |         |          | 95,781  |  
|Property and equipment, net |                                                                                                                                                                           |                             | 22,649  |              |         |   | 25,012  |         
|Other intangible assets     |                                                                                                                                                                           |                             | 35,818  |              |         |   | 38,960  |         
|Goodwill                    |                                                                                                                                                                           |                             | 38,338  |              |         |   | 38,308  |         
|Other                       |                                                                                                                                                                           |                             | 4,402   |              |         |   | 4,830   |         
|                            |                                                                                                                                                                           |                             |         |              |         |   |         |         
|                            |                                                                                                                                                                           | $                           | 205,403 |              |         | $ | 202,891 |         
|                            |                                                                                                                                                                           |                             |         |              |         |   |         |         
|Current Liabilities:        |                                                                                                                                                                           |                             |         |              |         |   |         |         
|                            | Accounts payable                                                                                                                                                          |                             | $       | 5,687        |         |   | $       | 6,085    |        
|                            | Accrued compensation                                                                                                                                                      |                             |         | 19,211       |         |   |         | 23,884   |        
|                            | Accrued expenses                                                                                                                                                          |                             |         | 21,510       |         |   |         | 21,705   |        
|                            |                                                                                                                                                                           |                             |         |              |         |   |         |         
|                            |                                                                                                                                                                           |                             | 46,408  |              |         |   | 51,674  |         
|                            | Deferred revenue                                                                                                                                                          |                             |         | 21,985       |         |   |         | 19,800   |        
|                            |                                                                                                                                                                           |                             |         |              |         |   |         |         
|                            |                                                                                                                                                                           | Total current liabilities   |         |              | 68,393  |   |         |          | 71,474  |  
|Long-term debt              |                                                                                                                                                                           |                             | 176,260 |              |         |   | 175,091 |         
|Other obligations           |                                                                                                                                                                           |                             | 5,581   |              |         |   | 6,456   |         
|                            |                                                                                                                                                                           |                             |         |              |         |   |         |         
|                            |                                                                                                                                                                           | Total liabilities           |         |              | 250,234 |   |         |          | 253,021 |  
|                            |                                                                                                                                                                           |                             |         |              |         |   |         |         
|Stockholders Deficit:      |                                                                                                                                                                           |                             |         |              |         |   |         |         
|                            | Preferred stock, no par value, 20,000 authorized;
    none issued                                                                                                         |                             |         |             |         |   |         |         |        
|                            | Common stock, voting, $0.01 par value, 200,000
    authorized, 30,084 and 29,969 issued and outstanding as of
    September 30, 2002, and December 31, 2001, respectively |                             |         | 300          |         |   |         | 300      |        
|                            | Common stock, non-voting, $0.01 par value, 600
    authorized; none issued                                                                                                |                             |         |             |         |   |         |         |        
|                            | Paid-in capital                                                                                                                                                           |                             |         | 775,664      |         |   |         | 774,983  |        
|                            | Warrants                                                                                                                                                                  |                             |         | 1,495        |         |   |         | 1,495    |        
|                            | Accumulated deficit                                                                                                                                                       |                             |         | (822,290     | )       |   |         | (826,908 | )      
|                            |                                                                                                                                                                           |                             |         |              |         |   |         |         
|                            |                                                                                                                                                                           | Total stockholders deficit |         |              | (44,831 | ) |         |          | (50,130 | )
|                            |                                                                                                                                                                           |                             |         |              |         |   |         |         
|                            |                                                                                                                                                                           | $                           | 205,403 |              |         | $ | 202,891 |         
|                            |                                                                                                                                                                           |                             |         |              |         |   |         |         

See notes to consolidated financial statements.

2



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##### Table of Contents



PER-SE TECHNOLOGIES, INC. AND
SUBSIDIARIES






CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

(in thousands, except per share
data)


|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |       |         |  
|------------------------------------------------------------------------ | ---------------------------------------------------------- | ------------------ | ------ | ----------------- | ------ | ---- | ------ | ----- | ------ | - | ------- | ----- | ------- | - | ------- | ----- | ------- | -
|                                                                         |                                                            |                    |        |                  
|                                                                         |                                                            | Three Months Ended |        | Nine Months Ended
|                                                                         |                                                            | September 30,      |        | September 30,    
|                                                                         |                                                            |                    |        |                  
|                                                                         |                                                            | 2002               |        | 2001              |        | 2002 |        | 2001 
|                                                                         |                                                            |                    |        |                   |        |      |        |      
|Revenue                                                                  |                                                            | $                  | 89,930 |                   |        | $    | 82,230 |       |        | $ | 264,254 |       |         | $ | 246,009 |      
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|Salaries and wages                                                       |                                                            |                    | 51,284 |                   |        |      | 49,222 |       |        |   | 152,624 |       |         |   | 149,874 |      
|Other operating expenses                                                 |                                                            |                    | 25,934 |                   |        |      | 22,773 |       |        |   | 74,255  |       |         |   | 70,949  |      
|Depreciation                                                             |                                                            |                    | 2,798  |                   |        |      | 2,876  |       |        |   | 8,772   |       |         |   | 9,433   |      
|Amortization                                                             |                                                            |                    | 3,008  |                   |        |      | 3,430  |       |        |   | 8,827   |       |         |   | 9,799   |      
|Interest expense, net                                                    |                                                            |                    | 4,514  |                   |        |      | 4,385  |       |        |   | 13,476  |       |         |   | 12,742  |      
|Process improvement project expenses                                     |                                                            |                    |       |                   |        |      | 1,247  |       |        |   |        |       |         |   | 3,423   |      
|Non-recurring and other expenses                                         |                                                            |                    |       |                   |        |      | (30    | )     |        |   |        |       |         |   | 593     |      
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|                                                                         |                                                            | Total expenses     |        |                   | 87,538 |      |        |       | 83,903 |   |         |       | 257,954 |   |         |       | 256,813 |  
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|Income (loss) before income taxes                                        |                                                            |                    | 2,392  |                   |        |      | (1,673 | )     |        |   | 6,300   |       |         |   | (10,804 | )    
|Income tax expense                                                       |                                                            |                    | 248    |                   |        |      | 122    |       |        |   | 734     |       |         |   | 475     |      
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|Income (loss) from continuing operations                                 |                                                            |                    | 2,144  |                   |        |      | (1,795 | )     |        |   | 5,566   |       |         |   | (11,279 | )    
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|(Loss) income from discontinued operations, net
    of tax               |                                                            |                    | (857   | )                 |        |      | 1      |       |        |   | (958    | )     |         |   | 2,912   |      
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|                                                                         |                                                            | Net income (loss)  |        | $                 | 1,287  |      |        | $     | (1,794 | ) |         | $     | 4,608   |   |         | $     | (8,367  | )
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|Basic net income (loss) per common share:                                |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|                                                                         | Income (loss) from continuing operations                   |                    | $      | 0.07              |        |      | $      | (0.06 | )      |   | $       | 0.18  |         |   | $       | (0.38 | )      
|                                                                         | (Loss) income from discontinued operations, net
    of tax |                    |        | (0.03             | )      |      |        |      |        |   |         | (0.03 | )       |   |         | 0.10  |        
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|                                                                         |                                                            | Net income (loss)  |        | $                 | 0.04   |      |        | $     | (0.06  | ) |         | $     | 0.15    |   |         | $     | (0.28   | )
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|Weighted average shares used in computing basic
    earnings per share   |                                                            |                    | 30,083 |                   |        |      | 29,914 |       |        |   | 30,041  |       |         |   | 29,907  |      
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|Diluted net income (loss) per common share:                              |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|                                                                         | Income (loss) from continuing operations                   |                    | $      | 0.07              |        |      | $      | (0.06 | )      |   | $       | 0.17  |         |   | $       | (0.38 | )      
|                                                                         | (Loss) income from discontinued operations, net
    of tax |                    |        | (0.03             | )      |      |        |      |        |   |         | (0.03 | )       |   |         | 0.10  |        
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|                                                                         |                                                            | Net income (loss)  |        | $                 | 0.04   |      |        | $     | (0.06  | ) |         | $     | 0.14    |   |         | $     | (0.28   | )
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      
|Weighted average shares used in computing diluted
    earnings per share |                                                            |                    | 31,258 |                   |        |      | 29,914 |       |        |   | 32,092  |       |         |   | 29,907  |      
|                                                                         |                                                            |                    |        |                   |        |      |        |       |        |   |         |       |         |   |         |      

See notes to consolidated financial statements.

3



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##### Table of Contents



PER-SE TECHNOLOGIES, INC. AND
SUBSIDIARIES






CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)


(in thousands)


|                                                                                             |                                                                                            |                                |                                                             |        |        |         |         |        |        |         |  
|-------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------ | ----------------------------------------------------------- | ------ | ------ | ------- | ------- | ------ | ------ | ------- | -
|                                                                                             |                                                                                            |                               
|                                                                                             |                                                                                            | Nine Months Ended             
|                                                                                             |                                                                                            | September 30,                 
|                                                                                             |                                                                                            |                               
|                                                                                             |                                                                                            | 2002                           |                                                             | 2001  
|                                                                                             |                                                                                            |                                |                                                             |       
|Cash Flows From Operating
    Activities:                                                    |                                                                                            |                                |                                                             |        |        |         |         |       
|Net income (loss)                                                                            |                                                                                            | $                              | 4,608                                                       |        |        | $       | (8,367  | )     
|Adjustments to reconcile net income (loss) to net
    cash provided by operating activities: |                                                                                            |                                |                                                             |        |        |         |         |       
|                                                                                             | Depreciation and amortization                                                              |                                |                                                             | 17,599 |        |         |         | 19,232 |       
|                                                                                             | Loss (income) from discontinued operations                                                 |                                |                                                             | 958    |        |         |         | (2,912 | )     
|                                                                                             | Changes in assets and liabilities, excluding
    effects of acquisitions and divestitures: |                                |                                                             |        |        |         |         |        |       
|                                                                                             |                                                                                            | Restricted cash                |                                                             |        | 313    |         |         |        | 1,080  |        
|                                                                                             |                                                                                            | Accounts receivable, billed    |                                                             |        | (5,498 | )       |         |        | 1,985  |        
|                                                                                             |                                                                                            | Accounts receivable, unbilled  |                                                             |        | (3,659 | )       |         |        | 2,502  |        
|                                                                                             |                                                                                            | Accounts payable               |                                                             |        | (398   | )       |         |        | (5,534 | )      
|                                                                                             |                                                                                            | Accrued compensation           |                                                             |        | (4,199 | )       |         |        | 434    |        
|                                                                                             |                                                                                            | Accrued expenses               |                                                             |        | (2,490 | )       |         |        | (3,111 | )      
|                                                                                             |                                                                                            | Accrued litigation settlements |                                                             |        |       |         |         |        | (1,602 | )      
|                                                                                             |                                                                                            | Deferred revenue               |                                                             |        | 2,617  |         |         |        | (636   | )      
|                                                                                             |                                                                                            | Other, net                     |                                                             |        | (4,847 | )       |         |        | 1,316  |        
|                                                                                             |                                                                                            |                                |                                                             |        |        |         |         |       
|                                                                                             |                                                                                            |                                | Net cash provided by continuing operations                  |        |        | 5,004   |         |        |        | 4,387   |  
|                                                                                             |                                                                                            |                                | Net cash (used for) provided by discontinued
    operations |        |        | (508    | )       |        |        | 2,943   |  
|                                                                                             |                                                                                            |                                |                                                             |        |        |         |         |       
|                                                                                             |                                                                                            |                                | Net cash provided by operating activities                   |        |        | 4,496   |         |        |        | 7,330   |  
|                                                                                             |                                                                                            |                                |                                                             |        |        |         |         |       
|Cash Flows From Investing
    Activities:                                                    |                                                                                            |                                |                                                             |        |        |         |         |       
|Purchases of property and equipment                                                          |                                                                                            |                                | (5,591                                                      | )      |        |         | (2,716  | )     
|Software development costs                                                                   |                                                                                            |                                | (5,615                                                      | )      |        |         | (4,630  | )     
|Proceeds from sale of property and equipment                                                 |                                                                                            |                                | 48                                                          |        |        |         | 1,527   |       
|Acquisitions, net of cash acquired                                                           |                                                                                            |                                | (1,620                                                      | )      |        |         | (10,857 | )     
|Other                                                                                        |                                                                                            |                                |                                                            |        |        |         | (31     | )     
|                                                                                             |                                                                                            |                                |                                                             |        |        |         |         |       
|                                                                                             |                                                                                            |                                | Net cash used for investing activities                      |        |        | (12,778 | )       |        |        | (16,707 | )
|                                                                                             |                                                                                            |                                |                                                             |        |        |         |         |       
|Cash Flows From Financing
    Activities:                                                    |                                                                                            |                                |                                                             |        |        |         |         |       
|Proceeds from the exercise of stock options                                                  |                                                                                            |                                | 681                                                         |        |        |         | 64      |       
|Payments of debt                                                                             |                                                                                            |                                | (53                                                         | )      |        |         | (57     | )     
|Deferred financing costs                                                                     |                                                                                            |                                |                                                            |        |        |         | (228    | )     
|                                                                                             |                                                                                            |                                |                                                             |        |        |         |         |       
|                                                                                             |                                                                                            |                                | Net cash provided by (used for) financing
    activities    |        |        | 628     |         |        |        | (221    | )
|                                                                                             |                                                                                            |                                |                                                             |        |        |         |         |       
|Cash and Cash Equivalents:                                                                   |                                                                                            |                                |                                                             |        |        |         |         |       
|Net change                                                                                   |                                                                                            |                                | (7,654                                                      | )      |        |         | (9,598  | )     
|Balance at beginning of period                                                               |                                                                                            |                                | 36,493                                                      |        |        |         | 30,970  |       
|                                                                                             |                                                                                            |                                |                                                             |        |        |         |         |       
|Balance at end of period                                                                     |                                                                                            | $                              | 28,839                                                      |        |        | $       | 21,372  |       
|                                                                                             |                                                                                            |                                |                                                             |        |        |         |         |       
|Supplemental Disclosures:                                                                    |                                                                                            |                                |                                                             |        |        |         |         |       
|Non-cash investing and financing activities:                                                 |                                                                                            |                                |                                                             |        |        |         |         |       
|                                                                                             | Additions to capital lease obligations                                                     |                                | $                                                           | 1,409  |        |         | $       | 165    |       
|                                                                                             | Liabilities assumed in acquisitions                                                        |                                |                                                             |       |        |         |         | 311    |       
|                                                                                             | Common Stock issued in acquisition                                                         |                                |                                                             |       |        |         |         | 35     |       
|Cash paid for:                                                                               |                                                                                            |                                |                                                             |        |        |         |         |       
|                                                                                             | Interest                                                                                   |                                | $                                                           | 16,781 |        |         | $       | 16,680 |       
|                                                                                             | Income taxes                                                                               |                                |                                                             | 763    |        |         |         | 188    |       

See notes to consolidated financial statements.

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##### Table of Contents



PER-SE TECHNOLOGIES, INC. AND
SUBSIDIARIES






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


Note 1  Basis of
Presentation

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

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

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

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

On January 1, 1998, the Company adopted SFAS
No. 130, Reporting Comprehensive Income. The
Companys net income/(loss), as presented in the
Consolidated Statements of Operations, approximates the
Companys other comprehensive income amount, as defined,
for all periods presented.

Note 2  Earnings (Loss) Per
Share

Basic earnings per share (EPS) is
calculated by dividing net income (loss) by the weighted average
number of shares of common stock outstanding during the period.
Diluted EPS reflects the potential dilution that could occur
from common shares issuable through stock options and warrants.
The following sets forth the computation of basic and diluted
earnings (loss) per share for the three-month and nine-month
periods ended September 30, 2002 and 2001 (in thousands,
except per share data):

|                                  |                                                                          |                    |       |                   |  |      |        |        |     |   |       |        |  |   |        |        |    
|--------------------------------- | ------------------------------------------------------------------------ | ------------------ | ----- | ----------------- |  | ---- | ------ | ------ | --- | - | ----- | ------ |  | - | ------ | ------ | ---
|                                  |                                                                          |                    |       |                  
|                                  |                                                                          | Three Months Ended |       | Nine Months Ended
|                                  |                                                                          | September 30,      |       | September 30,    
|                                  |                                                                          |                    |       |                  
|                                  |                                                                          | 2002               |       | 2001              |  | 2002 |        | 2001  
|                                  |                                                                          |                    |       |                   |  |      |        |       
|Net income (loss)                 |                                                                          | $                  | 1,287 |                   |  | $    | (1,794 | )      |     | $ | 4,608 |        |  | $ | (8,367 | )     
|                                  |                                                                          |                    |       |                   |  |      |        |        |     |   |       |        |  |   |        |       
|Common shares outstanding:        |                                                                          |                    |       |                   |  |      |        |        |     |   |       |        |  |   |        |       
|                                  | Weighted average shares used in computing basic
    earnings per share   |                    |       | 30,083            |  |      |        | 29,914 |     |   |       | 30,041 |  |   |        | 29,907 |    
|                                  | Effect of potentially dilutive stock options and
    warrants            |                    |       | 1,175             |  |      |        |       | (1) |   |       | 2,051  |  |   |        |       | (1)
|                                  |                                                                          |                    |       |                   |  |      |        |        |     |   |       |        |  |   |        |       
|                                  | Weighted average shares used in computing diluted
    earnings per share |                    |       | 31,258            |  |      |        | 29,914 |     |   |       | 32,092 |  |   |        | 29,907 |    
|                                  |                                                                          |                    |       |                   |  |      |        |        |     |   |       |        |  |   |        |       
|Earnings (loss) per common share: |                                                                          |                    |       |                   |  |      |        |        |     |   |       |        |  |   |        |       
|                                  | Basic                                                                    |                    | $     | 0.04              |  |      | $      | (0.06  | )   |   | $     | 0.15   |  |   | $      | (0.28  | )  
|                                  |                                                                          |                    |       |                   |  |      |        |        |     |   |       |        |  |   |        |       
|                                  | Diluted                                                                  |                    | $     | 0.04              |  |      | $      | (0.06  | )   |   | $     | 0.14   |  |   | $      | (0.28  | )  
|                                  |                                                                          |                    |       |                   |  |      |        |        |     |   |       |        |  |   |        |       



---



|    |                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company has excluded all stock options and
    warrants from the diluted loss per common share because such
    securities are antidilutive for 2001.

5



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##### Table of Contents



PER-SE TECHNOLOGIES, INC. AND
SUBSIDIARIES


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

Options and warrants to purchase 3.7 million
and 3.1 million shares of common stock outstanding during
the three and nine months ended September 30, 2002,
respectively, were excluded from the computation of diluted
earnings per share because the exercise prices were greater than
the average market price of the common shares, and therefore,
the effect would have been antidilutive.

Options and warrants to purchase 5.6 million
and 3.0 million shares of common stock outstanding during
the three and nine months ended September 30, 2001,
respectively, were excluded from the computation of diluted
earnings per share due to their antidilutive effect as a result
of the Companys loss from continuing operations for the
period.

Note 3  Restricted
Cash

At September 30, 2002, restricted cash
primarily represents restrictions on the Companys cash as
security for letters of credit.

Note 4  New Accounting
Pronouncements

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets(SFAS
No. 142). SFAS No. 142 requires goodwill and
indefinite lived intangible assets to be reviewed periodically
for impairment and no longer amortized. The Company adopted SFAS
No. 142 on January 1, 2002. SFAS No. 142 required
companies with goodwill and indefinite lived intangible assets
to complete an impairment test by June 30, 2002. The
Company completed the impairment test of its goodwill and other
indefinite lived intangible assets and did not identify an asset
impairment as a result of the impairment test. The Company will
continue to review its goodwill and other indefinite lived
intangible assets annually for impairment as of December 31.

In accordance with SFAS No. 142, the Company
discontinued the amortization of goodwill and indefinite lived
intangible assets effective January 1, 2002. For the three
months and nine months ended September 30, 2002, the
Company had a reduction in amortization expense of approximately
$0.4 million and $1.3 million, respectively, related
to the adoption of SFAS No. 142. For the three months and
nine months ended September 30, 2001, a reconciliation has
been provided of previously reported net loss and net loss per
share amounts. These amounts exclude the amortization expense
recognized related to goodwill and intangible assets that are no
longer amortized (in thousands, except per share data):

|                                 |                                    |                    |       |                   |  |      |        |      |  |   |       |   |  |   |        |       | 
|-------------------------------- | ---------------------------------- | ------------------ | ----- | ----------------- |  | ---- | ------ | ---- |  | - | ----- | - |  | - | ------ | ----- | 
|                                 |                                    |                    |       |                  
|                                 |                                    | Three Months Ended |       | Nine Months Ended
|                                 |                                    | September 30,      |       | September 30,    
|                                 |                                    |                    |       |                  
|                                 |                                    | 2002               |       | 2001              |  | 2002 |        | 2001
|                                 |                                    |                    |       |                   |  |      |        |     
|Reported net income (loss)       |                                    | $                  | 1,287 |                   |  | $    | (1,794 | )    |  | $ | 4,608 |   |  | $ | (8,367 | )    
|Add back:                        |                                    |                    |       |                   |  |      |        |      |  |   |       |   |  |   |        |      
|                                 | Goodwill amortization, net of tax  |                    |       |                  |  |      |        | 558  |  |   |       |  |  |   |        | 1,735 | 
|                                 | Trademark amortization, net of tax |                    |       |                  |  |      |        | 13   |  |   |       |  |  |   |        | 43    | 
|                                 | Workforce amortization, net of tax |                    |       |                  |  |      |        | 10   |  |   |       |  |  |   |        | 33    | 
|                                 |                                    |                    |       |                   |  |      |        |      |  |   |       |   |  |   |        |      
|Adjusted net income (loss)       |                                    | $                  | 1,287 |                   |  | $    | (1,213 | )    |  | $ | 4,608 |   |  | $ | (6,556 | )    
|                                 |                                    |                    |       |                   |  |      |        |      |  |   |       |   |  |   |        |      
|Basic earnings (loss) per share: |                                    |                    |       |                   |  |      |        |      |  |   |       |   |  |   |        |      
|Reported net income (loss)       |                                    | $                  | 0.04  |                   |  | $    | (0.06  | )    |  | $ | 0.15  |   |  | $ | (0.28  | )    
|                                 | Goodwill amortization, net of tax  |                    |       |                  |  |      |        | 0.02 |  |   |       |  |  |   |        | 0.06  | 
|                                 | Trademark amortization, net of tax |                    |       |                  |  |      |        |     |  |   |       |  |  |   |        |      | 
|                                 | Workforce amortization, net of tax |                    |       |                  |  |      |        |     |  |   |       |  |  |   |        |      | 
|                                 |                                    |                    |       |                   |  |      |        |      |  |   |       |   |  |   |        |      
|Adjusted net income (loss)       |                                    | $                  | 0.04  |                   |  | $    | (0.04  | )    |  | $ | 0.15  |   |  | $ | (0.22  | )    
|                                 |                                    |                    |       |                   |  |      |        |      |  |   |       |   |  |   |        |      

6



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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 Ended
|                                   |                                    | September 30,      |      | September 30,    
|                                   |                                    |                    |      |                  
|                                   |                                    | 2002               |      | 2001              |  | 2002 |       | 2001
|                                   |                                    |                    |      |                   |  |      |       |     
|Diluted earnings (loss) per share: |                                    |                    |      |                   |  |      |       |      |  |   |      |   |  |   |       |     
|Reported net income (loss)         |                                    | $                  | 0.04 |                   |  | $    | (0.06 | )    |  | $ | 0.14 |   |  | $ | (0.28 | )   
|                                   | Goodwill amortization, net of tax  |                    |      |                  |  |      |       | 0.02 |  |   |      |  |  |   |       | 0.06 | 
|                                   | Trademark amortization, net of tax |                    |      |                  |  |      |       |     |  |   |      |  |  |   |       |     | 
|                                   | Workforce amortization, net of tax |                    |      |                  |  |      |       |     |  |   |      |  |  |   |       |     | 
|                                   |                                    |                    |      |                   |  |      |       |      |  |   |      |   |  |   |       |     
|Adjusted net income (loss)         |                                    | $                  | 0.04 |                   |  | $    | (0.04 | )    |  | $ | 0.14 |   |  | $ | (0.22 | )   
|                                   |                                    |                    |      |                   |  |      |       |      |  |   |      |   |  |   |       |     

In December 2001, the FASBs Emerging Issues
Task Force (EITF) issued EITF 01-14, Income
Statement Characterization of Reimbursements Received for
Out-of-Pocket Expenses Incurred(EITF 01-14). The Company adopted
EITF 01-14 on January 1, 2002. EITF 01-14
requires companies that provide services as part of their
central ongoing operations to characterize the reimbursement of
out-of-pocket expenses related to those services as revenue. In
prior year periods, reimbursed out-of-pocket expenses were
recorded as a reduction to other operating expenses. In
accordance with EITF 01-14, the Company reclassified
$0.3 million and $0.9 million of reimbursed
out-of-pocket expenses in the Application Software division for
the three months and nine months ended September 30, 2001,
respectively, from other operating expenses to revenue.

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

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections(SFAS No. 145). SFAS
No. 145 rescinds SFAS No. 4, Reporting Gains and
Losses from Extinguishment of Debt, and an amendment of that
statement, SFAS No. 64, Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements. In addition, SFAS
No. 145 rescinds SFAS No. 44, Accounting for
Intangible Assets of Motor Carriers. SFAS No. 145
amends SFAS No. 13, Accounting for Leases, to
eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects similar
to sale-leaseback transactions. SFAS No. 145 also amends
other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their
applicability under changed conditions. SFAS No. 145 is
effective for financial statements issued on or after
May 15, 2002. The Company adopted SFAS No. 145
effective May 15, 2002, however, SFAS No. 145 did not
affect the Companys Consolidated Statements of Operations.

In July 2002, the FASB issued Statement
No. 146, Accounting for Costs Associated with Exit or
Disposal Activities(SFAS No. 146). SFAS
No. 146 addresses the financial accounting and reporting
for costs associated with exit or disposal activities and
nullifies EITF 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an
Activity. SFAS No. 146 requires companies to recognize
costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment

7



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##### Table of Contents



PER-SE TECHNOLOGIES, INC. AND
SUBSIDIARIES


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

to an exit or disposal plan. The effective date
of SFAS No. 146 is December 31, 2002 with early
application encouraged. The Company will adopt SFAS No. 146
on December 31, 2002, however, management does not believe
SFAS No. 146 will have a material effect on the
Companys Consolidated Statements of Operations.

Note 5  Acquisitions

On April 27, 2001, the Company acquired all
of the assets of Virtual Information Systems, Inc.
(VIS) for consideration of $7.0 million in
cash. The purchase agreement also provided for a purchase price
adjustment of up to $1.5 million payable in cash should VIS
meet certain financial targets over the twelve months following
the date of acquisition. As of December 31, 2001, the
Company had recorded the purchase price adjustment of
$1.5 million. During the first quarter of 2002, VIS met the
financial targets in the purchase agreement and accordingly, on
May 10, 2002, the payment for the purchase price adjustment
of $1.5 million was made. VISs core product, Virtual
Processing Systems, is an automated remittance processing
solution for hospitals, which ensures accurate and efficient
processing of cash collections and payment of denial management
codes.

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

Both the VIS and OfficeMed acquisitions were
recorded using the purchase method of accounting and,
accordingly, the purchase price was allocated to the assets
acquired and the liabilities assumed based on their estimated
fair market value at the date of acquisition. Approximately
$5.0 million of the combined purchase price was allocated
to goodwill and other indefinite-lived assets that are not being
amortized. Approximately $5.2 million of the combined
purchase price was allocated to finite-lived assets with 5-year
lives. The additional $1.5 million VIS purchase price
adjustment was allocated to goodwill and is not being amortized.
The operating results of VIS and OfficeMed are included in the
Companys Consolidated Statements of Operations from the
date of acquisition in the e-Health Solutions division.

Note 6  Discontinued
Operations and Divestitures

On November 30, 1998, the Company completed
the sale of its Hospital Services business segment. In 1999, the
Company completed the sale of both divisions of its Impact
business segment.

In January of 1998, SCI Management Corporation
(SCI) filed a complaint against the commercial
division of Impact. The Company paid a total of
$5.3 million in settlement of the complaint. The Company
paid $3.2 million to SCI in November 1999 and issued a
promissory note for the remaining balance of $2.1 million
bearing interest at 8.25%, which was paid in October 2000. In
May of 2001, the Company received an insurance settlement
related to the SCI matter of approximately $3.0 million.
The Company continues to pursue claims against a former vendor
of this division for damages incurred in the SCI matter.

For the period ended September 30, 2002, the
Company charged $0.7 million through discontinued
operations to reflect an agreement resolving an indemnification
claim by NCO Group, Inc. (NCO), the buyer of the
Companys Hospital Services division. When NCO bought
Hospital Services, the Company agreed to indemnify NCO for
limited periods of time in the event NCO incurred certain
damages related to Hospital Services. NCO incurred such damages
in connection with an alleged environmental liability of
Hospital Services, and the Company agreed to reimburse NCO for a
portion of those damages, in satisfaction of the Companys
indemnification obligation. The Company paid $0.3 million
to NCO on September 16, 2002. The Company intends to pay
the remaining balance of $0.4 million, plus interest at the
then-current prime rate, in equal payments to NCO, on the first
and second anniversaries of that date.

8



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##### Table of Contents



PER-SE TECHNOLOGIES, INC. AND
SUBSIDIARIES


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

The limited periods of time for which the Company
agreed to indemnify NCO for most types of claims related to
Hospital Services have passed without the assertion by NCO of
any other significant claims. These limitations do not apply to
a small number of other types of potential claims to which
statutory limitations apply, such as those involving title to
Hospital Services shares, taxes, and billing and coding
under Medicare and Medicaid; however, management believes that
such other types of claims are unlikely to occur.

During the nine months ended September 30,
2002, the Company also incurred expenses of approximately
$0.3 million, which were primarily legal costs, associated
with Hospital Services and Impact. Pursuant to SFAS
No. 144,the consolidated financial statements of
the Company have been presented to reflect the activity
associated with Hospital Services and Impact as discontinued
operations for all periods presented.

Note 7  Legal
Matters

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

In February 2002, the Company settled claims for
alleged breach of contract arising out of a 1997 contract for
billing services provided by the Physician Services division to
a former client. The Company and its insurance carrier, certain
underwriters at Lloyds of London (collectively
Lloyds), each paid the plaintiff
$2.0 million in cash in exchange for a release of all
claims asserted against the Company. Under the terms of its
insurance policy with Lloyds, the Company is seeking
reimbursement from Lloyds for the $2.0 million it
paid in this settlement.

On May 30, 2002, the Company received a
letter on behalf of Lloyds purporting to rescind various
managed healthcare professional liability, or errors and
omissions (E&O), insurance policies and
directors and officers and company reimbursement
(D&O) insurance policies (collectively the
Policies) issued to the Company by Lloyds. The
E&O policies were for the term of December 31, 1998,
through June 30, 2002, and the D&O policies were for
the term of July 1, 2000, through June 30, 2002. The
purported rescission was based on allegations that the Company
had failed to advise Lloyds about the existence of several
lawsuits that were alleged to be related to the risk covered
under the policies, including the lawsuit settled in February
2002 in which the Company and Lloyds each paid the
plaintiff $2.0 million.

On May 31, 2002, Lloyds filed a
lawsuit against the Company seeking rescission of the E&O
and D&O policies based on the allegations in its letter,
dated May 30, 2002, or a declaration that coverage is
unavailable for the claim related to the February 2002
settlement under the policies issued by Lloyds, and
restitution of the $2.0 million paid by Lloyds on
behalf of the Company in that settlement. This lawsuit is
pending in the Circuit Court for Kent County, Michigan.

On June 5, 2002, the Company filed a lawsuit
against Lloyds seeking damages for breach of contract and
breach of obligations of good faith and fair dealing, including
punitive damages. The Company also seeks a declaratory judgment
to enforce the E&O and D&O policies according to their
terms. This lawsuit is pending in the Superior Court of the
State of California for the County of Los Angeles.

The Company believes that Lloyds attempt to
rescind the policies is without merit, and the Company is
prosecuting the matter vigorously and asserting all appropriate
claims against Lloyds.

The Companys insurance coverage for both
the E&O and D&O policies was scheduled to be renewed as
of June 30, 2002, and the Company was in the process of
actively pursuing new coverage with insurance carriers,
including Lloyds, when the rescission notice was received
from Lloyds. Due to the attempted rescission, the Company
expedited its insurance proposal process and the Company secured
new insurance coverage in mid-June. The Company believes it
experienced a significant increase in insurance premiums with

9



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##### Table of Contents



PER-SE TECHNOLOGIES, INC. AND
SUBSIDIARIES


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

its new policies as a result of Lloyds
actions and is seeking reimbursement for a portion of the
increased premium costs and increased deductibles in its lawsuit
against Lloyds. Until the litigation with Lloyds is
resolved, the Company will expense the increased insurance
premiums and deductibles in the Companys Consolidated
Statements of Operations.

The Company estimates insurance premium increases
related to new insurance coverage and the cost of pursuing
litigation against Lloyds to be approximately
$3 million for the year 2002. For the three and nine months
ended September 30, 2002, the Company incurred
$1.3 million and $1.8 million, respectively, of these
costs and, accordingly, these costs have been reflected as an
expense in the Companys Consolidated Statements of
Operations.

The Company has not received any D&O
insurance claims since 1996. The Company did receive E&O
insurance claims during the term of the Lloyds E&O
insurance policies in the ordinary course of business. Over the
last five years, the majority of E&O claims received by the
Company were resolved with nominal or no settlement.

Pending the outcome of the litigation with
Lloyds, the Company will continue to vigorously defend,
and will be required to fund the legal costs and any litigation
settlements covered by the Lloyds E&O policies. The
Company expects to recover these costs from Lloyds in
accordance with the obligations of Lloyds under the
E&O policies and, as such, has recorded and will record the
amounts as non-trade accounts receivable.

At September 30, 2002, the Companys
Other Current Assets include non-trade accounts receivable of
$6.6 million related to the interim funding of legal costs
and litigation settlements incurred by the Company in excess of
the Lloyds E&O policies deductible that are
expected to be recovered from Lloyds. The non-trade
accounts receivable includes $3.5 million paid through
September 30, 2002, and an additional obligation to be paid
of $3.1 million.

The Company believes that it has meritorious
defenses to the Lloyds claims and that a favorable outcome
is probable. The Companys insurance is on a
claims-made basis, which means insurance coverage is
in place based on the date the claim is made, not the date(s)
the services were provided and/or the products were sold. In the
event that the Company is unsuccessful in the litigation with
Lloyds, certain claims presently pending against the
Company would not be covered by the Companys new E&O
insurance. Although the Company believes it will be successful
in its litigation with Lloyds, if it is not and uninsured
claims do exist, such claims, including the non-trade accounts
receivable related to the interim funding of legal costs and
litigation settlements, could have a material adverse effect on
the Companys financial condition and results of
operations. Regardless of the outcome of the litigation with
Lloyds, the Companys new insurance coverage will not
be affected.

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

Note 8  Process Improvement
Project

The Company implemented a process improvement
project within the Physician Services division (the
Project). The Project installed a formalized set of
productivity and quality measures, workflow processes and a
management operating system in the Physician Services
major processing centers. The Project focused on productivity
improvements that result in both improved client service for the
divisions clients as well as improved profitability for
the division. The costs associated with the first phase of the
Project were incurred during 2001 and consisted primarily of
professional fees paid to outside consultants retained
exclusively for implementation of the Project.

10



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##### Table of Contents



PER-SE TECHNOLOGIES, INC. AND
SUBSIDIARIES


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

The Company incurred approximately
$1.2 million and $3.4 million of expense in the three
months and nine months ended September 30, 2001,
respectively, during the first phase of the Project, which
involved implementation in 12 processing centers. The first
phase of the Project was completed in the third quarter of 2001
with all external project costs for this phase incurred as of
September 30, 2001. The second phase of the Project, which
began in the first quarter of 2002, was completed as of
September 30, 2002 with implementation into an additional
15 processing centers. The second phase was implemented
with internal resources, and therefore the Company did not incur
any external project costs.

Note 9  Non-Recurring and Other
Expenses

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

Note 10  Long-Term Debt

Under the Indenture governing the
$175 million of 9 1/2% Senior Notes due 2005 (the
Notes), the balance of net proceeds, as defined by
the Indenture governing the Notes, from the sale of any assets
having a fair value in excess of $1.0 million must be
invested in the Companys business within 360 days of
receipt of proceeds related to the sale or they become
excess proceeds. If the aggregate of excess proceeds
is greater than $10.0 million, the Company is required to
offer to repurchase the Notes at par with such excess proceeds.
As of September 30, 2002, the Company did not have excess
proceeds (as defined by the Indenture governing the Notes) in
excess of $10.0 million.

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

The Credit Facility contains financial,
collateral and other restrictive covenants, including, without
limitation, those restricting the incurrence of additional
indebtedness, creation of liens, payment of dividends, sales of
assets, stock offerings, capital expenditures, cash velocity,
maximum days sales outstanding and prepayment of the Notes and
those requiring maintenance of minimum EBITDA and minimum fixed
charge coverage, each as defined in the Credit Facility. At
September 30, 2002, the Company was in compliance with all
applicable covenants. The initial term of the Credit Facility is
42 months expiring on October 6, 2004. The Company and
the lender can mutually agree to extend this term by
18 months if certain conditions have been met. The Company
intends to use the Credit Facility, as needed, for future
investments in its operations including capital expenditures,
acquisitions and other general corporate purposes. The Company
has not incurred any borrowings under the Credit Facility and
there were no outstanding borrowings under the Credit Facility
as of September 30, 2002.

Note 11  Income Taxes

Income tax expense, which was primarily related
to state and local income taxes, was $0.2 million for the
three months ended September 30, 2002, as compared to
income tax expense of $0.1 million for the same period in
2001. As of September 30, 2002, the Company had a net
deferred tax asset, which was fully offset by a valuation
allowance. Realization of the net deferred tax asset is
dependent upon the Company generating sufficient taxable income
prior to the expiration of the federal net operating loss
carryforwards. The Company

11



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##### Table of Contents



PER-SE TECHNOLOGIES, INC. AND
SUBSIDIARIES


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

will adjust this valuation reserve accordingly
if, during future periods, management believes the Company will
generate sufficient taxable income to realize the net deferred
tax asset.

Note 12  Segment
Reporting

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

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

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

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

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

12



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##### Table of Contents



PER-SE TECHNOLOGIES, INC. AND
SUBSIDIARIES


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

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

|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |         |  
|------------------------------------------------------------------------------------- | -------------------- | ------------------ | ------ | ----------------- | - | ---- | ------ | ------ | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                      |                      |                    |        |                  
|                                                                                      |                      | Three Months Ended |        | Nine Months Ended
|                                                                                      |                      | September 30,      |        | September 30,    
|                                                                                      |                      |                    |        |                  
|                                                                                      |                      | 2002               |        | 2001              |   | 2002 |        | 2001  
|                                                                                      |                      |                    |        |                   |   |      |        |       
|                                                                                      |                      |                    |        |                  
|                                                                                      |                      | (in thousands)     |        | (in thousands)   
|Revenue:                                                                              |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|                                                                                      | Physician Services   |                    | $      | 59,520            |   |      | $      | 55,488 |   |   | $       | 174,591 |   |   | $       | 167,940 |  
|                                                                                      | Application Software |                    |        | 16,105            |   |      |        | 14,697 |   |   |         | 48,589  |   |   |         | 44,673  |  
|                                                                                      | e-Health Solutions   |                    |        | 17,632            |   |      |        | 14,988 |   |   |         | 50,474  |   |   |         | 41,811  |  
|                                                                                      | Eliminations         |                    |        | (3,327            | ) |      |        | (2,943 | ) |   |         | (9,400  | ) |   |         | (8,415  | )
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|                                                                                      |                      | $                  | 89,930 |                   |   | $    | 82,230 |        |   | $ | 264,254 |         |   | $ | 246,009 |        
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|Segment operating expenses(1):                                                        |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|                                                                                      | Physician Services   |                    | $      | 52,573            |   |      | $      | 51,744 |   |   | $       | 157,547 |   |   | $       | 159,846 |  
|                                                                                      | Application Software |                    |        | 14,112            |   |      |        | 13,543 |   |   |         | 41,944  |   |   |         | 41,154  |  
|                                                                                      | e-Health Solutions   |                    |        | 15,420            |   |      |        | 13,273 |   |   |         | 43,699  |   |   |         | 39,106  |  
|                                                                                      | Corporate            |                    |        | 4,246             |   |      |        | 2,684  |   |   |         | 10,688  |   |   |         | 8,364   |  
|                                                                                      | Eliminations         |                    |        | (3,327            | ) |      |        | (2,943 | ) |   |         | (9,400  | ) |   |         | (8,415  | )
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|                                                                                      |                      | $                  | 83,024 |                   |   | $    | 78,301 |        |   | $ | 244,478 |         |   | $ | 240,055 |        
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|Segment operating margin(1):                                                          |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|                                                                                      | Physician Services   |                    | $      | 6,947             |   |      | $      | 3,744  |   |   | $       | 17,044  |   |   | $       | 8,094   |  
|                                                                                      | Application Software |                    |        | 1,993             |   |      |        | 1,154  |   |   |         | 6,645   |   |   |         | 3,519   |  
|                                                                                      | e-Health Solutions   |                    |        | 2,212             |   |      |        | 1,715  |   |   |         | 6,775   |   |   |         | 2,705   |  
|                                                                                      | Corporate            |                    |        | (4,246            | ) |      |        | (2,684 | ) |   |         | (10,688 | ) |   |         | (8,364  | )
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|                                                                                      |                      | $                  | 6,906  |                   |   | $    | 3,929  |        |   | $ | 19,776  |         |   | $ | 5,954   |        
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|Interest expense, net                                                                 |                      | $                  | (4,514 | )                 |   | $    | (4,385 | )      |   | $ | (13,476 | )       |   | $ | (12,742 | )      
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|Non-recurring and other expenses (including
    process improvement project expenses) |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|                                                                                      | Physician Services   |                    | $      |                  |   |      | $      | (1,247 | ) |   | $       |        |   |   | $       | (3,405  | )
|                                                                                      | Corporate            |                    |        |                  |   |      |        | 30     |   |   |         |        |   |   |         | (611    | )
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|                                                                                      |                      | $                  |       |                   |   | $    | (1,217 | )      |   | $ |        |         |   | $ | (4,016  | )      
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|Income (loss) from continuing operations before
    income taxes                      |                      | $                  | 2,392  |                   |   | $    | (1,673 | )      |   | $ | 6,300   |         |   | $ | (10,804 | )      
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|Depreciation and amortization:                                                        |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|                                                                                      | Physician Services   |                    | $      | 2,619             |   |      | $      | 2,670  |   |   | $       | 8,011   |   |   | $       | 8,536   |  
|                                                                                      | Application Software |                    |        | 1,622             |   |      |        | 1,781  |   |   |         | 4,810   |   |   |         | 5,387   |  
|                                                                                      | e-Health Solutions   |                    |        | 1,325             |   |      |        | 1,616  |   |   |         | 4,081   |   |   |         | 4,457   |  
|                                                                                      | Corporate            |                    |        | 240               |   |      |        | 239    |   |   |         | 697     |   |   |         | 852     |  
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        
|                                                                                      |                      | $                  | 5,806  |                   |   | $    | 6,306  |        |   | $ | 17,599  |         |   | $ | 19,232  |        
|                                                                                      |                      |                    |        |                   |   |      |        |        |   |   |         |         |   |   |         |        

13



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PER-SE TECHNOLOGIES, INC. AND
SUBSIDIARIES


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

|                                                                     |                      |                    |       |                   |  |      |       |       |  |   |        |       |  |   |       |       | 
|-------------------------------------------------------------------- | -------------------- | ------------------ | ----- | ----------------- |  | ---- | ----- | ----- |  | - | ------ | ----- |  | - | ----- | ----- | 
|                                                                     |                      |                    |       |                  
|                                                                     |                      | Three Months Ended |       | Nine Months Ended
|                                                                     |                      | September 30,      |       | September 30,    
|                                                                     |                      |                    |       |                  
|                                                                     |                      | 2002               |       | 2001              |  | 2002 |       | 2001 
|                                                                     |                      |                    |       |                   |  |      |       |      
|                                                                     |                      |                    |       |                  
|                                                                     |                      | (in thousands)     |       | (in thousands)   
|Capital expenditures and capitalized software
    development costs: |                      |                    |       |                   |  |      |       |       |  |   |        |       |  |   |       |      
|                                                                     | Physician Services   |                    | $     | 852               |  |      | $     | 496   |  |   | $      | 2,925 |  |   | $     | 1,127 | 
|                                                                     | Application Software |                    |       | 1,171             |  |      |       | 1,271 |  |   |        | 3,871 |  |   |       | 3,691 | 
|                                                                     | e-Health Solutions   |                    |       | 1,090             |  |      |       | 918   |  |   |        | 4,048 |  |   |       | 2,480 | 
|                                                                     | Corporate            |                    |       | 41                |  |      |       | 41    |  |   |        | 362   |  |   |       | 48    | 
|                                                                     |                      |                    |       |                   |  |      |       |       |  |   |        |       |  |   |       |      
|                                                                     |                      | $                  | 3,154 |                   |  | $    | 2,726 |       |  | $ | 11,206 |       |  | $ | 7,346 |      
|                                                                     |                      |                    |       |                   |  |      |       |       |  |   |        |       |  |   |       |      

|                     |                      |                |         |              |  |   |         |        | 
|-------------------- | -------------------- | -------------- | ------- | ------------ |  | - | ------- | ------ | 
|                     |                      |               
|                     |                      | As of         
|                     |                      |               
|                     |                      | September 30,  |         | December 31,
|                     |                      | 2002           |         | 2001        
|                     |                      |                |         |             
|                     |                      |               
|                     |                      | (in thousands)
|Identifiable assets: |                      |                |         |              |  |   |         |       
|                     | Physician Services   |                | $       | 53,204       |  |   | $       | 55,812 | 
|                     | Application Software |                |         | 40,218       |  |   |         | 33,172 | 
|                     | e-Health Solutions   |                |         | 67,508       |  |   |         | 65,713 | 
|                     | Corporate            |                |         | 44,473       |  |   |         | 48,194 | 
|                     |                      |                |         |              |  |   |         |       
|                     |                      | $              | 205,403 |              |  | $ | 202,891 |       
|                     |                      |                |         |              |  |   |         |       



---



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

14



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

General

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

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

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

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

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

Results of Operations



| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | Three months ended September 30, 2002,
    as compared to three months ended September 30,
    2001

Revenue.Revenue
classified by the Companys reportable segments
(divisions) is as follows:

|                     |  |                    |        |      |  |   |        |  
|-------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                     |  |                   
|                     |  | Three Months Ended
|                     |  | September 30,     
|                     |  |                   
|                     |  | 2002               |        | 2001
|                     |  |                    |        |     
|                     |  |                   
|                     |  | (in thousands)    
|Physician Services   |  | $                  | 59,520 |      |  | $ | 55,488 |  
|Application Software |  |                    | 16,105 |      |  |   | 14,697 |  
|e-Health Solutions   |  |                    | 17,632 |      |  |   | 14,988 |  
|Eliminations         |  |                    | (3,327 | )    |  |   | (2,943 | )
|                     |  |                    |        |      |  |   |        |  
|                     |  | $                  | 89,930 |      |  | $ | 82,230 |  
|                     |  |                    |        |      |  |   |        |  

Revenue for the Physician Services division
increased approximately 7% in the three months ended
September 30, 2002, as compared to the same period in 2001.
There was one more business day in the three months ended
September 30, 2002, as compared to the three months ended
September 30, 2001. Revenue per business day for the three
months ended September 30, 2002, increased by approximately
6% over the same three months of the prior year. The revenue
increase is due to growth in the existing client base and new
sales. The Company continued to experience client retention in
the mid-90% range during the three months ended

15



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##### Table of Contents



September 30, 2002. Net backlog at
September 30, 2002, was approximately $5 million,
compared to approximately $1 million at June 30, 2002.
Net backlog represents the annualized revenue related to new
contracts signed with the business still to be implemented, less
the annualized revenue related to existing contracts where
discontinuance notification has been received.


Revenue for the Application Software division
increased approximately 10% for the three months ended
September 30, 2002, as compared to the same period in 2001.
Revenue in the division is recognized using the
percentage-of-completion method of accounting, and the increase
over the prior year period was primarily the result of
implementations of clinical information and patient financial
management software that was sold in 2001. The division ended
September 30, 2002, with a backlog of approximately
$45 million as compared to approximately $41 million
at June 30, 2002.

In December 2001, the Financial Accounting
Standards Boards (FASB) Emerging Issues Task
Force (EITF) issued EITF 01-14 Income Statement
Characterization of Reimbursements Received for
Out-of-Pocket Expenses Incurred(EITF
01-14). The Company adopted EITF 01-14 on January 1,
2002. EITF 01-14 requires companies that provide services as
part of their central ongoing operations to characterize the
reimbursement of out-of-pocket expenses related to those
services as revenue. In prior periods, reimbursed out-of-pocket
expenses were recorded as a reduction to other operating
expenses. In accordance with EITF 01-14, the Company
reclassified $0.3 million of reimbursed out-of-pocket
expenses in the Application Software division for the three
months ended September 30, 2001, from other operating
expenses to revenue.

Revenue for the e-Health Solutions division
increased approximately 18% for the three months ended
September 30, 2002, as compared to the same period in 2001.
The revenue growth is a result of increased transaction volume
from the divisions existing customer base and the addition
of new customers.

The e-Health Solutions division revenue includes
intersegment revenue for services provided to the Physician
Services division, which is shown in Eliminations to reconcile
to total consolidated revenue.

Segment Operating Margin.Segment operating margin is net
income/(loss) excluding net interest expense, income taxes and
discontinued operations, net of income taxes, for all periods
presented. For the three months ended September 30, 2001,
segment operating margin also excluded the process improvement
project expenses and non-recurring and other expenses. Segment
operating margin, classified by the Companys divisions, is
as follows:

|                     |  |                    |        |      |  |   |        |  
|-------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                     |  |                   
|                     |  | Three Months Ended
|                     |  | September 30,     
|                     |  |                   
|                     |  | 2002               |        | 2001
|                     |  |                    |        |     
|                     |  |                   
|                     |  | (in thousands)    
|Physician Services   |  | $                  | 6,947  |      |  | $ | 3,744  |  
|Application Software |  |                    | 1,993  |      |  |   | 1,154  |  
|e-Health Solutions   |  |                    | 2,212  |      |  |   | 1,715  |  
|Corporate            |  |                    | (4,246 | )    |  |   | (2,684 | )
|                     |  |                    |        |      |  |   |        |  
|                     |  | $                  | 6,906  |      |  | $ | 3,929  |  
|                     |  |                    |        |      |  |   |        |  

Physician Services segment operating margin
increased $3.2 million in the three months ended
September 30, 2002, compared to the same period in 2001.
The increase is due to efficiencies and cost savings realized
from the productivity and other initiatives implemented, as well
as revenue gains in the division.

Application Softwares segment operating
margin increased $0.8 million in the three months ended
September 30, 2002, compared to the same period in 2001.
The increase is attributable to the revenue increase previously
discussed, as well as improved leverage on operating expenses
that resulted from managements continued focus on overall
cost containment.

e-Health Solutions segment operating margin
increased $0.5 million in the three months ended
September 30, 2002, compared to the same period in 2001.
This increase is attributable to the revenue increase previously
discussed as well as the decrease in goodwill amortization
expense of approximately

16



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##### Table of Contents



$0.4 million related to the Companys
adoption of the FASB Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets(SFAS No. 142) on January 1, 2002 (for
more information refer to Note 4  New
Accounting Pronouncements in the Companys Notes to
Consolidated Financial Statements). The increase was negatively
impacted by approximately $0.2 million related to the
write-off of certain software development costs.


The Companys corporate overhead expenses
increased $1.6 million in the three months ended
September 30, 2002, compared to the same period in 2001.
The increase is primarily attributable to increased insurance
premiums and legal expenses of $1.3 million related to
Lloyds attempt to rescind certain insurance policies
(refer to Note 7  Legal Matters in the
Companys Notes to Consolidated Financial Statements for
more information).

Interest.Net
interest expense was $4.5 million for the three months
ended September 30, 2002, as compared to $4.4 million
for the same period in 2001. The increase is attributable to a
decrease in investment rates available on short-term cash
investments.

Process Improvement Project.The Company implemented a process
improvement project within the Physician Services division (the
Project). The Project installed a formalized set of
productivity and quality measures, workflow processes and a
management operating system in certain of Physician
Services major processing centers. The Project focused on
productivity improvements that result in both improved client
service for the divisions clients as well as improved
profitability for the division. The costs associated with the
first phase of the Project during 2001 primarily consisted of
professional fees paid to outside consultants retained
exclusively for implementation of the Project.

The Company incurred approximately
$1.2 million of expense in the three months ended
September 30, 2001, during the first phase of the Project,
which involved implementation in 12 processing centers. The
first phase of the Project was completed in the third quarter of
2001 with all external project costs for this phase, amounting
to approximately $3.4 million, incurred as of
September 30, 2001. The second phase of the Project, which
began in the first quarter of 2002, was completed as of
September 30, 2002, with implementation into an additional
15 processing centers. The second phase was implemented with
internal resources, and therefore the Company did not incur any
external project costs.

Income Taxes.Income
tax expense, which was primarily related to state and local
income taxes, was $0.2 million for the three months ended
September 30, 2002, as compared to income tax expense of
$0.1 million for the same period in 2001. As of
September 30, 2002, the Company had a net deferred tax
asset, which was fully offset by a valuation allowance.
Realization of the net deferred tax asset is dependent upon the
Company generating sufficient taxable income prior to the
expiration of the federal net operating loss carryforwards. The
Company will adjust this valuation reserve accordingly if,
during future periods, management believes the Company will
generate sufficient taxable income to realize the net deferred
tax asset.



| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Nine months ended September 30, 2002,
    as compared to the nine months ended September 30,
    2001

Revenue.Revenue
classified by the Companys reportable segments
(divisions) is as follows:

|                     |  |                   |         |      |  |   |         |  
|-------------------- |  | ----------------- | ------- | ---- |  | - | ------- | -
|                     |  |                  
|                     |  | Nine Months Ended
|                     |  | September 30,    
|                     |  |                  
|                     |  | 2002              |         | 2001
|                     |  |                   |         |     
|                     |  |                  
|                     |  | (in thousands)   
|Physician Services   |  | $                 | 174,591 |      |  | $ | 167,940 |  
|Application Software |  |                   | 48,589  |      |  |   | 44,673  |  
|e-Health Solutions   |  |                   | 50,474  |      |  |   | 41,811  |  
|Eliminations         |  |                   | (9,400  | )    |  |   | (8,415  | )
|                     |  |                   |         |      |  |   |         |  
|                     |  | $                 | 264,254 |      |  | $ | 246,009 |  
|                     |  |                   |         |      |  |   |         |  

17



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##### Table of Contents



Revenue for the Physician Services division
increased approximately 4% in the nine months ended
September 30, 2002, as compared to the same period in 2001.
The increase in revenue is due to growth in the existing client
base and new sales. The Company continued to experience client
retention in the mid-90% range during the nine months ended
September 30, 2002. Net backlog at September 30, 2002,
was approximately $5 million, compared to approximately $2
million at September 30, 2001.

Revenue for the Application Software division
increased approximately 9% for the nine months ended
September 30, 2002, as compared to the same period in 2001.
Revenue in the division is recognized using the
percentage-of-completion method of accounting, and the increase
over the prior year period was primarily the result of
implementations of clinical information and patient financial
management software that was sold in 2001. The division ended
September 30, 2002, with a backlog of approximately
$45 million as compared to approximately $41 million
at September 30, 2001.

In accordance with EITF 01-14, the Company
reclassified $0.9 million of reimbursed out-of-pocket
expenses in the Application Software division for the nine
months ended September 30, 2001, from other operating
expenses to revenue.

Revenue for the e-Health Solutions division
increased approximately 21% for the nine months ended
September 30, 2002, as compared to the same period in 2001.
Excluding the impact of the April 2001 acquisitions of VIS and
OfficeMed, the year-over-year increase in revenue would have
been approximately 19%. The increase in the base business is due
to increased market penetration as well as sales of additional
products into the divisions existing customer base.

The e-Health Solutions division revenue includes
intersegment revenue for services provided to the Physician
Services division, which is shown in Eliminations to reconcile
to total consolidated revenue.

Segment Operating Margin.Segment operating margin is net
income/(loss) excluding net interest expense, income taxes and
discontinued operations, net of income taxes, for all periods
presented. For the nine months ended September 30, 2001,
segment operating margin also excluded the process improvement
project expenses and non-recurring and other expenses. Segment
operating margin, classified by the Companys divisions, is
as follows:

|                     |  |                   |         |      |  |   |        |  
|-------------------- |  | ----------------- | ------- | ---- |  | - | ------ | -
|                     |  |                  
|                     |  | Nine Months Ended
|                     |  | September 30,    
|                     |  |                  
|                     |  | 2002              |         | 2001
|                     |  |                   |         |     
|                     |  |                  
|                     |  | (in thousands)   
|Physician Services   |  | $                 | 17,044  |      |  | $ | 8,094  |  
|Application Software |  |                   | 6,645   |      |  |   | 3,519  |  
|e-Health Solutions   |  |                   | 6,775   |      |  |   | 2,705  |  
|Corporate            |  |                   | (10,688 | )    |  |   | (8,364 | )
|                     |  |                   |         |      |  |   |        |  
|                     |  | $                 | 19,776  |      |  | $ | 5,954  |  
|                     |  |                   |         |      |  |   |        |  

Physician Services segment operating margin
increased $9.0 million in the nine months ended
September 30, 2002, compared to the same period in 2001.
The increase is due to efficiencies and cost savings realized
from the productivity and other initiatives implemented, as well
as revenue gains in the division.

Application Softwares segment operating
margin increased $3.1 million in the nine months ended
September 30, 2002, compared to the same period in 2001.
The increase is attributable to the revenue increase previously
discussed, as well as improved leverage on operating expenses
that resulted from managements continued focus on overall
cost containment.

e-Health Solutions segment operating margin
increased $4.1 million in the nine months ended
September 30, 2002, compared to the same period in 2001.
This increase is attributable to the revenue increase previously
discussed, the impact of the VIS and OfficeMed acquisitions and
the decrease in goodwill amortization expense of approximately
$1.3 million related to the Companys adoption of the
SFAS No. 142

18



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##### Table of Contents



(for more information refer to Note 4
 New Accounting Pronouncements in the Companys
Notes to Consolidated Financial Statements).


The Companys corporate overhead expenses
increased $2.3 million in the nine months ended
September 30, 2002, compared to the same period in 2001.
The increase was primarily attributable to increased insurance
premiums and legal expenses of $1.8 million related to
Lloyds attempt to rescind certain insurance policies
(refer to Note 7  Legal Matters in the
Companys Notes to Consolidated Financial Statements for
more information).

Interest.Net
interest expense was $13.5 million for the nine months
ended September 30, 2002, as compared to $12.7 million
for the same period in 2001. The increase is attributable to a
reduction in interest income due to a decrease in investment
rates available on short-term cash investments.

Process Improvement Project.The Company incurred approximately
$3.4 million of expense in the nine months ended
September 30, 2001, during the first phase of the Project,
which involved implementation in 12 processing centers. The
first phase of the Project was completed in the third quarter of
2001 with all external project costs for this phase, amounting
to approximately $3.4 million, incurred as of
September 30, 2001. The second phase of the Project, which
began in the first quarter of 2002, was completed as of
September 30, 2002,with implementation into an additional
15 processing centers. The second phase was implemented with
internal resources, and therefore the Company did not incur any
external project costs.

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

Income Taxes.Income
tax expense, which was primarily related to state and local
income taxes, was $0.7 million for the nine months ended
September 30, 2002, as compared to income tax expense of
$0.5 million for the same period in 2001. As of
September 30, 2002, the Company had a net deferred tax
asset, which was fully offset by a valuation allowance.
Realization of the net deferred tax asset is dependent upon the
Company generating sufficient taxable income prior to the
expiration of the federal net operating loss carryforwards. The
Company will adjust this valuation reserve accordingly if,
during future periods, management believes the Company will
generate sufficient taxable income to realize the net deferred
tax asset.

Liquidity and Capital Resources

As of September 30, 2002, the Company had
working capital of $35.8 million compared to
$24.3 million at December 31, 2001. The increase in
working capital is primarily related to the increase in accounts
receivable and the $6.6 million increase in other current
assets related to the Companys litigation with
Lloyds (refer to Note 7  Legal
Matters in the Companys Notes to Consolidated
Financial Statements for more information). Restricted cash
totaled $4.3 million as of September 30, 2002, and
$4.4 million as of December 31, 2001. Restricted cash
primarily represents restrictions on the Companys cash as
security for letters of credit. Unrestricted cash and cash
equivalents totaled $28.8 million at September 30,
2002, a decrease of $7.7 million compared to December 31,
2001.

Cash provided by continuing operations was
$5.0 million in the nine months ended September 30,
2002, compared to cash provided by continuing operations in the
nine months ended September 30, 2001, of $4.4 million.

The Company used $12.8 million in cash for
investing activities during the nine months ended
September 30, 2002, compared to $16.7 million during
the same period in 2001. The decrease in cash used for
investment activities was primarily related to investments in
strategic acquisitions made during the first nine months of 2001
partially offset by an increased level of capital spending in
2002.

Cash provided by financing activities was
$0.6 million in the nine months ended September 30,
2002, compared to cash used for financing activities of
$0.2 million in the same period in 2001. The increase in
cash was primarily attributable to proceeds from the exercise of
stock options in the nine months ended

19



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##### Table of Contents



September 30, 2002, compared to deferred
financing costs related to the Company initiating a credit
facility in April 2001.


For more information about the Companys
long-term debt, refer to Note 10  Long-Term
Debt in the Companys Notes to Consolidated Financial
Statements.

The Company is in litigation with certain
underwriters at Lloyds of London
(Lloyds) following an attempt by Lloyds
to rescind certain of the Companys insurance policies
(refer to Note 7  Legal Matters in the
Companys Notes to Consolidated Financial Statements for
more information). The Company estimates insurance premium
increases related to new insurance coverage and the cost of
pursuing litigation against Lloyds to be approximately
$3 million for the year 2002. For the three and nine months
ended September 30, 2002, the Company had incurred
approximately $1.3 million and $1.8 million,
respectively, of these costs and, accordingly, these costs have
been reflected in the Companys Consolidated Statements of
Operations.

In addition, pending the outcome of the
litigation with Lloyds, the Company will fund the legal
costs and any litigation settlements covered by the E&O
policies. The Company expects to recover these costs from
Lloyds and will reflect the amounts as a non-trade
accounts receivable. As of September 30, 2002, the
Companys cash flow has been negatively impacted by
$3.5 million related to these costs. The Company believes
it will be successful in its litigation with Lloyds and,
therefore, that it will recover these costs when the litigation
process is complete, which the Company currently estimates to be
in 2003.

The negative impact of these items on the
Companys full year cash flow is projected to be
approximately $7 million to $9 million, which consists
of approximately $3 million related to insurance premium
increases for new insurance coverage and the cost of pursuing
litigation against Lloyds and approximately
$4 million to $6 million related to the funding of
legal costs and litigation settlements covered by the E&O
policies. As of September 30, 2002, cash flow has been
negatively impacted by approximately $5.4 million, which
includes funding of legal costs and litigation settlements in
excess of the policies deductibles and the cost of
increased insurance premiums.

20



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##### Table of Contents



Forward-Looking Statements

Certain statements included in the Notes to
Consolidated Financial Statements, Managements Discussion
and Analysis of Financial Condition and Results of Operations,
and elsewhere in this report including but not limited to
certain statements set forth under the captions
Note 6  Discontinued Operations and
Divestitures, Note 7  Legal
Matters, Note 8  Process Improvement
Project, Note 10  Long-Term
Debt, Note 11  Income Taxes,
Results of Operations and Liquidity and
Capital Resources, are forward-looking
statements within the meaning of the Securities Act of
1933 and the Securities Exchange Act of 1934, as amended by the
Private Securities Litigation Reform Act of 1995.
Forward-looking statements include the Companys
expectations with respect to meritorious defenses to the claims
and other issues asserted in pending legal matters, the effect
of industry and regulatory changes on the Companys
customer base, the impact of revenue backlog on future revenue,
the impact of operational improvement or cost reduction
initiatives, projected cost savings from such initiatives,
operating margins, overall profitability and the availability of
capital. Although the Company believes that the statements it
has made are based on reasonable assumptions, they are based on
current information and beliefs and, accordingly, the Company
can give no assurance that its expectations will be achieved. In
addition, these statements are subject to factors that could
cause actual results to differ materially from those suggested
by the forward-looking statements. These factors include, but
are not limited to, factors identified below under the caption
Factors That May Affect Future Results of Operations,
Financial Condition or Business. The Company disclaims any
responsibility to update any forward-looking statements.

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



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

The business management outsourcing business,
especially surrounding the areas of billings and collections, is
highly competitive. The Company competes with regional and local
physician reimbursement organizations, and physician groups that
provide their own business management services. Successful
competition within this industry is dependent on numerous
industry and market conditions. An increase in the number of
competitors providing comparable services could adversely affect
the Companys ability to compete within this industry.



| |                                                      
| | -----------------------------------------------------
| | Competition with Information Technology
    Companies

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



| |                                                                 
| | ----------------------------------------------------------------
| | Competition with Electronic Transaction
    Processing Companies

The business of providing electronic transaction
processing services to physicians and hospitals is also highly
competitive. The Company competes with national and regional
electronic transaction processing companies in this regard. Some
competitors have longer operating histories and greater
financial, technical and marketing resources than that of the
Company. The Companys successful competition within this
industry is dependent on numerous industry and market conditions.



| |                      
| | ---------------------
| | Major Client Projects

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

21



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##### Table of Contents





| |                                   
| | ----------------------------------
| | Changes in the Healthcare Industry

The markets for the Companys software and
e-commerce products and services as well as our business
management outsourcing services are characterized by rapidly
changing technology, evolving industry standards and frequent
new product introductions. The Companys ability to keep
pace with changes in the healthcare industry may be dependent on
a variety of factors, including its ability to enhance existing
products and services, introduce new products and services
quickly and cost effectively, achieve market acceptance for new
products and services, and respond to emerging industry
standards and other technological changes.

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



| |                                 
| | --------------------------------
| | Consolidation in the Marketplace

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

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



| |                       
| | ----------------------
| | Government Regulations

The healthcare industry is highly regulated and
is subject to changing political, economic and regulatory
influences. For example, the Balanced Budget Act of 1997, which
made changes to Medicare and Medicaid, has had a significant
influence on the healthcare industry due to limitations on
reimbursement, resulting cost containment initiatives, and its
effect on pricing and demand for capital-intensive systems.
Rules under the Health Information Portability and
Accountability Act of 1996 (HIPAA), which requires
standardized electronic transaction processing and extensive
security and privacy measures to ensure the protection of
patient health information, also have had a significant
influence. These regulatory influences affect the purchasing
practices and other aspects of business operations of healthcare
industry participants.

Federal and state legislatures periodically
consider programs to reform or amend the U.S. healthcare system
at both the federal and state level and to change healthcare
financing and reimbursement systems. These programs may contain
proposals to increase governmental involvement in healthcare,
lower reimbursement rates or otherwise change the environment in
which healthcare industry participants operate. Such proposals
may affect our business. Healthcare industry participants may
respond by reducing their investments or postponing investment
decisions, including investments in the Companys products
and services.

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

Federal and state civil and criminal laws also
govern the collection, use, storage and disclosure of health
information. The Company handles such information during the
course of its activities. Federal or state governments may
impose civil and criminal penalties for noncompliance with these
laws. Persons who believe their health information has been
misused or disclosed improperly may bring claims, and payers who
believe

22



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instances of noncompliance with privacy and
security standards have occurred may bring administrative
sanctions or remedial actions against offending parties.


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



| |     
| | ----
| | Debt

The Company has a significant amount of long-term
indebtedness that matures in February 2005. As a result, the
Company has obligations to make semiannual interest payments on
that debt and to repay the entire principal amount upon
maturity. If unable to make the required debt payments, the
Company could be required to reduce or delay capital
expenditures, sell certain assets, restructure or refinance its
indebtedness or seek additional equity capital. The
Companys ability to make payments on its debt obligations
will depend on future operating performance, which will be
affected by certain conditions that are beyond the
Companys control.



| |           
| | ----------
| | Litigation

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

The Company may not be able successfully to
resolve such legal matters, or other legal matters that may
arise in the future. In the event of an adverse outcome with
respect to such legal matters or other legal matters in which
the Company may become involved, its insurance coverage, product
liability coverage or otherwise, may not fully cover any damages
assessed against the Company. Although the Company maintains all
insurance coverage in amounts that it believes is sufficient for
its business, there can be no assurance that such coverage will
prove to be adequate or that such coverage will continue to
remain available on acceptable terms, if at all. In the event
that the Company is unsuccessful in its ongoing litigation with
Lloyds, certain claims presently pending against the
Company would not be covered by insurance (refer to
Note 7  Legal Matters in the
Companys Notes to Consolidated Financial Statements for
more information). A successful claim brought against the
Company, which is uninsured or under-insured, could materially
harm its business, results of operations or financial condition.



| |                       
| | ----------------------
| | Stock Price Volatility

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






|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

The Companys Chief Executive Officer and
Chief Financial Officer have evaluated the Companys
disclosure controls and procedures as of a date within
90 days of the filing date of this report and have

23



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##### Table of Contents



concluded that these disclosure controls and
procedures operate effectively to support the certifications
required of such officers in this report.


There were no significant changes in internal
controls or in other factors that could significantly affect the
Companys internal controls subsequent to the date of the
most recent evaluation of these internal controls.

24



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##### Table of Contents






PART II: OTHER INFORMATION




Item 1.     Legal
Proceedings

The information required by this Item is included
in Note 7  Legal Matters of Notes to
Consolidated Financial Statements in Item 1 of Part I.




Item 6.     Exhibits
and Reports on Form 8-K

(A) Exhibits

|        |   |    |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | - | -- |  | -------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |    |  |         
|Number  |   |    |  | Document
|        |   |    |  |         
|        | 2 | .1 |  |         |  | Stock Purchase Agreement dated as of
    October 15, 1998, between Registrant and NCO Group, Inc.
    (incorporated by reference to Exhibit 2.1 to Quarterly
    Report on Form 10-Q for the quarter ended
    September 30, 1998).                                                                                                                                                                     
|        | 2 | .2 |  |         |  | Stock Purchase Agreement dated as of
    April 20, 1999, among Complete Business Solutions, Inc.,
    E-Business Solutions.com, Inc., Impact Innovations Holdings,
    Inc. and Registrant (incorporated by reference to
    Exhibit 2.1 to Current Report on Form 8-K filed on
    May 5, 1999).                                                                                                       
|        | 2 | .3 |  |         |  | Stock Purchase Agreement dated as of
    November 4, 1999, among J3 Technology Services Corp.,
    Impact Innovations Holdings, Inc., Impact Innovations Government
    Group, Inc. and Registrant (incorporated by reference to
    Exhibit 2.3 to Quarterly Report on Form 10-Q for the
    quarter ended September 30, 1999).                                                                        
|        | 2 | .4 |  |         |  | Stock Purchase Agreement dated as of
    December 8, 2000, among Registrant, Health Data Services,
    Inc., Patient Account Management Services, Inc., and Marc
    Saltzberg, Raymond DelBrocco, Charles Moore, and Larry Shaw
    (incorporated by reference to Exhibit 2.1 to Current Report
    on Form 8-K filed on December 20, 2000).                                                           
|        | 2 | .5 |  |         |  | Asset Purchase Agreement dated as of
    April 27, 2001, among Registrant, Health Data Services,
    Inc., Virtual Information Systems, Inc., and Paul M.
    Helmick and William T. Adams (incorporated by reference to
    Exhibit 2.5 to Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2001).                                                                                    
|        | 2 | .6 |  |         |  | Asset Purchase Agreement dated as of
    April 27, 2001, among Registrant, Per-Se Transaction
    Services, Inc., officemed.com LLC, SoftLinc, Inc., and Daniel
    Mansfield (incorporated by reference to Exhibit 2.6 to
    Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2001).                                                                                                 
|        | 3 | .1 |  |         |  | Restated Certificate of Incorporation of
    Registrant (incorporated by reference to Exhibit 3.1 to
    Annual Report on Form 10-K for the year ended
    December 31, 1999 (the 1999 Form 10-K)).                                                                                                                                                                                                   
|        | 3 | .2 |  |         |  | Restated By-laws of Registrant (incorporated by
    reference to Exhibit 3.2 to the 1999 Form 10-K).                                                                                                                                                                                                                                                                                                    
|        | 4 | .1 |  |         |  | Indenture dated as of February 20, 1998,
    among Registrant, as Issuer, the Subsidiary Guarantors named in
    the Indenture and State Street Bank and Trust Company, as
    Trustee (including form of note) (incorporated by reference to
    Exhibit 10.3 to Current Report on Form 8-K filed on
    March 3, 1998).                                                                               
|        | 4 | .2 |  |         |  | Warrant Agreement dated as of July 8, 1998,
    between Registrant and SunTrust Bank, Atlanta, as Warrant Agent
    (including form of warrant certificate) (incorporated by
    reference to Exhibit 4.2 to Registration Statement on
    Form 8-A filed on July 21, 1998).                                                                                                                            
|        | 4 | .3 |  |         |  | Settlement Agreement dated as of June 24,
    1999, by and among Lori T. Caudill, William J.
    DeZonia, Carol T. Shumaker, Alyson T. Stinson,
    James F. Thacker, James F. Thacker Retained Annuity
    Trust, Paulanne H. Thacker Retained Annuity Trust and
    Borrower (incorporated by reference to Exhibit 10.1 to
    Quarterly Report on Form 10-Q for the quarter ended
    June 30, 1999).
|        | 4 | .4 |  |         |  | Rights Agreement dated as of February 11,
    1999, between Registrant and American Stock Transfer &
    Trust Company (including form of rights certificates)
    (incorporated by reference to Exhibit 4 to Current Report
    on Form 8-K filed on February 12, 1999).                                                                                                                               
|        | 4 | .5 |  |         |  | First Amendment to Rights Agreement dated as of
    February 11, 1999, between Registrant and American Stock
    Transfer & Trust Company, entered into as of
    May 4, 2000 (incorporated by reference to Exhibit 4.4
    to Quarterly Report of Form 10-Q for the quarter ended
    March 31, 2000).                                                                                                 

25



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##### Table of Contents



|        |    |    |  |          |  |                                                                                                                                                                                                                                                                                                                                                 
|------- | -- | -- |  | -------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    |  |         
|Number  |    |    |  | Document
|        |    |    |  |         
|        | 4  | .6 |  |         |  | Second Amendment to Rights Agreement dated as of
    February 11, 1999, between Registrant and American Stock
    Transfer & Trust Company, entered into as of
    December 6, 2001, to be effective as of March 6, 2002
    (incorporated by reference to Exhibit 4.12 to Annual Report
    on Form 10-K for the year ended December 31, 2001).
|        | 10 | .1 |  |         |  | First Amendment to Credit Agreement dated as of
    April 6, 2001, among the Registrant, General Electric
    Capital Corporation, as Lender and Agent, and the other Credit
    Parties signatory thereto, entered into as of August 30,
    2002.                                                                                             
|        | 10 | .2 |  |         |  | Fourth Amendment to the Per-Se Technologies
    Employees Retirement Savings Plan.                                                                                                                                                                                                                                                             

(B) Reports on Form 8-K

The Company did not file any reports on
Form 8-K during the quarter ended September 30, 2002.

26



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##### Table of Contents






SIGNATURES

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



| |                          
| | -------------------------
| | PER-SE TECHNOLOGIES, INC.
| | (Registrant)             



| |     |                     
| | --- | --------------------
| | By: | /s/ CHRIS E. PERKINS

| |                             
| | ----------------------------
| |                             
| | Chris E. Perkins            
| | Executive Vice President and
| | Chief Financial Officer     



| |     |                     
| | --- | --------------------
| | By: | /s/ MARY C. CHISHOLM

| |                               
| | ------------------------------
| |                               
| | Mary C. Chisholm              
| | Vice President and Controller 
| | (Principal Accounting Officer)

Date: November 7, 2002

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CERTIFICATIONS

I, Philip M. Pead, certify that:



| |                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this quarterly report on Form 10-Q of Per-Se Technologies,
    Inc.;                                                                                                                                                                                                                                                              
|
| | 2.     Based on my
    knowledge, this quarterly report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this quarterly
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this quarterly report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this quarterly report;                       
|
| | 4.     The
    registrants other certifying officers and I are
    responsible for establishing and maintaining disclosure controls
    and procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and we have:                                                                                                             



| |                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officers and I have
    disclosed, based on our most recent evaluation, to the
    registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officers and I have indicated
    in this quarterly report whether or not there were significant
    changes in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions
    with regard to significant deficiencies and material weaknesses.



| |                                           
| | ------------------------------------------
| | /s/ PHILIP M. PEAD                        
| |                                           
| | Philip M. Pead                            
| | President, Chief Executive Officer
    and
| | Director                                  

Date: November 7, 2002

28



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##### Table of Contents



CERTIFICATIONS

I, Chris E. Perkins, certify that:



| |                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this quarterly report on Form 10-Q of Per-Se Technologies,
    Inc.;                                                                                                                                                                                                                                                              
|
| | 2.     Based on my
    knowledge, this quarterly report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this quarterly
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this quarterly report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this quarterly report;                       
|
| | 4.     The
    registrants other certifying officers and I are
    responsible for establishing and maintaining disclosure controls
    and procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and we have:                                                                                                             



| |                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officers and I have
    disclosed, based on our most recent evaluation, to the
    registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officers and I have indicated
    in this quarterly report whether or not there were significant
    changes in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions
    with regard to significant deficiencies and material weaknesses.



| |                             
| | ----------------------------
| | /s/ CHRIS E. PERKINS        
| |                             
| | Chris E. Perkins            
| | Executive Vice President and
| | Chief Financial Officer     

Date: November 7, 2002

29



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##### Table of Contents






INDEX TO EXHIBITS

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

30