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                                                                   EXHIBIT 10.12










                            SEPARATION AGREEMENT

                               BY AND BETWEEN

                            MEDAPHIS CORPORATION

                                     AND

                         HEALTHCARE RECOVERIES, INC.


                                      



                           DATED AS OF MAY 28, 1997



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                            SEPARATION AGREEMENT

                                      

        THIS SEPARATION AGREEMENT, dated as of the IPO Effective Date, is
entered into by and between Medaphis and HRI. Capitalized terms used in this
Agreement and not otherwise defined shall have the respective meanings assigned
to them in Section 1.

        WHEREAS, the Board of Directors of Medaphis has determined that it is
appropriate and desirable for Medaphis to sell for its account all of the
shares of HRI Common Stock owned by Medaphis; and

        WHEREAS, it is appropriate and desirable to set forth certain
agreements of the parties in connection with the Separation.

        NOW, THEREFORE, the parties agree as follows:

        Section 1.        Definitions.

        For the purpose of this Agreement the following terms shall have the
following meanings:

        "Action" means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.

        "Affiliate" of any Person means a Person that controls, is controlled
by, or is under common control with such Person. As used herein, "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such entity, whether through
ownership of voting securities or other interests, by contract or otherwise.

        "Agreement" means this Separation Agreement, including all of the
Schedules.

        "Ancillary Agreements" means any and all supplemental and other
agreements and instruments contemplated by this Agreement or entered into in
connection with this Agreement.

        "Arbitration Act" means the Federal Arbitration Act, 9 U.S.C. Sections
1-14, as the same may be amended from time to time.

        "Arbitration Demand Date" has the meaning set forth in Section 20.3.


                                    
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        "Arbitration Demand Notice" has the meaning set forth in Section 20.3.

        "Closing" means the receipt by Medaphis of the proceeds of the IPO in
accordance with the terms of the Underwriting Agreement.

        "Closing Date" means the date on which the Closing occurs.

        "Code" means the Internal Revenue Code of 1986, as amended.

        "Commission" means the Securities and Exchange Commission.

        "CPR" means the Center for Public Resources.

        "Environmental Law" means any federal, state, local, foreign or
international statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, common law (including tort and environmental
nuisance law), legal doctrine, order, judgment, decree, injunction, requirement
or agreement with any Governmental Authority, now or hereafter in effect
relating to health, safety, pollution or the environment (including ambient
air, surface water, groundwater, land surface or subsurface strata) or to
emissions, discharges, releases or threatened releases of any substance
currently or at any subsequent time listed, defined, designated or classified
as hazardous, toxic, waste, radioactive or dangerous, or otherwise regulated,
under any of the foregoing, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any such substances, including the Comprehensive Environmental
Response, Compensation and Liability Act, the Superfund Amendments and
Reauthorization Act and the Resource Conservation and Recovery Act and
comparable provisions in state, local, foreign or international law.

        "Environmental Liabilities" means all Liabilities relating to, arising
out of or resulting from any Environmental Law or contract or agreement
relating to environmental, health or safety matters (including all removal,
remediation or cleanup costs, investigatory costs, governmental response costs,
natural resources damages, property damages, personal injury damages, costs of
compliance with any settlement, judgment or other determination of Liability
and indemnity, contribution or similar obligations) and all costs and expenses
(including allocated costs of in-house counsel and other personnel), interest,
fines, penalties or other monetary sanctions in connection with such
liabilities.

        "Escalation Notice" has the meaning set forth in Section 20.2.

        "Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated under the Exchange Act.

        "GAAP" means generally accepted accounting principles.


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        "Governmental Authority" shall mean any federal, state, local, foreign
or international court, government, department, commission, board, bureau,
agency, official or other regulatory, administrative or governmental authority.

        "HRI" means Healthcare Resources, Inc., a Delaware corporation.

        "HRI Audited Balance Sheet" means the audited balance sheet of HRI,
including the notes thereto, as of December 31, 1996, a copy of which is
included in the Registration Statement when it becomes effective.

        "HRI April 30 Balance Sheet" means the unaudited balance sheet of HRI
as of April 30, 1997, prepared in accordance with GAAP on a basis consistent
with the preparation of the HRI Audited Balance Sheet.

        "HRI Common Stock" means the Common Stock, $0.001 par value per share,
of HRI.

        "HRI Indemnitees" has the meaning set forth in Section 15.3.

        "Indemnifying Party" has the meaning set forth in Section 15.4.

        "Indemnitee" has the meaning set forth in Section 15.4.

        "Indemnity Payment" has the meaning set forth in Section 15.4.

        "Information" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.

        "Insurance Proceeds" means those monies:

        (a)      received by an insured from an insurance carrier;

        (b)      paid by an insurance carrier on behalf of the insured; or


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        (c) received (including by way of set off) from any third party in the
nature of insurance, contribution or indemnification in respect of any
Liability; in any such case net of any applicable premium adjustments
(including reserves and retrospectively rated premium adjustments) and net of
any costs or expenses (including allocated costs of in-house counsel and other
personnel) incurred in the collection of proceeds.

        "IPO" means the public offering for sale by Medaphis of shares of HRI
Common Stock pursuant to the IPO Registration Statement.

        "IPO Effective Date" means May __, 1997, which is the date on which the
IPO Registration Statement was declared effective by the Commission.

        "IPO Registration Statement" means the registration statement,
Registration No. 333-23287, on Form S-1 filed under the Securities Act,
pursuant to which the HRI Common Stock to be sold in the IPO has been
registered.

        "Liabilities" means any and all losses, claims, charges, debts,
demands, actions, causes of action, suits, damages, obligations, costs and
expenses, including those arising under any law, rule, regulation, Action,
threatened or contemplated Action (including the costs and expenses of demands,
assessments, judgments, settlements and compromises relating thereto and
attorneys' fees and any and all costs and expenses (including allocated costs
of in-house counsel and other personnel) whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or threatened or
contemplated Actions), order or consent decree of any Governmental Authority or
any award of any arbitrator or mediator of any kind.

        "Medaphis" means Medaphis Corporation, a Delaware corporation.

        "Medaphis Group" means Medaphis and each Person (other than HRI) that
is an Affiliate of Medaphis immediately after the Closing Date.

        "Medaphis Indemnitees" has the meaning set forth in Section 17.2.

        "Person" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a
limited liability entity, any other entity and any Governmental Authority.

        "Prime Rate" means the rate which SunTrust Bank (or any successor or
other major money center commercial bank agreed to by the parties) announces
from time to time as its prime lending rate, as in effect from time to time.

        "Prospectus" means each preliminary, final or supplemental prospectus
forming a part of the IPO Registration Statement.


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        "Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated under the Securities Act.

        "Separation" means the transactions, arrangements and agreements
embodied in this Agreement entered into by the parties in preparation for the
sale by Medaphis of all HRI Common Stock held by Medaphis.

        "Subsidiary" of any Person means any corporation or other organization
whether incorporated or unincorporated of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person or by any one or more
of its Subsidiaries, or by such Person and one or more of its Subsidiaries;
provided, however that no Person that is not directly or indirectly wholly
owned by any other Person shall be a Subsidiary of such other Person unless
such other Person controls, or has the right, power or ability to control, that
Person.

        "Tax" or "Taxes" means all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise,
property, sales, withholding, social security, occupations, use, service,
service use, license, payroll, franchise, transfer and recording taxes, fees
and charges, imposed by the United States, or any state, local or foreign
government or subdivision or agency thereof, whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest, fines, penalties or additional amounts attributable to or imposed
on or with respect to any such taxes, charges, fees, levies or other
assessments.

        "Third Party Claim" has the meaning set forth in Section 15.5

        "Underwriters" means the managing Underwriters for the IPO.

        "Underwriting Agreement" means the underwriting agreement entered into
among Medaphis, HRI and the Underwriters with respect to the IPO.

        Section 2. Effect of Agreement. This Agreement is being executed and
delivered on the IPO Effective Date to memorialize actions that have been taken
by the parties prior to the IPO Effective Date in connection with the
Separation, and to govern the conduct of the parties subsequent to the IPO
Effective Date as to the matters addressed in this Agreement. If the Closing
does not occur, this Agreement shall terminate.


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        Section 3.        HRI Stockholders' Equity and Net Tangible Assets.

        3.1   HRI April 30, 1997 Balance Sheet. A copy of the HRI April 30, 1997
Balance Sheet is attached as Schedule 3.1. As of April 30, 1997, as reflected
in the HRI April 30, 1997 Balance Sheet, the stockholders' equity of HRI was
not less than $4,100,000, and the net tangible assets of HRI were not less than
$4,100,000. After December 31, 1996 and prior to April 30, 1997, Medaphis and
HRI took the following actions affecting HRI's stockholders' equity and net
tangible assets:

            (a) On May 19, 1997 (the "Dividend Date"), HRI declared 
        a dividend to Medaphis in the amount of $8,559,727, which dividend
        was paid by means of satisfaction of the account receivable from 
        Medaphis on the books of HRI in the amount of $8,599,727 (no cash
        owed or to be paid to Medaphis under this Section 3.1(a)).

            (b)  From the HRI April 30, 1997 Balance Sheet, HRI 
        transferred to Medaphis from time to time all of HRI's 
        unrestricted cash on hand in excess of cash required for working 
        capital. Such transfers were effected by transferring all of 
        HRI's cash to Medaphis, with Medaphis then providing funds as 
        necessary for HRI's working capital requirements, by HRI's 
        funding its working capital requirements and transferring excess 
        cash to Medaphis, or by a combination of the foregoing, as was 
        convenient from time to time. 

            (c) On or before the Closing Date, HRI will declare a
        dividend in the amount equal to stockholders' equity of HRI on
        April 30, 1997 (the Balance Sheet date) minus $4,100,000, which
        dividend equals $601,194. The dividend will be paid and evidenced 
        by HRI's non-interest bearing promissory note due on the earlier 
        of (i) thirty days after the Closing Date and (ii) the date on 
        which HRI receives net proceeds from exercise of the Underwriters' 
        over-allotment option in an amount equal to or greater than the 
        amount of such dividend.

        3.2  Closing Date Stockholders' Equity and Net Tangible Assets.
Medaphis shall take such actions as shall be necessary, including, without
limitation, any required contribution to capital, so that, at the Closing Date,
(i) the stockholders' equity of HRI is not less than $4,100,000, and the net
tangible assets of HRI are not less than $4,100,000, in each case as determined
in accordance with GAAP on a basis consistent with the determination thereof in
connection with the HRI Audited Balance Sheet, (ii) the assets of HRI do not
include any indebtedness of Medaphis to HRI (except for obligations expressly
created by this Agreement and any Ancillary Agreements), and (iii) the
liabilities of HRI do not include any indebtedness of HRI 

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to Medaphis (except for obligations expressly created by this Agreement and
any Ancillary Agreements). The parties acknowledge and agree that, as of the
Closing Date, HRI's unrestricted cash on hand is not likely to exceed a nominal 
amount, and that there is no requirement that Medaphis take any action to
cause HRI's unrestricted cash on hand to be any particular amount. Prior to the
Closing Date, Medaphis shall be entitled to all unrestricted cash of HRI
subject to the restrictions set forth in the first sentence of this Section
3.2.


                  Section 4.        Certain Tax Matters.


        4.1  Federal Income Tax Returns. Medaphis will include the income of
HRI (including any deferred income required to be recognized under Treasury
Regulation ss. 1.1502-13 and any excess loss account taken into income under
Treasury Regulation ss. 1.1502-19) on the Medaphis consolidated federal income
tax returns for all periods from August 29, 1995 through the Closing Date and
will pay all Taxes assessed with respect to such consolidated federal income
tax returns. HRI will furnish all information reasonably required by Medaphis
for inclusion in Medaphis' federal consolidated income tax returns in
accordance with HRI's past custom and practice. Medaphis will allow HRI an
opportunity to review and comment on such federal consolidated income tax
returns (including any amended returns) to the extent they relate to HRI. HRI
will include its income on its separate federal income tax returns for all
taxable periods ended on or before August 28, 1995, and all taxable periods
beginning after the Closing Date. The income of HRI will be apportioned to the
period up to and including the Closing Date and the period after the Closing
Date by closing the books of HRI as of the end of the Closing Date, unless
Medaphis and HRI elect ratable allocation pursuant to Treasury Regulation ss.
1.1502-76(b)(2)(ii).

        4.2  State, Local and Foreign Income Tax and Other Tax Returns. Medaphis
and HRI will file their tax returns for state, local and foreign income tax
purposes and all other Tax returns on a separate basis and shall be separately
responsible for all Taxes assessed with respect to such returns.

        4.3  Audits. Medaphis will allow HRI and its counsel to participate at
HRI's own expense in any audits of the consolidated federal income tax returns
of Medaphis to the extent that such returns relate to HRI. Medaphis will not
settle any such audit in a manner that would adversely affect HRI after the
Closing Date unless such settlement would be reasonable in the case of a person
that owned HRI both before and after the Closing Date.

        4.4  Post-Closing Elections. At Medaphis' request, HRI will make or
join with Medaphis in making any election for Tax purposes if the making of
such election does not have a material adverse impact on HRI for any taxable
period after the Closing Date.

        4.5  Termination of Other Tax Sharing Agreements.  Any Tax sharing or
allocation agreements between Medaphis and HRI other than this Agreement shall
terminate on the Closing Date.


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        Section 5.        Insurance Matters.

        5.1  New Policies. As of the respective dates indicated on Schedule
5.1, HRI obtained binders for the new business insurance policies listed on
such Schedule, which policies by their terms became or become effective no
later than the Closing Date. HRI is responsible for paying all premiums
required under such policies, and to the extent any such premiums became due
prior to the IPO Effective Date HRI has paid such premiums.

        5.2  Tail Coverages. HRI is or has been a named insured under various
blanket business insurance policies owned by Medaphis that in their current
forms are listed on Schedule 5.2 (the "Medaphis Blanket Policies"). Medaphis
has made available to HRI the opportunity to purchase extended discovery period
coverage for the benefit of HRI under the Medaphis Blanket Policies, and HRI
has purchased the extended discovery period coverages listed on Schedule 5.2.

        5.3  Refunds. The parties acknowledge that certain of the premiums paid
by Medaphis under the Medaphis Blanket Policies are subject to reduction after
the applicable insurer audits the related claims history. Refunds reflecting
any such reductions shall be solely for the account of Medaphis, and HRI shall
have no claim with respect thereto. To the extent that HRI receives any such
refund, HRI shall immediately pay it over to Medaphis.

        5.4  Workers' Compensation. Effective as of Closing Date (the "WC
Switch Date"), HRI obtained the workers' compensation insurance arrangements
described on Schedule 5.4, and HRI shall be solely responsible for all workers'
compensation claims of HRI employees incurred after the WC Switch Date. As of
the WC Switch Date, Medaphis' recorded reserve for workers' compensation claims
by HRI employees was $51,736.36 (which amount, plus that amount of reserve to
be determined within one month of the date hereof by Medaphis' insurance
carrier with respect to those HRI employees who have reported or filed claims
prior to the WC Switch Date but whose claims are not reflected in the
$51,736.36 figure, are referred to as the "WC Reserve"). Medaphis shall be
solely responsible for all workers' compensation claims of HRI employees
incurred before the WC Switch Date, whether or not reported before such date,
to the extent that such claims do not exceed the WC Reserve. HRI shall be
solely responsible for all workers' compensation claims of HRI employees
incurred before the WC Switch Date, whether or not reported before such date,
to the extent that such claims exceed the WC Reserve.

        Section 6.  Telecommunications Services. Since April 25, 1997 (the
"Telecom Switch Date"), HRI has obtained telecommunications services,
separately billed from Medaphis, from one or more vendors selected by HRI. To
the extent known at the date of the HRI April 30, 1997 Balance Sheet,
telecommunications charges incurred by HRI prior to the Telecom Switch Date
were taken into account and charged to HRI in determining the amount of the
account payable from Medaphis to HRI as of that date that is referred to in
Section 3.1(b). Subject to Medaphis' obligation under Section 3.2, to the
extent that, as of the Closing Date, the parties have been able to identify
telecommunications charges incurred by HRI prior to the Telecom Switch Date
that have not been previously taken into account, HRI shall reimburse Medaphis
for such charges on the Closing Date. The parties have diligently attempted to
identify all telecommunications charges incurred by HRI prior to the Telecom
Switch Date, to minimize any need to settle such charges after the Closing
Date. Upon presentation by Medaphis of reasonable 

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supporting documentation after the Closing Date, HRI will reimburse
Medaphis for any telecommunications charges incurred by HRI prior to the Telecom
Switch Date and not previously taken into account as of the Closing Date or the
date of the HRI April 30, 1997 Balance Sheet.

        Section 7.  Pittsburgh Telephone Equipment. On the Closing Date,
Medaphis shall execute and deliver to HRI a bill of sale transferring to HRI,
free and clear of any lien or other encumbrance, the assets identified on
Schedule 7 relating to the telephone system in HRI's Pittsburgh, Pennsylvania
offices. The parties acknowledge that such assets originally were acquired by
HRI and later were included as collateral in a financing lease facility
obtained by Medaphis, the lien of which shall be released as contemplated by
Section 8 and title to which shall be (if necessary) transferred to HRI.

        Section 8.  Lien and Guaranty Releases. It is the parties' intention
that, from and after the Closing Date, (a) no assets (including, without
limitation, cash balances in bank accounts and rights as lessee) or capital
stock of HRI will be subject to any lien, security interest, mortgage or other
encumbrance relating to any indebtedness of Medaphis or of any member of the
Medaphis Group, and (b) HRI will have no obligation, as guarantor or otherwise,
for any indebtedness of Medaphis or of any member of the Medaphis Group. To
that end, the parties have conducted a lien search in all jurisdictions deemed
by them to be relevant, and have otherwise diligently attempted to identify all
such liens and guaranties. Medaphis shall cause all such liens and guaranties
to be released on or before the Closing Date. If, after the Closing Date, any
lien or guaranty is discovered that encumbers any asset or capital stock of
HRI, or under which HRI has any obligation, and that relates to any
indebtedness of Medaphis or of any member of the Medaphis Group, Medaphis shall
take all actions that shall be necessary to obtain the release of such lien or
guaranty.

        Section 9.  Asset Transfer. As of the Closing Date, Medaphis shall
execute and deliver to HRI a quitclaim bill of sale, transferring to HRI any
interest Medaphis might have in any of the assets used by HRI in the conduct of
its business.

        Section 10.  Payroll. Since May 2, 1997 (the "Payroll Switch Date") and
effective for the payroll period ended April 26, 1997, HRI has obtained,
separately from Medaphis, payroll and employment tax administrative services
from one or more vendors selected by HRI and approved by Medaphis. Since the
Payroll Switch Date, HRI has borne all costs relating to payroll services for
its employees and has funded all payroll costs incurred with respect to its
employees. In determining the amount of the account due from Medaphis to HRI
that has been addressed as described in Section 3.1(b), the parties have taken
into account the obligation of HRI to fund all payroll related costs after the
Payroll Switch Date. Without limiting the foregoing, the parties have taken
such steps as they have deemed to be appropriate to cause HRI to have the
benefit of any deposits of payroll or withholding taxes for periods prior to
the Payroll Switch Date, to the extent that, under applicable law and
regulations, HRI will have liability for such taxes.

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        Section 11.  Purchases of Goods and Services. Prior to the IPO
Effective Date, those vendors specified by Medaphis that have supplied goods or
services to HRI through Medaphis' centralized purchasing program have
been notified that, from and after the Closing Date, all goods and services
ordered by HRI are for the account of HRI and that Medaphis has no obligation
with respect thereto. To the extent deemed appropriate by HRI, on or prior to
the Closing Date HRI shall enter into purchase contracts with such vendors,
under which Medaphis shall have no liability. Any purchases made by HRI prior
to the date of the HRI April 30, 1997 Balance Sheet through Medaphis'
centralized purchasing program were taken into account in the settlement
referred to in Section 3.1(b). Any such purchases made by HRI since such date
shall be paid for by HRI on or prior to the Closing Date, subject to Medaphis'
obligation set forth in Section 3.2.

        Section 12.  Bank Accounts/Cash Management. Prior to the IPO Effective
Date, HRI has established such bank accounts as it deems to be necessary to
conduct its business (and/or, with the assistance of Medaphis, has amended the
authorizations relating to mutually agreed existing bank accounts so that they
are controlled exclusively by HRI personnel), and all authorizations, standing
wire instructions and the like relating to HRI's participation in Medaphis'
cash management system have been terminated.

        Section 13.  Employee Benefit Plans. Simultaneously with the execution
of this Agreement, HRI and Medaphis have executed the Agreement Respecting
Employee Benefits Matters attached as Schedule 13, which agreement constitutes
the agreement between HRI and Medaphis with respect to employee benefit aspects
of the Separation.

        Section 14.  Termination of Agreements. Except for this Agreement and
any Ancillary Agreements, in furtherance of the Separation, HRI and Medaphis
hereby terminate any and all agreements, arrangements, commitments or
understandings, whether or not in writing, between or among HRI, on the one
hand, and Medaphis and/or any member of the Medaphis Group, on the other hand,
effective as of the Closing Date.

        Section 15.  Mutual Releases; Indemnification.

        15.1  Release of Pre-Closing Claims. (a) Except as provided in Section
15.1(c), effective as of the Closing Date, HRI does, for itself and its
successors and assigns, remise, release and forever discharge Medaphis, the
members of the Medaphis Group, their respective Affiliates (other than HRI),
successors and assigns, and all Persons who at any time prior to the Closing
Date have been shareholders, directors, officers, agents or employees of any
member of the Medaphis Group (in each case, in their respective capacities as
such), and their respective heirs, executors, administrators, successors and
assigns, from any and all Liabilities to HRI, whether at law or in equity
(including any right of contribution), whether arising under any contract or
agreement, by operation of law or otherwise, existing or arising from any acts
or

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events occurring or failing to occur or alleged to have occurred or to have
failed to occur or any conditions existing or alleged to have existed on or
before the Closing Date.

        (b)  Except as provided in Section 15.1(c), effective as of the Closing
Date, Medaphis does, for itself and each other member of the Medaphis Group,
their respective Affiliates (other than HRI), successors and assigns, remise,
release and forever discharge HRI, and all Persons who at any time prior to the
Closing Date have been shareholders, directors, officers, agents or employees
of HRI (in each case, in their respective capacities as such), and their
respective heirs, executors, administrators, successors and assigns, from any
and all Liabilities to Medaphis or any of the Medaphis Group, whether at law or
in equity (including any right of contribution), whether arising under any
contract or agreement, by operation of law or otherwise, existing or arising
from any acts or events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions existing or alleged to
have existed on or before the Closing Date.

        (c)  Nothing contained in Section 15.1(a) or (b) shall impair any
obligation under this Agreement or any Ancillary Agreement or any right of any
Person to enforce this Agreement or any Ancillary Agreement.

        15.2  Indemnification by HRI. Except as provided in Section 15.4, HRI
shall indemnify, defend and hold harmless Medaphis, each member of the Medaphis
Group and each of their respective directors, officers and employees, and each
of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Medaphis Indemnitees"), from and against any and all
Liabilities of the Medaphis Indemnitees relating to, arising out of or
resulting from any of the following items (without duplication):

             (i)   the conduct by HRI of its business after the Closing Date;
              
             (ii)  the conduct by HRI of its business prior to August 28, 1995;
        and
              
             (iii) any breach by HRI of this Agreement or any Ancillary 
        Agreement;
              
             (iv)  Taxes incurred by HRI, or arising with respect to the 
        business conducted by HRI, during or with respect to any and all 
        periods ending on or prior to August 28, 1995, or after the Closing 
        Date.

        15.3  Indemnification by Medaphis. Medaphis shall indemnify, defend and
hold harmless HRI, and each of its directors, officers and employees, and each
of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "HRI Indemnitees"), from and against any and all Liabilities
of the HRI Indemnitees relating to, arising out of or resulting from any of the
following items (without duplication):


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             (i)   the conduct by Medaphis or any member of the Medaphis Group,
        of its business at any time;

             (ii)  any breach by Medaphis or any member of the Medaphis Group of
        this Agreement or any Ancillary Agreement; and

             (iii)  federal income Taxes incurred by, or arising with respect 
        to the business conducted by, HRI or any member of the Medaphis Group,
        and state and local income and other Tax liabilities relating to 
        Medaphis or any member of the Medaphis Group, during or with respect 
        to any and all periods ending after August 28, 1995 and on or prior to
        the Closing Date.


        15.4   Indemnification Obligations Net of Insurance Proceeds and Other
Amounts.  The parties intend that any Liability subject to indemnification or
reimbursement pursuant to this Section 15 will be net of Insurance Proceeds.

        15.5  Procedures for Indemnification of Third Party Claims. (a) If an
Indemnitee shall receive notice or otherwise learn of the assertion by a Person
of any claim or of the commencement by any such Person of any Action
(collectively, a "Third Party Claim") with respect to which an Indemnifying
Party may be obligated to provide indemnification to such Indemnitee pursuant
to Section 15.2 or 15.3, or any other Section of this Agreement or any
Ancillary Agreement, such Indemnitee shall give such Indemnifying Party written
notice within 20 days after becoming aware of such Third Party Claim. Any such
notice shall describe the Third Party Claim in reasonable detail.
Notwithstanding the foregoing, the failure of any Indemnitee or other Person to
give notice as provided in this Section 15.5(a) shall not relieve the related
Indemnifying Party of its obligations under this Section 15, except to the
extent that such Indemnifying Party is actually prejudiced by such failure to
give notice.

        (b)  An Indemnifying Party may elect to defend (and to seek to settle
or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days after
the receipt of notice from an Indemnitee in accordance with Section 15.5(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee whether the Indemnifying Party will assume
responsibility for defending such Third Party Claim.

        (c)  If an Indemnifying Party elects not to assume responsibility for
defending a Third Party Claim, or fails to notify an Indemnitee of its election
as provided in Section 15.5(d), such Indemnitee may defend such Third Party
Claim at the cost and expense (including allocated costs of in-house counsel
and other personnel) of the Indemnifying Party.

        (d)  Unless the Indemnifying Party has failed to assume the defense of
the Third Party Claim in accordance with the terms of this Agreement, no
Indemnitee may settle or compromise any Third Party Claim without the consent
of the Indemnifying Party.

                                   - 12 -

<PAGE>   14

        (e)  No Indemnifying Party shall consent to entry of any judgment or
enter into any settlement of the Third Party Claim without the consent of the
Indemnitee if the effect thereof is to permit any injunction, declaratory
judgment, other order or other nonmonetary relief to be entered, directly or
indirectly, against any Indemnitee.

        15.6  Additional Matters. (a) Any claim on account of a Liability that
does not result from a Third Party Claim shall be asserted by written notice
given by the Indemnitee to the related Indemnifying Party. Such Indemnifying
Party shall have a period of 30 days after the receipt of such notice within
which to respond. If such Indemnifying Party does not respond within such
30-day period, such Indemnifying Party shall be deemed to have refused to
accept responsibility to make payment. If such Indemnifying Party does not
respond within such 30-day period or rejects such claim in whole or in part,
such Indemnitee shall be free to pursue such remedies as may be available to
such party as contemplated by this Agreement and any Ancillary Agreement.

        (b)  In the event of payment by or on behalf of any Indemnifying Party
to any Indemnitee in connection with any Third Party Claim, such Indemnifying
Party shall be subrogated to and shall stand in the place of such Indemnitee as
to any events or circumstances in respect of which such Indemnitee may have any
right, defense or claim relating to such Third Party Claim against any claimant
or plaintiff asserting such Third Party Claim or against any other person. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner,
and at the cost and expense (including allocated costs of in-house counsel and
other personnel) of such Indemnifying Party, in prosecuting any subrogated
right, defense or claim.

        15.7  Remedies Cumulative.  The remedies provided in this Section 15
shall be cumulative and shall not preclude assertion by any Indemnitee of any
other rights or the seeking of any and all other remedies against any
Indemnifying Party.

        15.8  Survival of Indemnities. The rights and obligations of each of
Medaphis and HRI and their respective Indemnitees under this Section 15 shall
survive the Closing for a period of three years.

        15.9  Certain HRI Directors. Medaphis shall, by a separate agreement,
indemnify those persons who have agreed to become HRI directors upon the
Closing against Liabilities relating to the IPO to the extent customary for
indemnification of directors by issuers relating to initial public offerings.

        Section 16.  Certain Business Matters. (a) Neither HRI, Medaphis nor
any member of the Medaphis Group shall have any duty to refrain from (i)
engaging in the same or similar activities or lines of business as any other of
such Persons, (ii) doing business with any potential or actual supplier or
customer of any other of such Persons, or (iii) engaging in, or refraining
from, any other activities relating to any of the potential or actual suppliers
or

                                   - 13 -

<PAGE>   15



customers of any other of such Persons. Until the first anniversary of the
Closing Date, HRI shall not solicit any employee of Medaphis or of any member of
the Medaphis Group to become an employee of HRI, and neither Medaphis nor any
member of the Medaphis Group shall solicit any employee of HRI to become an
employee of Medaphis or of any member of the Medaphis Group.

        Section 17.  Late Payments.  Any amount not paid when due pursuant to
this Agreement or any Ancillary Agreement shall accrue interest at a rate per
annum equal to the Prime Rate plus 1%.

        Section 18.  Exchange of Information; Confidentiality.

        18.1  Exchange of Information. (a) Each of Medaphis and HRI agrees to
provide, or cause to be provided, to each other, at any time after the Closing
Date, as soon as reasonably practicable after written request, any Information
in its possession or under its control that the requesting party reasonably
needs (i) to comply with reporting, disclosure, filing or other requirements
imposed on the requesting party (including under applicable securities or tax
laws) by a Governmental Authority having jurisdiction over the requesting
party, (ii) for use in any other judicial, regulatory, administrative, tax or
other proceeding or in order to satisfy audit, accounting, claims, regulatory,
litigation, tax or other similar requirements, or (iii) to comply with its
obligations under this Agreement or any Ancillary Agreement; provided, however,
that if any party determines that any such provision of Information could be
commercially detrimental, violate any law or agreement, or waive any
attorney-client privilege, the parties shall take all reasonable measures to
permit the compliance with such obligations in a manner that avoids any such
harm or consequence.

        (b)  Ownership of Information. Any Information that is provided to a
requesting party pursuant to Section 18.1(a) shall be deemed to remain the
property of the providing party. Unless specifically set forth in this
Agreement, nothing contained in this Agreement shall be construed as granting
or conferring rights of license or otherwise in any such Information.

        (c)  Costs of Providing Information. The party requesting Information
agrees to reimburse the other party for the reasonable costs, if any, of
creating, gathering and copying such Information, to the extent that such costs
are incurred for the benefit of the requesting party.

        (d)  Record Retention. To facilitate the possible exchange of
Information pursuant to this Section 18 after the Closing Date, the parties
agree to use their reasonable best efforts to retain all Information in their
respective possession or control on the Closing Date in accordance with the
policies of Medaphis as in effect on the Closing Date. No party will destroy,
or permit any of its Subsidiaries to destroy, any Information that the other
party may have the right to obtain pursuant to this Agreement prior to the
third anniversary of the date of this Agreement without first using its
reasonable best efforts to notify the other party of the proposed destruction
and giving the other party the opportunity to take possession of such
Information

                                   - 14 -

<PAGE>   16



prior to such destruction; provided, however, that in the case of any
Information relating to Taxes or to Environmental Liabilities, such period shall
be extended to the expiration of the applicable statute of limitations (giving
effect to any extensions).

        (e)  Production of Witnesses; Records; Cooperation. (i) After the
Closing Date, except in the case of an adversarial Action by one party against
another party, each party shall use its reasonable best efforts to make
available to each other party, upon written request, the former, current and
future directors, officers, employees, other personnel and agents of the
members of its respective organization as witnesses and any books, records or
other documents within its control or that it otherwise has the ability to make
available, to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and agents) or
books, records or other documents may reasonably be required in connection with
any Action in which the requesting party may from time to time be involved,
regardless of whether such Action is a matter with respect to which
indemnification may be sought under this Agreement. The requesting party shall
bear all costs and expenses (including allocated costs of in-house counsel and
other personnel) in connection with complying with the request.


                 (ii)  If an Indemnifying Party chooses to defend or to
        seek to compromise or settle any Third Party Claim, the other
        parties shall make available to such Indemnifying Party, upon
        written request, the former, current and future directors,
        officers, employees, other personnel and agents of the members
        of its respective organization as witnesses and any books,
        records or other documents within its control or which it
        otherwise has the ability to make available, to the extent
        that any such person (giving consideration to business demands
        of such directors, officers, employees, other personnel and
        agents) or books, records or other documents may reasonably be
        required in connection with such defense, settlement or
        compromise, or such prosecution, evaluation or pursuit, as the
        case may be, and shall otherwise cooperate in such defense,
        settlement or compromise, or such prosecution, evaluation or
        pursuit, as the case may be.
        
                 (ii)  In connection with any matter contemplated by
        this Section 18(e), the parties will enter into a mutually
        acceptable joint defense agreement so as to maintain to the
        extent practicable any applicable attorney-client privilege or
        work product immunity.

        Section 19.  Confidentiality. (a) Each of Medaphis and HRI agrees to
hold, and to cause its respective directors, officers, employees, agents,
accountants, counsel, other advisors and representatives, and Subsidiaries to
hold, in strict confidence, with at least the same degree of care that applies
to Medaphis' confidential and proprietary information pursuant to policies in
effect as of the Closing Date, all Information concerning the other that is
either in its possession (including Information in its possession prior to the
Closing Date) or furnished by such other or its respective directors, officers,
employees, agents, accountants, counsel and other advisors and

                                   - 15 -

<PAGE>   17



representatives at any time pursuant to this Agreement, any Ancillary Agreement
or otherwise, and shall not use any such Information other than for such
purposes as shall be expressly permitted by such agreements, except, in each
case, to the extent that such Information has been (i) in the public domain
through no fault of such party or any of its directors, officers, employees,
agents, accountants, counsel and other advisors and representatives, (ii) later
lawfully acquired from other sources by such party, which sources are not
themselves bound by a confidentiality obligation), or (iii) independently
generated without reference to any proprietary or confidential Information of
the other party.

        (b)  Protective Arrangements. In the event that any party either
determines on the advice of its counsel that it is required to disclose any
Information pursuant to applicable law or receives any demand under lawful
process or from any Governmental Authority to disclose or provide Information
of any other party that is subject to the confidentiality provisions of this
Agreement, such party shall notify the other party prior to disclosing or
providing such Information and shall cooperate at the expense of the requesting
party in seeking any reasonable protective arrangements requested by such other
party. Subject to the foregoing, the Person that received such request may
subsequently disclose or provide Information to the extent required by such law
(as so advised by counsel) or by lawful process or such Governmental Authority.

        Section 20.  Arbitration; Dispute Resolution.

        20.1  Agreement to Arbitrate. The procedures for discussion,
negotiation and arbitration set forth in this Section 20 shall apply to all
disputes, controversies or claims that may arise out of or relate to, or arise
under or in connection with this Agreement or any Ancillary Agreement, or the
transactions contemplated by any such agreement. Each party agrees that the
procedures set forth in this Section 20 shall be the sole and exclusive remedy
in connection with any dispute, controversy or claim relating to any of the
foregoing matters and irrevocably waives any right to commence any Action in or
before any Governmental Authority, except to the extent provided under the
Arbitration Act in the case of judicial review of arbitration results or
awards. Each party irrevocably waives any right to any trial by jury with
respect to any claim, controversy or dispute set forth in the first sentence of
this Section 20.1.

        20.2  Escalation. (a) It is the intent of the parties to use their
respective reasonable best efforts to resolve expeditiously any dispute,
controversy or claim between or among them with respect to the matters covered
hereby that may arise from time to time on a mutually acceptable negotiated
basis. In furtherance of the foregoing, any party involved in a dispute,
controversy or claim may deliver a notice (an "Escalation Notice") demanding an
in person meeting involving representatives of the parties at a senior level of
management of the parties (or if the parties agree, of the appropriate
strategic business unit or division within such entity). A copy of any such
Escalation Notice shall be given to the general counsel, or like officer or
official, of each party involved in the dispute, controversy or claim (which
copy shall state that it is an Escalation Notice pursuant to this Agreement) .
Any agenda, location or procedures for such discussions or negotiations between
the parties may be established by the parties from 

                                   - 16 -

<PAGE>   18



time to time; provided, however, that the parties shall use their
reasonable best efforts to meet within 30 days of the Escalation Notice.

        (b)  The parties may, by mutual consent, retain a mediator to aid the
parties in their discussions and negotiations by informally providing advice to
the parties. Any opinion expressed by the mediator shall be strictly advisory
and shall not be binding on the parties, nor shall any opinion expressed by the
mediator be admissible in any arbitration proceedings. Mediation is not a
prerequisite to a demand for arbitration under Section 20.3.

        20.3  Demand for Arbitration. At any time after the first to occur of
(i) the date of the meeting actually held pursuant to the applicable Escalation
Notice or (ii) 45 days after the delivery of an Escalation Notice (as
applicable, the "Arbitration Demand Date"), any party involved in the dispute,
controversy or claim (regardless of whether such party delivered the Escalation
Notice) may make a written demand (the "Arbitration Demand Notice") that the
dispute be resolved by binding arbitration.


        20.4  Arbitrators. (a) Within 15 days after a valid Arbitration Demand
Notice is given, the parties involved in the dispute, controversy or referenced
claim shall attempt to select a sole arbitrator satisfactory to all such
parties.


        (b)  If such parties are not able jointly to select a sole arbitrator
within such 15-day period, such parties shall each appoint an arbitrator (who
need not be disinterested as to the parties or the matter) within 30 days after
delivery of the Arbitration Demand Notice. If one party appoints an arbitrator
within such time period and the other party or parties fail to appoint an
arbitrator within such time period, the arbitrator appointed by the one party
shall be the sole arbitrator of the matter.

        (c)  If a sole arbitrator is not selected pursuant to paragraph (a) or
(b) above and, instead, two or three arbitrators are selected pursuant to
paragraph (b) above, the two or three arbitrators will, within 30 days after
the appointment of the later of them to be appointed, select an additional
arbitrator who shall act as the sole arbitrator of the dispute. After selection
of such sole arbitrator, the initial arbitrators shall have no further role
with respect to the dispute. In the event that the arbitrators so appointed do
not, within 30 days after the appointment of the later of them to be appointed,
agree on the selection of the sole arbitrator, any party involved in such
dispute may apply to CPR, New York, New York to select the sole arbitrator,
which selection shall be made by such organization within 30 days after such
application. Any arbitrator selected pursuant to this paragraph (c) shall be
disinterested with respect to any of the parties and the matter and shall be
reasonably competent in the applicable subject matter.

        (d)  The sole arbitrator selected pursuant to paragraph (a), (b) or (c)
above will set a time for the hearing of the matter which will commence no
later than 90 days after the date of appointment cf the sole arbitrator
pursuant to paragraph (a), (b) or (c) above and which hearing will be no longer
than 30 days (unless in the judgment of the arbitrator the matter is

                                   - 17 -

<PAGE>   19



unusually complex and sophisticated and thereby requires a longer time, in which
event such hearing shall be no longer than 90 days) . The final decision or such
arbitrator will be rendered in writing to the parties not later than 60 days
after the last hearing date, unless otherwise agreed by the parties in writing.

        (e)  The place of any arbitration will be Atlanta, Georgia, unless
otherwise agreed by the parties.

        20.5  Hearings. Within the time period specified in Section 20.4(d),
the matter shall be presented to the arbitrator at a hearing by means of
written submissions of memoranda and verified witness statements, filed
simultaneously, and responses, if necessary in the judgment of the arbitrator
or both the parties. If the arbitrator deems it to be essential to a fair
resolution of the dispute, live cross-examination or direct examination may be
permitted, but is not generally contemplated to be necessary. The arbitrator
shall actively manage the arbitration with a view to achieving a just, speedy
and cost-effective resolution of the dispute, claim or controversy. The
arbitrator may, in his or her discretion, set time and other limits on the
presentation of each party's case, its memoranda or other submissions, and
refuse to receive any proffered evidence, which the arbitrator, in his or her
discretion, finds to be cumulative, unnecessary, irrelevant or of low probative
nature. Except as otherwise set forth herein, any arbitration hereunder will be
conducted in accordance with the CPR Rules for Non-Administered Arbitration of
Business Disputes then prevailing. The decision of the arbitrator will be final
and binding on the parties, and judgment thereon may be had and will be
enforceable in any court having jurisdiction over the parties. Arbitration
awards will bear interest at an annual rate of the Prime Rate plus 1% per
annum. To the extent that the provisions of this Agreement and the prevailing
rules of the CPR conflict, the provisions of this Agreement shall govern.

        20.6  Discovery and Certain Other Matters.

        (a)  The arbitrator shall have full power and authority to set rules
for discovery and to determine issues of arbitrability but shall otherwise be
limited to interpreting or construing the applicable provisions of this
Agreement or any Ancillary Agreement, and will have no authority or power to
limit, expand, alter, amend, modify, revoke or suspend any condition or
provision of this Agreement or any Ancillary Agreement; it being understood,
however, that the arbitrator will have full authority to implement the
provisions of this Agreement or any Ancillary Agreement and to fashion
appropriate remedies for breaches of this Agreement (including interim or
permanent injunctive relief); provided that the arbitrator shall not have (i)
any authority in excess of the authority a court having jurisdiction over the
parties and the controversy or dispute would have absent these arbitration
provisions or (ii) any right or power to award punitive or treble damages. It
is the intention of the parties that in rendering a decision the arbitrator
give effect to the applicable provisions of this Agreement and the Ancillary
Agreements and follow applicable law (it being understood and agreed that this
sentence shall not give rise to a right of judicial review of the arbitrator's
award).


                                   - 18 -

<PAGE>   20



        (b)  If a party fails or refuses to appear at and participate in an
arbitration hearing after due notice, the arbitrator may hear and determine the
controversy upon evidence produced by the appearing party.

        (c)  Arbitration costs will be borne equally by each party involved in
the matter, except that each party will be responsible for its own attorney's
fees and other costs and expenses, including the costs of witnesses selected by
such party.

        (d)  Judgment upon any arbitration award may be entered in any court
having jurisdiction.

        (e)  Prior to the time at which an arbitrator is appointed, any party
may seek one or more temporary restraining orders in a court of competent
jurisdiction if necessary in order to preserve and protect the status quo.
Neither the request for, or grant or denial cf, any such temporary restraining
order shall be deemed a waiver of the obligation to arbitrate as set forth in
this Agreement and the arbitrator may dissolve, continue or modify any such
order. Any such temporary restraining order shall remain in effect until the
first to occur of the expiration of the order in accordance with its terms or
the dissolution of the order by the arbitrator.

        20.7  Law Governing Arbitration Procedures. The interpretation of the
provisions of this Section, only insofar as they relate to the agreement to
arbitrate and any related procedures, shall be governed by the Arbitration Act
and other applicable federal law. In all other respects, the interpretation of
this Agreement shall be governed as set forth in Section 22.2.

        Section 21.  Further Assurances. In addition to the actions
specifically provided for elsewhere in this Agreement, each of the parties
hereto shall use its reasonable best efforts, prior to, on and after the
Closing Date, to take, or cause to be taken, all actions, and to do, or cause
to be done, all things, reasonably necessary, proper or advisable under
applicable laws, regulations and agreements to consummate and make effective
the transactions contemplated by this Agreement and the Ancillary Agreements.

        Section 22.  Miscellaneous.

        22.1  Counterparts; Entire Agreement. (a) This Agreement and each
Ancillary Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other party.

        (b)  This Agreement any Ancillary Agreements and the Schedules hereto
and thereto contain the entire agreement between the parties with respect to
the subject matter hereof, supersede all previous agreements, negotiations,
discussions, writings, understandings, commitments and conversations with
respect to such subject matter and there are no agreements or understandings
between the parties other than those set forth or referred to herein or
therein.

                                   - 19 -

<PAGE>   21



        22.2  Governing Law. Except as set forth in Section 20.7, this
Agreement and each Ancillary Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Georgia (other than as
to its laws of arbitration which shall be governed under the Arbitration Act or
other applicable federal law pursuant to Section 20.7), irrespective of the
choice of laws principles of the State of Georgia, as to all matters, including
matters of validity, construction, effect, enforceability, performance and
remedies.

        22.3  Assignability. This Agreement and each Ancillary Agreement shall
be binding upon and inure to the benefit of the parties to such agreements,
respectively, and their respective successors and assigns; provided, however,
that no party may assign its respective rights or delegate its respective
obligations under this Agreement or any Ancillary Agreement without the express
prior written consent of the other parties.

        22.4  Third Party Beneficiaries. Except for the indemnification rights
under this Agreement of any Medaphis Indemnitee or HRI Indemnitee in their
respective capacities as such, (a) the provisions of this Agreement and each
Ancillary Agreement are solely for the benefit of the parties and are not
intended to confer upon any Person except the parties any rights or remedies
under this Agreement, and (b) there are no third party beneficiaries of this
Agreement or any Ancillary Agreement and neither this Agreement nor any
Ancillary Agreement shall provide any third person with any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement or any Ancillary Agreement.

        22.5  Notices. All notices or other communications under this Agreement
or any Ancillary Agreement shall be in writing and shall be deemed to be duly
given when (a) delivered in person or (b) deposited in the United States mail
or private express mail, postage prepaid, addressed as follows:

                  If to Medaphis, to:  Secretary
                                       Medaphis Corporation
                                       2840 Mt. Wilkinson Parkway
                                       Suite 300
                                       Atlanta, Georgia 30339
                                       
                  If to HRI, to:       Secretary
                                       Healthcare Recoveries, Inc.
                                       1400 Watterson Tower
                                       Louisville, Kentucky 40218

Any party may, by notice to the other party, change the address to which such
notices are to be given.


                                   - 20 -

<PAGE>   22



        22.6  Severability. If any provision of this Agreement or any Ancillary
Agreement or its application to any Person or circumstance is determined by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions of such agreement, or the application of such provision to
Persons or circumstances or in jurisdictions other than those as to which it
has been held invalid or unenforceable, shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, so long as the
economic or legal substance of the transactions contemplated by such agreement,
as the case may be, is not affected in any manner adverse to any party. Upon
such determination, the parties shall negotiate in good faith in an effort to
agree upon such a suitable and equitable provision to effect the original
intent of the parties.

        22.7  Force Majeure. No party shall be deemed in default of this
Agreement or any Ancillary Agreement to the extent that any delay or failure in
the performance of its obligations under this Agreement or any Ancillary
Agreement results from any cause beyond its reasonable control and without its
fault or negligence, such as acts of God, acts of civil or military authority,
embargoes, epidemics, war, riots, insurrections, fires, explosions,
earthquakes, floods, unusually severe weather conditions, labor problems or
unavailability of parts, or, in the case of computer systems, any failure in
electrical or air conditioning equipment. In the event of any such excused
delay, the time for performance shall be extended for a period equal to the
time lost by reason of the delay.

        22.8  Publicity; Expenses. Prior to the Closing Date, each of HRI and
Medaphis shall consult with each other prior to issuing any press releases or
otherwise making public statements with respect to the IPO, the Separation or
any of the other transactions contemplated hereby. Certain expenses incurred in
connection with the implementation of the IPO and the Separation, as set forth
on Schedule 22.8, shall be for the account of HRI. Except as otherwise
expressly provided for in this Agreement, all other expenses incurred in
connection with the IPO and the Separation shall be for the account of
Medaphis.

        22.9  Waivers of Default. Waiver by any party of any default by the
other party of any provision of this Agreement or any Ancillary Agreement shall
not be deemed a waiver by the waiving party of any subsequent or other default,
nor shall it prejudice the rights of the other party.

        22.10  Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement or any Ancillary Agreement, the party or parties who are or are to be
aggrieved shall have the right to specific performance and injunctive or other
equitable relief of its rights under this Agreement or such Ancillary
Agreement, in addition to any and all other rights and remedies at law or in
equity, and all such rights and remedies shall be cumulative. The parties agree
that the remedies at law for any breach or threatened breach, including
monetary damages, are inadequate compensation for any loss and that any defense
in any action for specific performance that a remedy at law would be 

                                   - 21 -

<PAGE>   23



adequate is waived.  Any requirements for the securing or posting of any bond 
with such remedy are waived.

        22.11  Amendments. No provision of this Agreement or any Ancillary
Agreement shall be deemed waived, amended, supplemented or modified by any
party, unless such waiver, amendment, supplement or modification is in writing
and signed by the authorized representative of the party against whom it is
sought to enforce such waiver, amendment, supplement or modification.

        IN WITNESS WHEREOF, the parties have caused this Separation Agreement
to be executed by their duly authorized representatives.


                                       MEDAPHIS CORPORATION
                                       
                                       
                                       By:
                                          ----------------------------
                                          Name:
                                               -----------------------
                                          Title:
                                                ----------------------


                                   - 22 -

<PAGE>   24



                                       
                                       HEALTHCARE RECOVERIES, INC.
                                       
                                       
                                       By:
                                          ----------------------------
                                          Name:
                                               -----------------------
                                          Title:
                                                ----------------------


                                   - 23 -

<PAGE>   25



                                                                  SCHEDULE 1(A)



             See attached copy of the HRI Audited Balance Sheet


<PAGE>   26



                                                                  SCHEDULE 3.1



       See attached copy of the HRI _____________, 1997 Balance Sheet


<PAGE>   27



                                                                   SCHEDULE 5.1



New HRI Insurance Policies:


         Policy                                       Date Bound
         ------                                       ----------







<PAGE>   28



                                                                   SCHEDULE 5.2



Medaphis Blanket Polices:



















Extended Discovery Period Coverages Purchased by HRI:






<PAGE>   29



                                                                   SCHEDULE 5.4



HRI's workers' compensation coverage:


<PAGE>   30



                                                                     SCHEDULE 7

Pittsburgh telephone assets:


<PAGE>   31



                                                                     SCHEDULE 8



Liens and Guaranties to be Released:


<PAGE>   32


                                                                  SCHEDULE 22.8


Certain IPO and Separation expenses allocated to HRI: