10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________________ to ______________________________

Commission file number: 000-22052

PROXYMED, INC.

(Exact name of registrant as specified in its charter)

Florida	65-0202059
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1854 Shackleford Court, Suite 200, Atlanta, Georgia	30093
(Address of principal executive offices)	(Zip Code)

(770) 806-9918

(Registrant’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  þ Yes    o No

Indicate by check mark whether registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act of 1934).  þ Yes    o No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $.001 Par Value
12,626,567 Shares as of May 9, 2005

1

TABLE OF CONTENTS

	Page
Part I — Financial Information
Item 1 - Consolidated Financial Statements:
Consolidated Balance Sheets as of March 31, 2005 (unaudited) and December 31, 2004		3
Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and 2004 (unaudited)		4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004 (unaudited)		5
Notes to Consolidated Financial Statements (unaudited)		6
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3 - Quantitative and Qualitative Disclosures About Market Risk		27
Item 4 - Controls and Procedures		27
Part II — Other Information
Item 1 - Legal Proceedings		28
Item 6 - Exhibits		29
Signatures		30-32
EX-10.1 EMPLOYMENT AGREEMENT
EX-31.1 SECTION 302, CERTIFICATION OF THE CEO
EX-31.2 SECTION 302, CERTIFICATION OF THE CFO
EX-32.1 SECTION 906, CERTIFICATION OF THE CEO
EX-32.2 SECTION 906, CERTIFICATION OF THE CFO

2

PART I

ITEM 1.

PROXYMED, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in thousands except for share and per share data)

	(Unaudited)
	March 31,			December 31,
	2005			2004
Assets
Current assets:
Cash and cash equivalents	$	11,559		$	12,374
Accounts receivable — trade, net of allowance of $3,038 and $3,168 respectively		16,335			17,591
Other receivables		218			312
Inventory, net		1,667			1,775
Other current assets		1,606			1,399
Total current assets		31,385			33,451
Property and equipment, net		4,765			4,801
Goodwill, net		93,604			93,604
Purchased technology, capitalized software and other intangible assets, net		50,589			52,305
Restricted cash		75			75
Other long-term assets		126			167
Total assets	$	180,544		$	184,403
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable and current portion of long-term debt	$	1,791		$	2,178
Related party debt		18,294			18,394
Accounts payable and accrued expenses		7,648			8,889
Accrued compensation costs		4,655			4,748
Deferred revenue		723			691
Income taxes payable		184			215
Total current liabilities		33,295			35,115
Convertible notes		13,137			13,137
Other long-term debt		—			206
Long-term deferred revenue and other long-term liabilities		726			863
Total liabilities		47,158			49,321
Commitments and contingencies (Note 9)
Stockholders’ equity:
Series C 7% Convertible preferred stock — $.01 par value. Authorized 300,000 shares; issued 253,265 shares; outstanding 2,000 shares; liquidation preference $200		—			—
Common stock — $.001 par value. Authorized 30,000,000 shares; issued and outstanding 12,626,567 and 12,626,567 shares, respectively		13			13
Additional paid-in capital		239,298			239,255
Accumulated deficit		(105,864	)		(104,073	)
Unearned compensation		(61	)		(113	)
Total stockholders’ equity		133,386			135,082
Total liabilities and stockholders’ equity	$	180,544		$	184,403

See notes to the unaudited consolidated financial statements.

3

PROXYMED, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
(amounts in thousands except for share and per share data)

	Three Months Ended March 31,
	2005			2004
Net revenues:
Transaction fees, cost containment services and license fees	$	19,198		$	15,886
Communication devices and other tangible goods		2,516			4,618
		21,714			20,504
Costs and expenses:
Cost of transaction fees, cost containment services and license fees, excluding depreciation and amortization		6,181			4,270
Cost of laboratory communication devices and other tangible goods, excluding depreciation and amortization		1,502			4,019
Selling, general and administrative expenses		12,625			10,409
Depreciation and amortization		2,596			1,849
		22,904			20,547
Operating loss		(1,190	)		(43	)
Interest expense, net		601			334
Loss before income taxes		(1,791	)		(377	)
Provision for income taxes		—			50
Net loss	$	(1,791	)	$	(427	)
Basic and diluted loss per share	$	(0.14	)	$	(0.05	)
Basic and diluted weighted average shares outstanding		12,626,567			8,570,731

See notes to the unaudited consolidated financial statements.

4

PROXYMED, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
(amounts in thousands)

	Three Months Ended March 31,
	2005			2004
Cash flows from operating activities:
Net loss	$	(1,791	)	$	(427	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Depreciation and amortization		2,596			1,849
Provision for doubtful accounts		—			207
Non-cash interest income		—			(27	)
Stock option compensation charges		95			106
Changes in assets and liabilities, net of effect of acquisitions and dispositions:
Accounts and other receivables		1,350			(641	)
Inventory		108			(226	)
Other current assets		251			60
Accounts payable and accrued expenses		(1,860	)		(51	)
Accrued expenses of PlanVista paid by ProxyMed		—			(4,011	)
Deferred revenue		41			53
Income tax		(31	)		—
Other current liabilities		390			(137	)
Net cash provided by (used in) operating activities		1,149			(3,245	)
Cash flows from investing activities:
Net cash acquired in acquisition		—			782
Capital expenditures		(723	)		(705	)
Capitalized software		(127	)		(380	)
Collection of notes receivable		—			45
Decrease in restricted cash		—			40
Payments for acquisition-related costs		—			(776	)
Net cash used in investing activities		(850	)		(994	)
Cash flows from financing activities:
Net proceeds from sale of common stock		—			24,100
Proceeds from exercise of stock options and warrants		—			8,750
Draws on line of credit		—			4,900
Repayment of line of credit		—			(4,400	)
Payment of related party note payable		(600	)		—
Payment of notes payable, capital leases and long-term debt		(514	)		(24,063	)
Net cash (used in) provided by financing activities		(1,114	)		9,287
Net (decrease) increase in cash and cash equivalents		(815	)		5,048
Cash and cash equivalents at beginning of period		12,374			5,333
Cash and cash equivalents at end of period	$	11,559		$	10,381
Supplemental disclosure of cash flow information:
Cash paid for interest	$	640		$	198
Non-cash investing and financing information:
Issuance of 3.6 million shares of common stock for PlanVista acquisition	$	—		$	59,760

See notes to the unaudited consolidated financial statements.

5

ProxyMed, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

(1) Summary of Significant Accounting Policies

(a)	Basis of Presentation — The accompanying unaudited consolidated financial statements of ProxyMed, Inc. and subsidiaries (“ProxyMed,” “we,” or “us”) and the notes thereto have been prepared in accordance with the instructions of Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”) and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America. However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim periods.
	The results of operations for the three months ended March 31, 2005 are not necessarily indicative of the results to be expected for the full year. The unaudited consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K/A for the year ended December 31, 2004 as filed with the SEC on March 31, 2005 (“10-K/A”).
(b)	Revenue Recognition — Revenue is derived from our Transaction Services and Laboratory Communication Solutions segments.
	Revenues in our Transaction Services segment are recorded as follows:

•   For revenues derived from insurance payers, pharmacies and submitters, such revenues are recognized on a per transaction basis or flat fee basis in the period the services are rendered.

•   Revenue from the Company’s medical cost containment business is recognized when the services are performed and are recorded net of estimated allowances. These revenues are primarily in the form of fees generated from discounts we secure for payers that access our provider network (see Note 1c).

•   Revenues associated with revenue sharing agreements are recorded as gross revenue on a per transaction basis or a percentage of revenue basis and may involve increasing amounts or percentages based on transaction or revenue volumes achieved. This treatment is in accordance with Emerging Issues Task Force Consensus No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent.”

•   Revenue from certain up-front fees is recognized ratably over three years, which is the expected life of the customer. This treatment is in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB No. 104”).

6

ProxyMed, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements, Continued
(Unaudited)

•   Revenue from support and maintenance contracts is recognized ratably over the contract period.

Revenues in our Laboratory Communication Solutions segment are recorded as follows:

•   Revenue from support and maintenance contracts is recognized ratably over the contract period.

•   Revenues from the sale of inventory and manufactured goods is recognized when the product is delivered, price is fixed or determinable, and collectibility is probable. This treatment is in accordance with SAB No. 104.

•   Revenue from the rental of laboratory communication devices is recognized ratably over the period of the rental contract.

(c)

Reserve for Revenue Adjustments, Doubtful Accounts and Bad Debt Estimates — The Company relies on estimates to determine the revenue adjustments, bad debt expense and the adequacy of our reserve for doubtful accounts receivable. These estimates are based on the Company’s historical experience, including historical collection ratios, and the industry in which the customer operates. If the financial condition of a customer were to deteriorate, resulting in an impairment of its ability to make payments, additional allowances are made.

(d)

Net loss per share — Basic net loss per share of common stock is computed by dividing net loss by the weighted average shares of common stock outstanding during the period. Diluted net loss per share reflects the potential dilution from the exercise or conversion of securities into common stock; however, the following shares were excluded from the calculation of diluted net loss per share because their effects would have been anti-dilutive:

	March 31,
	2005		2004
Common shares excluded in the computation of diluted net loss per share:
Stock options		32,044		151,347

7

ProxyMed, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements, Continued
(Unaudited)

(e)

Stock Based Compensation — The Company applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and related interpretations in accounting for its stock-based compensation plans. The Company measures compensation expense related to the grant of stock options and stock-based awards to employees (including independent directors) in accordance with the provisions of APB No. 25. In accordance with APB No. 25, compensation expense, if any, is generally based on the difference between the exercise price of an option, or the amount paid for an award, and the market price or fair value of the underlying common stock at the date of the award or at the measurement date for variable awards. Stock-based compensation arrangements involving non-employees are accounted for under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No. 123”) as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (“SFAS No. 148”), under which such arrangements are accounted for based on the fair value of the option or award.

Under SFAS No. 123, as amended by SFAS No. 148, compensation cost for the Company’s stock-based compensation plans would be determined based on the fair value at the grant dates for awards under those plans. Had the Company adopted SFAS No. 123 in accounting for our stock option plans, its consolidated net loss and net loss per share for the three months ended March 31, 2005 and 2004 would have been adjusted to the pro forma amounts indicated as follows:

	Three Months Ended March 31,
In thousands except for per share data	2005			2004
Net loss, as reported	$	(1,791	)	$	(427	)
Deduct: Total stock-based employee pro forma compensation expense determined under fair value based method for all awards, net of related tax effects (1)		(958	)		(376	)
Addback charges already taken for intrinsic value of options		95			14
Pro forma net loss	$	(2,654	)	$	(789	)
Loss per common share:
Basic and Diluted — as reported	$	(0.14	)	$	(0.05	)
Basic and Diluted — pro forma	$	(0.21	)	$	(0.09	)

(1)   The following ranges of assumptions were used in the calculation of pro forma compensation expense for the periods presented:

Risk-free interest rate		4.1% - 4.5	%		3.8% - 4.1	%
Expected life	6 years			10 years
Expected volatility		75% - 76	%		75% - 76	%
Dividend yield		0	%		0	%

8

ProxyMed, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements, Continued
(Unaudited)

	On September 1, 2004, 68,543 stock options granted to the former Chief Executive Officer (CEO) of PlanVista, with an exercise price of $17.74 per share were modified due to his change in employment status. Consequently, the Company is amortizing the $0.1 million value of these options as a non-cash charge in our consolidated statements of operations over the 30-month period of the agreement in proportion to the vesting schedule of the stock options. The value of these options was computed using a Black-Scholes model using the following assumptions: risk-free rate of 2.8%, expected life of 2.5 years, expected volatility of 65%, and no dividend yield. The Company must measure the value of these options each reporting period and record any increase in value as a period charge. Based on our measurements, no additional charge was recorded in the three months ended March 31, 2005.
	In December 2004, the Company’s new Chairman and Interim Chief Executive Officer was granted stock options to purchase 75,000 shares of our common stock at an exercise price of $7.10 per share in connection with his consulting agreement with us. Such options expire in 10 years and vest ratably over the first 12 months. The options will cease to vest if the consulting agreement is terminated. The total charge for these stock options is $172,800 and is being recorded ratably over the first twelve vesting months based on a Black-Scholes model using the following assumptions: risk-free rate of 2.9%, expected life of 2 years, expected volatility of 55%, and no dividend yield. In January 2005, the Interim CEO was granted stock options to purchase 25,000 shares of our stock at the market value on the date of issuance of $9.87 per share in his capacity as Chairman of the Board. These options expire in 10 years and vest ratably over the first 12 months. There is no compensation charge for these options.
(f)	New Accounting Pronouncements — In March 2005, the SEC issued Staff Accounting Bulletin (SAB) No. 107. This SAB provides guidance related to the application of SFAS No. 123(R), “Shared-Based Payments (Revised 2004)” for transactions with non-employees, the transition from nonpublic to public entity status, valuation methods, the accounting for certain redeemable financial instruments issued under share-based payment arrangements, the classification of compensation expense, non-GAAP financial measure, first-time adoption of Statement 123(R) and disclosures in Management’s Discussion and Analysis (MD&A) subsequent to adoption of Statement 123(R). The revised effective date of SFAS No. 123(R) is for annual reporting periods beginning after June 15, 2005. The adoption date for the Company is January 1, 2006. The Company has not completed the process of evaluating the impact that will result from adopting FASB Statement No. 123(R) and is therefore unable to disclose the impact that adoption will have on the Company’s financial position and results of operations.
	In September 2004, the Financial Accounting Standards Board (“FASB”) issued EITF No. 04-8, “Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share” (“EITF No. 04-8”). EITF No. 04-8 addresses when the dilutive effect of contingently convertible debt instruments should be included in diluted earnings per share and requires that contingently convertible debt

9

ProxyMed, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements, Continued
(Unaudited)

instruments are to be included in the computation of diluted earnings per share regardless of whether the market price or other trigger has been met. EITF No. 04-8 also requires that prior period diluted earnings per share amounts presented for comparative purposes be restated. EITF No. 04-8 is effective for reporting periods ending after December 15, 2004. As a result of the issuance of EITF No. 04-8, shares convertible from our $13.1 million convertible notes may be required to be included in the calculation of our earnings per share in periods of net income; however, the FASB has yet to reach a conclusion as to the effect of non-market price triggers on earnings per share calculations in situations where the instrument contains only non-market price triggers, such as our convertible notes, and therefore the impact on the consolidated financial statements is not determinable at this time.

In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” This Statement clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) and requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal” under ARB No. 43. The provisions of this Statement shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is evaluating the impact that adoption will have on the Company’s results of operations.

10

ProxyMed, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements, Continued
(Unaudited)

(2) Acquisition of PlanVista

On March 2, 2004, the Company acquired all of the capital stock of PlanVista Corporation (“PlanVista”), a publicly-held company that provides medical cost containment and business process outsourcing solutions, including claims repricing services, for the medical insurance and managed care industries, as well as services for healthcare providers, including individual providers, preferred provider organizations and other provider groups, for 3,600,000 shares of the Company’s common stock issued to PlanVista’s shareholders. In addition, the Company assumed debt and other liabilities of PlanVista, and incurred $1.3 million in acquisition related expenses. The value of these shares was $59.8 million based on the average closing price of our common stock for the day of and the two days before and after the announcement of the definitive agreement on December 8, 2003 in accordance with EITF No. 99-12, “Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in Purchase Business Combination.” Additionally, the Company raised $24.1 million in a private placement sale of its common stock to various entities affiliated with General Atlantic Partners and Commonwealth Associates to partially fund repayment of PlanVista’s debts and other obligations outstanding at the time of the acquisition.

The following unaudited pro forma summary presents the consolidated results of operations of both the Company and PlanVista as if the acquisition had occurred on January 1, 2005 and 2004. The 2004 results include $2.8 million of revenue from the manufacturing assets sold in June 2004. These pro forma results do not necessarily represent results that would have occurred if the acquisition had taken place on the dates, or of results that may occur in the future.

	Three Months Ended March 31,
In thousands except for per share data	2005			2004
Revenues	$	21,714		$	26,172
Net loss	$	(1,791	)	$	(91	)
Basic and diluted net loss per share of common stock	$	(0.14	)	$	(0.01	)

See Note 2 of the Audited Consolidated Financial Statements on our 2004 Form 10-K/A for complete detail pertaining to the PlanVista acquisition.

11

ProxyMed, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements, Continued
(unaudited)

(3) Inventory

Inventory consists of the following as of the dates indicated:

	Unaudited
	March 31,		December 31,
(in thousands)	2005		2004
Materials, supplies and component parts	$	630	$	651
Work in process		71		32
Finished goods		966		1,092
	$	1,667	$	1,775

(4) Other Intangible Assets

The estimated useful lives and the carrying amounts of other intangible assets as of March 31, 2005 and December 31, 2004, by category, are as follows:

(in thousands)
		March 31, 2005							December 31, 2004
	Estimated	Carrying		Accumulated					Carrying		Accumulated
	Useful lives	Amount		Amortization			Net		Amount		Amortization			Net
Capitalized software	3 - 5 years	$	2,778	$	(946	)	$	1,832	$	2,661	$	(769	)	$	1,892
Purchased technology	1 - 12 years		10,352		(5,137	)		5,215		10,342		(4,738	)		5,604
Customer relationships	4.6 - 12 years		34,283		(5,186	)		29,097		34,283		(4,324	)		29,959
Provider network	10 years		16,200		(1,755	)		14,445		16,200		(1,350	)		14,850
		$	63,613	$	(13,024	)	$	50,589	$	63,486	$	(11,181	)	$	52,305

The estimates of useful lives of other intangible assets are based on historical experience, the industry in which the entity operates, or on contractual terms. If indications arise that would materially impact these lives, an impairment charge may be required and the corresponding useful lives may be reduced. Other intangible assets are being amortized on a straight-line basis. Amortization expense for the three months ended March 31, 2005 and 2004 was $1.8 and $1.1 million, respectively.

12

ProxyMed, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements, Continued
(Unaudited)

As of March 31, 2005, estimated future amortization of other intangible assets is as follows:

In thousands
2005 (remainder of year)	$	5,486
2006		7,174
2007		6,809
2008		6,169
2009		5,063
2010		4,764
	$	35,465

(5) Debt Obligations

(a)	Senior Debt — As a result of the acquisition of PlanVista, we assumed and guaranteed a $20.4 million secured obligation to PVC Funding Partners, LLC (an investment company related to Commonwealth Associates, LP). This obligation is payable in monthly installments of $0.2 million and matures with a balloon payment of $17.6 million on May 31, 2005 and currently bears an interest rate of 10% (the obligation originally bore interest of 6% through November 2004), payable monthly in cash. Under the covenants of the senior debt obligation, PlanVista is limited in its ability to transfer cash to ProxyMed. Additionally, the assets of PlanVista are not eligible collateral for our asset-based line of credit due to covenants of the senior debt. At March 31, 2005, the balance of this senior debt is $17.8 million.
	On April 18, 2005, the Company closed a new senior debt facility. The Company used the proceeds from this facility and some of its cash to pay approximately $18.7 million which constituted all of the Company’s previous senior debt obligation and notes outstanding to former directors of PlanVista including all accrued interest. The Senior debt would have matured on May 31, 2005.
(b)	Convertible Notes — On December 31, 2002, we issued $13.4 million in uncollateralized convertible promissory notes at 4% to the former shareholders of MedUnite as part of the consideration paid in the acquisition of MedUnite. Interest is payable quarterly in cash in arrears. The convertible promissory notes are payable in full on December 31, 2008 unless converted earlier upon the meeting of certain aggregate revenue triggers by the former shareholders. After an offsetting claim by us in October 2003 in the amount of $0.3 million, the outstanding balance of these notes is $13.1 million. Additionally, as a result of the reduction in principal, the notes are now convertible into 716,968 shares of our common stock subject to achieving certain revenue triggers. The first revenue trigger was met in the fourth quarter of 2003, and the second revenue trigger date is June 30, 2005.

13

ProxyMed, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements, Continued
(Unaudited)

(c)	Notes Payable — In March 2003, we restructured $3.4 million in accounts payable and accrued expenses acquired from MedUnite and outstanding at December 31, 2002 to one vendor by paying $0.8 million in cash and financing the balance of $2.6 million with an unsecured note payable over 36 months at 8% commencing in March 2003. At March 31, 2005, the balance of this note payable is $0.8 million.
	In April 2003, we financed a net total of $2.0 million existing at December 31, 2002 from MedUnite to NDCHealth by issuing an unsecured note payable over 24 months at 6%. At March 31, 2005, the balance of this note payable is $0.6 million.
	As a result of the acquisition of PlanVista, we also assumed notes payable to two former board members of PlanVista. The combined balance of these notes is $0.5 million at March 31, 2005. One of these board members has been appointed as one of our directors as a result of the acquisition. These notes bear interest at prime plus 4% and $0.2 million in interest is accrued at March 31, 2005. Both principal and interest were due on December 1, 2004; however, repayment of principal and accrued interest are expressly subordinated to prior payment of the Senior Debt which was not yet paid as of March 31, 2005 and was due on May 31, 2005. (See Note 10)

(6) Equity Transactions

During the three months ended March 31, 2005 and 2004, we granted 39,000 and 241,373 stock options at exercise prices between $8.58 and $18.86 per share to officers and employees. Such options are for a ten-year term and generally vest equally over three or four years following the date of the grant. However, of these options, 173,120 options granted to employees of PlanVista upon its acquisition by us will vest two-thirds on the first anniversary date of the grant and one-third on the third anniversary date of the grant. Since these options were granted at an exercise price of $17.74, which was below the $19.00 market price at the time of issuance, we record periodic non-cash compensation charges over the vesting period of the options based on the intrinsic value method. For the three months ended March 31, 2005 and 2004, we recorded charges of $51,800 and $14,000, respectively, for these options.

As a result of PlanVista’s former Chief Executive Officer’s change in status and modification to the original stock option award, we are amortizing the $0.1 million value of these options as a non-cash compensation charge in the statement of operations over the 30-month period of the agreement in proportion to the vesting schedule of the stock options. Additionally, each reporting period we must measure the value of these options and record any increase in value as a period charge. As of March 31, 2005, the value of these options had not increased and therefore there was no additional charge recorded in the statement of operations for the three months ended March 31, 2005.

14

ProxyMed, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements, Continued
(Unaudited)

(7) Segment Information

We operate in two reportable segments that are separately managed: Transaction Services and Laboratory Communication Solutions. Transaction Services includes transaction, cost containment and other value-added services principally between physicians and insurance companies (Payer Services and Submitter Services), and providers and pharmacies. Laboratory Communication Solutions includes the sale, lease and service of communication devices principally to laboratories and, through June 30, 2004, the contract manufacturing of printed circuit boards (Laboratory Services). As a result of a re-alignment of our corporate overhead functions in the second quarter of 2004, we are now reporting these expenses and assets as part of our Transaction Services segment.

	Three Months Ended March 31,
In thousands	2005			2004
Net revenues by operating segment:
Transaction Services	$	18,607		$	14,594
Laboratory Communication Solutions		3,107			5,910
	$	21,714		$	20,504
Net revenues by geographic location:
Domestic	$	21,714		$	20,456
International (1)		—			48
	$	21,714		$	20,504
Operating income (loss) by operating segment:
Transaction Services	$	(1,776	)	$	797
Laboratory Communication Solutions		586			257
Corporate		—			(1,097	)
	$	(1,190	)	$	(43	)

	March 31, 2005		March 31, 2004
Total assets by operating segment:
Transaction Services	$	168,971	$	179,213
Laboratory Communication Solutions		11,573		12,018
	$	180,544	$	191,231

(1)   Laboratory Communication Solutions segment only.

(8) Income Taxes

As of March 31, 2005, we had a net deferred tax asset of approximately $71.7 million, which was fully offset by a valuation allowance due to cumulative losses in recent years. Realization of the net deferred tax asset is dependent upon us generating sufficient taxable income prior to the expiration of the federal net operating loss carryforwards. We will adjust this valuation reserve if, during future periods, management believes we will generate sufficient taxable income to realize the net deferred tax asset. The provision for income taxes reported in the

15

ProxyMed, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements, Continued
(Unaudited)

Consolidated statement of operations for the three months ended March 31, 2004 of approximately $0.1 million was related primarily to state income taxes.

(9) Commitments and Contingencies

(a)	Litigation — In December of 2001, Insurdata Marketing Services, Inc. (“IMS”) filed a lawsuit against HealthPlan Services, Inc. (“HPS”), a former subsidiary of the Company’s PlanVista subsidiary, for unspecified damages in excess of $75,000. The complaint alleges that HPS failed to pay commissions to IMS pursuant to an arbitration award rendered in 1996. On January 10, 2005, the court granted summary judgment to IMS on issue of liability for the arbitration award. The Company has filed an appeal on the issue of liability, and continues to contest vigorously the amount of damages claimed by IMS. The Company has determined exposure to be in the range of $0.6 million to $1.6 million and has accrued $0.6 million at March 31, 2005 and December 31, 2004.
	In early 2000, four named plaintiffs filed a class action against Fidelity Group, Inc. (“Fidelity”), “HPS”, Third Party Claims Management, and others, for unspecified damages. The complaint stems from the failure of a Fidelity insurance plan, and alleges unfair and deceptive trade practices; negligent undertaking; fraud; negligent misrepresentation; breach of contract; civil conspiracy; and RICO violations against Fidelity, and its contracted administrator, HPS. Two principals of the Fidelity plan have been convicted of insurance fraud and sentenced to prison in a separate proceeding. The class has been certified and the case is proceeding in discovery. The Company is contesting the plaintiffs’ claims vigorously, but is unable to predict the outcome of the case or any potential liability.
	In 2004, the Company filed a tax appeal in the State of New York contesting a Notice of Deficiency sent by the State of New York to PlanVista. The notice involved taxes claimed to be due on a deconsolidated basis for the tax years ending December 31, 1999 through December 31, 2001 in an amount of $2.8 million. The Company’s contends that taxation on a consolidated basis is appropriate, and is vigorously pursuing its appeal. However, the Company is unable to determine whether it will be successful or whether it will be obligated to pay some or all of the alleged deficiencies.
(b)	Other — In connection with the Company’s June 1997 acquisition of its PreScribe technology used in its Prescription Services business, the Company would be obligated to pay up to $10 million to the former owner of PreScribe in the event of a divestiture of a majority interest in ProxyMed, or all or part of the PreScribe technology.

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PROXYMED, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)

(c)	Leases — In January 2005, the Company renewed its Corporate office lease in Atlanta, Georgia for an additional 5 year term, commencing May 1, 2005 through April 30, 2010. The base lease payments for the renewal term total $2.2 million.
(d)	Employment Agreements — The Company entered into employment agreements with certain executives and other members of management that provide for cash severance payments if these employees are terminated without cause. The Company’s aggregate commitment under these agreements is $1.4 million at December 31, 2004.

(10)   Subsequent Event — On April 18, 2005, the Company closed a new senior debt facility. The Company used the proceeds from this facility and some of its cash to pay approximately $18.7 million which constituted all of the Company’s previous senior debt obligation and notes outstanding to former directors of PlanVista including all accrued interest. The Senior debt would have matured on May 31, 2005.

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ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

     Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided as a supplement to ProxyMed, Inc.’s (“ProxyMed” or the “Company”) unaudited consolidated financial statements in this Form 10-Q and notes thereto and to the audited consolidated financial statements and the notes thereto including the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2004 as filed with the Securities and Exchange Commission (“SEC”) on March 31, 2005.

Introduction

     We were incorporated in Florida in 1989 and are a leading healthcare transaction services company providing Electronic Data Interchange (“EDI”), cost-containment services and related value-added products to physician offices, payers, medical laboratories, pharmacies and other healthcare institutions. Our broad existing connectivity to payers and providers positions us as the second largest independent medical claims clearinghouse in the industry, serving over 150,000 providers. Our cost containment business has the second largest Preferred Provider Organization (“PPO”) in terms of reach with over 400,000 providers contracted, and currently is sixth in terms of managed care lives accessed through us.

     Our business strategy is to leverage our leadership position in connectivity services in order to establish ourselves as the premier provider of automated financial, clinical, cost containment, business outsourcing and administrative transaction services primarily between healthcare providers and payers, clinical laboratories and pharmacies.

     Our electronic transaction processing services support a broad range of financial, clinical, and administrative transactions. To facilitate these services, we are completing the conversion of all of our non-clinical EDI clients to Phoenix™, our secure, proprietary national electronic information network, that provides physicians and other healthcare providers with direct connectivity to one of the industry’s largest list of payers.

     Our cost containment and business outsourcing solutions businesses are included in the Transaction Services segment since our acquisition of PlanVista Corporation (“PlanVista”) in March 2004, and are directed toward the medical insurance and managed care industries. Specifically, we provide integrated national PPO network access, electronic claims repricing, and network and data management to healthcare payers, including self-insured employers, medical insurance carriers, PPO’s and third party administrators (“TPAs”).

     We believe we are uniquely positioned in the marketplace to make a contribution that our competitors do not. The differentiators include our ability to integrate cost containment solutions, including bill negotiation and provider network recruitment, with EDI and network management into one new offering: Enterprise Solutions for Payers (“ESP”). In addition, we maintain an open electronic network for electronic transactions with no equity ownership in businesses engaged in the front-end (i.e., physician practice management software system vendors and other physician desk top vendors) or in the back-end (i.e., payers, laboratories and

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pharmacies). With our neutral position, we believe that we can better attract both front-end and back-end partners who may be more comfortable doing business with a non-competitive partner.

     Another competitive differentiator is our presence in the clinical market. With the nation’s largest clinical laboratories as long-time customers, we have worked in partnership with them to develop customized laboratory communication tools and services.

Operating Segments

     We operate in two reportable segments that are separately managed: Transaction Services and Laboratory Communication Solutions. Transaction Services includes EDI, cost containment and other value-added services principally between submitters (physicians, billing companies, hospitals, laboratories, and others) and payers (insurance companies, TPAs, Medicare, Medicaid, and others). Laboratory Communication Solutions includes the sale, lease and service of communication devices principally to laboratories and, through June 30, 2004, contract manufacturing. As a result of a re-alignment of our corporate overhead functions (i.e., executives, finance, legal, human resources, facilities and insurance) in the second quarter of 2004, we now report these expenses and assets as part of our Transaction Services segment. International sales were attributable to the manufacturing assets of the Laboratory Communication Solutions segment that were sold on June 30, 2004.

     Our corporate headquarters is located in Atlanta, Georgia, and our products and services are provided from various operational facilities located throughout the United States. We also operate our clinical computer network and portions of our financial and real-time production computer networks from a secure, third-party co-location site also located in Atlanta, Georgia.

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Results of Operations

Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004

	Three Months Ended March 31,
				% of Net						% of Net
In thousands (unaudited)	2005			Revenues			2004			Revenues			Change $			Change %
Net revenues:
Transaction Services	$	18,607			85.7	%	$	14,594			71.2	%		4,013			27.5	%
Laboratory Communication Solutions		3,107			14.3	%		5,910			28.8	%		(2,803	)		-47.4	%
	$	21,714			100.0	%	$	20,504			100.0	%	$	1,210			5.9	%
Cost of sales:
Transaction Services		5,999			27.6	%		4,260			20.8	%		1,739			40.8	%
Laboratory Communication Solutions		1,684			7.8	%		4,029			19.6	%		(2,345	)		-58.2	%
	$	7,683			35.4	%	$	8,289			40.4	%	$	(606	)		-7.3	%
Selling, General and Administrative Expenses
Transaction Services		11,971			55.1	%		9,045			44.1	%		2,926			32.3	%
Laboratory Communication Solutions		654			3.0	%		1,364			6.7	%		(710	)		-52.1	%
	$	12,625			58.1	%	$	10,409			50.8	%	$	2,216			21.3	%
Depreciation and amortization:
Transaction Services		2,413			11.1	%		1,590			7.8	%		823			51.8	%
Laboratory Communication Solutions		183			0.8	%		259			1.3	%		(76	)		-29.3	%
	$	2,596			12.0	%	$	1,849			9.0	%	$	747			40.4	%
Total costs and expenses:
Transaction Services		20,383			93.9	%		14,895			72.6	%		5,488			36.8	%
Laboratory Communication Solutions		2,521			11.6	%		5,652			27.6	%		(3,131	)		-55.4	%
	$	22,904			105.5	%	$	20,547			100.2	%	$	2,357			11.5	%
Loss from operations:
Transaction Services		(1,776	)		-8.2	%		(301	)		-1.5	%		(1,475	)		490.0	%
Laboratory Communication Solutions		586			2.7	%		258			1.3	%		328			127.1	%
	$	(1,190	)		-5.5	%	$	(43	)		-0.2	%	$	(1,147	)		2667.4	%
Interest expense, net		601			2.8	%		334			1.6	%		267			79.9	%
Loss before income taxes	$	(1,791	)		-8.2	%	$	(377	)		-1.8	%		(1,414	)		375.1	%
Provision for income taxes		—						50						(50	)		-100.0	%
Net loss	$	(1,791	)		-8.2	%	$	(427	)		-2.1	%		(1,364	)		319.4	%

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     Net Revenues. Net revenues for the three months ended March 31, 2005 increased by $1.2 million, or 5.9%, to $21.7 million from $20.5 million for the three months ended March 31, 2004.

     Net revenues in the Company’s Transaction Services segment increased by $4.0 million, or 27.5%, over the 2004 period. Revenues have increased significantly due to the higher per transaction revenue attributable to the Company’s cost containment services included in the results for all three months ended March 31, 2005 compared to one month in the same period last year; offset by revenue declines in electronic claims, statements and real-time transactions due to pricing pressures in the market (decrease of $0.7 million).

     For the 2005 period, approximately 85.7% of ProxyMed’s revenues came from its Transaction Services segment compared to 71.2% from this segment for the 2004 period. For the remainder of 2005 and beyond, it is anticipated that ProxyMed’s greatest growth will come from the Transaction Services segment.

     A summary of the number of transactions the Company processed for the periods presented is as follows:

	Three Months Ended March 31,
In thousands (unaudited)	2005		2004
Core transactions		69,752		63,793
Encounters		5,916		9,967
		75,668		73,760

     Laboratory Communication Solutions segment net revenues decreased by $2.8 million, or 47.4%, over the 2004 period. The decrease is primarily due to the asset sale of the manufacturing division in June 2004. The Company doesn’t anticipate significant growth from this segment.

     Cost of Sales. Cost of sales decreased by $0.6 million and as a percentage of net revenues to 35.4% for the three months ended March 31, 2005 from 40.4% for the three months ended March 31, 2004.

     Cost of sales in the Company’s Transaction Services segment consists of transaction fees, provider network outsourcing fees, services and license fees, third-party electronic transaction processing costs, certain telecommunication and co-location center costs, revenue sharing arrangements with ProxyMed’s business partners, and third-party database licenses. Cost of sales in the 2005 period increased $1.7 million, or 40.8%, from the 2004 period. As a percentage of net revenues, cost of sales in this segment increased to 27.6% in the 2005 period compared to 20.8% in the 2004 period primarily due to two additional months of higher margin of Cost Containment services in the three months ended March 31, 2005 compared to only one month in the same period last year.

     Cost of sales in the Laboratory Communication Solutions segment includes hardware, third party software, consumable materials, direct manufacturing labor and indirect manufacturing overhead. Cost of sales in the three months ended March 31, 2005 decreased $2.3 million, or 58.2%, from the 2004 period. As a percentage of net revenues, cost of sales in

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this segment decreased to 7.8% for the three months ended March 31, 2005 from 19.6% for the same period in 2004. This decrease is primarily due to the sale of the Company’s contract manufacturing assets in June 2004.

     Selling, General and Administrative Expenses (“SG&A”). SG&A increased for the three months ended March 31, 2005 by $2.2 million, or 21.3%, to $12.6 million from $10.4 million for the three months ended March 31, 2004. SG&A expenses as a percentage of total net revenues increased to 58.1% for the 2005 period compared to 50.8% in the same period last year.

     Transaction Services segment SG&A expenses for the three months ending March 31, 2005 increased $2.9 million, or 32.3%, over the same period last year primarily due to the addition of SG&A expenses from PlanVista for all three months ended March 31, 2005 compared to only one month for the same period last year. Additionally, the Company experienced increased expenditures related to its ongoing efforts to comply with the Sarbanes-Oxley Act of 2002 in the 2005 period and higher health insurance costs. As a result, segment SG&A expenses as a percentage of segment net revenues increased to 64.3% for the 2005 period compared to 62.0% for the same period last year.

     Laboratory Communication Solutions segment SG&A expenses for the three months ended March 31, 2005 decreased by $0.7 million, or 52.1%, over the same period last year and segment SG&A expenses as a percentage of segment net revenues decreased to 21.0% for the 2005 period compared to 23.1% for the same period last year. These decreases are primarily due to the reduction in SG&A expenses related to the sale of the Company’s contract manufacturing assets in June 2004.

     Depreciation and Amortization. Depreciation and amortization increased by $0.7 million to $2.6 million for the three months ended March 31, 2005 from $1.8 million for the same period last year. This increase was due to approximately $0.7 million for the amortization of intangible assets acquired in the PlanVista acquisition.

     Operating Loss. As a result of the foregoing, the operating loss for the three months ended March 31, 2005 was $1.2 million compared to an operating loss of $43,000 for the same period last year.

     Interest Expense, net. Net interest expense for the three months ended March 31, 2005 was $0.6 million compared to $0.3 million for the same period last year. This increase in expense is primarily due to the assumption of debt in conjunction with the PlanVista acquisition. Interest expense for the 2005 year is expected to be at levels above those in the prior year due to the senior debt acquired from PlanVista.

     Net Loss. As a result of the foregoing, net loss for the three months ended March 31, 2005 and 2004 was $1.8 million and $0.4 million, respectively.

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Liquidity and Capital Resources

     During the three months ended March 31, 2005, net cash provided by operating activities totaled $1.1 million, primarily related to strong cash collections during the quarter. Cash used by investing activities totaled $0.8 million for the funding of capital expenditures related to the Company’s technical infrastructure and administrative systems and capitalized development of internal systems. Cash used in financing activities totaled $1.1 million for the funding of repayments of notes payable, other long-term debt, and payments related to capital leases.

     On April 18, 2005, the Company closed a new senior debt facility. The Company used the proceeds from this facility and some of its cash to pay approximately $18.7 million which constituted all of the Company’s previous senior debt obligation and notes outstanding to former directors of PlanVista including all accrued interest. The Senior debt would have matured on May 31, 2005.

     We believe that we have sufficient cash and cash equivalents on hand to fund our future operational requirements and capital expenditures, and a sufficient level of capital in order to fund specific research and development projects. If we require additional funding in the future to satisfy any of our outstanding future obligations, or further our strategic plans, there can be no assurance that any additional funding will be available to us, or if available, that it will be available on acceptable terms.

Critical Accounting Policies and Estimates

     Our discussion and analysis of our financial condition and results of operations are based on the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, but we believe that any variation in results would not have a material effect on our financial condition. We evaluate our estimates on an ongoing basis.

     We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. For a detailed discussion on the application of these and other accounting policies, see Note 1 in the Notes to Consolidated Financial Statements of the Company’s Form 10-K/A for the year ended December 31, 2004.

     Revenue Recognition — Revenue is derived from our Transaction Services and Laboratory Communication Solutions segments.

     Revenues in our Transaction Services segment are recorded as follows:

•   For revenues derived from insurance payers, pharmacies, and submitters, such revenues are recognized on a per transaction basis or flat fee basis in the period the services are rendered.

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•   Revenue from our medical cost containment business is recognized when the services are performed and are recorded net of estimated allowances. These revenues are primarily in the form of fees generated from discounts we secure for payers that access our provider network.

•   Revenues associated with revenue sharing agreements are recorded on a per transaction basis or a percentage of revenue basis and may involve increasing amounts or percentages based on transaction or revenue volumes achieved. This treatment is in accordance with Emerging Issues Task Force No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent.”

•   Revenue from certain up-front fees is recognized ratably over three years, which is the expected life of the customer. This treatment is in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB No. 104”).

•   Revenue from support and maintenance contracts is recognized ratably over the contract period.

     Revenues in our Laboratory Communication Solutions segment are recorded as follows:

•   Revenue from support and maintenance contracts is recognized ratably over the contract period.

•   Revenues from the sale of inventory and manufactured goods is recognized when the product is delivered, price is fixed or determinable, and collectibility is probable. This treatment is in accordance with SAB No. 104.

•   Revenue from the rental of laboratory communication devices is recognized ratably over the period of the rental contract.

     Capitalized Software Development and Research and Development — Costs incurred internally and fees paid to outside contractors and consultants during the application development stage of our internally used software products are capitalized. Costs of upgrades and major enhancements that result in additional functionality are also capitalized. Costs incurred for maintenance and minor upgrades are expensed as incurred. All other costs are expensed as incurred as research and development expenses (which are included in “Selling, general and administrative expenses”). Application development stage costs generally include software configuration, coding, installation to hardware and testing. Once the project is completed, capitalized costs are amortized over their remaining estimated economic life. Our judgment is used in determining whether costs meet the criteria for immediate expense or capitalization. We periodically review projected cash flows and other criteria in assessing the impairment of any internal-use capitalized software and take impairment charges as needed.

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     Reserve for Revenue Adjustments/Doubtful Accounts/Bad Debt Estimates — We rely on estimates to determine the revenue adjustments, bad debt expense and the adequacy of the reserve for doubtful accounts receivable. These estimates are based on our historical experience, including historical collection ratios, and the industry in which the customer operates. If the financial condition of a customer were to deteriorate, resulting in an impairment of its ability to make payments, additional allowances are made.

New Accounting Pronouncements

     In March 2005 the SEC issued Staff Accounting Bulletin (SAB) No. 107, this SAB provides guidance related to the application of SFAS No. 123(R), “Shared-Based Payments (Revised 2004)” for transactions with non-employees, the transition from nonpublic to public entity status, valuation methods, the accounting for certain redeemable financial instruments issued under share-based payment arrangements, the classification of compensation expense, non-GAAP financial measure, first-time adoption of Statement 123(R) and disclosures in Management’s Discussion and Analysis (MD&A) subsequent to adoption of Statement 123(R). The revised effective date of SFAS No. 123(R) is for annual reporting periods beginning after June 15, 2005. The adoption date for the Company is January 1, 2006. The Company has not completed the process of evaluating the impact that will result from adopting FASB Statement No. 123(R) and is therefore unable to disclose the impact that adoption will have on the Company’s financial position and results of operations.

     In September 2004, the Financial Accounting Standards Board (“FASB”) issued EITF No. 04-8, “Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share” (“EITF No. 04-8”). EITF No. 04-8 addresses when the dilutive effect of contingently convertible debt instruments should be included in diluted earnings per share and requires that contingently convertible debt instruments are to be included in the computation of diluted earnings per share regardless of whether the market price or other trigger has been met. EITF No. 04-8 also requires that prior period diluted earnings per share amounts presented for comparative purposes be restated. EITF No. 04-8 is effective for reporting periods ending after December 15, 2004. As a result of the issuance of EITF No. 04-8, shares convertible from our $13.1 million convertible notes may be required to be included in the calculation of our earnings per share in periods of net income; however, the FASB has yet to reach a conclusion as to the effect of non market price triggers on earnings per share calculations in situations where the instrument contains only non-market price trigger, such as our convertible notes, and therefore the impact on the consolidated financial statements is not determinable at this time.

     In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” This Statement clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) and requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal” under ARB No. 43. The provisions of this Statement shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is evaluating the impact that adoption will have on the Company’s results of operations.

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Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

     Statements contained in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report may contain information that includes or is based upon forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. Forward-looking statements present the Company’s expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They frequently are accompanied by words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning. In particular, these include statements relating to: the Company’s ability to attract and retain a suitable CEO; the Company’s ability to identify suitable acquisition candidates; the Company’s successful integration of past and any other future acquisitions; the Company’s ability to successfully develop, market, sell, cross-sell, install and upgrade the Company’s clinical and financial transaction services and applications to new and current physicians, payers, medical laboratories and pharmacies; the Company’s ability to compete effectively on price and support services; the Company’s ability to increase revenues and revenue opportunities; continued and increasing the growth of the Company’s Transaction Services segment. The Company’s ability to successfully resolve litigation; the Company’s ability to comply with governmental regulation of the industry; and the Company’s ability to meet expectations regarding future capital needs and the availability of credit and other financing sources.

     All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of earnings, revenues, synergies, accretion, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations, including the execution of integration and restructuring plans and the anticipated timing of filings, approvals and closings relating to the merger or other planned acquisitions; any statements concerning proposed new products, services, developments or industry rankings; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.

     Actual results may differ significantly from projected results due to a number of factors, including, but not limited to, the soundness of the Company’s business strategies relative to perceived market opportunities; the Company’s assessment of the healthcare industry’s need, desire and ability to become technology efficient; market acceptance of the Company’s products and services; and the Company’s ability and that of its business associates to comply with various government rules regarding healthcare information and patient privacy. These and other risk factors are more fully discussed in the Company’s Form 10-K/A for the year ended December 31, 2004 filed with the SEC on March 31, 2005, which the Company strongly urges you to read.

     Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. ProxyMed’s future results and shareholder values may differ materially from those expressed in the forward-looking statements. Many of the factors that will determine these results and values are beyond ProxyMed’s ability to control or predict. Shareholders are cautioned not to put undue reliance on any forward-looking statements. For those statements, ProxyMed claims the protection of the safe harbor for forward-looking

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statements contained in the Private Securities Litigation Reform Act of 1995. ProxyMed expressly disclaim any intent or obligation to update any forward-looking statements.

Available Information

     ProxyMed’s Internet address is www.proxymed.com. ProxyMed makes available free of charge on or through its Internet website the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material was electronically filed with, or furnished to, the SEC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     ProxyMed owns no derivative financial instruments or derivative commodity instruments. Revenue derived from international sales are transacted in U.S. Dollars and therefore, ProxyMed does not believe that it is exposed to material risks related to foreign currency exchange rates.

ITEM 4. CONTROLS AND PROCEDURES

     As of the end of the period covered by this report, the Company evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)), under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer. Based upon such evaluation, management has concluded that the Company’s disclosure controls and procedures are effective to ensure that the information the Company is required to disclose in reports that it files or submits under the Exchange Act is communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the Commission rules and forms.

     There have not been any changes in the Company’s internal control over financial reporting during this quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     In December of 2001, Insurdata Marketing Services, Inc. (“IMS”) filed a lawsuit against HealthPlan Services, Inc. (“HPS”), a former subsidiary of PlanVista, for unspecified damages in excess of $75,000. The complaint alleges that HPS failed to pay commissions to IMS pursuant to an arbitration award rendered in 1996. On January 10, 2005, the court granted summary judgment to IMS on the issue of liability for the arbitration award. The Company has filed an appeal on the issue of liability, and continues to contest vigorously the amount of damages claimed by IMS. The Company has determined exposure to be in the range of $0.6 million to $1.6 million and has accrued $0.6 million.

     In early 2000, four named plaintiffs filed a class action against Fidelity Group, Inc. (“Fidelity”), HPS, Third Party Claims Management, and others, for unspecified damages. The complaint stems from the failure of a Fidelity insurance plan, and alleges unfair and deceptive trade practices; negligent undertaking; fraud; negligent misrepresentation; breach of contract; civil conspiracy; and RICO violations against Fidelity and its contracted administrator, HPS. Two principals of the Fidelity plan have been convicted of insurance fraud and sentenced to prison in a separate proceeding. The class has been certified and the case is proceeding in discovery. The Company is contesting the plaintiffs’ claims vigorously, but is unable to predict the outcome of the case or any potential liability.

     In 2004, the Company filed a tax appeal in the State of New York contesting a Notice of Deficiency sent by the State of New York to PlanVista. The notice involved taxes claimed to be due on a deconsolidated basis for the tax years ending December 31, 1999 through December 31, 2001 in an amount of $2.8 million. The Company contends that taxation on a consolidated basis is appropriate and is vigorously pursuing its appeal. However, the Company is unable to determine whether it will be successful or whether it will be obligated to pay some or all of the alleged deficiencies.

28

Item 6. Exhibits

The following exhibits are furnished or filed as part of this Report on Form 10-Q:

10.1	Employment Agreement with John Lettko, dated May 10, 2005.
31.1	Certification by Kevin M. McNamara, Interim Chief Executive Office, pursuant to Exchange Act Rules 13a-14 and 15d-14.31.2.
31.2	Certification by Gregory J. Eisenhauer, Chief Financial Officer, pursuant to Exchange Act Rules 13a-14 and 15d-14.
32.1	Certification by Kevin M. McNamara, Interim Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by Gregory J. Eisenhauer, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

29

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PROXYMED, INC.
Date: May 16, 2005	By:	/s/ Kevin McNamara
		Kevin McNamara Chairman and Interim Chief Executive Officer
Date: May 16, 2005	By:	/s/ Gregory J. Eisenhauer
		Gregory J. Eisenhauer, CFA EVP and Chief Financial Officer

30

EX-10.1

                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered on May 10,
2005 by and between PROXYMED, INC., a Florida corporation headquartered in
Atlanta, Georgia (the "Company"), and JOHN LETTKO, an individual currently
residing in Orinda, California ("Executive").

      WHEREAS, Executive has more than 20 years of CEO and senior executive
experience in financial service related transaction and data transmittal,
processing, analysis and storage businesses; and

      WHEREAS, the Board of Directors of the Company (the "Board") is willing to
employ Executive as its Chief Executive Officer reporting directly and solely to
the Board, and to employ him in such capacity, and Executive desires to obtain
such employment on, and subject to, the terms and conditions set forth in this
Agreement:

      NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth hereinafter and other good and valuable considerations, the receipt
and sufficiency of which are hereby acknowledged, the Company and the Executive,
intending to be legally bound, agree as follows:

1.    Term. The initial term of this Agreement shall commence on May 10th, 2005
(the "Effective Date"), and shall continue for an initial period of four (4)
years and shall be automatically renewed from year to year thereafter
(hereafter, the initial term and any renewals thereof shall constitute the
"Term"), unless either party provides the other party with notice of its intent
not to renew this Agreement not less than ninety (90) days prior to the
expiration of the then-current Term, or unless this Agreement is earlier
terminated in accordance with the terms in Section 5. Any decision by the
Company not to renew this Employment Agreement shall entitle Executive to treat
his employment as having been terminated by the Company Without Cause on the
last day of the then current Term for purposes of Section 5 below.

2.    Position; Duties; Loyalty.

      a)    Position. Executive will be employed by Company and shall render
service to Company as its CHIEF EXECUTIVE OFFICER, reporting directly and solely
to the BOARD, pursuant to the terms, provisions and conditions hereinafter set
forth. Executive shall also, within 60 days following the Effective Date, be
appointed to, and serve as a director on the Board, and shall continue to so
serve as a director until the first annual meeting of the Company occurring
after the Executive's initial appointment to the Board. The Board shall use its
best efforts to nominate Executive for re-election to the Board at such annual
meeting and at each subsequent annual meeting at which he would otherwise be up
for reelection if still the CEO. Any failure to nominate Executive to the Board
whenever he would otherwise be eligible for re-election to the Board, other than
due to or following the termination of his employment with the Company or
failure by Executive to meet the applicable requirements for Board membership,
shall constitute a breach of this Agreement. Executive, on written notice from
the Board to Executive, shall also serve as an officer and/or director of one or
more Affiliates of the Company at the pleasure of the Board of Directors.

      b)    Duties. Executive shall be employed by Company on a full-time,
exclusive basis. The parties contemplate that Executive shall perform his duties
primarily in one or more of the Company's offices during the first 18 months of
the Term. Thereafter, Executive shall, subject to approval of the Board, have
the right to designate the corporate office location of the Company, and
Executive shall relocate, if necessary, to such corporate office location.
Executive will be required to travel on business, to the extent customary and
usual for Executive's position. Executive shall perform such duties and have



such authority and responsibilities customarily accompanying his/her position
and as reasonably directed by the BOARD OF DIRECTORS of the Company consistent
with the Executive's position. Specifically, and without limitation, Executive
shall perform the duties and have the authority and responsibilities customarily
accompanying those of a CHIEF EXECUTIVE OFFICER of a public company, including
without limitations, those prescribed by the Company's By-laws.

      c)    Loyalty. Executive shall devote his full business time and attention
to the Company and shall give Executive's reasonable best efforts to the
business of the Company and to the performance of the duties and obligations
described in this Agreement. Except as may be authorized in writing by the Board
of Directors of the Company, Executive shall not, directly or indirectly, alone,
or as a partner, officer, director or shareholder of any other institution, be
engaged in any other commercial activities whatsoever, or continue or assume any
other corporate affiliations except for (i) an Affiliate; (ii) any passive
investments; and (iii) minimal time utilized for business activities that do not
compete with the business of the Company or its subsidiaries. As used herein,
the term "Affiliate" shall refer to any entity that is owned or controlled by,
under common ownership or control with, or which owns or controls the Company or
any of its subsidiaries, now or in the future. Nothing herein shall restrict
Executive's passive stock and other investments consistent with applicable law
and the Company's Insider Trading policy and Code of Ethics, or preclude
Executive from addressing in a reasonable manner from time to time, during or
outside of regular business hours, any personal family, financial, health or
legal matters that may arise. In addition, nothing herein shall preclude
Executive from serving on any trade or industry organization board or charitable
or community board, with the written consent of the Board.

         d) Investment. No later than 5 days after the Effective Date, or such
other time as shall be established by the Board of Directors in accordance with
the Company's Insider Trading policy, the Executive shall purchase no less than
$500,000 of the common shares of the Company at the closing price on the
Effective Date. Such shares shall be unregistered and subject to restrictions on
transfer. The Company shall use good faith efforts to register such shares at
the earliest possible opportunity in the Company's next commercial registration
of common shares.

3.    Compensation and Expenses.

      a)    Salary. In consideration for the services rendered by the Executive
under this Agreement, Company shall pay the Executive a base salary of not less
than $400,000 per annum (such salary rate if and as increased from time to time,
the "Base Salary") in accordance with the Company's customary payroll practices
(but not less frequently than monthly). Executive performance reviews (with or
without a salary increase) will be conducted at least annually by the
Compensation Committee or as otherwise agreed to by the parties in writing. The
Company shall adjust Executive's Base Salary for any salary increases approved
in writing by the Board of Directors or its Compensation Committee in its sole
discretion.

      b)    Incentive Compensation. The Executive shall be entitled to and may
earn such annual bonuses ("Bonuses") as may be awarded from time to time by the
Compensation Committee or the Board of Directors of the Company, sitting as a
whole or in committee, in its sole discretion, including, but not limited to,
pursuant to any bonus plan ("Bonus Plan") implemented by the Compensation
Committee or the Board, and to participate in any stock option plans ("Stock
Option Plans"), or any plan providing for restricted stock share or unit awards
or any other equity-based awards, or cash-based long-term incentive awards, or
any other Bonus Plans which the Company may now have or in the future develop
and for which the Executive or executive officers generally qualify for
eligibility under the terms of such plan.

                                       2


      c)    Initial Stock Options. Executive will receive on the Effective Date
an initial stock option grant , and agreement in the form attached hereto as
Exhibit A (updated to reflect this Section 3(c)) and incorporated herein by
reference, which option shall have a ten (10) year term, and which shall allow
Executive to purchase all or any part of up to 400,000 shares of ProxyMed common
stock (the "Stock Options") at its fair market value defined as the price at
which common stock is reported to have traded on the NASDAQ System at the close
of business on the Effective Date. The options will vest over a four (4) year
period pro rata (1/48 each month) with the first monthly installment vesting
thirty (30) days following the Effective Date. In addition, 200,000 10-year
options to purchase ProxyMed common stock at its fair market value on the
Effective Date will be granted on the Effective Date to the Executive with
performance vesting triggers at $15, $20, $25 and $30 for 50,000 shares each
such that 50,000 shares will vest when the closing stock price reaches the
trigger amount for each such 50,000 share option for ten (10) consecutive
trading days. The Stock Options described above and granted hereunder, for an
aggregate of 600,000 shares (collectively the "Initial Stock Options") shall be
governed exclusively by and issued in accordance with the terms of the ProxyMed
2002 Stock Option Plan, as amended through 2004 (the "2002 Option Plan")
attached hereto as Exhibit B and incorporated herein by reference; subject,
however, to the express terms of this Section 3(c) and of this Agreement
generally (as it relates to the Initial Stock Options). Specifically, such
Initial Stock Options shall provide that, once vested, they shall remain fully
exercisable until the earlier of the tenth anniversary of the option grant date
or the date that is 18 months following the termination of Executive's
Employment with the Company, and that they shall be fully vested in the event of
a Change of Control (as defined in the 2002 Option Plan). In addition, in the
event of a Change of Control any excise taxes incurred on any accelerated
vesting of Executive's stock options, whenever granted, shall be covered by a
full excise tax gross up, and the Company shall defray fully any income and
excise tax due on such gross up. In the event of termination due to death or
disability, Executive's options shall vest, and shall be exercisable in
accordance with the terms of the 2002 Option Plan, except as otherwise set forth
in this Agreement. Finally, for avoidance of doubt, in the event of any
discrepancy, the provisions of this Section 3(c) and this Agreement (as it
relates to the Initial Stock Options), if more favorable to Executive, shall
control over the form of option agreement attached hereto as Exhibit A.

      d)    Annual Bonus Opportunity. Each year, Executive may earn a target
annual cash bonus of 100% of Base Salary (the "Target Bonus"), based on such
award criteria as may be set, and such final earned award determinations as may
be made from time to time at the discretion of the Compensation Committee or the
Board of Directors of the Company or pursuant to an Incentive Compensation Plan
(as defined herein) ( the "Annual Bonuses"). By not later than June 30th, 2005
or as otherwise agreed to by the parties in writing, the Compensation Committee
(or the Board) and Executive shall negotiate, subject to the final approval of
the Board (if applicable), within 30 days thereafter, an incentive compensation
plan for Executive for 2005 with objective performance criteria (the "2005
Incentive Compensation Plan"), which will be incorporated into this Agreement at
the time it is placed into effect. Thereafter, each year, after consulting with
Executive, the Compensation Committee (or the Board), in its sole discretion,
shall put in place an updated annual bonus plan providing Executive with at
least the same size target annual bonus opportunity (when expressed as a
percentage of current salary) as applicable for 2005 on a full-year basis.

      e)    Tax Withholding. The Company shall have the right to deduct or
withhold from all compensation paid to Executive hereunder any and all sums
required to be withheld, including without limitation for Federal income, social
security and Medicare taxes and all state and local taxes now applicable or that
may be enacted and become applicable in the future.

                                       3


      f)    Reimbursement of Expenses.

                  (i) During the Term, the Company shall reimburse the
Executive, in accordance with the policies and procedures of the Company in
effect from time to time with respect to other senior executives of the Company
of similar rank and status, for all reasonable and necessary expenses and
disbursements incurred, including reasonable and necessary travel (and
reasonable temporary housing and related expenses in the Atlanta, Georgia area
during the first 18 months of the Term), by him for or on behalf of the Company
in connection with the performance of his duties hereunder upon presentation by
the Executive to the Company of appropriate and accurate documentation therefor.

                  (ii) In addition to, but not in duplication of, any amounts
contemplated by paragraph (i) above, the Company shall reimburse the Executive
for all expenses incurred (not to exceed an aggregate amount of $200,000.00) to
move his spouse and children to a new work location to be determined by the
Executive with the prior approval of the Board. The Company may, in its sole
discretion, extend such eighteen (18) month period. This will include
reimbursement for closing costs on the purchase of a principal residence, which
may include points and origination fees of up to 2% and other related fees,
commissions payable in connection with the sale of the Executive's current
residence in California, moving and/or storage of the Executive's personal
belongings from California and any other real estate and travel expenses in
connection with his family's relocation within the continental United States.
Such relocation expenses shall be capped at $200,000.00, net of (i.e., after
payment of) a one time "gross up" at maximum federal rates, plus actual state
and local income and other payroll related taxes.

      h)    Indemnification. Subject to Section 6(g), the Company shall
indemnify the Executive with respect to any claims or liabilities asserted
against him in his capacity as Chief Executive Officer of the Company and/or any
Affiliate (or as a non-CEO officer of any Affiliate), and/or as a director of
the Company and/or any Affiliate, to the maximum extent permitted by applicable
law and the Company's current By-laws in accordance with, and subject to the
terms of the Company's standard Indemnification Agreement (copy attached as
Exhibit C), with such provisions for legal fee advancement as are set forth in
such Indemnification Agreement The Company shall also separately provide
Executive with D&O insurance on a basis and to an extent no less favorable to
Executive than that applied to any other executive or director of the Company.

4.    Benefits and Perks.

      a)    Vacation. The Executive shall be entitled to a yearly vacation of
four (4) weeks during the first year of this Agreement, and thereafter such
greater annual vacation as may be provided by the Company in writing in its
then-current policies or otherwise, at full pay to be accrued and taken in
accordance with the Company's policies in effect from to time ("Vacation").
Vacation shall accrue ratably during each calendar year in accordance with
Company policies. Vacation not taken in one calendar year may be carried over to
the following calendar year subject to any limitations set forth in the Company
policies in effect from time to time. Subject to Section 5 below, Executive
shall not be entitled to receive any additional compensation from the Company
for Executive's failure to take all of Executive's granted vacation time. In the
event Executive's employment is terminated pursuant to Section 5(b) below, any
vacation time used but not earned at the time of termination shall be deducted
from any monies owed to Executive, but any vacation time earned but not yet used
shall be promptly paid out.

      b)    Participation in Benefit Plans. Executive shall be eligible for and
entitled to receive all other benefits and perquisites ("Benefits") offered or
extended to any other executives of the Company.

                                       4


5.    Termination.

      a)    Involuntary Termination for Death or Disability. This Agreement
shall terminate immediately upon Executive's death. The Company may terminate
Executive's employment with the Company for Disability on 30 days prior written
notice after the 6 month period referred to below, unless Executive returns to
full-time active service prior to or within those 30 days. For purposes of this
Agreement, "Disability" is defined to mean the inability of Executive due to
illness or physical or mental infirmity (as reasonably determined by a physician
selected by Executive and as reasonably confirmed by a physician acceptable to
the Company) to perform Executive's duties hereunder on a full-time basis for
six (6) consecutive months with reasonable accommodation by the Company. Upon
termination due to death or Disability, Executive or Executive's beneficiary or
estate or legal representative shall be entitled to receive the For Cause
Separation Pay, plus (i) any death or disability benefits to which Executive
would otherwise be entitled under Company policy and procedure, (ii) any stock
options that are already vested as of the termination date; and (iii) any vested
amounts under any Company-sponsored tax-qualified or non-qualified retirement,
savings or profit-sharing plan or program.

      b)    Termination by Company For Cause. The Company may terminate
Executive's employment with the Company at any time "For Cause" effective
immediately, unless stated otherwise in writing, upon giving written notice
thereof to Executive, but provided that Executive has had a reasonable prior
opportunity for a Board level hearing with his legal counsel present, which
notice shall state with reasonable specificity the facts supporting the
termination "For Cause." "For Cause" shall include the following:

            (i) Conviction of, or pleading guilty to, a felony or any
misdemeanor involving moral turpitude, fraud, dishonesty or theft;

            (ii) Executive's gross negligence or significant willful misconduct
relating to the Company that is materially injurious to the Company; or

            (iii) Executive's excessive use of alcohol or illegal drugs that (A)
interferes with the performance of Executive's duties hereunder; and (B)
continues even after written warning regarding such excessive use is actually
received by Executive; or

            (iv) Any material breach by Executive of this Agreement or of any of
the Company's applicable written policies then in effect (but only if timely
communicated to Executive in writing), including without limitations, the
Company's Code of Ethics for Officers and Directors, with prior written notice
thereof by the Company, provided such notice is actually received by Executive
and an appropriate period (of not less than 30 business days) to cure such
material breach, if such breach is curable, is given and has expired without a
cure by Executive.

      For purposes of this Agreement, an act or omission by Executive shall not
be considered "willful" if done or not done in the good faith belief that such
action or inaction was in, or not contrary to, the best interests of the
Company.

      Any action to terminate Executive for Cause shall require a majority
approval vote of the independent directors on the Board.

      Upon the Company's termination of this Agreement and Executive's
employment For Cause, the Executive shall be entitled to, and the Company shall
pay the Executive the following "For Cause

                                       5


Separation Pay": the Executive's Base Salary and accrued benefits through the
effective date of termination at the Executive's then current rate (including
any applicable pro rated bonus and accrued vacation pay). Except as provided for
herein or in any other written agreement, the Company shall have no other
liabilities or obligations to Executive upon payment in full of the For Cause
Separation Pay. In addition, Executive shall remain entitled to any stock
options that are already vested as of the termination date. Executive shall also
be entitled to any vested amounts under any Company-sponsored tax-qualified or
non-qualified retirement, savings or profit-sharing plan or program

      c)    Termination by Company Without Cause. The Company may terminate
Without Cause Executive's employment with the Company or this Agreement at any
time for any or no reason. Such termination by Company shall be deemed to be
"Without Cause" by the Company. In the event of termination by the Company
pursuant to this Section, the Executive shall be entitled to and shall receive,
and the Company shall promptly pay, the following "Without Cause Separation
Pay": (i) a lump sum amount equal to 12 months of Executive's Base Salary as of
the date of termination; plus (ii) a lump sum amount equal to any accrued
vacation not already taken and a pro rata portion of any bonus that would have
been paid to Executive under any bonus plan adopted by the Company's
Compensation Committee or Board of Directors for the year of termination if the
Company and Executive had met the targeted goals to the date of termination; and
shall also provide Executive with the continuation for 12 months from the
effective date of termination of, or any equivalent lump sum payment for, all of
Executive's benefits including, without limitation, all insurance benefit
coverages (including all medical, dental, optical, hospital, life and short-term
and long-term disability insurance coverages or any Company self-insured
equivalents), on the same terms and conditions and on the same after-tax basis
to Executive as had been provided to Executive prior to the termination, all of
the foregoing which shall be payable in accordance with the Company's customary
payroll practices then in effect. Any COBRA coverage rights shall commence after
the later of the date on which the continuation rights provided in the preceding
sentence end, or the date on which full payment of all of the Section 5(c)(i)
amount is received. Executive shall also be entitled to any vested amounts under
any Company-sponsored tax-qualified or non-qualified retirement, savings or
profit-sharing plan or program Finally, subject to the provisions of Section
3(c) above in the case of the Initial Stock Options, Executive's rights with
respect to his then vested stock options and any other then outstanding
equity-based awards, long-term cash-based incentives and/or deferred
compensation shall be governed by the applicable award agreements and plan
documents. All time vesting options will continue to vest for 12 months, and
one-half of all unvested performance-based options will immediately vest on the
termination date. The Company shall have the right to request the execution by
Executive of a mutual release agreement with mutually agreed-on language in
connection with the payment of the lump sum amount referred to in Section
5(c)(i) above, but Executive's rights to such payment (and his other rights as
noted above) shall not be conditioned on the execution of any such release

      d)    Termination by Executive For Good Reason. Executive may terminate
this Agreement for "Good Reason" by giving the Company thirty (30) days prior
written notice (the "Notice Period")] to that effect, specifically stating
Executive's Good Reason for terminating in sufficient detail to allow the
Company to respond effectively to the notice, with the termination becoming
effective on the 31st day after such notice is actually received by the Company
(the "Termination Date"), unless the Company at its option cures any alleged
breach, if curable, on or before the Termination Date. The stated Good Reason
must be one or more of any of the reasons defined as a "Good Reason" herein. As
used in this Agreement, "Good Reason" means termination by Executive only for
any one or more of the following reasons:

                                       6


            (i) Any reduction of Executive's then-current Base Salary or Target
Annual Bonus opportunity or a failure by the Company to issue the Initial Stock
Options as set forth in Section 3(c) above on a fully S-8 registered basis - in
each case without Executive's prior written consent; or

            (ii) Any material breach of this Agreement by the Company, not cured
within 30 days after prior written notice of such breach by the Executive;

            (iii) Any reduction, made Without Cause (as defined above), in the
duties, authority, or responsibilities of the office of Chief Executive Officer
of the Company. An Executive's termination for any of the foregoing Good Reasons
shall be treated the same as a termination "Without Cause" by the Company for
purposes of calculating separation pay, entitling the Executive to the Without
Cause Separation Pay set forth in Section 5(c), including the same treatment of
Initial Stock Options (subject to Section 3(c) above), any other stock options
and any other then outstanding equity-based awards, long-term cash-based
incentives and/or deferred compensation. Executive shall also be entitled to any
vested amounts under any Company-sponsored tax-qualified or non-qualified
retirement, savings or profit-sharing plan or program.

      e)    Termination by Executive Without Good Reason. Executive may
terminate this Agreement for any reason (other than Good Reason) or no reason at
any time with not less than thirty (30) days prior written notice to the Company
(such termination shall be called a termination "Without Good Reason"). After
the Company receives notice of a termination Without Good Reason, the Company
may by written notice to the Executive cause the effective date of any such
termination to be accelerated without causing such termination to be considered
a termination by the Company Without Cause, but in such case the Company shall
keep Executive on its payroll for the balance of the 30 day notice period for
all purposes, or provide Executive with an equivalent lump sum payment for his
Base Salary, Benefits, etc. for the balance of such 30-day period - separate and
apart from any other payments to which Executive may be entitled. Upon
Executive's termination of his employment Without Good Reason, the Executive
shall, in addition to any amounts referred to in the preceding sentence, also be
entitled to, and the Company shall pay the Executive, the following "Without
Good Reason Separation Pay": the Executive's Base Salary and accrued benefits
through the effective date of termination at the Executive's then current rate
(including any applicable pro rated bonus and earned/accrued but unused vacation
pay), and any awarded but not yet paid bonus amounts or vested deferred
compensation, and any vested amounts under any Company-sponsored tax-qualified
or non-qualified retirement, savings or profit-sharing plan or program. Finally,
subject to Section 3(c) above, Executive's rights with respect to his then
vested stock options and any other then outstanding equity-based awards,
long-term cash-based incentives and/or deferred compensation shall be governed
by the applicable award agreements and plan documents. Except as provided for
herein or in any other written agreement, the Company shall have no other
liabilities or obligations to Executive upon payment in full of the Without Good
Reason Separation Pay. For avoidance of doubt, a termination by Executive for
any reason that is also a Good Reason shall be treated as a termination by
Executive for Good Reason as set forth in Section 5(d).

      f)    Return of Company Property. Upon any termination of this Agreement,
Executive shall promptly return to the Company all property of the Company in
Executive's possession, including Confidential Information (as defined below),
provided that Executive shall have the right to retain his personal diaries and
personal employment and compensation and benefits records including, without
limitation, copies of this Agreement and any other cash compensation, employee
benefit, stock option, restricted stock share or unit award, stock purchase,
long-term incentive, deferred compensation or other employment-related plan,
program, award or other agreements or documents. Executive acknowledges

                                       7


that the Company may withhold any compensation and benefits owed to Executive
hereunder until all such property is returned in good condition, normal wear and
tear excepted.

      g)    Change in Control. If, within six (6) months prior to a Change of
Control, as defined in Executive's Stock Option Agreement, the Agreement
terminates pursuant to Section 5(c) or (d)), then, (i) any unvested options
shall vest as of the date of the Change of Control and shall remain vested and
exercisable as specified in Executive's Stock Option Agreement, and (ii)
Executive shall receive, and the Company shall pay the Executive, the "Without
Cause Separation Pay" set forth in Section 5(c) above.

6.    Covenants of Executive.

      a)    Executive acknowledges that (i) the knowledge and experience that he
will acquire while an employee of the Company and the services rendered to the
Company are of a special, unique and extraordinary character and that his
position with the Company will place him in a position of confidence and trust
with customers and prospective customers and other employees of the Company and
allow him access to Confidential Information (as hereinafter defined); (ii) as
the Company's Chief Executive Officer, the Company is entrusting Executive with
all facets of its business and all of its customer, vendor, and employee
relationships; (iii) the nature and periods of the restrictions imposed by the
covenants contained in this Section are fair, reasonable and necessary to
protect and preserve for the Company the benefits of Executive's employment
hereunder and that such restrictions will not prevent Executive from earning a
livelihood; (iv) the Company could sustain great and irreparable loss and damage
if Executive in any material manner were to breach any of such covenants; (v)
the Company conducts its business actively in and throughout the entire
Territory (as hereinafter defined) and that other persons are engaged in like
and similar business in the Territory; and (vi) Executive's duties hereunder
will include sales, servicing, production, operations, marketing and/or
managerial activities throughout the entire Territory on behalf of the Company.

      (b)   Having acknowledged the foregoing, Executive covenants and agrees
with the Company as follows:

            (i) That, during the Term of this Agreement and through the period
ending twelve (12) months after the termination of his employment for any
reason, including without limitation, "For Cause", "Without Cause", "For Good
Reason", or "Without Good Reason", Executive will not, without the prior written
consent of the Company, directly or indirectly provide services within the
Territory, as hereinafter defined, that are substantially similar to those
provided by Executive to the Company during the last two years of his employment
hereunder, to any person, (including Executive or any third party) which is at
the time, directly or indirectly in competition with the Business of the
Company, as hereinafter defined, or any subsidiary or affiliate of the Company
engaged in similar business with which Executive had material business dealings
during his employment.

            (ii) That, during the Term of this Agreement and through the period
ending twelve (12) months after the expiration or termination of this Agreement
for any or no reason, including without limitation, "For Cause", "Without
Cause", "For Good Reason" or "Without Good Reason", Executive will not, directly
or indirectly, without the prior written consent of the Company, solicit or
attempt to solicit, divert or take away, or attempt to divert or take away,
Customers, as hereinafter defined, from the Company and/or Customers of any
subsidiary or affiliate of the Company engaged in similar business with which
Executive had material business dealings during his employment.

                                       8


            (iii) That, while in the Company's employ, and through the period
ending twenty-four (24) months after the termination of his employment for any
reason, Executive will not knowingly solicit, directly or by assisting others,
or attempt to solicit any employee of the Company, or their affiliates with
which Executive had material business dealings during and as a result of his
employment, employed in the Territory or with whom Executive had material
contact during the last two (2) years of his employment.

            (iv)  Executive will disclose promptly to the Company every
discovery, improvement and invention made, conceived or developed by Executive
during the entire period of employment (whether or not during working hours)
which discoveries, improvements or inventions directly relate to the current
business of the Company. To the fullest extent permitted by law, all such
discoveries, inventions and improvements will be deemed works made-for-hire.
Executive grants and agrees to convey to Company or its nominee the entire
right, title and interest, domestic and foreign, which Executive may have in
such discoveries, improvements or inventions, or a lesser interest therein, at
the option of Company. Executive further agrees to promptly, upon request, sign
all applications for patents, copyrights, assignments and other appropriate
documents, and to perform all acts and to do all things necessary and
appropriate to carry out the intent of this section, whether or not Executive is
still an employee of the Company at the time of such requests.

            (v)   Executive agrees and acknowledges that the Confidential
Information of the Company is valuable, special and unique to its business, that
such business depends on such Confidential Information, and that the Company
wishes to protect such Confidential Information by keeping it confidential for
the exclusive use and benefit of the Company. Based on the foregoing, Executive
agrees to undertake the following obligations with respect to such Confidential
Information:

                  (1) Executive agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company;

                  (2) Executive agrees that, except as required by Executive's
duties or authorized in writing by the Company, Executive will not at any time
during and for a period of three (3) years after the termination of Executive's
employment with the Company, disclose, directly or indirectly, any Confidential
Information of the Company to any third party; except as may be required by
applicable law or court order, in which case Executive shall promptly notify
Company so as to allow it to seek a protective order if it so elects; and
provided that the all information constituting a trade secret under the law of
the state of Georgia shall continue to be held in confidence for so long as such
information constitutes a trade secret unless it becomes known within the
industry outside of the Company other than due to any act or Executive;

                  (3) Executive agrees to take all reasonable steps necessary,
or reasonably requested by the Company, to ensure that all Confidential
Information of the Company is kept confidential for the use and benefit of the
Company and its subsidiaries; and

                  (4) Executive agrees that, upon termination of Executive's
employment by the Company or at any other time the Company may in writing so
request, Executive will promptly deliver to the Company all materials
constituting Confidential Information (including all copies and derivatives
thereof) that are in the possession of or under the control of Executive.
Executive further agrees that, if requested by the Company to return any
Confidential Information pursuant to this Subsection (v), Executive will not
make or retain any copy or extract from such materials), provided that Executive
shall have the right to retain his personal diaries and personal employment and
compensation

                                       9


and benefits records including, without limitation, copies of this Agreement and
any other cash compensation, employee benefit, stock option, restricted stock
share or unit award, stock purchase, long-term incentive, deferred compensation
or other employment-related plan, program, award or other agreements or
documents.

            For the purposes of this Section 6(b)(v), "Confidential Information"
means any and all information, including derivative works, developed by or for
the Company or entrusted to the Company in confidence by its customers, of which
Executive gained knowledge by reason of Executive's employment by the Company,
which is not generally known in any industry in which the Company is or may
become engaged, but does not apply to information which is generally known to
the public or the trade or in such industry, unless such knowledge results from
an unauthorized disclosure by Executive. Confidential Information includes, but
is not limited to, any and all information developed by or for the Company
concerning plans, marketing and sales methods, materials, processes, business
forms, procedures, devices used by the Company, its suppliers and customers with
which the Company had dealt with prior to Executive's termination of employment
with the Company, plans for development of new products, services and expansion
into new areas or markets, internal operations, and any trade secrets,
proprietary information of any type owned by the Company, together with all
written, graphic and other materials relating to all or any part of the same.
The Company will be entitled to all materials, including, software programs,
source code, object code, specifications, documents, abstracts and summaries
developed for the Company by Employee while employed by the Company. Executive
acknowledges that any programs and documentation developed for the Company by
Employee while employed by the Company shall be the exclusive property of the
Company, and that the Company shall retain all right, title and interest in such
materials, including without limitation patent and copyright interests. Nothing
herein shall be construed as a license from the Company to Executive to make,
use, sell or copy any inventions, ideas, trade secrets, trademarks,
copyrightable works or other intellectual property of the Company during the
Term of this Agreement or subsequent to its termination.

            (vi) Executive acknowledges that there is no general geographical
restriction contained in Section 6(b)(v) because the Company's and/or
Affiliates' Customers are not confined to one geographical area or operate on a
national level. Notwithstanding the foregoing, if a court of competent
jurisdiction were to determine that any of the foregoing covenants would be held
to be unreasonable in time or distance or scope, the time or distance or scope
may be reduced by appropriate order of the court to that deemed reasonable.

Notwithstanding any other provision, nothing in this Agreement shall preclude
you from discussing your employment by the Company, including, without
limitation, this Agreement, any stock option, indemnification or other related
agreement, or any future compensation or benefit agreement (including any future
equity-based or cash-based long-term incentive award or deferred compensation
agreement) or your compensation and/or benefits with your spouse, or your legal
or other advisors on a confidential basis.

      c)    For the purpose of this Agreement,

            (i)   "Territory" shall mean (i) the State of Georgia, and (ii) each
other state listed on Exhibit D and in which the Company currently derives at
least five percent (5%) of its gross revenues from such geographic area. In the
event that, during the term of this Agreement, the Company's operations in any
of the States listed on Exhibit D cease to generate on an annual basis at least
five percent (5%) of the Company's gross revenues, Executive agrees that such
states will automatically no longer be included in the definition of
"Territory." In the event that, during the term of the Agreement,

                                       10


the Company at any time derives at least five percent (5%) of its gross revenues
from any states not listed on Exhibit D, Executive agrees to execute a written
addendum to this Agreement adding such states to the definition of "Territory."
If such written addendum is specifically requested at an applicable future date
by the Company's General Counsel (with a copy to Executive's counsel, the
failure of which copy shall not be a material breach of this Agreement),
Executive agrees to execute such written addendum within thirty (30) days of
receiving written request and to deliver such written addendum as set forth in
Section 7(f). Executive acknowledges by initialing this paragraph below that
such territorial restrictions are reasonable and necessary to protect the
Company and its business.

            (ii)  "Business of the Company" shall mean the provision of
electronic medical information and medical claim data interchange,
cost-containment services and directly related value-added products to physician
offices, medical claim payers, medical laboratories, pharmacies and other
healthcare institutions; including, without limitation the sale, lease and
service of communication devices directly related to transmission of lab results
to clinical laboratories. "Electronic medical information and medical claim data
interchange" includes the processing of standard and non-standard healthcare
data transactions, including without limitation, claims, eligibility inquiries,
remittance advice, prescription orders and refills, and laboratory results
between healthcare providers, payers and intermediaries. "Cost containment"
services include arranging PPO network access, providing electronic claims
repricing, bill negotiations, and network and data management to healthcare
payers, including self-insured employers, medical insurance carriers, PPO's and
third party administrators. Nothing herein shall preclude Executive at any time
form working for a bank, credit card issuer, credit card processor or other
financial services firm engaged in financial transaction data retrieval,
processing, storage or transmittal activities of any kind, or any other entity
engaged in electronic data exchange not involving medical information or medical
claim data.

            (iii) "Customers" shall mean and include persons and entities
within the Territory that are: (1) currently under contract with the Company to
access Company products or services (2) currently under the sales process to
access products or services offered by the Company and any subsidiary or
affiliate of the Company engaged in similar business with which Executive has
material business dealings during his employment, with whom or which Executive
had material direct contact during the six (6) month period preceding the
termination of his employment for any reason relating to the Company; and (3)
any current suppliers and vendors of the Company and of any subsidiary or
affiliate of the Company engaged in similar business with which Executive had
material business dealings during his employment.

            (iv)  "Material Contact," as used in Section 6(b)(iii), shall mean
contact between Executive and each employee (A) with whom Executive dealt; or
(B) whose dealings with the Company were directly coordinated or supervised by
Executive, with such contact in each of cases (A) and (B) limited to within two
years prior to the date of Executive's termination from the Company;

      d)    Executive confirms that Executive is not bound by the terms of any
agreement with any previous Company or other party which restricts in any way
Executive's use or disclosure of information or Executive's engagement in any
business other than possibly the bank check imaging, collection, retrieval,
processing, analysis, storage and/or transmittal business, except as Executive
may disclose in a separate schedule attached to this Agreement prior to
Company's and Executive's execution of this Agreement. Further, Executive
represents that Executive has delivered to the Company prior to executing this
Agreement true and complete copies of any agreements disclosed on such attached
schedule. Executive represents to the Company that, to the best of his
knowledge, Executive's execution of this

                                       11


Agreement, employment with the Company and the performance of Executive's
proposed duties for the Company will not violate any written obligations
Executive may have to any such previous Company or other party. In any work for
the Company, Executive will not disclose or make use of any information in
violation of any agreements with or rights of any such previous Company or other
party, and will not bring to the premises of the Company any copies or other
tangible embodiments of non-public information belonging to or obtained from any
such previous employment or other party.

      e)    Assistance in Litigation. Subject to whatever legal rights Executive
may have (all of which Executive reserves), Executive shall upon reasonable
notice, furnish such information and proper assistance to the Company as it may
reasonably require in connection with any litigation in which the Company is, or
may become, a party during Executive's employment with the Company.

      f)    Injunctive Relief.

            i)    Executive acknowledges and agrees that the covenants and
obligations contained in this Section 6 relate to special, unique and
extraordinary matters and that a violation of any of the terms of this Section
may cause the Company irreparable injury for which adequate remedies at law are
not available. Therefore, Executive agrees that the Company shall be entitled to
seek an injunction, restraining order, or other equitable relief from any court
of competent jurisdiction, restraining the Executive from committing any
violation of the covenants and obligations set forth in this Section 6.

            ii)   The Company's rights and remedies under this Section 6 are
cumulative and are in addition to any other rights and remedies the Company may
have pursuant to the specific provisions of this Agreement and at law or in
equity.

7.    Miscellaneous.

      a)    Attorney's Fees. In the event a proceeding is brought to enforce or
interpret any part of this Agreement or the rights or obligations of any party
to this Agreement, each party shall pay their own fees and expenses, including
reasonable attorney's fees and costs. However, in the event of a disputed claim,
if you prevail in whole or in part by reason of litigation, arbitration or
settlement, the Company shall pay your reasonable legal fees and expenses in
pursuing or defending such claim. The Company shall also promptly pay for the
reasonable attorney fees and expenses incurred by you in connection with
negotiating this Agreement not to exceed $20,000.

      b)    Successors and Assigns. This Agreement and the benefits hereunder
are personal to the Company and are not assignable or transferable by the
Executive except, in the case of death or disability, as provided herein and/or
in any stock option or other equity-based award or deferred compensation
agreements or employee benefit plan or program. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the Company and the
Executive, and the Executive's heirs and legal representatives, and the
Company's successors and assigns.

      c)    Governing Law. This Agreement shall be construed in accordance with
and governed by the law of the State of Georgia, without regard to the
application of Georgia's principles of conflict of laws.

      d)    Arbitration. Executive agrees that all controversies that may arise
between Executive and the Company concerning, arising out of or relating to his
employment, or to the interpretation, construction, performance or breach of
this Agreement (other than for injunctive relief seeking a

                                       12


temporary restraining order, preliminary or interlocutory injunction, or
permanent injunction from a court of competent jurisdiction, and other than any
dispute relating to any shares of Company stock Executive purchases or owns at
any time) shall be determined by arbitration conducted in Atlanta, Georgia,
before a panel of three arbitrators. Any arbitration under this Agreement shall
be pursuant to the Federal Arbitration Act and the laws of the State of Georgia.
The arbitrators shall be selected, and the arbitration shall be conducted, in
accordance with the rules for employment disputes promulgated by the American
Arbitration Association. The award of the arbitrators shall be final, and
judgment upon the award rendered may be entered in any court, state or federal,
having jurisdiction. The arbitrators shall have jurisdiction to award any and
all damages other than injunctive relief. Executive expressly agrees to submit
all disputes (other than those seeking injunctive relief or relating to any
dispute between Executive and the Company relating to any shares of Company
stock he purchases or owns at any time) to arbitration and waives his right to
trial by jury but only on those matters required to be arbitrated. This waiver
specifically includes, but is not limited to, employment discrimination claims
under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act, the Age Discrimination in Employment Act, the Employee Retirement Insurance
Security Act, and any other state or federal anti-discrimination statutes. In
the event that suit is filed in court for injunctive relief, no claim that
Executive may seek to assert against the Company shall be deemed to be a
compulsory counterclaim, and any such claim by Executive shall be brought
exclusively by arbitration.

      e)    Notices. All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, to the parties to this Agreement addressed (in the
case of the Company) to the Company's Board of Directors at its then principal
office with a copy to the General Counsel, and in the case of Executive, to the
Executive at Executive's most current address as shown in Executive's personnel
file, or to either party hereto at such other address or addresses as Executive
or the Company may from time to time specify for such purposes in a notice
similarly given. Copies of any notice to Executive shall also be delivered by
the Company at the same time to Executive's designated attorney or other advisor
as designated by Executive in writing in accordance with this provision, failure
of which notice shall not be a material breach.

      f)    Modification; Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by Executive and a duly authorized officer of the Company and is agreed
to in a writing signed by the Executive and such officer. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.

      g)    Headings. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.

      h)    Validity. The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

                                       13


      i)    Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and if any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid, this Agreement
shall be construed as if such invalid word or words, phrase or phrases, sentence
or sentences, clause or clauses, or section or sections had not been inserted.

      k)    Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

      l)    Surviving Provisions. Any portion of this Agreement which by it
nature survives the termination of this Agreement, including Section 6, shall
survive the termination of this Agreement.

      m)    Entire Agreement. Except as modified by this Agreement and the
attached incorporated agreements set forth in Exhibits A to E, all of
Executive's compensation, rights and benefits are as set forth in the Company's
policies in effect from time to time. Other than the Company's policies in
effect from time to time, as modified in this Agreement or the attached
exhibits, no agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party, which are not set forth expressly in this Agreement or in the attached
Exhibits A to E which are expressly incorporated herein. This Agreement and such
Exhibits constitute the final and entire agreement between the parties, and
supercedes all prior written and oral agreements, understandings, or
communications with respect to the subject matter of this Agreement.

      n)    Authorization. The Company and the undersigned individual signing on
behalf of the Company represent that execution of this Agreement on behalf of
the Company has been approved by the Compensation Committee and, if required,
the Board, that sufficient shares are available under the 2002 Stock Option Plan
to cover all of the Initial Stock Option grants set forth in Section 3(c) above,
and that such individual has the authority to execute this Agreement on behalf
of the Board and the Company.

                         [SIGNATURES ON FOLLOWING PAGE]

                                       14


      IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.

PROXYMED, INC.                                       EXECUTIVE

By: /s/ Kevin M. McNamara                            By: /s/ John G. Lettko
    Signature                                            Signature

Print Name: Kevin M. McNamara                        Print Name: John G. Lettko

                                       15

EX-31.1

                                                                    EXHIBIT 31.1

              CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
       EXCHANGE ACT RULES 13A-14(a) AND 15D-14(a), AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin McNamara, Interim Chief Executive Officer of ProxyMed, Inc., certify
that:

     1. I have reviewed this quarterly report on Form 10-Q of ProxyMed, Inc;

     2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

     4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in the Exchange Act Rules 13a-15(f) and 15(d)-15(f) for
the registrant and have:

        a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

        b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

        c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

        d. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of the
annual report) that has materially affected, or is reasonably likely to
materially affect the registrant's internal control over financial reporting.

     5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):

        a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

        b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date:  May 16, 2005


/s/ KEVIN McNAMARA
- -------------------
Kevin McNamara
Chairman of the Board and Interim Chief Executive Officer


                                       31

EX-31.2

                                                                    EXHIBIT 31.2

              CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
       EXCHANGE ACT RULES 13A-14(a) AND 15D-14(a), AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory J. Eisenhauer, Chief Financial Officer of ProxyMed, Inc., certify
that:

     1. I have reviewed this quarterly report on Form 10-Q of ProxyMed, Inc;

     2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

     4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) )) and internal control over
financial reporting (as defined in the Exchange Act Rules 13a-15(f) and
15(d)-15(f) for the registrant and have:

        a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

        b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

        c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

        d. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of the
annual report) that has materially affected, or is reasonably likely to
materially affect the registrant's internal control over financial reporting.

     5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):

        a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

        b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date:  May 16, 2005

/s/ GREGORY J. EISENHAUER
Gregory J. Eisenhauer, CFA
Executive Vice President and Chief Financial Officer

                                       32

EX-32.1

                                                                    EXHIBIT 32.1


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ProxyMed, Inc. (the "Company") on
Form 10-Q for the period ending March 31, 2005 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Kevin McNamara ,
Chairman and Interim Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.



/s/ Kevin McNamara
- -------------------
Kevin McNamara
Chairman and Interim Chief Executive Officer
May 16, 2005

A signed original of this written statement required by Section 906 has been
provided to ProxyMed, Inc. and will be retained by ProxyMed, Inc. and furnished
to the Securities and Exchange Commission or its staff upon request.

EX-32.2

                                                                    EXHIBIT 32.2


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ProxyMed, Inc. (the "Company") on
Form 10-Q for the period ending March 31, 2005 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Gregory J. Eisenhauer,
EVP and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.


/s/ Gregory J. Eisenhauer
- --------------------------
Gregory J. Eisenhauer, CFA
EVP and Chief Financial Officer
May 16, 2005

A signed original of this written statement required by Section 906 has been
provided to ProxyMed, Inc. and will be retained by ProxyMed, Inc. and furnished
to the Securities and Exchange Commission or its staff upon request.