##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the quarterly period ended June 30, 2008
 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: 001-33881
 MEDASSETS, INC.
 (Exact name of registrant as specified in its charter)
 DELAWARE
    
    51-0391128(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 100 North Point Center East, Suite 200Atlanta, Georgia
    
    30022(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (678) 323-2500
(Former name, former address and former fiscal year, if changed since last report)
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer  þ
    
    Smaller Reporting Company o(Do not check if a smaller reporting company)
 o þ




---



##### 



PART I. FINANCIAL INFORMATION
    
    
    2Item 1. Condensed Consolidated Financial Statements
    
    
    2Condensed Consolidated Balance Sheets at June 30, 2008 and December 31, 2007
    
    
    2Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007
    
    
    3Condensed Consolidated Statement of Stockholders Equity for the six months ended June 30, 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    43Item 4T. Controls and Procedures
    
    
    43PART II. OTHER INFORMATION
    
    
    44Item 1. Legal Proceedings
    
    
    44Item 1A. Risk Factors
    
    
    44Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    45Item 3. Defaults Upon Senior Securities
    
    
    46Item 4. Submission of Matters to a Vote of Security Holders
    
    
    46Item 5. Other Information
    
    
    46Item 6. Exhibits
    
    
    47Signatures
    
    
    48EX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32.1 SECTION 906 CERTIFICATION OF CEO AND CFO
  1




---



##### Table of Contents



Part I. FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements
 MedAssets, Inc.
 
 Condensed Consolidated Balance Sheets
 (In thousands, except share and per share amounts)
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrentCash and cash equivalents
    
    $
    14,057
    
    
    $
    136,952Restricted cash
    
    
    20
    
    
    
    20Accounts receivable, net of allowances of
$2,886 and $3,506 as of June 30, 2008 and
December 31, 2007
    
    
    46,565
    
    
    
    33,679Deferred tax asset, current
    
    
    14,313
    
    
    
    15,049Prepaid expenses and other current assets
    
    
    6,503
    
    
    
    4,508Total current assets
    
    
    81,458
    
    
    
    190,208Property and equipment, net
    
    
    38,718
    
    
    
    32,490Other long term assetsGoodwill (Note 4)
    
    
    509,284
    
    
    
    232,822Intangible assets, net (Note 4)
    
    
    139,359
    
    
    
    62,491Other
    
    
    16,118
    
    
    
    8,368Other long-term assets
    
    
    664,761
    
    
    
    303,681Total assets
    
    $
    784,937
    
    
    $
    526,379LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    10,578
    
    
    $
    4,562Accrued revenue share obligation and rebates
    
    
    27,634
    
    
    
    29,998Accrued payroll and benefits
    
    
    17,979
    
    
    
    13,402Other accrued expenses
    
    
    10,898
    
    
    
    5,612Deferred revenue, current portion (Note 5)
    
    
    26,911
    
    
    
    19,791Deferred purchase consideration (Note 3)
    
    
    18,621
    
    
    
    Current portion of notes payable (Note 6)
    
    
    2,523
    
    
    
    2,020Current portion of finance obligation
    
    
    142
    
    
    
    128Total current liabilities
    
    
    115,286
    
    
    
    75,513Notes payable, less current portion (Note 6)
    
    
    271,625
    
    
    
    196,264Finance obligation, less current portion
    
    
    9,936
    
    
    
    10,009Deferred revenue, less current portion (Note 5)
    
    
    3,669
    
    
    
    3,229Deferred tax liability
    
    
    15,324
    
    
    
    5,868Other long term liabilities
    
    
    1,893
    
    
    
    5,981Total liabilities
    
    
    417,733
    
    
    
    296,864Commitments and contingencies (Note 7)
    
    
    
    
    
    
    Stockholders equity (Note 8)Common stock, $0.01 par value, 150,000,000
shares authorized; 53,645,000 and 44,429,000
shares issued and outstanding as of June 30,
2008 and December 31, 2007, respectively
    
    
    536
    
    
    
    444Additional paid-in capital
    
    
    598,280
    
    
    
    464,313Notes receivable from stockholders
    
    
    (627
    )
    
    
    (614
    )Accumulated other comprehensive loss (Note 2)
    
    
    (415
    )
    
    
    (2,935
    )Accumulated deficit
    
    
    (230,570
    )
    
    
    (231,693
    )Total stockholders equity
    
    
    367,204
    
    
    
    229,515Total liabilities and stockholders equity
    
    $
    784,937
    
    
    $
    526,379
  2




---



##### Table of Contents



MedAssets, Inc.
 
 Condensed Consolidated Statements of Operations
 (Unaudited)
 Three Months ended June 30,
    
    Six Months ended June 30,2008
    
    2007
    
    2008
    
    2007(In thousands, except per share data)RevenueAdministrative fees, net
    
    $
    25,148
    
    
    $
    22,347
    
    
    $
    52,693
    
    
    $
    48,324Other service fees
    
    
    36,087
    
    
    
    20,671
    
    
    
    67,300
    
    
    
    37,000Total net revenue
    
    
    61,235
    
    
    
    43,018
    
    
    
    119,993
    
    
    
    85,324Operating expenses:Cost of revenue
    
    
    10,688
    
    
    
    5,516
    
    
    
    19,151
    
    
    
    9,702Product development expenses
    
    
    3,611
    
    
    
    1,807
    
    
    
    6,308
    
    
    
    3,688Selling and marketing expenses
    
    
    9,544
    
    
    
    10,876
    
    
    
    22,455
    
    
    
    18,714General and administrative expenses
    
    
    22,215
    
    
    
    12,806
    
    
    
    43,275
    
    
    
    26,255Depreciation
    
    
    2,349
    
    
    
    1,734
    
    
    
    4,470
    
    
    
    3,334Amortization of intangibles
    
    
    5,016
    
    
    
    2,990
    
    
    
    8,793
    
    
    
    5,830Impairment of intangibles (Note 4)
    
    
    2,079
    
    
    
    1,195
    
    
    
    2,079
    
    
    
    1,195Total operating expenses
    
    
    55,502
    
    
    
    36,924
    
    
    
    106,531
    
    
    
    68,718Operating income
    
    
    5,733
    
    
    
    6,094
    
    
    
    13,462
    
    
    
    16,606Other income (expense):Interest (expense)
    
    
    (5,000
    )
    
    
    (3,758
    )
    
    
    (9,317
    )
    
    
    (7,387
    )Other (expense) income
    
    
    (3,362
    )
    
    
    440
    
    
    
    (2,329
    )
    
    
    912(Loss) income before income taxes
    
    
    (2,629
    )
    
    
    2,776
    
    
    
    1,816
    
    
    
    10,131Income tax (benefit) expense
    
    
    (1,053
    )
    
    
    1,063
    
    
    
    693
    
    
    
    3,873Net (loss) income
    
    
    (1,576
    )
    
    
    1,713
    
    
    
    1,123
    
    
    
    6,258Preferred stock dividends
    
    
    
    
    
    
    (3,975
    )
    
    
    
    
    
    
    (7,647
    )Net (loss) income attributable to common stockholders
    
    $
    (1,576
    )
    
    $
    (2,262
    )
    
    $
    1,123
    
    
    $
    (1,389
    )Basic and diluted (loss) income per share (Note 10):Basic net (loss) income attributable to common
stockholders
    
    $
    (0.03
    )
    
    $
    (0.21
    )
    
    $
    0.02
    
    
    $
    (0.13
    )Diluted net (loss) income attributable to common
stockholders
    
    $
    (0.03
    )
    
    $
    (0.21
    )
    
    $
    0.02
    
    
    $
    (0.13
    )Weighted average shares  basic
    
    
    47,288
    
    
    
    10,721
    
    
    
    45,853
    
    
    
    10,707Weighted average shares  diluted
    
    
    47,288
    
    
    
    10,721
    
    
    
    48,485
    
    
    
    10,707
  3




---



##### Table of Contents



MedAssets, Inc.
 
 Condensed Consolidated Statement of Stockholders Equity (Unaudited)
 Six Months Ended June 30, 2008
 Notes
    
    
    AccumulatedAdditional
    
    
    Receivable
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    from
    
    
    Comprehensive
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Par Value
    
    
    Capital
    
    
    Stockholders
    
    
    Income (Loss)
    
    
    Deficit
    
    
    Equity(In thousands)Balances at December 31, 2007
    
    
    44,429
    
    
    $
    444
    
    
    $
    464,313
    
    
    $
    (614
    )
    
    $
    (2,935
    )
    
    $
    (231,693
    )
    
    $
    229,515Interest accrued on notes
receivable from stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    (13
    )Issuance of common stock in
connection with acquisition
    
    
    8,850
    
    
    
    89
    
    
    
    129,298
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129,387Issuance of common stock
from stock option exercises
    
    
    151
    
    
    
    1
    
    
    
    532
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    533Issuance of common stock
from warrant exercises
    
    
    190
    
    
    
    2
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other common stock issuances
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    4,139
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,139Other comprehensive income
(net of tax):Unrealized loss from
hedging activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,394
    )
    
    
    
    
    
    
    (1,394
    )Interest rate swap
termination (Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,914
    
    
    
    
    
    
    
    3,914Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,123
    
    
    
    1,123Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,520
    
    
    
    1,123
    
    
    
    3,643Balances at June 30, 2008
    
    
    53,645
    
    
    $
    536
    
    
    $
    598,280
    
    
    $
    (627
    )
    
    $
    (415
    )
    
    $
    (230,570
    )
    
    $
    367,204
  4




---



##### Table of Contents



MedAssets, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 Six Months ended June 30,2008
    
    
    2007(In thousands)Operating activitiesNet income
    
    $
    1,123
    
    
    $
    6,258Adjustments to reconcile net income to net cash provided by operating activities:Bad debt expense
    
    
    985
    
    
    
    73Depreciation
    
    
    4,729
    
    
    
    3,476Amortization of intangibles
    
    
    9,296
    
    
    
    6,368(Gain) Loss on sale of assets
    
    
    (3
    )
    
    
    3Noncash stock compensation expense (Note 8)
    
    
    4,139
    
    
    
    1,592Amortization of debt issuance costs
    
    
    414
    
    
    
    167Noncash interest expense, net
    
    
    402
    
    
    
    244Impairment of intangibles (Note 4)
    
    
    2,079
    
    
    
    1,195Deferred income tax expense
    
    
    165
    
    
    
    2,928Changes in assets and liabilities:Accounts receivable, net
    
    
    (5,640
    )
    
    
    3,186Prepaid expenses and other assets
    
    
    (915
    )
    
    
    (1,434
    )Other long-term assets
    
    
    (703
    )
    
    
    (723
    )Accounts payable
    
    
    5,000
    
    
    
    (4,311
    )Accrued revenue share obligations and rebates
    
    
    (2,364
    )
    
    
    3,369Accrued payroll and benefits
    
    
    (956
    )
    
    
    (2,935
    )Other accrued expenses
    
    
    3,262
    
    
    
    (969
    )Deferred revenue
    
    
    3,361
    
    
    
    (2,548
    )Cash provided by operating activities
    
    
    24,374
    
    
    
    15,939Investing activitiesPurchases of property, equipment, and software
    
    
    (2,790
    )
    
    
    (3,356
    )Capitalized software development costs
    
    
    (4,953
    )
    
    
    (2,649
    )Acquisitions, net of cash acquired (Note 3)
    
    
    (209,423
    )
    
    
    (19,316
    )Cash used in investing activities
    
    
    (217,166
    )
    
    
    (25,321
    )Financing activitiesProceeds from notes payable
    
    
    100,000
    
    
    
    10,188Repayment of notes payable and capital lease obligations (Note 6)
    
    
    (24,136
    )
    
    
    (1,053
    )Repayment of finance obligation
    
    
    (320
    )
    
    
    (326
    )Debt issuance costs (Note 6)
    
    
    (6,167
    )
    
    
    Interest accrued on note receivable from stockholders
    
    
    (14
    )
    
    
    (71
    )Issuance of common stock, net of offering costs (Note 8)
    
    
    534
    
    
    
    221Cash provided by financing activities
    
    
    69,897
    
    
    
    8,959Net decrease in cash and cash equivalents
    
    
    (122,895
    )
    
    
    (423
    )Cash and cash equivalents, beginning of period
    
    
    136,952
    
    
    
    23,459Cash and cash equivalents, end of period
    
    $
    14,057
    
    
    $
    23,036
  5




---



##### Table of Contents



MedAssets, Inc.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 Unless the context indicates otherwise, references in this Quarterly Report to
MedAssets, the Company, we, our and us mean MedAssets, Inc., and its subsidiaries and
predecessor entities.
 1. BUSINESS DESCRIPTION AND BASIS OF PRESENTATION
     2. RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements
 Fair
Value Measurements,
 Accounting for Derivative Instruments and Hedging
Activities
 6




---



##### Table of Contents



Par forward contracts
   Interest rate collar
  Accounting for Derivatives
   Fair Value Option for Financial Assets and Financial Liabilities
 The Fair Value Option for Financial Assets and
Financial Liabilities
  7




---



##### Table of Contents



Disclosures about Derivative Instruments and Hedging Activities
 Disclosures about Derivative Instruments and Hedging
Activities  An Amendment of SFAS No. 133
 Business Combinations
 Business Combinations
 3. ACQUISITION AND RESTRUCTURING ACTIVITIES
 Accuro
    
    
    The acquisition expands our research and development capability and general market
presence, and increases our revenue cycle management product and service offerings with well
regarded solutions and recurring revenue streams;
    
    Accuros business is complementary and a long-term strategic fit that provides us
opportunities to expand market share and further penetrate our current customer base;
    
    The acquisition of Accuro, which was one of our largest and most scaled Revenue Cycle
Management segment competitors, allows us to compete effectively for hospital and health
system customers; and
    
    The acquisition offers us the opportunity to leverage cost and revenue synergies.
  Preliminary Purchase Price Allocation
  8




---



##### Table of Contents



Accounting for Uncertainty in Income Taxes
 Current assets
    
    $
    9,312Property and equipment
    
    
    4,888Other long term assets
    
    
    178Goodwill
    
    
    276,462Intangible assets
    
    
    87,700Total assets acquired
    
    
    378,540Less:Current liabilities
    
    
    12,691Deferred tax liability, long-term
    
    
    8,539Total liabilities assumed
    
    
    21,230Total purchase price
    
    $
    357,310
 Intangible Assets
  Gross carrying value
    
    
    Weighted-average useful livesDeveloped technology
    
    $
    23,200
    
    
    
    5.0Customer base
    
    
    63,200
    
    
    
    12.5Non-compete agreements
    
    
    1,300
    
    
    
    2.0Total acquired intangible assets
    
    $
    87,700
    
    
    
    10.4
  Deferred Revenues
  Unaudited Pro Forma Financial Information
  9




---



##### Table of Contents



Three Months ended June 30,
    
    Six Months ended June 30,2008
    
    2007
    
    2008
    
    2007(Unaudited; in thousands, except per share data)Net revenue
    
    $
    73,270
    
    
    $
    69,716
    
    
    $
    148,533
    
    
    $
    137,510Net (loss) income
    
    
    (2,137
    )
    
    
    (1,222
    )
    
    
    (551
    )
    
    
    445Preferred stock dividends and accretion
    
    
    
    
    
    
    (4,357
    )
    
    
    
    
    
    
    (8,644
    )Net (loss) attributable to common
stockholders
    
    
    (2,137
    )
    
    
    (5,579
    )
    
    
    (551
    )
    
    
    (8,199
    )Basic and diluted net (loss) per share
attributable to common stockholders
    
    $
    (.04
    )
    
    $
    (.29
    )
    
    $
    (.01
    )
    
    $
    (.42
    )
 2008 Restructuring Plan
   4. GOODWILL AND INTANGIBLE ASSETS
  June 30, 2008Indefinite Life Intangibles:Goodwill, net
    
    $
    509,284Tradename
    
    
    1,029Total
    
    $
    510,313
 10




---



##### Table of Contents



Consolidated
    
    
    RCM
    
    
    SMBalance, December 31, 2007
    
    $
    232,822
    
    
    $
    148,101
    
    
    $
    84,721Acquisition of Accuro (Note 3)
    
    
    276,462
    
    
    
    276,462
    
    
    
    Balance, June 30, 2008
    
    $
    509,284
    
    
    $
    424,563
    
    
    $
    84,721
  WeightedAverage
    
    
    GrossAmortization
    
    
    Carrying
    
    
    AccumulatedPeriod (Years)
    
    
    Amount
    
    
    Amortization
    
    
    Net(Unaudited, in thousands)June 30, 2008Customer base
    
    10 years
    
    $
    161,128
    
    
    $
    (59,956
    )
    
    $
    101,172Developed technology
    
    5 years
    
    
    40,556
    
    
    
    (5,372
    )
    
    
    35,184Employment agreements
    
    3 years
    
    
    224
    
    
    
    (118
    )
    
    
    106Non-compete agreements
    
    3 years
    
    
    2,322
    
    
    
    (497
    )
    
    
    1,825Tradename
    
    3 years
    
    
    192
    
    
    
    (149
    )
    
    
    43$
    204,422
    
    
    $
    (66,092
    )
    
    $
    138,330
  Amount(Unaudited, in thousands)2008
    
    $
    15,0182009
    
    
    28,7522010
    
    
    23,8162011
    
    
    19,6682012
    
    
    16,327Thereafter
    
    
    34,749$
    138,330
   5. DEFERRED REVENUE
  11




---



##### Table of Contents



June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)(In thousands)Software and implementation fees
    
    $
    18,392
    
    
    
    11,082Service fees
    
    
    10,997
    
    
    
    7,266Administrative fees
    
    
    898
    
    
    
    2,914Other fees
    
    
    293
    
    
    
    1,758Deferred revenue, total
    
    
    30,580
    
    
    
    23,020Less: Deferred revenue, current portion
    
    
    (26,911
    )
    
    
    (19,791
    )Deferred revenue, non-current portion
    
    $
    3,669
    
    
    
    3,229
  6. NOTES PAYABLE
  June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)(In thousands)Notes payable  senior
    
    $
    246,425
    
    
    $
    197,548Revolving credit facility
    
    
    27,000
    
    
    
    Other
    
    
    723
    
    
    
    736Notes payable, total
    
    
    274,148
    
    
    
    198,284Less: current portions
    
    
    (2,523
    )
    
    
    (2,020
    )Notes payable, non-current portion
    
    $
    271,625
    
    
    $
    196,264
 May 2008 Financing
   12




---



##### Table of Contents



Amount(Unaudited, inthousands)2008
    
    $
    1,2632009
    
    
    2,7612010
    
    
    2,6872011
    
    
    29,7572012
    
    
    2,499Thereafter
    
    
    235,181$
    274,148
   Interest Rate Swaps
  7. COMMITMENTS AND CONTINGENCIES
  Legal Proceedings
  13




---



##### Table of Contents



Acquisition Contingencies
     8. STOCKHOLDERS EQUITY
 Common Stock
      14




---



##### Table of Contents



WeightedAverageGrant DateShares
    
    
    Fair ValueNonvested balance at January 1, 2008
    
    
    25,000
    
    
    $
    6.35Change during the period:Shares granted
    
    
    5,000
    
    
    
    15.95Shares vested
    
    
    (3,000
    )
    
    
    5.04Nonvested balance at June 30, 2008
    
    
    27,000
    
    
    $
    8.21
   Stock Options
      15




---



##### Table of Contents



WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOptions outstanding as of January 1, 2008
    
    
    6,974,000
    
    
    $
    6.49
    
    
    8 years
    
    $
    121,713,000Granted
    
    
    873,000
    
    
    
    16.35Exercised
    
    
    (151,000
    )
    
    
    3.68Forfeited
    
    
    (194,000
    )
    
    
    8.92Options outstanding as of June 30, 2008
    
    
    7,502,000
    
    
    
    7.63
    
    
    8 years
    
    
    70,685,000Options exercisable as of June 30, 2008
    
    
    2,249,000
    
    
    $
    4.83
    
    
    7 years
    
    $
    27,497,000
   June 30,
    
    June 30,2008
    
    2007Range of exercise prices
    
    $ .63 - $17.86

    
    $ .63 - $10.44Number of options outstanding
    

    7,502,000

    

    5,531,000Weighted average exercise price
    
    $
7.63

    
    $
4.98Weighted average remaining contractual life
    
    8.0 years

    
    7.8 years
 Share-Based Payment
  Six Months Ended
    
    Six Months EndedJune 30, 2008
    
    June 30, 2007Calculated volatility
    

    32.16% - 35.31%

    

    40.12%Dividend yield
    

    0%

    

    0%Risk free interest rate
    

    3.00% - 3.56%

    
    4.73%Range of expected term
    
    5.4 - 6.5 years

    
    6.5 years
  16




---



##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Cost of revenue
    
    $
    457,000
    
    
    $
    155,000
    
    
    $
    1,105,000
    
    
    $
    295,000Product development
    
    
    134,000
    
    
    
    68,000
    
    
    
    256,000
    
    
    
    140,000Selling and marketing
    
    
    511,000
    
    
    
    175,000
    
    
    
    988,000
    
    
    
    329,000General and administrative
    
    
    1,297,000
    
    
    
    449,000
    
    
    
    1,790,000
    
    
    
    828,000Total share-based compensation expense
    
    $
    2,399,000
    
    
    $
    847,000
    
    
    $
    4,139,000
    
    
    $
    1,592,000
 9. INCOME TAXES
    10. INCOME PER SHARE
 Earnings Per Share. Participating Securities and the Two-Class Method under SFAS No. 128
 17




---



##### Table of Contents



Three Months Ended June 30,2008
    
    
    2007(Unaudited)(In thousands, except per shareamounts)Numerator for Basic and Diluted (Loss) Per Share:Net (loss) income from continuing operations
    
    $
    (1,576
    )
    
    $
    1,713Preferred stock dividends
    
    
    
    
    
    
    (3,975
    )Net (loss) attributable to common stockholders
    
    
    (1,576
    )
    
    
    (2,262
    )Denominator:Weighted average shares outstanding
    
    
    47,288
    
    
    
    10,721Effect of participating convertible preferred stock
    
    
    
    
    
    
    Denominator for basic income per share weighted average shares using the two-class method
    
    
    47,288
    
    
    
    10,721Effect of dilutive securities:Stock options
    
    
    
    
    
    
    Stock warrants
    
    
    
    
    
    
    Denominator for diluted income per share  adjusted weighted average shares and assumed
conversions
    
    
    47,288
    
    
    
    10,721Basic (loss) per share:Net (loss) attributable to common stockholders from continuing operations
    
    $
    (0.03
    )
    
    $
    (0.21
    )Basic (loss) per share
    
    $
    (0.03
    )
    
    $
    (0.21
    )Diluted (loss) per share:Net (loss) attributable to common stockholders from continuing operations
    
    $
    (0.03
    )
    
    $
    (0.21
    )Diluted net (loss) per share
    
    $
    (0.03
    )
    
    $
    (0.21
    )
 Six Months Ended June 30,2008
    
    
    2007(Unaudited)(In thousands, except per shareamounts)Numerator for Basic and Diluted Income (Loss) Per Share:Net income from continuing operations
    
    $
    1,123
    
    
    $
    6,258Preferred stock dividends
    
    
    
    
    
    
    (7,647
    )Net income (loss) attributable to common stockholders
    
    
    1,123
    
    
    
    (1,389
    )Denominator:Weighted average shares outstanding
    
    
    45,853
    
    
    
    10,707Effect of participating convertible preferred stock
    
    
    
    
    
    
    Denominator for basic income (loss) per share weighted average shares using the two-class method
    
    
    45,853
    
    
    
    10,707Effect of dilutive securities:Stock options
    
    
    2,596
    
    
    
    Stock warrants
    
    
    36
    
    
    
    Denominator for diluted income (loss) per share  adjusted weighted average shares and assumed
conversions
    
    
    48,485
    
    
    
    10,707Basic income per share:Net income (loss) attributable to common stockholders from continuing operations
    
    $
    0.02
    
    
    $
    (0.13
    )Basic income (loss) per share
    
    $
    0.02
    
    
    $
    (0.13
    )Diluted net income (loss) per share:Net income (loss) attributable to common stockholders from continuing operations
    
    $
    0.02
    
    
    $
    (0.13
    )Diluted net income per share
    
    $
    0.02
    
    
    $
    (0.13
    )
 18




---



##### Table of Contents



Three Months Ended June 30,
    
    Six Months Ended June 30,2008
    
    2007
    
    2008
    
    2007Convertible
preferred stock
    
    
    
    
    
    
    16,730
    
    
    
    
    
    
    
    16,424Stock options
    
    
    2,450
    
    
    
    1,964
    
    
    
    
    
    
    
    1,963Stock warrants
    
    
    36
    
    
    
    63
    
    
    
    
    
    
    
    632,486
    
    
    
    18,757
    
    
    
    
    
    
    
    18,450
 11. SEGMENT INFORMATION
  
    
    Revenue Cycle Management.Our Revenue Cycle Management segment
provides a comprehensive suite of software and services spanning the
hospital, health system and other ancillary healthcare provider
revenue cycle workflow  from patient admission, bill estimation,
charge capture, case management, contract management and health
information management through claims processing and accounts
receivable management. Our workflow solutions, together with our data
management and business intelligence tools, increase revenue capture
and cash collections, reduce accounts receivable balances and increase
regulatory compliance.
    
    Spend Management.Our Spend Management segment provides a
comprehensive suite of technology-enabled services that help our
customers manage their non-labor expense categories. Our solutions
lower supply and medical device pricing and utilization by managing
the procurement process through our group purchasing organization
portfolio of contracts, consulting services and business intelligence
tools.
 Disclosures about Segments of an Enterprise and Related Information
    19




---



##### Table of Contents



Three Months Ended June 30, 2008RCM
    
    
    SM
    
    
    Corporate
    
    
    Total(Unaudited, in thousands)Results of Operations:Revenue:Administrative fees
    
    $
    
    
    
    $
    37,879
    
    
    $
    
    
    
    $
    37,879Revenue share obligation
    
    
    
    
    
    
    (12,731
    )
    
    
    
    
    
    
    (12,731
    )Other service fees
    
    
    31,320
    
    
    
    4,767
    
    
    
    
    
    
    
    36,087Total net revenue
    
    
    31,320
    
    
    
    29,915
    
    
    
    
    
    
    
    61,235Total operating expenses
    
    
    32,750
    
    
    
    17,173
    
    
    
    5,579
    
    
    
    55,502Operating (loss) income
    
    
    (1,430
    )
    
    
    12,742
    
    
    
    (5,579
    )
    
    
    5,733Interest expense
    
    
    (3
    )
    
    
    
    
    
    
    (4,997
    )
    
    
    (5,000
    )Other income (expense)
    
    
    15
    
    
    
    (25
    )
    
    
    (3,352
    )
    
    
    (3,362
    )Income (loss) before income taxes
    
    
    (1,418
    )
    
    
    12,717
    
    
    
    (13,928
    )
    
    
    (2,629
    )Income tax (benefit)
    
    
    (734
    )
    
    
    5,283
    
    
    
    (5,602
    )
    
    
    (1,053
    )Net income (loss)
    
    
    (684
    )
    
    
    7,434
    
    
    
    (8,326
    )
    
    
    (1,576
    )Segment Adjusted EBITDA
    
    $
    7,799
    
    
    $
    15,313
    
    
    $
    (4,075
    )
    
    $
    19,037
 As of June 30, 2008RCM
    
    
    SM
    
    
    Corporate
    
    
    Total(Unaudited, in thousands)Financial Position:Accounts receivable, net
    
    $
    35,414
    
    
    $
    29,578
    
    
    $
    (18,427
    )
    
    $
    46,565Other assets
    
    
    585,019
    
    
    
    99,587
    
    
    
    53,766
    
    
    
    738,372Total assets
    
    
    620,433
    
    
    
    129,165
    
    
    
    35,339
    
    
    
    784,937Accrued revenue share obligation
    
    
    
    
    
    
    27,634
    
    
    
    
    
    
    
    27,634Deferred revenue
    
    
    26,429
    
    
    
    4,151
    
    
    
    
    
    
    
    30,580Other liabilities
    
    
    31,506
    
    
    
    28,152
    
    
    
    299,861
    
    
    
    359,519Total liabilities
    
    $
    57,935
    
    
    $
    59,937
    
    
    $
    299,861
    
    
    $
    417,733
 Three Months Ended June 30, 2007RCM
    
    
    SM
    
    
    Corporate
    
    
    Total(Unaudited, in thousands)Results of Operations:Revenue:Administrative fees
    
    $
    
    
    
    $
    33,315
    
    
    $
    
    
    
    $
    33,315Revenue share obligation
    
    
    
    
    
    
    (10,968
    )
    
    
    
    
    
    
    (10,968
    )Other service fees
    
    
    16,152
    
    
    
    4,519
    
    
    
    
    
    
    
    20,671Total net revenue
    
    
    16,152
    
    
    
    26,866
    
    
    
    
    
    
    
    43,018Total operating expenses
    
    
    15,165
    
    
    
    17,983
    
    
    
    3,776
    
    
    
    36,924Operating income (loss)
    
    
    987
    
    
    
    8,883
    
    
    
    (3,776
    )
    
    
    6,094Interest expense
    
    
    (3
    )
    
    
    
    
    
    
    (3,755
    )
    
    
    (3,758
    )Other income (expense)
    
    
    
    
    
    
    9
    
    
    
    431
    
    
    
    440Income (loss) before income taxes
    
    
    984
    
    
    
    8,892
    
    
    
    (7,100
    )
    
    
    2,776Income tax (benefit)
    
    
    281
    
    
    
    4,421
    
    
    
    (3,639
    )
    
    
    1,063Net income (loss)
    
    
    703
    
    
    
    4,471
    
    
    
    (3,461
    )
    
    
    1,713Segment Adjusted EBITDA
    
    $
    5,416
    
    
    $
    11,170
    
    
    $
    (3,009
    )
    
    $
    13,577
 20




---



##### Table of Contents



Six Months Ended June 30, 2008RCM
    
    
    SM
    
    
    Corporate
    
    
    Total(Unaudited, in thousands)Results of Operations:Revenue:Administrative fees
    
    $
    
    
    
    $
    77,766
    
    
    $
    
    
    
    $
    77,766Revenue share obligation
    
    
    
    
    
    
    (25,073
    )
    
    
    
    
    
    
    (25,073
    )Other service fees
    
    
    56,426
    
    
    
    10,874
    
    
    
    
    
    
    
    67,300Total net revenue
    
    
    56,426
    
    
    
    63,567
    
    
    
    
    
    
    
    119,993Total operating expenses
    
    
    59,001
    
    
    
    37,072
    
    
    
    10,458
    
    
    
    106,531Operating (loss) income
    
    
    (2,575
    )
    
    
    26,495
    
    
    
    (10,458
    )
    
    
    13,462Interest expense
    
    
    (3
    )
    
    
    
    
    
    
    (9,314
    )
    
    
    (9,317
    )Other income (expense)
    
    
    29
    
    
    
    (33
    )
    
    
    (2,325
    )
    
    
    (2,329
    )Income (loss) before income taxes
    
    
    (2,549
    )
    
    
    26,462
    
    
    
    (22,097
    )
    
    
    1,816Income tax (benefit)
    
    
    (973
    )
    
    
    9,608
    
    
    
    (7,942
    )
    
    
    693Net income (loss)
    
    
    (1,576
    )
    
    
    16,854
    
    
    
    (14,155
    )
    
    
    1,123Segment Adjusted EBITDA
    
    $
    12,041
    
    
    $
    31,340
    
    
    $
    (8,314
    )
    
    $
    35,067
 Six Months Ended June 30, 2007RCM
    
    
    SM
    
    
    Corporate
    
    
    Total(Unaudited, in thousands)Results of Operations:Revenue:Administrative fees
    
    $
    
    
    
    $
    71,042
    
    
    $
    
    
    
    $
    71,042Revenue share obligation
    
    
    
    
    
    
    (22,718
    )
    
    
    
    
    
    
    (22,718
    )Other service fees
    
    
    30,008
    
    
    
    6,992
    
    
    
    
    
    
    
    37,000Total net revenue
    
    
    30,008
    
    
    
    55,316
    
    
    
    
    
    
    
    85,324Total operating expenses
    
    
    27,257
    
    
    
    34,186
    
    
    
    7,275
    
    
    
    68,718Operating income (loss)
    
    
    2,751
    
    
    
    21,130
    
    
    
    (7,275
    )
    
    
    16,606Interest expense
    
    
    (3
    )
    
    
    (1
    )
    
    
    (7,383
    )
    
    
    (7,387
    )Other (expense) income
    
    
    (20
    )
    
    
    1
    
    
    
    931
    
    
    
    912Income (loss) before income taxes
    
    
    2,728
    
    
    
    21,130
    
    
    
    (13,727
    )
    
    
    10,131Income tax (benefit)
    
    
    943
    
    
    
    8,104
    
    
    
    (5,174
    )
    
    
    3,873Net income (loss)
    
    
    1,785
    
    
    
    13,026
    
    
    
    (8,553
    )
    
    
    6,258Segment Adjusted EBITDA
    
    $
    9,997
    
    
    $
    25,658
    
    
    $
    (5,820
    )
    
    $
    29,835
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited, in thousands)RCM Adjusted EBITDA
    
    $
    7,799
    
    
    $
    5,416
    
    
    $
    12,041
    
    
    $
    9,997SM Adjusted EBITDA
    
    
    15,313
    
    
    
    11,170

    
    
    
    31,340
    
    
    
    25,658Total reportable Segment Adjusted EBITDA
    
    
    23,112
    
    
    
    16,586
    
    
    
    43,381
    
    
    
    35,655Depreciation
    
    
    (1,943
    )
    
    
    (1,329
    )
    
    
    (3,675
    )
    
    
    (2,574
    )Amortization of intangibles
    
    
    (5,016
    )
    
    
    (2,990
    )
    
    
    (8,793
    )
    
    
    (5,830
    )Amortization of intangibles (included in cost of revenue)
    
    
    (371
    )
    
    
    (457
    )
    
    
    (762
    )
    
    
    (680
    )Interest expense, net of interest income (1)
    
    
    (3
    )
    
    
    (3
    )
    
    
    2
    
    
    
    (4
    )Income tax
    
    
    (4,549
    )
    
    
    (4,702
    )
    
    
    (8,635
    )
    
    
    (9,047
    )Impairment of intangibles (2)
    
    
    (1,916
    )
    
    
    (1,195
    )
    
    
    (1,916
    )
    
    
    (1,195
    )Share-based compensation expense (3)
    
    
    (1,462
    )
    
    
    (492
    )
    
    
    (2,965
    )
    
    
    (930
    )Purchase accounting adjustments (4)
    
    
    (1,102
    )
    
    
    (244
    )
    
    
    (1,359
    )
    
    
    (584
    )Total reportable segment net income
    
    
    6,750
    
    
    
    5,174
    
    
    
    15,278
    
    
    
    14,811Corporate net (loss)
    
    
    (8,326
    )
    
    
    (3,461
    )
    
    
    (14,155
    )
    
    
    (8,553
    )Consolidated net income
    
    $
    (1,576
    )
    
    $
    1,713
    
    
    $
    1,123
    
    
    $
    6,258
 21




---



##### Table of Contents



(1)
    
    Interest income is included in other income (expense) and is not
netted against interest expense in our Condensed Consolidated
Statements of Operations.(2)
    
    Impairment of intangibles during the three and six months ended June
30, 2008 primarily relates to acquired developed technology from prior
acquisitions, revenue cycle management tradename and internally
developed software products, mainly due to the integration of Accuros
operations. Impairment of intangibles during the three and six months
ended June 30, 2007 represents the write-off of in-process research
and development from the XactiMed acquisition in May 2007.(3)
    
    Represents non-cash share-based compensation to both employees and
directors. We believe excluding this non-cash expense allows us to
compare our operating performance without regard to the impact of
share-based compensation, which varies from period to period based on
amount and timing of grants.(4)
    
    These adjustments include the effect on revenue of adjusting acquired
deferred revenue balances, net of any reduction in associated deferred
costs, to fair value as of the respective acquisition dates for Avega
Health Systems, Inc. (or Avega), XactiMed, and Accuro. The reduction
of the deferred revenue balances materially affects period-to-period
financial performance comparability and revenue and earnings growth in
periods subsequent to the acquisition and is not indicative of the
changes in underlying results of operations. 12. RELATED PARTY TRANSACTION
   13. SUBSEQUENT EVENTS
  22




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 NOTE ON FORWARD-LOOKING STATEMENTS
   Overview
    Three months ended June 30,
    
    Change
    
    Six months ended June 30,
    
    Change2008
    
    2007
    
    Amount
    
    %
    
    2008
    
    2007
    
    Amount
    
    %Gross fees
    
    $
    73.6
    
    
    $
    54.0
    
    
    $
    19.6
    
    
    
    36.3
    %
    
    $
    145.1
    
    
    $
    108.0
    
    
    $
    37.1
    
    
    
    34.4
    %Total net revenue
    
    
    61.2
    
    
    
    43.0
    
    
    
    18.2
    
    
    
    42.3
    
    
    
    120.0
    
    
    
    85.3
    
    
    
    34.7
    
    
    
    40.7Operating income
    
    
    5.7
    
    
    
    6.1
    
    
    
    (0.4
    )
    
    
    (6.6
    )
    
    
    13.5
    
    
    
    16.6
    
    
    
    (3.1
    )
    
    
    (18.7
    )Net (loss) income
    
    $
    (1.6
    )
    
    $
    1.7
    
    
    $
    (3.3
    )
    
    
    (194.1
    )%
    
    $
    1.1
    
    
    $
    6.3
    
    
    $
    (5.2
    )
    
    
    (82.5
    )%
  
    
    the recent acquisitions of XactiMed (in May 2007), MD-X (in July 2007) and Accuro (in
June 2008) by our Revenue Cycle Management segment; and
    
    strong performance by our Spend Management segment due to higher administrative fees,
consulting fees, and subscription revenues.
  
    
    significant increases in amortization of acquired intangibles (an increase of
approximately $2.0 million and $3.0 million during the three and six months ended June 30,
2008, respectively);
    
    non-recurring charges incurred during the three and six months ended June 30, 2008,
including $2.1 million in intangible asset impairment charges, primarily related to the
Accuro Acquisition, and a $3.9 million interest rate swap cancellation charge;
    
    declining performance from our business intelligence software and services in our
Revenue Cycle Management segment, which management believes to be temporary, also resulted
in declining operating margins in the current periods;
    
    expenses related to acquisition integration efforts at our Revenue Cycle Management
segment; and
    
    greater general and administrative costs associated with being a publicly-traded company
which contributed to higher costs as compared to the prior year. We closed on the initial
public offering of our common stock on December 18, 2007.
 23




---



##### Table of Contents



Three months ended June 30,
    
    Change
    
    Six months ended June 30,
    
    Change2008
    
    2007
    
    Amount
    
    %
    
    2008
    
    2007
    
    Amount
    
    %Adjusted EBITDA(a)
    
    $
    19.0
    
    
    $
    13.6
    
    
    $
    5.4
    
    
    
    39.7
    %
    
    $
    35.1
    
    
    $
    29.8
    
    
    $
    5.3
    
    
    
    17.8
    %Adjusted EBITDA
margin
    
    
    31.0
    %
    
    
    31.6
    %
    
    
    
    
    
    
    
    
    
    
    29.3
    %
    
    
    34.9
    %
 
 (a)
    
    Adjusted EBITDA is a non-GAAP measure. See Managements Discussion and Analysis of Financial
Condition and Results of Operations Use of Non-GAAP Financial Measures.  
    
    our recently acquired revenue cycle management businesses;
    
    greater administrative fees generated from strong group purchasing service performance
in our Spend Management segment;
    
    continued growth in our Spend Management supply chain consulting and subscription
services; and
    
    continued market acceptance of our Revenue Cycle Management segment subscription
services.
 Recent Developments
 Acquisition of Accuro
   
    
    The acquisition expands our research and development capability and general market
presence, and increases our revenue cycle management product and service offerings with well
regarded solutions and recurring revenue streams;
 
    
    Accuros business is complementary and a long-term strategic fit that provides us
opportunities to expand market share and further penetrate our current customer base;
 
    
    The acquisition of Accuro, which was one of our largest and most scaled Revenue Cycle
Management segment competitors, allows us to compete effectively for hospital and health
system customers; and
 
    
    The acquisition offers us the opportunity to leverage cost and revenue synergies.
    24




---



##### Table of Contents



Credit Facility Amendment
  Termination of Interest Rate Swaps
  Impairment of Intangible Assets
  Segment Structure and Revenue Streams
  Revenue Cycle Management
  Subscription and implementation fees.
 Transaction fees.
 Software-related fees.
 Service fees.
 Spend Management
  Administrative fees and revenue share obligations.
 25




---



##### Table of Contents



Other service fees. Other service fees
 
    
    Consulting fees.We consult with our customers regarding the costs and
utilization of medical devices and implantable physician preference
items, or PPI, and the efficiency and quality of their key clinical
service lines. Our consulting projects are typically fixed fee
projects with a duration of three to nine months, and the related
revenues are earned as services are rendered.
    
    Subscription fees.We also offer technology-enabled services that
provide spend management analytics and data services to improve
operational efficiency, reduce supply costs, and increase transparency
across spend management processes. We earn fixed subscription fees on
a monthly basis for these ASP-hosted services.
 Operating Expenses
  Cost of revenue.
 Product development expenses.
 Selling and marketing expenses.
 General and administrative expenses.
 Depreciation.
 Amortization of intangibles.
 26




---



##### Table of Contents



Results of Operations
 Consolidated Tables
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited, in thousands)Net revenue:Revenue Cycle Management
    
    $
    31,320
    
    
    $
    16,152
    
    
    $
    56,426
    
    
    $
    30,008Spend ManagementAdministrative fees
    
    
    37,879
    
    
    
    33,315
    
    
    
    77,766
    
    
    
    71,042Revenue share obligation
    
    
    (12,731
    )
    
    
    (10,968
    )
    
    
    (25,073
    )
    
    
    (22,718
    )Other service fees
    
    
    4,767
    
    
    
    4,519
    
    
    
    10,874
    
    
    
    6,992Total Spend Management
    
    
    29,915
    
    
    
    26,866
    
    
    
    63,567
    
    
    
    55,316Total net revenue
    
    
    61,235
    
    
    
    43,018
    
    
    
    119,993
    
    
    
    85,324Operating expenses:Revenue Cycle Management
    
    
    32,750
    
    
    
    15,165
    
    
    
    59,001
    
    
    
    27,257Spend Management
    
    
    17,173
    
    
    
    17,983
    
    
    
    37,072
    
    
    
    34,186Total segment operating expenses
    
    
    49,923
    
    
    
    33,148
    
    
    
    96,073
    
    
    
    61,443Operating income:Revenue Cycle Management
    
    
    (1,430
    )
    
    
    987
    
    
    
    (2,575
    )
    
    
    2,751Spend Management
    
    
    12,742
    
    
    
    8,883
    
    
    
    26,495
    
    
    
    21,130Total segment operating income
    
    
    11,312
    
    
    
    9,870
    
    
    
    23,920
    
    
    
    23,881Corporate expenses(1)
    
    
    5,579
    
    
    
    3,776
    
    
    
    10,458
    
    
    
    7,275Operating income
    
    
    5,733
    
    
    
    6,094
    
    
    
    13,462
    
    
    
    16,606Other (expense) income:Interest expense
    
    
    (5,000
    )
    
    
    (3,758
    )
    
    
    (9,317
    )
    
    
    (7,387
    )Other (expense) income
    
    
    (3,362
    )
    
    
    440
    
    
    
    (2,329
    )
    
    
    912(Loss) income before income taxes
    
    
    (2,629
    )
    
    
    2,776
    
    
    
    1,816
    
    
    
    10,131Income tax (benefit) expense
    
    
    (1,053
    )
    
    
    1,063
    
    
    
    693
    
    
    
    3,873Net (loss) income
    
    
    (1,576
    )
    
    
    1,713
    
    
    
    1,123
    
    
    
    6,258Reportable segment Adjusted EBITDA(2):Revenue Cycle Management
    
    
    7,799
    
    
    
    5,416
    
    
    
    12,041
    
    
    
    9,997Spend Management
    
    $
    15,313
    
    
    $
    11,170
    
    
    $
    31,340
    
    
    $
    25,658Reportable segment Adjusted EBITDA margin (3):Revenue Cycle Management
    
    
    24.9
    %
    
    
    33.5
    %
    
    
    21.3
    %
    
    
    33.3
    %Spend Management
    
    
    51.2
    %
    
    
    41.6
    %
    
    
    49.3
    %
    
    
    46.4
    %
 
 (1)
    
    Represents the expenses of corporate office operations. Corporate does not represent an operating segment of the Company.(2)
    
    Managements primary metric of segment profit or loss is Segment Adjusted EBITDA. See Note 11 of the Notes to our
Condensed Consolidated Financial Statements.(3)
    
    Reportable segment Adjusted EBITDA margin represents each reportable segments Adjusted EBITDA as a percentage of each
segments respective net revenue. 27




---



##### Table of Contents



Comparison of the Three Months Ended June 30, 2008 and June 30, 2007
 Three Months Ended June 30,2008
    
    
    2007
    
    
    Change% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    %(Unaudited, in thousands)Net revenue:Revenue Cycle Management
    
    $
    31,320
    
    
    
    51.1
    %
    
    $
    16,152
    
    
    
    37.5
    %
    
    $
    15,168
    
    
    
    93.9
    %Spend ManagementAdministrative fees
    
    
    37,879
    
    
    
    61.9
    
    
    
    33,315
    
    
    
    77.4
    
    
    
    4,564
    
    
    
    13.7Revenue share obligation
    
    
    (12,731
    )
    
    
    (20.8
    )
    
    
    (10,968
    )
    
    
    (25.5
    )
    
    
    (1,763
    )
    
    
    16.1Other service fees
    
    
    4,767
    
    
    
    7.8
    
    
    
    4,519
    
    
    
    10.5
    
    
    
    248
    
    
    
    5.5Total Spend Management
    
    
    29,915
    
    
    
    48.9
    
    
    
    26,866
    
    
    
    62.5
    
    
    
    3,049
    
    
    
    11.3Total net revenue
    
    $
    61,235
    
    
    
    100.0
    %
    
    $
    43,018
    
    
    
    100.0
    %
    
    $
    18,217
    
    
    
    42.3
    %
 Total Net Revenue
  Revenue Cycle Management revenue .
 
    
    Acquisitions. $10.9 million of the increase resulted from product and
service revenue attributable to the 2007 acquisitions of XactiMed and
MD-X. Revenue attributable to Accuro, which we acquired on June 2,
2008, contributed an additional $5.1 million of the increase in
segment revenue. The operating results of XactiMed were included in
our full three months ended June 30, 2008 compared to approximately
six weeks of operating results in the three months ended June 30,
2007. The operating results of MD-X were included in our full three
months ended June 30, 2008 and were not included in the comparable
prior period (MD-X was acquired July 2, 2007). We refer to the three
aforementioned acquisitions collectively as the Revenue Cycle
Management Acquisitions.On a pro forma basis, net revenue from the Revenue Cycle Management
Acquisitions grew from $29.5 million to $31.9 million, or an 8.4%
increase, during the three months ended June 30, 2008 compared to the
three months ended June 30, 2007. This growth was primarily
attributable to a 13.7% increase in recurring subscription and
transactional revenue, partially offset by a 3.8% decrease in
service-based revenues. We define pro forma net revenue as the
stand-alone revenue (unaudited) of the Revenue Cycle Management
Acquisitions as though their results of operations were included in
our results of operations from the beginning of the relative
comparative periods, which is the three month period
beginning April 1, 2007 versus the three month period beginning April
1, 2008.Our pro forma results include actual results from the relevant dates
of acquisition, in addition to pre-acquisition acquiree revenues.
Actual acquisition operating results included in our results of
operations during the three months ended June 30, 2007 included $1.7
million of net revenue from the operations of XactiMed from May 18,
2007, the date of acquisition. Actual acquisition operating results
included in our results of operations during the three months ended
June 30, 2008 included $17.7 million of net revenue from the
operations of all Revenue Cycle Management Acquisitions for all three
months, except for Accuro, in which case results are included from
June 2, 2008, the date of acquisition.
    
    Non-acquisition related products and services. Partially offsetting
the net $16.0 million increase from acquired Revenue Cycle Management
segment revenue is a $0.8 million decrease in net revenue from
non-acquisition related products and services. This amount is
comprised of a $1.1 million decrease in net revenue from our business
intelligence products and services, offset by a $0.3 million increase
in our software-related subscription fees from new and existing
customers.
 28




---



##### Table of Contents



The $1.1 million decrease in net revenue from our business
intelligence products and services, excluding those acquired from
Accuro, is due to the following factors. During 2007 and the first
half of 2008, we experienced delays in the release of the fourth
version of our decision support software, which limited the growth of
Revenue Cycle Management net revenue during 2007 as well as the three
months ended June 30, 2008. We expect continued adverse impact into
second half of 2008 as current and potential customers await the
release of the new product upgrade, now expected in the fourth quarter
of 2008. An additional contributing factor to this $1.1 million
revenue decline is a $0.6 million revenue loss due to a scheduled and
planned step down in software support and maintenance fees from a
large business intelligence customer.
 Spend Management net revenue .
 
    
    Administrative fees.Administrative fee revenue increased by
$4.6 million, or 13.7%, as compared to the prior period, primarily due
to higher purchasing volumes by new and existing customers under our
group purchasing organization contracts with our manufacturer and
distributor vendors. We also experienced a net $0.8 million increase
in contingent revenue upon confirmation from certain customers that
the respective performance targets had been achieved during the three
months ended June 30, 2008 compared to the three months ended June 30,
2007. We may have fluctuations in our administrative fee revenue in
future quarters as the timing of vendor reporting and recognition of
contingent revenue may not result in discernable trends.
    
    Revenue share obligation.Revenue share obligation increased $1.8
million compared to the prior period. We analyze the impact that our
revenue share obligation has on our results of operations by analyzing
the ratio of revenue share obligation to administrative fees (or the
revenue share ratio). The revenue share ratio for the three months
ended June 30, 2008 was 33.6%, which was slightly higher than the
revenue share ratio of 32.9% for the three months ended June 30, 2007,
mainly due to a higher mix of purchasing volumes coming from customers
who pay us fixed service fees, and in turn, receive higher revenue
share obligation payments. We may experience some quarterly
fluctuations in our revenue share ratio from changes in revenue mix
derived from larger customers and the timing of vendor reporting.
    
    Other service fees. The $0.2 million of growth in other service fees
primarily related to $2.8 million of increased revenues from our
supply chain consulting and subscription services, offset by a $2.6
million decrease in revenue related to our annual customer and vendor
meeting held during the three months ended June 30, 2007. In 2007,
this meeting was held and its related revenue and costs were
recognized in our second quarter. However, in 2008 the meeting was
held in March, and the related recognition occurred in the first
quarter.
 The $2.8 million increase in revenues from our supply chain consulting
and subscription services primarily consisted of more consulting hours
and an increased number of consulting engagements from new and
existing customers, including a new engagement with a large health
system whose services began during the current quarter.
 Three Months Ended June 30,2008
    
    
    2007
    
    
    Change% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    %(Unaudited, in thousands)Operating expenses:Cost of revenue
    
    $
    10,688
    
    
    
    17.5
    %
    
    $
    5,516
    
    
    
    12.8
    %
    
    $
    5,172
    
    
    
    93.8
    %Product development expenses
    
    
    3,611
    
    
    
    5.9
    
    
    
    1,807
    
    
    
    4.2
    
    
    
    1,804
    
    
    
    99.8Selling and marketing expenses
    
    
    9,544
    
    
    
    15.6
    
    
    
    10,876
    
    
    
    25.3
    
    
    
    (1,332
    )
    
    
    (12.2
    )General and administrative
expenses
    
    
    22,215
    
    
    
    36.3
    
    
    
    12,806
    
    
    
    29.8
    
    
    
    9,409
    
    
    
    73.5Depreciation
    
    
    2,349
    
    
    
    3.8
    
    
    
    1,734
    
    
    
    4.0
    
    
    
    615
    
    
    
    35.5Amortization of intangibles
    
    
    5,016
    
    
    
    8.2
    
    
    
    2,990
    
    
    
    7.0
    
    
    
    2,026
    
    
    
    67.8Impairment of intangibles
    
    
    2,079
    
    
    
    3.4
    
    
    
    1,195
    
    
    
    2.8
    
    
    
    884
    
    
    
    74.0Total operating expenses
    
    
    55,502
    
    
    
    90.6
    
    
    
    36,924
    
    
    
    85.8
    
    
    
    18,578
    
    
    
    50.3Operating expenses by segment:Revenue Cycle Management
    
    
    32,750
    
    
    
    53.5
    
    
    
    15,165
    
    
    
    35.3
    
    
    
    17,585
    
    
    
    116.0Spend Management
    
    
    17,173
    
    
    
    28.0
    
    
    
    17,983
    
    
    
    41.8
    
    
    
    (810
    )
    
    
    (4.5
    )Total segment operating expenses
    
    
    49,923
    
    
    
    81.5
    
    
    
    33,148
    
    
    
    77.1
    
    
    
    16,775
    
    
    
    50.6Corporate expenses
    
    
    5,579
    
    
    
    9.1
    
    
    
    3,776
    
    
    
    8.8
    
    
    
    1,803
    
    
    
    47.7Total operating expenses
    
    $
    55,502
    
    
    
    90.6
    %
    
    $
    36,924
    
    
    
    85.8
    %
    
    $
    18,578
    
    
    
    50.3
    %
 29




---



##### Table of Contents



Total Operating Expenses
 Cost of revenue .
   Product development expenses .
  Selling and marketing expenses .
  General and administrative expenses .
  30




---



##### Table of Contents



Depreciation .
  Amortization of intangibles .
  Impairment of intangibles .
  Segment Operating Expenses
 Revenue Cycle Management expense s.
  Spend Management expenses .
 31




---



##### Table of Contents



Corporate expenses .
 Non-operating Expenses
 Interest expense .
 Other (expense) income .
 Income tax (benefit)expense.
 32




---



##### Table of Contents



Comparison of the Six Months Ended June 30, 2008 and June 30, 2007
 Six Months Ended June 30,2008
    
    
    2007
    
    
    Change% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    %(Unaudited, in thousands)Net revenue:Revenue Cycle Management
    
    $
    56,426
    
    
    
    47.0
    %
    
    $
    30,008
    
    
    
    35.2
    %
    
    $
    26,418
    
    
    
    88.0
    %Spend ManagementAdministrative fees
    
    
    77,766
    
    
    
    64.8
    
    
    
    71,042
    
    
    
    83.3
    
    
    
    6,724
    
    
    
    9.5Revenue share obligation
    
    
    (25,073
    )
    
    
    (20.9
    )
    
    
    (22,718
    )
    
    
    (26.6
    )
    
    
    (2,355
    )
    
    
    10.4Other service fees
    
    
    10,874
    
    
    
    9.1
    
    
    
    6,992
    
    
    
    8.2
    
    
    
    3,882
    
    
    
    55.5Total Spend Management
    
    
    63,567
    
    
    
    53.0
    
    
    
    55,316
    
    
    
    64.8
    
    
    
    8,251
    
    
    
    14.9Total net revenue
    
    $
    119,993
    
    
    
    100.0
    %
    
    $
    85,324
    
    
    
    100.0
    %
    
    $
    34,669
    
    
    
    40.6
    %
 Total Net Revenue
  Revenue Cycle Management revenue .
 
    
    Acquisitions. $22.0 million of the increase resulted from product and service
revenue attributable to the 2007 acquisitions of XactiMed and MD-X. Revenue attributable to Accuro,
which we acquired on June 2, 2008, contributed an additional $5.1 million of the increase in
segment revenue. The operating results of XactiMed were included in our full six months ended June
30, 2008 compared to only approximately six weeks of operating results in the six months ended June
30, 2007.The operating results of MD-X were included in our full six months ended June 30, 2008 and were not
included in the comparable prior period.On a pro forma basis, net revenue from the Revenue Cycle Management Acquisitions grew from $56.1
million to $61.6 million, or a 9.9% increase, during the six months ended June 30, 2008 compared to
the six months ended June 30, 2007. This growth was primarily attributable to a 14.7% increase in
recurring subscription and transactional revenue, partially offset by a 2.0% decrease in
service-based revenue. We define pro forma net revenue as the stand-alone revenue (unaudited) of
the Revenue Cycle Management Acquisitions as though their results of operations were included in
our results of operations from the beginning of the relative comparative periods, which
is the six month period beginning January 1, 2007 versus the six month period beginning
January 1, 2008.Our pro forma operating results include actual results from the relevant dates of acquisition, in
addition to pre-acquisition acquiree revenues. Actual acquisition operating results included in
our results of operations during the six months ended June 30, 2007 included $1.7 million of net
revenue from the operations of XactiMed from May 18, 2007, or the date of acquisition. Actual
acquisition operating results included in our results of operations during the six months ended
June 30, 2008 included $28.8 million of net revenue from the operations of all Revenue Cycle
Management Acquisitions for all six months, except for Accuro, in which case results are included
from June 2, 2008, the date of acquisition.
    
    Non-acquisition related products and services. Partially offsetting the net
$27.1 million increase from acquired Revenue Cycle Management revenue is a $0.7 million decrease in
net revenue from non-acquisition related products and services. This decrease is comprised of a
$1.1 million decrease in consulting revenue and an approximate $2.0 million decrease in revenue
from our business intelligence products and services, offset by a $2.4 million increase (or a 21.1%
increase compared to the six months ended June 30, 2007) in our software-related subscription fees
from new and existing customers. Our subscription fee growth was derived from continued market
demand for our charge capture, rate modeling, and our supply-chain-revenue-cycle linkage
subscription services, as well as from our latest version of our chargemaster management services.
Our decrease in consulting revenue is primarily attributable to revenue from a significant
consulting contract in 2007 that did not reoccur during the six months ended June 30, 2008.
 33




---



##### Table of Contents



The approximate $2.0 million decrease in net revenue from our business intelligence
products and services, excluding those acquired from Accuro, is due to the following factors.
During 2007 and the first half of 2008, we experienced delays in the release of the fourth version
of our decision support software, which limited the growth of Revenue Cycle Management net revenue
during 2007 as well as the six months ended June 30, 2008. We expect continued adverse impact in
the second half of 2008 as current and potential customers await release of the new product
upgrade, now expected in the fourth quarter of 2008. An additional
contributing factor to this approximate $2.0 million revenue decline is a $1.1 million revenue loss
due to a scheduled and planned step down in software support and maintenance fees from a large
business intelligence customer.
 Spend Management net revenue .
 
    
    Administrative fees.Administrative fee revenue increased by $6.7 million, or
9.5%, as compared to the prior period, primarily due to higher purchasing volumes by existing
customers under our group purchasing organization contracts with our manufacturer and distributor
vendors. Also contributing to the above increase, we experienced a net $2.3 million in higher
contingent revenue upon confirmation from certain customers that the respective performance targets
had been achieved during the six months ended June 30, 2008 compared to the six months ended June
30, 2007. We may have fluctuations in our administrative fee revenue in future quarters as the
timing of vendor reporting and contingent revenue may not result in discernable trends.
    
    Revenue share obligation.Revenue share obligation increased $2.4 million as compared
to the prior period. We analyze the impact that our revenue share obligation has on our results of
operations by analyzing the revenue share ratio. The revenue share ratio for the six months ended
June 30, 2008 was 32.2%, which was relatively consistent with the revenue share ratio of 32.0% for
the six months ended June 30, 2007. We may experience some quarterly fluctuations in our revenue
share ratio from changes in revenue mix to larger customers and from the timing of vendor
reporting.
    
    Other service fees. The $3.9 million of growth in other service fees primarily related
to higher revenues from our supply chain consulting and subscription services. The consulting
growth was mainly due to more consulting hours and an increased number of consulting engagements
from new and existing customers, including a new engagement with a large health system whose
services began during the current period. Additionally, we realized growth in the number of our
subscription products.
 Six months Ended June 30,2008
    
    
    2007
    
    
    Change% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    %(Unaudited, in thousands)Operating expenses:Cost of revenue
    
    $
    19,151
    
    
    
    16.0
    %
    
    $
    9,702
    
    
    
    11.4
    %
    
    $
    9,449
    
    
    
    97.4
    %Product development expenses
    
    
    6,308
    
    
    
    5.3
    
    
    
    3,688
    
    
    
    4.3
    
    
    
    2,620
    
    
    
    71.0Selling and marketing expenses
    
    
    22,455
    
    
    
    18.7
    
    
    
    18,714
    
    
    
    21.9
    
    
    
    3,741
    
    
    
    20.0General and administrative
expenses
    
    
    43,275
    
    
    
    36.1
    
    
    
    26,255
    
    
    
    30.8
    
    
    
    17,020
    
    
    
    64.8Depreciation
    
    
    4,470
    
    
    
    3.7
    
    
    
    3,334
    
    
    
    3.9
    
    
    
    1,136
    
    
    
    34.1Amortization of intangibles
    
    
    8,793
    
    
    
    7.3
    
    
    
    5,830
    
    
    
    6.8
    
    
    
    2,963
    
    
    
    50.8Impairment of intangibles
    
    
    2,079
    
    
    
    1.7
    
    
    
    1,195
    
    
    
    1.4
    
    
    
    884
    
    
    
    74.0Total operating expenses
    
    
    106,531
    
    
    
    88.8
    
    
    
    68,718
    
    
    
    80.5
    
    
    
    37,813
    
    
    
    55.0Operating expenses by segment:Revenue Cycle Management
    
    
    59,001
    
    
    
    49.2
    
    
    
    27,257
    
    
    
    31.9
    
    
    
    31,744
    
    
    
    116.5Spend Management
    
    
    37,072
    
    
    
    30.9
    
    
    
    34,186
    
    
    
    40.1
    
    
    
    2,886
    
    
    
    8.4Total segment operating expenses
    
    
    96,073
    
    
    
    80.1
    
    
    
    61,443
    
    
    
    72.0
    
    
    
    34,630
    
    
    
    56.4Corporate expenses
    
    
    10,458
    
    
    
    8.7
    
    
    
    7,275
    
    
    
    8.5
    
    
    
    3,183
    
    
    
    43.8Total operating expenses
    
    $
    106,531
    
    
    
    88.8
    %
    
    $
    68,718
    
    
    
    80.5
    %
    
    $
    37,813
    
    
    
    55.0
    %
 34




---



##### Table of Contents



Total Operating Expenses
 Cost of revenue .
   Product development expenses .
  Selling and marketing expenses .
  General and administrative expenses .
  Depreciation .
 35




---



##### Table of Contents



Amortization of intangibles .
  Impairment of intangibles .
  Segment Operating Expenses
 Revenue Cycle Management expense s.
  Spend Management expenses .
  Corporate expenses .
 36




---



##### Table of Contents



Non-operating Expenses
 Interest expense .
 Other (expense) income .
 Income tax expense.
  Use of Non-GAAP Financial Measures
      37




---



##### Table of Contents




    
    EBITDA does not reflect our cash expenditures or future requirements
for capital expenditures or contractual commitments;
    
    EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
    
    EBITDA does not reflect the interest expense, or the cash requirements
to service interest or principal payments under our credit agreement;
    
    EBITDA does not reflect income tax payments we are required to make; and
    
    Although depreciation and amortization are non-cash charges, the
assets being depreciated and amortized often will have to be replaced
in the future, and EBITDA does not reflect any cash requirements for
such replacements.
    Three months ended June 30,
    
    Six months ended June 30,2008
    
    2007
    
    2008
    
    2007(Unaudited, in thousands)Net (Loss) Income
    
    $
    (1,576
    )
    
    $
    1,713
    
    
    $
    1,123
    
    
    $
    6,258Depreciation
    
    
    2,349
    
    
    
    1,735
    
    
    
    4,470
    
    
    
    3,334Amortization of intangibles
    
    
    5,016
    
    
    
    2,989
    
    
    
    8,793
    
    
    
    5,830Amortization of intangibles (included in cost of revenue)
    
    
    371
    
    
    
    457
    
    
    
    762
    
    
    
    680Interest Expense, net of Interest Income (1)
    
    
    4,545
    
    
    
    3,442
    
    
    
    7,954
    
    
    
    6,708Income tax (benefit) expense
    
    
    (1,053
    )
    
    
    1,063
    
    
    
    693
    
    
    
    3,873EBITDA
    
    
    9,652
    
    
    
    11,399
    
    
    
    23,795
    
    
    
    26,683Impairment of intangibles (2)
    
    
    2,079
    
    
    
    1,195
    
    
    
    2,079
    
    
    
    1,195Share-based compensation (3)
    
    
    2,399
    
    
    
    848
    
    
    
    4,139
    
    
    
    1,592Rental income from capitalized building lease (4)
    
    
    (109
    )
    
    
    (109
    )
    
    
    (219
    )
    
    
    (219
    )Purchase accounting adjustment (5)
    
    
    1,102
    
    
    
    244
    
    
    
    1,359
    
    
    
    584Interest rate swap cancellation (6)
    
    
    3,914
    
    
    
    
    
    
    
    3,914
    
    
    
    Adjusted EBITDA
    
    $
    19,037
    
    
    $
    13,577
    
    
    $
    35,067
    
    
    $
    29,835
 38




---



##### Table of Contents



(1)
    
    Interest income is included in other income (expense) and is not
netted against interest expense in our Condensed Consolidated
Statements of Operations.(2)
    
    Impairment of intangibles during the three and six months ended June
30, 2008 primarily relates to acquired developed technology from prior
acquisitions, revenue cycle management tradename and internally
developed software products, mainly due to the integration of Accuros
operations. Impairment of intangibles during the three and six months
ended June 30, 2007 represents the write-off of in-process research
and development from the XactiMed acquisition in May 2007.(3)
    
    Represents non-cash share-based compensation to both employees and
directors. The significant increase in 2008 is due to share-based
grants made subsequent to our initial public offering. We believe
excluding this non-cash expense allows us to compare our operating
performance without regard to the impact of share-based compensation
expense, which varies from period to period based on the amount and
timing of grants.(4)
    
    The imputed rental income recognized with respect to a capitalized
building lease is deducted from net income (loss) due to its non-cash
nature. We believe this income is not a useful measure of continuing
operating performance. See our Consolidated Financial Statements
included in our annual report on Form 10-K for the year ended
December 31, 2007 for further discussion of this rental income.(5)
    
    These adjustments include the effect on revenue of adjusting acquired
deferred revenue balances, net of any reduction in associated deferred
costs, to fair value as of the respective acquisition dates for Avega,
XactiMed and Accuro. The reduction of the deferred revenue balances
materially affects period-to-period financial performance
comparability and revenue and earnings growth in future periods
subsequent to the acquisition and is not indicative of changes in
underlying results of operations.(6)
    
    During the three and six months ended June 30, 2008, we recorded an
expense associated with the cancellation of our interest rate swap
arrangements. In connection with the cancellation, we paid the
counterparty $3.9 million in termination fees. We believe such expense
is infrequent in nature and is not indicative of continuing operating
performance. Critical Accounting Policies
   Self-Insurance Reserves
   New Pronouncements
 Fair Value Measurements
 Fair Value Measurements,
 39




---



##### Table of Contents



Accounting for Derivative Instruments and
Hedging Activities
  Fair Value Option for Financial Assets and Financial Liabilities
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations
 Business Combinations
 Liquidity and Capital Resources
   
    
    cash and cash equivalents of $14.1 million, which we held deposited in various bank accounts and cash
equivalent funds; and
    
    $97.0 million of available capacity under our revolving loan facility, which is discussed further below.
  40




---



##### Table of Contents



Cash Flows
    
    
    changes in working capital from the inconsistent timing of cash
receipts and payments for major recurring items such as accounts
receivable collections, accounts payable payments, revenue share
obligation payments, incentive compensation, changes in deferred
revenue, and other various items;
    
    unforeseeable events or transactions; and
    
    incremental net cash flows from operations of acquired businesses.
    41




---



##### Table of Contents



Acquisition Contingent Consideration
     Off-Balance Sheet Arrangements and Commitments
    2008
    
    $
    4,1182009
    
    
    5,9572010
    
    
    5,3272011
    
    
    5,1602012
    
    
    4,808Thereafter
    
    
    10,594$
    35,964
  42




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign currency exchange risk.
 Interest rate risk.
  
 Item 4T. Controls and Procedures
 Disclosure Controls and Procedures
    Changes in Internal Control over Financial Reporting
   43




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
  Our indebtedness could adversely affect our financial health and reduce the funds available to us
for other purposes.
   
    
    a material portion of our cash flow from operations must be dedicated
to the payment of interest on and principal of our outstanding
indebtedness, thereby reducing the funds available to us for other
purposes, including working capital, acquisitions and capital
expenditures;
    
    our substantial degree of leverage could make us more vulnerable in
the event of a downturn in general economic conditions or other
adverse events in our business or our industry;
    
    our ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes may
be impaired, limiting our ability to maintain the value of our assets
and operations; and
    
    there will be a material and adverse effect on our business and
financial condition if we are unable to service our indebtedness or
obtain additional financing, as needed.
 44




---



##### Table of Contents



We may have difficulty integrating Accuros business.
   
    
    the diversion of our managements attention, as integrating the operations and assets of the
acquired business will require a substantial amount of our managements time;
    
    difficulties associated with assimilating the operations of the acquired business, including
differing technology, business systems and corporate cultures;
    
    increased demand from customers for pricing concessions based on the broader product offering.
    
    the ability to achieve operating and financial synergies anticipated to result from the acquisition;
    
    the costs of integration may exceed our expectations; and
    
    failure to retain key personnel and customers of Accuro.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Accuro Acquisition
 Options
 45




---



##### Table of Contents



Warrants.
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  46




---



##### Table of Contents



Item 6. Exhibits
 Number
    
    Description of Exhibit10.1
    
    Third Credit Agreement Amendment, dated as of May 22, 2008 among MedAssets, Inc., its domestic
subsidiaries, Bank of America, N. A., and the other lenders party thereto. (Incorporated by
reference to Exhibit 10.1 of the Companys Current Report on Form 8-K/A filed May 28, 2008)31.1*
    
    Sarbanes-Oxley Act of 2002, Section 302 Certification for President and Chief Executive Officer31.2*
    
    Sarbanes-Oxley Act of 2002, Section 302 Certification for Chief Financial Officer32.1*
    
    Sarbanes-Oxley Act of 2002, Section 906 Certification for President and Chief Executive
Officer and Chief Financial Officer
 
 *
    
    Filed herewith 47




---



##### Table of Contents



Signatures
  MEDASSETS, INC.August 14, 2008
    
    By:
Name:
    
    /s/ John A. Bardis

John A. BardisTitle:
    
    Chief Executive Officer(Principal Executive Officer)August 14, 2008
    
    By:
Name:
    
    /s/ L. Neil Hunn

L. Neil HunnTitle:
    
    Chief Financial Officer(Principal Financial Officer)
 48




---



##### Table of Contents



Number
    
    Description of Exhibit10.1
    
    Third Credit Agreement Amendment, dated as of May 22, 2008 among MedAssets, Inc., its domestic
subsidiaries, Bank of America, N. A., and the other lenders party thereto. (Incorporated by
reference to Exhibit 10.1 of the Companys Current Report on 
Form 8-K/A filed May 28, 2008)31.1*
    
    Sarbanes-Oxley Act of 2002, Section 302 Certification for President and Chief Executive Officer31.2*
    
    Sarbanes-Oxley Act of 2002, Section 302 Certification for Chief Financial Officer32.1*
    
    Sarbanes-Oxley Act of 2002, Section 906 Certification for President and Chief Executive
Officer and Chief Financial Officer
 
 *
    
    Filed herewith 49