GROWTH. INNOVATION. RESULTS. Growth. Innovation. Results. A Higher IQ For Healthcare IT Annual Report 2002 Company Profile Quality Systems Inc. and its NextGen Healthcare Information Systems subsidiary develops and markets computer-based practice management systems, electronic patient records systems, and connectivity applications for large medical and dental group practices. Products are marketed under the QSI and NextGen product names. Visit www.qsii.com and www.nextgen.com for additional information. President’s Letter To our Shareholders, Clients, Partners, and Associates: Investors and entrepreneurs perpetually search for companies that combine award-winning products, dedicated, knowledgeable, and motivated staff, and visionary clients; companies which operate in the largest and most vibrant sectors of the economy; companies that have established a track record for growth, innovation, and results. During FY 2002, QSI proved that it can be that kind of company. For the year, revenue growth was to a record $44.4 million. These results were driven by record setting performance in our NextGen Healthcare Information Systems and EDI units. Growth was driven by our 221 associates. The contributions of these professionals are too numerous to list, and are impossible to forget. The skills, energy, and commitment of our team members are extraordinary assets to the Company. Growth draws inspiration from innovation. During the year, our NextGen Division delivered NextGenpda as well as important enhancements to our flagship EPM and EMR applications. Awards from TEPR, AAFP, and others serve as objective proof of the quality of our products and the clarity of our vision. Our new product pipeline remains robust. Continued innovation in our EDI unit led to the expanded rollout of numerous connectivity products. At the QSI division, Project Sequoia has been the catalyst for two important product extensions. Growth and innovation are nothing without results. For the year, Company earnings per share increased 47%, driven by gains in Operating Income at our NextGen and QSI units of 31% and 61%, respectively. At year end, and on behalf of everyone at the Company, a sincere “thank you” to the members of the QSI community who inspire us to be our best. Know that each day we strive to lead our industry in growth, innovation, and results. Your past, present, and future support is greatly appreciated. Sincerely, Lou Silverman Perspectives We are proud of the results we’ve delivered to our shareholders over the past year. We are equally proud of the results we’ve helped our clients achieve through the use of our products: Southeast Texas Medical Associates in Beaumont, Texas purchased NextGenemr and has become an enthusiastic advocate of “going electronic”. SETMA’s transcription costs have declined from $5.93 per visit to $.25 per visit. More accurate coding and charge capture increased revenue per patient visit by 20%. Operating expenses decreased by over $2 million per year. Documentation quality increased such that through six audits, no deficiencies were found. SETMA is also a happy NextGenepm client. Piedmont Physicians Group in Atlanta, Georgia purchased NextGenepm and realized a 200% ROI in their first year. A/R decreased by 55%, claims denials decreased by 84%, and physician satisfaction increased. Creative Dimensions in Dentistry in Castro Valley, California purchased QSI’s Clinical Product Suite (electronic dental record product) and moved to a completely paperless chart environment. Office space that had been used for patient files is now used for revenue producing patient treatment resulting in a $1.5 million per year revenue opportunity. Costs associated with chart management and traditional x-ray film usage have been reduced by 60%. Pratt Medical Center in Fredericksburg, Virginia purchased a suite of Connectivity services from QSI. Through its first eight months, more than 8,000 appointments have been scheduled on-line, eliminating a similar number of phone calls into the practice. More than 5,000 families (encompassing about 12,000 individuals) have registered with the practice on-line. Thousands of appointments have been electronically confirmed. And, bottom line, patients responded with a 94% satisfaction rate when surveyed about the enhanced functionality. m o c . s r o n n o c - n a r r u c . w w w / . c n I , s r o n n o C & n a r r u C y b d e n g i s e D Corporate Information OFFICERS OF THE COMPANY LEGAL COUNSEL Louis Silverman President, Chief Executive Officer Rutan & Tucker LLP Costa Mesa, California INDEPENDENT AUDITORS Grant Thornton LLP Irvine, California REGISTRAR AND TRANSFER AGENT U.S. Stock Transfer Corp. Glendale, California INVESTOR RELATIONS CONSULTANTS Coffin Communications Group Sherman Oaks, California 818.789.0100 FORM 10-K A copy of the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission is available on the Company’s website at www.qsii.com or by contacting the Company at the address below. Patrick Cline President NextGen Healthcare Information Systems Division Greg Flynn Executive Vice President, General Manager QSI Division Paul Holt Chief Financial Officer DIRECTORS OF THE COMPANY Sheldon Razin Chairman of the Board Ahmed Hussein Co-Chairman of the Board Mohammed Tawfick El-Bardai CEO National Telecommunications Corporation Emad Zikry President and CEO ARM Capital Advisors, LLC Dale Hanson CEO American Partners Capital Group Frank Meyer President Glenwood Holdings William Small Independent Management Consultant CORPORATE/QSI DIVISION HEADQUARTERS 18191 Von Karman Avenue Suite 450 Irvine, California 92612 949.255.2600 www.qsii.com DIVISION LOCATIONS 795 Horsham Road Second Floor Horsham, Pennsylvania 19044 215.657.7010 3414 Peachtree Road NE Suite 660 Atlanta, Georgia 30326 404.467.1500 www.nextgen.com