out and was included in restricted cash at December 31, 2000. SAI is based in Wisconsin and provides subrogation recovery services with respect to an installed base of lives, which are covered by insurers, HMOs and employer-funded plans, throughout the United States of America. The Subro Audit Acquisition was accounted for using the purchase method of accounting.
The Company capitalizes direct costs incurred during the application development and implementation stages for developing, purchasing or otherwise acquiring software for internal use. These software costs are included in property and equipment on the balance sheet and are amortized over the estimated useful life of the software, generally three to five years. All costs incurred during the preliminary project stage are expensed as incurred.
The following tables present certain key operating indicators for the Healthcare Recovery Services for the periods indicated (lives and dollars in millions):
(1) Backlog is the total dollar amount of potentially recoverable claims that the Company is pursuing or auditing on behalf of its clients at a given point in time. (2) At December 31, 2002, approximately $370.2 million of the backlog derived from terminated clients and clients that, by that date, had given notice of termination. See "Concentration of Clients".
Healthcare claims recoveries for 2002 increased approximately $10.3 million, or 4.3%, from 2001 claims recoveries. Healthcare subrogation recoveries for 2002 were approximately $1.0 million, or 0.5%, less than in the prior year, primarily due to a decrease in throughput. Provider bill audit recoveries increased approximately $10.1 million, or 33.9%, compared to 2001, in large part due to hospital access issues encountered during the first three quarters of 2001. Total backlog increased 10.2% to $1,559.0 million as of December 31, 2002 from $1,414.8 million as of December 31, 2001. Although most of the backlog growth related to provider bill audit, subrogation backlog increased approximately $5.1 million, or 0.6%, compared to the prior year. The decline in total throughput from 18.4% in 2001 to 16.7% in 2002, was primarily the effect of a shift in the backlog mix, with a greater percentage of backlog and recoveries coming from provider bill audit, which typically exhibits a lower throughput than does healthcare subrogation.
Support Expenses. Support expenses for the Healthcare Recovery Services segment increased 80.4% to $4.9 million in 2001, from $2.7 million in 2000. Support expenses as a percentage of claims revenues increased from 4.2% for the year ended December 31, 2000 to 7.6% for the year ended December 31, 2001. Of the $2.2 million increase in support expenses, approximately $1 million was caused by a change in the reporting structure of certain systems support personnel from Corporate to Healthcare Recovery Services, effective January 1, 2001. These systems personnel included programmers dedicated to the maintenance of the legacy subrogation system and other systems personnel responsible for the installation and maintenance of client data extracts. Of the remaining $1.2 million increase, approximately $1 million was attributable to an increase in
Net cash used in investing activities for the year ended December 31, 2002 includes purchases of property and equipment principally related to the development and conversion to the Troveris software. The Company capitalized approximately $2.0 million of internally-developed software during 2002 and 2001. During the year ended December 31, 2001, approximately $2.6 million had been included as restricted cash to pay earn-outs related to the Subro Audit Acquisition was released from restricted cash into operating cash as the earn-outs had been paid in full.
The Company accounts for options granted under its employee stock-based compensation plans in accordance with APB No. 25, "Accounting for Stock Issued to Employees". As a result, the Company has not recognized compensation expense for stock options granted with an exercise price equal to the quoted market price of the common stock on the date of grant and that vest based solely on continuation of employment by the recipient of the option award. The Company adopted SFAS No. 123 (as amended by SFAS No. 148 in 2002) for disclosure purposes in 1996. For SFAS No. 123 purposes, the fair value of each option grant and stock-based award has been estimated as of the date of grant using the Black-Scholes option pricing model. The following summarizes the weighted average assumptions used in valuing awards under the Employees' Plan, Directors' Plan, 1997 Plan and 2002 Outside Directors Stock Plan:
As of December 31, 2002, the Company had granted 10,000 shares of restricted stock, all of which were granted during 2002. The weighted average grant price was $5.20. The shares vest over a five year period. The cost of the awards, determined to be the fair market value of the shares at the date of grant, is charged to compensation expense ratably over the vesting period. The Company has recorded compensation expense of $13,000 for the year ended December 31, 2002.
Prior to January 1, 2002, the Company reported one segment, Healthcare Services. The Company did not have any products or services which met the quantitative or qualitative guidelines for segment reporting through December 31, 2001. Effective January 1, 2002, the Company has three reportable segments based on qualitative guidelines. The Company's three segments are: (1) Healthcare Recovery Services, which encompasses its healthcare recovery products: healthcare subrogation, provider bill audit, overpayment recoveries, and MD Audit; (2) Property and Casualty Recovery Services, which includes subrogation recovery services for property and casualty insurers, which the Company sells under the name TransPaC Solutions; and