<PAGE>
                          UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
                                
                            FORM 10-Q


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1998

                               OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
____________ TO ___________

Commission file number: 0-28212

               SUNQUEST INFORMATION SYSTEMS, INC.
     (Exact name of registrant as specified in its charter)
                                
PENNSYLVANIA                                 86-0378223
(State or Other Jurisdiction of              (I.R.S. Employer
Incorporation or Organization)               Identification Number)

                  4801 East Broadway Boulevard
                      Tucson, Arizona 85711
       (Address of principal executive office) (Zip Code)
                                
                         (520) 570-2000
      (Registrant's telephone number, including area code)
                                
                         Not Applicable
(Former name, former address, and former fiscal year, if changed
                       since last report)
                                

Indicate by check mark whether the registrant (1) has 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 to such filing
requirements for the past 90 days.  [ X ] Yes   [   ]  No


On November 11, 1998, there were 15,388,753 shares of Common
Stock outstanding.

<PAGE>

               Sunquest Information Systems, Inc.
                            Form 10-Q
        For the Quarterly Period Ended September 30, 1998
                                
                        Table of Contents

                                                                 Page
                                                                 ----
Part I.    Financial Information                                    
                                                                    
  Item 1.  Financial Statements                                     
                                                                    
           (a.) Condensed consolidated balance sheets as           3
           of September 30, 1998 (unaudited) and December
           31, 1997
                                                                    
           (b.) Unaudited condensed consolidated                   4
           statements of income and comprehensive income
           for each of the three and nine month periods
           ended September 30, 1998 and September 30, 1997
                                                                    
           (c.) Unaudited condensed consolidated                   5
           statements of cash flows for each of the nine
           month periods ended September 30, 1998 and
           September 30, 1997
                                                                    
           (d.) Notes to unaudited condensed consolidated          6
           financial statements
                                                                    
  Item 2.  Management's Discussion and Analysis of                 9
           Financial Condition and Results of Operations
                                                                    
  Item 3.  Quantitative and Qualitative Disclosures About         17
           Market Risk
                                                                    
Part II.   Other Information                                        
                                                                    
  Item 1.  Legal Proceedings                                      18
                                                                    
  Item 2.  Changes in Securities and Use of Proceeds              18
                                                                    
  Item 3.  Defaults Upon Senior Securities                        18
                                                                    
  Item 4.  Submission of Matters to a Vote of  Security           18
           Holders
                                                                    
  Item 5.  Other Information                                      18
                                                                    
  Item 6.  Exhibits and Reports on Form 8-K                       18
                                                                    
           (a.)  Exhibits                                         18
                                                                    
           (b.)  Reports on Form 8-K                              18
                                                                    
Signatures                                                        19

                                   2

<PAGE> 

Part I. Financial Information
Item 1. Financial Statements


               Sunquest Information Systems, Inc.
              Condensed Consolidated Balance Sheets
                         (In thousands)
                                
<TABLE>
<CAPTION>
                                
                                              September 30,    December 31,
                                                  1998             1997
                                              -------------    ------------
       <S>                                     <C>               <C>
                                               (unaudited)         
       ASSETS                                                         
                                                                     
       Cash and cash equivalents                 $  3,940        $ 23,692
       Short-term investments                      30,976               -
       Trade receivables, net                      36,782          36,547
       Other current assets                         2,383           2,166
       Deferred tax asset                           1,895           1,898
                                                 --------        --------
         Total current assets                      75,976          64,303
                                                                     
       Property and equipment, net                 10,573          11,513
       Capital leases from related party, net       3,502           4,096
       Software development costs, net             11,312          12,252
       Deferred tax asset                             199             346
       Other assets, net                            1,478           1,663
                                                 --------         -------
         Total assets                            $103,040         $94,173
                                                 ========         =======
                                                                     
       LIABILITIES AND SHAREHOLDERS' EQUITY                           
                                                                     
       Accounts payable                          $  5,218         $ 3,401
       Accrued compensation and related taxes       5,118           4,523
       Accrued expenses                             7,365           4,957
       Obligations under capital leases,                              
         primarily from related party                 899             800
       Deferred revenue                            12,743          11,519
       Deferred income taxes                           17              13
       Other liabilities                            1,000           1,000
                                                 --------         -------
         Total current liabilities                 32,360          26,213
                                                                     
       Obligations under capital leases,                              
         primarily from related party               4,400           5,080
       Deferred income taxes                        1,167           1,167
       Transition costs                                 -             891
       Other liabilities                                -           1,000
                                                                     
       Shareholders' equity                                           
         Common stock                              50,573          50,474
         Retained earnings                         14,558           9,403
         Accumulated other comprehensive loss         (18)            (55)
                                                 --------         -------
           Total shareholders' equity              65,113          59,822
                                                 --------         -------
         Total liabilities and
           shareholders' equity                  $103,040         $94,173
                                                 ========         =======
</TABLE>
      

See accompanying notes.

                                   3

<PAGE>

               Sunquest Information Systems, Inc.
  Condensed Consolidated Statements of Income and Comprehensive Income
            (In thousands, except per share amounts)
                           (Unaudited)

<TABLE>
<CAPTION>
                                  Three Months Ended   Nine Months Ended
                                     September 30,        September 30,
                                  ------------------   ------------------
                                    1998      1997       1998      1997
                                  --------  --------   --------  --------
<S>                                <C>       <C>        <C>       <C>          
Revenues:                                                          
  System sales                     $17,013   $12,098    $45,686   $39,351
  Support and service               15,187    12,173     42,825    37,507
                                   -------   -------    -------   -------
Total revenues                      32,200    24,271     88,511    76,858
                                   -------   -------    -------   -------
Operating expenses:                                                
  Cost of system sales               7,644     4,999     21,399    19,154
  Client services                    8,632     7,316     24,358    20,738
  Research and development           3,969     3,159     11,452     9,025
  Sales and marketing                4,437     3,244     12,418    10,110
  General and administrative         3,416     2,656     10,699     9,128
  Gain on sale of assets                 -         -       (404)        -
  Capitalized software                                               
    development cost adjustment          -     1,529          -     1,529
  Acquired, in-process technology        -     1,265          -     1,265
                                   -------   -------    -------   -------
Total operating expenses            28,098    24,168     79,922    70,949
                                   -------   -------    -------   -------
                                                                   
Operating income                     4,102       103      8,589     5,909
Other income (expense):                                            
  Interest income                      378       217        997       876
  Interest expense                    (264)     (278)      (834)     (903)
  Other                                (69)      (25)        94        10
                                   -------   -------    -------   -------
Income before income taxes           4,147        17      8,846     5,892
Income tax provision                 1,709       285      3,691     2,737
                                   -------   -------    -------   -------
Net income (loss)                    2,438      (268)     5,155     3,155
                                                                   
Other comprehensive income (loss),
  net of tax:                                                      
  Foreign currency translation
    adjustment                          19         3         32      (112)
  Unrealized gain on securities
    available-for-sale                   5         -          5         -
                                   -------   -------    -------   -------
Comprehensive income (loss)        $ 2,462     ($265)   $ 5,192   $ 3,043
                                   =======   =======    =======   =======
                                                                   
Net income (loss) per share:                                       
  Basic                               $.16     ($.02)      $.34      $.21
                                   =======   =======    =======   =======
  Diluted                             $.16     ($.02)      $.33      $.20
                                   =======   =======    =======   =======
                                                                   
Weighted-average shares                                            
outstanding:
  Basic                             15,385    15,372     15,380    15,367
                                   =======   =======    =======   =======
  Diluted                           15,401    15,372     15,396    15,444
                                   =======   =======    =======   =======
</TABLE>

See accompanying notes.

                                   4

<PAGE>

               Sunquest Information Systems, Inc.
         Condensed Consolidated Statements of Cash Flows
                         (In thousands)
                           (Unaudited)

<TABLE>
<CAPTION>
                                                      Nine Months Ended
                                                        September 30,
                                                      ------------------
                                                        1998      1997
                                                      --------  --------
<S>                                                   <C>       <C>  
Cash flows from operating activities:                         
  Net income                                          $  5,155  $  3,155
  Adjustments to reconcile net income to                      
    net cash provided by operating activities:
    Depreciation and amortization                        6,004     5,820
    Capitalized software development cost adjustment         -     1,529
    Acquired, in-process technology                          -     1,265
    Bad debt expense                                       397       713
    Deferred revenue                                     1,288    (1,705)
    Deferred income taxes                                  150     1,197
    Gain on sale of assets                                (404)        -
Changes in operating assets and liabilities,
  net of acquisitions:                                        
    Receivables                                         (1,038)  (11,521)
    Inventory                                             (222)    1,097
    Prepaid expenses and other                            (122)     (268)
    Other assets                                            50     1,157
    Accounts payable                                     1,817       436
    Accrued compensation and related taxes                 595       341
    Other accrued expenses                               3,811      (443)
                                                      --------  --------        
      Net cash provided by operating activities         17,481     2,773
                                                      --------  --------
                                                              
Cash flows from investing activities:                         
  Purchase of PreciseCare Pharmacy System                    -    (1,410)
  Purchase of property and equipment                    (1,952)   (4,290)
  Costs related to acquisitions                         (1,585)   (2,051)
  Capitalized software development costs                (3,408)   (3,853)
  Purchase of investments                              (71,419)        -
  Proceeds from sale or maturity of investments         40,451         -
  Proceeds from sale of assets                           1,130         -
                                                      --------  --------
      Net cash used in investing activities            (36,783)  (11,604)
                                                      --------  --------
                                                              
Cash flows from financing activities:                         
  Principal payments on debt                                 -      (289)
  Principal payments on capitalized                           
    leases, primarily from related party                  (581)     (514)
  S Corporation distribution                                 -    (3,601)
  Net proceeds from employee stock purchase plan            99       136
                                                      --------  --------
      Net cash used in financing activities               (482)   (4,268)
                                                      --------  --------
Foreign currency translation adjustment                     32      (112)
                                                      --------  --------
      Net decrease in cash and cash equivalents        (19,752)  (13,211)
Cash and cash equivalents at beginning of period        23,692    31,911
                                                      --------  --------
Cash and cash equivalents at end of period            $  3,940  $ 18,700
                                                      ========  ========
</TABLE>

See accompanying notes.

                                   5

<PAGE>

Notes to Unaudited Condensed Consolidated Financial Statements


Note 1 - Interim Statement Presentation

The unaudited condensed consolidated financial statements of
Sunquest Information Systems, Inc. (the "Company") have been
prepared by the Company pursuant to the rules and regulations of
the Securities and Exchange Commission (the "Commission") and in
accordance with generally accepted accounting principles for the
preparation of interim financial statements.  Accordingly,
certain information and footnote disclosures normally included in
annual financial statements have been omitted or condensed.
These unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial
statements and the notes thereto incorporated by reference into
the Company's 1997 Annual Report on Form 10-K filed with the
Commission.  The 1997 balance sheet amounts were derived from
audited statements.

In the opinion of management, all necessary adjustments,
consisting of normal and recurring adjustments, have been made to
provide a fair presentation to the unaudited financial
information.  The operating results for the three and nine month
periods ended September 30, 1998 are not necessarily indicative
of the results that may be expected for any other interim period
or for the full year ending December 31, 1998.

Certain prior period amounts have been reclassified to conform to
the current period presentation.


Note 2 - Employee Stock Purchase Plan

In the three months ended September 30, 1998, the Company issued
4,286 shares of its Common Stock for approximately $28,000
pursuant to the Employee Stock Purchase Plan.  In the nine months
ended September 30, 1998, the Company has issued a total of
12,791 shares of its Common Stock for approximately $99,000
pursuant to the Employee Stock Purchase Plan.


Note 3 - Net Income Per Share

The Company adopted the provisions of Statement of Financial
Accounting Standards No. 128,  "Earnings Per Share" ("SFAS No.
128") effective December 31, 1997.  Under the new provisions for
calculating earnings per share, the dilutive effect of stock
options has been excluded in the determination of "basic"
earnings per share and only included in "diluted" earnings per
share.

                                   6

<PAGE>


In accordance with the disclosure requirements of SFAS No. 128, a
reconciliation of the numerator and denominator of basic and
diluted net income per share follows.

<TABLE>
<CAPTION>
                                   Three Months Ended        Nine Months Ended
                                      September 30,            September 30,
                                 ----------------------   ----------------------
                                    1998        1997         1998        1997
                                 ----------  ----------   ----------  ----------
<S>                              <C>         <C>          <C>         <C>
Numerator for basic and                                              
 diluted net income per share:                                                  
 Net income (loss)               $2,438,000  $ (268,000)  $5,155,000  $3,155,000
                                 ==========  ==========   ==========  ==========
                                                                     
Denominator:                                                         
 Denominator for basic                                              
  net income per share --
  weighted-average shares        15,384,514  15,371,814   15,380,382  15,366,675
 Effect of diluted securities:
  Stock options                      16,543           -       15,806      77,392
                                 ----------  ----------   ----------  ----------
 Denominator for diluted net                                           
  income per share -- adjusted                                             
  weighted-average shares        15,401,057  15,371,814   15,396,188  15,444,067
                                 ==========  ==========   ==========  ==========
                                                                     
Basic net income (loss)
 per share                             $.16       $(.02)        $.34        $.21
                                 ==========  ==========   ==========  ==========
Diluted net income (loss)
 per share                             $.16       $(.02)        $.33        $.20
                                 ==========  ==========   ==========  ==========

</TABLE>

Note 4 - Investments

The Company accounts for its investments in Tax Exempt Municipals
and Short-term Demand Notes based on Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," ("SFAS No. 115").  SFAS No. 115
provides the accounting and reporting requirements for
investments in securities that have readily determinable fair
values and for all investments in debt securities.  At September
30, 1998, all of the Company's investments in debt securities
have been classified as available-for-sale securities.  Available-
for-sale securities are carried at fair value with net unrealized
gains and losses on such securities, net of tax, reported as a
component of shareholders' equity.  At September 30, 1998,
unrealized gains on investments available-for-sale were
approximately $5,000, net of tax, and reflected in shareholders'
equity.

                                   7


<PAGE>

Note 5 - Income Taxes

The reconciliation of income tax expense is set forth below:

<TABLE>
<CAPTION>
                                     Three Months Ended    Nine Months Ended
                                        September 30,         September 30,
                                     ------------------    ------------------
                                       1998      1997        1998      1997
                                     --------  --------    --------  --------
                                                   (In thousands)
<S>                                    <C>       <C>         <C>       <C>
Income tax provision at the        
  statutory rate                       $1,451    $    6      $3,096    $2,062
Increases (decreases):                                              
  State income taxes                      164       (19)        345       244
  Acquired, in-process technology           -       357           -       357
  Research and development credit           -         -        (100)        -
  Foreign taxes                             8         -          55         -
  Other                                    86       (59)        295        74
                                       ------    ------      ------    ------
Total income tax expense               $1,709    $  285      $3,691    $2,737
                                       ======    ======      ======    ======
                      
</TABLE>


                                   8

<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations


Forward-Looking Statements
--------------------------

     This report, and other reports and communications to
shareholders, contains forward-looking statements, including
statements which contain words such as "will," "expects,"
"believes," "plans," "anticipates" and words of similar impact.
Certain risk factors, including but not limited to dependence on
laboratory information system products, competition in the
marketplace, purchase and installation decisions of customers,
pricing decisions of competitors and development risks and
uncertainties could cause actual results to differ materially
from such forward-looking statements.  These and other risks are
detailed in Sunquest's 1997 Annual Report on Form 10-K filed with
Securities and Exchange Commission.


General
-------

     Sunquest Information Systems, Inc. (the "Company") designs,
develops, markets, installs and supports health care information
systems for large and mid-sized hospitals, clinics and other
facilities, including integrated delivery networks.  Revenues are
derived from the licensing of software, the provision of value-
added services and the sale of related hardware.

     During the quarter ended June 30, 1998, the Company sold the
assets comprising its Managed Care Manager Payor ("MCM") software
product line to Monument Systems, Inc. ("Monument") for
approximately $1.1 million.  Monument assumed the existing
contracts and future support of customer installations.  The pre-
tax gain resulting from the sale, after associated write-offs,
was approximately $404,000.  The after-tax gain was approximately
$238,000, or $.02 per diluted share.  The sale of the MCM product
line is consistent with the Company's strategy to focus on its
clinical suite of products.

     For the three months ended September 30, 1998, the Company's
net income was $2.4 million, or $.16 per diluted share, compared
to a net loss of $268,000, or $.02 per diluted share, for the
corresponding period in 1997.  The net loss for the three months
ended September 30, 1997, included reductions to net income of
$1.1 million, or $.07 per diluted share, and $917,000, or $.06
per diluted share, related to the acquired, in-process technology
in conjunction with the purchase of the PreciseCare Medication
Management System from Medintell Systems Corporation
("Medintell") and the reduction in the carrying value of
IntelliCare software development costs, respectively.  For the
nine months ended September 30, 1998, net income was $5.2
million, or $.33 per diluted share, including the above mentioned
after-tax gain on the sale of the MCM product line compared to
net income of $3.2 million, or $.20 per diluted share, for the
corresponding period in 1997, including the above mentioned
charges to operations.

                                  9

<PAGE>

<TABLE>
<CAPTION>
                                    Three Months Ended   Nine Months Ended
                                       September 30,       September 30,
                                    ------------------   ------------------
                                      1998      1997       1998      1997
                                    --------  --------   --------  --------
<S>                                   <C>       <C>        <C>       <C>
Excluding the gain on sale of                                      
  assets and charges to operations    $ 0.16    $ 0.11     $ 0.31    $ 0.33
Gain on sale of assets                     -         -       0.02         -
Acquired, in-process technology,        
  net of tax                               -     (0.07)         -     (0.07)
Capitalized software                                               
  development cost adjustment,
  net of tax provision                     -     (0.06)         -     (0.06)
                                      ------    ------     ------    ------
                                      $ 0.16    $(0.02)    $ 0.33    $ 0.20
                                      ======    ======     ======    ======

</TABLE>
                                      

     The results of operations for the three and nine month
periods ended September 30, 1998 are not necessarily indicative
of the results that may be expected for any other interim period
or for the full year ending December 31, 1998.


Year 2000 Compliance
--------------------

     The year 2000 issue is the result of computer programs being
written using two digits rather than four to define the
applicable year.  Any of the Company's software programs, 
whether sold as products of the Company or used internally, may
recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a
temporary inability to process transactions, send invoices, or
engage in similar normal business activities.

     Based on a current assessment, the Company believes that
virtually all of the current releases of its products are year
2000 compliant, and with respect to those that are not, the
Company anticipates releasing year 2000 compliant versions by the
first quarter of 1999.  The Company believes that the costs
incurred to make its products year 2000 compliant will be
immaterial.  The Company plans to have all clients converted to year 2000
compliant versions of its products by October 1999.  Pursuant to
contract terms, clients are obligated to cooperate with the
Company in the installation of system enhancements, including the
current year 2000 compliant versions.  As of September 30, 1998,
approximately 87% of the Company's clients are using or
installing year 2000 compliant versions of its products.
     
    The Company is also assessing the year 2000 readiness of its
third-party suppliers and business partners.  Although the Company believes
that these third-party suppliers and business partners are taking appropriate
action to ensure that their products are, or will be, year 2000 compliant,
failure by such suppliers and business partners to adequately address their
year 2000 readiness could affect the Company's business.  The Company continues
to review the year 2000 readiness of its third-party suppliers and
business partners.

     Although the Company expects all of its products and systems
to be year 2000 compliant and all clients to have installed year 2000
compliant versions of its products before December 31,

                                  10

<PAGE>

1999, it cannot predict with complete accuracy the outcome of its year
2000 program.  If its year 2000 program is not successful or if the
systems of suppliers and clients material to the Company fail or
malfunction in the year 2000, the Company's business, financial condition
or results of operations may be adversely affected.

     The Company has determined that only a small portion of software
programs developed by other vendors and utilized internally will require
upgrades to new versions to properly utilize dates beyond December 31, 1999.
After reviewing the plans of these vendors, the Company believes that the
upgrades to such software programs will be completed by the end
of the second quarter of 1999.  The cost of year 2000 compliant
software related to systems developed by other vendors and used
internally is included in the related software maintenance
agreements.  The Company believes that consulting costs incurred
in accomplishing the installation of year 2000 compliant software
will be immaterial.

     Efforts by clients to address their year 2000 issues may
absorb a significant portion of their information technology
budgets in the near term and may cause them to either delay or
accelerate the purchase and implementation of new applications
and systems.  While these purchasing decisions may increase
demand for certain of the Company's products and services,
including its year 2000 offerings, it could also decrease demand
for other offerings.  The outcome of these purchasing decisions
could affect the Company's revenues or change its revenue
patterns.
     

Results of Operations
---------------------

Comparison of Three Months Ended September 30, 1998 and September 30, 1997

     Revenues.  The Company's total revenues were $32.2 million
for the three months ended September 30, 1998 compared to $24.3
million for the three months ended September 30, 1997, an
increase of $7.9 million, or 32.7%.  Revenues from system sales
were $17.0 million for the three months ended September 30, 1998
compared to $12.1 million for the three months ended September
30, 1997, an increase of $4.9 million, or 40.6%. This increase
was primarily attributable to an increase in installations of
software to existing customers and an increase in installations
of hardware to both new and existing customers.  Revenues from
support and service were $15.2 million for the three months ended
September 30, 1998 compared to $12.2 million for the three months
ended September 30, 1997, an increase of $3.0 million, or 24.8%.
This increase was primarily attributable to the Company's
increased installed customer base and other services for existing
customers.

     At September 30, 1998, the Company had a total contract
backlog of $113.3 million, which consisted of $53.9 million of
system sales and $59.4 million of support and service.  The
Company's total contract backlog at June 30, 1998, was $109.5
million, which consisted of $51.2 million of system sales and
$58.3 million of support and service.  At September 30, 1997,
total contract backlog was $86.0 million, which consisted of
$38.1 million of system sales and $47.9 million of support and
service.

                                  11

<PAGE>

     Cost of System Sales.  Cost of system sales was $7.6 million
for the three months ended September 30, 1998 compared to $5.0
million for the three months ended September 30, 1997, an
increase of $2.6 million, or 52.9%.  As a percentage of total
revenues, cost of system sales was 23.8% in 1998 compared to
20.6% in 1997.  The dollar increase was primarily attributable to
increases in hardware and operating system deliveries.
Amortization of previously capitalized software development costs
was $817,000 for the three months ended September 30, 1998
compared to $949,000 for the three months ended September 30,
1997, a decrease of $132,000, or 13.9%.  The decrease in
amortization was primarily attributable to the reduction in
carrying value of IntelliCare software in the third and fourth
quarters of 1997.  During the fourth quarter of 1997, the Company
discontinued the sale of its IntelliCare suite of products as an
enterprise-wide computerized patient record solution and the
related development of a nurse clinical documentation system.

     Client Services.  Client services expenses were $8.6 million
for the three months ended September 30, 1998 compared to $7.3
million for the three months ended September 30, 1997, an
increase of $1.3 million, or 18.0%.  As a percentage of total
revenues, client services expenses were 26.8% in 1998 compared to
30.1% in 1997.  The dollar increase was primarily attributable to
additional staff and outside consultants dedicated to support and
installation of the Company's systems and to providing consulting
services to customers.

     Research and Development.  Research and development expenses
were $4.0 million for the three months ended September 30, 1998
compared to $3.2 million for the three months ended September 30,
1997, an increase of $810,000, or 25.6%.  As a percentage of
total revenues, research and development expenses were 12.3% in
1998 compared to 13.0% in 1997.  The dollar increase in research
and development expenses was primarily attributable to increased
staff dedicated to the development, enhancement and documentation
of the Company's clinical laboratory, reference laboratory and
pharmacy systems partially offset by decreased expenses and
capitalization related to the IntelliCare suite of products and
the MCM product line.  The Company capitalized $723,000 of its
software development costs for the three months ended September
30, 1998 compared to $858,000 for the three months ended
September 30, 1997, a decrease of 135,000, or 15.7%.  The dollar
decrease in capitalized software development was primarily
attributable to the discontinuation of development related to
IntelliCare and the MCM software product lines, partially offset
by increased capitalization for the clinical laboratory and
reference laboratory products.

     Sales and Marketing.  Sales and marketing expenses were $4.4
million for the three months ended September 30, 1998 compared to
$3.2 million for the three months ended September 30, 1997, an
increase of $1.2 million, or 36.8%.  As a percentage of total
revenues, sales and marketing expenses were 13.8% in 1998
compared to 13.4% in 1997.  The dollar increase was primarily
attributable to increases in marketing expenses, commissions
resulting from a 52.9% growth in sales bookings in 1998, travel
costs related to sales efforts, sales staff specializing in new
product offerings and sales efforts in the European market.

     General and Administrative.  General and administrative
expenses were $3.4 million for the three months ended September
30, 1998 compared to $2.7 million for the three months ended


                                  12

<PAGE>

September 30, 1997, an increase of $760,000, or 28.6%.  As a
percentage of total revenues, general and administrative expenses
were 10.6% in 1998 compared to 11.0% in 1997.  The dollar
increase was primarily attributable to additional employees and
the addition of Sunquest Pharmacy Information Systems, Inc.
("Sunquest Pharmacy").  Increases were also experienced in
professional fees, contributions to the Company's Profit Sharing
Plan and depreciation expense resulting from additions of
property and equipment.  These increases were partially offset by
a decrease in variable compensation.

     Transition Costs.  For the three months ended September 30,
1998, the Company paid previously accrued transition costs
established at the time of the acquisition of Antrim of $201,000
as compared to $265,000 paid during the corresponding period in
1997.  These costs were primarily associated with replacing
certain Antrim software products with Sunquest products and
employee related costs.  In addition, during the three months
ended September 30, 1998, the Company paid transition costs
related to the purchase of the PreciseCare Medication Management
System ("PreciseCare") of $10,000 as compared to $28,000 paid
during the corresponding period in 1997.  These costs were
primarily employee-related costs.


Comparison of Nine Months Ended September 30, 1998 and September 30, 1997

     Revenues.  The Company's total revenues were $88.5 million
for the nine months ended September 30, 1998 compared to $76.9
million for the nine months ended September 30, 1997, an increase
of $11.7 million, or 15.2%.  Revenues from system sales were
$45.7 million for the nine months ended September 30, 1998
compared to $39.4 million for the nine months ended September 30,
1997, an increase of $6.3 million, or 16.1%. This increase was
primarily attributable to increases in installations of software
and hardware to existing customers partially offset by decreases
in installations of hardware and software to new customers.
Revenues from support and service were $42.8 million for the nine
months ended September 30, 1998 compared to $37.5 million for the
nine months ended September 30, 1997, an increase of $5.3
million, or 14.2%.  This increase was primarily attributable to
the Company's increased installed customer base and other
services for existing customers.

     Cost of System Sales.  Cost of system sales was $21.4
million for the nine months ended September 30, 1998 compared to
$19.2 million for the nine months ended September 30, 1997, an
increase of $2.2 million, or 11.7%.  As a percentage of total
revenues, cost of system sales was 24.2% in 1998 compared to
24.9% in 1997.  The dollar increase was primarily attributable to
increases in hardware and operating system deliveries.
Amortization of previously capitalized software development costs
was $2.5 million for the nine months ended September 30, 1998
compared to $2.8 million for the nine months ended September 30,
1997, a decrease of $298,000, or 10.8%.  The decrease in
amortization was primarily attributable to the reduction in
carrying value of IntelliCare software in the third and fourth
quarters of 1997, partially offset by increased amortization of
the Company's pharmacy product.

     Client Services. Client services expenses were $24.4 million
for the nine months ended September 30, 1998 compared to $20.7
million for the nine months ended September 30, 1997,

                                  13

<PAGE>

an increase of $3.6 million, or 17.5%.  As a percentage of total revenues,
client services expenses were 27.5% in 1998 compared to 27.0% in
1997.  The dollar increase was primarily attributable to
additional staff and outside consultants dedicated to support and
installation of the Company's systems and to providing consulting
services to customers.

     Research and Development.  Research and development expenses
were $11.5 million for the nine months ended September 30, 1998
compared to $9.0 million for the nine months ended September 30,
1997, an increase of $2.4 million, or 26.9%.  As a percentage of
total revenues, research and development expenses were 13.0% in
1998 compared to 11.7% in 1997.  The dollar increase in research
and development expenses was primarily attributable to increased
staff dedicated to the development, enhancement and documentation
of the Company's clinical laboratory, pharmacy and reference
laboratory systems partially offset by decreased expenses and
capitalization related to the IntelliCare suite of products and
the MCM product line.  The Company capitalized $2.4 million of
its software development costs for the nine months ended
September 30, 1998 compared to $2.9 million for the nine months
ended September 30, 1997, a decrease of $445,000, or 15.6%.  The
dollar decrease in capitalized software development was primarily
attributable to the discontinuation of development related to
IntelliCare and the MCM software product lines, partially offset
by increased capitalization for the pharmacy and clinical
laboratory products.

     Sales and Marketing.  Sales and marketing expenses were
$12.4 million for the nine months ended September 30, 1998
compared to $10.1 million for the nine months ended September 30,
1997, an increase of $2.3 million, or 22.8%.  As a percentage of
total revenues, sales and marketing expenses were 14.0% in 1998
compared to 13.2% in 1997. The dollar increase was primarily
attributable to increases in commissions resulting from a 36.1%
growth in sales bookings in 1998, travel costs related to sales
efforts, sales staff specializing in new product offerings, and
sales efforts in the European market.

     General and Administrative.  General and administrative
expenses were $10.7 million for the nine months ended September
30, 1998 compared to $9.1 million for the nine months ended
September 30, 1997, an increase of $1.6 million, or 17.2%.  As a
percentage of total revenues, general and administrative expenses
were 12.1% in 1998 compared to 11.9% in 1997.  The dollar
increase was primarily attributable to increases related to
depreciation expense resulting from additions of property and
equipment, the addition of Sunquest Pharmacy, contributions to
the Company's Profit Sharing Plan, professional fees and
additional employees.

     Transition Costs.  For the nine months ended September 30,
1998, the Company paid previously accrued transition costs
established at the time of the acquisition of Antrim of $1.2
million as compared to $1.3 million paid during the corresponding
period in 1997.  These costs were primarily associated with
replacing certain Antrim software products with Sunquest products
and employee related costs.  In addition, during the nine months
ended September 30, 1998, the Company paid transition costs
related to the purchase of PreciseCare of $138,000 as compared to
$28,000 paid during the corresponding period in 1997.  These
costs were primarily employee- related costs and professional
services related to the purchase.

                                  14

<PAGE>


Liquidity and Capital Resources
-------------------------------

     At September 30, 1998, the Company had cash, cash
equivalents and short-term investments of $34.9 million, which
consisted of cash of $3.9 million and short-term investments of
$31.0 million.  This compares to cash and cash equivalents of
$23.7 million at December 31, 1997 and $18.7 million at September
30, 1997, increases of $11.2 million and $16.2 million,
respectively.  Cash provided by operating activities was $17.5
million for the nine months ended September 30, 1998, compared to
$2.8 million for the nine months ended September 30, 1997.

     As of September 30, 1998, the Company had net trade
receivables of $36.8 million, which consisted of $22.7 million in
net billed trade receivables and $14.1 million in unbilled trade
receivables.  At December 31, 1997, the Company had net trade
receivables of $36.5 million, which consisted of $27.9 million in
net billed trade receivables and $8.6 million in unbilled trade
receivables.  Net trade receivables have increased by $235,000
since December 31, 1997, with $5.5 million related to the
unbilled portion partially offset by collections of $5.2 million
on the billed portion.  The unbilled receivables represent
revenue that has been recognized in accordance with the
percentage-of-completion accounting method, but which has not yet
been billed to customers under contractual milestone billings.
The Company believes that this increase in unbilled receivables
is primarily a result of increased revenues and the timing of
system sales and installations in the year.  The Company
maintains an allowance for doubtful accounts that it believes is
adequate to cover potential credit losses.  The average
collection period, a rolling twelve-month average, on net billed
trade receivables was 77 days at September 30, 1998 compared to
88 days at June 30, 1998 and 91 days at December 31, 1997.  Days
sales outstanding ("DSO") was 103 at September 30, 1998 compared
to 110 at June 30, 1998 and 129 at December 31, 1997.

     Cash used in investing activities was $36.8 million for the
nine months ended September 30, 1998.  Purchases of investments
totaled $71.4 million.  Proceeds from the maturity or sale of
investments totaled $40.5 million.  Capitalized software
development costs totaled $3.4 million.  Of this amount, $1.0
million was related to the second payment under the Value Added
Reseller ("VAR") agreement with Dynamic Healthcare Technologies,
Inc. ("Dynamic") for the license of a software program known as
CoPath Client/Server.  Purchases of property and equipment
totaled $2.0 million and consisted primarily of purchases of
computers, computer-related equipment, computer software and
leasehold improvements.  Costs related to acquisitions totaled
$1.6 million.  Of this amount, approximately $1.2 million was
related to the payment of previously accrued transition costs
established at the time of the acquisition of Antrim and was
primarily associated with replacing certain Antrim software
products with Sunquest products and employee related costs.  In
addition, the Company also paid transition costs related to the
purchase of the PreciseCare software of approximately $138,000.
These costs were primarily employee-related costs and
professional services related to the purchase.  The proceeds from
the sale of assets consisted of $1.1 million from the sale of the
MCM software product line to Monument.

     Cash used in financing activities was $482,000 for the nine
months ended September 30, 1998.  Of this amount, $581,000 was
used for principal payments on capital leases.  This amount

                                  15

<PAGE>

was partially offset by the issuance of 12,791 shares of the
Company's Common Stock for approximately $99,000 under the
Employee Stock Purchase Plan.

     At September 30, 1998, working capital was $43.6 million
compared to $38.1 million at December 31, 1997.

     The Company has a revolving line of credit with a bank
allowing the Company to borrow up to $10.0 million.  Any
borrowings under the line of credit will bear interest at the
bank reference rate unless the Company elects a fixed rate or
certain variable rates contemplated by the agreement.  All
outstanding principal and interest under the line of credit is
due April 30, 1999 except for any amounts outstanding under stand-
by letters of credit which have a maximum maturity of 365 days.
Borrowings under the line of credit are secured by all of the
Company's assets.  Approximately $440,000 of the line of credit
is used to secure a letter of credit and is not available for
immediate expenditure.  There were no borrowings outstanding as
of September 30, 1998.

     Other than the final payment of $1.0 million due in February
of 1999 related to the VAR agreement with Dynamic, the Company
has no significant purchase commitments at this time.  However,
the Company continues to be actively involved in identifying and
evaluating potential acquisitions, which may result in the future
expenditure of funds.

     Management believes that existing cash, cash equivalents,
short-term investments, cash available under its revolving line
of credit and funds generated from operations will be sufficient
to meet operating requirements for at least the next twelve
months.

     To date, inflation has not had a material impact on the
Company's revenues or income, and the Company does not expect
inflation to have a material impact in the foreseeable future.


New Accounting Standards
------------------------

     As of January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"), which requires businesses to disclose
comprehensive income and its components in general purpose
financial statements with reclassification of prior period
financial statements.  The adoption of SFAS No. 130 had no
significant impact on the Company's financial statements.

     As of January 1, 1998, the Company adopted Statement of
Position ("SOP") 97-2, "Software Revenue Recognition," which
revised certain aspects of SOP 91-1.  The adoption of SOP 97-2
did not affect the Company's revenue recognition policies with
respect to software license fees which are recognized as part of
the Company's overall software contracts using the percentage-of-
completion method and are determined based upon actual hours
incurred related to total estimated installation hours.

                                  16

<PAGE>

     In March 1998, the American Institute of Certified Public
Accountants issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use."  SOP
98-1 requires companies to capitalize qualifying computer
software costs incurred during the application development stage.
SOP 98-1 is effective for fiscal years beginning after December
15, 1998 and permits early adoption.  The Company adopted SOP 98-
1 in the first quarter of 1998.  The adoption had no impact on
net income, as the Company's policy was materially consistent
with the requirements of SOP 98-1.

     In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"), which redefines how operating
segments are determined and requires disclosure of certain
financial and descriptive information about a company's operating
segments.  SFAS No. 131 is effective for fiscal years beginning
after December 15, 1997.  The Company is currently evaluating the
effects, if any, the adoption of this pronouncement will have on
the disclosure of its historical data at year-end.


Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
        Not applicable.

                                   17

<PAGE>

Part II.  Other Information

Item 1.   Legal Proceedings

          On July 30, 1998, the Company instituted a legal action
          in the United States District Court for the Western
          District of Pennsylvania against Dean Witter Reynolds,
          Inc. and The Compucare Company for material
          misrepresentations and omissions in connection with the
          Company's purchase of all of the outstanding capital
          stock of Antrim Corporation from the Compucare Company
          on November 26, 1996.  The Complaint seeks remedies
          available to the Company including damages and/or
          rescission of the acquisition.

          The Company is or may be subject to legal proceedings
          and claims covering a wide range of matters that arise
          in the ordinary course of business.  Management is of
          the opinion that the potential liability with respect
          to these legal proceedings and claims will not
          materially affect the Company's financial position or
          results of operations.

Item 2.   Changes in Securities and Use of Proceeds
          None.

Item 3.   Defaults Upon Senior Securities
          None.

Item 4.   Submission of Matters to a Vote of Security Holders
          None.

Item 5.   Other Information
          None.

Item 6.   Exhibits and Reports on Form 8-K

          (a.) Exhibits

               27.1 - Financial Data Schedule for the Nine Months
                      Ended September 30, 1998, filed herewith.

               27.2 - Financial Data Schedule for the Nine Months
                      Ended September 30, 1997, filed herewith.

          (b.) Reports on Form 8-K

               No reports on Form 8-K were filed by the Company
               during the quarter ended September 30, 1998.


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<PAGE>
                           SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.


                              SUNQUEST INFORMATION SYSTEMS, INC.
                                        (Registrant)



Date:  November 13, 1998      By:  /s/ Nina M. Dmetruk
                              --------------------------------------------
                              Nina M. Dmetruk
                              Executive Vice President and Chief Financial
                              Officer
                              (Authorized Officer of the Registrant and
                              Principal Financial and Accounting Officer)
                                                                 

                                  19