2010 financial guidance from HealthGrades

HealthGrades, Inc. (NASDAQ:HGRD), the leading independent healthcare ratings company, today introduced 2010 financial guidance.

“We are looking for another strong growth year in 2010”

Beginning in 2010, the Company will begin reporting its revenue results in two business units, Professional Services, which was formerly known as Provider Services, and Internet Business Group. The Strategic Health Solutions business will now be reported as part of our Internet Business Group.

The Company believes the term Professional Services more accurately describes what it currently delivers to its hospital clients and, as importantly, where the Company is heading with this business unit. The professional team, including our sales team and employee consultants, is comprised of healthcare industry experts. As the Company grows, the expectation is that its clients will look to HealthGrades more and more for not only its “ratings”-related products, but as importantly, for all of the professional services imbedded in its offerings, which add substantial strategic value to these organizations as they seek to improve their quality and influence patient choice in their markets.

Strategic Health Solutions is being added to the Internet Business Group, as the principal strategy in this area is to build distribution partnerships with web portals and to increase the visibility of the HealthGrades brand among consumers. This is consistent with the Company’s focus toward creating distribution channels with all types of web portals, both large and small, with the goal of building its brand, reaching patients through more touch points, and directing more traffic back to the HealthGrades web properties.

The Company expects 2010 total revenue to increase 20% compared with 2009 total revenue. Although the Company’s Professional Services business through the nine months ended September 30, 2009 grew at 10% and, as stated previously, is expected to finish 2009 with revenue growth slightly under 10%, the Company does expect this business to grow in excess of 10% in 2010. The Company expects its 2010 Internet Business Group revenue to grow at a rate substantially above the Company’s revenue guidance of 20%.

HealthGrades expects its operating margin for 2010 to be in the range of 19% to 22%. The Company is currently adding a significant number of sales team members. In addition, the Company has been adding staffing during the fourth quarter of 2009 to drive a number of business initiatives related to consumer experience and product development for its web properties. Finally, the Company is embarking on several major information technology initiatives.

“We are looking for another strong growth year in 2010,” said Kerry Hicks, CEO of HealthGrades. “As we described above, we are renaming our Provider Services business as Professional Services. This change reflects that we are focused now more than ever on delivering strategic value to our clients through our professional services offerings. We have and will continue to invest in our professional staff in terms of training and education, standardization of our product deliverables and enhancements to our current product offerings to deliver meaningful and strategic value to our clients. With respect to the Internet Business Group, we are very excited with the progress we have made during 2009 and very optimistic with respect to the opportunity ahead of us in 2010. We also have made, and will continue to make, meaningful changes to our web site to improve the consumer’s experience. We look forward to reporting our continued progress to you in the coming quarters.”

HealthGrades also affirmed its previous guidance for 2009 of ratings and advisory revenue growth of 30% over 2008, and an operating margin in the range of 17% to 21%.