U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


    For the quarter ended:                           Commission File Number:
      September 30, 2001                                     0-27554
------------------------------                   -------------------------------

                      PACE Health Management Systems, Inc.
                      ------------------------------------
        (Exact name of small business issuer as specified in its charter)

            Iowa                                         42-1297992
-------------------------------             ------------------------------------
(State or other jurisdiction of             (IRS Employer Identification Number)
incorporation or organization)

                              2116 Financial Center
                                   666 Walnut
                              Des Moines, IA 50309
       -------------------------------------------------------------------
              (Address and zip code of principal executive offices)


                                 (515) 244-5746
       -------------------------------------------------------------------
                Issuer's telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject of the filing requirements for at least the
past 90 days. YES _X_    NO ___

State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:

                                                Number of Shares Outstanding
           Class                                      November 6, 2001
           -----                                      ----------------
     Common Stock, no par                                 5,716,074

Transitional Small Business Disclosure Format (Check one):  YES ___   NO _X_.


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<PAGE>


                      PACE HEALTH MANAGEMENT SYSTEMS, INC.

                          PART I. FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)
                                                                            Page
                                                                            ----
Condensed Balance Sheets
       September 30, 2001 and December 31, 2000                               3

Condensed Statements of Operations
       Three Months and Nine Months Ended September 30, 2001 and 2000         4

Condensed Statements of Cash Flows
       Nine Months Ended September 30, 2001 and 2000                          5

Notes to Condensed Financial Statements 6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
        PLAN OF OPERATION                                                     7


                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS                                                     8

ITEM 2. CHANGES IN SECURITIES                                                 8

ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                       8

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                   8

ITEM 5. OTHER INFORMATION                                                     8

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                      8


                                       2
<PAGE>


                          PART 1. FINANCIAL INFORMATION

ITEM  1.  FINANCIAL STATEMENTS

PACE HEALTH MANAGEMENT SYSTEMS, INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30,      DEC. 31,
                                                                         2001             2000
                                                                     ------------     ------------
<S>                                                                  <C>              <C>
  ASSETS
  CURRENT ASSETS:
     Cash and cash equivalents                                       $  2,060,906     $  2,080,801
     Accounts receivable                                                       20              320
     Prepaid insurance                                                     14,292            8,166
                                                                     ------------     ------------
                                                                     $  2,075,218     $  2,089,287
                                                                     ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable and accrued expenses                           $     15,688     $         --
                                                                     ------------     ------------
         TOTAL CURRENT LIABILITIES                                         15,688               --
                                                                     ------------     ------------

SHAREHOLDERS' EQUITY:
     Serial preferred stock, no par value, authorized 1,000,000
         shares; issued none                                                   --               --
     Convertible participating preferred stock, Series A, no par
         value; issued and outstanding 2,875,000 shares                 2,875,000        2,875,000
     Common stock, no par value, issued and outstanding 5,716,074
         shares                                                        17,065,136       17,065,136
     Additional paid-in capital                                           673,486          673,486
     Accumulated deficit                                              (18,554,092)     (18,524,335)
                                                                     ------------     ------------
                                                                        2,059,530        2,089,287
                                                                     ------------     ------------
                                                                     $  2,075,218     $  2,089,287
                                                                     ============     ============
</TABLE>

  See Notes to Condensed Financial Statements


                                       3
<PAGE>


PACE HEALTH MANAGEMENT SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED               NINE MONTHS ENDED
                                                       SEPTEMBER 30,                   SEPTEMBER 30,
                                                ---------------------------     ---------------------------
                                                   2001            2000            2001            2000
                                                -----------     -----------     -----------     -----------
<S>                                             <C>             <C>             <C>             <C>
NET REVENUES                                    $        --     $        --     $        --     $        --
                                                -----------     -----------     -----------     -----------

COSTS AND EXPENSES
     General and administrative                      45,744          19,542          93,764          57,888
                                                -----------     -----------     -----------     -----------
                                                     45,744          19,542          93,764          57,888
                                                -----------     -----------     -----------     -----------
         (LOSS) FROM OPERATIONS                     (45,744)        (19,542)        (93,764)        (57,888)

INTEREST INCOME                                      16,949          29,217          64,007          82,060
PURCHASE PRICE ADJUSTMENT                                --        (104,482)             --        (104,482)
                                                -----------     -----------     -----------     -----------
         (LOSS) BEFORE INCOME TAXES                 (28,795)        (94,807)        (29,757)        (80,310)

PROVISION FOR INCOME TAXES                               --              --              --              --
                                                -----------     -----------     -----------     -----------
         NET (LOSS)                             $   (28,795)    $   (94,807)    $   (29,757)    $   (80,310)
                                                ===========     ===========     ===========     ===========

LOSS PER SHARE
     Basic                                      $     (0.02)    $     (0.03)    $     (0.04)   $      (0.05)
                                                ===========     ===========     ===========    ============
     Fully diluted                              $     (0.02)    $     (0.03)    $     (0.04)   $      (0.05)
                                                ===========     ===========     ===========    ============

WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
     EQUIVALENT SHARES OUTSTANDING                5,716,074       5,716,074       5,716,074       5,672,542
                                                ===========     ===========     ===========    ============
</TABLE>


See Notes to Condensed Financial Statements


                                       4
<PAGE>


PACE HEALTH MANAGEMENT SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                    NINE MONTHS ENDED
                                                                                       SEPTEMBER 30,
                                                                                ---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES                                               2001            2000
                                                                                -----------     -----------
<S>                                                                             <C>             <C>
Net (Loss)                                                                      $   (29,757)    $   (80,310)
Purchase price adjustment                                                                --         104,482
Change in assets and liabilities:
     Decrease in accounts receivable                                                    300             200
     (Increase) in prepaid insurance and other current assets                        (6,126)        (23,214)
     Increase (decrease) in accounts payable and accrued expenses                    15,688         (11,944)
                                                                                -----------     -----------
         NET CASH (USED IN) OPERATING ACTIVITIES                                    (19,895)        (10,786)
                                                                                -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from the exercise of stock options                                         --          62,864
                                                                                -----------     -----------
           NET CASH PROVIDED BY FINANCING ACTIVITIES                                     --          62,864
                                                                                -----------     -----------

           NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     (19,895)         52,078

CASH AND CASH EQUIVALENTS
Beginning                                                                         2,080,801       1,916,974
                                                                                -----------     -----------
Ending                                                                          $ 2,060,906     $ 1,969,052
                                                                                ===========     ===========
</TABLE>


See Notes to Condensed Financial Statements


                                       5
<PAGE>


PACE HEALTH MANAGEMENT SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

NOTE 1. BASIS OF PRESENTATION

The accompanying financial information should be read in conjunction with the
annual financial statements and notes thereto for the year ended December 31,
2000. The financial information included herein is unaudited; such information
reflects all adjustments, which, in the opinion of management, are necessary in
order to make the financial statements not misleading.

The results of operations for the nine months are not necessarily indicative of
the results to be expected for the entire fiscal year.

NOTE 2. BASIC AND DILUTED (LOSS) PER SHARE

In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share,
which requires the Company to present basic and diluted income (loss) per share
amounts. Basic income (loss) per share is based on the weighted average number
of common shares outstanding during the period. Diluted income (loss) per share
is based on the weighted average number of common shares and dilutive potential
common shares outstanding during the period. Dilutive potential common shares
consist of stock options and warrants (using the treasury stock method) and
convertible preferred stock (using the if-converted method). The effect of stock
options and warrants was not included in the computation because to do so would
have been antidilutive. At September 30, 2001, there are approximately 2,900,000
shares issuable under warrant or option arrangements.

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED SEPTEMBER 30,        NINE MONTHS ENDED SEPTEMBER 30,
                                           ------------------------------------------------------------------------
                                               2001                2000                2001                2000
                                           ------------------------------------------------------------------------
<S>                                        <C>                 <C>                 <C>                 <C>
Net income (loss)                          $   (28,795)        $   (94,807)        $   (29,757)        $   (80,310)
Preferred dividends in arrears                 (71,875)            (71,875)           (215,625)           (215,625)
                                           ------------------------------------------------------------------------
Net (loss) available to common
shareholders                               $  (100,670)        $  (166,682)        $  (245,382)        $  (295,935)
                                           ========================================================================
Weighted average shares
outstanding                                  5,716,074           5,716,074           5,716,074           5,672,542
                                           ========================================================================
Basic and diluted (loss) per share         $     (0.02)        $     (0.03)        $     (0.04)        $     (0.05)
                                           ========================================================================
</TABLE>


NOTE 3.   RELATED PARTY TRANSACTIONS

Administration expenses paid to Equity Dynamics, Inc., an entity wholly owned by
a Director of the Company, totaled $9,550 and $7,500 for the three months ended
September 30, 2001 and 2000, respectively, and totaled $28,050 and $29,674 for
the nine months ended September 30, 2001 and 2000, respectively.


                                       6
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

Prior to October 1998, PACE developed and marketed advanced patient care
management software systems that enabled healthcare providers to standardize the
delivery of care, maximize resource utilization and improve clinical outcomes.
The Company's enterprise-wide, client/server applications automated charting,
clinical workflow processes and clinical pathways. The Company's core system,
PACE CMS, was a modular suite of advanced software applications that provided
hospitals, physicians' offices, and integrated delivery systems a comprehensive
system for interdisciplinary documentation, nursing care planning, clinical
pathway management and enterprise-wide order management, all at the point of
care.

On October 7, 1998, the Company completed the sale of substantially all of its
assets to, and the assumption of certain of its liabilities by, Minnesota Mining
and Manufacturing Company ("3M") ("the Transaction"). The sale was made pursuant
to an Asset Purchase Agreement dated June 30, 1998, as amended, as described in
Company's definitive proxy statement dated September 14, 1998. The Transaction
was approved by the holders of both the common stock and the preferred stock at
a special meeting of shareholders held on October 7, 1998.

The purchase price of the Transaction was approximately $5.9 million, including
$4.75 million in cash, of which $750,000 was originally placed in escrow to
secure the Company's indemnification obligations under the Asset Purchase
Agreement, plus the assumption of substantially all of the Company's liabilities
other than $2.1 million in line of credit balances, which were paid off from
proceeds at closing. 3M offered positions to most of the Company's employees and
assumed full support of the Company's customers. Subsequent to the closing of
the Transaction, the Company agreed that $25,000 of the amount in escrow could
be paid to 3M as part of a purchase price adjustment contemplated by the Asset
Purchase Agreement, leaving an escrow balance of $725,000.

In July 1999, the Company received proceeds from the restricted escrow account
totaling approximately $525,000. In December 2000, the Company received final
proceeds from the restricted escrow account totaling $104,953. A like amount was
also paid to 3M in final settlement and as an adjustment to the purchase price.

Following the Transaction, the Company has no ongoing operations and no revenues
and has minimal operating expenses. The Company presently has no employees. The
Company's September 30, 2001 balance sheet reflects cash in excess of $2 million
and no material liabilities.

The net proceeds from the sale will be retained by the Company pending a
determination of whether to engage in a follow-on transaction. The Company has
been seeking a business combination with another entity, before considering
possible liquidation and distribution of its assets. The Company believes that
with the cash on hand and net operating loss carryforwards, subject to the
limitation of such carryforwards under the Internal Revenue Code, such a
combination may be attractive to potential partners and would better serve the
interests of the Company's shareholders. As of the date of this Form 10-QSB, no
definitive agreement has been signed for a follow-on transaction. If no suitable
business combination is identified within a reasonable period of time, the
Company may elect to liquidate and distribute the remaining net proceeds to
shareholders. If the Company liquidated at the present time, all of the net
assets of the Company would be paid to holders of the Company's preferred stock.

RESULTS OF OPERATIONS

GENERAL AND ADMINISTRATIVE: General and administrative expenses include
bookkeeping costs, expenses associated with shareholder relations and SEC
reporting requirements, and insurance. General and administrative expenses were
$45,744 and $19,542 for the three months ended September 30, 2001 and 2000,
respectively, representing an increase of 134.1%. General and administrative
expenses were $93,764 and


                                       7
<PAGE>


$57,888 for the nine months ended September 30, 2001 and 2000, respectively,
representing an increase of 62.0%. These increases are due mainly to an increase
in auditing, legal, and insurance expenses.

INTEREST INCOME AND PURCHASE PRICE ADJUSTMENT: Interest income was $16,949 and
$29,217 for the three months ended September 30, 2001 and 2000, respectively,
representing a decrease of 42.0%. Interest income was $64,007 and $82,060 for
the nine months ended September 30, 2001 and 2000, respectively, representing a
decrease of 22.0%. These decreases are a result of a decrease in the interest
rates from the prior year. As described elsewhere herein, the Company recognized
a purchase price adjustment of $104,482 during the three months ended September
30, 2000.

PROVISION FOR INCOME TAXES: No provision for income tax benefit has been
recorded due to the Company recording a valuation allowance on the deferred tax
assets.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities for the nine months ended September 30,
2001 and 2000 was $19,895 and $10,786, respectively. Following the Transaction,
the Company has no ongoing operations and no revenues and has minimal operating
expenses. The Company's September 30, 2001 balance sheet reflects cash of over
$2 million and no material liabilities.

Net cash provided by financing activities for the nine months ended September
30, 2001 and 2000 was $0 and $62,864, respectively. Net cash provided by
financing activities in 2000 was from the exercise of stock options.

The net proceeds from the sale will be retained by the Company pending a
determination of whether to engage in a follow-on transaction. The Company has
been seeking a business combination with another entity, before considering
possible liquidation and distribution of its assets. As of the date of this Form
10-QSB, no definitive agreement has been signed for a follow-on transaction. If
no suitable business combination is identified within a reasonable period of
time, the Company may elect to liquidate and distribute the remaining net
proceeds to shareholders. If the Company liquidated at the present time, all of
the net assets of the Company would be paid to holders of the Company's
preferred stock.

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
     N/A

ITEM 2.  CHANGES IN SECURITIES
     N/A

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
     N/A

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     N/A

ITEM 5.  OTHER INFORMATION.
     N/A

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
     (a)  Exhibits
               N/A
     (b) Reports on Form 8-K
               No reports on Form 8-K were filed during the quarter for which
               this report is filed.


                                       8
<PAGE>


                                   SIGNATURES

In accordance with requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.


PACE HEALTH MANAGEMENT SYSTEMS, INC.
-----------------------------------
(Registrant)

    November 6, 2001                                    /s/ John Pappajohn
--------------------------                              ------------------------
          Dated                                         John Pappajohn, Director


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