884497--3/12/2010--MEDQUIST

related topics

{system, service, information}

{product, market, service}

{cost, contract, operation}

{personnel, key, retain}

{acquisition, growth, future}

{cost, regulation, environmental}

{property, intellectual, protect}

Our ability to expand our business and properly service our customers depends on our ability to effectively manage our domestic production capacity and our only offshore transcription labor partner (CBay Systems Services, Inc.), including our ability to recruit, train and retain qualified MTs and MEs and maintain high standards of quality service in our operations, which we may not be able to do. If the electronic health records (EHR) companies produce solutions acceptable to large hospital systems for the creation of electronic clinical documentation that are not based on the conversion of voice to text, the overall demand for medical transcription services could be reduced. Our success will depend on our ability to support existing technologies as well as to adopt and integrate new technology into our DEP, to improve our production capabilities and expand the breadth of our service offerings, as well as our ability to address any unanticipated problems with our information technology systems, which we may not be able to do quickly, or at all. Our business, particularly our DEP and our speech recognition software, depends on the continuous, effective, reliable, and secure operation of our computer hardware, software, and Internet applications and related tools and functions. We may experience interruption at our data centers or client support facilities. Due to the critical nature of clinical documentation to our customers operations, potential customers may be reluctant to outsource or change service providers as a result of the cost and potential for disruption in services, which may inhibit our ability to attract new customers. If our intellectual property is not adequately protected, we may lose our market share to our competitors and be unable to operate our business profitably. We are dependent on third party speech recognition software incorporated in certain of our technologies, and impaired relations with such third party or the inability to enhance such third party software over time could harm our business. We compete with many others in the market for clinical documentation services which may result in lower prices for our services, reduced operating margins and an inability to maintain or increase our market share and expand our service offerings. We may pursue future transactions, including the proposed acquisition of certain assets of Spheris Inc., which could require us to incur debt and assume contingent liabilities and expenses, and we may not be able to effectively integrate new operations. If we fail to comply with extensive contractual obligations and applicable laws and government regulations governing the handling of patient identifiable medical information, including those imposed on us and our customers in connection with HIPAA, we could suffer material losses or be negatively impacted as a result of our and/or our customers exposure to material penalties and liabilities under HIPAA as amended by the HITECH Act.

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884497--3/12/2010--MEDQUIST_INC