def14a

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934 (Amendment No. )

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o Soliciting Material Pursuant to § 240.14a-12

HMS HOLDINGS CORP.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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HMS HOLDINGS CORP.

401 Park Avenue South

New York, New York 10016

April 30, 2009

Dear Stockholder:

On behalf of the Board of Directors and management, we cordially invite you to attend our Annual Meeting of Shareholders on Friday, June 12, 2009, beginning at 10:00 a.m., Eastern Daylight Time, at the offices of HMS Holdings Corp., 401 Park Avenue South, New York, NY 10016. The formal Notice of Annual Meeting is set forth in the enclosed material.

The matters expected to be acted upon at the meeting are described in the attached Proxy Statement. During the meeting, stockholders will have the opportunity to ask questions and comment on our business operations.

It is important that your views be represented whether or not you are able to be present at the Annual Meeting. You may cast your vote by signing and dating the enclosed proxy card, or, for shares held in street name, the voting instruction form, and promptly returning it in the provided return envelope. No postage is required if this envelope is mailed in the United States. You have the option to cast your vote in person at the Annual Meeting on June 12, 2009. Registered shareholders may also vote electronically by telephone or over the Internet by following the instructions included with your proxy card. If your shares are held in street name, as an alternative to returning the voting instruction form you receive, you will have the option to cast your vote by telephone or over the Internet if your voting instruction form includes instructions and a toll-free telephone number or Internet website to do so.

We appreciate your investment in HMS Holdings Corp. and urge you to return your proxy card as soon as possible.

I look forward to seeing you at the Annual Meeting.

Sincerely,

Walter D. Hosp

Chief Financial Officer and

Corporate Secretary

April 30, 2009

HMS HOLDINGS CORP.

401 Park Avenue South

New York, New York 10016

Notice of Annual Meeting of Shareholders

To Be Held June 12, 2009

The Annual Meeting of Shareholders (the Annual Meeting) of HMS Holdings Corp. will be held on Friday, June 12, 2009, at 10:00 a.m., Eastern Daylight Time, at our headquarters at 401 Park Avenue South, New York, New York 10016. At the Annual Meeting, shareholders will be asked to:


	•	elect five persons to our Board of Directors;

	•	consider and take action on the proposed amendment to our Amended and Restated 2006 Stock Plan as described within, including increasing the aggregate maximum number of shares that may be issued under the 2006 Stock Plan from 2,150,000 shares to 4,000,000 shares;

	•	consider and take action on the ratification of the selection of KPMG LLP as our independent registered public accounting firm for fiscal year 2009; and

	•	transact such other business as may properly come before the Annual Meeting or any adjournments thereof.

Only shareholders of record at the close of business on April 28, 2009 will be entitled to receive notice of and to vote at the Annual Meeting and at any adjournments of the Annual Meeting.

Shareholders are cordially invited to attend the Annual Meeting in person. Whether or not you expect to attend, we urge you to read the accompanying Proxy Statement and then complete, sign, date, and return the enclosed form of proxy (or, for shares held in street name, the enclosed voting instruction form) in the accompanying postage-prepaid envelope. It is important that your shares be represented at the Annual Meeting by virtue of your executed proxies should you be unable to attend the Annual Meeting in person. Your promptness in responding will assist us to prepare for the Annual Meeting and to avoid the cost of a follow-up mailing. If you receive more than one form of proxy because you own shares registered in different names or at different addresses, each form of proxy should be completed and returned.

By Order of the Board of Directors,

Walter D. Hosp

Chief Financial Officer and Corporate Secretary

April 30, 2009

Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be held on June 12, 2009.

Our Proxy Statement and 2008 Annual Report to Shareholders are available at
http://bnymellon.mobular.net/bnymellon/hmsy

HMS HOLDINGS CORP.

401 Park Avenue South

New York, New York 10016

PROXY STATEMENT

Annual Meeting of Shareholders To Be Held June 12, 2009

GENERAL INFORMATION

This Proxy Statement is furnished to shareholders of HMS Holdings Corp., a New York corporation, in connection with the solicitation by our Board of Directors of proxies for use at our Annual Meeting of Shareholders (the Annual Meeting). The Annual Meeting is scheduled to be held on Friday, June 12, 2009, at 10:00 a.m., Eastern Daylight Time, at our offices located at 401 Park Avenue South, New York, New York. We anticipate that this Proxy Statement and the enclosed form of proxy will be mailed to shareholders on or about May 5, 2009.

At the Annual Meeting, shareholders will be asked to vote upon: (1) the election of five directors; (2) the proposed amendment to our Amended and Restated 2006 Stock Plan (the 2006 Stock Plan); (3) the ratification of the selection of independent registered public accounting firm for fiscal year 2009; and (4) such other business as may properly come before the Annual Meeting and at any adjournments thereof.

Internet Availability

Pursuant to rules promulgated by the Securities and Exchange Commission, we have elected to provide access to our proxy materials both by sending you this full set of proxy materials, including a proxy card, and by notifying you of the availability of our proxy materials on the Internet. This Proxy Statement and our 2008 Annual Report are available at our web site at http://bnymellon.mobular.net/bnymellon/hmsy, which does not have “cookies” that identify visitors to the site.

Voting Rights and Votes Required

The close of business on April 28, 2009 has been fixed as the Record Date for the determination of shareholders entitled to receive notice of and to vote at the Annual Meeting. As of the close of business on such date, we had outstanding and entitled to vote 25,865,629 shares of Common Stock, par value $0.01 per share (the Common Stock), which are our only securities entitled to vote at the Annual Meeting. Because many shareholders cannot attend the Annual Meeting in person, it is necessary that a large number of shareholders be represented by proxy. Shareholders have a choice of voting over the Internet, by using a toll-free number or by completing a proxy card and mailing it in the postage-paid envelope provided. Shareholders should refer to their proxy card or the information forwarded by their bank, broker or other holder of record to see which voting options are available to them. Shareholders should be aware that if they vote over the Internet, they may incur costs such as telephone and Internet access charges for which they will be responsible. The Internet and telephone voting facilities for shareholders of record will close at 11:59 p.m. Eastern Daylight Time on June 11, 2009. Other deadlines may apply to shareholders whose stock is held of record by a bank, a broker or other holder of record.

A majority of the shares of Common Stock entitled to vote at the Annual Meeting must be represented in person or by proxy at the Annual Meeting in order to constitute a quorum for the transaction of business. The record holder of each share of Common Stock entitled to vote at the Annual Meeting will have one vote for each share so held.

Directors are elected by a plurality of the votes cast. Shareholders may not cumulate their votes. The five candidates receiving the highest number of votes will be elected. In tabulating the votes, votes withheld in connection with the election of one or more nominees and broker nonvotes will be disregarded and will have no effect on the outcome of the vote.

The affirmative vote of a majority of the votes cast at the Annual Meeting by the holders of Common Stock represented at the Annual Meeting in person or by proxy and entitled to vote will be required to ratify the proposed amendment to our 2006 Stock Plan and the selection of our independent registered public accounting firm.

Abstentions and broker nonvotes will count for quorum purposes. Abstentions and broker nonvotes will be disregarded and will have no effect on the outcome of the proposals to amend the 2006 Stock Plan and the selection of independent registered public accountants.

Voting of Proxies

If the accompanying proxy is properly executed and returned, the shares represented by the proxy will be voted at the Annual Meeting as specified in the proxy. If no instructions are specified, the shares represented by any properly executed proxy will be voted FOR the election of the nominees listed below under “Election of Directors,” FOR the adoption of the proposed amendment to the 2006 Stock Plan and FOR the ratification of the selection of independent registered public accounting firm. Shares of Common Stock represented by proxies that are returned improperly marked will be counted as present for purposes of determining a quorum but will be treated as abstentions for voting purposes. Unsigned proxies will not be counted for any purpose.

Revocation of Proxies

Any proxy given pursuant to this solicitation may be revoked by a shareholder at any time before it is exercised by: (i) written notice to our Secretary, (ii) timely notice of a properly executed proxy bearing a later date delivered to us, or (iii) voting in person at the Annual Meeting.

Solicitation of Proxies

We will bear the cost of the Annual Meeting and the cost of soliciting proxies, including the cost of mailing the proxy material. In addition to solicitation by mail, our directors, officers and regular employees (who will not be specifically compensated for such services) may solicit proxies by telephone or otherwise. Arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries to forward proxies and proxy material to their principals, and we will reimburse them for their expenses. In addition, we have retained BNYMellon Investor Services LLC (BNYMellon) to assist in the reception and tabulation of proxies and to serve as inspectors of election for the Annual Meeting. BNYMellon’s fee is estimated to be $7,500 plus reasonable out-of-pocket expenses.

MATTERS SUBJECT TO SHAREHOLDER VOTE


1.	ELECTION OF DIRECTORS

Pursuant to our by-laws, our Board of Directors is currently divided into two classes, with one class standing for election each year for two-year terms. Each of the nominees for the office of director was elected by our shareholders at our 2007 annual meeting and their terms will expire at the Annual Meeting.

Five persons have been designated by the Board of Directors as nominees for election as directors with terms expiring at the 2011 annual meeting: William F. Miller III, William W. Neal, Ellen A. Rudnick, Michael A. Stocker, and Richard H. Stowe. The terms of the other current directors listed below will expire at the 2010 annual meeting.

Unless a contrary direction is indicated, it is intended that proxies received will be voted for the election as directors of the five nominees, to serve for the terms specified below, and in each case until their successors are elected and qualified. Each of the nominees has consented to being named in this proxy statement and to serve as a director if elected. In the event any nominee for director declines or is unable to serve, the proxies may be voted for a substitute nominee selected by the Board of Directors. The Board of Directors expects that each nominee named in the following table will be available for election.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.


	Position with the Company or
Name	Principal Occupation	Served as Director from

*Nominees for Director for two — year terms ending in 2011:*
William F. Miller III	Partner, Highlander Partners, a private equity firm(1)		2000
William W. Neal	Private Investor		1989
Ellen A. Rudnick	Executive Director, Michael P. Polsky Entrepreneurship Center, University of Chicago Booth School of Business		1997
Michael A. Stocker	Private Investor; Former Chief Executive Officer of Empire Blue Cross Blue Shield		2007
Richard H. Stowe	General Partner, Health Enterprise Partners LLP, a private equity firm		1989


(1)		Mr. Miller served as our Chairman until April 2006. Under Mr. Miller’s amended and restated employment agreement, his employment as an executive of the Company continued through December 31, 2007.


	Position with the
	Company or Principal
Name	Occupation	Served as Director from

*Directors continuing in office until 2010:*
Robert M. Holster	Chairman		2005
James T. Kelly	Private Investor		2001
William C. Lucia	Chief Executive Officer		2008
William S. Mosakowski	President, Chief Executive Officer and Director, Public Consulting Group		2006
Galen D. Powers	Senior Founder of Powers, Pyles, Sutter & Verville, P.C. a healthcare law firm		1992

Executive Officers and Directors

Certain information is set forth below with respect to our executive officers and directors as of April 17, 2009:


Name		Position

Robert M. Holster		Chairman
William C. Lucia		Chief Executive Officer
Walter D. Hosp		Chief Financial Officer
John D. Schmid		Vice President of Human Resources
James T. Kelly(1)(2)(4)		Director
William F. Miller III		Director
William S. Mosakowski		Director
William W. Neal(2)(4)		Director
Galen D. Powers(3)(4)		Director
Ellen A. Rudnick(1)(3)(4)		Director
Michael A. Stocker(3)(4)		Director
Richard H. Stowe(1)(2)(4)		Director

As of April 17, 2009, Board Committee membership was as follows


(1)		Member of the Audit Committee

(2)		Member of the Compensation Committee

(3)		Member of the Compliance Committee

(4)		Member of the Nominating Committee

Robert M. Holster, 62, has been the Chairman of our Board of Directors since April 2006. He re-joined the Company in April of 2001 as President and Chief Operating Officer, and served as our Chief Executive Officer from May 1, 2005 until February 28, 2009. He has served as a director since 2005. Previously, Mr. Holster served as our Executive Vice President from 1982 through 1993 and as one of our directors from 1989 through 1996. Mr. Holster previously served in a number of executive positions including Chief Financial Officer of Macmillan, Inc. and Controller of Pfizer Laboratories, a division of Pfizer, Inc.

William C. Lucia, 51, has served as our President and Chief Operating Officer since May 1, 2005, and became our Chief Executive Officer effective March 1, 2009. Since joining us in 1996, Mr. Lucia has held several positions with us including: President, Health Management Systems, Inc. subsidiary, 2002 to present; President, Payor Services Division, 2001 to 2002 and Vice President and General Manager, Payor Services Division, 2000 to 2001. Prior to joining us, Mr. Lucia served in various executive positions including Senior Vice President, Operations and Chief Information Officer for Celtic Life Insurance Company and Senior Vice President, Insurance Operations for North American Company for Life and Health Insurance. Mr. Lucia is a Fellow, Life Management Institute (LOMA).

Walter D. Hosp, 51, joined us in July 2007 as our Senior Vice President and Chief Financial Officer. His responsibilities include financial reporting, budgeting and planning, financial operations, treasury and serves as a principal spokesperson to security analysts and investors. Mr. Hosp has over 15 years of experience in senior financial executive positions for large publicly-traded healthcare companies. Prior to joining us, Mr. Hosp was Vice President and Treasurer of Medco Health Solutions, Inc. (MHS) from August 2002 to July 2007. At MHS, Mr. Hosp built and managed all treasury activities related to the spin-off of MHS from Merck & Co. Prior to MHS, Mr. Hosp served as Chief Financial Officer of Ciba Specialty Chemicals Corporation, and President of their Business Support Center. Mr. Hosp is a director of Bostwick Laboratories, Inc. and the United Way of Westchester and Putnam.

John D. Schmid, 51, joined us in April 2007 as our Vice President of Human Resources. Mr. Schmid has over 16 years experience, having held senior human resource executive positions for publicly traded companies in the service and production industries. Most recently, Mr. Schmid served as global Director of HR Operations for Perot Systems from December 2002 to April 2007. At Perot, his responsibilities included IT outsourcing, international services and the management of new and existing service center operations to support Perot’s healthcare provider back offices. Prior to Perot, Mr. Schmid held field and corporate human resource positions with Office Depot and Fleming Companies. Mr. Schmid served in the US Navy as a Surface Warfare Officer for eight years before moving into the corporate human resources arena.

James T. Kelly, 62, has served as a director since December 2001. Mr. Kelly is a private investor and former Chief Executive Officer (1986 to 1996) of Lincare Holdings, Inc., one of the nation’s largest providers of oxygen and other respiratory therapy services to patients in the home. Mr. Kelly served as Chairman of the Board of Lincare from 1994 to 2000. Prior to Lincare, Mr. Kelly spent 19 years in various management positions within the Mining and Metals Division of Union Carbide Corporation. Mr. Kelly also serves as a director of Emergency Medical Services Corporation, a leading provider of emergency medical services in the U.S.

William F. Miller III, 59, director, joined the Company in October 2000 as Chief Executive Officer and director. Mr. Miller served as Chief Executive Officer through April 2005. From December 14, 2000 through April 4, 2006, Mr. Miller served as the Company’s Chairman of the Board. Mr. Miller is a partner of Highlander Partners, a private equity group in Dallas, Texas focused on investments in healthcare products, services and technology. From 1983 through 1999, Mr. Miller served as President and Chief Operating Officer of EmCare Holdings, Inc., a leading national healthcare services firm focused on the provision of emergency physician medical services. Mr. Miller is currently a director of Lincare Holdings, Inc., and AMN Healthcare, Inc. and several private companies.

William S. Mosakowski, 55, has served as a director since December 2006. Mr. Mosakowski founded Public Consulting Group, Inc. (PCG) in 1986 and has been its President since then. Prior to starting PCG, he served as Assistant Revenue Director for the Massachusetts Department of Mental Health and Mental Retardation, as Manager of Reimbursement for the Harvard Community Health Plan, and was a senior consultant with Touche Ross & Company. Mr. Mosakowski is the Chairman of the Board of Trustees of Clark University in Worcester, Massachusetts. He is also a founding benefactor of Clark’s Mosakowski Institute. Mr. Mosakowski was elected as a

director pursuant to an Asset Purchase Agreement dated June 22, 2006 among us, Health Management Systems, Inc. and PCG.

William W. Neal, 77, has served as a director since 1989. Mr. Neal is a private investor. Mr. Neal formerly served as Managing Principal of Piedmont Venture Partners from 1996 to 2001. From 1989 to 1996, he served as Chief Executive Officer of Broadway and Seymour, a company that provided software and computer systems to the banking industry. From 1985 through July 1989, he was a general partner of Welsh, Carson, Anderson & Stowe (WCAS), a private equity firm. Mr. Neal was Senior Vice President, Marketing of Automated Data Processing, Inc. (ADP) from 1984 to 1985 and a Group President of ADP from 1978 to 1984. He served as a director of ADP from 1982 to 1985.

Galen D. Powers, 72, has served as a director since 1992. Mr. Powers is the retired Senior Founder of Powers, Pyles, Sutter & Verville P.C., a Washington, D.C. law firm specializing in healthcare and hospital law, which he founded in 1983. Mr. Powers was the first chief counsel of the federal Health Care Financing Administration (now Centers for Medicare and Medicaid Services) and has served as a director and the President of the American Health Lawyers Association. Mr. Powers is currently a director of MedCath, Inc., which owns and operates acute care hospitals that specialize in cardiovascular disease.

Ellen A. Rudnick, 58, has served as a director since 1997. Ms. Rudnick has been an Executive Director and Clinical Professor of the Michael P. Polsky Entrepreneurship Center, University of Chicago Booth School of Business since 1999. She also served as Chairman of CEO Advisors, Inc., a privately held consulting firm through 2003. From 1993 until 1999, Ms. Rudnick served as Chairman of Pacific Biometrics, Inc., a publicly held healthcare biodiagnostics company and its predecessor, Bioquant. From 1990 to 1992, she was President and Chief Executive Officer of Healthcare Knowledge Resources (HKR), a privately held healthcare information technology corporation, and subsequently served as President of HCIA, Inc. (HCIA) following the acquisition of HKR by HCIA. From 1975 to 1990, Ms. Rudnick served in various positions at Baxter Health Care Corporation, including Corporate Vice President and President of its Management Services Division. She serves on the Boards of Liberty Mutual Insurance Company, Patterson Companies and First Midwest Bank.

Michael A. Stocker, M.D., 67, has served as a director since January 2007. Dr. Stocker served as Chief Executive Officer of Empire Blue Cross Blue Shield (Empire) from 1994 until its acquisition by Wellpoint, Inc. in December 2005. Dr. Stocker was employed by Wellpoint through April 2007. Dr. Stocker is a past Chairman of America’s Health Insurance Plans. Prior to joining Empire, Dr. Stocker had served as President of Cigna Healthplans and as General Manager of U.S. Healthcare for its New York market. Earlier he had been Medical Director, Anchor HMO/Rush Presbyterian St. Luke’s Medical Center in Chicago, and Associate Chairman of the Department of Family Practice at Cook County Hospital. He is currently on the Boards of the Arthur Ashe Institute for Urban Health, The New York Stem Cell Foundation, and Triveris, a start-up private equity company, which is part of the Psilos Group. He is also Chairman of NYC Health and Hospitals Corporation.

Richard H. Stowe, 65, has served as a director since 1989. Mr. Stowe is general partner of Health Enterprise Partners LLP, a private equity firm. From 1999 until 2005, Mr. Stowe was a private investor, a Senior Advisor to the predecessor fund of Health Enterprise Partners, and a Senior Advisor to Capital Counsel LLC, an asset management firm. From 1979 until 1998, Mr. Stowe was a general partner of WCAS. Prior to 1979, he was a Vice President of New Court Securities Corporation (now Rothschild, Inc.). Mr. Stowe is also a director of several private companies.

Director Compensation

In 2008, we paid our non-employee directors $7,500 for each of the first two quarters of the year and $8,750 for each of the last two quarters of the year and also reimbursed them for expenses incurred in attending Board of Directors and committee meetings. The Chair of the Audit Committee receives an additional fee of $1,250 per quarter. Directors who are employees receive no additional cash compensation for serving on the Board of Directors or its committees. Each non-employee director is eligible to receive an annual award of stock options valued at $40,000, with the number of options to be based on the grant date fair value computed in accordance with Statement of Financial Accounting Standards No. 123R (FAS 123R), except that no assumption for forfeitures is included. Such director option grants vest in quarterly increments over a period of one year. The option grants made to

directors in 2008 vest in quarterly increments over a period of one year commencing on December 31, 2008 and will expire on September 30, 2015.

The following table summarizes compensation paid to our directors, other than Messrs. Holster and Lucia, during 2008.


	Fees Earned or		Option
	Paid in Cash		Awards		Total
Name	($)		($)(b)(c)(d)		($)

James T. Kelly		32,500		50,871		83,371
William F. Miller		32,500		50,871		83,371
William S. Mosakowski		32,500		55,689		88,189
William W. Neal		32,500		50,871		83,371
Galen D. Powers		32,500		50,871		83,371
Ellen A. Rudnick(a)		37,500		51,935		89,435
Michael A. Stocker		32,500		50,919		83,419
Richard H. Stowe		32,500		50,871		83,371


(a)		Ms. Rudnick has served as Chair of the Audit Committee since July 1, 2007.

(b)		The amounts in this column reflect the dollar amount of compensation expense recognized during 2008 for financial reporting purposes under FAS 123R with respect to awards of options to purchase shares of Common Stock held by each of the directors listed above, including expense relating to awards granted in earlier years, but disregarding estimated forfeitures related to service-based vesting conditions. The relevant assumptions made in the valuations may be found in Notes 12 to the financial statements in the Company’s Annual Report on Forms 10-K for the fiscal year ended December 31, 2008.

(c)		Each of the directors other than Mr. Holster and Mr. Lucia received 5,850 stock options during 2008 under our 2006 Stock Plan with a grant date fair value of each award of approximately $40,000.

(d)		The number of stock options outstanding as of December 31, 2008 held by the directors named in the above table was as follows: Mr. Kelly (267,000), Mr. Miller (17,000), Mr. Mosakowski (15,750), Mr. Neal (17,000), Mr. Powers (32,000), Ms. Rudnick (112,000), Dr. Stocker (15,750) and Mr. Stowe (113,000).

Corporate Governance

Board Determination of Independence

Under applicable NASDAQ rules, a director will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Our Board has determined that none of Mr. Kelly, Mr. Neal, Mr. Powers, Ms. Rudnick, Dr. Stocker or Mr. Stowe has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as defined under Rule 5605(a)(2) of the NASDAQ Stock Market, Inc. Marketplace Rules.

In determining the independence of the directors listed above, our Board considered each of the transactions discussed in “Certain Relationships and Related Person Transactions.”

Meetings of the Board of Directors

The Board of Directors held five meetings during fiscal year 2008. During fiscal 2008, each director attended at least 75% of the aggregate of the total number of meetings of (a) the Board of Directors, and (b) the committees on which the director served.

We do not have a policy with regard to directors’ attendance at annual meetings. No director other than Messrs. Holster and Lucia attended our 2008 annual meeting.

Board Committees

The Board of Directors has the following standing committees: Audit Committee; Compensation Committee; Compliance Committee; and Nominating Committee, each of which operates pursuant to a separate charter that has been approved by the Board of Directors. A current copy of each charter is available at http://www.hmsholdings.com/company/govern.asp. Each committee reviews the appropriateness of its charter at least annually. The Board of Directors performs periodic self-evaluations of its composition and performance, including evaluations of its standing committees and its individual directors. The Board of Directors and each committee retains the authority to engage its own advisors and consultants. The composition and responsibilities of each committee are summarized below.

Audit Committee. The Audit Committee consists of Mr. Kelly, Ms. Rudnick and Mr. Stowe and Ms. Rudnick serves as its Chair. The Board has determined that all members of the Audit Committee are independent directors under the rules of The NASDAQ Stock Market and the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934 (the Exchange Act). The Board has determined that each member of the Audit Committee is able to read and understand fundamental financial statements. The Board has determined that Mr. Kelly qualifies as an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission.

The purpose of the Audit Committee is to oversee our accounting and financial reporting processes and audits of our financial statements. The responsibilities of the Audit Committee include appointing the independent accountants to conduct the annual audit of our accounts, reviewing the scope and results of the independent audits, reviewing and evaluating internal accounting policies, and approving all professional services to be provided to us by our independent accountants. The Audit Committee also approves the compensation of our independent accountants. The Audit Committee held five meetings during fiscal year 2008.

Compensation Committee. The Compensation Committee has a mission of overseeing compensation programs that enable the Company to attract, retain and motivate executives capable of establishing and accomplishing business plans in the best interests of the shareholders. Specific responsibilities within this overall mission include reviewing and recommending the compensation of our senior executives and administering our 2006 Stock Plan. The processes and procedures followed by our Compensation Committee in considering and determining executive and director compensation are described below under the heading “Executive and Director Compensation Processes.” The Compensation Committee is comprised of Messrs. Stowe (Chair), Kelly and Neal. The Board has determined that all members of the Compensation Committee are independent directors under the rules of The NASDAQ Stock Market. The Compensation Committee held six meetings during fiscal year 2008.

Compliance Committee. The Compliance Committee consists of Mr. Powers (Chair), Ms. Rudnick and Mr. Stocker. The purpose of the Compliance Committee is to oversee the operation of the Corporation’s Corporate Compliance Program providing for adherence to health care related laws, regulations, and guidance. The Compliance Committee held four meetings during fiscal year 2008.

Nominating Committee. The Nominating Committee consists of Mr. Kelly, Mr. Neal, Mr. Powers, Ms. Rudnick, Mr. Stowe and Dr. Stocker, who serves as Chair. The Nominating Committee held two meetings during fiscal year 2008.

The Nominating Committee is responsible for reviewing the qualifications and independence of members of the Board and its various committees on a periodic basis, as well as the composition of the Board as a whole. This assessment includes members’ qualification as independent and their economic interest in us through meaningful share ownership, as well as consideration of diversity, age, skills and experience in relation to the needs of the Board. Director nominees will be recommended to the Board by the Committee in accordance with the policies and principles in its charter. The processes and procedures followed by the Nominating Committee in identifying and evaluating director candidates are described below under the heading “Director Nomination Process.” The ultimate responsibility for selection of director nominees resides with the Board of Directors.

Executive and Director Compensation Processes

The Compensation Committee determines and approves total executive remuneration based on its review and evaluation of proposals and recommendations presented by the Company’s senior management. To establish total compensation levels, the Committee reviews data collected by the Company and by independent compensation firms retained by the Committee. The Company’s philosophy is that executive compensation should be closely aligned with the performance of the Company, and to that end annual performance goals are determined and set forth in writing at the beginning of each calendar year for the Company as a whole and for each executive. Annual corporate goals are proposed by management and approved by the Board of Directors at the end of each calendar year for the following year. Annual corporate goals target the achievement of specific strategic, operational and financial performance milestones. Annual individual goals focus on contributions that facilitate the achievement of the corporate goals. Individual goals are proposed by management and approved by the Committee.

The Compensation Committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. During 2006, 2007 and 2008, the Compensation Committee retained Frederic W. Cook & Co., Inc. to develop senior management short- and long-term incentive plans, to develop the Company’s peer group to be used by the Compensation Committee in making compensation determinations and to assist in the process of approval of the equity plan amendments. Frederic W. Cook & Co., Inc. provides services only to, or at the discretion of, the Compensation Committee. Representatives of Frederic W. Cook & Co., Inc. attended meetings of the Compensation Committee in 2008 to advise the Committee.

Additional information regarding compensation of executive officers is provided on pages 21 through 31 of this Proxy Statement.

Director Nomination Process

The Nominating Committee of the Board of Directors selected and recommended to the Board the current nominees for election to the Board. At the Annual Meeting, shareholders will be asked to consider the election of Messrs. Miller, Neal, Stocker, Stowe and Ms. Rudnick.

Criteria for Nomination to the Board. In evaluating director candidates, regardless of the source of the nomination, the Board of Directors will consider the composition of the Board as a whole, the requisite characteristics (including independence, diversity, age, skills and experience) of each candidate, and the performance and continued tenure of incumbent Board members. The Board of Directors has not established specific minimum qualifications in this connection. No formal policy has been established for the consideration of candidates recommended by shareholders, given the historically small number of shareholder recommendations received in the past. The Board of Directors does not believe the lack of such a policy would materially affect its willingness to consider a suitable candidate recommended by shareholders.

Process for Identifying and Evaluating Nominees. The members of the Nominating Committee initiate the process for identifying and evaluating nominees to the Board of Directors by identifying a slate of candidates who meet the criteria for selection as nominees and have the specific qualities or skills being sought based on input from all members of the Board of Directors and, if appropriate, a third-party search firm. The Nominating Committee members evaluate these candidates by reviewing their biographical information and qualifications and checking the candidates’ references. Qualified nominees are interviewed by at least one member of the Nominating Committee. Appropriate candidates meet with a majority of the Nominating Committee, and using the input from such interviews and the information obtained by them, the members of the Nominating Committee evaluate which of the prospective candidates is qualified to serve as a director and whether they should recommend to the Board of Directors that the Board nominate, or elect to fill a vacancy, these final prospective candidates. Candidates recommended by the Nominating Committee are presented to the Board for selection as nominees to be presented for the approval of the shareholders or for election to fill a vacancy.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics that applies to our employees, officers (including our principal executive officer and principal financial officer) and directors. The Code of Business Conduct and Ethics

is posted on our website at www.hms.com and can also be obtained free of charge by sending a request to our Secretary at 401 Park Avenue South, New York, New York 10016. Any changes to or waivers under the Code of Business Conduct and Ethics as it relates to our principal executive officer, principal financial officer, controller or persons performing similar functions must be approved by our Board of Directors and will be disclosed in a Current Report on Form 8-K within four business days of the change or waiver.

Section 16(a) Beneficial Ownership Reporting Compliance

Pursuant to Section 16(a) of the Exchange Act and the rules issued thereunder, our executive officers and directors are required to file with the SEC and NASDAQ reports of ownership and changes in ownership of Common Stock. Copies of such reports are required to be furnished to us. Based solely on review of the copies of such reports furnished to us, or written representations that no other reports were required, we believe that during fiscal year 2008, all of our executive officers and directors complied with the requirements of Section 16(a), except that Mr. Stowe, a director, filed one late Form 5 on March 12, 2008 relating to the sale of 47,312 shares of HMS Common Stock held by the Stowe Family Foundation, of which Mr. Stowe is a beneficial owner; and Mr. Walter D. Hosp, our Chief Financial Officer, filed an amended Form 3 on March 10, 2008 relating his beneficial ownership of 1,000 shares of our Common Stock.


2.	APPROVAL OF AMENDMENT TO THE 2006 STOCK PLAN

The Board of Directors is seeking shareholder approval of the Third Amendment (the Amendment) to the HMS Holdings Corp. 2006 Stock Plan (the 2006 Stock Plan) that, among other changes described below, increases the number of shares of Common Stock that may be delivered under the 2006 Stock Plan by 1,850,000 shares, from 2,150,000 to 4,000,000 shares (any or all of which could be used for incentive stock options). The Board of Directors unanimously approved the Amendment on April 30, 2009 subject to shareholder approval at the Annual Meeting. The affirmative vote of at least the majority of the votes cast at the Annual Meeting is required to approve the Amendment. If approved at the Annual Meeting, the 2006 Stock Plan will be amended and restated to reflect the amendments. If the Amendment is not approved at the Annual Meeting, then the Amendment will not become effective and the 2006 Stock Plan will continue as currently in effect.

The Compensation Committee of the Board of Directors (the Committee) reviewed our 2006 Stock Plan as currently constituted. Based on this review, the Committee determined that an insufficient number of shares are available under the 2006 Stock Plan to enable the Committee to provide future grants of stock options and other stock awards to our officers, directors and employees.

Our shareholders approved the 2006 Stock Plan at our 2006 annual meeting and authorized 1,000,000 shares for award thereunder. An amendment to the Plan was approved at our 2007 annual meeting authorizing an additional 500,000 shares for awards thereunder. Another amendment to the 2006 Stock Plan was approved at our 2008 annual meeting authorizing an additional 650,000 shares for awards thereunder. As of March 31, 2009, awards to acquire 1,882,369 shares of Common Stock had been granted under the 2006 Stock Plan to officers, directors and employees, and approximately 158,901 shares remained available for future grants under the 2006 Stock Plan.

The 1,850,000 additional shares of Common Stock that would be authorized to be issued under the 2006 Stock Plan pursuant to the Amendment represent approximately 7.2% of the shares of Common Stock outstanding on March 31, 2009.

As of March 31, 2009, we had a total of 3,709,152 stock options outstanding under the 2006 Stock Plan, our 1999 Long-Term Incentive Stock Plan (the 1999 Plan) (which plan was terminated in connection with the adoption of the 2006 Stock Plan) and inducement options issued outside of our plans. The weighted average exercise price of these options is $12.70 per share, and they have a weighted average term during which they may be exercised of 5.2 years. In addition, 127,918 restricted stock awards were outstanding on March 31, 2009.

It is our understanding that the proposed increase in the number of shares available for Awards under the 2006 Stock Plan is in compliance with the standards set by RiskMetrics Group, Inc.

The Board believes that by allowing us to continue to offer our employees long-term, performance-based compensation through the proposed increase to the shares reserved for issuance under the 2006 Stock Plan, we will

continue to be able to attract, motivate and retain experienced and highly qualified employees who will contribute to our financial success.

The Board also agreed to several other changes to the 2006 Stock Plan, which are designed to make the 2006 Stock Plan provisions consistent with market-based best practices, and/or compliant with the Internal Revenue Code of 1986, as amended (the Code). The change in control definition in the 2006 Stock Plan was amended to (i) increase the percentage of the Company’s voting power that must be acquired to trigger a change in control from 20% to 35%, and add an exclusion for Company repurchases of our voting stock and (ii) revise the exception to a merger or consolidation triggering a change in control such that it will not be triggered if the Company’s stock is converted into stock of the successor organization representing 55% (decreased from 80%) of the voting power of all of the stock of the successor organization immediately after that merger or consolidation.

Other significant changes made to the 2006 Stock Plan under the Amendment are the addition of more specific provisions relating to the use of restricted stock units and revised definitions of “change in control price” (to the tender or exchange offer price per share and otherwise the fair market value of our Common Stock on the change in control date) and “fair market value” (from the average of high and low prices to the closing price on the NASDAQ Global Select Market). Additionally, the Amendment adds a $1,500,000 limit on performance units intended to comply with Code Section 162(m) performance-based compensation that can be earned by a participant for each fiscal year in a performance period and clarifies that the 200,000 share limit on grants of options and other awards to a participant in a calendar year only applies to awards that are intended to comply with Section 162(m).

The Amendment revises the 2006 Stock Plan to permit the payment of the exercise price of an option by the withholding of shares that would otherwise be issuable, if permitted by the Committee. Dividends and dividend equivalents on performance awards, on restricted stock awards and restricted stock unit awards that vest based on the achievement of performance goals may only be paid if the awards are earned.

In addition, the amendment prohibits certain shares withheld by the Company in net exercises of stock options and shares reacquired with cash proceeds from stock option exercises to be added back to the maximum share limitation.

The 2006 Stock Plan provides for the granting of stock options, stock awards, stock appreciation rights, performance-contingent awards and other equity-based awards to our employees and directors. The 2006 Stock Plan does not permit the “repricing” of options without shareholder approval (see “Repricing Prohibited” below) or the granting of discounted options or stock appreciation rights (i.e., with an exercise price below fair market value on the grant date), nor does it contain an evergreen provision.

The following is a brief description of the material provisions of the 2006 Stock Plan. Additional, non-material changes are included in 2006 Stock Plan, as proposed to be amended at the Meeting. The full text of the amended and restated 2006 Stock Plan (taking into account the amendment for which approval is sought in this proposal as well as the amendments approved at the 2007 and 2008 annual meetings) is attached as Annex 1 to this Proxy Statement, and the following description is qualified in its entirety by reference to this Annex.

It is the judgment of the Board of Directors that approval of the Amendment to the 2006 Stock Plan is in the best interests of the Company and our shareholders.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE 2006 STOCK PLAN.


Plan Term		The 2006 Stock Plan was approved by our shareholders at the 2006 annual meeting and became effective as of that date, and amendments to the 2006 Stock Plan were approved at the 2007 and 2008 annual meetings. No awards may be made under the 2006 Stock Plan after June 6, 2016, the tenth anniversary of the date of initial approval. However, the 2006 Stock Plan may be terminated earlier by the Board or the Committee.

Eligibility for grants		All employees of the Company and its subsidiaries as well as the Company’s non-employee directors are eligible to participate in the


		2006 Stock Plan. From time to time, the Committee, or as to non-employee Directors, the Board, will determine who will be granted Awards, and the number of shares subject to such Awards.

Awards available		• Incentive and Nonqualified Stock Options (Stock Options).

		• Stock Appreciation Rights (SARs).

		• Restricted Stock Awards and Restricted Stock Unit Awards.

		• Performance Shares and Performance Units (Performance Awards).

		• Share Awards.

		• Phantom Stock Awards.

Shares Authorized		The maximum number of shares of Common Stock that could be issued under the 2006 Stock Plan, as amended to date, was 2,150,000 shares of Common Stock, counted and subject to adjustments, as described below. The Amendment authorizes an additional 1,850,000 shares for delivery with respect to awards, increasing the maximum total from 2,150,000 shares to 4,000,000 shares, counted and subject to adjustments as described below.

Share Counting Method		• Stock Options and SARs count as one share. Combination Tandem SARs and Stock Options — where exercise of one results in cancellation of the other — count as one share in the aggregate.

		• Restricted Stock Awards, Restricted Stock Unit Awards, Performance Shares, Share Awards and Phantom Stock Awards count as 1.85 shares.

		• Shares tendered or withheld in payment of the exercise price of a Stock Option do not increase the number of shares authorized.

		• Shares withheld to satisfy tax withholding obligations are not added to the shares authorized.

		• Shares reacquired by the Company on the open market (or otherwise) using the cash proceeds of Stock Option exercises are not added to the number of shares authorized.

		• All shares covered by a stock-settled SAR, to the extent exercised, are counted against the number of shares authorized, not just the net shares issued upon exercise.

		• Shares not purchased or awarded under a terminated, lapsed or forfeited Award and shares not issued under an SAR or other Award that is settled in cash may be used for further Awards under the Plan; the shares will be added back as one share if they were subject to a Stock Option or an SAR, and as 1.85 shares if they were subject to a Restricted Stock Award, Restricted Stock Unit Award, Performance Share, Share Award or Phantom Stock Award.

Individual Limitations		In any year, no individual may receive Awards intended to comply with the performance based exception of the Code covering more than 200,000 shares of Common Stock.

Repricing Prohibited		No adjustments or reduction of the exercise price of any outstanding Award in the event of a decline in stock price is permitted without


		approval by our shareholders or as otherwise specifically provided under the 2006 Stock Plan. The prohibition includes:

		• reducing the exercise price of outstanding Awards;

		• canceling outstanding Awards in connection with regranting Awards at a lower price to the same individual; and

		• canceling a Stock Option or an SAR for cash or another Award (other than in connection with a Change in Control).

Special Provisions for Stock Options

Number granted		Determined by the Committee.

Exercise Price		Not less than fair market value of a share of stock on grant date.

		• The fair market value is closing price of our Common Stock as reported on The NASDAQ Global Select Market on the grant date.

Vesting and Exercise Periods		As determined by the Committee. However,

		• If a grantee’s employment is terminated for misconduct, as determined by the Company, all rights under the Stock Option expire immediately.

		• The term of Stock Options may not exceed seven years.

Limits on Incentive Stock Options		In general, Incentive Stock Options (ISOs) must satisfy requirements prescribed by the Code to qualify for special tax treatment. Therefore, among other requirements,

		• No person may receive a grant of ISOs for stock that would have an aggregate fair market value in excess of $100,000 (or such other amount as the Internal Revenue Service may decide from time to time), determined when the ISO is granted, that would be exercisable for the first time during any calendar year.

		• If any grant is made in excess of the limits provided in the Code, the grant automatically becomes a Nonqualified Stock Option.

Dividends/Dividend Equivalents		Dividends and dividend equivalents are neither paid nor accumulated on Stock Options.

Special Provisions for SARs		SARs may be issued singly (Stand Alone SAR) or in combination with a Stock Option (Tandem SAR). SARs may be paid in shares, cash or a combination of shares and cash.

		• A Tandem SAR entitles its grantee to surrender the Stock Option that is then exercisable and receive an amount equal to the excess of the fair market value of the Common Stock on the date the election to surrender is received by the Company over the Stock Option exercise price multiplied by the number of shares covered by the Stock Option that is surrendered.

		• A Stand Alone SAR grantee is entitled to an amount equal to the excess of the fair market value of the Common Stock on the date the election to surrender is received by the Company over the fair market value of the Common Stock on the date of grant, multiplied by the number of shares covered by the Stand Alone SAR.

Number granted		Determined by the Committee.


Dividends and Dividend Equivalents		Dividends and dividend equivalents are neither paid nor accumulated on SARs.

Vesting and Exercise Periods		As determined by the Committee. However, the term of SARs may not exceed seven years.

Special Provisions for Restricted Stock Awards and Restricted Stock Unit Awards		Restricted Stock Awards — actual shares of Common Stock may be granted subject to the terms and conditions as the Committee prescribes.

		Restricted Stock Unit Awards — units valued by reference to shares of Common Stock may be granted subject to the terms and conditions as the Committee prescribes.

Number granted		Determined by the Committee.

Employment or Board membership required		Grantees generally must remain employed or serve as directors during a period designated by the Committee (Restricted Period) in order to receive the shares, cash or combination thereof under the Restricted Stock Award or Restricted Stock Unit Award.

		If employment or service as a director ends before the Restricted Period ends, the Restricted Stock Award or Restricted Stock Unit Award will terminate.

		However, the Committee may, at the time of the grant, provide for the employment or Board membership restriction to lapse with respect to a portion or portions of the Restricted Stock Award or Restricted Stock Unit Award at different times during the Restricted Period. The Committee may, in its discretion, also provide for complete or partial exceptions to the employment or Board membership restriction as it deems equitable.

		All restrictions imposed under the Restricted Stock Award or Restricted Stock Unit Award lapse upon the expiration of the Restricted Period if the conditions described above have been met.

Form of Grant		Restricted Stock Awards are shares of actual Common Stock. Restricted Stock Unit Awards are units valued by reference to shares of Common Stock.

		Payouts of Restricted Stock Awards or Restricted Stock Unit Awards may be in the form of shares of Common Stock, cash or any combination of shares and cash as determined by the Committee.

Dividends		The Committee may at the time of grant provide that dividends during the Restricted Period are paid or accumulated, or reinvested in additional Restricted Stock or credited to additional Restricted Stock Units, or neither paid nor accumulated, except that dividends on Restricted Stock Awards or Restricted Stock Unit Awards that vest based on the achievement of Performance Goals must either be accumulated or reinvested/credited and only be paid to the extent the Restricted Stock Award or Restricted Stock Unit Award is earned, or neither paid nor accumulated.

Vesting		Restricted Stock Awards and Restricted Stock Unit Awards will have a vesting period of at least three years, subject to certain exceptions,


		including a one-year minimum vesting period for Restricted Stock Awards and Restricted Stock Unit Awards that vest based on the achievement of Performance Goals.

Special Provisions for Performance Awards		The Committee will determine the period for which a Performance Award is made (Award Period) and the Performance Goals. The Award Period may not be less than one year. Recipients of Performance Awards must remain employees throughout the Award Period.

Number granted		Determined by the Committee.

Performance Goals		May include any or a combination of the following: net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income (before or after allocation of corporate overhead and bonus); earnings per share; net income (before or after taxes); return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the Common Stock or any other publicly-traded securities of the Company; market share; gross profits; earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels; operating margins, gross margins or cash margin; year-end cash; debt reductions; stockholder equity; research and development achievements; strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property; establishing relationships with commercial entities with respect to the marketing, distribution and sale of the Company’s products (including with group purchasing organizations, distributors and other vendors); co-development, co-marketing, profit sharing, joint venture or other similar arrangements); financing and other capital raising transactions (including sales of the Company’s equity or debt securities; factoring transactions; sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); and implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures and recruiting and maintaining personnel.

		For a Performance Award not intended to constitute “performance-based compensation” under Section 162(m) of the Code, measures may include any other financial or other measurement established by the Committee.

		For any Performance Award intended to constitute performance-based compensation” under Section 162(m) of the Code, revisions to the respective performance goals must be set forth in the related Award Agreement within the time period required by Section 162(m).


Performance Share Award Payouts		The Committee will establish the method of calculating the amount of payment to be made under a Performance Award if Performance Goals are met, including any maximum payment.

		The maximum amount that may be earned by any recipient for each fiscal year in an Award Period with respect to Performance Units that are intended to comply with the performance-based exception under Section 162(m) is $1,500,000.

		After the completion of an Award Period, the relevant performance will be measured against the Performance Goals, and the Committee will determine whether all, none or a portion of Performance Award is paid.

Dividends/Dividend Equivalents		The Committee may at the time of grant provide that dividends or dividend equivalents during the Award Period are paid to or accumulated for the participant to the extent that the Performance Shares are earned, or are not paid or accumulated.

Vesting		Performance Awards denominated in Performance Shares will have a minimum vesting period of one year.

Other Share-Based Awards		Actual shares of Common Stock or phantom shares of Common Stock may be granted in the amounts and on the terms and conditions as the Committee determines.

Dividends/Dividend Equivalents		The Committee may at the time of grant provide that dividends or dividend equivalents are paid or accumulated to the extent that the other share-based awards vest, or neither paid nor accumulated.

Other Information

Administration of the Plan. The 2006 Stock Plan is administered by the Compensation Committee of our Board of Directors, provided that the Committee consists of two or more directors all of whom are both (i) “outside directors” within the meaning of Section 162(m) of the Code and (ii) “non-employee directors” within the meaning of Rule 16b-3 of the General Rules and Regulations under the Exchange Act. To the extent permitted by law, the Committee may delegate certain of its authority in accordance with the 2006 Stock Plan. The Committee has the authority to, among other things, determine eligibility for and grant awards; determine, modify or waive the terms and conditions of any award; and prescribe forms, rules and procedures for awards. Determinations of the Committee under the 2006 Stock Plan will be conclusive and bind all parties.

Change in Control. Unless provided otherwise in the terms of a particular Award, in the event a participant is involuntarily terminated without cause within 24 months following a change in control of the Company (as defined in the 2006 Stock Plan) Stock Options and SARs will become fully vested and immediately exercisable, unvested Restricted Stock will immediately vest and become free of restrictions and the restrictions and other conditions applicable to other Awards shall lapse, and such Awards will become fully vested and transferable, to the extent of the original grant. Upon a change of control of the Company, all Performance Awards will be considered to be earned and payable in full, based on the applicable performance criteria or, if not determinable, at the target level and any deferral or other restriction will lapse and the Performance Awards will be immediately settled or distributed.

The Committee may provide that Stock Option or SAR holders will be entitled to receive cash for their Stock Options or SARs in an amount at least equal to the difference between the exercise price and the price paid to our shareholders in the change of control transaction.

Adjustments

In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in our capital structure, the Committee will make appropriate adjustments to the maximum number of shares that may be delivered under the 2006 Stock Plan; the individual award maximums and maximum share limits described in the 2006 Stock Plan; the number and exercise price of outstanding Stock Options and SARs; and the number and kind of shares subject to other awards granted under the 2006 Stock Plan.

Plan Amendment and Termination

The Board of Directors may discontinue the Plan at any time and may from time to time amend or revise the terms of the 2006 Stock Plan as permitted by applicable statutes. However, it may not, without the consent of affected grantees, revoke or alter outstanding incentives in a manner unfavorable to them. The Board also may not amend the 2006 Stock Plan without stockholder approval where the absence of approval would cause the 2006 Stock Plan to fail to comply with Rule 16b-3 under the Exchange Act, or any other requirement of applicable law or regulation. Notwithstanding the foregoing, without consent of affected grantees, awards may be amended, revised or revoked when necessary to avoid penalties under Section 409A of the Code.

Nontransferability of Awards

No Award under the Plan is transferable other than by will or the laws of descent and distribution, except that the Committee may permit transfers of Stock Options (other than Incentive Stock Options) to the optionee’s immediate family members (i.e., spouse, parent, child, stepchild, grandchild and their spouses) or to trusts, family partnerships or similar entities for the benefit of immediate family members.

United States Income Tax Consequences

The United States federal income tax consequences that will arise with respect to participation in the 2006 Stock Plan and with respect to the sale of Common Stock acquired under the 2006 Stock Plan are summarized in the following discussion. This summary is based on the tax laws in effect as of the date of this Proxy Statement. In addition, this summary assumes that all awards are exempt from, or comply with, the rules under Section 409A of the Code regarding nonqualified deferred compensation. The summary deals with general tax principles applicable to the 2006 Stock Plan and does not purport to be a complete description of the federal income tax consequences of awards made under the plan. The summary also does not cover federal employment tax or other federal tax consequences that may be associated with the 2006 Stock Plan, or state, local or non-U.S. taxes. Changes to these laws could alter the tax consequences described below.

Incentive Stock Options (ISOs). A participant will not have income upon the grant of an incentive stock option. Also, except as described below, a participant will not have income upon exercise of an incentive stock option if the participant has been employed by the Company or its corporate parent or 50% or more-owned corporate subsidiary at all times beginning with the option grant date and ending three months before the date the participant exercises the option. If the participant has not been so employed during that time, then the participant will be taxed as described below under “Nonqualified Stock Options.” The exercise of an incentive stock option may subject the participant to the alternative minimum tax.

A participant will have income upon the sale of the stock acquired under an incentive stock option at a profit (if sales proceeds exceed the exercise price). The type of income will depend on when the participant sells the stock. If a participant sells the stock more than two years after the option was granted and more than one year after the option was exercised, then all of the profit will be long-term capital gain. If a participant sells the stock prior to satisfying these waiting periods, then the participant will have engaged in a disqualifying disposition and a portion of the profit will be ordinary income and a portion may be capital gain. This capital gain will be long-term if the participant has held the stock for more than one year and otherwise will be short-term. If a participant sells the stock at a loss (sales proceeds are less than the exercise price), then the loss will be a capital loss. This capital loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.

Nonqualified Stock Options (NSOs). A participant will not have income upon the grant of a nonqualified stock option. A participant will have compensation income upon the exercise of a nonqualified stock option equal to the value of the stock on the day the participant exercised the option less the exercise price. Upon sale of the stock, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the day the option was exercised. This capital gain or loss will be long-term if the participant has held the stock for more than one year and otherwise will be short-term.

Restricted Stock. A participant will not have income upon the grant of restricted stock unless an election under Section 83(b) of the Code is made within 30 days of the date of grant. If a timely 83(b) election is made, then a participant will have compensation income equal to the value of the stock less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the stock on the date of grant. If the participant does not make an 83(b) election, then when the stock vests the participant will have compensation income equal to the value of the stock on the vesting date less the purchase price. When the stock is sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the stock on the vesting date. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.

Restricted Stock Units. A participant will not have income upon the grant of a restricted stock unit award. A participant is not permitted to make a Section 83(b) election with respect to a restricted stock unit award. When the restricted stock unit vests, the participant will have income on the date payment is made or shares are issued under the restricted stock unit in an amount equal to the fair market value of the stock on such date (or the amount of the cash paid). When the stock, if any, is sold, the participant will have capital gain or loss equal to the sales proceeds less the value of the stock already taken into income. Any capital gain or loss will be long-term if the participant held the stock for more than one year and otherwise will be short-term.

Awards That Are Settled in Cash or In Shares That Are Not Subject to a Substantial Risk of Forfeiture. With respect to other awards that are settled either in cash or in shares that are not subject to a substantial risk of forfeiture, the participant will recognize ordinary income equal to the excess of (a) the cash or the fair market value of any shares received (determined as of the date of settlement) over (b) the amount, if any, paid for the shares by the participant.

Tax Consequences to Us. There will be no tax consequences to us except that we will be entitled to a deduction when a participant has compensation income. Any such deduction will be subject to the limitations of Section 162(m) of the Code.

Section 162(m). Awards may qualify as “performance-based compensation” under Section 162(m) of the Code in order to preserve the Company’s federal income tax deductions with respect to annual compensation required to be taken into account under Section 162(m) that is in excess of $1 million and paid to our chief executive officer and our other officers whose compensation is required to be disclosed under the Exchange Act by reason of being among our four most highly compensated officers. To qualify, options and other awards must be granted by a committee consisting solely of two or more “outside directors” (as defined under applicable regulations) and satisfy the limit on the total number of shares that may be awarded to any one participant during any calendar year. In addition, for awards other than options to qualify, the grant, issuance, vesting or retention of the award must be contingent upon satisfying one or more of the preestablished, objective performance criteria, as approved by a committee consisting solely of two or more “outside directors.”

Stock Price

On April 17, 2009, the closing price of our Common Stock on The NASDAQ Global Select Market was $30.92.

New Plan Benefits

Since the Committee in its sole discretion will authorize awards, future benefits under the 2006 Stock Plan are not currently determinable. During 2008, stock options were granted under the 2006 Stock Plan to the Company’s named executive officers, as set forth in the table captioned 2008 Grants of Plan-Based Awards at page 27 of the

Proxy Statement. During 2008, options were granted to non-employee Directors pursuant to the compensation arrangement described in “Director Compensation” on page 6 of this Proxy Statement.


3.	RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors, in accordance with the recommendation of the Audit Committee, has selected, subject to ratification by shareholders, KPMG LLP, independent registered public accounting firm, to audit our consolidated financial statements for fiscal year 2009. KPMG LLP has audited our consolidated financial statements and the financial statements of our predecessor since 1981.

We expect representatives of KPMG LLP to attend the Annual Meeting, to be available to respond to appropriate questions from shareholders, and to have the opportunity to make a statement if so desired.

Fees of Independent Registered Public Accountants

Consistent with the Audit Committee’s responsibility for engaging our independent auditors, all audit and permitted non-audit services are required to be approved by the Audit Committee and all services were approved by the Audit Committee prior to the services being performed by the auditors.

During fiscal years 2008 and 2007, fees in connection with services rendered by KPMG LLP, the Company’s independent auditors, were as follows:


	2008		2007

Audit fees	$	556,500	$	475,100
Audit related fees	$	—	$	—
Tax fees	$	125,000	$	50,000
All other fees	$	—	$	—

Audit fees includes fees for professional services rendered for the audits of the consolidated financial statements of the Company, quarterly reviews, statutory audits, issuance of comfort letters, consents, and assistance with and review of documents filed with the SEC.

Audit-related fees generally include fees for pension or other special purpose audits, acquisition assistance and other accounting consultations.

Tax fees include fees for tax services, including tax compliance, tax advice and tax planning provided during the ordinary course of operations.

All other fees generally include fees for advisory services related to accounting principles, rules and regulations.

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

The Audit Committee currently pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE SELECTION OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2009.

ADDITIONAL INFORMATION

Stock Ownership

The following table sets forth certain information regarding the beneficial ownership of Common Stock as of March 31, 2009 by (a) each person known by us to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (b) each executive officer identified in the Summary Compensation Table below, (c) each director and nominee for director, and (d) all executive officers and directors as a group.

Except as otherwise noted, the named shareholder had sole voting and/or investment power with respect to such securities. As of March 31, 2009, there were 25,848,066 shares of Common Stock outstanding.


Name	Amount		Percentage

Robert M. Holster(a)		750,644		2.8
William C. Lucia(b)		330,029		1.3
Walter D. Hosp(c)		49,084		*
John D. Schmid(d)		6,300		*
James T. Kelly(e)		225,752		*
William F. Miller III(f)		365,095		1.4
William S. Mosakowski(g)		10,126		*
William W. Neal(h)		58,752		*
Galen D. Powers(i)		10,989		*
Ellen A. Rudnick(j)		88,752		*
Michael A. Stocker(k)		10,126		*
Richard H. Stowe(l)		106,752		*
All executive officers and directors as a group: 12 people(m)		1,986,817		7.3
Barclays Global Investors, NA(n)		1,668,778		6.5


*		denotes percentage of ownership is less than 1%.

(a)		Includes 31,996 shares of Common Stock owned by members of the family of Mr. Holster, as to which Mr. Holster disclaims beneficial ownership. And also includes outstanding options to purchase 631,334 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009.

(b)		Includes outstanding options to purchase 307,335 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009 and 31,980 shares of restricted stock, which will vest 25% annually on December 31, 2011, 2012, 2013 and 2014.

(c)		Includes outstanding options to purchase 17,500 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009 and 25,584 shares of restricted stock, which will vest 25% annually on December 31, 2011, 2012, 2013 and 2014.

(d)		Includes outstanding options to purchase 6,300 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009.

(e)		Includes outstanding options to purchase 225,752 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009.

(f)		Includes 6,000 shares of Common Stock owned by members of the family of Mr. Miller, as to which Mr. Miller disclaims beneficial ownership. Also includes outstanding options to purchase 10,752 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009.

(g)		Includes outstanding options to purchase 10,126 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009.

(h)		Includes 48,000 shares of Common Stock owned by members of the family of Mr. Neal, as to which Mr. Neal disclaims beneficial ownership. Also includes outstanding options to purchase 10,752 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009.


(i)		Includes 237 shares of Common Stock owned by members of the family of Mr. Powers, as to which Mr. Powers disclaims beneficial ownership. Also includes outstanding options to purchase 10,752 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009.

(j)		Includes outstanding options to purchase 85,752 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009.

(k)		Includes outstanding options to purchase 10,126 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009.

(l)		Includes outstanding options to purchase 106,752 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009.

(m)		Includes outstanding options to purchase 1,433,233 shares of Common Stock that are currently exercisable or will become exercisable before May 31, 2009.

(n)		Information is as of December 31, 2008, and is based on a Schedule 13G filed with the SEC on February 5, 2009 by Barclays Global Investors, NA (“BGI”) and its affiliates Barclays Global Fund Advisors (“BGFA”), Barclays Global Investors, Ltd. (“Barclays Ltd.”), Barclays Global Investors Japan Limited, Barclays Global Investors Canada Limited, Barclays Global Investors Australia Limited and Barclays Global Investors (Deutschland) AG. BGI reported that it has sole voting power over 470,254 of these shares and sole dispositive power over 563,285 of these shares, BGFA reported that it has sole voting power over 802,388 of these shares and sole dispositive power over 1,088,728 of these shares, Barclays Ltd. reported that it has sole voting power over 700 of these shares and sole dispositive power over 16,765 of these shares. The principal business office of BGI is 400 Howard Street, San Francisco, CA 94105.

10b5-1 Plans

Our policy regarding securities trades by our executive officers and directors permits sales of our securities under plans instituted pursuant to Securities and Exchange Commission Rule 10b5-1 under the Exchange Act. These plans allow insiders to diversify their holdings in a manner that dispels any inference that they are trading on the basis of material nonpublic information. Several of our executive officers and directors established 10b5-1 plans during 2005. Sales pursuant to these plans commenced during 2006 and continued in 2007 and 2008. Additional 10b5-1 plans have been established in 2007 and 2008 and sales pursuant to these plans are continuing. Other officers and directors may adopt plans pursuant to Rule 10b5-1 in the future.

Certain Relationships and Related Person Transactions

Review and Approval of Related Person Transactions

The Audit Committee’s written charter provides that the Audit Committee shall review all related party transactions on an ongoing basis and all such transactions must be approved by the Audit Committee.

Our Audit Committee has not adopted any written policies or procedures governing the review, approval or ratification of related person transactions. The Audit Committee’s practice is to evaluate whether a related person (as defined in Item 404 of the Securities and Exchange Commission’s Regulation S-K) will have a direct or indirect interest in a transaction in which the Company may be a party. Where the Audit Committee determines that such proposed transaction involved a related person, the Audit Committee reviews any and all information it deems necessary and appropriate to evaluate the fairness of the transaction to us and our stockholders (other than the interested person involved in such transaction), and may consider among other things, the following factors: the related person’s relationship to us and direct or indirect interest in the transaction, both objective (for example, the dollar amount of the related person’s interest) and subjective (for example, any personal benefit not capable of quantification); whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances; if applicable, the availability of other sources of comparable products or services; the benefits to us of the proposed interested transaction; and the impact on a director’s independence in the event the related person is a director, an “associated person” of a director or an entity in which a director is a partner, member, stockholder or officer.

If the Audit Committee decides not to approve a transaction, the Audit Committee will notify our Chief Executive Officer and Chief Financial Officer, who will ensure that the transaction is not entered into unless the concerns expressed by the Audit Committee are addressed to its satisfaction.

Related Person Transactions

Galen D. Powers, a director since 1992, is the retired Senior Founder of Powers, Pyles, Sutter & Verville, P.C. (PPSV), a law firm specializing in healthcare and hospital law, which has provided legal and advisory services to us for many years. We expect PPSV to continue providing similar services in the future. The amount of annual fees we have paid to PPSV is not reportable under applicable SEC rules.

William S. Mosakowski, a director since December 2006, is the President, Chief Executive Officer, controlling stockholder and a member of the Board of Directors of PCG. We acquired PCG’s Benefits Solutions Practice Area (BSPA) effective as of August 31, 2006 for a purchase price of $105.6 million and a contingent additional cash payment of up to $15 million if certain revenue targets were met for the twelve months ended June 30, 2007. As the revenue targets were exceeded, we paid $15.0 million to PCG on September 28, 2007. Mr. Mosakowski has an indirect material interest in this transaction arising out of his position with PCG. In addition, PCG maintains a continuing business relationship with the Company.

As part of the acquisition of BSPA in 2006, we entered into four subleases with PCG where BSPA was located in an office where the lease liability was not assumed by us. For the year ended December 31, 2008, the amounts recognized as expense by us under subleases to PCG was approximately $114,000 and there were no amounts recognized as a reduction to expense where PCG subleases from us.

Also in connection with the acquisition of BSPA, we entered into an Intercompany Services Agreement (the ISA) with PCG to allow each party to perform services such as IT support and contractual transition services. Services performed under the ISA are billed at pre-determined rates as specified in the ISA. For the year ended December 31, 2008, services rendered by PCG to us under the ISA approximated $33,000 and services rendered by us for PCG approximated $58,000.

Since the acquisition, amounts have been collected by or paid on behalf of us by PCG and are reimbursed to PCG at cost. As of December 31, 2008, $72,000 was owed to PCG and was classified as a current liability in our consolidated balance sheet.

During 2007 and 2008, we engaged And Partners (AP), a branding consulting firm, to perform consulting and creative services related to the re-branding of Health Management Systems. The firm was selected through a competitive and formal request for proposal process that resulted in responses from seven different firms. We paid AP approximately $157,000 and $85,000 under this engagement in 2008 and 2007, respectively. David Schimmel, the President and Creative Director of AP, is the son-in-law of Ellen A. Rudnick, who is a member of our Board of Directors.

The Audit Committee has reviewed and approved these transactions.

Executive Compensation

Compensation Discussion and Analysis

This Compensation Discussion and Analysis provides a narrative describing how compensation for our named executive officers for 2008 was established and should be read in conjunction with the compensation tables and related narrative descriptions set forth below.

Effective March 1, 2009, Mr. Lucia replaced Mr. Holster as Chief Executive Officer of the Company, and Mr. Holster continues as our Chairman of the Board. As of the end of the fiscal year ended December 31, 2008, our named executive officers were:


	•	Robert M. Holster, Chairman and Chief Executive Officer;

	•	William C. Lucia, President and Chief Operating Officer;


	•	Walter D. Hosp, Chief Financial Officer; and

	•	John D. Schmid, Vice President of Human Resources.

Objectives and Philosophy of Our Executive Compensation Program

Our mission is to be a significant provider of quality services in the markets we serve. To support this and other strategic objectives as approved by the Board of Directors and to provide adequate returns to shareholders, we must compete for, attract, develop, motivate, and retain top quality executive talent at the corporate office and operating business units during periods of both favorable and unfavorable business conditions.

Our executive compensation program is a critical management tool in achieving this goal. “Pay for performance” is the underlying philosophy for our executive compensation program. Consistent with this philosophy, the program has been carefully conceived and is independently administered by the Compensation Committee of the Board of Directors, which is comprised entirely of non-employee directors.

The program is designed and administered to:


	•	reward individual and team achievements that contribute to the attainment of our business goals; and

	•	provide a balance of total compensation opportunities, including salary, bonus, and longer-term cash and equity incentives, that are competitive with similarly situated companies and reflective of our performance.

Role of Management

Our Chief Executive Officer, in consultation with our Human Resources department, assists the Compensation Committee with its work. These individuals assist the Compensation Committee by presenting information to them and making recommendations for the Compensation Committee’s review and consideration. Such information and recommendations include, among other things, the compensation that should be received by the executive officers and certain other highly compensated employees; performance evaluations; financial information regarding us that should be reviewed in connection with compensation decisions; and the evaluation and compensation process to be followed by the Compensation Committee.

Peer Group Compensation Analysis

In making compensation decisions, the Compensation Committee compares our executive compensation against that paid by a peer group of publicly trading companies in the healthcare information services industry developed by Frederick W. Cook & Co., Inc. and approved by the Compensation Committee. This peer group, which is periodically reviewed and updated by the Compensation Committee, consists of companies the Committee believes are generally comparable in size to our company and against which the Committee believes we compete for executive talent. Companies included in this peer group for 2008 were Allscripts Healthcare Solutions, AMICAS, Computer Programs & Systems, eResearch Technology, First Consulting Group, Matria Healthcare, Maximus, Mediware Information Systems, National Research, Omnicell, Providence Service, Quality Systems, Quovadx and TriZetto.

We compete with many other companies for executive personnel. Accordingly, the Compensation Committee generally targets overall compensation for executives near the median of compensation paid to similarly situated executives of the companies in the peer group. Variations to this general target may occur as dictated by the experience level of the individual and market factors.

Components of our Executive Compensation Program

The primary elements of our executive compensation program are:


	•	base salary;

	•	annual cash incentive bonus;

	•	a long term incentive, primarily represented by stock options; and

	•	insurance, retirement and other employee benefits.

Base Salary. Base salary is used to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our executives. In determining the amount of compensation to be paid to our executive officers, the Compensation Committee adheres to long established compensation policies pursuant to which executive compensation is determined. Base salary determinants include the prevailing rate of compensation for positions of like responsibility in the particular geographic area, the level of the executive’s compensation in relation to our other executives with the same, more, or less responsibilities, and the tenure of the individual. To ensure both competitiveness and appropriateness of base salaries, we retain professional consultants on a periodic basis to update the job classification and pay scale structure pursuant to which individual executives (and the remainder of our employees) are classified and the pay ranges with which their jobs are associated.

In the case of Mr. Holster and Mr. Lucia, the minimum base salary is mandated by our employment agreements with those executives.

Base salaries are reviewed at least annually by our Compensation Committee, and are adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience.

Annual Short Term (Cash) Incentive Compensation. The Compensation Committee has the authority to award annual bonuses to individual senior executives in accordance with specific performance criteria established each year, and based on the extent to which those criteria were achieved. The committee believes that the short term bonus plan promotes the Company’s performance-based compensation philosophy by providing executives with direct financial incentives in the form of annual cash bonuses for achieving specific performance goals. Bonus criteria are established, and bonuses ultimately awarded, in a manner intended to reward both overall corporate performance and an individual’s participation in attaining such performance. Our annual short term incentive bonus is paid in cash, ordinarily in a single installment in the first quarter following the completion of the fiscal year, and is tied to the achievement of predetermined annual corporate financial and individual performance objectives. The targeted amount of annual performance bonus for 2008 was 65% of base salary for each of Mr. Holster and Mr. Lucia and 40% of base salary for Mr. Hosp and Mr. Schmid.

The primary factor that the Compensation Committee considers when determining incentive compensation for the Company’s named executive officers is the Company’s overall financial performance. Upon attainment of the Company’s financial performance objective, the named executive officers become entitled to certain short term cash incentive payments. If the Company financial performance objective is achieved, a named executive officer’s incentive compensation may be impacted by the Compensation Committee’s consideration of individual performance during the course of the year.

The Company financial objective established for 2008 was the achievement of specific budgeted net income earned by the Company. The applicable percentage of the bonus target to be paid under the formula varied with the percentage of the Company’s attainment of its net income goals. Upon attainment of 100% of the Company’s performance objective, the executives would be entitled to 100% of their respective bonus targets. The threshold for payment of any amount under the incentive plan for 2008 was attainment of 85% of the Company’s performance objectives, which would result in payment to the executive of 50% of the bonus target. The maximum payout level established under the 2008 incentive plan was an aggregate total equaling 20% of the incremental increase in operating margin above budget. The Compensation Committee may increase or decrease the annual bonus paid based on the attainment of goals relating to strategic objectives or to account equitably for items impacting the predetermined performance objectives that are non-recurring in nature.

Other than the corporate financial objective, specific individual goals are not set for each named executive officer; rather, following completion of the fiscal year, the Compensation Committee assesses each named executive officer’s overall contributions to helping the Company achieve its financial objective by (i) improving revenue, net income, cash flow, operating margins, earnings per share, and return on shareholders’ equity, (ii) developing competitive advantages, (iii) dealing effectively with the growing complexity of our businesses, (iv) developing business strategies, managing costs, and improving the quality of our services as well as customer satisfaction, (v) successfully executing divestitures, business unit closures, acquisitions, and strategic partnerships, (vi) implementing operating efficiencies, and (vii) general performance of individual job responsibilities.

In December 2008, the Compensation Committee approved the cash bonus amounts to be paid to each of the executive officers for services performed in 2008. The bonus amounts awarded to Mr. Holster and Mr. Lucia were at 86.2% and 84.4% above each executive officer’s 2008 bonus target, respectively, or $402,968 and $290,137, respectively. The bonus amounts awarded to Mr. Hosp and Mr. Schmid were prorated at 49.6% above each executive officer’s 2008 bonus target, or $161,200 and $99,200, respectively. The cash bonuses awarded to the executive officers for 2008 were determined based, in part, on the level of attainment of the Company’s performance objectives during the period. In addition, in determining bonus amounts for the 2008 fiscal year, the Compensation Committee considered, for Mr. Holster, who served as our Chief Executive Officer in 2008, the factors discussed below under “Compensation of the Chief Executive Officer” and for each of the other named executive officers, the factors described above, particularly in light of the named executive officers’ efforts in integrating the operations of the Benefits Solution Practice Area of the Public Consulting Group Inc., which the Company acquired in 2006.

The Compensation Committee has targeted bonus amounts to be paid for performance in 2009 at percentages that range from 40% to 65% of base salary for fifteen of our senior executives. The actual amount of bonus will be determined following a review of each executive’s individual performance and attainment of financial objectives conducted during the first quarter of 2010. Individual financial objectives are budgeted business unit operating margin (for executives heading business units), budgeted corporate operating margin (for executives in charge of Company-wide support functions) and budgeted corporate net income (for the CEO, COO, CFO and VP of Human Resources). The threshold for payment of any individual executive bonus is attainment of 80% of the executive’s individual financial objective. Bonuses may increase if individual financial objectives are exceeded up to an aggregate total equaling 20% of the incremental increase in operating margin above budget.

2008 Long Term Incentive Plan. The longer-term component of our executive compensation program has generally consisted of stock options. We believe that equity grants provide our executives with a strong link to our long-term performance create an ownership culture and help to align the interest of our executives and our shareholders. Stock options are granted upon the recommendation of management and approval of the Compensation Committee based upon their subjective evaluation of the appropriate amount for the level and amount of responsibility of each executive officer.

For the 2008 fiscal year, the Compensation Committee considered the individual contributions of the named executive officers discussed above under “Annual Short Term (Cash) Incentive Compensation” in making its determinations with respect to granting long term incentives, in addition to several more objective factors, including comparative share ownership of similarly-situated executives, the Company’s financial performance and the amount of equity previously awarded, the vesting of such awards and consultant recommendations. In determining amounts of short term and long term incentive compensation to be awarded, no fixed or specific mathematical weighting was applied to this subjective assessment of the named executive officers’ individual achievements.

The options generally permit the option holder to buy the number of shares of the underlying Common Stock (an option exercise) at a price equal to or greater than the market price of the Common Stock at the time of grant. Thus, the options generally gain value only to the extent the stock price exceeds the option exercise price during the term of the option. The Compensation Committee reviews all components of the executive’s compensation when determining annual equity awards to ensure that an executive’s total compensation conforms to our overall philosophy and objectives.

The 2008 Long Term Incentive Plan provided option grants of non-qualified (NQ) stock options to our executives on October 1, 2008. These grants are exercisable over five years and contain a performance vesting component that vests 50% of the grant ratably over three and one-quarter years from the date of issuance and the remaining 50% to cliff vest at the end of the three and one-quarter years from the date of issuance upon achievement of targeted Earnings per Share (EPS) growth.

Equity awards are typically granted to our executives annually in conjunction with the review of their individual performance. This review takes place at the regularly scheduled meeting of the Compensation Committee held following the second quarter of each year. We set the exercise price of all stock options to equal the average of the highest and lowest sales price of our Common Stock on the NASDAQ Stock Market on the day of the grant. Grants are not made during blackout periods. Vesting and exercise rights of non-exercised options cease shortly after termination of employment except in the case of death or disability.

In February 2009, we granted restricted stock awards to certain of our executives, including Messrs. Lucia and Hosp. These restricted stock awards will vest 25%, as of each applicable vesting date of February 19, 2011, February 19, 2012, February 19, 2013 and February 19, 2014 subject to the executive’s continued employment with the Company.

Benefits and Other Compensation. We maintain broad-based benefits that are provided to all employees, including health and dental insurance, life and disability insurance and a 401(k) plan. Executives are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees. The Company matches 100% of participant contributions up to 3% and 50% of the next 2% of their compensation contributed to the 401(k) plan.

Severance and Change-in-Control Benefits. Pursuant to employment agreements we have entered into with certain of our executives and our 2006 Stock Plan, our executives are entitled to specified benefits in the event of the termination of their employment under specified circumstances, including termination following a change in control of our company. We have provided more detailed information about these benefits, along with estimates of their value under various circumstances, under the caption “Potential Payments upon Termination of Employment or Change-in-Control” below.

We believe providing these benefits help us compete for executive talent. After reviewing the practices of companies represented in our compensation peer group, we believe that our severance and change-in-control benefits are generally in line with severance packages offered to executives by the companies in the peer group.

Compensation of the Chief Executive Officer

Determination of our compensation of Robert M. Holster, who was our Chief Executive Officer during 2008, takes into account the factors described above as pertinent to the remainder of our executives and employees, while also taking into consideration the proprietary nature of our business and efforts expended in connection with development of our business strategy and service development activities. The Compensation Committee more specifically took into account Mr. Holster’s (i) success in growing revenues, (ii) success in improving operating income compared to the prior year and in general, progressively during the year, (iii) achievement of certain specified financial and strategic targets, and (iv) success in leading and strengthening the executive team and the operating management teams. The Compensation Committee also took into account the amount of Mr. Holster’s compensation relative to chief executive officers of comparable companies.

Tax Considerations

Section 162(m) of the Internal Revenue Code prohibits us from deducting any compensation in excess of $1 million paid to certain of our executive officers, except to the extent that such compensation is paid pursuant to a shareholder approved plan upon the attainment of specified performance objectives. The Compensation Committee believes that tax deductibility is an important factor, but not the sole factor, to be considered in setting executive compensation policy. Accordingly, the Compensation Committee periodically reviews the potential consequences of Section 162(m) and generally intends to take such reasonable steps as are required to avoid the loss of a tax deduction due to Section 162(m). However, the Compensation Committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.

Summary Compensation Table

The following table sets forth the cash and non-cash compensation for the fiscal years ended December 31, 2008, 2007 and 2006 awarded to or earned by our the individuals who served during 2008 as our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Vice President of Human Resources.


													Change in
													Pension
													Value and
													Nonqualified
											Non-Equity		Deferred
							Stock		Option		Incentive Plan		Compensation		All Other
Name and Principal Position	Year		Salary		Bonus(1)		Awards(2)		Awards(3)		Compensation(4)		Earnings(5)		Compensation(6)		Total
(a)	(b)		(c)		(d)		(e)		(f)		(g)		(h)		(i)		(j)

Robert M. Holster,		2008		467,692		—		—		31,813		402,968		N/A		9,200		911,673
Chairman and Chief		2007		438,462		—		—		59,694		382,067		N/A		8,669		888,892
Executive Officer(7)		2006		400,000		—		—		196,800		400,000		N/A		46,600		1,043,400
William C. Lucia,		2008		343,846		—		—		240,274		290,137		N/A		9,200		883,457
President and Chief		2007		328,846		—		—		260,808		286,550		N/A		9,000		885,204
Operating Officer(8)		2006		300,000		—		—		300,634		300,000		N/A		36,381		937,015
Walter D. Hosp,		2008		325,000		—		—		142,668		161,200		N/A		7,015		635,883
Chief Financial Officer		2007		150,000		—		—		63,012		112,883		N/A		1,000		326,895
John D. Schmid		2008		200,000		—		—		79,831		99,200		N/A		9,200		388,231
Vice President, Human Resources		2007		142,308		—		—		46,548		129,200		N/A		1,846		319,902


1.		We did not grant any bonus awards to our named executive officers. The amounts in column (g) represent the aggregate cash awards paid to the named executive officers as Non-Equity Incentive Plan Compensation, which are discussed in further detail under the heading “Compensation Discussion and Analysis — Components of our Executive Compensation Program.”

2.		We did not recognize any compensation expense related to stock awards.

3.		The amounts in this column reflect the dollar amount of compensation expense recognized during 2008 for financial reporting purposes under FAS 123R with respect to awards of options to purchase shares of Common Stock held by each of the named executive officers, but disregarding estimated forfeitures related to service-based vesting conditions. The 2008 Grants of Plan-Based Awards Table also sets forth the aggregate grant date fair value of the stock options granted during 2008 computed in accordance with FAS 123R. The relevant assumptions made in the valuations may be found in Note 12 to the financial statements in the Company’s Annual Reports on Form 10-K for the fiscal year ended December 31, 2008.

4.		The amounts set forth in this column reflect the amounts paid for fiscal year 2008 to Messrs. Holster, Lucia, Hosp and Schmid under the Company’s cash incentive plan described in the Compensation Discussion and Analysis contained in this Proxy Statement under the heading “Annual Cash Incentive Compensation.” These amounts are based on a percentage of the individual’s base salary for the fiscal year.

5.		We do not have a pension plan or a nonqualified plan for our named executive officers.

6.		The amounts in this column reflect the company match for 401(k) contributions, vacation payout and certain relocation and living expenses.

7.		Mr. Holster served as our Chief Executive Officer until March 1, 2009. He continues to serve as our Chairman.

8.		Mr. Lucia became our Chief Executive Officer effective March 1, 2009.

Grants of Plan-Based Awards For the Year Ended December 31, 2008


											Exercise or
	Estimated Possible Payouts								Number of		Base Price
	Under Non-Equity Incentive								Securities		of Option		Closing		Grant Date
	Plan Awards(a)								Underlying		Awards		Market		Fair Value
	Threshold		Target		Maximum		Grant		Options (#)		($/Sh)		Price on		of Option
Name	($)		($)		($)		Date		(b)		(c)		Grant Date		Awards (d)

Robert M. Holster		162,500		325,000		—		10/1/2008		30,000	$	23.99	$	24.00	$	253,353
Chairman and Chief Executive Officer
William C. Lucia		117,000		234,000		—		10/1/2008		30,000	$	23.99	$	24.00	$	253,353
President and Chief Operating Officer
Walter D. Hosp		52,000		104,000		—		10/1/2008		25,000	$	23.99	$	24.00	$	211,128
Chief Financial Officer
John D. Schmid		32,000		64,000		—		10/1/2008		20,000	$	23.99	$	24.00	$	168,902
Vice President, Human Resources


(a)		The amounts set forth in this column reflect the estimated payouts for fiscal year 2008 to Messrs. Holster, and Lucia under the 2008 incentive plan described in the Compensation Discussion and Analysis contained in this Proxy Statement under the heading “Annual Short Term (Cash) Incentive Compensation”. These amounts are based on the individual’s fiscal year 2008 base salary. The individual bonus target amount for Mr. Holster and Mr. Lucia was 65% of base salary, while the individual bonus target for Mr. Hosp and Mr. Schmid was 40% of base salary. The threshold amount shown is 50% of the individual’s bonus target amount. The target amount shown is 100% of the individual bonus target amount. The plan does not provide for a capped maximum individual bonus amount. The maximum payable in the aggregate under the plan is 20% of the incremental increase in Operating Income above budget. Actual incentive bonuses received by these named executive officers for fiscal year 2008 are reported in the Summary Compensation Table under the column entitled “Non-Equity Incentive Plan Compensation”.

(b)		The amounts set forth in this column reflect the number of stock options granted under the Company’s 2006 Stock Plan. The options vest at the rate of 25% per year starting on the first anniversary of the grant and expire in seven years from the date of grant.

(c)		The exercise price equals the average of the highest and lowest sale prices of our Common Stock on the date of the grant.

(d)		The dollar values of stock options disclosed in this column are equal to the aggregate grant date fair value computed in accordance with FAS 123R, except no assumptions for forfeitures were included. A discussion of the assumptions used in calculating the grant date fair value is set forth in Note 12 of the Notes to Consolidated Financial Statements of our 2008 Annual Report on Form 10-K, a copy of which accompanies this Proxy Statement.

2008 Outstanding Equity Awards at Fiscal Year End Table


	Option Awards
	Number of		Number of
	Securities		Securities
	Underlying		Underlying
	Unexercised		Unexercised			Option		Option
	Options —		Options —			Exercise		Expiration
Name	Exercisable		Unexercisable			Price ($)		Date

Robert Holster		288,000		—			1.19		3/30/2011
		45,000		—			2.48		12/12/2011
		125,000		—			3.41		12/19/2012
		100,000		—			2.92		11/4/2013
		3,334		16,666	(a)		25.45		9/30/2012
		—		30,000	(c)		23.99		9/30/2015
William C. Lucia		46,332		—			3.41		12/19/2012
		668		—			2.92		11/4/2013
		125,000		—			6.95		4/14/2015
		61,999		20,666	(b)		9.44		5/4/2016
		58,668		58,667	(b)		10.98		6/26/2016
		3,334		16,666	(a)		25.45		9/30/2012
		—		30,000	(c)		23.99		9/30/2015
Walter D. Hosp		15,000		45,000	(b)		19.12		7/2/2017
		2,500		12,500	(a)		25.45		9/30/2012
		—		25,000	(c)		23.99		9/30/2015
John D. Schmid		6,300		12,500	(b)		21.86		4/2/2017
		—		12,500	(a)		25.45		9/30/2012
		—		20,000	(c)		23.99		9/30/2015


a)		Stock options vest as follows: 50% of initial grant vests in 1/3 increments over a period of three and a quarter years commencing on December 31, 2009. Vesting of the remaining 50% shall occur on December 31, 2011 to the extent that certain pre-defined performance and service conditions are satisfied.


b)		Stock options vest as follows: 50% of initial grant vests in 1/3 increments over a period of three and a quarter years commencing on December 31, 2008. Vesting of the remaining 50% shall occur on December 31, 2010 to the extent that certain pre-defined performance and service conditions are satisfied.


c)		Stock options vest annually in 25% increments beginning on first anniversary date of grant.

2008 Option Exercises and Stock Vested Table


	Option Awards
	Number of		Value Realized
	Shares Acquired		on Exercise ($)
Name	on Exercise (#)		(a)

Robert M. Holster		150,000	$	3,350,000
William C. Lucia		105,000	$	2,113,615


a)		The value realized on the exercise of stock options is based on the difference between the exercise price and the market price (used for tax purposes) of our Common Stock on the date of exercise.

Potential Payments Upon Termination of Employment or Change in Control

The following information and table set forth the amount of payments to each of our named executive officers in the event of a termination of employment as a result of involuntary termination and termination following a change in control.

Assumptions and General Principles. The following assumptions and general principles apply with respect to the following table and any termination of employment of a named executive officer:


	•	The amounts shown in the table assume that each named executive officer was terminated on December 31, 2008. Accordingly, the table reflects amounts earned as of December 31, 2008 and includes estimates of amounts that would be paid to the named executive officer upon the occurrence of a termination or change in control. The actual amounts to be paid to a named executive officer can only be determined at the time of the termination or change in control.

	•	A named executive officer is entitled to receive amounts earned during his term of employment regardless of the manner in which the named executive officer’s employment is terminated. These amounts include base salary, unused vacation pay and annual cash incentive compensation. These amounts are not shown in the table, except for potential prorated annual cash incentive compensation as described below.

	•	Because we have assumed a December 31, 2008 termination date, each of the named executive officers would have been entitled to receive the targeted annual bonus payment for 2008 and not the amount that the Board determined to pay based upon the level of attainment of the Company performance objectives. Therefore, the amount set forth in the table for prorated bonus compensation is the target bonus compensation for each named executive officer and not the amount that was actually paid and shown as Non-Equity Incentive Plan Compensation in the Summary Compensation Table.

	•	A named executive officer may exercise any stock options that are exercisable prior to the date of termination and any payments related to these stock options are not included in the table because they are not severance payments.

Involuntary Termination. Our employment contracts with Messrs. Holster and Lucia provide for severance pay equal to two years of base salary payable in 24 equal monthly installments and the continuation of health care benefits for 24 months in the event that employment is terminated other than for cause or voluntary termination. Our employment agreements with Messrs. Hosp and Schmid provide for severance pay and the continuation of health care benefits for six months in the event that employment is terminated other than for cause or voluntary termination.

Change in Control. Our employment contracts with Messrs. Holster and Lucia provide for severance pay equal to two years of base salary payable in 24 equal monthly installments and the continuation of health care benefits for 24 months in the event that employment is terminated within 45 days of a Change of Control transaction, as defined below. Additionally in the event of a Change of Control transaction, as defined below, all outstanding options immediately vest upon the consummation of the Change of Control. Our employment agreements with Messrs. Hosp and Schmid do not provide for additional benefits for termination following a Change of Control transaction; however, in the event of a termination other than for cause or voluntary termination, they would receive severance pay and the continuation of health care benefits for six months.

A “Change of Control” means the sale or transfer of all or substantially all of the assets of the Company or any merger, consolidation or other transaction that would result in the transfer, directly or indirectly, of more than 50% of the then outstanding capital stock of the Company to holders who were not holders of its capital stock immediately prior to such merger. Under the terms of the employment contracts and separation agreement, a sale of substantially all the Company’s assets may occur but such an event will not constitute a “Change of Control Transaction” unless we have sold all our significant lines of business and intend to limit our future activities to the distribution of the proceeds of such transaction.


Event	R.M. Holster		W.C. Lucia		W.D. Hosp		J.D. Schmid

Involuntary Termination
Prorated Annual Bonus Compensation		220,000		165,000		130,000		80,000
Cash severance payment		880,000		660,000		162,500		100,000
Continued health benefits		3,876		1,938		1,170		969

Total	$	1,103,876	$	826,938	$	293,670	$	180,969
Change in control with termination
Prorated Annual Bonus Compensation		220,000		165,000		130,000		80,000
Accelerated stock options		390,897		698,694		—		—
Cash severance payment		880,000		660,000		162,500		100,000
Continued health benefits		3,876		1,938		1,170		969

Total	$	1,494,773	$	1,525,632	$	293,670	$	180,969

Individual Agreements and Arrangements

Robert M. Holster — Chief Executive Officer

On March 1, 2009, Mr. Holster resigned from the position of Chief Executive Officer but will continue as Chairman of the Board, therefore, we entered into an amended and restated employment agreement with Mr. Holster, which agreement was originally entered into on March 31, 2001 and amended on February 11, 2004 and July 16, 2007 (the Holster Agreement). The Holster Agreement provides for his employment through February 28, 2011 (the Holster Employment Term) (subject to earlier termination in certain circumstances as described below), at a base salary of $250,000 per year. Mr. Holster is eligible to receive bonus compensation from us in respect of each fiscal year (or portion thereof) during the Holster Employment Term in an amount of 65% of base salary, in each case as may be determined by our Board of Directors in its sole discretion on the basis of performance-based or such other criteria as may be established from time to time by our Board of Directors. For 2008, Mr. Holster received a performance bonus of $402,968.

Also in connection with his employment, on March 30, 2001, the Compensation Committee granted Mr. Holster options to purchase 700,000 shares of Common Stock at an exercise price of $1.19 per share (the then current market price), with options covering 100,000 shares vesting on the first anniversary of the grant, and options covering the remaining 600,000 shares vesting thereafter in eight equal quarterly installments. These options were not granted pursuant to our former 1999 Long-Term Incentive Stock Plan.

If we terminate Mr. Holster’s employment without “cause” or if his employment ceases because of his death or disability or within 45 days of a change in control of us (all as defined in the Holster Agreement), Mr. Holster will be entitled to a continuation of salary and group medical insurance through February 28, 2011. In addition, certain of his unvested options accelerate in the case of a change in control.

William C. Lucia — President and Chief Operating Officer

On March 1, 2009, Mr. Lucia assumed the position of Chief Executive Officer, therefore, we entered into an amended and restated employment agreement with Mr. Lucia, which agreement was originally entered into on January 1, 2003 and amended on December 31, 2005 (the Lucia Agreement). The Lucia Agreement provides for his employment through February 28, 2011 (the Lucia Employment Term) (subject to earlier termination in certain circumstances as described below) at a base salary of $400,000 per year. In 2008, Mr. Lucia’s annual base salary was $344,000. Mr. Lucia is eligible to receive bonus compensation from us in respect of each fiscal year (or portion thereof) during the Lucia Employment Term in an amount of 65% of base salary, in each case as may be determined by our Board of Directors in

its sole discretion on the basis of performance-based or such other criteria as may be established from time to time by our Board of Directors. For 2008, Mr. Lucia received a performance bonus of $290,137.

Also in connection with his employment, Mr. Lucia is eligible for consideration by our Board of Directors for awards of stock options under any stock option plan that may be established by the Company for its and its subsidiaries’ key employees. The amount, if any, of shares for which options may be granted to Mr. Lucia is in the sole discretion of the Compensation Committee of our Board of Directors.

If we terminate Mr. Lucia’s employment without “cause” or if his employment ceases because of his death or disability or within 45 days of a change in control of us (all as defined in the Lucia Agreement), Mr. Lucia will be entitled to a continuation of salary and group medical insurance for 24 months following termination of employment. In addition, certain of his unvested options accelerate in the case of a change in control.

Walter D. Hosp — Chief Financial Officer

The terms of Mr. Hosp’s employment provide for a base salary of $325,000 per year. He is eligible for an annual performance bonus, with a target bonus of 40% of base salary, prorated for the portion of a year for which he is an employee, in each case as may be determined by our Board of Directors in its sole discretion on the basis of meeting the business objectives established from time to time by our Board of Directors. For 2008, Mr. Hosp received a performance bonus of $161,200. Upon his commencement of employment with us, Mr. Hosp was granted options to purchase 60,000 shares of Common Stock at an exercise price of $19.12 per share (the then current market price), with options covering 15,000 shares vesting on the first anniversary of the grant, and options covering the remaining 45,000 shares vesting thereafter in three equal annual installments. These options were not granted pursuant to our 2006 Stock Plan.

In the event of the involuntary termination of Mr. Hosp’s employment, he will be entitled to a continuation of salary and benefits for six months.

David Schmid — Vice President of Human Resources

The terms of Mr. Schmid’s employment provide for a base salary of $200,000 per year. He is eligible for an annual performance bonus, with a target bonus of 40% of base salary, prorated for the portion of a year for which he is an employee, in each case as may be determined by our Board of Directors in its sole discretion on the basis of meeting the business objectives established from time to time by our Board of Directors. For 2008, Mr. Schmid received a performance bonus of $99,200. Upon his commencement of employment with us, Mr. Schmid received a sign-on bonus of $25,000. In addition, Mr. Schmid was granted options to purchase 25,000 shares of Common Stock at an exercise price of $21.86 per share (the then current market price), with options covering 6,250 shares vesting on the first anniversary of the grant, and options covering the remaining 18,750 shares vesting thereafter in three equal annual installments. These options were granted pursuant to our 2006 Stock Plan.

In the event of the involuntary termination of Mr. Schmid’s employment, he will be entitled to a continuation of salary and benefits for six months.

William F. Miller III — Director

Effective January 2006, our employment agreement with Mr. Miller, originally entered into in October 2000 and amended in November 2003 (the Miller Agreement) was amended and restated. As so amended and restated, the Miller Agreement provided that the term of Mr. Miller’s employment was extended through December 31, 2007 and that he served as an executive. Mr. Miller assisted in the development of strategic alternatives for us, including possible acquisitions, advising on our investor relations efforts, and performing such other duties as may be assigned by the Board of Directors or Chief Executive Officer from time to time. The Miller Agreement provided for a lump-sum payment to Mr. Miller of $600,000 in lieu of preexisting severance obligations and any other bonus, which we paid upon execution of the Miller Agreement in 2005. The Miller Agreement provided for a base salary of $100,000 per annum, through the end of the employment term.

Our obligations to pay compensation terminated upon the expiration of the Miller Agreement on December 31, 2007. Mr. Miller’s health insurance benefits were provided by us through December 31, 2008. Non-competition, non-solicitation and non-interference covenants will apply to Mr. Miller through December 31, 2009.

Report of Compensation Committee

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

By the Compensation Committee of the Board of Directors of HMS Holdings Corp.

Richard H. Stowe, Chair
James T. Kelly
William W. Neal

Notwithstanding contrary statements set forth in any of our previous filings under the Securities Act of 1933 (the Securities Act) or the Exchange Act that might incorporate future filings, including this Proxy Statement, the Compensation Committee report and the Report of the Audit Committee set forth below shall not be incorporated by reference into such future filings.

Compensation Committee Interlocks and Insider Participation

During 2008, the members of our Compensation Committee were Richard H. Stowe, William W. Neal, and James T. Kelly, none of whom has ever been an officer or employee of the Company and none of whom had any related person transaction involving the company. During 2008, none of our executive officers (1) served as a member of the Board of Directors or compensation committee of any other entity that had one or more of its executive officers serving as a member of our Compensation Committee or (2) served as a member of the compensation committee of any other entity that had one or more of its executive officers service as a member of our Board of Directors.

Equity Compensation Plan Information

The following table summarizes the total number of outstanding options and shares available for other future issuances of options under all of our equity compensation plans as of December 31, 2008.

Number of Securities

Number of Securities to

Weighted-Average

Remaining Available

be Issued Upon Exercise

Exercise Price of

for Future Issuance

of Outstanding

Outstanding

Under Equity Compensation

Warrants,

Plans (Excluding Securities

Options and Rights

Reflected in Column (a)

Plan Category

(a)

(b)

(c)(2)

Equity Compensation Plans approved by Shareholders(1)

3,365,189

12.94

374,299

Equity Compensation Plans not approved by Shareholders(3)

701,250

8.98

—

Total

4,066,439

12.26

374,299


(1)		This includes options to purchase shares outstanding under: (i) the 2006 amended and restated Stock Plan and (ii) the 1999 Long-Term Incentive Plan (which was terminated upon shareholder approval of the 2006 Stock Plan).

(2)		These shares remain available for issuance under the 2006 Stock Plan.

(3)		Options issued under plans not approved by the shareholders include (i) 300,000 inducement options granted in March 2001 to our Chairman (and former Chief Executive Officer) in connection with his joining us, (ii) 341,250 inducement options granted in September 2006 to ten former senior executives of BSPA in connection with their joining us and (iii) 60,000 inducement options granted to the Chief Financial Officer in 2007.

As of March 31, 2009 we had a total of 3,719,152 stock options outstanding under the 2006 Stock Plan, our 1999 Long-Term Incentive Stock Plan (the 1999 Plan) (which plan was terminated in connection with the adoption of the 2006 Stock Plan) and inducement options issued outside of our plans. The weighted average exercise price of these options is $12.70 per share, and they have a weighted average term during which they may be exercised of 5.2 years. In addition, 127,918 restricted stock awards were outstanding on March 31, 2009.

Report of Audit Committee

In accordance with its Charter, the Audit Committee of the Board of Directors, among its other duties, assists the Board in fulfilling its responsibility for oversight of the quality and integrity of our accounting, auditing, and financial reporting practices. During 2008, the Audit Committee met four times. The Audit Committee discussed the interim financial information contained in each quarterly earnings announcement with our Chief Executive Officer and Chief Financial Officer and independent auditors prior to public release.

In discharging its oversight responsibility as to the audit process, the Audit Committee obtained from the independent auditors a formal written statement describing all relationships between the auditors and us that might bear on the auditors’ independence required by applicable requirements of the Public Company Accounting Oversight Board, discussed with the auditors any relationships that may impact their objectivity and independence and determined the auditor’s independence. The Audit Committee also discussed with senior management, including our Chief Financial Officer, and the independent auditors the quality and adequacy of our internal controls and organization and responsibilities. The Audit Committee reviewed with both the independent auditors and our Chief Financial Officer their audit plans, audit scope and identification of audit risks.

The Audit Committee discussed and reviewed with the independent auditors all communications required by generally accepted auditing standards, including those described in Statement on Auditing Standards No. 61, as amended, “Communications with Audit Committees” and, with and without management present, discussed and reviewed the results of the independent auditors’ examination of our financial statements. The Audit Committee has considered whether the provision of nonaudit services by our independent auditor is compatible with the auditor’s independence.

The Audit Committee reviewed and discussed our audited financial statements as of and for the fiscal year ended December 31, 2008 with management. Management has the responsibility for the preparation of our financial statements and the independent auditors have the responsibility for the examination of those statements.

Based on the above mentioned review and discussions with management and the independent auditors, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2008, for filing with the Securities and Exchange Commission. The Committee also recommended the reappointment, subject to shareholder approval, of the independent auditors and the Board concurred in such recommendation.

By the Audit Committee of the Board of Directors of HMS Holdings Corp.

Ellen A. Rudnick, Chair
James T. Kelly,
Richard H. Stowe

Other Business

As of the date of this Proxy Statement, the Board of Directors knows of no business to be presented at the Annual Meeting other than as set forth herein. If other matters properly come before the Annual Meeting, the persons named as proxies will vote on such matters in their discretion.

Shareholder Proposals for 2010 Annual Meeting and Other Shareholder Communications

Any shareholder proposals intended to be presented at our 2010 Annual Meeting of Shareholders must be received by the Secretary, HMS Holdings Corp., 401 Park Avenue South, New York, New York 10016, no later than

January 4, 2010 in order to be considered for inclusion in our Proxy Statement and form of proxy relating to such meeting. Shareholder communications to the Board of Directors, including any such communications relating to director nominees, may also be addressed to our Secretary at that address. The Board believes that no more detailed process for these communications is appropriate, due to the variety in form, content and timing of these communications. Our Secretary will forward the substance of meaningful shareholder communications, including those relating to director candidates, to the Board or the appropriate committee upon receipt.

Moreover, with regard to any proposal by a shareholder not seeking to have such proposal included in the Proxy Statement but seeking to have such proposal considered at the 2010 Annual Meeting, if such shareholder fails to notify us in the manner set forth above of such proposal no later than March 19, 2010 then the persons appointed as proxies may exercise their discretionary voting authority if the proposal is considered at the 2010 Annual Meeting notwithstanding that shareholders have not been advised of the proposal in the Proxy Statement for the 2010 Annual Meeting. Any proposals submitted by shareholders must comply in all respects with (i) the rules and regulations of the Securities and Exchange Commission, (ii) the provisions of our certificate of incorporation and by-laws and (iii) applicable New York law.

Annual Report

Our 2008 Annual Report on Form 10-K is concurrently being mailed to shareholders. The Annual Report contains our consolidated financial statements and the report thereon of KPMG LLP, independent registered public accounting firm.

BY ORDER OF THE BOARD OF DIRECTORS

Walter D. Hosp
Chief Financial Officer and
Corporate Secretary

Dated: April 30, 2009

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE ENCLOSED ENVELOPE.

HMS HOLDINGS CORP.
THIRD AMENDED AND RESTATED
2006 STOCK PLAN
(as proposed to be amended)

Section 1. Purpose

The purpose of the HMS Holdings Corp. 2006 Stock Plan (“the Stock Plan”) is to furnish a material incentive to employees and non-employee Directors of the Company and its subsidiaries by making available to them the benefits of a larger common stock ownership in the Company through stock options and awards. It is believed that these increased incentives stimulate the efforts of employees and non-employee Directors towards the continued success of the Company and its affiliates, as well as assist in the recruitment of new employees and non-employee Directors.

Section 2. Definitions

As used in the Stock Plan, the following terms shall have the meanings set forth below:

(a) “Affiliate” shall mean (i) any Person that directly, or through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company or (ii) any entity in which the Company has a significant equity interest, as determined by the Committee.

(b) “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Share, Performance Unit, dividend equivalent or any other right, interest or option relating to Shares granted pursuant to the provisions of the Stock Plan.

(c) “Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder, which in the sole and absolute discretion of the Committee may, but need not, be signed or acknowledged by the Company and the Participant.

(d) “Award Period” shall have the meaning set forth in Section 9 of the Stock Plan.

(e) “Board” shall mean the Board of Directors of the Company.

(f) “Change in Control” shall mean the occurrence of any of the following events: (i) at any time during the initial two-year period following the Effective Date or during each subsequent Renewal Term, as the case may be, at least a majority of the Board shall cease to consist of “Continuing Directors” (meaning directors of the Company who either were Directors at the beginning of such initial two-year period or subsequent Renewal Term, as the case may be, or who subsequently became Directors and whose election, or nomination for election by the Company’s stockholders, was approved by a majority of the then Continuing Directors); or (ii) any “person” or “group” (as determined for purposes of Section 13(d)(3) of the Exchange Act), except any majority-owned subsidiary of the Company or any employee benefit plan of the Company or any trust thereunder, shall have acquired “beneficial ownership” (as determined for purposes of Securities and Exchange Commission (“SEC”) Regulation 13d-3) of Shares having 35% or more of the voting power of all outstanding Shares, unless such acquisition is approved by a majority of the directors of the Company in office immediately preceding such acquisition, provided that a Change in Control shall not be deemed to occur because any person or group acquires beneficial ownership of 35% or more of the voting power of all outstanding Shares solely as a result of the Company’s acquisition of Shares which reduces the number of Shares outstanding unless and until after such acquisition such person or group becomes the beneficial owner of additional Shares that increases the percentage of the voting power of outstanding Shares beneficially owned by such person or group; or (iii) a merger or consolidation occurs to which the Company is a party, in which outstanding Shares are converted into shares of another company (other than a conversion into shares of voting common stock of the successor corporation or a holding company thereof representing 55% of the voting power of all capital stock thereof outstanding immediately after the merger or consolidation) or other securities (of either the Company or another company) or cash or other property; or (iv) the sale of all, or substantially all, of the Company’s assets occurs; or (v) the stockholders of the Company approve a plan of complete liquidation of the Company. Notwithstanding the foregoing, as to any Award under the Stock Plan

that consists of deferred compensation subject to Section 409A of the Code, the definition of “Change in Control” shall be deemed modified to the extent necessary to comply with Section 409A of the Code.

(g) “Change in Control Price” means, with respect to a Share, (A) if the Change in Control is the result of a tender or exchange offer or a corporate transaction, the price per such Share paid in such tender or exchange offer or corporate transaction; or (B) if the Change in Control is not the result of a tender or exchange offer or a corporate transaction, the Fair Market Value per Share on the date of the Change in Control. To the extent the consideration paid in any such transaction described above consists in full or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Committee.

(h) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

(i) “Committee” shall mean the Compensation Committee of the Board or such other persons or committee to which it has delegated any authority, as may be appropriate. A person may serve on the Compensation Committee only if he or she (i) is a “Non-employee Director” for purposes of Rule 16b-3 under the Exchange Act, and (ii) satisfies the requirements of an “outside director” for purposes of Section 162(m) of the Code.

(j) “Company” shall mean HMS Holdings Corp., a New York corporation.

(k) “Covered Employee” shall mean a “covered employee” within the meaning of Section 162(m)(3) of the Code, or any successor provision thereto.

(l) “Director” shall mean a member of the Board.

(m) “Effective Date” shall mean June 6, 2006, the date this Stock Plan is effective.

(n) “Employee” shall mean any employee of the Company or any Affiliate. For any and all purposes under this Stock Plan, the term “Employee” shall not include a person hired as an independent contractor, leased employee, consultant or a person otherwise designated by the Committee, the Company or an Affiliate at the time of hire as not eligible to participate in or receive benefits under the Stock Plan or not on the payroll, even if such ineligible person is subsequently determined to be a common law employee of the Company or an Affiliate or otherwise an employee by any governmental or judicial authority. Unless otherwise determined by the Committee in its sole discretion, for purposes of the Stock Plan, an Employee shall be considered to have terminated employment or services and to have ceased to be an Employee if his or her employer ceases to be an Affiliate, even if he or she continues to be employed by such employer.

(o) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(p) “Fair Market Value” shall mean, with respect to Shares, as of any date, the closing price of the Shares as reported on the NASDAQ Global Select Market for that date or, if no such prices are reported for that date, the closing price on the next preceding date for which such prices were reported, unless otherwise determined by the Committee.

(q) “Incentive Stock Option” shall mean an Option granted under Section 6 that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.

(r) “Nonqualified Stock Option” shall mean either an Option granted under Section 6 that is not intended to be an Incentive Stock Option or an Incentive Stock Option that has been disqualified.

(s) “Option” shall mean any right granted to a Participant under the Stock Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine.

(t) “Participant” shall mean an Employee or a non-employee member of the Board who is selected by the Committee or the Board from time to time in their sole discretion to receive an Award under the Stock Plan.

(u) “Performance Award” shall have the meaning set forth in Section 9 of the Stock Plan.

(v) “Performance Goals” shall have the meaning set forth in Section 9 of the Stock Plan.

(w) “Performance Period” shall mean that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured.

(x) “Performance Shares” shall have the meaning set forth in Section 9 of the Stock Plan.

(y) “Performance Units” shall have the meaning set forth in Section 9 of the Stock Plan.

(z) “Person” shall mean any individual, corporation, partnership, association, limited liability company, joint-stock company, trust, unincorporated organization or government or political subdivision thereof.

(aa) “Phantom Stock Award” shall mean any right granted to a Participant by the Committee pursuant to Section 10.

(bb) “Renewal Term” shall mean the two-year period beginning on the second anniversary of the Effective Date and each successive two-year period thereafter.

(cc) “Restricted Period” shall have the meaning set forth in Section 8 of the Stock Plan.

(dd) “Restricted Stock” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including, without limitation, any restriction on the right to vote such Share, and the right to receive any cash dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

(ee) “Restricted Stock Award” shall mean an award of Restricted Stock under Section 8.

(ff) “Restricted Stock Unit” shall mean a unit that is valued by reference to a Share, which value may be paid to the Participant by delivery of cash, Shares or such other property as the Committee shall determine and with such restrictions as the Committee, in its sole discretion, may impose and which may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

(gg) “Restricted Stock Unit Award” shall mean an award of Restricted Stock Units under Section 8.

(hh) “Section 16 Participant” shall have the meaning set forth in Section 16 of the Stock Plan.

(ii) “Shares” shall mean the shares of common stock of the Company.

(jj) “Spread” shall have the meaning set forth in Section 7 of the Stock Plan.

(kk) “Stand Alone SAR” shall have the meaning set forth in Section 7 of the Stock Plan.

(ll) “Stock Appreciation Right” shall have the meaning set forth in Section 7 of the Stock Plan.

(mm) “Tandem SAR” shall have the meaning set forth in Section 7 of the Stock Plan.

(nn) “1999 Plan” shall mean the Company’s 1999 Long-Term Incentive Stock Plan.

Section 3. Administration

The Stock Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to such orders or resolutions not inconsistent with the provisions of the Stock Plan as may from time to time be adopted by the Board, to (a) select the Employees of the Company and its Affiliates to whom Awards may from time to time be granted hereunder; (b) determine the type or types of Award to be granted to each Participant hereunder; (c) determine the number of Shares to be covered by or relating to each Award granted hereunder; (d) determine the terms and conditions, not inconsistent with the provisions of the Stock Plan, of any Award granted hereunder; (e) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property or canceled or suspended; (f) determine whether, to what extent, and under what circumstances payment of cash, Shares, other property and other amounts payable with respect to an Award made under the Stock Plan shall be deferred either automatically or at the election of the Participant; (g) interpret and administer the Stock Plan and any instrument or agreement entered into under the Stock Plan; (h) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Stock

Plan; and (i) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Stock Plan. The Committee may, in its sole and absolute discretion, and subject to the provisions of the Stock Plan, from time to time delegate any or all of its authority to administer the Stock Plan to any other persons or committee as it deems necessary or appropriate for the proper administration of the Stock Plan, except that no such delegation shall be made in the case of Awards intended to be qualified under Section 162(m) of the Code. The decisions of the Committee shall be final, conclusive and binding with respect to the interpretation and administration of the Stock Plan and any grant made under it. The Committee shall make, in its sole discretion, all determinations arising in the administration, construction or interpretation of the Stock Plan and Awards under the Stock Plan, including the right to construe disputed or doubtful Stock Plan or Award terms and provisions, and any such determination shall be conclusive and binding on all persons, except as otherwise provided by law. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings.

Except as provided in Section 12, the Committee shall be authorized to make adjustments in Performance Award criteria or in the terms and conditions of other Awards in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in applicable laws, regulations or accounting principles. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Stock Plan or any Award in the manner and to the extent it shall deem desirable to carry it into effect. In the event that the Company shall assume outstanding employee benefit awards or the right or obligation to make future such awards in connection with the acquisition of or combination with another corporation or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards under the Stock Plan as it shall deem appropriate.

Upon the approval of the Stock Plan by the shareholders of the Company, the 1999 Plan shall be terminated and of no further force and effect.

Section 4. Shares Subject to the Stock Plan

(a) Subject to adjustment as provided in Section 4(c), a total of 4,000,000 Shares shall be authorized for issuance pursuant to Awards granted under the Stock Plan. Any Shares issued in connection with Options and Stock Appreciation Rights shall be counted against the 4,000,000 limit described above as (1.0) Share for every one Share issued in connection with such Award or by which the Award is valued by reference. Any Shares issued in connection with Awards other than Options and Stock Appreciation Rights shall be counted against the 4,000,000 limit described above as one and eighty-five hundredths (1.85) Shares for every one Share issued in connection with such Award or by which the Award is valued by reference. No Participant under this Stock Plan shall be granted Options, Stock Appreciation Rights or other Awards intended to comply with the performance-based exception of Section 162(m) of the Code in any calendar year covering more than 200,000 Shares, and no Award will be granted to any Participant who owns more than ten percent of the stock of the Company within the meaning of Section 422 of the Code. If an Award is subject to a performance period greater than one fiscal year, the maximum numbers set forth above will equal the maximum times the number of years in the performance period. The foregoing sentence will be construed in a manner consistent with Section 162(m) of the Code.

(b) Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued Shares, treasury Shares or Shares purchased in the open market or otherwise.

(c) In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, special cash dividend, stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Shares, the equitable adjustments and other substitutions shall be made to the Stock Plan and to Awards as the Committee, in its sole discretion, deems necessary, including, without limitation, such adjustments in the aggregate number, class and kind of securities that may be delivered under the Stock Plan, in the aggregate or to any one Participant, in the number, class, kind and option or exercise price of securities subject to outstanding Awards granted under the Stock Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) as the Committee may determine to be appropriate in its sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number and further provided that in no event may any change be made to an Incentive Stock Option which would constitute a modification within the meaning of Section 424(h)(3) of the Code.

(d) Any Shares that are not purchased or awarded under an Award that has terminated or lapsed or has been forfeited, either by its terms or pursuant to the exercise, in whole or in part, of an Award granted under the Stock Plan (other than Shares not issued in connection with the settlement in Shares of a Stock Appreciation Right) may be used for the further grant of Awards. In addition, if Shares under an Award are not issued because the Award is settled in cash, the Shares may be used for the further grant of Awards. Shares under this paragraph that may be used for the further grant of Awards shall be added back as one (1) Share if the Shares were subject to Options or Stock Appreciation Rights, and (ii) as one and eighty-five hundredths (1.85) Shares if the Shares were subject to Awards other than Options or Stock Appreciation Rights.

(e) Notwithstanding anything to the contrary the following Shares shall not be added to the maximum share limitations described above: (a) Shares tendered or withheld by the Company in payment of the exercise price of an Option; (b) Shares withheld by the Company to satisfy the tax withholding obligation and (c) Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of an Option.

(f) With respect to Stock Appreciation Rights that may be settled in stock, the number of Shares available for Awards under the Stock Plan will be reduced by the total number of Stock Appreciation Rights so granted; provided, however, that to the extent the Stock Appreciation Rights are settled in cash the Shares not issued may be used for the further grant of Awards as provided in paragraph (d) of this Section. Stock Appreciation Rights that may only be settled in cash will not reduce the number of Shares available for award under the Stock Plan.

(g) To the extent consistent with the requirements of Section 422 of the Code and regulations thereunder, and with other applicable legal requirements (including applicable stock exchange requirements), Shares issued under awards of an acquired company that are converted, replaced, or adjusted in connection with the acquisition will not reduce the number of Shares available for Awards under the Stock Plan.

Section 5. Eligibility

Any Employee or non-employee Director shall be eligible to be selected as a Participant; provided, however, that Incentive Stock Options shall only be awarded to Employees of the Company, or a parent or subsidiary, within the meaning of Section 422 of the Code. Notwithstanding any provision in this Stock Plan to the contrary, the Board shall have the authority, in its sole and absolute discretion, to select non-employee members of the Board as Participants who are eligible to receive Awards other than Incentive Stock Options under the Stock Plan. The Board shall set the terms of any such Awards in its sole and absolute discretion, and the Board shall be responsible for administering and construing such Awards in substantially the same manner that the Committee administers and construes Awards to Employees.

Section 6. Stock Options

Options may be granted hereunder to any Participant, either alone or in addition to other Awards granted under the Stock Plan and shall be subject to the following terms and conditions:

(a) Option Price. The option price per Share shall be not less than the Fair Market Value of the Shares on the date the Option is granted.

(b) Period of Stock Option. The period of each Option shall be fixed by the Committee, provided that the period for all Options shall not exceed seven years from the grant date. The Committee may, subsequent to the granting of any Option, extend the term thereof, but in no event shall the extended term exceed seven years from the original grant date.

(c) Exercise of Option and Payment Therefore. No Shares shall be issued until full payment of the option price has been made. The option price may be paid in cash or, if the Committee determines, by the Participant tendering Shares or by the Company withholding Shares otherwise issuable in connection with the exercise of the Option, a combination of cash and Shares, or through a cashless exercise procedure that allows Participants to sell immediately some or all of the Shares underlying the exercised portion of the Option in order to generate sufficient cash to pay the option price. If the Committee approves the use of Shares as a payment method, the Committee shall establish such conditions as it deems appropriate for the use of common stock to exercise an Option. Options awarded under the Stock Plan shall be exercised through such procedure

or program as the Committee may establish or define from time to time, which may include a designated broker that must be used in exercising such Options.

(d) First Exercisable Date. The Committee shall determine how and when Shares covered by an Option may be purchased. The Committee may establish waiting periods, the dates on which Options become exercisable or vested” and, subject to paragraph (b) of this section, exercise periods. The Committee may accelerate the exerciseability of any Option or portion thereof.

(e) Termination of Employment. Unless determined otherwise by the Committee, upon the termination of a Participant’s employment (for any reason other than gross misconduct), Option exercise privileges shall be limited to the Shares that were immediately exercisable at the date of such termination. The Committee, however, in its discretion, may provide that any Options outstanding but not yet exercisable upon the termination of a Participant’s employment may become exercisable in accordance with a schedule determined by the Committee. Such Option exercise privileges shall expire unless exercised within such period of time after the date of termination of employment as may be established by the Committee, but in no event later than the expiration date of the Option.

(f) Termination Due to Misconduct. If a Participant’s employment is terminated for gross misconduct, as determined by the Company, all rights under the Option shall expire upon the date of such termination.

(g) Limits on Incentive Stock Options. Except as may otherwise be permitted by the Code, an Employee may not receive a grant of Incentive Stock Options for Shares that would have an aggregate Fair Market Value in excess of $100,000 (or such other amount as the Internal Revenue Service may decide from time to time), determined as of the time that the Incentive Stock Option is granted, that would be exercisable for the first time by such person during any calendar year. If any grant is made in excess of the limits provided in the Code, such grant shall automatically become a Nonqualified Stock Option. Solely for purposes of determining whether Shares are available for the grant of Incentive Stock Options under the Stock Plan, the maximum aggregate number of Shares that may be issued pursuant to Incentive Stock Options granted under the Stock Plan shall be 4,000,000 Shares, subject to adjustment as provided in Section 4(c).

(h) No dividend equivalents. Anything in the Stock Plan to the contrary notwithstanding, no dividends or dividend equivalents may be paid on Options.

Section 7. Stock Appreciation Rights

The Committee may, in its discretion, grant a right to receive the appreciation in the Fair Market Value of Shares (“Stock Appreciation Right”) either singly or in combination with an underlying Option granted hereunder. Such Stock Appreciation Right shall be subject to the following terms and conditions and such other terms and conditions as the Committee may prescribe:

(a) Time and Period of Grant. If a Stock Appreciation Right is granted with respect to an underlying Option (a “Tandem SAR”), it may be granted at the time of the Option grant or at any time thereafter but prior to the expiration of the Option grant. At the time the Tandem SAR is granted the Committee may limit the exercise period for such Stock Appreciation Right, before and after which period no Stock Appreciation Right shall attach to the underlying Option. In no event shall the exercise period for a Tandem SAR exceed the exercise period for such Option. If a Stock Appreciation Right is granted without an underlying Option (a “Stand Alone SAR”), the period for exercise of the Stock Appreciation Right shall be set by the Committee. The period of each Stock Appreciation Right shall be fixed by the Committee, provided that the period for all Stock Appreciation Rights shall not exceed seven years from the grant date.

(b) Value of Stock Appreciation Right. A Participant who is granted a Tandem SAR will be entitled to surrender the Option which is then exercisable and receive in exchange therefore an amount equal to the excess of the Fair Market Value of the Shares on the date the election to surrender is received by the Company, in accordance with exercise procedures established by the Company, over the Option price (the Spread”) multiplied by the number of Shares covered by the Option which is surrendered. A Participant who is granted a Stand Alone SAR will receive upon exercise of the Stock Appreciation Right an amount equal to the excess of the Fair Market Value of the Shares on the date the election to surrender such Stand Alone SAR is received by

the Company, in accordance with exercise procedures established by the Company, over the Fair Market Value of the Shares on the date of grant multiplied by the number of Shares covered by the grant of the Stand Alone SAR. Notwithstanding the foregoing, in its sole discretion the Committee at the time it grants a Stock Appreciation Right may provide that the Spread covered by such Stock Appreciation Right may not exceed a specified amount.

(c) Payment of Stock Appreciation Right. Payment of a Stock Appreciation Right shall be in the form of Shares, cash or any combination of Shares and cash. The form of payment upon exercise of such a right shall be determined by the Committee either at the time of grant of the Stock Appreciation Right or at the time of exercise of the Stock Appreciation Right.

(d) No dividend equivalents. Anything in the Stock Plan to the contrary notwithstanding, no dividends or dividend equivalents may be paid on Stock Appreciation Rights.

Section 8. Restricted Stock Awards and Restricted Stock Unit Awards

The Committee may make Restricted Stock Awards and Restricted Stock Unit Awards to a Participant, which Awards shall be subject to the following terms and conditions and such other terms and conditions as the Committee may prescribe:

(a) Requirement of Employment or Board Membership. A Participant who is granted a Restricted Stock Award or Restricted Stock Unit Award must remain an Employee or a Director of the Company during a period designated by the Committee (“Restricted Period”) in order to receive the Shares, cash or combination thereof under the Restricted Stock Award or Restricted Stock Unit Award. If the Participant ceases being an Employee or a Director of the Company prior to the end of the Restricted Period, the Restricted Stock Award or Restricted Stock Unit Award shall terminate and any Shares subject to a Restricted Stock Award shall be returned immediately to the Company, provided that the Committee may, at the time of the grant, provide for the employment or Board membership restriction to lapse with respect to a portion or portions of the Restricted Stock Award or Restricted Stock Unit Award at different times during the Restricted Period. The Committee may, in its discretion, also provide for such complete or partial exceptions to the employment or Board membership restriction as it deems equitable.

(b) Restrictions on Transfer and Legend on Stock Certificates. During the Restricted Period, the Participant may not sell, assign, transfer, pledge or otherwise dispose of the Restricted Stock Award or Restricted Stock Unit Award, including but not limited to any Shares. Any certificate for Shares issued hereunder shall contain a legend giving appropriate notice of the restrictions in the Award.

(c) Escrow Agreement. The Committee may require the Participant to enter into an escrow agreement providing that any certificates representing the Restricted Stock Award will remain in the physical custody of an escrow holder until all restrictions are removed or expire.

(d) Lapse of Restrictions. All restrictions imposed under the Restricted Stock Award or Restricted Stock Unit Award shall lapse upon the expiration of the Restricted Period if the conditions as to employment or Board membership set forth above have been met. The Participant shall then be entitled to have the legend removed from any certificates for Restricted Stock. Restricted Stock Awards and Restricted Stock Unit Awards may be paid in the form of Shares, cash or any combination of Shares and cash as determined by the Committee. The Committee may establish rules and procedures to permit a Participant to defer recognition of income upon the expiration of the Restricted Period.

(e) Dividends. The Committee may, in its discretion, at the time of the Restricted Stock Award or Restricted Stock Unit Award, provide that any dividends declared on Shares during the Restricted Period or dividend equivalents be (i) paid to the Participant, other than with respect to a Restricted Stock Award or Restricted Stock Unit Award that is conditioned on the achievement of one or more Performance Goals (as defined in Section 9(a)), (ii) accumulated or reinvested in additional Restricted Stock or credited to additional Restricted Stock Units for the benefit of the Participant and paid to the Participant only after the expiration of the Restricted Period or (iii) not paid or accumulated or reinvested or credited.

(f) Performance Goals. The Committee may designate whether any Restricted Stock Award or Restricted Stock Unit Award is intended to be “performance-based compensation” as that term is used in Section 162(m) of the Code. Any such Restricted Stock Award or Restricted Stock Unit Award designated to be “performance-based compensation” shall be conditioned on the achievement of one or more Performance Goals (as defined in Section 9(a)), to the extent required by Section 162(m).

(g) Vesting. The restrictions on each Restricted Stock Award or Restricted Stock Unit Award will lapse at such time or times, and on such conditions, as the Committee may specify. However, no Restricted Stock Awards or Restricted Stock Unit Awards shall be awarded with a vesting period of less than three years from the date of grant if the vesting of such Restricted Stock Award or Restricted Stock Unit Award is subject only to continued service with the Company or a subsidiary, except for Restricted Stock Awards or Restricted Stock Unit Awards awarded (i) to new hires to replace forfeited awards from a prior employer, (ii) to non-employee members of the Board or (iii) in payment of Performance Awards and other earned cash-based incentive compensation. The foregoing limitation shall not apply to Performance Awards under Section 9 of the Stock Plan, which will have a minimum vesting period of one year. Notwithstanding the preceding two sentences, the Committee may, in its discretion, accelerate vesting in the event of the death, disability or retirement of a Participant or a Change in Control.

Section 9. Performance Awards

The Committee may grant Awards denominated in Shares (“Performance Shares”), or denominated in dollars (“Performance Units”) if the performance of the Company or its subsidiaries during the Award Period (as defined below) meets certain goals established by the Committee (“Performance Awards”). The maximum amount that may be earned by any Participant for each fiscal year in an Award Period with respect to Performance Units that are intended to comply with the performance-based exception under Code Section 162(m) is $1,500,000. Performance Awards shall be subject to the following terms and conditions and such other terms and conditions as the Committee may prescribe:

(a) Award Period and Performance Goals. The Committee shall determine and include in a Performance Award grant the period of time for which a Performance Award is made (“Award Period”), subject to a one-year minimum vesting requirement for a Performance Award denominated in Performance Shares. The Committee also shall establish performance objectives (“Performance Goals”) to be met by the Company or its subsidiary during the Award Period as a condition to payment of the Performance Award. The Performance Goals may include net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income (before or after allocation of corporate overhead and bonus); earnings per share; net income (before or after taxes); return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the Shares or any other publicly-traded securities of the Company; market share; gross profits; earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels; operating margins, gross margins or cash margin; year-end cash; debt reductions; stockholder equity; research and development achievements; strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property; establishing relationships with commercial entities with respect to the marketing, distribution and sale of the Company’s products (including with group purchasing organizations, distributors and other vendors); co-development, co-marketing, profit sharing, joint venture or other similar arrangements); financing and other capital raising transactions (including sales of the Company’s equity or debt securities; factoring transactions; sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); and implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures and recruiting and maintaining personnel.

Such Performance Goals also may be based solely by reference to the Company’s performance or the performance of a subsidiary, division, business segment or business unit of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies.

For a Performance Award not intended to constitute “performance-based compensation” under Section 162(m) of the Code, Performance Goals may include any other financial or other measurement established by the Committee.

(b) Payment of Performance Awards. The Committee shall establish the method of calculating the amount of payment to be made under a Performance Award if the Performance Goals are met, including the fixing of a maximum payment. After the completion of an Award Period, the performance of the Company or its subsidiary shall be measured against the Performance Goals, and the Committee shall determine, in accordance with the terms of such Performance Award, whether all, none or any portion of a Performance Award shall be paid. The Committee, in its discretion, may elect to make payment in Shares, cash or a combination of Shares and cash. Any cash payment shall be based on the Fair Market Value of Shares on, or as soon as practicable prior to, the date of payment. The Committee may establish rules and procedures to permit a Participant to defer recognition of income upon the attainment of a Performance Award.

(c) Revision of Performance Goals. As to any Performance Award not intended to constitute performance-based compensation” under Section 162(m) of the Code, at any time prior to the end of an Award Period, the Committee may revise the Performance Goals and the computation of payment if unforeseen events occur which have a substantial effect on the performance of the Company or its subsidiary and which, in the judgment of the Committee, make the application of the Performance Goals unfair unless a revision is made. For any Performance Award intended to constitute “performance-based compensation” under Section 162(m) of the Code, such revisions must be set forth in the Award Agreement within the time period required by Section 162(m).

(d) Requirement of Employment. A Participant who is granted a Performance Award must remain an Employee of the Company or its subsidiaries until the completion of the Award Period in order to be entitled to payment under the Performance Award; provided that the Committee may, in its discretion, provide for a full or partial payment where such an exception is deemed equitable.

(e) Dividends. The Committee may, in its discretion, at the time of the granting of a Performance Award, provide that any dividends declared on the Shares during the Award Period, and which would have been paid with respect to Performance Shares had they been owned by a Participant, be (i) paid to the Participant to the extent that the Performance Shares are earned, (ii) accumulated for the benefit of the Participant and used to increase the number of Performance Shares of the Participant or (iii) not paid or accumulated.

Section 10. Other Share-Based Awards

The Committee may grant an Award of actual Shares or phantom Shares (a “Phantom Stock Award”) to any Employee on such terms and conditions as the Committee may determine in its sole discretion. Share Awards may be made as additional compensation for services rendered by the Employee or may be in lieu of cash or other compensation to which the Eligible Employee is entitled from the Company.

The Committee may, in its discretion, at the time of the Shares Award, provide that any dividends declared on Shares during any Restricted Period or dividend equivalents be (i) paid to the Participant, (ii) accumulated for the benefit of the Participant and paid to the Participant only after the expiration of any Restricted Period or (iii) not paid or accumulated.

Section 11. Change in Control Provisions

(a) Unless provided otherwise in the terms of a particular Award, and notwithstanding any other provision of the Stock Plan to the contrary, in the event a Participant’s employment or service is involuntarily terminated without

cause (as determined by the Committee or Board in its sole discretion) during the 24-month period following a Change in Control:

(i) any Options and Stock Appreciation Rights outstanding, which are not then exercisable and vested, shall become immediately fully vested and exercisable;

(ii) the restrictions and deferral limitations applicable to any Restricted Stock Award or Restricted Stock Unit Award shall lapse, and such Restricted Stock and Restricted Stock Units shall immediately become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant;

(iii) all Performance Awards shall be considered to be earned and payable in full, based on the applicable performance criteria or, if not determinable, at the target level and any deferral or other restriction shall lapse and such Performance Awards shall be immediately settled or distributed; and

(iv) the restrictions and deferral limitations and other conditions applicable to any other Awards shall immediately lapse, and any such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant.

(b) Change in Control Cash Out. Notwithstanding any other provision of the Stock Plan, in the event of a Change in Control the Committee or Board may, in its discretion, provide that each Option or Stock Appreciation Right shall, upon the occurrence of a Change in Control, be cancelled in exchange for a cash payment to be made within 60 days of the Change in Control in an amount equal to the amount by which the Change in Control Price per Share exceeds the purchase price per Share under the Option or Stock Appreciation Right multiplied by the number of Shares granted under the Option or Stock Appreciation Right.

(c) Compliance with Section 409A of the Code. In the case of an Award providing for the payment of deferred compensation subject to Section 409A of the Code, any payment of such deferred compensation by reason of a Change in Control shall be made only if the Change in Control is one described in subsection (a)(2)(A)(v) of Section 409A and the guidance thereunder and shall be paid consistent with the requirements of Section 409A. If any deferred compensation that would otherwise be payable by reason of a Change in Control cannot be paid by reason of the immediately preceding sentence, it shall be paid as soon as practicable thereafter consistent with the requirements of Section 409A, as determined by the Committee.

Section 12. Amendments and Termination

The Board of Directors may discontinue the Stock Plan at any time and may from time to time amend or revise the terms of the Stock Plan as permitted by applicable statutes, except that it may not, without the consent of the Participants affected, revoke or alter, in a manner unfavorable to the Participants granted any Awards hereunder, any Awards then outstanding, nor may the Board amend the Stock Plan without stockholder approval where the absence of such approval would cause the Stock Plan to fail to comply with Rule 16b-3 under the Exchange Act, or any other requirement of applicable law or regulation. Notwithstanding the foregoing, without consent of affected Participants, Awards may be amended, revised or revoked when necessary to avoid penalties under Section 409A of the Code. Unless approved by the Company’s stockholders or as otherwise specifically provided under this Stock Plan, no adjustments or reduction of the exercise price of any outstanding Awards shall be made in the event of a decline in stock price, either by reducing the exercise price of outstanding Awards or through cancellation of outstanding Awards in connection with regranting of Awards at a lower price to the same individual, or by canceling an Option or a Stock Appreciation Right for cash or another Award (other than in connection with a Change in Control).

Section 13. Transferability

Each Incentive Stock Option granted under the Stock Plan shall not be transferable other than by will or the laws of descent and distribution; each other Award granted under the Stock Plan will not be transferable or assignable by the recipient, and may not be made subject to execution, attachment or similar procedures, other than by will or the laws of descent and distribution or as determined by the Committee in accordance with the Exchange Act or any other applicable law or regulation. Notwithstanding the foregoing, the Committee, in its discretion, may adopt rules permitting the transfer, solely as gifts during the grantee’s lifetime, of Options (other than Incentive Stock Options) to members of a Participant’s immediate family or to trusts, family partnerships or similar entities for the benefit of such immediate family members. For this purpose, immediate family member means the

Participant’s spouse, parent, child, stepchild, grandchild and the spouses of such family members. The terms of an Option shall be final, binding and conclusive upon the beneficiaries, executors, administrators, heirs and successors of the grantee.

Section 14. General Provisions

(a) Nothing in the Stock Plan shall be construed to limit the right of the Company to establish other plans or to pay compensation to its employees, in cash or property, in a manner which is not expressly authorized under the Stock Plan.

(b) Nothing in the Stock Plan shall be construed (i) to limit, impair or otherwise affect the Company’s right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell or transfer all or any part of its business or assets, or (ii) except as provided in Section 12, to limit the right or power of the Company or its subsidiaries to take any action which such entity deems to be necessary or appropriate.

(c) The Company and its Affiliates shall be authorized to withhold from any Award granted or payment due under the Stock Plan the amount of withholding taxes due in respect of an Award or payment hereunder and to take such other action as may be necessary in the opinion of the Company or Affiliate to satisfy all obligations for the payment of such taxes. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by delivery of or transfer of Shares to the Company, or by directing the Company to retain Shares (up to the Employee’s minimum required tax withholding rate) otherwise deliverable in connection with the Award.

(d) Any proceeds received by the Company under the Stock Plan shall be added to the general funds of the Company and shall be used for such corporate purposes as the Board of Directors shall direct.

(e) Nothing in the Stock Plan or any Award granted under the Stock Plan shall be deemed to constitute an employment or service contract or confer or be deemed to confer on any Employee or Participant any right to continue in the employ or service of, or to continue any other relationship with, the Company or any Affiliate or limit in any way the right of the Company or any Affiliate to terminate an Employee’s employment or Participant’s service at any time, with or without cause.

(f) All certificates for Shares delivered under the Stock Plan pursuant to any Award shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(g) No Award granted hereunder shall be construed as an offer to sell securities of the Company, and no such offer shall be outstanding, unless and until the Committee in its sole discretion has determined that any such offer, if made, would comply with all applicable requirements of the U.S. federal securities laws and any other laws to which such offer, if made, would be subject.

(h) Any Award shall contain a provision that it may not be exercised at a time when the exercise thereof or the issuance of shares thereunder would constitute a violation of any federal or state law or listing requirements of the NASDAQ National Market for such shares or a violation of any foreign jurisdiction where Awards are or will be granted under the Stock Plan.

(i) The provisions of the Stock Plan shall be construed, regulated and administered according to the laws of the State of New York without giving effect to principles of conflicts of law, except to the extent superseded by any controlling federal statute.

(j) If any provision of the Stock Plan is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Stock Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Stock Plan, it shall be stricken and the remainder of the Stock Plan shall remain in full force and effect.

(k) If approved by the Committee in its sole discretion, an Employee’s absence or leave because of military or governmental service, disability or other reason shall not be considered an interruption of employment for any purpose under the Stock Plan.

(l) Anything to the contrary in the Stock Plan notwithstanding, the Committee may (i) offset any Award by amounts reasonably believed to be owed to the Company by the Participant and (ii) disallow an Award to be exercised or otherwise payable during a time when the Company is investigating reasonably reliable allegations of gross misconduct by the Participant.

(m) Awards under the Stock Plan are intended either to be exempt from the rules of Section 409A of the Code or to satisfy those rules and shall be construed accordingly. However, the Company shall not be liable to any Participant or other holder of an Award with respect to any Award-related adverse tax consequences arising under Section 409A or other provision of the Code.

Section 15. Term of Stock Plan

The Stock Plan shall terminate on the tenth anniversary of the Effective Date, unless sooner terminated by the Board pursuant to Section 12.

Section 16. Compliance with Section 16 of the Exchange Act

With respect to Participants subject to Section 16 of the Exchange Act (“Section 16 Participants”), transactions under the Stock Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent that compliance with any Stock Plan provision applicable solely to such Section 16 Participants that is included solely for purposes of complying with Rule 16b-3 is not required in order to bring a transaction by such Section 16 Participant in compliance with Rule 16b-3, it shall be deemed null and void as to such transaction, to the extent permitted by law and deemed advisable by the Committee. To the extent any provision in the Stock Plan or action by the Committee involving such Section 16 Participants is deemed not to comply with an applicable condition of Rule 16b-3, it shall be deemed null and void as to such Section 16 Participants, to the extent permitted by law and deemed advisable by the Committee.

Please mark your votes as X indicated in this example FOR all nominees WITHHOLD listed (except as AUTHORITY indicated to the to vote for all contrary) nominees listed *EXCEPTIONS FOR AGAINST ABSTAIN 1 . ELECTION OF DIRECTORS 2. Approval of the proposed amendment to the 2006 Stock Plan. Nominees: 0 1 William F. Miller III 3. Ratification of the selection of KPMG LLP as the 0 2 William W. Neal Company’s independent accountants for the fiscal 0 3 Ellen A. Rudnick year ending December 31, 2009. 04 Michael A. Stocker 05 Richard H. Stowe 4. To transact such other business as may properly come before the meeting or any adjournment thereof. (INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below.) *Exceptions ___Mark Here for Address Change or Comments SEE REVERSE Signature Signature Date NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. FOLD AND DETACH HERE WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING, BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK. Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to annual meeting day. INTERNET http://www.proxyvoting.com/hmsy Use the Internet to vote your proxy. Have HMS Holdings your proxy card in hand when you access the web site. OR TELEPHONE 1-866-540-5760 Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card. To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope. Your Internet or telephone vote authorizes the named proxies Important notice regarding the Internet availability of to vote your shares in the same manner as if you marked, signed and returned your proxy card. proxy materials for the Annual Meeting of shareholders The Proxy Statement and the 2008 Annual Report to Stockholders are available at: http://bnymellon.mobular.net/bnymellon/hmsy 48178

HMS HOLDINGS CORP. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned appoints William C. Lucia and Walter D. Hosp, and any one of them, as proxies, to vote all shares of Common Stock of HMS Holdings Corp. (the Company) held of record by the undersigned as of April 28, 2009, the record date with respect to this solicitation, at the Annual Meeting of Shareholders of the Company to be held at 401 Park Avenue South, New York, New York 10016 on Friday, June 12, 2009, at 10:00 A.M. and any adjournments thereof, upon the following matters: THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 ON THE REVERSE HEREOF. IN THEIR DISCRETION, THE PROXIES ARE ALSO AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING. IF ANY NOMINEE DECLINES OR IS UNABLE TO SERVE AS A DIRECTOR, THEN THE PROXIES SHALL HAVE FULL DISCRETION TO VOTE FOR ANY OTHER PERSON DESIGNATED BY THE BOARD OF DIRECTORS. (Continued and to be signed on the reverse side) BNY MELLON SHAREOWNER SERVICES Address Change/Comments P.O. BOX 3550 (Mark the corresponding box on the reverse side) SOUTH HACKENSACK, NJ 07606-9250 FOLD AND DETACH HERE HMS HOLDINGS CORP. Annual Meeting of Shareholders June 12, 2009 401 Park Avenue South New York, NY 10016 Choose MLink^SMfor fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on to Investor ServiceDirect^{^®} at www.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you through enrollment. 48178


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General Information		1
Matters Subject to Shareholder Vote		2
1. Election of Directors		2
2. Approval of Amendment to the 2006 Stock Plan		9
3. Ratification of the Selection of Independent Registered Public Accounting Firm		18
Additional Information		19
Stock Ownership		19
Certain Relationships and Related Person Transactions		20
Executive Compensation		21
Report of Compensation Committee		32
Report of Audit Committee		33
Other Business		33
Third Amended and Restated 2006 Stock Plan		35