Goodwill

The Company does not amortize goodwill as our goodwill has been determined to have an indefinite useful life.

Goodwill by division consists of the following:



	March 31, 2012		Acquisitions		Impairment			March 31, 2013
QSI Dental Division	$	7,289	$	—	$	—		$	7,289
NextGen Division	1,840		—		—			1,840
Hospital Solutions Division	21,323		419		(17,400		)	4,342
RCM Services Division	30,324		1,966		—			32,290
Total goodwill	$	60,776	$	2,385	$	(17,400	)	$	45,761

During the second quarter of fiscal 2013, the operating performance of the Hospital Solutions Division ("Hospital reporting unit" or "Hospital") weakened, relative to the historic performance of this division. Revenues and operating results further declined during the third quarter of 2013. Accordingly, we assessed the conditions giving rise to the operating performance and evaluated the carrying amount of Hospital's goodwill balance. At such time, we concluded that the fair value of the Hospital reporting unit exceeded the carrying amount of the related goodwill, and therefore the value of the goodwill required no impairment. During the latter part of the quarter ended March 31, 2013, however, we reassessed the short-term and longer-term business strategies and operating expectations relating to the Hospital Solutions Division. From this assessment, we concluded that it was necessary to re-evaluate Hospital's goodwill for impairment during the fourth quarter of fiscal 2013.

Based upon the above, the Company performed step one of the goodwill impairment test and determined that the fair value of the Hospital reporting unit, which was based on a combination of discounted cash flow analysis and market approach, was lower than the carrying value. The failure of step one triggered step two of the impairment test.

As a result of the step two analysis, the Company determined the implied fair value of the Hospital reporting unit's goodwill and concluded that the carrying value of goodwill exceeded its implied fair value. Based upon the resulting computations, an impairment charge of $17.4 million was recognized during the fourth quarter of fiscal 2013.

The Company determined the implied fair value of the Hospital reporting unit's goodwill in the same manner as the amount of goodwill recognized in a business combination. Therefore, the excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill.

Key assumptions affecting the results of the goodwill impairment test include: a) the near-term continuation of recent results of operations for the Division and b) our detailed reassessment of the strategies of the Division and the actions required to achieve those strategies. Such reassessment resulted in a reprioritization of the objectives for the Division in the next fiscal year and a determination that additional investment and expenditures would be required to achieve those objectives. Specifically, the Division will place client satisfaction as its highest priority, de-emphasizing near-term growth.

To achieve high client satisfaction, the Division plans to implement several initiatives designed to enhance the Division's ability to deliver better value for its customers including implementation, support, and software development. First, the Division will work to aggressively add employees to its implementation, support, and software development departments to increase the ratio of employees-to-customers. This will enable the Division to be more hands-on and responsive during the implementation and support phases. Additionally, during the next fiscal year, the Division plans to bear the cost of providing additional training and implementation services to certain customers, to enable those customers to make better use of the functionality of the system. We believe that by completing this work and adding to the support, implementation, and development teams, the Division will greatly improve its customer experience, and thereby help the Division improve its ability to have more of its client base serve as reference sites.

Additionally, the revenue assumptions relating to the Hospital Division outlook for the next several years reflect planned constraints on: a) the rate of new implementation engagements, to accommodate the client satisfaction initiative, and b) the timing and extent of product sales in light of other operational and product development considerations.

Though we have confidence in our assumptions regarding the future performance of the Hospital Solutions Division, if the future financial results relating to the Division fall short of our assumptions, the fair value of the reporting unit could be negatively impacted, resulting in an additional impairment of goodwill and/or other intangible assets.

The Company will continue to monitor the operating performance of its reporting units in future periods for evidence of any additional indicators of impairment.