##### 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 September 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
(Do not check if a smaller reporting company)

 

 Smaller Reporting Company o
 o þ




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##### 



PART I. FINANCIAL INFORMATION
    
    
    2Item 1. Condensed Consolidated Financial Statements
    
    
    2Condensed Consolidated Balance Sheets at September 30, 2008 and December 31, 2007
    
    
    2Condensed Consolidated Statements of Operations for the three and nine months ended September 30,
2008 and 2007
    
    
    3Condensed Consolidated Statement of Stockholders Equity for the nine months ended September 30, 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    45Item 4T. Controls and Procedures
    
    
    45PART II. OTHER INFORMATION
    
    
    46Item 1. Legal Proceedings
    
    
    46Item 1A. Risk Factors
    
    
    46Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    48Item 3. Defaults Upon Senior Securities
    
    
    48Item 4. Submission of Matters to a Vote of Security Holders
    
    
    48Item 5. Other Information
    
    
    48Item 6. Exhibits
    
    
    49Signatures
    
    
    50EX-31.1EX-31.2EX-32.1




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##### 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)
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrentCash and cash equivalents (Note 1)
    
    $
    
    
    
    $
    136,952Restricted cash
    
    
    
    
    
    
    20Accounts receivable, net of allowances of
$2,341 and $3,506 as of September 30, 2008
and December 31, 2007
    
    
    45,635
    
    
    
    33,679Deferred tax asset, current
    
    
    11,307
    
    
    
    15,049Prepaid expenses and other current assets
    
    
    6,407
    
    
    
    4,508Total current assets
    
    
    63,349
    
    
    
    190,208Property and equipment, net
    
    
    40,074
    
    
    
    32,490Other long term assetsGoodwill (Note 4)
    
    
    512,668
    
    
    
    232,822Intangible assets, net (Note 4)
    
    
    131,850
    
    
    
    62,491Other
    
    
    17,432
    
    
    
    8,368Other long-term assets
    
    
    661,950
    
    
    
    303,681Total assets
    
    $
    765,373
    
    
    $
    526,379LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    6,380
    
    
    $
    4,562Accrued revenue share obligation and rebates
    
    
    20,671
    
    
    
    29,998Accrued payroll and benefits
    
    
    22,364
    
    
    
    13,402Other accrued expenses
    
    
    9,358
    
    
    
    5,612Deferred revenue, current portion (Note 5)
    
    
    27,600
    
    
    
    19,791Deferred purchase consideration (Note 3)
    
    
    18,987
    
    
    
    Current portion of notes payable (Note 6)
    
    
    2,768
    
    
    
    2,020Current portion of finance obligation
    
    
    146
    
    
    
    128Total current liabilities
    
    
    108,274
    
    
    
    75,513Notes payable, less current portion (Note 6)
    
    
    252,531
    
    
    
    196,264Finance obligation, less current portion
    
    
    9,899
    
    
    
    10,009Deferred revenue, less current portion (Note 5)
    
    
    4,552
    
    
    
    3,229Deferred tax liability
    
    
    13,815
    
    
    
    5,868Other long term liabilities
    
    
    1,969
    
    
    
    5,981Total liabilities
    
    
    391,040
    
    
    
    296,864Commitments and contingencies (Note 7)
    
    
    
    
    
    
    Stockholders equity (Note 8)Common stock, $0.01 par value, 150,000,000
shares authorized; 53,860,000 and 44,429,000
shares issued and outstanding as of
September 30, 2008 and December 31, 2007,
respectively
    
    
    539
    
    
    
    444Additional paid-in capital
    
    
    601,353
    
    
    
    464,313Notes receivable from stockholders
    
    
    (217
    )
    
    
    (614
    )Accumulated other comprehensive loss (Note 2)
    
    
    (458
    )
    
    
    (2,935
    )Accumulated deficit
    
    
    (226,884
    )
    
    
    (231,693
    )Total stockholders equity
    
    
    374,333
    
    
    
    229,515Total liabilities and stockholders equity
    
    $
    765,373
    
    
    $
    526,379
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##### Table of Contents



MedAssets, Inc.
 
 Condensed Consolidated Statements of Operations
 (Unaudited)
 Three Months Ended September 30,
    
    Nine Months Ended September 30,2008
    
    2007
    
    2008
    
    2007(In thousands, except per share data)RevenueAdministrative fees, net
    
    $
    25,663
    
    
    $
    22,642
    
    
    $
    78,355
    
    
    $
    70,966Other service fees
    
    
    50,309
    
    
    
    26,631
    
    
    
    117,610
    
    
    
    63,631Total net revenue
    
    
    75,972
    
    
    
    49,273
    
    
    
    195,965
    
    
    
    134,597Operating expenses:Cost of revenue
    
    
    17,101
    
    
    
    8,155
    
    
    
    36,252
    
    
    
    17,845Product development expenses
    
    
    4,719
    
    
    
    1,916
    
    
    
    11,027
    
    
    
    5,612Selling and marketing expenses
    
    
    9,641
    
    
    
    7,958
    
    
    
    32,096
    
    
    
    26,675General and administrative expenses
    
    
    22,779
    
    
    
    18,148
    
    
    
    66,054
    
    
    
    44,402Depreciation
    
    
    2,581
    
    
    
    1,936
    
    
    
    7,051
    
    
    
    5,270Amortization of intangibles
    
    
    7,324
    
    
    
    5,102
    
    
    
    16,117
    
    
    
    10,933Impairment of intangibles (Note 4)
    
    
    
    
    
    
    
    
    
    
    2,079
    
    
    
    1,195Total operating expenses
    
    
    64,145
    
    
    
    43,215
    
    
    
    170,676
    
    
    
    111,932Operating income
    
    
    11,827
    
    
    
    6,058
    
    
    
    25,289
    
    
    
    22,665Other income (expense):Interest (expense)
    
    
    (5,803
    )
    
    
    (6,763
    )
    
    
    (15,120
    )
    
    
    (14,151
    )Other income (expense)
    
    
    228
    
    
    
    1,189
    
    
    
    (2,101
    )
    
    
    2,101Income before income taxes
    
    
    6,252
    
    
    
    484
    
    
    
    8,068
    
    
    
    10,615Income tax expense
    
    
    2,566
    
    
    
    320
    
    
    
    3,259
    
    
    
    4,193Net income
    
    
    3,686
    
    
    
    164
    
    
    
    4,809
    
    
    
    6,422Preferred stock dividends and accretion
    
    
    
    
    
    
    (4,798
    )
    
    
    
    
    
    
    (12,445
    )Net income (loss) attributable to common stockholders
    
    $
    3,686
    
    
    $
    (4,634
    )
    
    $
    4,809
    
    
    $
    (6,023
    )Basic and diluted income (loss) per share (Note 10):Basic net income (loss) attributable to common stockholders
    
    $
    .07
    
    
    $
    (.40
    )
    
    $
    .10
    
    
    $
    (.55
    )Diluted net income (loss) attributable to common
stockholders
    
    $
    .07
    
    
    $
    (.40
    )
    
    $
    .09
    
    
    $
    (.55
    )Weighted average shares  basic
    
    
    53,715
    
    
    
    11,685
    
    
    
    48,493
    
    
    
    11,037Weighted average shares  diluted
    
    
    56,136
    
    
    
    11,685
    
    
    
    51,035
    
    
    
    11,037
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MedAssets, Inc.
 
 Condensed Consolidated Statement of Stockholders Equity (Unaudited)
 Nine Months Ended September 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
    )
    
    $
    229,515Repayment of notes
receivable from
stockholders
    
    
    (22
    )
    
    
    
    
    
    
    (366
    )
    
    
    415
    
    
    
    
    
    
    
    
    
    
    
    49Interest accrued on
notes receivable
from stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    (18
    )Issuance of common
stock in connection
with acquisition
    
    
    8,850
    
    
    
    89
    
    
    
    129,298
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129,387Issuance of common
stock from stock
option exercises
    
    
    387
    
    
    
    4
    
    
    
    1,519
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,523Issuance of common
stock from warrant
exercises
    
    
    190
    
    
    
    2
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other common stock
issuances
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock compensation
expense
    
    
    
    
    
    
    
    
    
    
    6,591
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,591Other comprehensive
income (net of
tax):Unrealized loss
from hedging
activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,437
    )
    
    
    
    
    
    
    (1,437
    )Interest rate
swap
termination
(Note 6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,914
    
    
    
    
    
    
    
    3,914Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,809
    
    
    
    4,809Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,477
    
    
    
    4,809
    
    
    
    7,286Balances at
September 30, 2008
    
    
    53,860
    
    
    $
    539
    
    
    $
    601,353
    
    
    $
    (217
    )
    
    $
    (458
    )
    
    $
    (226,884
    )
    
    $
    374,333
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MedAssets, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 Nine Months Ended September 30,2008
    
    
    2007(In thousands)Operating activitiesNet income
    
    $
    4,809
    
    
    $
    6,422Adjustments to reconcile net income to net cash provided by operating activities:Bad debt expense
    
    
    1,457
    
    
    
    517Depreciation
    
    
    7,359
    
    
    
    5,496Amortization of intangibles
    
    
    16,806
    
    
    
    11,473(Gain) loss on sale of assets
    
    
    (119
    )
    
    
    3Noncash stock compensation expense (Note 8)
    
    
    6,591
    
    
    
    2,891Excess tax benefit from exercise of stock options
    
    
    (1,697
    )
    
    
    (1,659
    )Amortization of debt issuance costs
    
    
    895
    
    
    
    307Noncash interest expense, net
    
    
    906
    
    
    
    361Impairment of intangibles (Note 4)
    
    
    2,079
    
    
    
    1,195Deferred income tax expense
    
    
    937
    
    
    
    1,859Changes in assets and liabilities:Accounts receivable, net
    
    
    (5,356
    )
    
    
    (2,418
    )Prepaid expenses and other assets
    
    
    (819
    )
    
    
    (1,057
    )Other long-term assets
    
    
    (1,850
    )
    
    
    900Accounts payable
    
    
    785
    
    
    
    (1,052
    )Accrued revenue share obligations and rebates
    
    
    (9,327
    )
    
    
    (1,099
    )Accrued payroll and benefits
    
    
    1,768
    
    
    
    85Other accrued expenses
    
    
    949
    
    
    
    (778
    )Deferred revenue
    
    
    4,932
    
    
    
    (1,375
    )Cash provided by operating activities
    
    
    31,105
    
    
    
    22,071Investing activitiesPurchases of property, equipment, and software
    
    
    (3,891
    )
    
    
    (7,029
    )Capitalized software development costs
    
    
    (8,378
    )
    
    
    (5,658
    )Acquisitions, net of cash acquired (Note 3)
    
    
    (209,423
    )
    
    
    (90,890
    )Cash used in investing activities
    
    
    (221,692
    )
    
    
    (103,577
    )Financing activitiesDecrease in restricted cash
    
    
    20
    
    
    
    Proceeds from notes payable
    
    
    142,629
    
    
    
    160,188Repayment of notes payable and capital lease obligations (Note 6)
    
    
    (85,615
    )
    
    
    (11,860
    )Repayment of finance obligation
    
    
    (483
    )
    
    
    (489
    )Debt issuance costs (Note 6)
    
    
    (6,167
    )
    
    
    (1,397
    )Interest accrued on note receivable from stockholders
    
    
    (18
    )
    
    
    Payment on note receivable from stockholders
    
    
    49
    
    
    
    255Excess tax benefit from exercise of stock options
    
    
    1,697
    
    
    
    1,659Payment of dividend
    
    
    
    
    
    
    (70,000
    )Issuance of series J preferred stock, net of offering costs
    
    
    
    
    
    
    1,000Issuance of common stock, net of offering costs (Note 8)
    
    
    1,523
    
    
    
    2,795Cash provided by financing activities
    
    
    53,635
    
    
    
    82,151Net (decrease) increase in cash and cash equivalents
    
    
    (136,952
    )
    
    
    645Cash and cash equivalents, beginning of period
    
    
    136,952
    
    
    
    23,459Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    24,104
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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
     Cash and Cash Equivalents
  2. RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements
 Fair
Value Measurements,
 - 6 -




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Accounting for Derivative Instruments and Hedging
Activities
  Par forward contracts
   Interest rate collar
     Fair Value Option for Financial Assets and Financial Liabilities
 The Fair Value Option for Financial Assets and
Financial Liabilities
 - 7 -




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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
   Preliminary Purchase Price Allocation
  Accounting for Uncertainty in Income Taxes
 - 8 -




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Current assets
    
    $
    9,136Property and equipment
    
    
    4,888Other long term assets
    
    
    179Goodwill
    
    
    279,846Intangible assets
    
    
    87,700Total assets acquired
    
    
    381,749Less:Current liabilities
    
    
    14,597Deferred tax liability, long-term
    
    
    9,293Total liabilities assumed
    
    
    23,890Total purchase price
    
    $
    357,859
 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 -




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Three Months Ended September 30,
    
    Nine Months Ended September 30,2008
    
    2007
    
    2008
    
    2007(Unaudited; in thousands, except per share data)Net revenue
    
    $
    75,972
    
    
    $
    65,861
    
    
    $
    224,505
    
    
    $
    203,371Net income (loss)
    
    
    3,686
    
    
    
    (1,838
    )
    
    
    3,135
    
    
    
    (1,394
    )Preferred stock
dividends and accretion
    
    
    
    
    
    
    (4,798
    )
    
    
    
    
    
    
    (13,443
    )Net income
(loss) attributable to
common stockholders
    
    
    3,686
    
    
    
    (6,636
    )
    
    
    3,135
    
    
    
    (14,837
    )Basic net income
(loss) per share
attributable to common
stockholders
    
    $
    0.07
    
    
    $
    (0.32
    )
    
    $
    0.06
    
    
    $
    (0.75
    )Diluted net income
(loss) per share
attributable to common
stockholders
    
    $
    0.07
    
    
    $
    (0.32
    )
    
    $
    0.06
    
    
    $
    (0.75
    )
 2008 Restructuring Plan
    Initial
    
    
    
    
    
    
    
    
    
    
    AccruedAccrued
    
    
    Adjustments
    
    
    Cash
    
    
    September 30,2008 Restructuring Plan
    
    Costs
    
    
    To Costs
    
    
    Payments
    
    
    2008Severance
    
    $
    1,295
    
    
    $
    1,528
    
    
    $
    (1,199
    )
    
    $
    1,624Other
    
    
    652
    
    
    
    377
    
    
    
    (376
    )
    
    
    653Total 2008 Restructuring Costs
    
    $
    1,947
    
    
    $
    1,905
    
    
    $
    (1,575
    )
    
    $
    2,277
 4. GOODWILL AND INTANGIBLE ASSETS
  Indefinite Life Intangibles:Goodwill, net
    
    $
    512,668Tradename
    
    
    1,029Total
    
    $
    513,697
  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
    
    
    $
    84,721Adjustments related to the
acquisition 
of Accuro
(Note 3)
    
    $
    3,384
    
    
    
    3,384
    
    
    
    Balance, September 30, 2008
    
    $
    512,668
    
    
    $
    427,947
    
    
    $
    84,721
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WeightedAverage
    
    
    GrossAmortization
    
    
    Carrying
    
    
    AccumulatedPeriod (Years)
    
    
    Amount
    
    
    Amortization
    
    
    Net(Unaudited, in thousands)September 30, 2008Customer base
    
    10 years
    
    $
    161,128
    
    
    $
    (65,047
    )
    
    $
    96,081Developed technology
    
    5 years
    
    
    40,556
    
    
    
    (7,490
    )
    
    
    33,066Employment agreements
    
    3 years
    
    
    224
    
    
    
    (135
    )
    
    
    89Non-compete agreements
    
    3 years
    
    
    2,322
    
    
    
    (764
    )
    
    
    1,558Tradename
    
    3 years
    
    
    192
    
    
    
    (165
    )
    
    
    27$
    204,422
    
    
    $
    (73,601
    )
    
    $
    130,821
  Amount(Unaudited, in thousands)2008
    
    $
    7,5092009
    
    
    28,7522010
    
    
    23,8162011
    
    
    19,6682012
    
    
    16,327Thereafter
    
    
    34,749$
    130,821
    5. DEFERRED REVENUE
   September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)(In thousands)Software and implementation fees
    
    $
    17,088
    
    
    $
    11,082Service fees
    
    
    11,995
    
    
    
    7,266Administrative fees
    
    
    1,923
    
    
    
    2,914Other fees
    
    
    1,146
    
    
    
    1,758Deferred revenue, total
    
    
    32,152
    
    
    
    23,020Less: Deferred revenue, current portion
    
    
    (27,600
    )
    
    
    (19,791
    )Deferred revenue, non-current portion
    
    $
    4,552
    
    
    $
    3,229
 - 11 -




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##### Table of Contents



6. NOTES PAYABLE
  September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)(In thousands)Notes payable  senior
    
    $
    245,801
    
    
    $
    197,548Revolving credit facility
    
    
    9,041
    
    
    
    Other
    
    
    457
    
    
    
    736Notes payable, total
    
    
    255,299
    
    
    
    198,284Less: current portions
    
    
    (2,768
    )
    
    
    (2,020
    )Notes payable, non-current portion
    
    $
    252,531
    
    
    $
    196,264
 May 2008 Financing
       - 12 -




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##### Table of Contents



July 2008 Credit Agreement Amendment
       Amount(Unaudited, inthousands)2008
    
    $
    6312009
    
    
    2,7612010
    
    
    2,6872011
    
    
    11,5402012
    
    
    2,499Thereafter
    
    
    235,181$
    255,299
 Interest Rate Swaps
  7. COMMITMENTS AND CONTINGENCIES
 Performance Targets
  - 13 -




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##### Table of Contents



Legal Proceedings
  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
    
    
    6,000
    
    
    
    16.04Shares vested
    
    
    (6,000
    )
    
    
    3.99Nonvested balance at September 30, 2008
    
    
    25,000
    
    
    $
    8.94
    Stock Options
   - 15 -




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##### 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
    
    
    1,639,000
    
    
    
    16.45Exercised
    
    
    (388,000
    )
    

    
    3.99Forfeited
    
    
    (228,000
    )
    
    
    8.94Options outstanding as of September 30,
2008
    
    
    7,997,000
    
    
    
    8.58
    
    
    8 years
    
    
    68,924,000Options exercisable as of September 30, 2008
    
    
    2,453,000
    
    
    $
    5.52
    
    
    7 years
    
    $
    28,646,000
   September 30,
    
    September 30,2008
    
    2007Range of exercise prices
    
    $0.63 - $17.86
    
    $0.63 - $10.44Number of options outstanding
    
    7,997,000
    
    6,527,000Weighted average exercise price
    
    $8.58
    
    $6.24Weighted average remaining contractual life
    
    7.9 years
    
    8.2 years
 Share-Based Payment
 - 16 -




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##### Table of Contents



Nine Months Ended
    
    Nine Months EndedSeptember 30, 2008
    
    September 30, 2007Calculated volatility
    
    32.1% - 36.0%
    
    38.1% - 42.6%Dividend yield
    
    0%
    
    0%Risk free interest rate
    
    3.00% - 3.56%
    
    4.13% - 4.32%Range of expected term
    
    5.4 - 6.5 years
    
    6.0 - 6.5 years
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Cost of revenue
    
    $
    498
    
    
    $
    235
    
    
    $
    1,603
    
    
    $
    521Product development
    
    
    231
    
    
    
    104
    
    
    
    488
    
    
    
    243Selling and marketing
    
    
    499
    
    
    
    275
    
    
    
    1,487
    
    
    
    614General and administrative
    
    
    1,224
    
    
    
    685
    
    
    
    3,013
    
    
    
    1,513Total share-based
compensation expense
    
    $
    2,452
    
    
    $
    1,299
    
    
    $
    6,591
    
    
    $
    2,891
 9. INCOME TAXES
    10. INCOME PER SHARE
 Earnings Per Share.
 - 17 -




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##### Table of Contents



Participating Securities and the Two-Class Method under SFAS No. 128
  Three Months Ended September 30,2008
    
    
    2007(Unaudited)(In thousands, except per shareamounts)Numerator for Basic and Diluted Income (Loss) Per Share:Net income from continuing operations
    
    $
    3,686
    
    
    $
    164Preferred stock dividends
    
    
    
    
    
    
    (4,798
    )Net income (loss) attributable to common stockholders
    
    
    3,686
    
    
    
    (4,634
    )Denominator:Weighted average shares outstanding
    
    
    53,715
    
    
    
    11,685Effect of participating convertible preferred stock
    
    
    
    
    
    
    Denominator for basic income per share weighted average
shares using the two-class method
    
    
    53,715
    
    
    
    11,685Effect of dilutive securities:Stock options
    
    
    2,386
    
    
    
    Stock warrants
    
    
    35
    
    
    
    Denominator for diluted income per share  adjusted weighted
average shares and assumed conversions
    
    
    56,136
    
    
    
    11,685Basic income (loss) per share:Basic net income (loss) attributable to common stockholders
    
    $
    .07
    
    
    $
    (.40
    )Diluted income (loss) per share:Diluted net income (loss) attributable to common stockholders
    
    $
    .07
    
    
    $
    (.40
    )
 Nine Months Ended September 30,2008
    
    
    2007(Unaudited)(In thousands, except per shareamounts)Numerator for Basic and Diluted Income (Loss) Per Share:Net income from continuing operations
    
    $
    4,809
    
    
    $
    6,422Preferred stock dividends
    
    
    
    
    
    
    (12,445
    )Net income (loss) attributable to common stockholders
    
    
    4,809
    
    
    
    (6,023
    )Denominator:Weighted average shares outstanding
    
    
    48,493
    
    
    
    11,037Effect of participating convertible preferred stock
    
    
    
    
    
    
    Denominator for basic income (loss) per share weighted
average shares using the two-class method
    
    
    48,493
    
    
    
    11,037Effect of dilutive securities:Stock options
    
    
    2,507
    
    
    
    Stock warrants
    
    
    35
    
    
    
    Denominator for diluted income (loss) per share  adjusted
weighted average shares and assumed conversions
    
    
    51,035
    
    
    
    11,037Basic income per share:Basic net income (loss) attributable to common stockholders
    
    $
    .10
    
    
    $
    (.55
    )Diluted net income (loss) per share:Diluted net income (loss) attributable to common stockholders
    
    $
    .09
    
    
    $
    (.55
    )
 - 18 -




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##### Table of Contents



Three Months Ended September 30,
    
    Nine Months Ended September 30,2008
    
    2007
    
    2008
    
    2007Convertible
preferred stock
    
    
    
    
    
    
    16,276
    
    
    
    
    
    
    
    16,276Stock options
    
    
    
    
    
    
    1,827
    
    
    
    
    
    
    
    1,848Stock warrants
    
    
    
    
    
    
    136
    
    
    
    
    
    
    
    136
    
    
    
    18,239
    
    
    
    
    
    
    
    18,260
 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, patient financial
liability 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
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##### Table of Contents



Three Months Ended September 30, 2008RCM
    
    
    SM
    
    
    Corporate
    
    
    Total(Unaudited, in thousands)Results of Operations:Revenue:Administrative fees
    
    $
    
    
    
    $
    39,867
    
    
    $
    
    
    
    $
    39,867Revenue share obligation
    
    
    
    
    
    
    (14,204
    )
    
    
    
    
    
    
    (14,204
    )Other service fees
    
    
    45,791
    
    
    
    4,518
    
    
    
    
    
    
    
    50,309Total net revenue
    
    
    45,791
    
    
    
    30,181
    
    
    
    
    
    
    
    75,972Total operating expenses
    
    
    41,702
    
    
    
    17,217
    
    
    
    5,226
    
    
    
    64,145Operating income (loss)
    
    
    4,089
    
    
    
    12,964
    
    
    
    (5,226
    )
    
    
    11,827Interest expense
    
    
    
    
    
    
    
    
    
    
    (5,803
    )
    
    
    (5,803
    )Other income (expense)
    
    
    12
    
    
    
    (26
    )
    
    
    242
    
    
    
    228Income (loss) before income taxes
    
    
    4,101
    
    
    
    12,938
    
    
    
    (10,787
    )
    
    
    6,252Income tax (benefit)
    
    
    1,577
    
    
    
    5,642
    
    
    
    (4,653
    )
    
    
    2,566Net income (loss)
    
    
    2,524
    
    
    
    7,296
    
    
    
    (6,134
    )
    
    
    3,686Segment Adjusted EBITDA
    
    $
    14,003
    
    
    $
    15,207
    
    
    $
    (4,009
    )
    
    $
    25,201As of September 30, 2008RCM
    
    
    SM
    
    
    Corporate
    
    
    Total(Unaudited, in thousands)Financial Position:Accounts receivable, net
    
    $
    96,241
    
    
    $
    33,230
    
    
    $
    (83,836
    )
    
    $
    45,635Other assets
    
    
    586,443
    
    
    
    96,459
    
    
    
    36,836
    
    
    
    719,738Total assets
    
    
    682,684
    
    
    
    129,689
    
    
    
    (47,000
    )
    
    
    765,373Accrued revenue share obligation
    
    
    
    
    
    
    20,671
    
    
    
    
    
    
    
    20,671Deferred revenue
    
    
    26,866
    
    
    
    5,286
    
    
    
    
    
    
    
    32,152Other liabilities
    
    
    99,917
    
    
    
    39,639
    
    
    
    198,661
    
    
    
    338,217Total liabilities
    
    $
    126,783
    
    
    $
    65,596
    
    
    $
    198,661
    
    
    $
    391,040Three Months Ended September 30, 2007RCM
    
    
    SM
    
    
    Corporate
    
    
    Total(Unaudited, in thousands)Results of Operations:Revenue:Administrative fees
    
    $
    
    
    
    $
    34,837
    
    
    $
    
    
    
    $
    34,837Revenue share obligation
    
    
    
    
    
    
    (12,195
    )
    
    
    
    
    
    
    (12,195
    )Other service fees
    
    
    24,386
    
    
    
    2,245
    
    
    
    
    
    
    
    26,631Total net revenue
    
    
    24,386
    
    
    
    24,887
    
    
    
    
    
    
    
    49,273Total operating expenses
    
    
    23,850
    
    
    
    15,566
    
    
    
    3,799
    
    
    
    43,215Operating income (loss)
    
    
    536
    
    
    
    9,321
    
    
    
    (3,799
    )
    
    
    6,058Interest expense
    
    
    18
    
    
    
    
    
    
    
    (6,781
    )
    
    
    (6,763
    )Other income (expense)
    
    
    1
    
    
    
    106
    
    
    
    1,082
    
    
    
    1,189Income (loss) before income taxes
    
    
    555
    
    
    
    9,427
    
    
    
    (9,498
    )
    
    
    484Income tax (benefit)
    
    
    609
    
    
    
    5,106
    
    
    
    (5,395
    )
    
    
    320Net income (loss)
    
    
    (54
    )
    
    
    4,321
    
    
    
    (4,103
    )
    
    
    164Segment Adjusted EBITDA
    
    $
    6,139
    
    
    $
    11,837
    
    
    $
    (2,987
    )
    
    $
    14,989
 - 20 -




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##### Table of Contents



Nine Months Ended September 30, 2008RCM
    
    
    SM
    
    
    Corporate
    
    
    Total(Unaudited, in thousands)Results of Operations:Revenue:Administrative fees
    
    $
    
    
    
    $
    117,634
    
    
    $
    
    
    
    $
    117,634Revenue share obligation
    
    
    
    
    
    
    (39,279
    )
    
    
    
    
    
    
    (39,279
    )Other service fees
    
    
    102,218
    
    
    
    15,392
    
    
    
    
    
    
    
    117,610Total net revenue
    
    
    102,218
    
    
    
    93,747
    
    
    
    
    
    
    
    195,965Total operating expenses
    
    
    100,704
    
    
    
    54,289
    
    
    
    15,683
    
    
    
    170,676Operating income (loss)
    
    
    1,514
    
    
    
    39,458
    
    
    
    (15,683
    )
    
    
    25,289Interest expense
    
    
    (3
    )
    
    
    (1
    )
    
    
    (15,116
    )
    
    
    (15,120
    )Other income (expense)
    
    
    41
    
    
    
    (59
    )
    
    
    (2,083
    )
    
    
    (2,101
    )Income (loss) before income taxes
    
    
    1,552
    
    
    
    39,398
    
    
    
    (32,882
    )
    
    
    8,068Income tax (benefit)
    
    
    604
    
    
    
    15,251
    
    
    
    (12,596
    )
    
    
    3,259Net income (loss)
    
    
    948
    
    
    
    24,147
    
    
    
    (20,286
    )
    
    
    4,809Segment Adjusted EBITDA
    
    $
    26,043
    
    
    $
    46,547
    
    
    $
    (12,323
    )
    
    $
    60,267Nine Months Ended September 30, 2007RCM
    
    
    SM
    
    
    Corporate
    
    
    Total(Unaudited, in thousands)Results of Operations:Revenue:Administrative fees
    
    $
    
    
    
    $
    105,880
    
    
    $
    
    
    
    $
    105,880Revenue share obligation
    
    
    
    
    
    
    (34,914
    )
    
    
    
    
    
    
    (34,914
    )Other service fees
    
    
    54,394
    
    
    
    9,237
    
    
    
    
    
    
    
    63,631Total net revenue
    
    
    54,394
    
    
    
    80,203
    
    
    
    
    
    
    
    134,597Total operating expenses
    
    
    51,104
    
    
    
    49,754
    
    
    
    11,074
    
    
    
    111,932Operating income (loss)
    
    
    3,290
    
    
    
    30,449
    
    
    
    (11,074
    )
    
    
    22,665Interest expense
    
    
    14
    
    
    
    (1
    )
    
    
    (14,164
    )
    
    
    (14,151
    )Other (expense) income
    
    
    (19
    )
    
    
    107
    
    
    
    2,013
    
    
    
    2,101Income (loss) before income taxes
    
    
    3,285
    
    
    
    30,555
    
    
    
    (23,225
    )
    
    
    10,615Income tax (benefit)
    
    
    1,553
    
    
    
    13,209
    
    
    
    (10,569
    )
    
    
    4,193Net income (loss)
    
    
    1,732
    
    
    
    17,346
    
    
    
    (12,656
    )
    
    
    6,422Segment Adjusted EBITDA
    
    $
    16,137
    
    
    $
    37,494
    
    
    $
    (8,806
    )
    
    $
    44,825
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##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited, in thousands)RCM Adjusted EBITDA
    
    $
    14,003
    
    
    $
    6,139
    
    
    $
    26,043
    
    
    $
    16,137SM Adjusted EBITDA
    
    
    15,207
    
    
    
    11,837
    
    
    
    46,547
    
    
    
    37,494Total reportable Segment Adjusted EBITDA
    
    
    29,210
    
    
    
    17,976
    
    
    
    72,590
    
    
    
    53,631Depreciation
    
    
    (2,165
    )
    
    
    (1,613
    )
    
    
    (5,841
    )
    
    
    (4,186
    )Amortization of intangibles
    
    
    (7,324
    )
    
    
    (5,102
    )
    
    
    (16,117
    )
    
    
    (10,933
    )Amortization of intangibles (included in
cost of revenue)
    
    
    (233
    )
    
    
    (87
    )
    
    
    (995
    )
    
    
    (767
    )Interest expense, net of interest income (1)
    
    
    13
    
    
    
    20
    
    
    
    15
    
    
    
    17Income tax
    
    
    (7,219
    )
    
    
    (5,715
    )
    
    
    (15,855
    )
    
    
    (14,762
    )Impairment of intangibles (2)
    
    
    
    
    
    
    
    
    
    
    (1,916
    )
    
    
    (1,195
    )Share-based compensation expense (3)
    
    
    (1,755
    )
    
    
    (809
    )
    
    
    (4,720
    )
    
    
    (1,740
    )Purchase accounting adjustments (4)
    
    
    (707
    )
    
    
    (403
    )
    
    
    (2,066
    )
    
    
    (987
    )Total reportable segment net income
    
    
    9,820
    
    
    
    4,267
    
    
    
    25,095
    
    
    
    19,078Corporate net (loss)
    
    
    (6,134
    )
    
    
    (4,103
    )
    
    
    (20,286
    )
    
    
    (12,656
    )Consolidated net income
    
    $
    3,686
    
    
    $
    164
    
    
    $
    4,809
    
    
    $
    6,422
 
 (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 nine months ended September 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 and products. Impairment of intangibles during the nine
months ended September 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
 Conclusion of IRS Income Tax Audit
  2008 Annual Meeting of Stockholders
  - 22 -




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##### Table of Contents



Revolver Borrowing
  Accuro Post-Closing Working Capital Adjustment
  Lease Arrangements
  - 23 -




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##### 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 EndedSeptember 30,
    
    Change
    

Nine
Months EndedSeptember 30,
    
    Change2008
    
    2007
    
    Amount
    
    %
    
    2008
    
    2007
    
    Amount
    
    %Gross fees
    
    $
    90.2
    
    
    $
    61.5
    
    
    $
    28.7
    
    
    
    46.7
    %
    
    $
    235.2
    
    
    $
    169.5
    
    
    $
    65.7
    
    
    
    38.8
    %Revenue share obligation
    
    
    (14.2
    )
    
    
    (12.2
    )
    
    
    (2.0
    )
    
    
    16.4
    
    
    
    (39.2
    )
    
    
    (34.9
    )
    
    
    (4.2
    )
    
    
    12.3Total net revenue
    
    
    76.0
    
    
    
    49.3
    
    
    
    26.7
    
    
    
    54.2
    
    
    
    196.0
    
    
    
    134.6
    
    
    
    61.4
    
    
    
    45.6Operating income
    
    
    11.8
    
    
    
    6.1
    
    
    
    5.7
    
    
    
    93.4
    
    
    
    25.3
    
    
    
    22.7
    
    
    
    2.6
    
    
    
    11.5Net income
    
    $
    3.7
    
    
    $
    0.2
    
    
    $
    3.5
    
    
    
    1,750.0
    %
    
    $
    4.8
    
    
    $
    6.4
    
    
    $
    (1.6
    )
    
    
    (25.0
    )%
  
    
    the acquisitions of XactiMed (in May 2007), MD-X (in July 2007) and
Accuro (in June 2008) by our Revenue Cycle Management segment (or the
Revenue Cycle Management Segment Acquisitions); and
    
    strong performance by our Spend Management segment due to higher
administrative fees, consulting fees, and subscription revenues,
partially offset by declining performance from our decision
support software and services in our Revenue Cycle Management
segment, which was the result of a scheduled and planned step down in
software support and maintenance fees from a large customer and the
negative impact of the delay of the release of our newest decision
support software (which was released in October 2008).
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##### Table of Contents




    
    significant increases in amortization of acquired intangibles (an increase of approximately
$2.2 million and $5.2 million during the three and nine months ended September 30, 2008,
respectively);
    
    non-recurring charges incurred during the nine months ended September 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;
    
    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. The initial public offering of our
common stock was completed on December 18, 2007.
  Three Months Ended September 30,
    
    Change
    
    Nine Months Ended September 30,
    
    Change2008
    
    2007
    
    Amount
    
    %
    
    2008
    
    2007
    
    Amount
    
    %Adjusted
EBITDA(a)
    
    $
    25.2
    
    
    $
    15.0
    
    
    $
    10.2
    
    
    
    68.1
    %
    
    $
    60.3
    
    
    $
    44.8
    
    
    $
    15.5
    
    
    
    34.4
    %Adjusted EBITDA
margin
    
    
    33.2
    %
    
    
    30.4
    %
    
    
    
    
    
    
    
    
    
    
    30.8
    %
    
    
    33.3
    %
 
 (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.  Recent Developments
 Acquisition of Accuro
    - 25 -




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##### Table of Contents




    
    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.
   Credit Facility Amendment
   Termination of Interest Rate Swaps
  Impairment of Intangible Assets
  2008 Long-Term Incentive Plan
  Segment Structure and Revenue Streams
  - 26 -




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##### Table of Contents



Revenue Cycle Management
  Subscription and implementation fees.
 Transaction fees.
 Software-related fees.
 Service fees.
 Spend Management
  Administrative fees and revenue share obligations.
    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.
 - 27 -




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##### Table of Contents



Operating Expenses
  Cost of revenue.
 Product development expenses.
 Selling and marketing expenses.
 General and administrative expenses.
 Depreciation.
 Amortization of intangibles.
 Results of Operations
 Consolidated Tables
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited, in thousands)Net revenue:Revenue Cycle Management
    
    $
    45,791
    
    
    $
    24,386
    
    
    $
    102,218
    
    
    $
    54,394Spend ManagementAdministrative fees
    
    
    39,867
    
    
    
    34,837
    
    
    
    117,634
    
    
    
    105,880Revenue share obligation
    
    
    (14,204
    )
    
    
    (12,195
    )
    
    
    (39,279
    )
    
    
    (34,914
    )Other service fees
    
    
    4,518
    
    
    
    2,245
    
    
    
    15,392
    
    
    
    9,237Total Spend Management
    
    
    30,181
    
    
    
    24,887
    
    
    
    93,747
    
    
    
    80,203Total net revenue
    
    
    75,972
    
    
    
    49,273
    
    
    
    195,965
    
    
    
    134,597Operating expenses:Revenue Cycle Management
    
    
    41,702
    
    
    
    23,850
    
    
    
    100,704
    
    
    
    51,104Spend Management
    
    
    17,217
    
    
    
    15,566
    
    
    
    54,289
    
    
    
    49,754Total segment operating expenses
    
    
    58,919
    
    
    
    39,416
    
    
    
    154,993
    
    
    
    100,858Operating income:Revenue Cycle Management
    
    
    4,089
    
    
    
    536
    
    
    
    1,514
    
    
    
    3,290Spend Management
    
    
    12,964
    
    
    
    9,321
    
    
    
    39,458
    
    
    
    30,449Total segment operating income
    
    
    17,053
    
    
    
    9,857
    
    
    
    40,972
    
    
    
    33,739Corporate expenses(1)
    
    
    (5,226
    )
    
    
    (3,799
    )
    
    
    (15,683
    )
    
    
    (11,074
    )
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##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited, in thousands)Operating income
    
    
    11,827
    
    
    
    6,058
    
    
    
    25,289
    
    
    
    22,665Other (expense) income:Interest expense
    
    
    (5,803
    )
    
    
    (6,763
    )
    
    
    (15,120
    )
    
    
    (14,151
    )Other income (expense)
    
    
    228
    
    
    
    1,189
    
    
    
    (2,101
    )
    
    
    2,101Income before income taxes
    
    
    6,252
    
    
    
    484
    
    
    
    8,068
    
    
    
    10,615Income tax expense
    
    
    (2,566
    )
    
    
    (320
    )
    
    
    (3,259
    )
    
    
    (4,193
    )Net income
    
    
    3,686
    
    
    
    164
    
    
    
    4,809
    
    
    
    6,422Reportable segment Adjusted
EBITDA(2):Revenue Cycle Management
    
    
    14,003
    
    
    
    6,139
    
    
    
    26,043
    
    
    
    16,137Spend Management
    
    $
    15,207
    
    
    $
    11,837
    
    
    $
    46,547
    
    
    $
    37,494Reportable segment Adjusted
EBITDA margin (3):Revenue Cycle Management
    
    
    30.6
    %
    
    
    25.2
    %
    
    
    25.5
    %
    
    
    29.7
    %Spend Management
    
    
    50.4
    %
    
    
    47.6
    %
    
    
    49.6
    %
    
    
    46.8
    %
 
 (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 our unaudited Notes to Condensed
Consolidated Financial Statements herein.(3)
    
    Reportable segment Adjusted EBITDA margin represents each reportable
segments Adjusted EBITDA as a percentage of each segments respective
net revenue. Comparison of the Three Months Ended September 30, 2008 and September 30, 2007
 Three Months Ended September 30,2008
    
    
    2007
    
    
    Change% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    %(Unaudited, in thousands)Net revenue:Revenue Cycle Management
    
    $
    45,791
    
    
    
    60.3
    %
    
    $
    24,386
    
    
    
    49.5
    %
    
    $
    21,405
    
    
    
    87.8
    %Spend ManagementAdministrative fees
    
    
    39,867
    
    
    
    52.4
    
    
    
    34,837
    
    
    
    70.7
    
    
    
    5,030
    
    
    
    14.4Revenue share obligation
    
    
    (14,204
    )
    
    
    (18.7
    )
    
    
    (12,195
    )
    
    
    (24.7
    )
    
    
    (2,009
    )
    
    
    16.5Other service fees
    
    
    4,518
    
    
    
    6.0
    
    
    
    2,245
    
    
    
    4.5
    
    
    
    2,273
    
    
    
    101.3Total Spend Management
    
    
    30,181
    
    
    
    39.7
    
    
    
    24,887
    
    
    
    50.5
    
    
    
    5,294
    
    
    
    21.3Total net revenue
    
    $
    75,972
    
    
    
    100.0
    %
    
    $
    49,273
    
    
    
    100.0
    %
    
    $
    26,699
    
    
    
    54.2
    %
 Total Net Revenue
  Revenue Cycle Management revenue .
 
    
    Accuro Acquisition. $17.2 million of the increase resulted from
product and service revenue attributable to Accuro, which we acquired
on June 2, 2008. The operating results of Accuro were included in our
full three months ended September 30, 2008 and were not included in
the comparable prior period.
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On a pro forma basis, net revenue from the Revenue Cycle Management
segment grew from $41.0 million to $45.8 million, or an 11.8%
increase, during the three months ended September 30, 2008 compared to
the three months ended September 30, 2007. This growth was primarily
attributable to increases in our recurring subscription fees and
services revenue, partially offset by a decrease in our decision
support software and services revenue. Such unaudited pro forma net revenue
gives effect to the Accuro Acquisition as if it was completed
on January 1 of each respective year. Our provision of unaudited pro forma financial data is for illustrative and
information purposes only and is not intended to represent or be
indicative of what our results of operations would have been if the
acquisition of Accuro had occurred at the beginning of the period.
Unaudited pro forma financial data also should not be considered
representative of our future results of operations.
 
    
    Non-acquisition related products and services. Non-acquisition related
revenue increased $4.2 million or 17.1% as compared to the prior
period. This increase primarily relates to revenue growth resulting
from our software subscription revenues of approximately $2.6 million
and our transactional fee revenue of approximately $2.8 million.
Partially offsetting this combined revenue growth of $5.4 million is a
$1.2 million decrease in revenue from our decision support software
and services. This $1.2 million decrease in net revenue from our
decision support products and services, excluding those acquired from
Accuro, is primarily due to two factors. We experienced a
$0.7 million revenue loss due to a scheduled and planned step down in
software support and maintenance fees from a large decision support
customer. For the quarter ended September 30, 2008, we began recognizing
revenue related to our largest decision support customer. We expect
significant revenue from this customer to be recognized ratably
through the first quarter 2010. Additionally, during 2007 and the first nine months of
2008, we experienced delays in the release of the latest version of
our decision support software, which limited the growth of Revenue
Cycle Management net revenue. The latest version of the software was
released in October 2008; however, due to the previous delay, we
expect continued adverse impact through the fourth quarter of 2008 and
early into 2009.
 Spend Management net revenue .
 
    
    Administrative fees.Administrative fee revenue increased by $5.0 million, or 14.4%, 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 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 $2.0 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 September 30, 2008 was approximately 35.6%, which was slightly higher than the revenue share ratio of
approximately 35.0% for the three months ended September 30, 2007. This is mainly due to a higher percentage 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 $2.3 million of growth in other service fees primarily related to $1.2 million of increased revenue from our supply chain
consulting services and $0.5 million resulted from increased subscription fees associated with our spend management analytical services. This increase
primarily resulted from additional 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 second quarter of 2008.
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Three Months Ended September 30,2008
    
    
    2007
    
    
    Change% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    %(Unaudited, in thousands)Operating expenses:Cost of revenue
    
    $
    17,101
    
    
    
    22.5
    %
    
    $
    8,155
    
    
    
    16.6
    %
    
    $
    8,946
    
    
    
    109.7
    %Product development expenses
    
    
    4,719
    
    
    
    6.2
    
    
    
    1,916
    
    
    
    3.9
    
    
    
    2,803
    
    
    
    146.3Selling and marketing expenses
    
    
    9,641
    
    
    
    12.7
    
    
    
    7,958
    
    
    
    16.1
    
    
    
    1,683
    
    
    
    21.1General and administrative expenses
    
    
    22,779
    
    
    
    30.0
    
    
    
    18,148
    
    
    
    36.8
    
    
    
    4,631
    
    
    
    25.5Depreciation
    
    
    2,581
    
    
    
    3.4
    
    
    
    1,936
    
    
    
    3.9
    
    
    
    645
    
    
    
    33.3Amortization of intangibles
    
    
    7,324
    
    
    
    9.6
    
    
    
    5,102
    
    
    
    10.4
    
    
    
    2,222
    
    
    
    43.6Total operating expenses
    
    
    64,145
    
    
    
    84.4
    %
    
    
    43,215
    
    
    
    87.7
    
    
    
    20,930
    
    
    
    48.4
    %Operating expenses by segment:Revenue Cycle Management
    
    
    41,702
    
    
    
    54.9
    %
    
    
    23,850
    
    
    
    48.4
    
    
    
    17,852
    
    
    
    74.9
    %Spend Management
    
    
    17,217
    
    
    
    22.7
    
    
    
    15,566
    
    
    
    31.6
    
    
    
    1,651
    
    
    
    10.6Total segment operating expenses
    
    
    58,919
    
    
    
    77.6
    
    
    
    39,416
    
    
    
    80.0
    
    
    
    19,503
    
    
    
    49.5Corporate expenses
    
    
    5,226
    
    
    
    6.8
    
    
    
    3,799
    
    
    
    7.7
    
    
    
    1,427
    
    
    
    37.6Total operating expenses
    
    $
    64,145
    
    
    
    84.4
    %
    
    $
    43,215
    
    
    
    87.7
    %
    
    $
    20,930
    
    
    
    48.4
    %
 Total Operating Expenses
 Cost of revenue .
    Product development expenses .
  Selling and marketing expenses .
  - 31 -




---



##### Table of Contents



General and administrative expenses .
   Depreciation .
  Amortization of intangibles .
  Segment Operating Expenses
 Revenue Cycle Management expense s.
  Spend Management expenses .
 - 32 -




---



##### Table of Contents



Corporate expenses .
 Non-operating Expenses
 Interest expense .
 Other (expense) income .
 Income tax (benefit) expense.
 Comparison of the Nine Months Ended September 30, 2008 and September 30, 2007
 Nine Months Ended September 30,2008
    
    
    2007
    
    
    Change% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    %(Unaudited, in thousands)Net revenue:Revenue Cycle Management
    
    $
    102,218
    
    
    
    52.2
    %
    
    $
    54,394
    
    
    
    40.4
    %
    
    $
    47,824
    
    
    
    87.9
    %Spend ManagementAdministrative fees
    
    
    117,634
    
    
    
    60.0
    
    
    
    105,880
    
    
    
    78.7
    
    
    
    11,754
    
    
    
    11.1Revenue share obligation
    
    
    (39,279
    )
    
    
    (20.0
    )
    
    
    (34,914
    )
    
    
    (25.9
    )
    
    
    (4,365
    )
    
    
    12.5Other service fees
    
    
    15,392
    
    
    
    7.8
    
    
    
    9,237
    
    
    
    6.8
    
    
    
    6,155
    
    
    
    66.6Total Spend Management
    
    
    93,747
    
    
    
    47.8
    
    
    
    80,203
    
    
    
    59.6
    
    
    
    13,544
    
    
    
    16.9Total net revenue
    
    $
    195,965
    
    
    
    100.0
    %
    
    $
    134,597
    
    
    
    100.0
    %
    
    $
    61,368
    
    
    
    45.6
    %
 Total Net Revenue
  - 33 -




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Revenue Cycle Management revenue .
 
    
    Acquisitions. $24.8 million of the increase resulted from product and
service revenue attributable to the 2007 acquisitions of XactiMed and
MD-X, which were included in our full nine months ended September 30,
2008 compared to only approximately four and half months and three
months, respectively, of operating results in the nine months ended
September 30, 2007. Revenue attributable to Accuro, which we acquired
on June 2, 2008, contributed an additional $22.4 million to the
increase in segment revenue.On a pro forma basis, net revenue from the Revenue Cycle Management
Acquisitions grew from $81.2 million to $88.1 million, or an 8.5%
increase, during the nine months ended September 30, 2008 compared to
the nine months ended September 30, 2007. This growth was primarily
attributable to a 15.4% increase in service revenue and a 6.6%
increase in subscription revenue. Such unaudited pro forma net revenue gives effect to the XactiMed
and MD-X acquisitions as if they were completed on January 1, 2007 and the Accuro Acquisition as if it was
completed on January 1 of each respective year. Our provision of unaudited pro forma
financial data is for illustrative and information purposes only and
is not intended to represent or be indicative of what our results of
operations would have been if the Revenue Cycle Management Acquisitions had occurred
at the beginning of the period. Unaudited pro forma financial data
also should not be considered representative of our future results of
operations.Our actual results of operations during the nine months ended
September 30, 2007 included $12.5 million of net revenue from the
operations of XactiMed and MD-X from their respective dates of
acquisition. Our actual results of operations during the nine months
ended September 30, 2008 included $59.6 million of net revenue from
the operations of all Revenue Cycle Management Acquisitions, including
Accuro, from June 2, 2008, the date of acquisition.
    
    Non-acquisition related products and services. The increase in net
revenue from non-acquisition related products and services was
approximately $0.7 million or 1.3%. This increase was comprised of an
approximate 17.5% increase in our software-related subscription fees
from new and existing customers. Partially offsetting this increase
was a 16.0% decrease in revenue from our decision support software and
services. 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.The approximate $3.2 million decrease in net revenue from our decision support
software and services, excluding those acquired from Accuro, is due to the
following factors: During 2007 and 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 nine
months ended September 30, 2008. The fourth version was released in October
2008; however, we expect continued adverse impact in the fourth quarter of 2008
and early into 2009. An additional contributing factor to this approximate $3.2
million revenue decline is a $1.8 million revenue loss due to a scheduled and
planned step down in software support and maintenance fees from a large
decision support customer.
 Spend Management net revenue .
 
    
    Administrative fees.Administrative fee revenue increased by
$11.8 million, or 11.1%, 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 $2.7 million increase in contingent revenue
recognized upon confirmation from certain customers that the
respective performance targets had been achieved during the nine
months ended September 30, 2008 compared to the nine months ended
September 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.
 - 34 -




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
    
    Revenue share obligation.Revenue share obligation increased $4.4
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
nine months ended September 30, 2008 was 33.4%, which was relatively
consistent with the revenue share ratio of 33.0% for the nine months
ended September 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 $6.2 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 in the
second quarter 2008. Additionally, we realized growth in the number of
our subscription products.
 Nine Months Ended September 30,2008
    
    
    2007
    
    
    Change% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    %(Unaudited, in thousands)Operating expenses:Cost of revenue
    
    $
    36,252
    
    
    
    18.5
    %
    
    $
    17,845
    
    
    
    13.3
    %
    
    $
    18,407
    
    
    
    103.1
    %Product development
expenses
    
    
    11,027
    
    
    
    5.6
    
    
    
    5,612
    
    
    
    4.2
    
    
    
    5,415
    
    
    
    96.5Selling and marketing
expenses
    
    
    32,096
    
    
    
    16.4
    
    
    
    26,675
    
    
    
    19.8
    
    
    
    5,421
    
    
    
    20.3General and administrative
expenses
    
    
    66,054
    
    
    
    33.7
    
    
    
    44,402
    
    
    
    33.0
    
    
    
    21,652
    
    
    
    48.8Depreciation
    
    
    7,051
    
    
    
    3.6
    
    
    
    5,270
    
    
    
    3.9
    
    
    
    1,781
    
    
    
    33.8Amortization of intangibles
    
    
    16,117
    
    
    
    8.2
    
    
    
    10,933
    
    
    
    8.1
    
    
    
    5,184
    
    
    
    47.5Impairment of intangibles
    
    
    2,079
    
    
    
    1.1
    
    
    
    1,195
    
    
    
    0.9
    
    
    
    884
    
    
    
    74.0Total operating expenses
    
    
    170,676
    
    
    
    87.1
    
    
    
    111,932
    
    
    
    83.2
    
    
    
    58,744
    
    
    
    52.5Operating expenses by segment:Revenue Cycle
Management
    
    
    100,704
    
    
    
    51.4
    
    
    
    51,104
    
    
    
    38.0
    
    
    
    49,600
    
    
    
    97.1Spend Management
    
    
    54,289
    
    
    
    27.7
    
    
    
    49,754
    
    
    
    37.0
    
    
    
    4,535
    
    
    
    9.1Total segment operating
expenses
    
    
    154,993
    
    
    
    79.1
    
    
    
    100,858
    
    
    
    75.0
    
    
    
    54,135
    
    
    
    53.7Corporate expenses
    
    
    15,683
    
    
    
    8.0
    
    
    
    11,074
    
    
    
    8.2
    
    
    
    4,609
    
    
    
    41.6Total operating expenses
    
    $
    170,676
    
    
    
    87.1
    %
    
    $
    111,932
    
    
    
    83.2
    %
    
    $
    58,744
    
    
    
    52.5
    %
 Total Operating Expenses
 Cost of revenue .
   - 35 -




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Product development expenses .
   Selling and marketing expenses .
   General and administrative expenses .
  Depreciation .
  - 36 -




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##### Table of Contents



Amortization of intangibles .
 Impairment of intangibles .
  Segment Operating Expenses
 Revenue Cycle Management expense s.
   Spend Management expenses .
   Corporate expenses .
 - 37 -




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Non-operating Expenses
 Interest expense .
 Other (expense) income .
 Income tax expense.
  Use of Non-GAAP Financial Measures
     - 38 -




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
    
    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 September 30,
    
    Nine Months Ended September 30,2008
    
    2007
    
    2008
    
    2007(Unaudited, in thousands)Net Income
    
    $
    3,686
    
    
    $
    164
    
    
    $
    4,809
    
    
    $
    6,422Depreciation
    
    
    2,581
    
    
    
    1,936
    
    
    
    7,051
    
    
    
    5,270Amortization of intangibles
    
    
    7,324
    
    
    
    5,102
    
    
    
    16,117
    
    
    
    10,933Amortization of intangibles (included in
cost of revenue)


    233
    
    
    
    87
    
    
    
    995
    
    
    
    767Interest Expense, net of Interest Income (1)
    
    
    5,761
    
    
    
    5,787
    
    
    
    13,715
    
    
    
    12,496Income tax (benefit) expense
    
    
    2,566
    
    
    
    320
    
    
    
    3,259
    
    
    
    4,193EBITDA
    
    
    22,151
    
    
    
    13,396
    
    
    
    45,946
    
    
    
    40,081Impairment of intangibles (2)
    
    
    
    
    
    
    
    
    
    
    2,079
    
    
    
    1,195Share-based compensation (3)
    
    
    2,452
    
    
    
    1,299
    
    
    
    6,591
    
    
    
    2,891Rental income from capitalized building
lease (4)
    
    
    (109
    )
    
    
    (109
    )
    
    
    (329
    )
    
    
    (329
    )Purchase accounting adjustment (5)
    
    
    707
    
    
    
    403
    
    
    
    2,066
    
    
    
    987Interest rate swap cancellation (6)
    
    
    
    
    
    
    
    
    
    
    3,914
    
    
    
    Adjusted EBITDA
    
    $
    25,201
    
    
    $
    14,989
    
    
    $
    60,267
    
    
    $
    44,825
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(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 nine months ended September 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 and products. Impairment of intangibles during the nine
months ended September 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 nine months ended September 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. - 40 -




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Critical Accounting Policies
   Self-Insurance Reserves
   New Pronouncements
 Fair Value Measurements
 Fair Value Measurements,
  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
 - 41 -




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Business Combinations
 Business Combinations
 Liquidity and Capital Resources
          - 42 -




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##### 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.
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Acquisition Contingent Consideration
    Off-Balance Sheet Arrangements and Commitments
    2008
    
    $
    2,2242009
    
    
    7,1402010
    
    
    6,8202011
    
    
    6,5212012
    
    
    6,057Thereafter
    
    
    14,499$
    43,261
   - 44 -




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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
  - 45 -




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##### Table of Contents



Changes in Internal Control over Financial Reporting
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 1A. Risk Factors
  - 46 -




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##### Table of Contents



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 vulnerable in the
event of a downturn in general economic conditions or other adverse
events in our business or our industry;
    
    our substantial degree of leverage could impair our ability to obtain
additional financing for working capital, capital expenditures,
acquisitions or general corporate purposes 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.
   Due to the challenging conditions of the financial markets, and weakening economic environment,
 our lenders may not be able to fund our borrowings under our revolving credit facility.
   - 47 -




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##### 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
  Options
  Issuer Purchases of Equity Securities
  Total Number of
    
    Maximum NumberShares Purchased
    
    (or Approximate Dollar Value)as Part of Publicly
    
    of Shares that May Yet BeTotal Number of
    
    Average Price Paid
    
    Announced Plans
    
    Purchased Under the PlansPeriod
    
    Shares Purchased (1)
    
    per Share
    
    or Programs
    
    or ProgramsJuly 1  31, 2008
    
    
    9,264
    
    
    $
    16.19
    
    
    
    
    
    
    
    August 1  31, 2008
    
    
    13,032
    
    
    $
    16.56
    
    
    
    
    
    
    
    September 1  30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    22,296
    
    
    $
    16.42
    
    
    
    
    
    
    
    
 
 (1)
    
    The shares set forth above represent shares of our common stock paid to us in
connection with the repayment of certain notes receivable due from shareholders. See Note 8
of the unaudited Notes to our Condensed Consolidated Financial Statements herein. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  - 48 -




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Item 6. Exhibits
 Number
    
    Description of Exhibit31.1
    
    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
 - 49 -




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

John A. BardisTitle:
    
    Chief Executive Officer(Principal Executive Officer)November 14, 2008
    
    By:
    
    /s/ L. Neil HunnName:
    
    L. Neil HunnTitle:
    
    Chief Financial Officer(Principal Financial Officer)
 - 50 -




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##### Table of Contents



Number
    
    Description of Exhibit31.1
    
    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
 - 51 -