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                                                                   Exhibit 10.12

                      STAY IN PLACE / SEPARATION AGREEMENT

      This STAY IN PLACE/ SEPARATION AGREEMENT is made this 31 Day of October
2000 by and between Health Management Systems, Inc. (hereinafter the "Employer"
or "HMS"), and William Lucia ("Employee"), One West St., Apt. 2611, New York, NY
10001.

      WHEREAS Employer has determined that it will explore restructuring
alternatives for the unit of Employer's business (the "Unit") to which the
Employee's services currently are being rendered; and

      WHEREAS, Employer desires to retain the services of the Employee through
the restructuring period to insure continuity of leadership.

      NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:

      1.    STAY IN PLACE: PROVIDED Employee continues to render services to,
            and to be employed by, the Unit, Employee will receive a
            "stay-in-place-bonus" (hereinafter "Bonus") equivalent to six months
            base compensation of $85,000.00 (Eighty Five Thousand Dollars) under
            the following circumstances:

            A.    DIVESTITURE: Coincident with the closing of the sale or other
                  transfer of the Unit (including a sale or other transfer of
                  the substantially all of the assets thereof) to an entity (the
                  "Successor Company") other than a subsidiary of the Employer.
                  The Bonus will be paid to Employee in a lump sum within thirty
                  days after the date of such closing.

            B.    CONTINUATION OF OPERATION: When the Chief Executive Officer of
                  Employer notifies the head of the Unit in writing (a
                  "Continuation Notification") that the Unit shall continue as
                  part of HMS. Employer shall cause a copy of the Continuation
                  Notice to be provided to Employee simultaneously with its
                  delivery to the head of the Unit. The Bonus will be paid to
                  Employee in a lump sum within thirty business days after
                  delivery of the Continuation Notice.
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            C.    SHUT DOWN: At the conclusion of an orderly shut down of the
                  Unit. Employer shall notify Employee in writing of its
                  intention to shut down the Unit and shall specify in such
                  notice the intended last day of operation of the Unit (the
                  "Shut Down Date"). The Bonus will be paid to Employee in a
                  lump sum within thirty business days after Shut down Date.

            D.    DATE: If none of the above occurs, by 31 December 2001, the
                  Bonus will be paid to employee in a lump sum by no later than
                  Friday, January 5, 2002.

2.    Employer recognizes that the Employee, by agreeing to continue to render
      services to Employer and the Unit during the transition period, may be
      giving up an opportunity to seek alternative employment. In order to
      provide salary continuance in the event Employee's employment is not
      continued, Employee will receive severance payments ("Severance"), as
      described herein and under the following circumstances:

            A.    The Successor Company does not offer employment to Employee.
                  Employee will receive six months Severance commencing on the
                  date (the "Termination Date") of termination of Employee's
                  employment with HMS. Severance Payments will be made over a
                  six-month period in accordance with Employee's current payroll
                  cycle.

            B.    The Successor Company tenders an offer to Employee containing
                  a base pay component less than 85% of the Employee's current
                  base pay. If Employee decides not to accept the Successor
                  Company's offer, Employee shall so notify in writing his
                  immediate supervisor. If Employer thereafter terminates
                  Employee, Employee will receive six months Severance
                  commencing the Termination Date. Severance payment will be
                  made over a six-month period in accordance with the Employee's
                  current payroll cycle.

            C.    The Successor Company tenders an offer of employment in a
                  different location (more than 50 miles from the Employee's
                  current HMS office.) If Employee decides not to accept the
                  Successor Company's offer, Employee shall so notify in writing
                  his immediate supervisor. If Employer thereafter terminates
                  Employee, Employee will receive three
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                  months Severance commencing the Termination Date. Severance
                  payments will be made over a three-month period in accordance
                  with the employee's normal payroll cycle.

            D.    If HMS terminates Employee during Calendar Year 2001 without
                  cause, Employee will receive six months Severance commencing
                  the Termination Date. Severance payments will be made over a
                  six-month period on the employee's normal payroll cycle. For
                  purposes of this Agreement, "Cause" for termination shall mean
                  (1) conviction (including a plea of guilty or nolo contendere)
                  of a crime involving theft, fraud, dishonesty or moral
                  turpitude, (2) willful gross violation of Employer's written
                  policies or procedures, or (3) failure to carry out the duties
                  of Employee's position.

            E.    Notwithstanding the foregoing, Employee shall not be entitled
                  to any Severance hereunder in the event of a " Management
                  Buyout" of the Unit where the Employee is retained to help
                  manage the Successor Company.

            F.    During the Severance pay period Employee will continue to
                  participate in the Employer provided health insurance plan and
                  will continue to pay a portion of the premium for health.
                  Participation in the Employer provided STD, LTD, Life
                  Insurance and 401(k) plans will cease as of the Termination
                  Date.

            G.    Employee's rights to any Severance hereunder will be
                  conditioned upon Employee's agreeing, effective as of the
                  Termination Date, to a standard Separation Agreement with HMS;
                  a blank copy of the Separation Agreement and Release is
                  appended for Employee's convenience.

            H.    Employee agrees not to disclose or make reference to the terms
                  of this Agreement without prior written consent of HMS, except
                  as required by law, or to his attorney and his immediate
                  family.

            I.    Employee agrees to adhere to the terms and condition of the
                  HMS Not To Compete Agreement. If Employee has not signed a HMS
                  Not To Compete Agreement, HMS will require the Employee to
                  enter into a Not To Compete Agreement to be eligible for the
                  severance payments described herein.
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3.    Employee acknowledges that (i) he has had a minimum of 14 days from the
      date of receipt to review this Agreement; (ii) HMS has recommended that he
      discuss this Agreement with his legal and other advisors to ensure full
      and thorough knowledge of the legal significance of this Agreement and;
      (iii) that he is executing this Agreement voluntarily after having
      undertaken the aforementioned review. This Agreement shall be construed
      under the laws of the state of New York and shall in all respects be
      interpreted, enforced, and governed under the law of said state.

4.    This Agreement is binding on the parties and their respective successors
      and assigns.

5.    This Agreement contains, and is intended as, a complete statement of all
      of the terms of the arrangements among the parties with respect to the
      matters provided for herein, and supersedes any previous agreements and
      understandings among the parties with respect to those matters.

6.    No provision of this Agreement may be amended or modified except by an
      instrument or instruments in writing signed by the parties hereto.

ACCEPTED AND AGREED TO:                      HEALTH MANAGEMENT
                                             SYSTEMS INC.

_____________________________                By:  ______________________________
William Lucia                                Lewis D. Levetown
                                             Vice President Human Resources

_____________________________                     ______________________________
Date                                              Date