<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                            ------------------------

                                   FORM 10-Q

<TABLE>
<C>        <S>
   /X/     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
                                       OR

<TABLE>
<C>        <S>
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE
           SECURITIES EXCHANGE ACT OF 1934
</TABLE>

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                         COMMISSION FILE NUMBER 0-27502

                            ------------------------

                       HEALTH SYSTEMS DESIGN CORPORATION

             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
               DELAWARE                                     94-3235734
    (State or other Jurisdiction of              (I.R.S. Employer Identification
    Incorporation or Organization)                           Number)

  1111 BROADWAY, OAKLAND, CALIFORNIA                          94607
    (Address of principal executive                         (Zip code)
               offices)
</TABLE>

                                 (510) 251-1330
              (Registrant's telephone number, including area code)

                            ------------------------

    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. Yes /X/  No / /

    The registrant had 6,742,728 shares of common stock outstanding as of April
30, 2000.

    Exhibit index is located on page 12

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                       HEALTH SYSTEMS DESIGN CORPORATION

                                     INDEX

<TABLE>
<CAPTION>
                                                                                  PAGE
                                                                                --------
<S>      <C>      <C>                                                           <C>
PART I. FINANCIAL INFORMATION

         Item 1.  Consolidated Financial Statements

                  Consolidated Balance Sheets--March 31, 2000 and
                  September 30, 1999..........................................      2

                  Consolidated Statements of Operations--Three and Six months
                  ended March 31, 2000 and 1999...............................      3

                  Consolidated Statements of Cash Flows--Six months ended
                  March 31, 2000 and 1999.....................................      4

                  Notes to Consolidated Financial Statements..................      5

                  Management's Discussion and Analysis of Financial Condition
         Item 2.  and Results of Operations...................................      7

PART II. OTHER INFORMATION

         Item 6.  Exhibits and Reports on Form 8-K............................     12
</TABLE>

                                       1
<PAGE>
                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                       HEALTH SYSTEMS DESIGN CORPORATION

                          CONSOLIDATED BALANCE SHEETS

               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                               MARCH 31,    SEPTEMBER 30,
                                                                 2000            1999
                                                              -----------   --------------
                                                              (UNAUDITED)
<S>                                                           <C>           <C>
                           ASSETS
Current Assets:
  Cash and cash equivalents.................................   $  3,738        $  4,176
  Short-term marketable securities..........................      3,545           5,029
  Accounts receivable, net of allowance for doubtful
    accounts of $425 at March 31, 2000, and $325 at
    September 30, 1999, respectively........................      8,265           4,440
  Unbilled revenue..........................................        564           6,007
  Prepaid expenses..........................................        375             272
                                                               --------        --------
    Total current assets....................................     16,487          19,924
                                                               --------        --------

Property and equipment:
  Computer equipment........................................      4,320           4,148
  Office furniture and other................................      2,429           2,320
                                                               --------        --------
    Total property and equipment............................      6,749           6,468
                                                               --------        --------
    Less: accumulated depreciation..........................     (4,226)         (3,561)
                                                               --------        --------
    Net property and equipment..............................      2,523           2,907
                                                               --------        --------
Deposits and other assets...................................        433             623
                                                               --------        --------
Software development costs, net of accumulated amortization
  of $1,992 at March 31, 2000 and $1,245 at September 30,
  1999, respectively........................................      3,624           3,330
                                                               --------        --------
    Total assets............................................   $ 23,067        $ 26,784
                                                               ========        ========

            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................   $    969        $    878
Accrued liabilities.........................................      2,138           3,481
Current portion of capital lease obligations................        308             294
Unearned revenue............................................      4,344           4,700
                                                               --------        --------
    Total current liabilities...............................      7,759           9,353
  Deferred rent.............................................         96              21
  Capital lease obligations, net of current portion.........        103             262
                                                               --------        --------
    Total liabilities.......................................      7,958           9,636

Stockholders' equity:
  Preferred stock, $.001 par value, 1,000,000 shares
    authorized, none outstanding............................         --              --
  Common stock, $.001 par value, 20,000,000 shares
    authorized, 6,742,728 and 6,730,858 shares issued and
    outstanding at March 31, 2000 and September 30, 1999,
    respectively............................................          7               7
  Additional paid-in capital................................     24,157          24,122
  Treasury stock, 2,054 shares..............................        (29)            (29)
  Deferred compensation.....................................         (4)            (12)
  Retained deficit..........................................     (9,022)         (6,940)
                                                               --------        --------
  Total stockholders' equity................................     15,109          17,148
                                                               --------        --------
    Total liabilities and stockholders' equity..............   $ 23,067        $ 26,784
                                                               ========        ========
</TABLE>

                                       2
<PAGE>
                       HEALTH SYSTEMS DESIGN CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                    (IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED     SIX MONTHS ENDED
                                                               MARCH 31,             MARCH 31,
                                                          -------------------   -------------------
                                                            2000       1999       2000       1999
                                                          --------   --------   --------   --------
<S>                                                       <C>        <C>        <C>        <C>
Revenues:
  System sales..........................................  $ 4,765    $ 6,377    $ 8,653    $ 10,831
  Services and other....................................    1,355      1,408      2,637       2,335
                                                          -------    -------    -------    --------
    Total revenues......................................    6,120      7,785     11,290      13,166
Cost of revenues........................................    2,928      2,469      5,670       4,672
                                                          -------    -------    -------    --------
    Gross margin........................................    3,192      5,316      5,620       8,494
                                                          -------    -------    -------    --------
Operating expenses:
  General and administrative............................    1,333      1,387      2,822       2,857
  Sales and marketing...................................      897      1,345      1,758       2,538
  Product development...................................    1,336      2,442      3,272       4,494
                                                          -------    -------    -------    --------
    Total operating expenses............................    3,566      5,174      7,852       9,889
                                                          -------    -------    -------    --------
      Income (loss) from operations.....................     (374)       142     (2,232)     (1,395)
                                                          -------    -------    -------    --------
Interest, net...........................................       87         97        168         209
                                                          -------    -------    -------    --------
  Income (loss) before provision for income taxes.......     (287)       239     (2,064)     (1,186)
Provision for income taxes..............................        4         12         18          13
                                                          -------    -------    -------    --------
Net income (loss).......................................  $  (291)   $   227    $(2,082)   $ (1,199)
                                                          =======    =======    =======    ========

Net income (loss) per share:
  Basic.................................................  $ (0.04)   $  0.03    $ (0.31)   $  (0.18)
                                                          =======    =======    =======    ========
  Diluted...............................................  $ (0.04)   $  0.03    $ (0.31)   $  (0.18)
                                                          =======    =======    =======    ========
Weighted average common shares outstanding:
  Basic.................................................    6,742      6,704      6,738       6,690
                                                          =======    =======    =======    ========
  Diluted...............................................    6,742      6,754      6,738       6,690
                                                          =======    =======    =======    ========
</TABLE>

                                       3
<PAGE>
                       HEALTH SYSTEMS DESIGN CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               SIX MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Cash flows from operating activities:
  Net loss..................................................  $(2,082)   $ (1,199)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Allowance for doubtful accounts.........................      100          25
    Depreciation and amortization...........................    1,495       1,142
    Loss on sale of assets..................................       --           8
    Amortization of deferred rent...........................       75          --
    Changes in current assets and liabilities:
      Accounts receivable...................................   (3,925)        275
      Unbilled revenue......................................    5,443         809
      Prepaid expenses......................................     (103)       (146)
      Accounts payable......................................       91          (5)
      Accrued liabilities...................................   (1,343)       (343)
      Unearned revenue......................................     (356)      1,894
                                                              -------    --------
        Net cash provided by (used in) operating
          activities........................................     (605)      2,460
                                                              -------    --------
Cash flows from investing activities:
  Purchases of property and equipment.......................     (281)       (259)
  Proceeds from sale of property and equipment..............       --          75
  Sales of short-term marketable securities, net............    1,484          --
  Capitalization of software development costs..............   (1,117)       (870)
  Deposits and other assets.................................      190        (445)
                                                              -------    --------
    Net cash provided by (used in) investing activities.....      276      (1,499)
                                                              -------    --------
Cash flows from financing activities:
  Repayments of capital lease obligations...................     (144)         --
  Proceeds from issuance of common stock to employees.......       21          53
  Proceeds from exercise of common stock options............       14           9
  Proceeds from exercise of common stock warrants...........       --          25
                                                              -------    --------
    Net cash provided by (used in) financing activities.....     (109)         87
                                                              -------    --------
    Net increase (decrease) in cash.........................     (438)      1,048
Cash and cash equivalents at beginning of period............    4,176       9,440
                                                              -------    --------
Cash and cash equivalents at end of period..................  $ 3,738    $ 10,488
                                                              =======    ========

Supplemental disclosure of cash flow information:
  Interest paid.............................................  $    24    $     --
  Taxes paid................................................  $    13    $     13
</TABLE>

                                       4
<PAGE>
                       HEALTH SYSTEMS DESIGN CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 2000

1.  BASIS OF PRESENTATION

    The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information on substantially the same basis as the annual audited
financial statements. However, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring adjustments, considered necessary for a fair presentation
have been included. Operating results for the six month period ended March 31,
2000 are not necessarily indicative of the results that may be expected for the
year ending September 30, 2000. These consolidated financial statements should
be read in conjunction with the financial statements and footnotes thereto for
the year ended September 30, 1999 included in the Company's Form 10-K Annual
Report.

2.  REVENUE RECOGNITION

    The Company licenses its internally developed software products and other
software products and other software products directly to end-users and
indirectly though remarketers, under the terms of product license contracts. The
Company also generates revenues from sales of implementation services, fees for
product enhancement, post-contract support, consulting services and training
services performed for customers who license the Company's products and
reselling hardware and third party products.

    If the contract does not require significant production or customization of
software, license revenue is recognized when all the following conditions are
met: a signed contract is obtained, delivery has occurred, the fee is fixed and
determinable, and collection is probable. The Company generally recognizes
DIAMOND-Registered Trademark- 725 license revenue upon shipment of the software
to end users, as no significant production or customization of this software is
required, and the installation period is relatively short. The Company generally
recognizes DIAMOND-Registered Trademark- 950C/S license revenue on a
percentage-of-completion basis based on the labor hours required to implement
the system, as this software generally requires an extended installation period
and can require significant enhancements. If the software license agreement
provides for acceptance criteria that extend beyond the published specifications
of the applicable product, then revenues are recognized upon the earlier of
customer acceptance or the expiration of the acceptance period.

    Implementation, consulting and training fees are billed either on an hourly
or a monthly basis and are recognized as services are rendered. Third party
software and hardware are typically billed and recognized as revenue when
delivered to the end user.

    The Company generally recognizes DIAMOND-Registered Trademark- enhancement
revenues on a percentage-of-completion basis based on the labor hours required
to complete the applicable release project.

    Post-contract support services are billed on a monthly basis. Customers who
purchase post-contract support services under maintenance agreements have the
right to receive unspecified product updates and upgrades. Revenues from
post-contract support services are recognized ratably over the term of the
support period. If post-contract support services are included free or at a
discount in a license agreement, such amounts are recorded at their fair market
value based on the value established by independent sale of such post-contract
support services to customers and license fee revenue is correspondingly
reduced. Customers that do not purchase post-contract support must purchase
product updates and upgrades under separate agreements that are subject to the
criteria of the Company's revenue recognition policy.

                                       5
<PAGE>
3.  CAPITALIZED SOFTWARE DEVELOPMENT COSTS

    The Company accounts for capitalized software costs in accordance with SFAS
86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed." The Company begins capitalizing software development costs
upon the establishment of technological feasibility, which is established upon
the completion of a working model or, in the case of major releases, detailed
program design. Costs incurred prior to technological feasibility are charged to
expense as incurred. Capitalization ceases when the product is considered
available for general release to customers. Capitalized software development
costs are amortized to direct costs over the estimated economic lives of the
software products based on actual sales experience and product life expectancy.
Generally, estimated economic lives of the software products do not exceed 3
years. Capitalized software development cost amortization was approximately
$823,000 and $492,000 for the six months ended March 31, 2000 and 1999,
respectively.

4.  ADOPTION OF NEW ACCOUNTING STANDARDS

    In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which is required to be adopted for fiscal
quarters beginning after June 15, 2000. Adoption of this pronouncement is not
expected to have a material impact on the Company's financial statements taken
as a whole.

    In June 1999, the FASB issued SFAS No. 137 "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective date of SFAS No.
133" which extended the required adoption date for SFAS No. 133 to fiscal years
beginning after June 15, 2000.

    In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. The adoption
is not expected to have a significant effect on the Company's results of
operations or financial position.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

    Health Systems Design Corporation (the Company) provides health benefits
information systems software to a broad range of organizations that administer
health benefits. The Company's principal product line,
DIAMOND-Registered Trademark- consists of DIAMOND-Registered Trademark- 725 and
DIAMOND-Registered Trademark- 950C/S. The Company's principal software products,
DIAMOND-Registered Trademark-, enable organizations to manage information about
members, employer groups, providers, benefit plans, referrals and authorizations
and health care services. DIAMOND-Registered Trademark- supports a wide range of
administrative and financial transactions related to provider reimbursement,
premium billing, customer service, patient care management and a variety of
other functions.

    The Company's revenues are derived from licensing
DIAMOND-Registered Trademark- products, providing the associated implementation,
product enhancements, post-contract support, consulting services and training
services and reselling hardware and third party products. If there are no
uncertainties surrounding a contract, as described by generally accepted
accounting principles, then the Company generally recognizes
DIAMOND-Registered Trademark- 950C/S license revenue on a percentage of
completion basis based on the labor hours required to implement the system. The
Company's ability to make individual system sales in a particular period will
significantly impact its financial performance in future periods. As the Company
has pursued larger system sales (DIAMOND-Registered Trademark- 950C/S), it has
seen and expects to continue to see variability in the recognition of system
sales revenue. If there are no uncertainties surrounding a contract, as
described by generally accepted accounting principles, then the Company
generally recognizes DIAMOND-Registered Trademark- 725 license revenue upon
shipment of the software to end users. Implementation, post-contract support,
consulting fees and

                                       6
<PAGE>
training are billed either on an hourly or monthly basis and are recognized as
services are rendered. Hardware and third party products are typically billed
and recognized as revenues when delivered to the client. Significant portions of
system revenues recognized in the six months ended March 31, 2000 resulted from
license sales executed in prior periods.

RESULTS OF OPERATIONS

    REVENUES

    Total revenues were $6,120,000 and $7,785,000 for the three months ended
March 31, 2000 and 1999, respectively, representing a decrease of 21%. Total
revenues were $11,290,000 and $13,166,000 for the six months ended March 31,
2000 and 1999, respectively, representing a decrease of 14%. Three customers
accounted for approximately 58% and 52% of total revenues for the three months
and six months ended March 31, 2000, respectively. Covation LLC represented 29%
and 18%, Blue Shield of California represented 12% and 16% and Kaiser Permanente
represented 17% and 18% of total revenues for the three and six months ended
March 31, 2000, respectively. The decrease in total revenues is due to lower
bookings of new systems partially offset by an increase in services and other
revenues. No other customers exceed 10% of total revenues in the periods
presented. In addition, at March 31, 2000, a total of 70% of accounts receivable
and 58% of unearned revenue is related to Covation LLC, Blue Shield of
California and Kaiser Permanente. Two customers accounted for approximately 59%
and 46% of total revenues for the three and six months ended March 31, 1999,
respectively. Blue Shield of California represented 43% and 28%, while Kaiser
Permanente represented 16% and 18% of total revenues for the three and six
months ended March 31, 1999, respectively.

    In the six months ended March 31, 2000, the Company experienced lower
license and implementation bookings relative to the six months ended March 31,
1999. The Company expects this slowdown in bookings to have a negative impact on
revenues in the future. Unbilled revenues decreased from September 30, 1999 due
to a significant billing during the six months ended March 31, 2000 and due to
the effect of the slow down in bookings mentioned above.

    SYSTEM SALES.  System sales revenues consist of license fees for the
Company's products, implementation and enhancement fees, and revenues associated
with reselling third-party software and hardware. System sales revenues were
$4,765,000 and $6,377,000 for the three months ended March 31, 2000 and 1999,
respectively, representing a decrease of 25%. System sales revenues were
$8,653,000 and $10,831,000 for six months ended March 31, 2000 and 1999,
respectively, representing a decrease of 20%. The decrease in system sales
revenue is due primarily to lower bookings in previous quarters.

    SERVICES AND OTHER.  Services and other revenues are comprised of system
support, consulting and training revenues. Services and other revenues were
$1,355,000 and $1,408,000 for the three months ended March 31, 2000 and 1999,
respectively, representing a decrease of 4%. Services and other revenues were
$2,637,000 and $2,335,000 for six months ended March 31, 2000 and 1999,
respectively, representing an increase of 13%. The increase in services and
other revenues was due primarily to an increase in support fees resulting from
the Company's larger installed DIAMOND-Registered Trademark- 950C/S customer
base partially offset by a decrease in consulting and training revenue.

    COST OF REVENUES.  Cost of revenues was $2,928,000 and $2,469,000 for the
three months ended March 31, 2000 and 1999, respectively, representing an
increase of 19%. Cost of revenues was $5,670,000 and $4,672,000 for the six
months ended March 31, 2000 and 1999, respectively, representing an increase of
21%. Cost of revenues increased from 32% of total revenues in the three months
ended March 31, 1999 to 48% of total revenues in the three months ended
March 31, 2000 and from 35% of total revenues in the six months ended March 31,
1999 to 50% of total revenues in the six months ended March 31, 2000. Costs of
revenues, as a percentage of total revenues, increased primarily due to
increases in amortization expense,

                                       7
<PAGE>
personnel costs and rent and a decrease in total revenues. No long-term trend
should be implied from either of these period to period comparisons.

    OPERATING EXPENSES.

    GENERAL AND ADMINISTRATIVE.  General and administrative expenditures were
$1,333,000 and $1,387,000 for the three months ended March 31, 2000 and 1999,
respectively, representing a decrease of 4%. General and administrative
expenditures were $2,822,000 and $2,857,000 for the six months ended March 31,
2000 and 1999, respectively, representing a decrease of 1%. General and
administrative expenditures as a percentage of total revenues for the three
months ended March 31, 2000 and 1999 were 22% and 18%, respectively. General and
administrative expenditures as a percentage of total revenues for the six months
ended March 31, 2000 and 1999 were 25% and 22%, respectively. The increase in
general and administrative expenditures during the period is primarily due to
decrease in total revenues and an increase in personnel costs partially offset
by a decrease in bad debts. General and administrative expenses include the
salaries and benefits associated with general management, finance and
administration and allocated facilities costs.

    SALES AND MARKETING.  Sales and marketing expenditures were $897,000 and
$1,345,000 for the three months ended March 31, 2000 and 1999, respectively,
representing a decrease of 33%. Sales and marketing expenditures were $1,758,000
and $2,538,000 for the six months ended March 31, 2000 and 1999, respectively,
representing a decrease of 31%. Sales and marketing expenditures as a percentage
of revenues for the three months ended March 31, 2000 and 1999 were 15% and 17%,
respectively. Sales and marketing expenditures as a percentage of revenues for
the six months ended March 31, 2000 and 1999 were 16% and 19%, respectively. The
decreases in sales and marketing expenditures during the period were primarily
due to a decrease in commissions, personnel and marketing activities.

    PRODUCT DEVELOPMENT.  Product development expenditures, net of software
capitalization, were $1,336,000 and $2,442,000 for the three months ended March
31, 2000 and 1999, respectively, representing a decrease of 45%. Product
development expenditures, net of software capitalization, were $3,272,000 and
$4,494,000 for the six months ended March 31, 2000 and 1999, respectively,
representing a decrease of 27%. Product development expenditures as a percentage
of revenues for the three months ended March 31, 2000 and 1999 was 22% and 31%,
respectively. Product development expenditures as a percentage of revenues for
the six months ended March 31, 2000 and 1999 was 29% and 34%, respectively. The
decreases in product development expenditures during the period were primarily
due to a decrease in personnel and an increase in capitalization. The Company
believes that product development expenditures are essential to maintaining its
competitive position and expects these costs to continue to constitute a
significant percentage of total revenues in the near future.

    The Company capitalized $756,000 and $186,000 of product development costs
in the three months ended March 31, 2000 and 1999, respectively. The Company
capitalized $1,117,000 and $870,000 of product development costs in the six
months ended March 31, 2000 and 1999, respectively. Capitalized product
development expenditures as a percentage of total product expenditures were 36%
and 7% for the three months ended March 31, 2000 and 1999, respectively.
Capitalized product development expenditures as a percentage of total product
expenditures were 25% and 16% for the six months ended March 31, 2000 and 1999,
respectively. The increase in product development costs capitalized, for the
three and six months ended March 31, 2000, is due primarily to the stage of
development of major releases. The Company begins capitalizing software
development costs upon the establishment of technological feasibility, which is
established upon the completion of a working model or, in the case of major
releases, detailed program design. Costs incurred prior to technological
feasibility are charged to expense as incurred. Capitalization ceases when the
product is considered available for general release to customers.

    INTEREST INCOME AND EXPENSE.  Interest income, net of interest expense, was
$87,000 and $97,000 for the three months ended March 31, 2000 and 1999,
respectively. Interest income, net of interest expense,

                                       8
<PAGE>
was $168,000 and $209,000 for the six months ended March 31, 2000 and 1999,
respectively. The decrease in interest income, net of expense, was primarily due
to the amount of cash invested and interest paid on capital lease obligations.
Interest income represents interest earned on the Company's excess cash
balances, which are generally placed in short term investments, money market
funds, and government securities.

    PROVISION FOR INCOME TAXES.  The provision for income taxes was $4,000 and
$12,000 for the three months ended March 31, 2000 and 1999 respectively. The
provision for income taxes was $18,000 and $13,000 for the six months ended
March 31, 2000 and 1999 respectively. The increase in the provision for income
taxes for the six month period ended March 31, 2000 was due to recording higher
state taxes then in the prior comparable six month period.

LIQUIDITY AND CAPITAL RESOURCES

    Net cash provided by (used in) operating activities was $(605,000) and
$2,460,000 during the six months ended March 31, 2000 and 1999, respectively.
The increase in cash used by operating activities, as compared to the six months
ended March 31, 2000, resulted primarily from an increased loss, an increase in
accounts receivable and a decrease in accrued liabilities partially offset by a
decrease in unbilled revenue.

    Net cash provided by (used in) investing activities was $276,000 and
$(1,499,000) during the six months ended March 31, 2000 and 1999, respectively.
The increase in cash provided by investing activities, as compared to the six
months ended March 31, 1999, consisted primarily of sales of short-term
marketable securities during the current period.

    Net cash provided by (used in) financing activities was $(109,000) and
$87,000 during the six months ended March 31, 2000 and 1999, respectively. The
increase in cash used by financing activities, as compared to the six months
ended March 31, 1999, was primarily due to repayments of capital lease
obligations.

    As of March 31, 2000 and 1999, the Company had cash and cash equivalents in
the amounts of $3,738,000 and $10,488,000 respectively.

    The company believes that available funds and cash flows from operations and
short-term marketable securities will be adequate to fund its presently
anticipated working capital requirements for at least the next 12 months.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
  1995:

    Statements in this report concerning the future results of operations,
financial condition and business of the Company are "forward-looking" statements
as defined in the Securities Act of 1933 and the Securities and Exchange Act of
1934. Investors are cautioned that information contained in these forward-
looking statements is inherently uncertain, and that actual performance and
results may differ materially due to numerous risk factors. Such risks and
uncertainties include Healthcare and Government Regulation; risks related to
acquisitions; variability of operating results due to the long sales cycle and
implementation period of the Company's products; dependence of the Company's
results of operations on certain large customers; the Company's dependence on a
single product line; the dynamic nature of the market in which the Company's
product line competes; development of new products and enhancements to the
current product; the Company's ability to attract and retain qualified personnel
and other risks described in the Company's other filings with the Securities and
Exchange Commission.

                                       9
<PAGE>
                           PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<S>        <C>    <C>
(a)  Exhibits
           11.1   Statement re: computation of earnings per share
           27     Financial Data Schedule
(b)  Reports on Form 8-K

           No reports on Form 8-K have been filed during the quarter for which
           this report is filed.
</TABLE>

                                       10
<PAGE>
                                   SIGNATURES

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

Date: May 12, 2000

<TABLE>
<S>                                                    <C>  <C>
                                                       Health Systems Design Corporation

                                                       By:  /s/ ARTHUR M. SOUTHAM
                                                            -----------------------------------------
                                                            Arthur M. Southam
                                                            PRESIDENT AND CHIEF EXECUTIVE OFFICER

                                                       By:  /s/ CHRISTOPHER C. OHMAN
                                                            -----------------------------------------
                                                            Christopher C. Ohman
                                                            EXECUTIVE VICE PRESIDENT AND CHIEF
                                                            FINANCIAL OFFICER
</TABLE>

                                       11
<PAGE>
                       HEALTH SYSTEMS DESIGN CORPORATION
                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
       EXHIBIT                                  DESCRIPTION
---------------------                           -----------
<S>                     <C>
 11.1                   Computation of net loss per share
 27                     Financial Data Schedule
</TABLE>

                                       12