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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, DC 20549
  FORM 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31,
    2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    001-34435
  EMDEON INC.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware(State or Other Jurisdiction
    of Incorporation or Organization)

20-5799664(I.R.S. Employer
    Identification No.)3055 Lebanon Pike, Suite 1000
    Nashville, TN(Address of Principal
    Executive Offices)

37214(Zip Code)   (615) 932-3000
 (Registrants Telephone Number, Including Area Code)
  Securities Registered Pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredClass A common stock, $0.00001 par value

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the Act:
    None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer þ

Smaller reporting
    company o(Do not check if a smaller
    reporting company)   Rule 12b-2 o þ
  one-for-one
    Class

Outstanding as of March 11, 2010Class A common stock, $0.00001 par value

90,460,770Class B common stock, $0.00001 par value

24,716,126   DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





Emdeon
    Inc.
  Table of
    Contents
   
 PagePART IItem 1.

Business


2Item 1A.

Risk Factors


21Item 1B.

Unresolved Staff Comments


40Item 2.

Properties


40Item 3.

Legal Proceedings


40Item 4.

Reserved


41PART IIItem 5.

Market For Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


41Item 6.

Selected Financial Data


43Item 7.

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


45Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


66Item 8.

Financial Statements and Supplementary Data


66Item 9.

Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


66Item 9A(T).

Controls and Procedures


66Item 9B.

Other Information


67PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


67Item 11.

Executive Compensation


67Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


67Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


67Item 14.

Principal Accountant Fees and Services


68PART IVItem 15.

Exhibits and Financial Statement Schedules


68Signatures


69EX-10.22EX-10.25EX-10.27EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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FORWARD-LOOKING
    STATEMENTS
  Form 10-K
     1




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PART I  ITEM 1.
    BUSINESS  Overview
        and/or
   2




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Recent
    Development
  
    On March 16, 2010, we entered into a definitive agreement
    to acquire Healthcare Technology Management Services, Inc., a
    management consulting company focused primarily on the
    healthcare payer market, for consideration of $11.0 million
    at closing, to be paid $8.5 million in cash and
    $2.5 million in our Class A common stock, and
    additional contingent payments of $0 to $14.0 million in
    cash based upon the financial performance of the acquired
    business for the three year period following the closing. This
    acquisition will allow us to assist payers in evaluating their
    existing information technology strategies, systems and
    technologies in order to help our customers implement effective
    solutions.  Organizational
    Structure and Corporate History
      
    Prior to November 2006, the group of companies that comprised
    Emdeon Business Services (EBS) was owned by HLTH
    Corporation (HLTH). EBS Master LLC (EBS
    Master) was formed by HLTH to act as a holding company for
    EBS. EBS Master, through its 100% owned subsidiary, Emdeon
    Business Services LLC (EBS LLC), owns EBS.
    In September 2006, we were formed by General Atlantic LLC
    (General Atlantic) as a Delaware limited liability
    company for the purpose of making an investment in EBS Master.
    In November 2006, we acquired a 52% interest in EBS Master from
    HLTH (the 2006 Transaction). HLTH retained a 48%
    interest in EBS Master upon closing of the 2006 Transaction.
    In February 2008, HLTH sold its remaining 48% interest in EBS
    Master (the 2008 Transaction) to affiliates of
    General Atlantic and Hellman & Friedman LLC
    (H&F). As a result, following the 2008
    Transaction, EBS Master was owned 65.77% by affiliates of
    General Atlantic (including us), who we sometimes refer to
    herein as the General Atlantic Equityholders, and
    34.23% by affiliates of H&F, who we sometimes refer to
    herein as the H&F Equityholders. The General
    Atlantic Equityholders and H&F Equityholders are sometimes
    collectively referred to herein as the Principal
    Equityholders.
    In connection with our initial public offering
    (IPO), we were converted into a Delaware corporation
    and changed our name to Emdeon Inc. in September 2008 and
    completed a corporate restructuring on August 5, 2009
    (collectively, the reorganization transactions).
    On August 11, 2009, we priced the IPO of our Class A
    common stock and began trading on the New York Stock Exchange
    (NYSE) under the symbol EM.    
    In June 2009, we acquired The Sentinel Group, a healthcare fraud
    and abuse management services provider. We acquired The Sentinel
    Group to expand our portfolio of offerings to help identify
    potential financial risks earlier in the revenue and payment
    cycle, creating efficiencies for payers and cost savings for
    both payers and providers, and to enhance our data and
    analytical capabilities.
    In July 2009, we acquired eRx Network, L.L.C. (eRx),
    a provider of electronic pharmacy healthcare solutions. We
    acquired eRx to accelerate our development of solutions for our
    pharmacy customers, including integrated tools for managing
    efficiency and profitability through innovative claims
    management, and provide us with an increased presence in
    ePrescribing.
    In January 2010, we acquired FutureVision Investment Group,
    L.L.C. (FVTech), a provider of outsourced services
    specializing in electronic data conversion and information
    management solutions. This acquisition will allow us to
    electronically process virtually all patient and third party
    healthcare payments regardless of the format in which payments
    are submitted by combining FVTechs document conversion
    technology with our broad connectivity network and revenue cycle
    management solutions. 3




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Our
    Industry
  Payer
    and Provider Landscape
         4




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The
    Revenue and Payment Cycle
      
    Pre-Care/Medical Treatment:  The provider
    verifies insurance benefits available to the patient, ensures
    treatment will adhere to medical necessity guidelines and
    confirms patient personal financial and demographic information.
    In addition, in order to receive reimbursement for the care they
    provide, providers are often required by payers to obtain
    pre-authorizations before patient procedures or in advance of
    referring patients to specialists for care. Co-pay and other
    self-pay amounts are also collected. The provider then treats
    the patient and documents procedures conducted and resources
    used.
    Claim Management/Adjudication:  The provider
    prepares and submits paper or electronic claims to a payer for
    services rendered directly or through a clearinghouse, such as
    ours. Before submission, claims are validated for payer-specific
    rules and corrected as necessary. The payer verifies accuracy,
    completeness and appropriateness of the claim and calculates
    payment based on the patients health plan design, out of
    pocket payments relative to established deductibles and the
    existing contract between the payer and provider.
    Payment Distribution:  The payer sends payment
    and a payment explanation (i.e., remittance advice) to the
    provider and sends an explanation of benefits (EOB)
    to the patient.
    Payment Posting/Denial Management:  The
    provider posts payments internally, reconciles payments with
    accounts receivable and submits any claims to secondary insurers
    if secondary coverage exists. The provider is responsible for
    evaluating denial/underpayment of a claim and re-submitting it
    to the payer if appropriate.
    Patient Billing and Payment:  The provider
    sends a bill to the patient for any remaining balance and posts
    payments received.  Recent
    Industry Trends
   5




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tm manual-to-electronic-based
 6




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Our
    Market Opportunity and Solutions
    
  Products
    and Services
   7




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PAYER
    PRODUCTS AND SERVICES
  Pre-Care
    and Claim Management/Adjudication
  paper-to-EDI
    Emdeon CareCommsm

    
    Enables payers to engage their provider network through pre-care
    messaging that leverages a real-time eligibility connection.Emdeon Transform
    
    High-volume imaging, data capture and transaction/forms
    processing software capable of scanning any form, claim or
    document to enable electronic transaction processing.Emdeon
    Paper-to-EDI
    Conversion
    
    Converts paper claims to electronic formats capable of
    submission to payer adjudication systems. This service may also
    include full mailroom outsourcing.Emdeon Claims Connection
    
    A direct connectivity service for claims transactions.Emdeon Eligibility
    
    Provides network connection via HIPAA-standard formats
    supporting eligibility inquiry and response, claim status, find
    provider, healthcare services review request and response,
    healthcare services review inquiry and response and claim
    financial inquiry.Emdeon Hosted Eligibility
    
    Offers payer organizations the functionality for real-time
    healthcare transaction exchange in HIPAA-standard formats and
    enables real-time eligibility and benefits inquiry and response
    capability.Emdeon Patient Responsibility
    Estimatorsm

    
    An extension of Emdeons eligibility services which
    estimates the patients
    out-of-pocket
    responsibility.Emdeon Electronic Remittance Advice
    
    Provides Emdeon network connection via HIPAA-standard format
    supporting electronic remittance advice (ERA).Emdeon Advanced Claiming
    
    Improves the efficiency of the payment settlement cycle and
    lowers processing
    cost-per-claim
    by providing intelligent routing between payers, PPOs and other
    business partners and applying payer-specific pre-adjudication
    services to all claims.Emdeon
    Visionsm

    for Claim Management
    
    A web-based application that offers payers claim-level views
    into the electronic claim filing process from claim submission
    to Emdeon through delivery to the payer.Emdeon Third-Party Liability Analysis
    
    Manages the process of mapping Medicaid claims data to
    commercial payers eligibility rosters. Helps Medicaid
    recover overpaid 8




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claim dollars and limit future overpayments by identifying
    commercial payers with primary coordination of benefits
    responsibility.Emdeon Fraud Prevention Services
    
    Analyzes claims data to identify and prevent potential
    fraudulent or abusive activity.  Payment
    Distribution
      Emdeon Printing and Fulfillment
    
    Print and mail service that enables payers to realize postage
    and print savings through
    state-of-the-art
    fulfillment capabilities and efficient management of print and
    mailroom processes.Emdeon Healthpayers USA Postage Cooperative
    
    Consolidates communications to providers, including EOBs,
    payments and correspondence, across all of a providers
    contracted payers.Emdeon ePayment
    
    Offers payers the ability to distribute payments to providers
    electronically including online access to ERA and payment
    information.  PROVIDER
    PRODUCTS AND SERVICES
  Pre-Care/Medical
    Treatment
  out-of-pocket
    Emdeon Assistant
    
    Simplifies patient registration through real-time automation of
    patient eligibility and verification tasks. Includes the
    capability to verify patient addresses and provide credit
    scoring.Emdeon Patient Responsibility
    Estimatorsm

    
    An extension of Emdeons eligibility services which
    estimates the patients
    out-of-pocket
    responsibility by combining contract rate, treatment and
    benefits information.Emdeon Revenue & Reimbursement Analytics
    
    Pre-care batch screenings of patient account information which
    allows providers to identify insurance eligible accounts in
    their self-pay roster to increase revenue collection and reduce
    bad debt expense.Emdeon Provider Direct
    
    Direct connectivity to the Emdeon network for insurance
    eligibility and benefits transactions. 9




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Emdeon Application & Imaging Manager
    
    Automates Medicaid and charity care applications to streamline
    workflow, reduce errors and save time for hospitals and other
    providers that help patients fill out these applications.Emdeon Office
    
    Web-based service with the ability to process insurance
    eligibility and benefits verification tasks, as well as process
    claims for payers connected to the Emdeon network.Emdeon POS
    
    Point-of-service
    terminals for verifying patient insurance and benefits.Emdeon Dental Direct Solution
    
    A software application that allows dental practices to process
    insurance eligibility verification and check claim status
    through the Emdeon network.Emdeon Dental Provider Services
    
    A web-based application designed to provide a simplified,
    end-to-end,
    single source solution to dental offices, allowing real-time
    eligibility and benefits verification and claim status tracking
    by connecting users to the Emdeon network of dental payers.Emdeon Vendor Connect
    
    Direct connectivity to the Emdeon network for insurance
    eligibility and benefits, claims processing, claim status and
    ERAs for vendors.Emdeon Clinician
    
    Order entry and reports distribution of any clinical
    documentation. Allows physicians and office staff to process lab
    orders and access laboratory reports, transcription reports,
    radiology reports, face sheets and images from any computer that
    has Internet access.Emdeon ClinicianRx
    
    A web-based ePrescribing solution. Using a personal digital
    assistant or secure Internet browser, prescribers have access to
    complete medication histories, drug formularies and drug
    information at the
    point-of-care.  Claim
    Management/Adjudication
      Emdeon Claim Master
    
    A web-based billing management solution that allows providers to
    manage their billing processes across all facilities.Emdeon Office
    
    Web-based service with the ability to submit claims to payers
    connected to the Emdeon network.Emdeon Provider Direct
    
    Direct connectivity to the Emdeon network for claims processing.Emdeon Medicare Secondary Billing-Accelerated
    
    Allows accelerated processing of secondary claims once the
    electronic remittance advice is received. Data is automatically
    updated and the secondary claim is produced.Emdeon
    72-Hour
    RuleCheck
    
    Provides a means of checking Medicare claims for
    72-hour
    billing conflicts before submission of claim or after
    adjudication.Emdeon Dental Direct Solution
    
    A software application that allows dental practices to submit
    claims and check claim status through the Emdeon network. 10




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Emdeon Vendor Connect
    
    Direct connectivity to the Emdeon network for insurance claims
    management and claim status for vendors.Emdeon Revenue & Reimbursement Analytics
    
    Post-care batch screenings of patient account information which
    allows providers to identify insurance eligible accounts in
    their self-pay roster to increase revenue collection and reduce
    bad debt expense.Emdeon Medi-Cal
    Follow-Up
    Services
    
    Business process outsourcing services to process denials for
    providers submitting Medi-Cal institutional claims.Emdeon Payment Manager
    
    A web-based payment and reconciliation solution that provides
    visibility of remittance data and facilitates the electronic
    transfer of funds from the Emdeon payer network to the provider.Emdeon Automated Secondary Claim Processing
    
    Automatically generates and prints collated secondary claims and
    the remittance advice if secondary insurance coverage is
    provided. A copy of the remittance advice from the primary payer
    is collected and automatically triggers the creation of a
    secondary claim with the required attachments.Emdeon
    VisionSM

    for Claim Management
    
    A web-based application designed to give providers simplified,
    end-to-end
    visibility into the claims management cycle.  Payment
    Posting/Denial Management
      Emdeon AccuPost
    
    Works with administrative systems to interpret ERA and
    automatically post payments directly to the proper patient
    accounts.Emdeon Denial Manager
    
    Allows providers to organize and manage remittance inventory,
    denials and underpayments, and report and view denied and
    adjusted amounts.Emdeon Medicare Manager/DDE Plus
    
    Overall management (viewing, prioritizing, sorting) of
    suspended, rejected,
    returned-to-provider,
    paid and denied Medicare Part A claims. Allows for
    correction of claims within the Medicare direct data entry
    (DDE) system via the Internet.Emdeon Wholesale Lockbox
    
    Electronic payment processing capabilities for providers, which
    eliminates the need to sort mail, open and post payments, create
    deposit tickets or make bank deposits.  Patient
    Billing and Payment
   11




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point-of-service
    Emdeon Patient Connect
    
    Provides a bundled offering of patient billing and payment
    solutions, including Emdeon ExpressBill Services, Emdeon Return
    Mail Manager, Emdeon Patient Pay Online, Emdeon eCashiering and
    Emdeon Document Archive.Emdeon ExpressBill Services
    
    Provides outsourced print and mail services for patient
    statements, invoices and other patient communications.Emdeon Return Mail Manager
    
    Automates the skip tracing process of undeliverable mail in
    order to eliminate return mail handling for our customers.Patient Pay Online
    
    Allows patients to receive email updates linking them to a
    secure section of their providers existing website where
    they can view, manage and pay their accounts online.Emdeon eCashiering
    
    Provides an integrated view of all patient payment activity and
    web-based access to the entire patient account, enabling
    real-time processing of all credit card, check card and
    automatic clearing house transactions.Emdeon Merchant Services
    
    Secure and reliable debit and credit card processing solution.Emdeon Document Archive
    
    24/7 desktop file retrieval and viewing capabilities allow
    providers to view statements and documents online that mirror
    those sent to their patients.Emdeon Patient Lockbox
    
    Provides the ability to receive patient paper payments,
    reconcile them to the original billing, deposit payments and
    automatically post to accounts receivable.Emdeon Patient Communications
    
    Statement inserts and other custom printing.  PHARMACY
    PRODUCTS AND SERVICES
  Prescription
    Benefits Administration (Payers)
      Emdeon SelectRx
    
    Provides real-time claims adjudication in support of
    payers in-house prescription benefit programs, including
    managed care, discount cash, workers compensation and
    voucher/coupon programs. This solution can be augmented with
    additional services as needed that are designed to help payers
    better control prescription drug costs, including rebate
    management, network administration, mail order and specialty and
    customer service call center. 12




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Claims
    Management and Adjudication (Providers)
      eRx Connect
    
    Third party claim switching service, which includes real-time
    tools for support and monitoring, to all payers covering
    pharmacy benefit programs.eRx Edit
    
    Enables pharmacies to receive real-time pre and post edits to
    improve third party reimbursements and in-store productivity.eRx Pad
    
    Enables pharmacies to exchange secure electronic transactions
    with physicians, including new prescriptions, refill requests
    and responses and medication change requests through intelligent
    routing capabilities.eRx Print to Pharmacy
    
    Real-time patient printout at the
    point-of-service,
    including coupons and/or other patient education documents.eRx Medicare DME
    
    Enables electronic submission of Medicare Part B claims.eRx Medicaid DME
    
    Enables electronic submission of Medicaid durable medical
    equipment (DME) claims.eRx Flu
    
    Enables electronic submission of Medicare Part B
    vaccination claims.  Payment
    Posting and Denial Management (Providers)
      eRx Reconciliation
    
    Enables pharmacies to monitor and track payments of third party
    sales, remittance and deposit information. Provides online tools
    and reports to identify payer issues and allow pharmacies to
    view sales and payment, aging and partial pay reports.eRx Recovery
    
    Provides comprehensive denial management service for pharmacies
    billing Medicare and select Medicaid plans.  Customers
  and/or
 13




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Payer
    Services
  print-and-mail
  Provider
    Services
    Pharmacy
    Services
    Marketing
    and Sales
  e-newsletters
        and/or
 14




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Technology
    Competition
    
    transaction processing companies, including those providing EDI
    and/or
    Internet-based services and those providing services through
    other means, such as paper and fax;
    healthcare information system vendors that support providers,
    including physician practice management system, hospital
    information system and electronic medical record system vendors;
    large information technology consulting service providers;
    health insurance companies, pharmacy benefit management
    companies and pharmacies that provide or are developing
    electronic transaction services for use by providers
    and/or by
    their members and customers;
    healthcare focused print and mail vendors; and
    financial institutions that have invested in healthcare data
    management assets.  and/or and/or
     15




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Intellectual
    Property
    ® ® ® ® sm
      Regulation
    and Legislation
  Introduction
        HIPAA
    Administrative Simplification Requirements
  General.
 16




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Transaction Standards.
        NPI Standard.
   17




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Regulation
    of Healthcare Relationships and Payments
          False
    Claims Laws and Other Fraud and Abuse Restrictions
     18




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Requirements
    Regarding the Confidentiality, Privacy and Security of Personal
    Information
  Data Protection and Breaches.
  HIPAA Privacy Standards and Security
    Standards.
 19




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Other Requirements.
  Banking
    and Financial Services Industry
   20




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Employees
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330
  Form 10-K, Form 10-Q, Form 8-K,
  ITEM 1A.
    RISK
    FACTORS  Overview
    Risks
    Related to our Business
  We
    face significant competition for our products and
    services.
  and/or and/or
   21




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Some
    of our customers compete with us and some, instead of using a
    third party provider, perform internally some of the same
    services that we offer.
    If we
    are unable to retain our existing customers, our business,
    financial condition and results of operations could
    suffer.
  and/or
  If we
    are unable to connect to a large number of payers and providers,
    our product and service offerings would be limited and less
    desirable to our customers.
   22




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The
    failure to maintain our relationships with our channel partners
    or significant changes in the terms of the agreements we have
    with them may have an adverse effect on our ability to
    successfully market our products and services.
    Our
    business and future success may depend on our ability to
    cross-sell our products and services.
    We
    have faced and will continue to face increasing pressure to
    reduce our prices, which may reduce our margins, profitability
    and competitive position.
     23




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Our
    ability to generate revenue could suffer if we do not continue
    to update and improve our existing products and services and
    develop new ones.
    Achieving
    market acceptance of new or updated products and services is
    necessary in order for them to become profitable and will likely
    require significant efforts and expenditures.
    
    electronic billing, payment and remittance services for payers
    and providers that complement our existing paper-based patient
    billing and payment and payment distribution services;
    electronic prescriptions from healthcare providers to pharmacies
    and pharmacy benefit managers;
    our other pre- and post-adjudication services for payers and
    providers; and
    decision support, clinical exchange, payment integrity, fraud
    and abuse management or other business intelligence solutions.    There
    are increased risks of performance problems during times when we
    are making significant changes to our products and services or
    to systems we use to provide services. In addition,
    implementation of our products and services and efficiency
    measures and other cost savings initiatives may cost more, may
    not provide the benefits expected or may take longer than
    anticipated.
     24




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Disruptions
    in service or damages to our data or other operation centers, or
    other software or systems failures, could adversely affect our
    business.
    denial-of-service
    We may
    be liable to our customers and may lose customers if we provide
    poor service, if our products and services do not comply with
    our agreements or if our software products or transmission
    systems contain errors or experience failures.
     25




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Our
    business will suffer if we fail to successfully integrate
    acquired businesses and technologies or to appropriately assess
    the risks in particular transactions.
    
    our ability to maintain relationships with the customers of the
    acquired business;
    our ability to cross-sell products and services to customers
    with which we have established relationships and those with
    which the acquired businesses have established relationships;
    our ability to retain or replace key personnel;
    potential conflicts in payer, provider, pharmacy, vendor or
    marketing relationships;
    our ability to coordinate organizations that are geographically
    diverse and may have different business cultures; and
    compliance with regulatory requirements.     26




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We
    have a substantial amount of indebtedness, which could affect
    our financial condition.
      
    obtain necessary additional financing for working capital,
    capital expenditures or other purposes in the future;
    plan for, or react to, changes in our business and the
    industries in which we operate;
    make future acquisitions or pursue other business
    opportunities; and
    react in an extended economic downturn.    Recent
    events in the credit markets may affect our ability to refinance
    our existing debt or obtain additional debt financing on
    acceptable terms.
  and/or
  The
    terms of our credit agreements may restrict our current and
    future operations, which would adversely affect our ability to
    respond to changes in our business and to manage our
    operations.
    
    incur additional debt;
    issue preferred stock;
    create liens;
    create or incur contingent obligations;
    engage in sales of assets and subsidiary stock;
    enter into sale-leaseback transactions;
    make investments and acquisitions; 27




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
    enter into hedging arrangements;
    make capital expenditures;
    pay dividends and make other restricted payments;
    enter into transactions with affiliates; and
    transfer all or substantially all of our assets or enter into
    merger or consolidation transactions.    Recent
    and future developments in the healthcare industry could
    adversely affect our business.
      
    government regulation or private initiatives that affect the
    manner in which providers interact with patients, payers or
    other healthcare industry constituents, including changes in
    pricing or means of delivery of healthcare products and services;
    reductions in governmental funding for healthcare; and
    adverse changes in business or economic conditions affecting
    payers, providers, pharmaceutical companies, medical device
    manufacturers or other healthcare industry constituents.    
    changes in the billing patterns of providers;
    changes in the design of health insurance plans; 28




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
    changes in the contracting methods payers use in their
    relationships with providers; and
    decreases in marketing expenditures by pharmaceutical companies
    or medical device manufacturers, as a result of governmental
    regulation or private initiatives that discourage or prohibit
    promotional activities by pharmaceutical or medical device
    companies.    Government
    regulation creates risks and challenges with respect to our
    compliance efforts and our business strategies.
      
    Data Protection and Breaches.  In recent years,
    there have been a number of well-publicized data breaches
    involving the improper dissemination of personal information of
    individuals both within and outside of the healthcare industry.
    Many states have responded to these incidents by enacting laws
    requiring holders of personal information to maintain safeguards
    and to take certain actions in response to a data breach, such
    as providing prompt notification of the breach to affected
    individuals. In many cases, these laws are limited to electronic
    data, but states are increasingly enacting or considering
    stricter and broader requirements. As required by ARRA, HHS
    published an interim final rule on August 24, 2009, which
    requires Covered Entities to report breaches of unsecured
    protected health information to affected individuals without
    unreasonable delay but not to exceed 60 days of discovery
    of the breach by a Covered Entity or its agents. Notification
    must also be made to HHS and, in certain circumstances involving
    large breaches, to the media. Business Associates must report
    breaches of unsecured protected health information to Covered
    Entities within 60 days of discovery of the breach by the
    Business Associate or its agents. In addition, the FTC has
    prosecuted some data breach cases as 29




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##### Table of Contents



unfair and deceptive acts or practices under the Federal Trade
    Commission Act. Further, some of our customers are subject to a
    new federal rule requiring creditors, which may include health
    providers and health plans, to implement identity theft
    prevention programs to detect, prevent, and mitigate identity
    theft in connection with customer accounts. We may be required
    to apply additional resources to our existing process to assist
    our customers in complying with this rule. We have implemented
    and maintain physical, technical and administrative safeguards
    intended to protect all personal data and have processes in
    place to assist us in complying with all applicable laws and
    regulations regarding the protection of this data and properly
    responding to any security breaches or incidents; however, we
    cannot be sure that these safeguards are adequate to protect all
    personal data or assist us in complying with all applicable laws
    and regulations regarding the protection of personal data.  
    HIPAA and Other Privacy and Security
    Requirements.  There are numerous federal and
    state laws and regulations related to the privacy and security
    of personal health information. In particular, regulations
    promulgated pursuant to HIPAA established privacy and security
    standards that limit the use and disclosure of individually
    identifiable health information and that require the
    implementation of administrative, physical and technological
    safeguards to ensure the confidentiality, integrity and
    availability of individually identifiable health information in
    electronic form. Our operations as a healthcare clearinghouse
    are directly subject to the Privacy Standards and Security
    Standards. In addition, our payer and provider customers are
    also directly subject to the Privacy Standards and Security
    Standards and are required to enter into written agreements with
    us, known as business associate agreements, which require us to
    safeguard individually identifiable health information and
    restrict how we may use and disclose such information. Effective
    February 17, 2010, ARRA extended the direct application of
    certain provisions of the Privacy Standards and Security
    Standards to us when we are functioning as a Business Associate
    of our payer or provider customers.  Violations of the Privacy Standards and Security Standards may
    result in civil and criminal penalties, and ARRA has increased
    the penalties for HIPAA violations and strengthened the
    enforcement provisions of HIPAA. Recently, enforcement
    activities appear to have increased, and ARRA may further
    increase such enforcement activities. For example, ARRA
    authorizes state attorneys general to bring civil actions
    seeking either injunctions or damages in response to violations
    of Privacy Standards and Security Standards that threaten the
    privacy of state residents.  
    HIPAA Transaction and Identifier
    Standards.  HIPAA and its implementing regulations
    also mandate format, data content and provider identifier
    standards that must be used in certain electronic transactions,
    such as claims, payment advice and eligibility inquiries.
    Although our systems are fully capable of transmitting
    transactions that comply with these requirements, some payers
    and healthcare clearinghouses with which we conduct business
    interpret HIPAA transaction requirements differently than we do
    or may require us to use legacy formats or include legacy
    identifiers as they transition to full compliance. Where payers
    or healthcare clearinghouses require conformity with their
    interpretations or require us to accommodate legacy transactions
    or identifiers as a condition of successful transactions, we
    seek to comply with their requirements, but may be subject to
    enforcement actions as a result. In January 2009, CMS published
    a final rule adopting updated standard code sets for diagnoses
    and procedures known as the ICD-10 code sets. A separate final
    rule also published by CMS in January 2009 resulted in changes
    to the formats to be used for electronic transactions subject to
    the ICD-10 code sets, known as Version 5010. While use of the
    ICD-10 code sets is not mandatory until October 1, 2013 and
    the use of Version 5010 is not mandatory until January 1,
    2012, we have begun to modify our payment systems and processes
    to prepare for their implementation. We may not be successful in
    responding to these changes and any responsive changes we make
    to our transactions and software may result in errors or
    otherwise negatively impact our service levels. We may also
    experience complications related to supporting customers that
    are not fully compliant with the revised requirements as of the
    applicable compliance date.
    Anti-Kickback and Anti-Bribery Laws.  A number
    of federal and state laws govern patient referrals, financial
    relationships with physicians and other referral sources and
    inducements to providers and patients. For example, the federal
    Anti-Kickback Law prohibits any person or entity from offering,
    paying, soliciting or receiving, directly or indirectly,
    anything of value with the intent of generating 30




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##### Table of Contents



referrals of patients covered by Medicare, Medicaid or other
    federal healthcare programs. Many states also have similar
    anti-kickback laws that are not necessarily limited to items or
    services for which payment is made by a federal healthcare
    program. Moreover, both federal and state laws forbid bribery
    and similar behavior. Any determination by a state or federal
    regulatory agency that any of our activities or those of our
    customers or vendors violate any of these laws could subject us
    to civil or criminal penalties, could require us to change or
    terminate some portions of our business, could require us to
    refund a portion of our service fees, could disqualify us from
    providing services to customers doing business with government
    programs and could have an adverse effect on our business. Even
    an unsuccessful challenge by regulatory authorities of our
    activities could result in adverse publicity and could require a
    costly response from us.  
    False or Fraudulent Claim Laws.  There are
    numerous federal and state laws that prohibit false or
    fraudulent claims. False or fraudulent claims include, but are
    not limited to, billing for services not rendered, failing to
    refund known overpayments, misrepresenting actual services
    rendered, improper coding and billing for medically unnecessary
    items or services. The FCA and some state false claims laws
    contain whistleblower provisions that allow private individuals
    to bring actions on behalf of the government alleging that the
    defendant has defrauded the government. Whistleblowers, the
    federal government and some courts have taken the position that
    entities that have violated other statutes, such as the federal
    anti-kickback law, have thereby submitted false claims under the
    FCA.  We rely on our customers to provide us with accurate and
    complete information. Errors and the unintended consequences of
    data manipulations by us or our systems with respect to entry,
    formatting, preparation or transmission of claim information may
    be determined or alleged to be in violation of these laws and
    regulations or could adversely impact the compliance of our
    customers.  
    Banking and Financial Services Industry
    Laws.  The banking and is subject to numerous
    laws, regulations and industry standards, some of which may
    impact our operations and subject us, our vendors or our
    customers to liability as a result of the payment distribution
    products and services we offer. Although we do not act as a
    bank, we offer products and services that involve banks, or
    vendors who contract with banks and other regulated providers of
    financial services. As a result, we may be impacted by banking
    and financial services industry laws, regulations and industry
    standards, such as licensing requirements, solvency standards,
    requirements to maintain the privacy and security of nonpublic
    personal financial information and FDIC deposit insurance
    limits. Further, our payment distribution products and services
    may impact the ability of our payer customers to comply with
    state prompt payment laws. These laws require payers to pay
    healthcare claims meeting the statutory or regulatory definition
    of a clean claim to be paid within a specified time
    frame.  Legislative
    changes may impede our ability to utilize our off-shore service
    capabilities.
   31




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##### Table of Contents



Failure
    by our customers to obtain proper permissions or provide us with
    accurate and appropriate data may result in claims against us or
    may limit or prevent our use of data which could harm our
    business.
    Certain
    of our products and services present the potential for
    embezzlement, identity theft or other similar illegal behavior
    by our employees or contractors with respect to third
    parties.
  and/or and/or
  Contractual
    relationships with customers that are governmental agencies or
    are funded by government programs may impose special burdens on
    us and provide special benefits to those
    customers.
    
    termination when appropriated funding for the current fiscal
    year is exhausted;
    termination for the governmental customers convenience,
    subject to a negotiated settlement for costs incurred and profit
    on work completed, along with the right to place contracts out
    for bid before the full contract term, as well as the right to
    make unilateral changes in contract requirements, subject to
    negotiated price adjustments;
    compliance and reporting requirements related to, among other
    things, agency specific policies and regulations, equal
    employment opportunity, affirmative action for veterans and
    workers with disabilities and accessibility for the disabled;
    broad audit rights; and 32




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##### Table of Contents




    specialized remedies for breach and default, including setoff
    rights, retroactive price adjustments and civil or criminal
    fraud penalties, as well as mandatory administrative dispute
    resolution procedures instead of state contract law remedies.  and/or conflict-of-interest
  The
    protection of our intellectual property requires substantial
    resources.
    Third
    parties may claim that we are infringing their intellectual
    property, and we could suffer significant litigation or
    licensing expenses or be prevented from selling products or
    services.
    A
    write-off of all or a part of our identifiable intangible assets
    or goodwill would hurt our operating results and reduce our net
    worth.
   33




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##### Table of Contents



We are
    dependent on the continued service of key executives, the loss
    of any of whom could adversely affect our
    business.
  and/or
  Our
    success depends in part on our ability to identify, recruit and
    retain skilled management and technical personnel. If we fail to
    recruit and retain suitable candidates or if our relationship
    with our employees changes or deteriorates, there could be an
    adverse effect on our business.
    A
    prolonged economic downturn could have a material adverse effect
    on our business, financial condition and results of
    operations.
    Lengthy
    sales, installation and implementation cycles for some of our
    applications may result in delays or an inability to generate
    revenues from these applications.
   34




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##### Table of Contents



Risks
    Related to our Organization and Structure
  We are
    a holding company and our principal asset is our ownership of
    equity interests in EBS Master, and we are accordingly dependent
    upon distributions from EBS Master to pay dividends, if any,
    taxes and other expenses.
             35




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##### Table of Contents



and/or
  We
    have elected to be exempt from certain corporate governance
    requirements since we are a Controlled Company
    within the meaning of the NYSE Rules and, as a result, our
    stockholders do not have the protections afforded by these
    corporate governance requirements for so long as our election
    continues.
    We are
    required to pay an affiliate of our Principal Equityholders and
    the EBS Equity Plan Members for certain tax benefits we may
    claim, and the amounts we may pay could be
    significant.
    step-up
  step-up
  step-up
 36




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##### Table of Contents



37




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##### Table of Contents



Risks
    Related to Ownership of Our Class A Common Stock
  The
    market price of our Class A common stock may be volatile,
    and your investment in our Class A common stock could suffer a
    decline in value.
    
    our actual or anticipated operating performance and growth and
    the actual or anticipated operating performance and growth of
    our competitors;
    the overall performance of the equity markets;
    actions of our historical equity investors, including sales of
    common stock by our directors and executive officers;
    public response to press releases and other announcements by us
    and our competitors, including announcements of acquisitions,
    business developments and new products and services;
    changes to our senior management team;
    legal and regulatory changes;
    publication of research reports or news stories about us, our
    competitors or our industry or positive or negative
    recommendations or withdrawal of research coverage by securities
    analysts; and
    general economic, industry and market conditions, and in
    particular those conditions specific to the healthcare industry.    We do
    not intend to pay dividends in the foreseeable future, and,
    because we are a holding company, we may be unable to pay
    dividends.
   38




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##### Table of Contents



Provisions
    in our organizational documents may delay or prevent our
    acquisition by a third party.
    
    provisions relating to the number of directors on our board of
    directors and the appointment of directors upon an increase in
    the number of directors or vacancy on our board of directors;
    provisions requiring a
    662/3%
    stockholder vote for the amendment of certain provisions of our
    certificate of incorporation, such as provisions relating to the
    election of directors and the inability of stockholders to act
    by written consent or call a special meeting, and for the
    adoption, amendment and repeal of our by-laws;
    provisions barring stockholders from calling a special meeting
    of stockholders or requiring one to be called;
    elimination of the right of our stockholders to act by written
    consent; and
    provisions that set forth advance notice procedures for
    stockholders nominations of directors and proposals for
    consideration at meetings of stockholders.    We
    have and will continue to incur additional costs as a result of
    becoming a public company, and our management may be required to
    devote substantial time and attention to new compliance
    initiatives.
    Failure
    to establish and maintain effective internal controls over
    financial reporting could have an adverse effect on our
    business, operating results and stock price.
   39




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##### Table of Contents



Form 10-K
  ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    sub-lease sub-lease
          ITEM 3.
    LEGAL
    PROCEEDINGS   40




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##### Table of Contents



ITEM 4.
    RESERVED PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information
    2009High

LowThird Quarter (from August 12, 2009)

$
18.25


$
14.81Fourth Quarter

$
16.25


$
14.27   one-for-one
  Holders
    Dividends
   41




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##### Table of Contents



Performance
    Graph
    Comparison
    of Five Month Cumulative Total Return
 Among Emdeon Inc., The S&P 500 Index
    And The NYSE Health Services Index
  
  8/12/09


8/31/09


9/30/09


10/31/09


11/30/09


12/31/09Emdeon Inc.



100.00




105.57




98.06




90.68




91.34




92.31S&P 500



100.00




101.60




105.39




103.43




109.64




111.75NYSE Health Services



100.00




101.81




100.16




98.28




105.30




112.90     Use of
    Proceeds From Registered Securities
  Form S-1 No. 333-153451), Form S-1MEF No. 333-161270)
 42




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##### Table of Contents




    The Company used approximately $25.7 million of the
    proceeds from the IPO to purchase FVTech in January 2010 and to
    pay HLTH license fees in October 2009 pursuant to a data
    sublicense agreement between the Company and HLTH.
    From September 30, 2009 through January 2010, the Company
    used approximately $0.7 million of the proceeds from the
    IPO to fund expenses related to operating as a public company.    ITEM 6.
    SELECTED
    FINANCIAL DATA       43




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##### Table of Contents



Emdeon Inc.



Emdeon Business Services(Successor)(1)(2)



(Predecessor)(1)Period from



Period fromNovember 16,



January 1,Year Ended


Year Ended


Year Ended


2006 thru



2006 thru


Year EndedDecember 31,


December 31,


December 31,


December 31,



November 15,


December 31,2009


2008


2007


2006



2006


2005(In thousands, except per share data)Statement of Operations Data:Revenues

$
918,448


$
853,599


$
808,537


$
87,903



$
663,186


$
690,094Costs and expenses:Cost of operations


562,867



541,563



514,918



56,628




425,108



449,044Development and engineering


33,928



28,625



28,198



2,782




21,782



22,734Sales, marketing, general and administrative


113,701



91,212



94,475



12,762




80,352



89,042Depreciation and amortization


105,321



97,864



62,811



7,127




30,440



32,273Loss on abandonment of leased properties


1,675



3,081
















Total costs and expenses


817,492



762,345



700,402



79,299




557,682



593,093Operating income


100,956



91,254



108,135



8,604




105,504



97,001Interest income


(75
)


(963
)


(1,567
)


(139
)



(67
)


(74
)Interest expense


70,246



71,717



74,325



10,113




25



56Other


(519
)



















Income (loss) before income taxes


31,304



20,500



35,377



(1,370
)



105,546



97,019Income tax provision


17,301



8,567



18,101



1,014




42,004



31,526Net income (loss)


14,003



11,933



17,276



(2,384
)



63,542



65,493Net income attributable to noncontrolling interest


4,422



2,702
















Net income (loss) attributable to controlling interest

$
9,581


$
9,231


$
17,276


$
(2,384
)


$
63,542


$
65,493Basic and diluted earnings (loss) per share toClass A common stockholders:Basic

$
0.12


$
0.12


$
0.33


$
(0.05
)







Diluted

$
0.12


$
0.12


$
0.17


$
(0.05
)







Weighted average number of shares used incomputing earnings per share:Basic


82,459,169



74,775,039



52,000,000



52,000,000








Diluted


82,525,002



100,000,000



100,000,000



52,000,000








   EmdeonBusinessEmdeon Inc.


Services(Successor)(1)(2)


(Predecessor)(1)At

At

At

At


AtDecember 31,

December 31,

December 31,

December 31,


December 31,2009

2008

2007

2006


2005(In thousands)Balance Sheet Data:Cash and cash equivalents

$
211,999


$
71,478


$
33,687


$
30,513



$
6,930Total assets


2,230,426



2,000,279



1,357,229



1,372,853




1,245,128Total
    debt(3)


840,682



825,230



871,934



907,349




Tax receivable obligations to related parties


142,044
















Total equity

$
979,869


$
878,153


$
300,969


$
292,657



$
1,121,637     (1)
    
    Our financial results prior to November 16, 2006 represent
    the financial results of the group of wholly-owned subsidiaries
    of HLTH that comprised its Emdeon Business Services segment. On
    November 16, 44




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##### Table of Contents



2006, HLTH sold a 52% interest in EBS Master (which was formed
    as a holding company for our business in connection with that
    transaction) to an affiliate of General Atlantic. Accordingly,
    the financial information presented reflects the results of
    operations and financial condition of Emdeon Business Services
    before the 2006 Transaction (Predecessor) and of us after the
    2006 Transaction (Successor).(2)
    
    As a result of our history of business combinations, our
    financial position and results of operations may not be
    comparable for each of the periods presented. See
    Business  Organizational Structure and
    Corporate History in Part I, Item 1. of this
    Annual Report.(3)
    
    Our debt as of December 31, 2009 and 2008 is reflected net
    of unamortized debt discount of approximately $53.3 and
    $64.7 million, respectively, related to original loan fees
    and purchase accounting adjustments to discount the debt to fair
    value in conjunction with the 2008 Transaction. Total debt as of
    December 31, 2009 includes an obligation of approximately
    $37.6 million related to a data sublicense obligation.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  You should read the following discussion in conjunction with
    Selected Financial Data and our consolidated
    financial statements and related notes included elsewhere in
    this Annual Report. Some of the statements in the following
    discussion are forward-looking statements. See
    Forward-Looking Statements included elsewhere in
    this Annual Report.
  Overview
       45




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Our
    Revenues and Expenses
       46




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##### Table of Contents



Recent
    Developments
     47




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Significant
    Items Affecting Comparability
    Acquisitions
    and Divestitures
    Date

Acquisition

Description

Affected SegmentDecember 2007

IXT Solutions

Paper and electronic patient billing and payment solutions

ProviderSeptember 2008

Patient statements business of GE Healthcare

Paper patient billing and payment solutions

ProviderJune 2009

The Sentinel Group

Fraud and abuse management services

PayerJuly 2009

eRx Network, L.L.C.

Electronic pharmacy healthcare solutions

PharmacyOctober 2009

Data Rights

Acquired certain additional rights to specified uses of data
    from HLTH/WebMD Corp

N/A   Effective Date

Divestiture

Description

Affected SegmentOctober 2009

Control-o-Fax

Office supplies and print services

Provider   Efficiency
    Measures
  and/or
 48




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##### Table of Contents



Purchase
    Accounting
    
    Recognition of the fair value of our identifiable intangible
    assets.The increased value of these intangibles
    resulted in incremental amortization expense of
    $35.9 million in 2008 related to the 2008 Transaction.
    Reduction to fair value of our deferred revenue related to
    outstanding products and services to be provided subsequent to
    the 2008 Transaction.In connection with the 2008
    Transaction, we reduced our deferred revenue by
    $5.6 million. This adjustment, in effect, reduced the
    revenue and income from operations that would otherwise have
    been recognized by $5.3 million in 2008 and
    $0.7 million in 2009.
    Reduction in the carrying value of our long-term debt to fair
    value in connection with the 2008 Transaction.In
    connection with the 2008 Transaction, 48% of our long-term debt
    was adjusted to fair value, a debt discount of approximately
    $66.4 million was recorded and approximately
    $8.2 million of the debt discount existing prior to the
    2008 Transaction was written off. Amortization of the debt
    discount and the write-off of the previous debt discount
    resulted in incremental interest expense of approximately
    $7.4 million in 2008 over 2007. Also, as a result of the
    2008 Transaction, our interest rate swap no longer met the
    criteria for hedge accounting and thus the value of the interest
    rate swap at that date is being amortized over its term to
    interest expense. This amortization resulted in incremental
    interest expense of approximately $9.7 million in 2008 over
    2007. As a result of no longer meeting the criteria for hedge
    accounting, the change in fair value of our interest rate swap
    from the date of the 2008 Transaction to its redesignation date
    as a hedge on September 30, 2008 was reflected within
    interest expense, which reduced interest expense by
    approximately $12.7 million during 2008.  Income
    Taxes
    
    Changes in our book and tax basis in EBS Master Certain items, including certain equity-based compensation,
    other comprehensive income and income of a corporate
    consolidated subsidiary of EBS Master, affect our book basis in
    EBS Master without similarly affecting our tax basis in EBS
    Master. The difference in the book and tax basis of our
    investment in EBS Master increased our income tax provision by
    approximately $10.5 million for 2009.
    Valuation allowance changes During 2009, we
    concluded, based primarily on our taxable income during the
    period and the expected accretive impact of our recent
    acquisitions on future taxable income, that we would generate
    sufficient future taxable income to utilize certain of our
    federal net operating losses, the benefit of which we had not
    previously recognized. As a result, income tax expense for 2009
    is net of a benefit of approximately $11.8 million related
    to these net operating losses that had been the subject of a
    valuation allowance in the comparable prior year periods. The
    benefit was partially offset by an increase in state income tax
    valuation allowance related to a consolidated subsidiary of
    approximately $5.8 million.
    Changes in apportioned state income tax rate Changes in our operations also may cause our apportioned
    state income tax rate to change from period to period. Such rate
    changes may require adjustment to our existing deferred income
    tax assets and liabilities that have been recorded primarily as
    a result of our investment in EBS Master, as well as the 2006
    Transaction and 2008 Transaction. A change in our estimated
    state income tax rate resulted in additional deferred income
    taxes of approximately $2.2 million during 2009. 49




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##### Table of Contents



Stock-Based
    and Equity-Based Compensation Expense
      
    Change in the estimated fair value of liability
    awards.All equity-based awards granted under the
    EBS Equity Plan and EBS Phantom Plan prior to the second quarter
    of 2009 were classified as liabilities due to certain repurchase
    features. As liabilities, we were required to adjust the
    equity-based awards to fair value at the end of each quarter.
    The fair value of these liabilities generally fluctuated with
    the value of the underlying EBS Units.
    Modification of equity-based awards.In June
    2009, we modified the repurchase features of all Grant Units
    previously granted under the EBS Equity Plan. Following this
    modification, all Grant Units were reclassified as equity
    awards. Immediately prior to this reclassification, we adjusted
    the value of these Grant Units to their fair value and
    recognized equity-based compensation expense from this change in
    estimate of approximately $4.6 million during 2009.
    Conversion in connection with our IPO.In
    connection with the IPO and reorganization transactions, the
    Phantom Units were converted into shares of our Class A
    common stock, restricted Class A common stock units and
    options to purchase shares of our Class A common stock
    under the 2009 Plan. As a result of the IPO and this conversion,
    we recognized equity-based compensation expense from this change
    in estimate of approximately $9.2 million during 2009.
    Grant of options.On the IPO date, we also
    granted options to purchase shares of our Class A common
    stock to certain of our employees under the 2009 Plan.  Critical
    Accounting Policies
      Revenue
    Recognition
   50




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##### Table of Contents



Business
    Combinations
      Goodwill
    and Intangible Assets
    Customer relationships

9 to 20 yearsTrade names

20 yearsData sublicense agreement

8 yearsNon-compete agreements

1 to 5 years        51




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##### Table of Contents



and/or
    Income
    Taxes
        Equity-Based
    Compensation
      Tax
    Receivable Agreements
   52




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##### Table of Contents



Results
    of Operations
    Year Ended


Year Ended


Year EndedDecember 31, 2009


December 31, 2008


December 31, 2007% of





% of





% ofAmount


Revenue(1)


Amount


Revenue(1)


Amount


Revenue(1)Revenues(2)Payer Services

$
397,492



43.3
%

$
372,159



43.6
%

$
366,675



45.4
%Provider Services


462,513



50.4



444,845



52.1



408,439



50.5Pharmacy Services


60,843



6.6



39,067



4.6



36,937



4.6Eliminations


(2,400
)


(0.3
)


(2,472
)


(0.3
)


(3,514
)


(0.4
)Total revenues


918,448



100.0



853,599



100.0



808,537



100.0Costs of operationsPayer Services


253,473



63.8



242,950



65.3



241,755



65.9Provider Services


294,700



63.7



292,844



65.8



268,529



65.7Pharmacy Services


16,668



27.4



7,612



19.5



7,094



19.2Eliminations


(1,974
)






(1,843
)






(2,460
)Total costs of operations


562,867



61.3



541,563



63.4



514,918



63.7Development and engineeringPayer Services


12,677



3.2



10,472



2.8



11,157



3.0Provider Services


15,294



3.3



14,015



3.2



12,869



3.2Pharmacy Services


5,957



9.8



4,138



10.6



4,172



11.3Eliminations


















Total development and engineering


33,928



3.7



28,625



3.4



28,198



3.5Sales, marketing, general and adminPayer Services


25,803



6.5



23,286



6.3



22,386



6.1Provider Services


31,978



6.9



30,475



6.9



31,329



7.7Pharmacy Services


8,047



13.2



3,864



9.9



3,561



9.6Eliminations


(426
)






(624
)






(1,052
)Total sales, marketing, general and admin excluding corporate


65,402



7.1



57,001



6.7



56,224



7.0Income from segment operations


256,251



27.9



226,410



26.5



209,197



25.9Corporate expense


49,974



5.4



37,292



4.4



38,251



4.7Depreciation and amortization


105,321



11.5



97,864



11.5



62,811



7.8Operating income


100,956



11.0



91,254



10.7



108,135



13.4Interest income


(75
)


(0.0
)


(963
)


(0.1
)


(1,567
)


(0.2
)Interest expense


70,246



7.6



71,717



8.4



74,325



9.2Other income


(519
)


(0.1
)














Income before income tax provision


31,304



3.4



20,500



2.4



35,377



4.4Income tax provision


17,301



1.9



8,567



1.0



18,101



2.2Net income


14,003



1.5
%


11,933



1.4
%


17,276



2.1
%Net income attributable to noncontrolling interest


4,422







2,702







Net income attributable to Emdeon Inc.

$
9,581






$
9,231






$
17,276     (1)
    
    All references to percentage of revenues for expense components
    refer to the percentage of revenues for such segment.(2)
    
    See
    Note 24-Segment
    Reporting to our consolidated financial statements for
    further detail of our revenues within each reportable segment. 53




---



##### Table of Contents



Year
    Ended December 31, 2009 Compared to Year Ended
    December 31, 2008
  Revenues
      2009


2008


$ ChangeClaims management

$
184,605


$
179,930


$
4,675Payment services


211,985



191,874



20,111Intersegment revenue


902



355



547$
397,492


$
372,159


$
25,333       2009


2008


$ ChangePatient statements

$
274,390


$
266,233


$
8,157Revenue cycle management


155,112



144,904



10,208Dental


31,513



31,591



(78
)Intersegment revenue


1,498



2,117



(619
)$
462,513


$
444,845


$
17,668       Cost
    of Operations
     54




---



##### Table of Contents



Development
    and Engineering Expense
    Sales,
    Marketing, General and Administrative Expense (Excluding
    Corporate Expense)
     55




---



##### Table of Contents



Corporate
    Expense
    Depreciation
    and Amortization Expense
    Interest
    Income
    Interest
    Expense
   56




---



##### Table of Contents



Income
    Taxes
    Year
    Ended December 31, 2008 Compared to Year Ended
    December 31, 2007
  Revenues
      2008


2007


ChangeClaims management

$
179,930


$
192,318


$
(12,388
)Payment services


191,874



173,677



18,197Intersegment revenue


355



680



(325
)$
372,159


$
366,675


$
5,484       2008


2007


ChangePatient statements

$
266,233


$
240,074


$
26,159Revenue cycle management


144,904



136,679



8,225Dental


31,591



28,852



2,739Intersegment revenue


2,117



2,834



(717
)$
444,845


$
408,439


$
36,406    57




---



##### Table of Contents



Cost
    of Operations
          Development
    and Engineering Expense
    Sales,
    Marketing, General and Administrative Expense (Excluding
    Corporate Expense)
         58




---



##### Table of Contents



Corporate
    Expense
    Depreciation
    and Amortization Expense
    Interest
    Income
    Interest
    Expense
    Income
    Taxes
    Liquidity
    and Capital Resources
  General
     59




---



##### Table of Contents



Cash
    Flows
  Operating
    Activities
      and/or
  Investing
    Activities
      Financing
    Activities
   60




---



##### Table of Contents



Credit
    Facilities
           61




---



##### Table of Contents



Covenants
       62




---



##### Table of Contents



Commitments
    and Contingencies
    Payments by PeriodTotal


2010


2011-2012


2013-2014


Thereafter(In thousands)Long-term debt obligations

$
893,956


$
9,972


$
21,958


$
845,692


$
16,334Expected interest(a)


111,564



27,189



53,125



29,035



2,215Interest rate swap agreement(b)


21,337



15,054



6,283







Tax receivable agreement obligations to related parties(c)


142,044







11,612



34,256



96,176Operating lease obligations(d)


56,275



6,707



12,617



10,473



26,478Purchase obligations(e)


15,137



5,940



9,197







Total contractual obligations

$
1,240,313


$
64,862


$
114,792


$
919,456


$
141,203     (a)
    
    Expected interest consists of both interest payable under our
    Credit Agreements and imputed interest payable under our data
    sublicense agreement. Interest related to our Credit Agreements
    is based on our interest rates in effect as of December 31,
    2009 and assumes that we make no optional or mandatory
    prepayments of principal prior to the maturity of the Credit
    Agreements. Because the interest rates under our Credit
    Agreements are variable, actual payments may differ.(b)
    
    Under our interest rate swap agreement, we receive a three month
    LIBOR rate and pay a fixed rate of 4.944% on a specified
    notional amount. The above payments represent the present value
    of the net amounts we expect to pay in the respective periods
    based upon the three-month LIBOR yield curve in effect at
    December 31, 2009.(c)
    
    Represents amounts due based on facts and circumstances existing
    as of December 31, 2009. The timing and/or amount of
    aggregate payments due may vary based on a number of factors,
    including the amount and timing of the taxable income the
    Company generates in the future and the tax rate then
    applicable, the use of loss carryovers and the portion of
    payments under the tax receivable agreements constituting
    imputed interest or amortizable basis. 63




---



##### Table of Contents



(d)
    
    Represents amounts due under existing operating leases related
    to our offices and other facilities.(e)
    
    Represents contractual commitments under certain
    telecommunication and other supply contracts. Where our purchase
    commitments are cumulative over a period of time (i.e., no
    specified annual commitment), the table above assumes such
    commitments will be fulfilled on a ratable basis over the
    commitment period.    Off-Balance
    Sheet Arrangements
    Recent
    Accounting Pronouncements
          157-4, Determining Fair Value When the Volume and Level of Activity
    for the Asset or Liability Have Significantly Decreased and
    Identifying Transactions That Are Not Orderly
 64




---



##### Table of Contents



No. 2010-09,
  2009-05,
  No. 2009-13,
  No. 2010-02,
  No. 2010-06,
 65




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK          ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Page F-1
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A(T).
    CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
 66




---



##### Table of Contents



Managements
    Annual Report on Internal Control Over Financial
    Reporting
    Changes
    in Internal Control Over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE   67




---



##### Table of Contents



ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES                     68




---



##### Table of Contents



Index to
    Consolidated Financial Statements
  PageReport of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of
    December 31, 2009 and 2008


F-3Consolidated Statements of Operations for the
    years ended December 31, 2009, 2008 and 2007


F-4Consolidated Statements of Equity for the years
    ended December 31, 2009, 2008 and 2007


F-5Consolidated Statements of Cash Flows for the
    years ended December 31, 2009, 2008 and 2007


F-6Notes to Consolidated Financial Statements


F-7Schedule I


S-1  F-1




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm               
    F-2




---



##### Table of Contents



Emdeon
    Inc.



Consolidated
    Balance Sheets December 31,2009


2008(In thousands, except share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
211,999


$
71,478Accounts receivable, net of allowance for doubtful accounts of
    $4,433 and $4,576 at December 31, 2009 and 2008,
    respectively


151,022



144,149Deferred income tax assets


4,924



2,285Prepaid expenses and other current assets


16,632



21,137Total current assets


384,577



239,049Property and equipment, net


152,091



136,038Goodwill


703,027



646,851Intangible assets, net


989,280



971,001Other assets, net


1,451



7,340Total assets

$
2,230,426


$
2,000,279LIABILITIES AND EQUITYCurrent liabilities:Accounts payable

$
9,910


$
805Accrued expenses


72,493



79,513Deferred revenues


12,153



12,056Current portion of long-term debt


9,972



17,244Total current liabilities


104,528



109,618Long-term debt, excluding current portion


830,710



807,986Deferred income tax liabilities


145,914



159,811Tax receivable agreement obligations to related parties


142,044



Other long-term liabilities


27,361



44,711Commitments and contingenciesEquity:Preferred stock (par value, $0.00001), 25,000,000 shares
    authorized and 0 shares issued and outstanding






Class A common stock (par value, $0.00001),
    400,000,000 shares authorized and 90,423,941 and
    77,413,610 shares outstanding at December 31, 2009 and
    2008, respectively


1



1Class B common stock, exchangeable (par value, $0.00001),
    52,000,000 shares authorized and 24,752,955 and
    22,586,390 shares outstanding at December 31, 2009 and
    2008, respectively






Additional paid-in capital


730,941



670,702Accumulated other comprehensive loss


(11,198
)


(23,195
)Retained earnings


33,704



24,123Emdeon Inc. equity


753,448



671,631Noncontrolling interest


226,421



206,522Total equity


979,869



878,153Total liabilities and equity

$
2,230,426


$
2,000,279    F-3




---



##### Table of Contents



Emdeon
    Inc.



Consolidated
    Statements of Operations  Year Ended December 31,2009


2008


2007(In thousands, except share and per share amounts)Revenue

$
918,448


$
853,599


$
808,537Costs and expenses:Cost of operations (exclusive of depreciation and amortization
    below)


562,867



541,563



514,918Development and engineering


33,928



28,625



28,198Sales, marketing, general and administrative


113,701



91,212



94,475Depreciation and amortization


105,321



97,864



62,811Loss on abandonment of leased properties


1,675



3,081



Operating income


100,956



91,254



108,135Interest income


(75
)


(963
)


(1,567
)Interest expense


70,246



71,717



74,325Other income


(519
)






Income before income tax provision


31,304



20,500



35,377Income tax provision


17,301



8,567



18,101Net income


14,003



11,933



17,276Net income attributable to noncontrolling interest


4,422



2,702



Net income attributable to Emdeon Inc.

$
9,581


$
9,231


$
17,276Net income per share Class A common stock:Basic

$
0.12


$
0.12


$
0.33Diluted

$
0.12


$
0.12


$
0.17Weighted average common shares outstanding:Basic


82,459,169



74,775,039



52,000,000Diluted


82,525,002



100,000,000



100,000,000    F-4




---



##### Table of Contents



Emdeon
    Inc.



Consolidated
    Statements of Equity  Class A


Class B


Additional





Other


Non-Common Stock


Common Stock


Paid-in


Retained


Comprehensive


Controlling


TotalShares


Amount


Shares


Amount


Capital


Earnings


Income (Loss)


Interest


Equity(In thousands, except share amounts)Balance at January 1, 2007


52,000,000


$
1



48,000,000


$



$
295,055


$
(2,384
)

$
(15
)

$



$
292,657Contribution from HLTH Corporation for non-cash transfer
    stock-based compensation expense


















2,107















2,107Contribution from HLTH Corporation for retention bonuses paid on
    behalf of the Company


















3,388















3,388Comprehensive income (loss):


































Net income






















17,276











17,276Change in the fair value of interest rate swap, net of taxes


























(14,468
)






(14,468
)Foreign currency translation adjustment


























9







9Total comprehensive income


































2,817Balance at December 31, 2007


52,000,000



1



48,000,000







300,550



14,892



(14,474
)






300,969Capital contribution from affiliates of General Atlantic LLC and
    Hellman & Friedman LLC for the purchase of HLTH
    Corporations 48% interest in EBS Master LLC on
    February 8, 2008


25,413,610















578,409















578,409Establish noncontrolling interest on February 8, 2008










22,586,390







(210,585
)






5,435



205,150



Eliminate HLTH Corporations 48% minority interest on
    February 8, 2008










(48,000,000
)






1,345















1,345Capital contribution from stockholders


















1,300















1,300Distribution to stockholders


















(317
)














(317
)Comprehensive income (loss):Net income






















9,231







2,702



11,933Change in the fair value of interest rate swap, net of taxes


























(20,705
)


(3,240
)


(23,945
)Foreign currency translation adjustment


























(43
)


(13
)


(56
)Other comprehensive income amortization, net of taxes


























6,592



1,923



8,515Total comprehensive loss


































(3,553
)Balance at December 31, 2008


77,413,610



1



22,586,390







670,702



24,123



(23,195
)


206,522



878,153Capital contribution from stockholders


















203















203Distribution to stockholders


















(434
)














(434
)Reclassification of liability awards to equity awards


















20,548











6,183



26,731Equity based compensation expense


















5,784











1,531



7,315Purchase of eRx Network L.L.C.










1,850,000







3,504







318



19,707



23,529Issuance of units of EBS Master to members of management, net of
    taxes










2,537,325







(11,899
)






394



18,246



6,741Issuance of Class A common stock to employees and
    directors, net of taxes


349,166















1,372







(18
)


(851
)


503Conversion of EBS Master units held by eRx to shares of
    Class A common stock, net of taxes


1,850,000







(1,850,000
)






21,968







(376
)


(17,443
)


4,149Issuance of Class A shares in connection with initial
    public offering


10,725,000















144,915















144,915Issuance of Units of EBS Master to Emdeon Inc., net of taxes


















13,706







(448
)


(21,025
)


(7,767
)Repurchase of Class A shares (to satisfy tax withholding
    obligation)


(102,305
)














(1,780
)






4



190



(1,586
)Repurchase of units of EBS Master issued to members of
    management, net of taxes










(370,760
)






(1,107
)






(74
)


(3,500
)


(4,681
)Contribution of data sublicense intangible to EBS Master


















(5,872
)










9,312



3,440Tax receivable agreement with related parties, net of taxes


















(131,433
)














(131,433
)Issuance of Class A common stock upon vesting of Restricted
    Stock Units


188,470















764







(6
)


(368
)


390Comprehensive income:Net income






















9,581







4,422



14,003Changes in the fair value of interest rate swap, net of taxes


























6,755



1,933



8,688Foreign currency translation adjustment


























17



8



25Other comprehensive income amortization, net of taxes


























5,431



1,554



6,985Total comprehensive income


































29,701Balance at December 31, 2009


90,423,941


$
1



24,752,955


$



$
730,941


$
33,704


$
(11,198
)

$
226,421


$
979,869    F-5




---



##### Table of Contents



Emdeon
    Inc.



Consolidated
    Statements of Cash Flows  Year Ended December 31,2009


2008


2007(In thousands)Operating activitiesNet income

$
14,003


$
11,933


$
17,276Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


105,321



97,864



62,811Equity compensation expense


25,415



4,145



6,593Deferred income tax expense (benefit)


(1,248
)


(4,140
)


13,846Amortization of debt discount and issuance costs


11,947



9,954



2,390Amortization of discontinued cash flow hedge from other
    comprehensive loss


7,970



9,745



Change in fair value of interest rate swap (not subject to hedge
    accounting)






(12,714
)


Loss on abandonment of leased properties


1,675



3,081



Loss on disposal of fixed assets


17



177



11Other


(519
)






Changes in operating assets and liabilities:Accounts receivable


(2,571
)


(19,409
)


354Prepaid expenses and other


4,945



(12,049
)


(3,114
)Accounts payable


4,731



(9,159
)


6,047Accrued expenses and other liabilities


(9,329
)


3,119



(645
)Due to HLTH Corporation






(797
)


(9,226
)Deferred revenues


95



1,585



1,696Tax receivable agreement obligations to related parties


299Net cash provided by operating activities


162,751



83,335



98,039Investing activitiesPurchases of property and equipment


(48,292
)


(27,971
)


(28,179
)Payments for acquisitions, net of cash acquired


(76,250
)


(21,061
)


(11,074
)Purchase of Emdeon Business Services, net of cash acquired






(306,260
)


(10,949
)Proceeds from sale of office supplies business


1,300







Net cash used in investing activities


(123,242
)


(355,292
)


(50,202
)Financing activitiesRepayment of cash advance from HLTH Corporation










(10,000
)Proceeds from initial public offering


147,964







Repurchase of Class A common stock


(1,586
)






Repurchase of Units of EBS Master LLC


(5,373
)






Debt principal and sublicense obligation payments


(29,203
)


(7,550
)


(37,551
)Payment of debt issuance costs


(359
)






(500
)Proceeds from revolver






10,000



10,000Payments on revolver


(10,200
)






(10,000
)Capital contributions from stockholders


203



307,615



3,388Distribution to stockholders


(434
)


(317
)


Net cash provided by (used in) financing activities


101,012



309,748



(44,663
)Net increase in cash and cash equivalents


140,521



37,791



3,174Cash and cash equivalents at beginning of period


71,478



33,687



30,513Cash and cash equivalents at end of period

$
211,999


$
71,478


$
33,687Supplemental disclosures of cash flow informationCash paid during the period for interest

$
49,649


$
64,752


$
72,012Cash paid during the period for income taxes

$
21,087


$
14,924


$
2,206Supplemental disclosures of noncash transactionsExecution of tax receivable agreements:Additional paid in capital

$
141,745


$



$
Tax receivable agreement obligation to related parties

$
141,745


$



$
Acquisition of certain data rights:Intangible assets

$
37,606


$



$
Current portion of long-term debt

$
3,078


$



$
Long-term debt

$
34,528


$



$
    F-6




---



##### Table of Contents



Emdeon
    Inc.



Notes to
    Consolidated Financial Statements

(In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)  1.
    Nature of
    Business and Organization  Nature
    of Business
    Organization
    No. 88-16, Basis in Leveraged Buyout Transactions
      Reorganization
       F-7




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
      
    The Company amended and restated its certificate of
    incorporation and reclassified its outstanding common stock into
    an aggregate of 56,000,000 shares of its Class A
    common stock;
    The Company redeemed 4,000,000 shares of Class A
    common stock from its existing stockholders in exchange for the
    rights by its existing stockholders to receive payments under a
    tax receivable agreement;
    Another member of EBS Master, EBS Acquisition II, LLC (EBS
    Acquisition II), an affiliate of General Atlantic, was
    merged with a newly-formed subsidiary of the Company with the
    newly formed subsidiary being the surviving entity in the
    merger; EBS Acquisition IIs members, all of whom are
    investment funds organized and controlled by General Atlantic,
    received an aggregate of 13,773,913 shares of Class A
    common stock and the Company acquired, indirectly, an additional
    13.52% interest in EBS Master;
    Another member of EBS Master, H&F Harrington AIV I,
    L.P. (H&F Harrington), an entity whose partners
    consist of investment funds organized and controlled by
    H&F, dissolved and distributed 1.06% of its interests in
    EBS Master to Hellman & Friedman Investors VI, L.P.,
    its general partner (H&F GP), and 98.94% to
    H&F Harrington, Inc.; H&F Harrington, Inc. then merged
    with a newly-formed subsidiary of the Company with the newly
    formed subsidiary being the surviving entity in the merger;
    H&F Harrington, Inc.s sole stockholder, H&F
    Harrington AIV II, L.P. (H&F AIV), an
    investment fund organized and controlled by H&F, received
    an aggregate of 11,639,697 shares of Class A common
    stock and the Company acquired, indirectly, an additional 11.43%
    interest in EBS Master; and
    Affiliates of H&F (or their successors) (the H&F
    Continuing LLC Members) continue to hold an aggregate of
    22,586,390 units in EBS Master (EBS Units) and
    were issued an aggregate of 22,586,390 shares of
    Class B common stock.          2.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
   F-8




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
  Reclassifications
    Noncontrolling
    Interest
      Accounting
    Estimates
    Business
    Combinations
     F-9




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
  Cash
    and Cash Equivalents
    Allowance
    for Doubtful Accounts
    Inventory
  first-in,
  Software
    Development Costs
    Property
    and Equipment
    Computer equipment

3 to 5 yearsOffice equipment, furniture and fixtures

3 to 7 yearsSoftware

3 yearsTechnology

6 to 7 yearsLeasehold improvements

Shorter of useful life or lease term     Goodwill
    and Intangible Assets
    Customer relationships

9 to 20 yearsTrade names

20 yearsData sublicense agreement

8 yearsNon-compete agreements

1 to 5 years    F-10




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
      Long-Lived
    Assets
    Other
    Assets
    Derivatives
    Equity-Based
    Compensation
       F-11




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
    Revenue
    Recognition
          Income
    Taxes
        Net
    Income Per Share of Class A Common Stock
     F-12




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
        Recent
    Accounting Pronouncements
         F-13




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
    157-4, Determining Fair Value When the Volume and Level of Activity
    for the Asset or Liability Have Significantly Decreased and
    Identifying Transactions That Are Not Orderly
  No. 2010-09,
  2009-05,
  No. 2009-13,
  No. 2010-02,
 F-14




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
    No. 2010-06,
  3.
    Concentration
    of Credit Risk      4.
    Business
    Combinations  2007
    Acquisition
  Patient
    Statement Acquisition
      Current assets

$
2,528Property and equipment


3,190Identifiable intangible assets:Customer contracts


9,690Non-compete agreements


600Goodwill


7,121Current liabilities


(2,185
)Deferred tax liability and other long- term liabilities


(5,591
)Total purchase price

$
15,353    F-15




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
  2008
    Acquisitions
  2008
    Transaction
  No. D-97, Push Down Accounting Application of
    Pushdown Basis of Accounting in Financial Statements
    of Subsidiaries Acquired by Purchase
    Current assets

$
88,074Property and equipment


60,705Other assets


266Identifiable intangible assets:Customer contracts


571,732Tradename


81,888Non-compete agreements


6,869Goodwill


298,592Current liabilities


(46,690
)Long term debt


(356,587
)Deferred tax liability


(113,213
)Long term liabilities


(13,227
)Total transaction price

$
578,409Cash paid by H&F Continuing LLC Member


(272,149
)Cash paid by Emdeon Inc. & subsidiaries

$
306,260     Patient
    Statement Acquisition
      Current assets

$
2,358Property and equipment


408Identifiable intangible assets:Customer contracts


11,730Goodwill


2,862Current liabilities


(290
)Total purchase price

$
17,068    F-16




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
  2009
    Acquisitions
  Sentinel
    Group Acquisition
    eRx
    Acquisition
      Cash

$
2,889Accounts receivable


4,045Other current assets


750Property and equipment


7,017Other assets


41Identifiable intangible assets:Customer contracts
    (20-year
    weighted average useful life)


28,130Tradename
    (20-year
    weighted average useful life)


9,660Non-compete agreements
    (5-year
    weighted average useful life)


320Goodwill


53,653Accounts payable


(1,304
)Accrued expenses


(4,281
)Current maturities of long-term debt


(200
)Net assets acquired


100,720Noncontrolling interest


(13
)Total consideration transferred

$
100,707Acquisition costs included in sales, marketing, general and
    administrative expenses

$
219        F-17




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
  Other
    Information
    Pro Forma


Pro Forma


Pro FormaYear Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2009


2008


2007Revenues

$
935,145


$
880,686


$
803,689Net income (loss) attributable to Emdeon Inc.


10,019



6,761



(13,001
)Basic and diluted net income (loss) per share to Class A
    common stockholders:Basic

$
0.12


$
0.09


$
(0.25
)Diluted

$
0.12


$
0.09


$
(0.25
)   5.
    Inventory    6.
    Property
    and Equipment    2009


2008Computer equipment

$
45,984


$
36,911Office equipment, furniture and fixtures


27,470



22,951Software


54,340



34,047Technology


104,205



98,465Leasehold improvements


11,537



9,643Construction in process


26,339



10,657269,875



212,674Less accumulated depreciation


(117,784
)


(76,636
)Property and equipment, net

$
152,091


$
136,038    F-18




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
   7.
    Goodwill
    and Intangible Assets    Payer


Provider


Pharmacy


TotalBalance at December 31, 2007

$
302,963


$
331,562


$
32,472


$
666,9972008 Transaction


157,021



126,284



15,287



298,592Elimination of goodwill related to HLTHs ownership interest


(159,143
)


(145,117
)


(17,682
)


(321,942
)Acquisition






2,862







2,862Other


68



274







342Balance at December 31, 2008


300,909



315,865



30,077



646,851Acquisitions


2,691







53,653



56,344Other


50



(218
)






(168
)Balance at December 31, 2009

$
303,650


$
315,647


$
83,730


$
703,027     WeightedAverage

GrossRemaining

Carrying


AccumulatedLife

Amount


Amortization


NetCustomer relationships

16.0 years

$
965,523


$
(122,242
)

$
843,281Trade names

18.2 years


117,548



(14,568
)


102,980Data sublicense agreement

8.1 years


43,259



(1,294
)


41,965Non-compete agreements

0.2 years


11,496



(10,442
)


1,054Total



$
1,137,826


$
(148,546
)

$
989,280     Years ending December 31,2010

$
64,2402011


63,7892012


63,7852013


63,6832014


63,651Thereafter

$
670,132   8.
    Debt
    Issuance Costs     F-19




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
   9.
    Accrued
    Expenses    2009


2008Customer deposits

$
26,357


$
26,081Accrued compensation


14,698



16,269Accrued insurance


2,040



2,858Accrued rebates


5,214



4,758Accrued outside services


3,526



7,825Accrued telecommunications


2,783



3,880Accrued income, sales and other taxes


2,078



1,552Accrued earnout






1,068Accrued liabilities for purchases of property and equipment


3,057



3,765Other accrued liabilities


12,740



11,457$
72,493


$
79,513   10.
    Long-Term
    Debt    December 31,2009


2008Credit Facilities$50 million Revolving Line of Credit facility, expiring on
    November 16, 2012 and bearing interest payable quarterly at
    a variable base rate plus a spread rate (total rate of 1.51% at
    December 31, 2009)

$



$
10,000$755 million First Lien Term Loan facility, expiring on
    November 16, 2013, bearing interest payable quarterly at a
    variable base rate plus a spread rate (total rate 2.26% and
    3.46%) and net of unamortized discount of $38,105 and $46,833 at
    December 31, 2009 and 2008, respectively (effective
    interest rate of 3.89% at December 31, 2009)


648,245



663,067$170 million Second Lien Term Loan facility, expiring on
    May 16, 2014, bearing interest at a variable base rate plus
    a spread rate (total rate 5.26% and 6.46%) and net of
    unamortized discount of $15,169 and $17,837 at December 31,
    2009 and 2008, respectively (effective interest rate of 7.71% at
    December 31, 2009)


154,831



152,163Obligation under Data Sublicense Agreement


37,606



Less current portion


(9,972
)


(17,244
)Long-term debt

$
830,710


$
807,986   Credit
    Facilities
   F-20




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
              Obligation
    Under Data Sublicense Agreement
   F-21




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
    Years Ending December 31,2010

$
9,9722011


10,6862012


11,2722013


670,1402014


175,552Thereafter


16,334$
893,956   11.
    Interest
    Rate Swap    Fair Values of Derivative InstrumentsAsset (Liability) DerivativesDecember 31,

December 31,Balance Sheet Location

2009

2008Derivatives designated as hedging instruments:Interest rate swap

Other long-term liabilities

$
(21,337
)

$
(31,244
)   Cash
    Flow Hedging Relationships
     F-22




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
    Year Ended December 31,2009


2008


2007Derivatives in Cash Flow Hedging RelationshipsGain/(loss) related to effective portion of derivative
    recognized in other comprehensive loss

$
9,908


$
(27,381
)

$
(16,577
)Gain/(loss) related to effective portion of derivative
    reclassified from accumulated other comprehensive loss to
    interest expense

$
(27,736
)

$
(19,230
)

$
2,981Gain/(loss) related to ineffective portion of derivative
    recognized in interest expense

$



$



$
Derivatives Not Designated as Hedging InstrumentsGain recognized in interest expense

$



$
12,714


$
   12.
    Fair
    Value Measurements  Assets
    and Liabilities Measured at Fair Value on a Recurring
    Basis
        Fair
    Value Measurements at Reporting Date Using:
  Quoted in



SignificantBalance at

Markets

Significant Other

UnobservableDecember 31,

Identical

Observable Inputs

InputsDescription

2009

(Level 1)

(Level 2)

(Level 3)Interest Rate Swap

$
(21,337
)





$
(21,337
)


    F-23




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
  Assets
    and Liabilities Measured at Fair Value upon Initial
    Recognition
    CarryingAmount

Fair ValueCash and cash equivalents

$
211,999


$
211,999Accounts receivable


151,022



151,022Long-term debt (Credit Facilities)


803,076



818,239     13.
    Lease
    Commitments      Years ending December 31, 2010

$
6,7072011


6,4112012


6,2062013


5,2882014


5,185Thereafter


26,478Total minimum lease payments

$
56,275     14.
    Legal
    Proceedings    15.
    Capital
    Stock  Common
    Stock
   F-24




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
  one-for-one
  Preferred
    Stock
    Initial
    Public Offering
  Form S-1 No. 333-153451), Form S-1MEF No. 333-161270)
  Noncontrolling
    Interests
    Year Ended December 31,2009


2008


2007Net income attributable to Emdeon Inc.

$
9,581


$
9,231


$
17,276Transfers (to) from the noncontrolling interestDecrease in Emdeon Inc. paid-in capital for the transfer of
    34,226,087 units of EBS Master from HLTH to H&F






(210,585
)


Increase in Emdeon Inc. paid-in capital for issuance of
    1,850,000 units of EBS Master


3,504







Decrease in Emdeon Inc. paid-in capital for issuance of
    2,537,325 units of EBS Master to management


(11,899
)






Increase in Emdeon Inc. paid-in capital for the issuance of
    537,636 EBS Units


2,136Increase in Emdeon Inc. paid-in capital related to exchange of
    units of EBS Master held by eRx selling stockholders for shares
    of Emdeon Inc. Class A common stock


21,968







Increase in Emdeon Inc. paid-in capital related to the issuance
    of 10,354,240 EBS Units


13,706Decrease in Emdeon Inc. paid-in capital for purchase of
    370,760 units of EBS Master from management


(1,107
)






Decrease in Emdeon Inc. paid-in capital for the repurchase of
    Class A common stock and cancellation of corresponding
    units of EBS Master (to satisfy tax withholding obligation)


(1,780
)Net transfers (to) from noncontrolling interest


26,528



(210,585
)


Change from net income attributable to Emdeon Inc. and transfers
    (to) from noncontrolling interest


36,109



(201,354
)


17,276  F-25




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
   16.
    HLTH
    Stock-Based Compensation Plans    Stock
    Options
    Expected dividend yield


0.00
%Expected volatility


38.00
%Risk free interest rate


4.56
%Expected term (years)


4.46Weighted-average fair value of options granted during the period

$
3.48         Restricted
    Stock
      Summary
    of HLTH Stock-Based Compensation Expense
   F-26




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
   17.
    Equity-Based
    Compensation Plans  EBS
    LLC Equity Plans Prior to IPO
    EBS
    Equity Plan
         F-27




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
      EBS
    Phantom Plan
        Activity
    Summary
    GrantUnits withPerformanceGrant Units

Conditions

Phantom UnitsUnvested at December 31, 2008:


2,834,355







1,284,133Granted


621,663



850,000



662,500Canceled


(3,342,645
)


(850,000
)


(1,899,833
)Vested


(113,373
)






(46,800
)Unvested at December 31, 2009










  F-28




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
  2009
    Plan and Management Awards Subsequent to IPO
      EBS Units
    and Restricted Class A common stock Units
  one-for-one
    Options
    to Purchase Shares of Class A common stock
      Performance
    Awards
   F-29




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
        Activity
    Summary
    RestrictedEBS Units with

Class APerformance

CommonEBS Units

Conditions

Stock UnitsUnvested at December 31, 2008:










Granted


1,527,354



206,578



733,598Canceled










(19,525
)Vested


(400,864
)






(188,470
)Unvested at December 31, 2009


1,126,490



206,578



525,603     Weighted AverageWeighted Average


Remaining


AggregateOptions


Exercise Price


Contractual Term


Intrinsic ValueService


Performance


Service


Performance


Service


Performance


Service


PerformanceOptions


Options


Options


Options


Options


Options


Options


OptionsOutstanding at January 1, 2009









$



$











$



$
Replacement of cancelled awards


4,018,138



643,422



15.50



15.50



9.6



9.6







Granted


622,000







15.50







9.6











Forfeited


(31,194
)






15.50



















Outstanding at December 31, 2009


4,608,944



643,422


$
15.50


$
15.50



9.6



9.6


$



$
Vested at December 31, 2009









$



$











$



$
Exercisable at December 31, 2009









$



$











$



$
  F-30




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
  Black-Scholes
    Option Pricing Model Assumptions
    EBS Equity PlanGrant Unitswith2009 Equity







PerformancePlan Options

EBS Equity Plan Grant Units

ConditionsYear Ended

Year Ended

Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,

December 31,

December 31,2009

2009

2008

2007

2009Weighted average fair value

$
7.54


$
8.51


$
5.35


$
6.43


$
6.66Expected dividend yield


















Expected volatility


47.00
%


47.00
%


48.00
%


66.00
%


47.00
%Risk-free interest rate


2.55
%


2.50
%


1.60
%


2.20
%


2.30
%Expected term (years)


6.3



5.6



5.7



1.8



6.4           Summary
    of Equity-Based Compensation Expense
    18.
    Retirement
    Plans     F-31




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
   19.
    Income
    Taxes    Year Ended December 31,2009


2008


2007Current:Federal

$
14,998


$
10,801


$
3,299State


3,551



1,906



956Current income tax provision


18,549



12,707



4,255Deferred:Federal


(6,169
)


(2,317
)


12,532State


4,921



(1,823
)


1,314Deferred income tax provision (benefit)


(1,248
)


(4,140
)


13,846Total income tax provision

$
17,301


$
8,567


$
18,101     Year Ended December 31,2009

2008

2007Statutory U.S. federal tax rate


35.00
%


35.00
%


35.00
%State income taxes (net of federal benefit)


(9.89
)


(16.86
)


(0.82
)Meals and entertainment


0.39



0.52



0.33Other


2.60



1.38



(0.09
)Tax credits


(1.14
)






Equity-based compensation


5.67



1.61



0.76Non-timing basis differences


33.57



(22.62
)


(15.06
)Noncontrolling interest


(5.17
)


(5.09
)


Foreign loss not benefitted


3.29



5.85



3.47Return to provision adjustments


10.12



(4.28
)


(0.31
)Change in valuation allowance


(19.17
)


46.28



27.89Effective income tax rate


55.27
%


41.79
%


51.17
%    F-32




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
    2009


2008Deferred tax assets and (liabilities):Depreciation and amortization

$
(120,929
)

$
(121,597
)Investment in partnership


(49,132
)


(36,910
)Accounts receivable


856



665Fair value of interest rate swap


2,758



3,941Accruals and reserves


4,701



2,063Net operating losses


28,166



20,810Debt discount and interest


(4,818
)


(5,859
)Equity-based compensation


2,425



167Valuation allowance


(16,201
)


(20,810
)Tax receivable agreement obligation to related parties


10,558



Other


626



4Net deferred tax assets and (liabilities)

$
(140,990
)

$
(157,526
)Reported as:Current deferred tax assets

$
4,924


$
2,285Non-current deferred tax liabilities


(145,914
)


(159,811
)Net deferred tax assets and (liabilities)

$
(140,990
)

$
(157,526
)     Deferred tax benefit

$
1,248Deferred taxes related to uncertain tax position


1,272Deferred taxes related to transactions with stockholders
    impacting additional paid-in capital


16,219Change in deferred tax assets and (liabilities) recorded in
    other comprehensive income


(2,203
)Change in deferred tax assets and (liabilities)

$
16,536       Year Ended December 31,2009


2008


2007Unrecognized benefit from prior years

$
2,458


$
1,022


$
Increases from current period tax positions


3,524



1,436



1,022Ending unrecognized benefit

$
5,982


$
2,458


$
1,022    F-33




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##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
      20.
    Net
    Income Per Share    Year Ended December 31,2009


2008


2007Basic net income per share:Numerator:Net income attributable to Emdeon Inc.

$
9,581


$
9,231


$
17,276Denominator:Weighted average common shares outstanding


82,459,169



74,775,039



52,000,000Basic net income per share

$
0.12


$
0.12


$
0.33Diluted net income per share:Numerator:Net income attributable to Emdeon Inc.





$
9,231


$
17,276Net (loss) excluding EBS Master

$
(6,241
)Weighted average effect of dilutive securitiesAdd:Emdeon Inc allocation of EBS Master net income


15,761Impact of exchange of Class B shares on income attributable
    to Emdeon Inc






2,702



$
9,520


$
11,933


$
17,276Denominator:Number of shares used in basic computation


82,459,169



74,775,039



52,000,000Weighted average effect of dilutive securitiesAdd:Exchange of Class B common stock for Class A common
    stock






25,224,961



48,000,000Restricted Class A common stock units


65,833







82,525,002



100,000,000



100,000,000Diluted net income per share

$
0.12


$
0.12


$
0.17     Year Ended December 312009

2008

2007Class B common stock


23,017,774







Options to purchase Class A common stock


1,803,237







  F-34




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
   21.
    Tax
    Receivable Agreement Obligations to Related Parties        Years Ending December 31,2010

$
2011


1,5582012


10,0542013


25,1952014


9,061Thereafter


96,176$
142,044   and/or
  22.
    Other
    Related Party Transactions  HLTH
    
    Effective November 16, 2006, the Company and HLTH entered
    into a Transition Services Agreement (TSA) for
    services to be provided to each other through specified dates in
    2008. The services included accounting services, accounts
    payable, payroll, legal, certain human resources and benefits
    services, information systems, purchasing and tax services.
    Total net expense under this TSA was $1,752 and $22 for the year
    ended December 31, 2007 and the period from January 1,
    2008 to February 8, 2008, respectively.
    The Company also provided customer support and printing services
    to HLTH. Revenue for such services was $1,567 and $155 for the
    year ended December 31, 2007 and the period from
    January 1, 2008 to February 8, 2008, respectively.
    As of December 31, 2007, the Company was the beneficiary of
    letters of credit held by HLTH and had entered into an agreement
    whereby the Company would reimburse HLTH for related fees and
    the F-35




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##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
  difference between the interest earned on HLTHs committed
    funds and the rate HLTH could otherwise earn on these funds.
    Total expense under this agreement was $63 for 2007. No expense
    under this agreement was incurred during the period from
    January 1, 2008 to February 8, 2008.  
    During August 2007, the Company entered into an agreement with
    HLTH to lease office space for use by the Companys
    employees. Total expense related to this agreement was $48 and
    $14 for the year ended December 31, 2007 and the period
    from January 1, 2008 to February 8, 2008, respectively.
    During 2007, the Company purchased computer equipment totaling
    $166 from HLTH.
    During the year ended December 31, 2007 and the period from
    January 1, 2008 to February 8, 2008, the Company
    incurred expense of $430 and $39, respectively, for access to
    WebMD Healths physician directory, WebMDs Personal
    Health Manager services, and website hosting services provided
    by WebMD.    23.
    Loss on
    Abandonment of Leased Properties      Balance at December 31, 2007

$
Costs incurred


3,203Costs paid or otherwise settled


Balance at December 31, 2008

$
3,203Costs incurred


1,675Costs paid or otherwise settled


(2,708
)Balance at December 31, 2009

$
2,170     24.
    Segment
    Reporting    Payer
    Services Segment
   F-36




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##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
    Provider
    Services Segment
    Pharmacy
    Services Segment
    Other
          For
    the Year Ended December 31, 2009
  Corporate &Payer


Provider


Pharmacy


Eliminations


ConsolidatedRevenue from external customersClaims management

$
184,605


$



$



$



$
184,605Payment services


211,985















211,985Patient statements






274,390











274,390Revenue cycle management






155,112











155,112Dental






31,513











31,513Pharmacy services










60,843







60,843Inter-segment revenues


902



1,498







(2,400
)


Net revenue


397,492



462,513



60,843



(2,400
)


918,448Costs and expenses:Cost of operations


253,473



294,700



16,668



(1,974
)


562,867Development and engineering


12,677



15,294



5,957







33,928Sales, marketing, general and administrative


25,803



31,978



8,047



47,873



113,701Loss on abandonment of leased properties






45







1,630



1,675Segment contribution

$
105,539


$
120,496


$
30,171


$
(49,929
)


206,277Depreciation and amortization


















105,321Interest income


















(75
)Interest expense


















70,246Other income


















(519
)Income before income tax provision

















$
31,304  F-37




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##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
  For
    the Year Ended December 31, 2008
  Corporate &Payer


Provider


Pharmacy


Eliminations


ConsolidatedRevenue from external customersClaims management

$
179,930


$



$



$



$
179,930Payment services


191,874















191,874Patient statements






266,233











266,233Revenue cycle management






144,904











144,904Dental






31,591











31,591Pharmacy services










39,067







39,067Inter-segment revenue


355



2,117







(2,472
)


Net revenue


372,159



444,845



39,067



(2,472
)


853,599Costs and expenses:Cost of operations


242,950



292,844



7,612



(1,843
)


541,563Development and engineering


10,472



14,015



4,138







28,625Sales, marketing, general and administrative


23,286



30,475



3,864



33,587



91,212Loss on abandonment of leased properties














3,081



3,081Segment contribution

$
95,451


$
107,511


$
23,453


$
(37,297
)


189,118Depreciation and amortization


















97,864Interest income


















(963
)Interest expense


















71,717Income before income tax provision

















$
20,500   For
    the Year Ended December 31, 2007
  Corporate &Payer


Provider


Pharmacy


Eliminations


ConsolidatedRevenue from external customersClaims management

$
192,318


$



$



$



$
192,318Payment services


173,677















173,677Patient statements






240,074











240,074Revenue cycle management






136,679











136,679Dental






28,852











28,852Pharmacy services










36,937







36,937Inter-segment revenue


680



2,834







(3,514
)


Net revenue


366,675



408,439



36,937



(3,514
)


808,537Costs and expenses:Cost of operations


241,755



268,529



7,094



(2,460
)


514,918Development and engineering


11,157



12,869



4,172







28,198Sales, marketing, general and administrative


22,386



31,329



3,561



37,199



94,475Segment contribution

$
91,377


$
95,712


$
22,110


$
(38,253
)


170,946Depreciation and amortization


















62,811Interest income


















(1,567
)Interest expense


















74,325Income before income tax provision

















$
35,377  F-38




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
   25.
    Accumulated
    Other Comprehensive (Loss) Income    Foreign


Net Losses





AccumulatedCurrency


on Cash


Discontinued


OtherTranslation


Flow Hedging


Cash Flow


ComprehensiveAdjustment


Derivatives


Hedge


IncomeBalance at December 31, 2008

$
(49
)

$
(11,095
)

$
(12,051
)

$
(23,195
)Change associated with foreign currency translation


17











17Change associated with current period hedging transaction






(13,110
)






(13,110
)Reclassification into earnings






19,766



5,324



25,090Balance at December 31, 2009

$
(32
)

$
(4,439
)

$
(6,727
)

$
(11,198
)   26.
    Quarterly
    Information (Unaudited)    1st Quarter

2nd Quarter

3rd Quarter

4th Quarter2009Revenue

$
219,885


$
224,541


$
235,462


$
238,560Gross profit (excluding depreciation and amortization)

$
85,287


$
87,532


$
88,990


$
93,772Depreciation and amortization

$
25,098


$
25,286


$
26,667


$
28,270Net income (loss)

$
3,290


$
14,483


$
(8,463
)

$
4,693Net income (loss) attributable to Emdeon Inc.

$
1,218


$
12,439


$
(7,217
)

$
3,141Net income (loss) per share Class A common stockBasic

$
0.02


$
0.16


$
(0.09
)

$
0.03Diluted

$
0.02


$
0.14


$
(0.09
)

$
0.032008Revenue

$
210,395


$
212,463


$
212,808


$
217,933Gross profit (excluding depreciation and amortization)

$
74,884


$
77,003


$
78,357


$
81,792Depreciation and amortization

$
21,267


$
25,002


$
25,710


$
25,885Net income (loss)

$
1,426


$
6,809


$
(479
)

$
4,177Net income (loss) attributable to Emdeon Inc.

$
3,066


$
3,315


$
(1,245
)

$
4,095Net income (loss) per share Class A common stockBasic

$
0.05


$
0.04


$
(0.02
)

$
0.05Diluted

$
0.01


$
0.04


$
(0.02
)

$
0.04  F-39




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
    27.
    Subsequent
    Events  FVTech
    Acquisition
          Cash

$
372Accounts receivable


1,711Other current assets


312Property and equipment


10,640Other assets


30Identifiable intangible assets:Customer contracts (13 year weighted average life)


6,700Tradename (3 year weighted average life)


170Goodwill (Provisional)


14,718Accounts payable


(244
)Accrued expenses


(324
)Total consideration transferred

$
34,085Acquisition costs reflected within sales, marketing, general and
    administrative expenses in 2009

$
568  F-40




---



##### Table of Contents



Emdeon
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
 (In
    Thousands, Except Per Share, Unit and Per Unit
    Amounts)
      HTMS
    Acquisition
   F-41




---



##### Table of Contents



Schedule I 
    Financial Information of Parent Company    Schedule I 
    Condensed Financial Information of Emdeon Inc. (Parent
    Only)
  Condensed Balance Sheets
  December 312009


2008(In thousands)ASSETSCurrent assets:Cash

$
131,741


$
3Other current assets


561



Total current assets


132,302



3Property and equipment, net


11



Investment in subsidiaries


819,889



696,531Deferred IPO Costs






5,462Total assets

$
952,202


$
701,996LIABILITIES AND EQUITYCurrent liabilities:Current portion of long-term debt

$
3,078


$
Accrued expenses


995



Due to affiliates


209



5,574Total current liabilities


4,282



5,574Long-term debt, excluding current poriton


34,528



Tax receivable obligations to related parties


142,044



Deferred income tax liabilities


17,900



24,791Total equity


753,448



671,631Total liabilities and equity

$
952,202


$
701,996  S-1




---



##### Table of Contents



Schedule I 
    Condensed Financial Information of Emdeon Inc. (Parent
    Only)
  Condensed Statements of Operations
  Year Ended December 31,2009


2008


2007(In thousands)Revenue

$



$



$
Costs and expenses:Sales, marketing, general and administrative


1,114



496



364Operating loss


(1,114
)


(496
)


(364
)Equity in earnings of consolidated subsidiaries


14,439



13,132



32,220Interest income






(1
)


Interest expense


715







Income before income tax provision


12,610



12,637



31,856Income tax provision


3,029



3,406



14,580Net income

$
9,581


$
9,231


$
17,276  S-2




---



##### Table of Contents



Schedule I 
    Condensed Financial Information of Emdeon Inc. (Parent Only)
  Condensed
    Statements of Cash Flows
  Year Ended December 31,2009


2008


2007(In thousands)Operating activities:Net income

$
9,581


$
9,231


$
17,276Adjustments to reconcile net income to net cash used in
    operating activities:Equity compensation expense


307







Deferred income taxes


3,029



3,406



14,580Equity in earnings of consolidated subsidiaries


(14,439
)


(13,132
)


(32,220
)Changes in operating assets and liabilities:Prepaid expenses and other assets


(561
)






Accrued expenses and other liabilities


745







Tax receivable obligations to related parties


299







Due to affiliates


97



112Net cash used in operating activities


(942
)


(383
)


(364
)Investing activity:Purchases of property and equipment


(11
)






Net cash used in investing activity


(11
)






Financing activities:Proceeds from IPO


145,165







Repurchase of Class A common stock


(1,586
)






Repurchase of Units of EBS Master LLC


(5,373
)






Payment of data sublicense obligation


(5,653
)






Proceeds from capital contribution


138



379



Net cash provided by financing activities


132,691



379



Net increase (decrease) in cash


131,738



(4
)


(364
)Cash at beginning of period


3



7



371Cash at end of period

$
131,741


$
3


$
7  S-3




---



##### Table of Contents



SIGNATURES      By:
    /s/  George
    I. Lazenby   Title:
    Chief Executive Officer and Director    Signature

Title

Date/s/  George
    I. LazenbyGeorge
    I. Lazenby

Chief Executive Officer and Director (Principal Executive
    Officer)

March 18, 2010/s/  Bob
    A. Newport, Jr.Bob
    A. Newport, Jr.

Chief Financial Officer (Principal Financial and Accounting
    Officer)

March 18, 2010/s/  Tracy
    L. BahlTracy
    L. Bahl

Executive Chairman

March 18, 2010/s/  Mark
    F. DzialgaMark
    F. Dzialga

Director

March 18, 2010/s/  Jonathan
    C. KorngoldJonathan
    C. Korngold

Director

March 18, 2010/s/  Philip
    U. HammarskjoldPhilip
    U. Hammarskjold

Director

March 18, 2010/s/  Jim
    D. KeverJim
    D. Kever

Director

March 18, 2010/s/  Allen
    R. ThorpeAllen
    R. Thorpe

Director

March 18, 2010/s/  Dinyar
    S. DevitreDinyar
    S. Devitre

Director

March 18, 2010/s/  Philip
    M. PeadPhilip
    M. Pead

Director

March 18, 2010  69




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##### Table of Contents



Exhibit Index
  Exhibit No.2
.1

Amended and Restated Agreement and Plan of Merger, dated as of
    November 15, 2006, among Emdeon Corporation, EBS Holdco,
    Inc., EBS Master LLC, Emdeon Business Services LLC, Medifax-EDI
    Holding Company, EBS Acquisition LLC, GA EBS Merger LLC and EBS
    Merger Co. (included as Exhibit 2.1 to the Companys
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference).2
.2

Securities Purchase Agreement, dated as of February 8,
    2008, among HLTH Corporation, EBS Master LLC, the voting members
    of EBS Master LLC and the purchasers listed therein (included as
    Exhibit 2.2 to the Companys Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference).2
.3

Agreement and Plan of Merger, dated as of July 2, 2009, by
    and among EBS Master LLC, Envoy LLC, Emdeon Merger Sub LLC, eRx
    Network, L.L.C., and Longhorn Members Representative, LLC
    (included as Exhibit 2.3 to the Companys Registration
    Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference).3
.1

Amended and Restated Certificate of Incorporation of Emdeon Inc.
    (included as Exhibit 3.1 to the Companys Current
    Report on
    Form 8-K,
    filed on August 17, 2009, and incorporated herein by
    reference).3
.2

Amended and Restated By-laws of Emdeon Inc. (included as
    Exhibit 3.2 to the Companys Current Report on
    Form 8-K,
    filed on August 17, 2009, and incorporated herein by
    reference).4
.1

Specimen Class A Common Stock Certificate (included as
    Exhibit 4.1 to the Companys Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference).4
.2

First Lien Credit Agreement, dated as of November 16, 2006,
    among GA EBS Merger, LLC, as borrower, Medifax-EDI Holding
    Company, as additional borrower, EBS Master LLC, as parent, the
    lenders party thereto, Citibank, N.A., as administrative agent,
    collateral agent, Swingline Lender and Issuing Bank, Citigroup
    Global Markets Inc. and Deutsche Bank Securities Inc., as joint
    lead arrangers, Deutsche Bank Trust Company Americas, as
    syndication agent and Bear Stearns Corporate Lending Inc., as
    documentation agent (included as Exhibit 4.2 to the
    Companys Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference).4
.3

Amendment No. 1 to First Lien Credit Agreement, dated as of
    March 9, 2007 among EBS Master LLC, Emdeon Business
    Services LLC, as borrower, Medifax-EDI Holding Company, Inc., as
    additional borrower, the lenders from time to time party
    thereto, Citibank, N.A., as administrative agent, collateral
    agent, Swingline Lender and Issuing Bank, Citigroup Global
    Markets Inc., as joint lead arranger and joint bookrunner,
    Deutsche Bank Securities, Inc., as joint lead arranger and joint
    bookrunner, Bear, Stearns & Co Inc., as joint lead
    arranger and joint bookrunner, Deutsche Bank Trust Company
    Americas, as syndication agent and Bear Stearns Corporate
    Lending Inc., as documentation agent (included as
    Exhibit 4.3 to the Companys Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference).4
.4

Amendment No. 2 to First Lien Credit Agreement, dated as of
    July 7, 2009, among GA EBS Merger, LLC, as borrower,
    Medifax-EDI Holding Company, as additional borrower, EBS Master
    LLC, the lenders party thereto, Citibank, N.A., as
    administrative agent, collateral agent, Swingline Lender and
    Issuing Bank (included as Exhibit 4.4 to the Companys
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference).4
.5

Second Lien Credit Agreement, dated as of November 16,
    2006, by and among GA EBS Merger, LLC, as borrower, Medifax-EDI
    Holding Company, as additional borrower, EBS Master LLC, as
    parent, the lenders party thereto, Citibank, N.A., as
    administrative agent, collateral agent, Citigroup Global Markets
    Inc. and Deutsche Bank Securities Inc., as joint lead arrangers
    and, together with Bear, Stearns & Co. Inc., as joint
    bookrunners, Deutsche Bank Trust Company Americas, as
    syndication agent and Bear Stearns Corporate Lending Inc., as
    documentation agent (included as Exhibit 4.5 to the
    Companys Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference). 70




---



##### Table of Contents



Exhibit No.4
.6

Amendment No. 1 to Second Lien Credit Agreement, dated as
    of July 7, 2009, among GA EBS Merger, LLC, as borrower,
    Medifax-EDI Holding Company, as additional borrower, EBS Master
    LLC, the lenders party thereto, Citibank, N.A., as
    administrative agent, collateral agent, Swingline Lender and
    Issuing Bank (included as Exhibit 4.6 to the Companys
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference).10
.1

Reorganization Agreement, dated as of August 4, 2009, by
    and among EBS Master LLC, Emdeon Inc. and the other parties
    named therein (included as Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K,
    filed on August 17, 2009, and incorporated herein by
    reference).10
.2

Stockholders Agreement, dated as of August 5, 2009,
    by and among Emdeon Inc. and the stockholders named therein
    (included as Exhibit 10.2 to the Companys Current
    Report on
    Form 8-K,
    filed on August 17, 2009, and incorporated herein by
    reference).10
.3

Sixth Amended and Restated Limited Liability Company Agreement
    of EBS Master LLC, dated August 17, 2009 (included as
    Exhibit 10.3 to the Companys Current Report on
    Form 8-K,
    filed on August 17, 2009, and incorporated herein by
    reference).10
.4

Investor Tax Receivable Agreement by and among Emdeon Inc. and
    the other parties named therein (Exchanges), dated
    August 17, 2009 (included as Exhibit 10.4 to the
    Companys Current Report on
    Form 8-K,
    filed on August 17, 2009, and incorporated herein by
    reference).10
.5

Investor Tax Receivable Agreement by and among Emdeon Inc. and
    the other parties named therein (Reorganizations), dated
    August 17, 2009 (included as Exhibit 10.5 to the
    Companys Current Report on
    Form 8-K,
    filed on August 17, 2009, and incorporated herein by
    reference).10
.6

Management Tax Receivable Agreement by and among Emdeon Inc. and
    the persons named therein, dated August 17, 2009 (included
    as Exhibit 10.6 to the Companys Current Report on
    Form 8-K,
    filed on August 17, 2009, and incorporated herein by
    reference).10
.7

Agreement and Plan of Merger, dated as of August 5, 2009,
    by and among H&F Harrington, Inc., EBS Holdco II, LLC and
    Emdeon Inc. (included as Exhibit 10.7 to the Companys
    Current Report on
    Form 8-K,
    filed on August 17, 2009, and incorporated herein by
    reference).10
.8

Agreement and Plan of Merger, dated as of August 5, 2009,
    by and among EBS Acquisition II, LLC, EBS Holdco I, LLC and
    Emdeon Inc. (included as Exhibit 10.8 to the Companys
    Current Report on
    Form 8-K,
    filed on August 17, 2009, and incorporated herein by
    reference).10
.9

Unit Purchase Agreement, dated August 11, 2009, by and
    among Emdeon Inc. and the Sellers named therein (included as
    Exhibit 10.9 of the Exhibits to the Companys Current
    Report on
    Form 8-K,
    filed on August 17, 2009, and incorporated herein by
    reference).10
.10

Employment Agreement, dated March 29, 2007, among George I.
    Lazenby and Emdeon Business Services LLC (included as
    Exhibit 10.10 to the Companys Registration Statement
    on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference).10
.11

Employment Agreement, effective as of May 26, 2009, between
    Tracy Bahl and Emdeon Business Services LLC (included as
    Exhibit 10.11 to the Companys Registration Statement
    on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference).10
.12

Employment Agreement, effective as of July 21, 2008,
    between Gregory T. Stevens and Emdeon Business Services LLC
    (included as Exhibit 10.12 to the Companys
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference).10
.13

Employment Agreement, dated July 21, 2009, among Bob A.
    Newport and Emdeon Business Services LLC (included as
    Exhibit 10.13 to the Companys Registration Statement
    on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference).10
.14

Employment Agreement, dated July 7, 2009, among J. Philip
    Hardin and Emdeon Business Services LLC (included as
    Exhibit 10.14 to the Companys Registration Statement
    on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference).10
.15

Employment Agreement, dated July 7, 2009, among Gary Stuart
    and Emdeon Business Services LLC (included as Exhibit 10.15
    to the Companys Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference). 71




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##### Table of Contents



Exhibit No.10
.16

Emdeon Inc. 2009 Equity Incentive Plan (included as
    Exhibit 10.17 to the Companys Registration Statement
    on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference).10
.17

Sublease, dated December 31, 2000, among Willis North
    America Inc., as sublandlord, and Envoy Corporation, as
    subtenant (included as Exhibit 10.18 to the Companys
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference).10
.18

First Amendment to the Willis Building
    Sub-Lease,
    dated June 8, 2006, among Willis North America Inc. and
    Envoy Corporation (included as Exhibit 10.19 to the
    Companys Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference).10
.19

Donelson Corporate Centre Amended and Restated Office Lease
    Agreement, dated June 12, 2008, between Donelson Corporate
    Centre, Limited Partnership, as landlord, Envoy LLC, as tenant,
    and Emdeon Business Services LLC, as guarantor (included as
    Exhibit 10.20 to the Companys Registration Statement
    on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference).10
.20

Agreement of Lease, dated June 26, 2006, between
    Level 3 Communications, LLC, as landlord, and Envoy
    Corporation, as tenant (included as Exhibit 10.21 to the
    Companys Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference).10
.21

Lease Agreement, dated December 5, 1997, between BDM
    Properties, Kenneth A. MacLaren and Professional Office
    Services, Inc. (predecessor in interest to ExpressBill LLC)
    (included as Exhibit 10.22 to the Companys
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 9, 2009, and incorporated herein by
    reference).10
.22

Amended and Restated Lease Agreement, dated December 15,
    2009, between Solomon Airpark, LLC and Emdeon Business Services
    LLC (filed herewith).10
.23

Form of Common Stock Subscription and EBS Unit Vesting Agreement
    (included as Exhibit 10.24 to the Companys
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference).10
.24

Form of Emdeon Inc. Non-Qualified Stock Option Agreement
    (included as Exhibit 10.25 to the Companys
    Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference).10
.25

Form of Emdeon Inc. Restricted Share Unit Award Agreement (filed
    herewith).10
.26

Emdeon Management Bonus Program (included as Exhibit 10.1
    to the Companys Current Report on
    Form 8-K,
    filed on March 12, 2010, and incorporated herein by
    reference).10
.27

Emdeon Inc. Employee Stock Purchase Plan (filed herewith).10
.28

Form of Indemnification Agreement (included as Exhibit 10.1
    to the Companys Registration Statement on
    Form S-1,
    as amended (File
    No. 333-153451),
    filed on July 28, 2009, and incorporated herein by
    reference).21
.1

Subsidiaries of the Registrant (filed herewith).23
.1

Consent of Independent Registered Public Accounting Firm (filed
    herewith).31
.1

Certification of Chief Executive Officer required by
    Rule 13a-14(a)/15d-14(a)
    under the Securities Exchange Act of 1934, as amended, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002 (filed herewith).31
.2

Certification of Chief Financial Officer required by
    Rule 13a-14(a)/15d-14(a)
    under the Securities Exchange Act of 1934, as amended, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002 (filed herewith).32
.1

Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (furnished
    herewith).32
.2

Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (furnished
    herewith).     
    
    Denotes a management contract or compensatory plan, contract or
    arrangement. 72