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[CPSI Letterhead]

August 17, 2023

VIA EDGAR

Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, DC  20549

Attention:      David Edgar

        Kathleen Collins

Re:     Computer Programs and Systems, Inc.

Form 10-K for the Fiscal Year Ended December 31, 2022

Filed March 16, 2023

File No. 000-49796

Dear Mr. Edgar and Ms. Collins:

This letter is being submitted in response to the comment letter dated July 24, 2023 (the “Comment Letter”) from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) addressed to the undersigned, as Chief Financial Officer of Computer Programs and Systems, Inc. (the “Company”).  This letter contains the Company’s responses to the Comment Letter.  For your convenience, each comment is repeated below in bold, followed by the Company’s response.

Form 10-K for the Fiscal Year Ended December 31, 2022

Management’s Discussion and Analysis of Financial Condition and Results of Operations  Management Overview, page 44

1.You disclose that retention of existing Acute Care EHR customers is a key component of your long-term growth strategy and retention rates for these customers have remained in the mid-to-high 90th percentile ranges without deviating materially from 2019 to 2022. Please revise to disclose the actual retention rates for the periods presented as you appear to do in your March and June 2023 Investor Presentations.

Response:  The Company acknowledges the Staff’s comment and confirms that the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023 discloses, and future filings will disclose, the actual retention rates for Acute Care EHR customers for the periods presented.

Securities and Exchange Commission

August 17, 2023

Page 2

Results of Operations

2022 Compared to 2021, page 48

2.You disclose that the number of new hospital clients for your Acute Care EHR solutions for the periods presented. Please tell us your consideration to disclose the total number of such clients as of the end of each period presented to add context to this disclosure. In this regard, we note that such information is provided in your March and June 2023 Investor Presentations.

Response:  The Company acknowledges the Staff’s comment and respectfully submits for the Staff’s consideration that the total number of EHR customers presented in the Company’s March and June 2023 Investor Presentations were included therein solely to provide investors with a sense of the scale of the Company’s EHR business.  The Company’s management does not consider the total number of EHR customers as a key performance indicator or otherwise responsive to the disclosure requirements related to Management's Discussion and Analysis of Financial Condition and Results of Operations, but will disclose this metric in the Business section of future filings of the Company's Annual Report on Form 10-K.

With respect to the number of new Acute Care EHR customers, as discussed further below, the Company’s management no longer views the number of installations during a fiscal quarter as a key performance indicator due to the combined effects of (a) the rapid maturation of the Company’s core software markets as a result of the American Recovery and Reinvestment Act of 2009 (the “ARRA”) and (b) the natural evolution of customer licensing preferences, with Software as a Service (“SaaS”) arrangements gaining popularity at the expense of traditional client-server models and the accompanying perpetual licenses.  As such, the Company removed the disclosure of the number of new hospital clients for Acute Care EHR solutions from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023 and does not intend to provide such disclosure going forward.

With respect to the ARRA ((a) above), the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report”) notes that the ARRA greatly accelerated “the adoption of EHR technology nationwide, significantly increasing industry-wide penetration rates and our penetration rates within our existing customer base for our current menu of applications.”  The existing disclosure goes on to state that, as a result, “the revenue opportunities for new customer additions have greatly diminished, as have our opportunities for add-on sales to existing customers.”  Having stated that revenue opportunities from new customer implementations are greatly diminished and elsewhere in the 2022 Annual Report describing the Company’s continuing growth strategy as mostly reliant on expansion of our revenue cycle management (RCM) business, the Company’s management believes that it has appropriately communicated to investors that the number of new Acute Care EHR customers is no longer a key performance indicator.

Securities and Exchange Commission

August 17, 2023

Page 3

With respect to the evolution of licensing preferences ((b) above), the prevalence of SaaS arrangements within the Company’s new Acute Care EHR customer implementations was 68% in 2020, 63% in 2021, and 100% in 2022.  Management expects that all future new Acute Care EHR customer implementations will be in a SaaS environment.  This increase in the prevalence of SaaS arrangements has significant impacts on the key measures used to assess the Company’s financial performance during a given period.  Perpetual license sales generally result in “point-in-time” revenue recognition for the related software components, resulting in revenue volatility that is strongly correlated to the number of such new Acute Care EHR implementations performed during a period.  Conversely, SaaS arrangements generally result in the related contract consideration being recognized as revenue over the contract term.  The effect of this migration from perpetual license sales to SaaS arrangements has removed much of the revenue volatility associated with new Acute Care EHR implementations and greatly limits the usefulness of the number of such implementations in a fiscal quarter in assessing the Company’s performance.

Consolidated Financial Statements

Consolidated Statement of Operations, page 67

3.You present cost of sales exclusive of amortization expense and a subtotal for gross profit. Please tell us how your presentation complies with SAB Topic 11.B. In this regard, you should either include the amortization of acquisition-related intangibles in cost of sales or remove the gross profit subtotal from your statements of operations. Your discussion of gross profit and gross margin in MD&A should be similarly revised. In your response, provide us with the amount of amortization expense excluded from costs of sales for each period presented.

Response:  The Company acknowledges the Staff’s comment and will accordingly make the following changes and clarifications in future filings:  (i) remove the gross profit subtotal from the statements of operations, (ii) re-label the costs of revenue line-item(s) throughout the filing to reflect the exclusion of depreciation and amortization, and (iii) clarify the exclusion of depreciation and amortization in total costs of revenue within the relevant discussions in MD&A.  The table below reflects the intended revised presentation of the statements of operations.

Securities and Exchange Commission

August 17, 2023

Page 4

 Year Ended December 31,

 20XX

Revenues:

RCM $ XXX,XXX

EHR XXX,XXX

Patient Engagement XXX,XXX

Total revenues XXX,XXX

Expenses

Costs of revenue (exclusive of amortization and depreciation)

RCM  XXX,XXX

EHR XXX,XXX

Patient Engagement XXX,XXX

Total cost of revenue (exclusive of amortization and depreciation) XXX,XXX

Product development XXX,XXX

Sales and marketing XXX,XXX

General and administrative XXX,XXX

Amortization XXX,XXX

Depreciation XXX,XXX

Total expenses XXX,XXX

Operating income XXX,XXX

Other income (expense)

Other income (expense) XXX,XXX

Gain on contingent consideration XXX,XXX

Loss on extinguishment of debt XXX,XXX

Interest expense XXX,XXX

Total other income (expense) XXX,XXX

Income before taxes XXX,XXX

Provision for income taxes XXX,XXX

Net income $ XXX,XXX

Net income per share - basic $ X.XX

Net income per share - diluted $ X.XX

Weighted average shares outstanding used in per common share computation

Basic  XX,XXX

Diluted XX,XXX

Management estimates that amortization expense excluded from costs of sales as originally reported for the years ended December 31, 2022, 2021 and 2020 was approximately $5.6 million, $4.8 million and $3.4 million, respectively.

Securities and Exchange Commission

August 17, 2023

Page 5

Note 5. Software Development, page 80

4.We note you have determined that the change in accounting for software development costs is a change in accounting estimate effected by a change in accounting principle. Please provide us with a detailed analysis of how you determined that this change was not a correction of an error. In this regard, you state that your ongoing monitoring activities revealed that your then-current capitalization methodology did not fully reflect all of the activities critical to develop software assets.

Response:  The Company acknowledges the Staff’s comment and respectfully advises the Staff that it considered the guidance in FASB Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error Corrections, when this change in methodology was made during the quarter ended June 30, 2021 and the Company’s management concluded that the change in accounting for software development costs was not a correction of an error.  The Company provided various disclosures in its Quarterly Report on Form 10-Q for the period ended June 30, 2021 (the “Q2 2021 Form 10-Q”) regarding this change.  In Note 1. Basis of Presentation and Note 6. Software Development in the Notes to the Condensed Consolidated Financial Statements, we disclosed that a change in methodology was made, described the nature of the change in methodology, and discussed the financial impact of the change on the 2021 interim periods.  Similar disclosures were provided in the Management Overview section and the Critical Accounting Policies and Estimates section of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.  The impacts of the change in methodology on operations and cash flows were discussed in the Product Development and Investing Cash Flow Activities paragraphs, respectively, in the Q2 2021 Form 10-Q, and similar disclosures have been made in subsequent filings.    The discussion below provides details of our considerations in reaching the conclusion that this change in methodology was not the correction of an error.  For ease of presentation, the discussion below is organized as (i) Background, (ii) the Original Methodology, (iii) the Revised Methodology, and (iv) Accounting Conclusions.

Background

The Company implemented its accounting policy for capitalization of product developments costs incurred in the development of new technologies for hosted solutions to be marketed under a software as a service (“SaaS”) model in accordance with ASC 350-40, Internal-Use Software, for the fiscal year beginning January 1, 2020, upon adoption of Accounting Standards Update (“ASU”) 2018-15, Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, as required for public business entities for fiscal years beginning after December 15, 2019.  Prior to January 1, 2020, software development costs incurred were not capitalized as previous software development projects predominately related to the development of licensable software to be sold, leased, or marketed externally and were accounted for under ASC 985-20, Costs of Software to be Sold, Leased, or Marketed.  ASC 985-20 limits capitalization to a narrow timeframe between establishing technological feasibility and general release, resulting in insignificant amounts eligible for capitalization.  Additionally, the Company’s strategy to migrate to developing new applications that would be marketed as SaaS solutions, as opposed to software solutions licensed to customers or sold externally, occurred concurrently with the adoption of ASU 2018-15, resulting in subsequent

Securities and Exchange Commission

August 17, 2023

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increases in the costs eligible for capitalization. Although the Company offered SaaS solutions prior to 2020, the development costs associated with these products were concluded to be immaterial.

Original Methodology

The activities associated with software development on new SaaS projects are mostly performed by internal product development teams at the Company.  These teams do not work solely on new products accounted for as internal-use software and the Company historically (prior to January 1, 2020) did not track time on a project-level basis.  As a result, to comply with the capitalization requirements of ASC 350-40 as of January 1, 2020, the Company developed a reasonable methodology, based on the best information known at the time, to estimate time spent on software development in order to allocate a portion of product development teams’ labor costs to capitalized expenses.  As time tracking is the predominant industry practice to determine direct labor costs associated with a project, management established a system of estimating capitalizable labor costs using an estimated time-equivalent for development activities that met the capitalization criteria of ASC 350-40. This estimated time-equivalent (as described in more detail below) was based on assumptions supported by the limited tracked labor data of a pilot group of the Company's developers that was available at the time and required judgment from individual product development teams regarding time needed to complete a task.  Estimated time-equivalents during the relevant period were then multiplied by a Company-wide cost factor (i.e., the average daily compensation costs, inclusive of related payroll taxes and benefits, for our entire population of employees engaged in product development activities) to determine each period’s costs requiring capitalization.

More specifically, the Company utilizes the Agile Development framework that divides product development efforts into “sprints” and “epics”, which are then further broken into “story points” as the most detailed measure of the level of effort required to complete a specific task.  This level of effort determination is made by the development team assigned to complete the work and considers time-to-complete, but also includes other factors (such as complexity) that form a qualitatively-informed level-of-effort metric.  These story points are then classified as requiring capitalization (“CapEx”) or requiring immediate expense (“OpEx”) depending on the nature of the work in consideration of the relevant capitalization criteria in ASC 350-40.  As (i) the prevailing industry practice is to determine capitalization allocation rates using detailed time-tracking, and (ii) the Company (as of the implementation of this methodology during the first quarter of 2020) had no systematic time-tracking mechanism, the Company originally estimated the time-equivalent of a story point to determine the allocation of product development efforts between CapEx and OpEx, further quantifying the financial impact using organization-wide compensation averages for our product development organization.  This estimation was derived using a pilot group within our product development organization for which detailed time tracking was performed to arrive at an estimated time-equivalent per story point, resulting in a conclusion that one story point was the equivalent of approximately one work day.  Inherent in this methodology was an assumption that the time-