================================================================================
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                              --------------------
                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

    For The Fiscal Year Ended December 31, 1999 Commission File No. 000-26816
                           --------------------------
                             IDX SYSTEMS CORPORATION

             (Exact Name of Registrant as Specified in its Charter)
                               -------------------
                VERMONT                           03-0222230

       (State or Other Jurisdiction of         (I.R.S. Employer
       Incorporation or Organization           Identification No.)

       1400 Shelburne Road, P.O. Box 1070, South Burlington, Vermont 05403
               (Address of Principal Executive Offices) (Zip Code)
                               -------------------
       Registrant's telephone number, including area code: (802) 862-1022

        Securities registered pursuant to Section 12(b) of the Act: NONE

           Securities registered pursuant to Section 12(g) of the Act:


                               Title of each class

                          Common Stock, $.01 par value

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

         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
                               ----         ----

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference in Part III of this Form 10-K or any amendment to the
Form 10-K.

         The aggregate market value of voting Common Stock held by nonaffiliates
of the registrant was $464,153,699  based on the last  reported  sale price of
the Common Stock on the Nasdaq  consolidated  transaction  reporting system on
March 15, 2000.

         Number of shares outstanding of the registrant's class of Common Stock
as of March 15, 2000: 28,011,437

         Documents incorporated by reference:
         Proxy Statement for the 2000 Annual Meeting of Stockholders--
            Part II and Part III
===============================================================================



<PAGE>


PART I

ITEM 1.   BUSINESS

OVERVIEW

IDX is a leading  provider of  healthcare  information  solutions  in the United
States. IDX offers solutions including software,  hardware, and related services
required  by  physician  groups,   management  services   organizations  (MSOs),
hospitals,  and integrated  delivery networks (IDNs). IDX solutions use computer
and Internet  technologies to reengineer clinical,  financial and administrative
processes to improve healthcare efficiency and quality.

The Company operates its information systems and services business segment under
the IDX(R) name,  consisting of hardware sales,  software  licensing and related
services.  In October 1999, the Company  announced it had organized its Internet
services and content business segment,  formerly  referred to as IDX.com,  under
the name of  ChannelHealth(TM),  which  integrates  content,  transactions,  and
information systems using Internet technology.  IDX is the exclusive distributor
of ChannelHealth's  products and services to customers of IDX products. In April
1999, the Company  acquired EDiX  Corporation  (formed in 1994), and the Company
conducts its medical dictation and transcription services business segment under
the EDiX(TM) name.

IDX  solutions  are packaged as the  IDXtendR(TM)  @ the Site Series,  where the
"Site"  corresponds to settings across the care continuum:  IDXtendR @ the Group
Practice,   IDXtendR  @  the  MSO,  IDXtendR  @  the  Hospital  (also  known  as
"LastWord(TM)"),  and IDXtendR @ the IDN. IDX's  radiology and imaging  products
are marketed as IDXrad (TM)and the IDX Imaging Suite. The IDXtendR and radiology
product  lines  employ  relational,  scalable,  client/server  architecture  and
provide both ambulatory and hospital capabilities.  The EDiX(TM) line of medical
dictation and transcription services are sold to IDNs, hospitals,  and physician
groups and employ telephone  communications,  a digital recording system,  and a
secure,   centralized   transcription   operations   hub  for   collection   and
distribution.  ChannelHealth's  line of Internet  services are packaged as three
"channels," that correspond to specialized deployments to physicians,  patients,
and administrators.

As of December 31, 1999,  IDX's systems were deployed by  approximately  118,000
physicians  and were  installed at over 2065 client  sites,  including  over 265
large group  practices  with  greater than 75  physicians,  over 510 small group
practices with less than 75 physicians, and more than 280 IDNs representing more
than 370 hospitals.

IDX was  incorporated in Vermont on June 2, 1969.  IDX's  executive  offices are
located  at  1400  Shelburne  Road,  South  Burlington,  Vermont  05403  and its
telephone number is (802) 862-1022.

INDUSTRY BACKGROUND

Healthcare costs in the United States have risen  dramatically over the past two
decades  relative to the overall  rate of  inflation.  While  reimbursement  for
healthcare has historically  been based on a  fee-for-service  model of payment,
managed care  organizations and other payors utilize  alternative  reimbursement
models that shift the  financial  risk of delivering  healthcare  from payors to
both physicians and institutional providers. The Company believes that pressures
to control costs have  contributed  to the movement of care from more  expensive
inpatient settings,  such as hospitals,  to ambulatory  settings.  Further,  the
Company believes that ambulatory care providers,  particularly physician groups,
continue to deliver the  majority of  healthcare  services,  bear an  increasing
share of financial risk, and control a substantial  portion of total  healthcare
resources.

Over  the  past  decade,  individual  physicians,  physician  groups  and  other
ambulatory care providers joined and affiliated with other  physicians,  managed
care  organizations,  hospitals and other  enterprises to form larger healthcare
organizations  known as IDNs. These organizations have been formed to manage the
continuum of healthcare services for population groups across both inpatient and
ambulatory  settings  to improve  quality  and reduced  costs for  patients  and
members.

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Recently,  the  consolidation  of physicians into larger groups has slowed.
However,  the Company  believes that smaller  physician  groups will continue to
form relationships to consolidate information technology and practice management
functions.  The Company does believe that many existing large  physician  groups
are growing and their  information  technology  needs are becoming  increasingly
complex.  The Company expects the total number of IDNs to remain stable, but the
Company  expects  existing  IDNs to continue to grow by  expanding  their market
coverage  through the  acquisition  of  hospitals  and group  practices,  with a
resulting  increase  in their  needs  for  information  technology  integration.
Management  believes a key  operational  principle for healthcare  organizations
will be to control and influence the complete  treatment of a patient  during an
episode (or entire  lifetime) of care,  regardless of the  organization's  legal
structure or sources of payment for care.

The Company  expects that  continued  growth in Internet  usage will have a
profound impact on healthcare for both patients and providers.  While commercial
health Web sites, offer consumers valuable insights and increased involvement in
their own health issues, the Company believes  healthcare  organizations will be
concerned  that  patients  may rush to clinical  judgment  based on  incomplete,
incorrectly  interpreted,  or even  inaccurate  information.  In  addition,  the
Company  believes  healthcare  organizations  will  be  concerned  that  use  of
commercial  health Web sites by patients  will  undermine the personal and local
relationship  between  patients and  physicians.  The Company expects that these
organizations  will need to use the Internet to establish and  cultivate  online
relationships  with patients that will improve the  effectiveness  of healthcare
they deliver and enhance physician patient relationships.

In response to the  proliferation  of Internet  use, the  "eHealth"  industry is
currently  emerging.  The Company believes  information  solutions  vendors will
significantly alter their products and services to take advantage of the eHealth
opportunity,   resulting  in  increased   customer   expectations  for  improved
connectivity to partners,  access to data, system reliability,  and lower costs.
The Company believes the broad use of Web technology  presents an opportunity to
benefit all constituencies in healthcare  strengthening the relationship between
patients and physicians,  enabling  physicians to improve the  coordination  and
quality of care, and connecting  healthcare  organizations with trading partners
to increase efficiency and save money.

The Company believes that increased consumer,  government,  employer,  and payor
awareness of the high incidence and resulting cost of medical errors will result
in increased  interest in clinical  information  systems.  It has been estimated
that in the U.S.,  between 44,000 and 98,000 unnecessary deaths result each year
from errors in medical treatment, making medical errors the eighth leading cause
of death,  ahead of automobile  accidents,  breast cancer,  and AIDS. Aside from
human costs, the total financial cost of medical errors has been estimated at up
to $8 billion per year.  A  significant  portion of medical  errors  result from
incorrect  administration  of medications - the wrong drug (often  stemming from
misinterpreted handwriting or medications with similar sounding names) the wrong
dosage, or  contraindications  (unanticipated  interactions) with other drugs or
patient  conditions  that  were  not  noted).  Online  information   processing,
specifically  computerized  physician ordering of medications,  can decrease the
incidence of adverse drug events resulting from medication errors.  Overall, the
Company  believes that reducing  medical errors will require  extensive  changes
throughout  the  healthcare   delivery  system.  The  Company  anticipates  that
increased use of  information  systems will be a significant  factor in changing
industry practices to reduce medical errors.

Healthcare  organizations  face  increasing  regulation and scrutiny by federal,
regional and local authorities. Compliance with regulations governing healthcare
cost reimbursement,  insurance,  and administration  impose financial burdens on
healthcare  organizations.  Managed  care and payor  rules  continue  to grow in
number and complexity. Recently, proposed regulations published under the Health
Insurance  Portability  and  Accountability  Act of 1996  (HIPAA)  have  created
significant  operational  challenges  to healthcare  providers  and payors.  The
Company believes that well designed,  up-to-date  information solutions can play
significant   roles  in   complementing   the   implementation   of   healthcare
organizations' internal compliance policies.

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STRATEGY

IDX seeks to maximize value for its clients by delivering  information solutions
designed to improve  healthcare  quality,  reduce  healthcare costs, and improve
operations.  The IDX  strategy  includes  building  on its  success as a leading
vendor of comprehensive  administrative  and financial  information  systems and
building on the reputation of its LastWord  clinical product to create increased
opportunities for comprehensive clinical solutions.  In addition, IDX expects to
increase penetration of the group practice market by combining service offerings
and products to improve  customers'  operational  processes.  IDX believes  that
information  systems  can  play a  significant  role  in  supporting  regulatory
compliance  efforts of  healthcare  organizations  and will offer  products  and
services to address these efforts.

IDX, through  ChannelHealth,  provides a set of modular  Internet  services that
integrate  with  the core  practice  management  and  clinical  systems  used by
healthcare providers. IDX believes it can leverage its presence in the physician
group  practice and hospital  markets to rapidly  build a  significant  base for
ChannelHealth's   physician  desktop  solutions.   IDX  will  seek  to  co-brand
ChannelHealth's  services with IDX's healthcare provider  customers,  leveraging
strong patient-provider relationships to drive usage of ChannelHealth's Internet
services.   IDX  believes  that   establishing   a  significant   presence  with
ChannelHealth's   Physician,   Patient  and   eCommerce   Channels  will  permit
ChannelHealth  to sell value-added  products and services and capture  recurring
revenue  from the  eHealth  sector,  including  fees from  processing  clinical,
financial and administrative transactions.

IDX will seek to position EDiX as a vendor of  comprehensive  medical  dictation
and  transcription  services,  on an  outsourcing  basis,  to take  advantage of
opportunities  where  customers  seek to reduce  costs in  non-core  areas.

IDX  believes  that  the  combined  strengths  of IDX  clinical,  financial  and
administrative  products, EDiX medical dictation and transcription services, and
ChannelHealth  Internet  solutions  will  position  IDX to  provide  high-value,
comprehensive  technologies  to  healthcare  organizations,  with an emphasis on
clinical excellence, Internet connectivity, and support of compliance efforts.

Key elements of IDX's strategy are:

MARKET CLINICAL PRODUCTS AS COMPREHENSIVE CLINICAL SOLUTIONS. The Company offers
a broad range of clinical  products,  including  the LastWord  clinical  system,
IDXtendR patient service applications,  EDiX medical dictation and transcription
services,  ChannelHealth  Physician Services,  and IDXrad radiology  information
system.   The  Company  believes  these  separate  clinical  offerings  used  in
combination  present  a  comprehensive  solution  for  healthcare  organizations
seeking  improvements  in clinical  care.  The  Company  will invest in LastWord
product  improvements to include  enhancements to ambulatory  clinical workflow,
nursing  workflow,  physician order entry,  expert systems for decision support,
structured text  capabilities and pharmacy and medication  management  workflow.
The Company will  differentiate its clinical  solutions by emphasizing the broad
range of  clinical  functions  available  from the  combination  of its  diverse
offerings.

PROVIDE  PRODUCTS THAT SUPPORT  REGULATORY AND COMPLIANCE  EFFORTS.  The Company
believes that information tools to support regulated customer business practices
will be beneficial to customers seeking greater  reliability and  predictability
of their business  practices.  The Company has invested in automated work flows,
primarily  in its  financial  and  clinical  products,  that can be  tailored by
healthcare  organizations  to compliment  their internal  regulatory  compliance
policies and efforts.  The Company will market this complementary  functionality
as tools to assist healthcare organizations in implementing their own regulatory
compliance policies.

Key Elements of IDX's information systems and services business segment are:

CROSS SELL LASTWORD  PRODUCTS TO IDXTENDR  CUSTOMERS.  The Company will continue
investments in the  integration  of the ambulatory and acute care  components of
IDXtendR  and  LastWord to meet IDN  enterprise  requirements  for  clinical and

                                     Page 4
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administrative  processes that span complex healthcare enterprises.  The Company
believes that market acceptance of LastWord will provide opportunities to expand
its market  position in the IDN market.  The Company  expects its  relationships
with  prestigious  medical  groups  and  academic  medical  practices  that  are
affiliated  with  hospitals  will enhance  opportunities  to cross sell LastWord
enterprise functionality.

EXPAND MEDICAL GROUP PRACTICE MARKET SHARE. The Company will seek to enhance its
current  large  group  practice  and  academic  practice  market  leadership  by
increasing sales efforts in the smaller and midsized group practice  market.  In
addition, the Company expects to market a combination of group practice products
and consulting services as combined solutions or "programs" to address the needs
of the group practice market to continue to achieve efficiency and reduce costs.
IDX expects to design programs to deliver solutions to  administrative  problems
involving  patient flow,  financial  flow,  and decision  support.  IDX plans to
incorporate   consulting   services  to  measure   organizational  and  solution
performance  against  industry best  practices will be  incorporated  into these
programs.  ChannelHealth  will incorporate  physician and business services into
the  core  practice  management  offerings.  By  emphasizing  integration  among
LastWord,  IDXtendR,  and  IDXrad,  the  Company  expects to target  independent
imaging centers and group practices with large radiology components.

ACCELERATE DELIVERY OF PRODUCTS AND SERVICES. Increasingly competitive pressures
on  healthcare  organizations  are  creating  a  need  for a  faster  return  on
investment in information solutions.  At the same time, customers are responding
to the increasing  complexity of information  technology  with requests for more
consultative assistance in the area of systems implementations. To address these
needs,  the Company has  developed  an improved  implementation  process  called
"IDXpedite"  which uses a  consultative  process to align  prioritized  business
objectives directly to system  functionality.  Through detailed project scoping,
consultation,  and the use of  prototypes in the design  phase,  IDXpedite  will
allow customers to go live on key functionality  more quickly and reduce overall
implementation time.


Key elements of IDX's Internet services and content business segment are:

MARKET A  COMPREHENSIVE  EHEALTH  SOLUTION.  The Company  believes  that to take
advantage of Internet capability,  a comprehensive healthcare information system
must access the essential financial,  clinical, and administrative data residing
in practice management and clinical systems. Through enabling technologies,  IDX
will provide the  essential  "backbone"  to bring data from both IDX and non-IDX
systems to a single, integrated Web desktop. The Company will market its systems
such as LastWord and IDXtendR, together with ChannelHealth's desktop services as
a physician desktop that integrates essential medical workflow and a broad range
of content and transactions.

PRODUCTS AND SERVICES

IDX offers a  comprehensive  suite of information  technology  solutions to help
healthcare  organizations  improve  the  quality  and  reduce  the  cost of care
delivery.  The  core  IDX  financial,  administrative,  and  clinical  solutions
combined with ChannelHealth(TM)  Internet-based  services and EDiX transcription
services will deliver a broad  information  system  solution to physician  group
practices,   management   service   organizations,   academic  medical  centers,
hospitals, and IDNs.

IDX  products  provide  a wide  range of  technology  solutions  for  healthcare
organizations,   including  electronic  medical  records,   practice  management
systems, acute care systems, imaging, transcription,  and connectivity services.
Key healthcare processes automated by IDX solutions include:

-    financial and managed care functions such as billing,
-    collections, benefit management, contract management, and data
     analysis
-    administrative functions such as scheduling, registration, and visit
     management
-    clinical  functions  such as medical  records,  transcription,  laboratory,
     pharmacy, and radiology information management.

                                     Page 5
<PAGE>

Below is a description of IDX, ChannelHealth,  and EDiX products and services as
of February 29, 2000.

   PRODUCTS AND SERVICES OF INFORMATION SYSTEMS AND SERVICES BUSINESS SEGMENT

IDXTENDR. Provides comprehensive and integrated financial,  administrative,  and
managed care  applications for large group practices,  academic medical centers,
and IDNs.

ENTERPRISE WIDE SCHEDULING (EWS)

-    schedules  patients,  providers,  and resources in physician group settings
     or across a healthcare  delivery  enterprise
-    manages  schedules  and  coordinates appointments in the acute care
     environment and is integrated with orders for procedure scheduling

REGISTRATION

-    stores patient demographics and insurance information
-    creates a single master database of patient  information  across multiple
     care settings
-    includes patient  registration,  charge entry, fee schedule,  patient
     list, user registration, security and text messaging functions

VISIT MANAGEMENT

-    provides inpatient and outpatient admission and discharge capabilities for
     physician practices, outpatient care centers and hospitals
-    reports information related to patient registration, visits, bed
     management, and insurance management
-    tracks patient interactions to build the comprehensive electronic medical
     record

BILLING AND ACCOUNTS RECEIVABLE (BAR)

-    integrated billing and receivables  management with comprehensive analysis
     and reporting
-    includes  a check  writer for  patient  refunds
-    provides  patient billing and insurance  billing for  professional
     charges,  HCFA 1500
-    supports insurance and employer package pricing and workers compensation
     billing

HOSPITAL PATIENT ACCOUNTING (HPA)

-    manages patient billing, collection and insurance management from initial
     registration through resolution of payment
-    supports HCFA 1500 and UB92 billing

TRANSACTION EDITING SYSTEM (TES)

-    captures, evaluates, and facilitates editing of charge and claim data
-    allows transactions to be edited for completeness and re-tested before
     they are entered into BAR and MCA applications

MANAGED CARE (MCA)

-    maintains member registration, demographic, and financial data and
     automatically applies benefits as defined in the member's plan
-    provides a  comprehensive  referrals  system with  authorization  tracking,
     concurrent  review,  pre-certification,  length  of  stay  assignment,  and
     provider selection
-    provides  case  identification,  care plan  tracking,  cost  simulation,
     form letters,  and linking of service records
-    adjudicates and processes  claims and statistical  encounters
-    provides  billing for  employer  groups and  self-pay members  and manages
     receivables
-    provides  flexible  risk  management  (fund accounting),  tracking, and
     reporting
-    provides issue tracking,  responsibility assignment, workflow management
     with automatic ticklers, and letter production
-    manages capitated contracts across the enterprise

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CONTRACT REFERENCE

-    catalogs and maintains insurance plan information providing ready access to
     referral   and   authorization   requirements,   covered  and   non-covered
     procedures, and copayment information

ELECTRONIC DATA INTERCHANGE

-    automates  the  computer-to-computer   exchange  of  data  such  as  claims
     submittals  and  remittances,  health  plan  eligibility  information,  and
     integrated credit card processing

INTERCEPT(TM)

-    facilitates contract administration,  encoding,  modeling, cost allocation,
     and  determination  of  contract   reimbursement  through  a  sophisticated
     contract management system

ANALYZER

-    provides relational  reporting and analysis of IDX data using Microsoft SQL
     Server and  on-line  analytical  processing  (OLAP)  for  multi-dimensional
     analysis in a graphical user environment

-    assists in understanding critical business data to improve key business
     measures

ENTERPRISE VIEW

-    provides an enterprise-wide,  system  independent,  relational data
     repository for retrospective decision support
-    supports both clinical quality and outcomes improvement  studies as well
     as financial and marketing  knowledge  management
-    features a Web-based front-end access tool

ENTERPRISE INDEX

-    provides  a  master   person  index  used  to  track   patient  and  member
     registration information and visit histories across multiple locations in a
     delivery network

LASTWORD  ENTERPRISE  CLINICAL  SYSTEM.  Provides  comprehensive  and integrated
clinical, administrative, and financial applications to hospitals and IDNs
Clinical Information Management

-    facilitates an interdisciplinary approach to management of the care process
     by providing a  cross-continuum  patient  record and access to a structured
     medical knowledge database that supports protocols and outcomes management
-    provides automated tools supporting caregiver activities such as
     assessments, charting, and patient classification in a variety of
     inpatient and outpatient  settings,  enhancing  clinical  productivity  and
     streamlining  workflow
-    supports  population health management with specialized tools, including
     automated alerts for patient health maintenance activities and patient
     panel tracking and querying
-    provides comprehensive order management and results reporting for inpatient
     and ambulatory  settings,  supporting  direct entry of orders by physicians
     and streamlined processes for ordering and results review

MEDICAL RECORDS

-    provides abstracting and encoding using ICD-9, CPT-4 and DRG codes
-    streamlines chart completion activities for medical records personnel
-    streamlines  all  activities  related to tracking  physical  medical
     records throughout a multi-site organization
-    automates activities related to releasing patient record information to
     external requesters, including tracking, billing and collection

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PHARMACY MANAGEMENT

-    provides comprehensive inpatient and outpatient pharmacy department support
     that creates a closed-loop  medication  administration  process across both
     inpatient and ambulatory  settings to increase  efficiency and decrease the
     potential for medication errors

EMERGENCY DEPARTMENT MANAGEMENT

-    provides  patient flow  management  and tracking  support for the emergency
     department  that is fully  integrated  with the  inpatient  and  ambulatory
     system,  making all care activities  performed in the emergency  department
     available as part of the patient's long-term record

GROUP PRACTICE  MANAGEMENT  SYSTEM  (GPMS).  Provides  integrated  financial and
administrative   applications   such  as  scheduling,   registration,   billing,
collections,  referrals, and reporting for the small to mid-size physician group
practice

IDXSITE(TM).  Provides integrated  financial,  administrative,  and managed care
applications  for midsize  physician  organizations  such as management  service
organizations,   independent  physician  associations,  and  physician  practice
management  companies  and features a Web-based  thin client  architecture  that
provides  an open  desktop for access to third  party  applications  and enables
centralized  system  management,  reduced desktop costs, and incremental  system
investments as the number of users grow

IDXRAD(TM)  AND THE IDX IMAGING  SUITE  ENTERPRISE  AND  DEPARTMENTAL  RADIOLOGY
SYSTEM.    Automates   a   radiology   department's    clinical,    demographic,
administrative, billing, scheduling, and film information.

-    provides enterprise access to patient data, exam information,  results,
     and  corresponding  digital images via the Web, supporting a filmless
     and paperless environment that substantially reduces instances of film
     loss and delays in reporting to physicians

-    provides  bi-directional  links between IDXrad, PACS and diagnostic imaging
     equipment via Imaging Suite,  thereby ensuring accurate data throughout the
     radiology enterprise

     PRODUCTS AND SERVICES OF INTERNET SERVICES AND CONTENT BUSINESS SEGMENT

THE PHYSICIAN CHANNEL(TM)

PHYSICIAN  HOMEBASE(TM)  . A  configurable  Web portal for  physicians to access
Web-based  content and  services  relevant to users'  professional  and personal
activities,  including  visual alerts and  indicators  of relevant  clinical and
administrative events, access to medical knowledge bases, navigation to business
and clinical  applications,  and access to personal Web content,  products,  and
services.

CLINICAL  WORKS.  Modular and  Web-based  services  that can be  customized  and
implemented  incrementally to manage clinical workflow, access lab and radiology
results,  manage  patient  medications,  create  notes  and  orders,  create  an
electronic medical record, including:

-    MedWorks for  prescription  ordering,  drug  utilization  review and
     formulary checking
-    ResultWorks  for  viewing  clinical  results  and  demographic  and
     insurance information
-    DocWorks for clinical documentation management including
     transcription  attestation and editing (Currently in development.)
-    ChargeWorks for clinical  charge  capture and  procedure  and billing
     coding  (Currently in development.)

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<PAGE>

THE PATIENT  CHANNEL(TM)  (Currently in development).  Includes  Web-based tools
such as the "Virtual Office" that enhance the relationship between the physician
and the patient by providing  patient access to physicians' Web sites for online
appointment  scheduling,  secure  messaging,  prescription  renewal  processing,
referral requests, account balance inquiry and payment, and online test results.

ECOMMERCE  CHANNEL(TM)  (Currently in development) Provides Internet services to
help manage the financial and  administrative  aspects of care delivery enabling
healthcare  organizations  to interact  electronically  with providers,  payors,
pharmacies, labs, and other suppliers.


CLINICAL MANAGEMENT SYSTEM (CMS)

-    a comprehensive  ambulatory  electronic  medical record including  clinical
     guidelines,   patient  health  plan  requirements,   and  drug  interaction
     information
-    supports  physician  workflow  by helping  to  organize  tasks,  facilitate
     communication, and enable efficient documentation and care planning
-    includes ambulatory clinical repository for clinical data tracking and
     reporting

OUTREACH(TM)  Provides  remote access to IDX business and clinical  applications
through the Internet or intranets.

EDIXPRESS(TM)  Web-based  tool for  viewing  transcriptions  produced  by EDiX's
medical dictation and transcription services.

DIETSITE(TM) Provides information on health,  nutrition,  food, and diet choices
to guide consumers, including o analysis of diets and recipes o sports nutrition
information o information  on specialized  diets o nutrition  facts and news o a
chat room for consumers

    SERVICES OF MEDICAL DICTATION AND TRANSCRIPTION SERVICES BUSINESS SEGMENT

EDIX MEDICAL DICTATION AND TRANSCRIPTION SERVICES

-    provides a dictation  and  transcription  outsourcing  solution  to
     physician groups,   hospitals,   and   integrated   delivery   networks
-    automates  the transcription  process  helping to meet  regulatory
     compliance  requirements
-    employs a  proprietary  technology  gateway and  intranet  technology
     to ensure quality and  conformity of transcribed  data
-    uses encrypted data  transmission for the highest level of data security
-    includes  automated  report routing for enhanced quality and fast turn
     around

BUSINESS RELATIONSHIPS

COMPAQ
Compaq is a leading provider of hardware and operating system software used by a
majority of the applications  offered by IDX. The IDXtendR suite of applications
runs on Compaq's Alpha platform using the OpenVMS operating system. The LastWord
suite of  applications  is powered by  Compaq's  Tandem  platform  in a non-stop
architecture. A number of other IDX applications running on Microsoft NT and SQL
Server are powered by Compaq's Proliant platform.

IBM
IBM is a leading  provider of hardware and  operating  systems  software used by
many of the  applications  offered  by IDX.  The  IDXtendR  and  GPMS  suite  of
applications  run on the  RISC  System/6000  platform  using  the AIX  operating
system. A number of other IDX applications,  including  IDXsite,  are powered by
IBM's Netfinity servers using Microsoft NT and SQL Server.

INTERSYSTEMS
IDX uses Intersystems  database offerings  exclusively for its IDXtendR suite of
products. These database systems include OpenM and Cache.

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<PAGE>

MICROSOFT
The Microsoft product suite is used in many different areas of IDX.  Internally,
Windows  NT, SQL  Server,  Internet  Explorer  and Office  Professional  are the
standards.  IDXrad uses NT, SQL Server and Internet Explorer as the platform for
its flagship  products.  IDXsite,  CMS and IDXtendR  use  Microsoft  products to
varying degrees.

PROXYMED, INC.
ProxyMed is a provider of networked  transaction  services that link physicians,
laboratories,  pharmacies,  and payers.  ProxyMed currently supplies  electronic
transaction services to IDX and its customers on a preferred basis.

HEALTHEON/WEBMD
On January 24, 2000, IDX and ChannelHealth  announced a strategic  alliance with
Healtheon/WedMD.  The strategic  alliance is contingent  on the  acquisition  by
ChannelHealth of an interest in Healtheon/WebMD in exchange for approximately 3%
of the common stock of ChannelHealth. ChannelHealth's acquisition of an interest
in  Healtheon/WebMD  is  subject  to  regulatory  approval,  and  therefore  the
strategic alliance will not be consummated  without  regulatory  approval of the
stock acquisition transaction.  Upon regulatory approval,  Healtheon/WebMD would
become the primary provider of content and transactions for ChannelHealth.

On March 24, 2000 the Company  received a request from the U. S.  Department  of
Justice for  additional  information  and documents with respect to the proposed
transaction with Healtheon/WebMD. As a result, the regulatory review process may
continue  for an extended  period of time.  There can be no  assurance  that the
proposed  transaction with  Healtheon/WebMD  will receive regulatory approval or
will ever be implemented.

SERVICES

IDX  maintains a client  services  organization  to install its  products and to
support and provide  professional,  technical  and other  services to its client
base. IDX possesses the healthcare  information systems expertise desired by the
growing number of larger and more sophisticated  healthcare  enterprises as they
reengineer  healthcare  delivery  processes  and deploy  information  systems to
support these processes.  The services organization is experienced at installing
and supporting  systems in very large  organizations  with thousands of computer
users across multiple departments.

INSTALLATION  SERVICES.  IDX installation  representatives  work with clients to
tailor and optimize  IDX  products to meet  specific  business  needs.  Services
include  project   management,   train-the-trainer   programs,   best  practices
comparison  to other IDX  clients  and  systems  conversion  and  implementation
assistance.  In 1999, the Company  introduced a new  implementation  methodology
called  IDXpedite,  designed  to  provide  customers  with a  faster  return  on
investment  for IDX solutions  while  answering  the need for more  consultative
assistance in the area of systems implementation.

MAINTENANCE SERVICES. IDX provides ongoing software support to substantially all
of its  clients of IDXtendR  and  LastWord  products  under  contracts  that are
typically  for a term  of one or  more  years.  These  contracts  generally  are
renewable  automatically unless terminated at the option of either the client or
IDX. Software  maintenance services consist of providing the client with certain
new software  releases,  as  available,  and general  support,  including  error
corrections  and  telephone  consultation.  Software  maintenance  services  are
generally  available  either on a 24-hour-a-day  basis or during normal business
hours.

PROFESSIONAL  AND  TECHNICAL  SERVICES.  IDX offers  professional  and technical
services to assist clients in building an information  infrastructure to operate
in a complex and  changing  healthcare  environment.  The work  performed by IDX
includes  information  systems planning,  process redesign,  project management,
contract programming,  network design, education and training. These value-added
services,  combined  with IDX's  systems  expertise,  enable IDX to support  its
clients' efforts to develop  consistent  enterprise-wide  systems and processes.
Through  these  services,  IDX believes it  strengthens  its  relationship  with
clients,  builds a knowledge base of best practices in the use of IDX's systems,
and gains information regarding future client needs.

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The  following  sets forth a  description  of the  services  provided by the IDX
consulting organization:

   PROFESSIONAL SERVICES OF INFORMATION SYSTEMS AND SERVICES BUSINESS SEGMENT

THE LAUREATE GROUP
Consulting  services  for all  LastWord  applications,  implementation  process,
project  management,  technical  (systems  and report  writing),  expert  rules,
upgrades, release migration, programming, and best practices.

THE HUNTINGTON GROUP
Process redesign,  organizational  change management,  outsourcing,  and systems
integration.

TECHNICAL CONSULTING SERVICES
Performance  and  investment  analysis and hardware  upgrades,  network  review,
systems operational analysis, and various utilities and tools.

APPLICATION CONSULTING SERVICES
Project management, upgrades, temporary services, and operational analysis.

NETWORK CONSULTING SERVICES
Network analysis,  design and  implementation,  temporary  networking  services,
client-server design and installation, and support services.

RADIOLOGY CONSULTING SERVICES
System analysis and process redesign for radiology groups.

TECHNOLOGY STRATEGY AND HARDWARE PLATFORMS

IDX  designs  its  software  to  operate on a variety  of  technical  platforms,
including computer equipment from Compaq,  Hewlett Packard Company ("HP"),  Data
General,  and  International  Business  Machines  Corporation  ("IBM").  The IDX
technology  strategy employs advanced  technology and connectivity  solutions to
solve business problems based on a philosophy of technology for performance. Key
IDX  product   features   embodying  the  strategy   include  a  single  desktop
presentation,  integrated business functions,  workflow across all participants,
and decision  support tools.  To fulfill this  strategy,  the IDX Technology and
Architecture Group has established an IDX Target Architecture that uses the most
current  Web  standards  and  protocols.  The  design  of  the  architecture  is
service-oriented,  an  approach  recommended  by the  Gartner  Group  because it
facilitates  product  integration  across  vendors  by  providing   standardized
interfaces that third party systems can readily understand. New products will be
built to this standard and existing IDX applications  will migrate to the Target
Architecture  over  time.  Fundamental  components  of the  Target  Architecture
include:

-    The IDX Web Framework
-    Objects and components
-    Customizable user interface and workflow tools
-    Platform independence

The IDX Web Framework is a set of software tools, user interface standards,  and
style  conventions  that  provides  the  ability  to  integrate  many  different
applications into a single desktop presentation.  The IDX Web Framework is built
on thin  client  Web  technology  that  enables  an  organization  to deliver an
integrated  IDX desktop from a Web server.  The Web  Framework  supports  single
sign-on to multiple applications and facilitates integration across applications
in a cost-effective, secure environment.

Component-based software is a software design methodology that uses concepts and
actions by describing their attributes in a programming language. Once a concept
or action has been described,  that  description and its  accompanying  software
code can be reused  broadly as the building  blocks for different  applications.
This software design approach leads to faster  development  processes and allows
IDX to "plug" components together in tailored configurations,  providing greater
congruence  with  client  needs  and  expectations.   The  approach  facilitates
cross-product and multi-vendor interoperability and connectivity.

                                    Page 11
<PAGE>

Customizable  user interface and workflow tools provide the flexibility to adapt
the IDX system to meet unique  business  needs.  A distributed  workflow  engine
based on Web standards (http, XML, etc.) is under development. This will allow a
heathcare  institution  to  dynamically  update and  superimpose  their business
processes across the enterprise by integration of multiple vendor products in an
e-commerce environment.

The platform  independence  foundation  allows IDX and our  customers to use the
best  technologies  available.  This strategy  provides options that balance the
scalability,  price,  and  functionality  issues that are involved with platform
decisions.  The addition of Web-enabled  IDX  applications  reduces the risks of
changing  technologies  and ensures that IDX customers  have the tools needed to
operate in complex clinical and business office settings.

IDX  strives  to  utilize   technology  for  performance  by  applying  the  new
technologies,  such as the Web, as they prove themselves able to perform well in
large-scale,  transaction-driven  environments.  The technology for  performance
philosophy  seeks to protect  customer  investments  in current  systems  with a
technology  framework designed to allow them to expand and take advantage of new
features and new technologies as they become available.  The architecture of IDX
products  is  expected  to enable  clients  to  incrementally  migrate  from one
technology to another. With a focus on reliable, scaleable hardware and software
solutions,  IDX applications  are expected to migrate to platform  independence,
beginning with a migration to SQL and Windows NT. IDX believes that its approach
to technology, particularly the emphasis on Web-based, thin client architecture,
will provide IDX customers with  flexibility  and utility,  while reducing costs
and deployment risks.

As a  service  to its  clients,  IDX  sells  third-party  computers,  terminals,
printers,  storage  devices  and other  peripheral  devices.  IDX also  provides
value-added  services to configure  client  systems.  Hardware is purchased from
Compaq, IBM, Data General,  and HP under renewable one-year reseller agreements.
IDX does not  maintain  an  inventory  of  hardware,  but  relies on  suppliers'
inventories  to  meet  client  delivery  requirements.  IDX  believes  that  its
relationships with vendors are good.


SALES AND MARKETING

IDX sells its products and the services of  ChannelHealth  and EDiX  exclusively
through a direct sales force.  IDX is the  exclusive  seller of  ChannelHealth's
services  to the IDX  customer  base.  The  majority of IDX's sales calls are in
response to requests for proposals. IDX generates these requests and other sales
primarily  through  referrals  from clients and  consultants.  IDX also seeks to
enhance  market  recognition  through  participation  in industry  seminars  and
tradeshows,   its  Web  site,   direct   mail   campaigns,   telemarketing   and
advertisements  in trade journals.  IDX products  typically have a 3 to 18 month
sales cycle for new client sales.

No single client  accounted for more than 5% of IDX's annual  revenues in fiscal
1997,  1998 or 1999. In 1999, one customer of EDiX  accounted for  approximately
11% of EDiX's revenues.

At December 31, 1999, the Company had total backlog of $340.6 million, including
$110.2 million  attributable to systems sales and $230.4 million attributable to
services.  Systems  sales  backlog  consists of fees due under signed  contracts
which have not yet been  recognized  as  revenues.  Service  backlog  represents
contracted software maintenance services,  consulting services, remote computing
service fees and medical  transcription  service fees for a period of 12 months.
At December 31, 1998, the Company had total backlog of $299.3 million  including
$129.0 million  attributable to systems sales and $170.3 million attributable to
services.  Of the total 1999 backlog of $340.6 million, the Company expects that
$40.9 million will not be fulfilled in the current fiscal year.

PRODUCT DEVELOPMENT

To  ensure  that  its  products  continue  to meet  the  evolving  needs  of the
healthcare  industry,  IDX allocates a significant portion of annual revenues to
research and development. IDX's research and development expenses for the fiscal
years 1997, 1998 and 1999 were $37.4 million,  $47.3 million,  and $53.2 million
respectively.

                                    Page 12
<PAGE>

IDX's product  development  activities include  enhancement of existing products
and the  development  of new  products,  as well  as the  implementation  of new
technologies.  IDX is devoting significant resources to integrating the LastWord
and IDX products,  developing a relational  practice  management  solution,  and
expanding  its  Web-based  architecture.  IDX is also  currently  migrating  its
products to the Web-based thin-client architecture. IDX's development process is
focused  on  building  components  for its  integrated  product  rather  than on
stand-alone  products.  These  components  can be integrated  and  configured to
address specific client needs.

IDX utilizes client focus groups,  user groups and industry  experts,  including
physicians,  nurses,  healthcare  administrators and consultants,  for advice in
developing and enhancing its products.

COMPETITION

The  market  for  healthcare  information  systems  is highly  competitive.  IDX
believes that the principal  competitive  factors in this market are the ability
to effectively market, install,  support and integrate systems, the resources to
support  ongoing  research and  development,  financial  stability and perceived
value  relative to price.  IDX  believes it competes  favorably  with respect to
these  factors.  Competitors  vary in size,  and in the scope and breadth of the
products and services offered.

IDX experiences competition from companies with strengths in various segments of
the healthcare  information  systems  market,  such as physician  group practice
systems, hospital information systems,  clinical information systems,  ancillary
departmental  systems and systems integration.  In addition,  other entities not
currently  offering  products  and  services  similar  to those  offered by IDX,
including    claims    processing    organizations,    hospitals,    third-party
administrators, insurers, healthcare organizations and others, may enter certain
markets  in which IDX  competes.  In  particular,  as IDX has now begun to offer
Internet-based  products  and  services for  physician  organizations  and their
patients through ChannelHealth, the Company can expect to experience competition
in these markets from emerging Internet-based electronic commerce providers.

INFORMATION SYSTEMS AND SERVICES BUSINESS SEGMENT
Certain of IDX's  competitors have greater  financial,  development,  technical,
marketing  and  sales  resources  than IDX and have a greater  penetration  into
segments of the market in which IDX  competes.  In addition,  as the markets for
IDX's  products and services  develop,  additional  competitors  may enter those
markets and competition may intensify.

MEDICAL DICTATION AND TRANSCRIPTION SERVICES BUSINESS SEGMENT
For EDiX's dictation and transcription services, competition consists of several
national  competitors  and an  estimated  1,000  to  1,500  local  and  regional
competitors.  In addition,  EDiX must  compete  against  in-house  transcription
departments  for  those  healthcare  providers  who do not  currently  outsource
transcription.

INTERNET SERVICES AND CONTENT BUSINESS SEGMENT
ChannelHealth  faces  competition  from  other  healthcare  information  systems
companies,  and systems  integrations  and from Internet  content  providers and
Internet  "portals."  ChannelHealth  competes  with various  vendors for the key
service offerings of connectivity,  content,  clinical modules,  and integration
between  line-of-business   applications  and  the  browser-based  desktop  user
interface.  While  ChannelHealth  enjoys the  advantage of access to IDX's large
installed  base of  practicing  physicians  in the United  States and the strong
relationships  IDX has  with  executive  management  at  prestigious  healthcare
organizations  nationwide,  ChannelHealth  expects  competitors to  aggressively
target that customer base.  ChannelHealth  faces  competition from other vendors
that have focused on partnerships to develop a comprehensive  service  offering.
These  partnerships  provide the financial  resources  necessary to market a new
Internet initiative.

                                    Page 13
<PAGE>

Some current and potential  competitors may have advantages over  ChannelHealth,
including:

-    Greater  financial  resources  for the  introduction  and  roll  out of
     their services;
-    Greater  brand  recognition  and larger  marketing  budgets;  and
-    Strategic media  relationships  to apply  consumer-based  tactics for
     wide-scale promotion of their Internet services.

IDX believes the principal  competitive  factors in attracting and promoting the
ChannelHealth  strategy of a sustained use model for  physicians  are aggressive
price discounting,  depth and breadth of transaction and content services,  data
security,  system  reliability,  and  integration  to practice  other  clinical,
administrative and financial systems. Other important factors lie in the ability
to prove clinical  relevance,  ease-of-use and physician  resistance to computer
use. The Company  expects  competition  to continue to increase as new companies
enter the market and existing companies continue to expand their services.

PROPRIETARY RIGHTS AND LICENSES

IDX depends upon a combination  of trade secret,  copyright and trademark  laws,
license  agreements,   nondisclosure  and  other  contractual  provisions,   and
technical  measures  to protect  its  proprietary  rights in its  products.  IDX
distributes its products under software license  agreements that grant clients a
nonexclusive,  nontransferable  license to use IDX's  products and contain terms
and conditions  prohibiting the  unauthorized  reproduction or transfer of IDX's
products.  In  addition,  IDX  attempts to protect  its trade  secrets and other
proprietary  information through agreements with employees and consultants.  All
current employees of IDX have signed a nondisclosure  agreement, and all current
employees  involved  in  product   development  have  signed  an  assignment  of
inventions  agreement.  There can be no  assurance  that the  legal  protections
afforded  to IDX  or  the  steps  taken  by IDX  will  be  adequate  to  prevent
misappropriation  of IDX's  technology.  In addition,  these  protections do not
prevent  independent  third-party  development  of  functionally  equivalent  or
superior    technologies,    products   or   services.   Any   infringement   or
misappropriation  of IDX's  proprietary  software would  disadvantage IDX in its
efforts to retain and  attract new  clients in a highly  competitive  market and
could cause IDX to lose revenues or incur substantial  litigation  expense.  IDX
believes that, due to the rapid pace of innovation within the software industry,
factors such as the  technological  and  creative  skills of its  personnel  and
ongoing  reliable  product   maintenance  and  support  are  more  important  in
establishing and maintaining a leadership  position within the industry than are
the various legal protections afforded to its technology.

Although IDX believes that its products, trademarks and other proprietary rights
do not infringe upon the  proprietary  rights of third parties,  there can be no
assurance that third parties will not assert  infringement claims against IDX in
the future and that such claims will not have a material adverse effect on IDX's
results of operations,  financial condition or business. Recent proliferation of
patents involving the Internet and business  processes  involving  computers and
the  Internet  may  result in  litigation  against  the  Company  that  could be
expensive and time consuming.

IDX utilizes a variety of  intellectual  property  rights that are licensed from
third  parties.  These  third  party  licenses  may not be  available  to IDX on
commercially  reasonable terms. IDX's loss of or inability to maintain or obtain
upgrades to any of these  licenses  could  significantly  harm IDX. In addition,
since IDX and  ChannelHealth  license a  majority  of their  content  from third
parties,  their exposure to copyright  infringement actions may increase because
they must rely upon such  third  parties  for  information  as to the origin and
ownership of such licensed content.

                                    Page 14
<PAGE>

GOVERNMENT REGULATION

The  Company's  products and services  are subject to  regulation  in the United
States by numerous regulatory  authorities,  including the Federal Food and Drug
Administration  (FDA),  the  Federal  Trade  Commission  (FTC),  and  comparable
regulatory authorities in foreign countries. In addition, the Company's products
are intended to support some  operations of its customers  that are regulated by
numerous   regulatory   authorities,   including   the  Health  Care   Financing
Administration   (HCFA)  and  comparable   regulatory   authorities  in  foreign
countries.  These  regulatory  authorities and other federal,  state,  and local
entities will regulate,  among other things,  healthcare  billing and claims for
reimbursement,  healthcare  data exchange  transactions,  computer  security and
patient  privacy.

Virtually  all of IDX's  customers  and the other  entities with which IDX has a
business  relationship  operate in the healthcare industry and, as a result, are
subject to governmental regulation,  including Medicare and Medicaid regulation.
Accordingly,  IDX's  customers  and the  other  entities  with  which  IDX has a
business   relationship   are  affected  by  changes  in  such  regulations  and
limitations in governmental spending for Medicare and Medicaid programs.  Recent
actions by Congress  have  limited  governmental  spending  for the Medicare and
Medicaid programs,  limited payments to hospitals and other providers under such
programs,  and  increased  emphasis  on  competition  and  other  programs  that
potentially  could  have an  adverse  effect  on IDX's  customers  and the other
entities with which IDX has a business  relationship.  In addition,  Federal and
state  legislatures  have  considered  proposals  to reform the U.S.  healthcare
system at both the federal and state level.  If enacted,  these  proposals could
increase  government  involvement in healthcare,  lower  reimbursement rates and
otherwise  change the  business  environment  of IDX's  customers  and the other
entities  with which IDX has a business  relationship.  IDX's  customers and the
other entities with which IDX has a business  relationship  could react to these
proposals  and the  uncertainty  surrounding  these  proposals by  curtailing or
deferring investments, including those for IDX's products and services.

REGULATIONS PERTAINING TO MEDICAL BILLING AND REIMBURSEMENT.

Virtually  all of IDX's  customers  and the other  entities with which IDX has a
business  relationship  operate in the healthcare industry and, as a result, are
subject to  governmental  regulation.  Because  IDX's  products and services are
designed  to function  within the  structure  of the  healthcare  financing  and
reimbursement  systems currently in place in the United States,  and because IDX
is pursuing a strategy of developing  and  marketing  products and services that
support its customers' regulatory and compliance efforts, IDX may become subject
to the reach of, and liability under, these regulations.

The Federal  Anti-Kickback  Law,  among other  things,  prohibits  the direct or
indirect  payment or receipt of any  remuneration  for  Medicare,  Medicaid  and
certain  other  Federal  or  state  healthcare  program  patient  referrals,  or
arranging for or  recommending  referrals or other business paid for in whole or
in  part  by the  federal  health  care  programs.  Violations  of  the  Federal
Anti-Kickback  Law may  result in civil and  criminal  sanction  and  liability,
including the temporary or permanent  exclusion of the violator from  government
health  programs,  treble damages and imprisonment for up to five years for each
violation. If the activities of a customer of IDX or other entity with which IDX
has a business  relationship were found to constitute a violation of the Federal
Anti-Kickback  Law and IDX, as a result of the provision of products or services
to such customer or entity,  was found to have  knowingly  participated  in such
activities,  IDX could be  subject to  sanction  or  liability  under such laws,
including the exclusion of IDX from government  health programs.  As a result of
exclusion from government health programs,  IDX customers would not be permitted
to make any payments to IDX.

                                    Page 15
<PAGE>

The  Federal  Civil  False  Claims  Act and the  Medicare/Medicaid  Civil  Money
Penalties  regulations  prohibit,  among other things,  the filing of claims for
services  that were not provided as claimed,  which were for services  that were
not medically necessary, or which were otherwise false or fraudulent. Violations
of these laws may result in civil damages,  including treble and civil penalties
up to $11,000 for each false claim filed. In addition the  Medicare/Medicaid and
other  Federal  statutes  provide for criminal  penalties for such false claims,
including  fines of up to  $25,000  and  imprisonment  up to five years for each
offense.  If, as a result of the provision by IDX of products or services to its
customers  or other  entities  with which IDX has a business  relationship,  IDX
provides  assistance with the provision of inaccurate  financial  reports to the
government under these  regulations,  or IDX is found to have knowingly recorded
or  reported  data  relating  to  inappropriate  payments  made to a  healthcare
provider, IDX could be subject to liability under these laws.

New  Regulations  Pertaining  to Patient  Confidentiality  and  Computer  System
Security.  The  Health  Insurance  Portability  and  Accountability  Act of 1996
("HIPAA")  contains  provisions  regarding  standardization  for  financial  and
administrative  transactions,  including standards to enable electronic exchange
of  information in health claims and health plan  administration,  and standards
for computer  system  security and privacy of patient  information.  Many of the
standards mandated by HIPAA and the regulations thereunder will become effective
in the year 2000 and will be applicable to the customer operations involving the
use of the  Company's  products.  It is necessary for the Company to ensure that
its products support HIPAA compliance by its customers  insofar as the Company's
products  are intended to be used in customer  operations  governed by HIPAA and
the regulations thereunder.

HIPAA requires the Secretary of Health and Human Services (the "Secretary")
to adopt national  standards for certain types of electronic health  information
transactions  and the  data  elements  used in such  transactions  and to  adopt
standards to ensure the integrity and confidentiality of health information. The
Secretary has recently issued proposed standards regarding four of the five sets
of  standards  that are  ultimately  expected.  IDX  believes  that the proposed
standards issued to date would not materially affect the business of the Company
if adopted as proposed. IDX cannot predict the potential impact of the standards
that have not yet been  proposed  or any other  standards  that might be finally
adopted instead of the proposed  standards.  As required by HIPAA, the Secretary
submitted  recommendations  to Congress for  legislation to protect  privacy and
confidentiality of personal health  information on September 11, 1997.  Congress
failed to enact legislation  concerning privacy and  confidentiality of personal
health  information by August 21,1999 as required by HIPAA.  Also as required by
HIPAA, the Secretary subsequently proposed such protections by regulation, which
have not yet become final.  Congress may yet adopt  legislation that may change,
override,  conflict with or preempt regulations.  The creation and dissemination
of medical  record  information is also  frequently  proposed and debated at the
state level. Such legislation,  if enacted, could require patient consent before
even   non-individually-identifiable   (e.g.,   coded  or   anonymous)   patient
information may be shared with third parties and could also require that holders
or users of such information  implement specified security measures.  These laws
or regulations, when adopted, could restrict the ability of customers to obtain,
use or disseminate patient  information.  This could adversely affect demand for
the products of the Company.

FDA  Regulation.  Unless a product is exempted  from  premarket  submission  and
clearance,  FDA approval or clearance of the  Company's  products  that meet the
definition of a medical device under the Federal Food Drug and Cosmetic Act (FDC
Act), is required before the products may be marketed in the United States.  FDA
has a draft policy for the  regulation of computer  software  products that meet
the  definition of a medical  device,  and has indicated  that it may modify its
draft policy or create a new policy.  Although it is not possible to  anticipate
the final content of FDA's policy with regard to computer software,  IDX expects
that,  whether  or not the  draft is  finalized  or  changed,  FDA  will  become
increasingly  active  in  regulating  computer  software  intended  for  use  in
healthcare settings.  FDA can impose extensive  requirements governing premarket
and   postmarket   activities,   including   product  design   development   and
manufacturing  quality assurance controls,  clinical  investigations,  marketing
clearance or approval,  and  labeling and  promotion.  There can be no assurance
that the company will be able to comply with any requirements or guidelines that
the FDA may issue.

                                    Page 16
<PAGE>

FDA already actively regulates  computer software used to capture,  communicate,
and store  images and  information  used in  medical  diagnosis  and  treatment;
depending on the intended use and technological  characteristics of the product,
it may require  clearance  under section  510(k) of the FDC Act before it may be
marketed.  In order to obtain  clearance  for  marketing,  a  manufacturer  must
demonstrate  substantial  equivalence to similar  legally  marketed  products by
submitting  a premarket  notification  (510(k))  to the agency.  FDA may require
additional data to support a substantial equivalence determination, and there is
no assurance FDA will find a device substantially  equivalent. If FDA finds that
a device is not  substantially  equivalent,  the manufacturer may ask the FDA to
make a  risk-based  classification  to place the  device in Class I or Class II.
However,  if a timely request for risk-based  classification  is not made, or if
FDA  determines  that a  Class  III  designation  is  appropriate,  an  approved
premarket  approval  application (PMA) will be required before the device may be
marketed.

The PMA approval process is lengthy,  expensive,  and typically requires,  among
other things,  extensive  data from  preclinical  testing and a  well-controlled
clinical trial or trials that demonstrates a reasonable  assurance of safety and
effectiveness. Clinical trials can take extended periods of time to complete. In
addition,  if FDA requires an approved  Investigational  Device  Exemption (IDE)
before clinical trials may commence,  there is no guarantee that the agency will
approve the IDE, and an IDE approval process could result in significant  delay.
There is no assurance that review will result in timely or any PMA approval, and
there may be  significant  conditions  on  approval,  including  limitations  on
labeling and  advertising  claims and the  imposition  of  post-market  testing,
tracking, or surveillance requirements.

Whether or not a product is required to be approved or cleared before marketing,
continuing compliance with strict FDA requirements concerning good manufacturing
practices,  enforced by periodic inspections, and medical device reporting (MDR)
regulations,  among other  requirements,  will be required.  The MDR regulations
require  that  reports  be  submitted  to FDA to report  device-related  deaths,
serious  injuries,  and  malfunctions the recurrence of which would likely cause
serious  injury or death.  MDRs can result in agency action such as  inspection,
recalls, and patient/physician notifications, and are often the basis for agency
enforcement actions.  Because MDRs are publicly available,  they can also become
the basis for private tort suits, including class actions.

If a manufacturer makes a change to a device cleared for marketing under section
510(k)  that is a major  change  in  intended  use,  or is a change  to  design,
material,  composition,  energy source, or manufacture that could  significantly
affect the safety and effectiveness of the marketed device, a new 510(k) will be
required  before the modified  device may be  marketed.  Changes to approved PMA
devices that affect safety and effectiveness  require supplemental PMA approvals
before the modified PMA device may be marketed, except for manufacturing changes
that affect safety or effectiveness, which may be deemed approved after a 30-day
notice  unless the FDA requests a  supplement.  There is no guarantee  that such
additional  clearances or approvals will be granted. In addition,  the nature of
marketing  claims that the Company will be permitted to make in the labeling and
advertising  of its  products  will be  limited  to  those  specified  in an FDA
clearance or approval,  and claims  exceeding those that are cleared or approved
will  constitute  violation  of the  Act.  Violations  of the Act or  regulatory
requirements  at any time during the product  development  process,  approval or
clearance  process,  or  after  clearance  or  approval  may  result  in  agency
enforcement  actions,  including  voluntary or mandatory  recall,  suspension or
withdrawal  of  marketing  clearance or  approval,  seizure of products,  fines,
injunctions and/or civil or criminal penalties.

The Company's  advertising of its products will also be subject to regulation by
the Federal  Trade  Commission  (FTC) under the FTC Act.  The FTC Act  prohibits
unfair  methods of  competition  and unfair or  deceptive  acts in or  affecting
commerce.  Violations of the FTC Act, such as failure to have substantiation for
product claims,  would subject the Company to a variety of enforcement  actions,
including  compulsory  process,  cease and desist orders,  and injunctions.  FTC
enforcement  can  result in orders  requiring,  among  other  things,  limits on
advertising,   corrective   advertising,   consumer  redress,  and  recision  of
contracts.  Violations of FTC enforcement orders can result in substantial fines
or other penalties.

                                    Page 17
<PAGE>

EMPLOYEES

At  December  31,  1999,  IDX  and its  subsidiaries  employed  3,586  full-time
employees,  of which 1,386 were  employed in its EDiX  business  segment and 112
were employed in its ChannelHealth business segment. No employees are covered by
any collective bargaining agreements.

ITEM 2.  PROPERTIES

The Company's  principal  corporate  offices are located at 1400 Shelburne Road,
South  Burlington,  Vermont 05403.  The Company  maintains  sales,  research and
support  facilities in South Burlington,  Vermont;  Boston,  Massachusetts;  and
Seattle, Washington. The Company maintains regional sales and support offices in
the  greater  metropolitan  areas of  Arlington,  Virginia;  Chicago,  Illinois;
Dallas, Texas; San Francisco, California; Deerfield Beach, Florida; and Atlanta,
Georgia. The Company owns or has contracted to purchase all of its facilities in
South Burlington,  Vermont,  consisting of approximately  181,500 square feet of
office  space.  The Company  leases all of its other  facilities  which,  in the
aggregate,  constitute  approximately  563,000 square feet of office space.  The
Company's  leases expire  between March 31, 1999 and April 12, 2014. The Company
believes  that its  facilities  are  adequate  for its  current  needs  and that
suitable  additional  space  will be  available  as  required.  The  Company  is
currently  negotiating  to acquire the land and  buildings at Shelburne  Road in
South Burlington,  Vermont, from BDP Realty Associates, a related party included
in the consolidated  financial  statements, consisting of approximately  112,000
square feet of office  space and has  commenced  construction  of  approximately
90,000 additional square feet of office space at that location.

ITEM 3.   LEGAL PROCEEDINGS

On  February 2, 2000,  the Company  entered  into a license  agreement  with the
plaintiff  resolving the litigation  entitled Allcare Health Management  System,
Inc. v. Cerner  Corporation,  et al., filed in the United States  District Court
for the  Northern  District  of Texas  Fort  Worth  Division.  The  terms of the
agreement  will have no material  adverse  effect on the financial  condition or
results of operations of the Company.

The Company is from time to time  involved in routine  litigation  incidental to
the conduct of its business. The Company believes that no such currently pending
routine  litigation to which it is party will have a material  adverse effect on
its financial condition or results of operations.

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

None.

                                    Page 18

<PAGE>



                      EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth: (i) the name and age of each current executive officer
of the Company;  (ii) the position(s)  currently held by each named person;  and
(iii) the principal  occupations held by each person named for at least the past
five years.

  Executive Officer           Age       Position
  -----------------           ---       --------
  Richard E. Tarrant          57        Chief Executive Officer and Director

  James H. Crook, Jr.         43        President and Chief Operating Officer

  Robert W. Baker, Jr., Esq.  51        Vice President, General Counsel, and
                                        Corporate Secretary

  Gene H. Barduson            61        Vice President, EDiX Business Unit

  Jeffrey M. Blanchard        43        Vice President, Enterprise Solutions
                                        Division

  Vicki S. Blanchard          46        Vice President, Integrated Solutions
                                        Division

  Robert F. Galin             55        Vice President Sales

  Stephen C.  Gorman          34        Vice President, Systems Division

  John A. Kane                47        Vice President, Finance and
                                        Administration, Chief Financial Officer,
                                        and Treasurer

  Walt N. Marti               44        Vice President, Radiology and Imaging
                                        Solutions Division

Mr. Tarrant co-founded the Company in 1969 and served as the President from June
1969 to February 1999. He has served as Chief  Executive  Officer of the Company
and as a Director  since 1969.  Mr.  Tarrant  served as a member of the Board of
Trustees for the University Health Center (Vermont), an academic medical center,
from July 1988 to December 1994 and as Chairman of the Board of Trustees for the
University Health Center (Vermont) from 1992 to 1994.

Mr. Crook, who joined the Company in April 1981, served as Vice President of the
Company from June 1984 to February  1999. He served as a Director of the Company
from July 1984 to June 1995.  He has  served as  President  and Chief  Operating
Officer since February 1999.

Mr. Baker joined the Company as General  Counsel and  Secretary in July 1989. He
has served as Vice President since April 1996.

Mr. Barduson has served as Vice President of the Company since December 1999. He
also has served as Vice  President and General  Manager of EDiX  Corporation,  a
subsidiary  of the Company,  since April 1999 and served as President  and Chief
Executive  Officer of EDiX  Corporation  from  September  1997 until April 1999.
Prior to joining EDiX  Corporation,  Mr.  Barduson  served as Vice  President of
Western  Operations and National  Health  Services for Shared  Medical  Systems,
Inc., a publicly traded health care information services company.

Mr.  Blanchard,  who  joined  the  Company  in August  1987,  has served as Vice
President,  Client Services since March 1995.  Prior to that time, Mr. Blanchard
served the Company in various  capacities,  including most recently as Director,
Customer Support from November 1992 to March 1995.

Ms.  Blanchard,  who joined the Company as a customer support  representative in
April 1983,  has served as Vice  President  since December 1999 and is currently
the General Manager of Integrated  Solutions  Division.  Prior to that time, Ms.
Blanchard  served  the  Company  in  various  capacities,  including  Manager of
Development,  Manager of Product  Implementation,  Manager of Customer  Support,
Director of Merger  Integration,  National Manager of Installations  and Eastern
Regional Manager of Customer Support.

                                    Page 19
<PAGE>

Mr. Galin has served as Vice  President,  Sales since August 1992.  He served as
Director of Sales from April 1982 to August 1992.

Mr. Gorman,  who joined the Company as a sales  representative in June 1991, has
served as Vice President  since December 1999 and has served as General  Manager
of the Systems  Division  since May 1999.  Prior to that time, Mr. Gorman served
the Company in various capacities, including Southeast Region Operations Manager
from 1995 to 1997, and National Operations Manager from 1997 to 1999.

Mr. Kane has served as the Vice  President,  Finance and  Administration,  Chief
Financial  Officer and Treasurer  since joining the Company in October 1984. Mr.
Kane is a C.P.A.

Mr. Marti, who joined the Company as a sales  representative  in March 1989, has
served as Vice President  since December 1999 and has served as General  Manager
of Radiology Imaging Solutions Division since February 1999. Prior to that time,
Mr. Marti served the Company in various  capacities,  including Sales Manager of
Systems Division, Regional Manager of Systems Division and Directors of Sales of
Radiology Imaging Solutions Division.

Each officer serves at the discretion of the Company's Board of Directors. There
are no family relationship among the named officers.

                                    Page 20
<PAGE>

PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a) MARKET  PRICE OF AND  DIVIDENDS  ON COMMON  STOCK AND RELATED  MATTERS.  The
Common  Stock of IDX is traded on the Nasdaq  National  Market  under the symbol
"IDXC." The  following  table sets forth for the periods  indicated the high and
low sales  prices  per  share of the  Common  Stock as  reported  by the  Nasdaq
National Market.

        Quarter/Year                            High                Low
--------------------------------------------------------------------------------
                                                           1998

         First Quarter 1998                     $ 47.50             $ 33.25
         Second Quarter 1998                    $ 49.56             $ 39.50
         Third Quarter 1998                     $ 55.75             $ 41.75
         Fourth Quarter 1998                    $ 52.25             $ 36.38
                                                           1999

         First Quarter 1999.                    $ 46.63             $ 13.75
         Second Quarter 1999                    $ 28.13             $ 12.44
         Third Quarter 1999                     $ 24.44             $ 18.13
         Fourth Quarter 1999                    $ 32.75             $ 15.63

On March 15, 2000, the Company had  approximately  480  stockholders  of record.
(This  number  does  not  include  stockholders  for whom  shares  are held in a
"nominee"  or  "street"  name.)  On March 15,  2000,  the  closing  price of the
Company's Common Stock on the Nasdaq National Market was $29.75.

The  Company   anticipates  that  all  future  earnings  will  be  retained  for
development  of its  business and will not be  distributed  to  stockholders  as
dividends.  Restrictions  or  limitations  on the  payment of  dividends  may be
imposed  in the  future  under  the terms of credit  agreements  or under  other
contractual provisions. In the absence of such restrictions or limitations,  the
payment of any dividends  will be at the  discretion  of the Company's  Board of
Directors.

(b) RECENT SALES OF UNREGISTERED SECURITIES. On May 17, 1999, the Company issued
a total of 1,603  shares of Common  Stock to the four  outside  directors of the
Company in  consideration  of one  year's  past  service  as a  director  of the
Company.  The shares of Common Stock issued in these  transactions  were offered
and sold in reliance upon the exemption from registration  under Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act"), relating to sales
by an issuer not involving any public  offering.  All such securities are deemed
restricted  securities  for  purposes  of the  Securities  Act.  There  were  no
underwriters involved in such transactions.

                                    Page 21
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA

                              Financial Highlights

                     Summary of Consolidated Financial Data

                                        Year Ended December 31,
                           -----------------------------------------------------
                            1995       1996       1997       1998      1999
                           ----------------------------------------------------
                                    (in thousands, except per share data)
Statements of Operations
  Data:
Revenues                    $ 181,142  $ 215,116  $ 272,007 $ 350,187 $ 340,999
Operating Income (Loss)        15,622     14,863     (4,890)   34,994   (12,649)
Net Income (Loss)              16,939      8,210     (7,982)   16,834    (7,944)
Net Income (Loss) Per
  Share                                $     .64  $   (0.30) $   0.60 $   (0.29)
Pro Forma Net Income           13,915
Pro Forma Net Income Per
  Share                     $    0.63

Balance Sheet Data:
Cash and Investments        $ 106,581   $ 113,885 $ 116,567  $125,132 $  68,359
Working Capital               112,091     130,116   140,015   169,671   136,732
Total Assets                  175,316     208,145   245,459   289,223   271,147
Long-term Debt, less current
  portion                       3,726       4,266     4,876     2,261         -
Total Stockholders' Equity  $ 133,739   $ 159,171 $ 177,855  $210,211 $ 206,514

The consolidated financial data set forth above has been restated to include the
results  of  operations  and  accounts  of PHAMIS for all  periods  prior to its
acquisition  by IDX on July 10, 1997,  and for EDiX for all periods prior to its
acquisition  on April  23,  1999.  Both of  these  acquisitions,  as more  fully
described  in  Note  2 to  the  Consolidated  Financial  Statements,  have  been
accounted for as poolings of interests.

Per share amounts  represent diluted net income (loss) per share.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL

Revenues  declined  2.6% to $341.0  million in 1999 from 1998 revenues of $350.2
million. Systems sales declined 30.2% in 1999 while maintenance and service fees
grew  26.1% as  compared  to the prior  year.  In  February  2000,  the  Company
announced  that,  during  the first  quarter  of 2000,  it  expected  a net loss
excluding  one time charges  related to the  impairment  of goodwill  related to
ChannelHealth of approximately ($0.11)-($0.19) per share in the first quarter of
2000.

Operating  income  decreased  from $35.0 million in 1998 to an operating loss of
($12.6)  million in 1999,  a  decrease  of $47.6  million  or 136.1%.  Excluding
expenses  related to the write-off of acquired  research and development in 1998
and merger and  related  costs in 1999,  operating  income  declined  from $38.2
million in 1998 to an  operating  loss of ($8.6)  million in 1999, a decrease of
$46.8 million or 122.5%.  Net income (loss)  decreased  from net income of $16.8
million  in 1998 to a net loss of ($7.9)  million in 1999,  a decrease  of $24.8
million or 147.2%.  Excluding the write-off of acquired research and development
in 1998, and merger and related costs as well as loss on impairment of assets in
1999,  net income (loss)  declined from net income of $19.4 million in 1998 to a
net loss of ($3.9)  million in 1999, a decrease of $23.3 million or 120.0%.  The
decrease in net income and income per share is  primarily  due to a  substantial
decrease in sales of the  Company's  higher  margin  software  systems.  Overall
revenue  decreased 2.6% from 1998, despite a system sales decrease of 30.2%. The

                                    Page 22
<PAGE>

majority of the  decrease in system  sales  revenue was offset by an increase in
revenues  from  maintenance  and service  fees that provide a lower gross profit
margin.  The  decrease  in gross  profit due to the change in revenue  mix had a
significant negative impact on earnings (loss) per share. In addition, increased
costs related to Internet initiatives,  product development and strengthening of
the Company's infrastructure contributed to the net loss.

During  1999,  certain of the  Company's  customers  delayed  making  purchasing
decisions with respect to certain of the Company's software systems comprised of
multiple products resulting in longer sales cycles for such systems.  Management
believes  such  delays  are  due to a  number  of  factors,  including  customer
organizational changes, government approvals,  product complexity,  competition,
and customer preoccupation with internal Year 2000 issues. In February 2000, the
Company  announced  that  weakness  in system  sales  experienced  in the fourth
quarter of 1999,  due in part to customer focus on final  preparations  for Year
2000,  was  expected  to continue  through  the first half of 2000.  The Company
expects that the healthcare  industry's Year 2000 focus will cause reductions in
spending  for new systems and  services in the first half of 2000.  Accordingly,
the Company expects that it will experience Year 2000 related  postponements  in
sales of software  and related  services,  professional  services,  and hardware
during the first half of 2000.

On April 23, 1999, the Company acquired EDiX Corporation ("EDiX"), a provider of
medical  transcription  services  which  was  accounted  for  as  a  pooling  of
interests.  In  accordance  with  the  merger  agreement,   the  Company  issued
approximately  one  million  shares of its common  stock, which  amounted  to an
acquisition  value of $16.7 million based on the closing stock price on the date
of the merger, plus the assumption of EDiX debt of  approximately  $14.0 million
that subsequently has been paid.

YEAR ENDED DECEMBER 31, 1999 AND 1998

REVENUES.  The Company's total revenues decreased to $341.0 million in 1999 from
$350.2  million in 1998,  a decrease  of $9.2  million  or 2.6%.  Revenues  from
systems sales decreased to $124.6 million in 1999 (36.5% of total revenues) from
$178.6 million in 1998 (51.0% of total revenues), a decrease of $53.9 million or
30.2%.  This  decrease  was  primarily  due  to a  decrease  in  new  sales  and
installations of certain IDX systems.

Revenues from  maintenance  and service fees increased to $216.4 million in 1999
(63.5% of total revenues) from $171.6 million in 1998 (49.0% of total revenues),
an  increase  of $44.8  million  or 26.1%.  Approximately  $18.4  million of the
increase  was due to an increase  in EDiX's  medical  transcription  service fee
revenue  combined  with a $14.3  million  increase  due to  maintenance  revenue
resulting from price increases and annualization of 1998 growth in the Company's
IDX systems installed client base.  Professional and technical services revenues
increased to $31.3 million in 1999 (9.2% of total  revenues)  from $28.8 million
in 1998 (8.2% of total  revenues),  an increase of $2.5  million,  or 8.7%.  The
Company's   Internet  services  and  content  business   segment,   operated  by
Channelhealth   Incorporated,   a  majority  owned  subsidiary  of  the  Company
incorporated  in  September  1999,  contributed  approximately  $1.5  million in
service revenue,  primarily from backlog revenue from IDX contracts  transferred
to Channelhealth Incorporated.

COST OF SALES.  The cost of sales and services  increased  to $216.6  million in
1999 from $196.5  million in 1998,  an increase of $20.1  million or 10.2%.  The
increase in cost of sales and services  resulted from growth in client  services
expenses, including maintenance,  installation,  and consulting staff. The gross
profit  margin on systems  sales and  services  decreased  to 36.5% in 1999 from
43.9% in 1998.  The decrease in gross profit margin as a percentage of sales was
due to the decrease in software license  revenues,  which provide a higher gross
profit margin,  offset by an increase in maintenance  and service  revenue which
provide a lower gross profit margin.  IDX's core business,  information  systems
and services, gross profit margin declined from 49.3% in 1998 to 40% in 1999 due
to the effect of the revenue mix  described  above.  The gross profit margin for
the  Company's  medical  dictation and  transcription  business  segment  (EDiX)
increased as a percentage  of sales from (17.2%) in 1998 to 14.4% in 1999 due to
an increase  in  utilization  of a new higher  margin  transcription  processing
system as  compared  to the prior  year,  combined  with other  efficiencies  in
editing and telecommunications.

                                    Page 23
<PAGE>

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative expenses increased to $79.9 million in 1999 from $68.2 million in
1998, an increase of $11.6 million or 17.1%.  As a percentage of total revenues,
selling,  general and  administrative  expenses  increased to 23.4% in 1999 from
19.5% in 1998.  Approximately  $5  million  of this  increase  is related to the
Internet  busines  setment  (ChannelHealth).  The  remaining  increase  resulted
primarily  from IDX's  investment in internet  strategies  of $1.4 million,  the
absorption of certain  administrative  functions provided by IDX for EDiX and an
increase in the Company's  sales,  marketing and  administrative  staff.  EDiX's
selling,  general and administrative  expenses decreased $0.6 million during the
year ended  December  31,  1999 as  compared  to the same  period in 1998.  This
decrease  is a  result  of the  merger  due to the  elimination  of  overlapping
services in EDiX.

RESEARCH AND DEVELOPMENT.  Research and development  expenses increased to $53.2
million  in 1999 from $47.3  million in 1998,  an  increase  of $5.9  million or
12.5%.  As a percentage of total  revenues,  research and  development  expenses
increased  to 15.6% in 1999  from  13.5% in 1998.  The  increase  was due to the
hiring of additional  staff to support the  development  of additional  products
including IDXsite and Web technology applications,  and for the costs of efforts
to address Year 2000 issues.  Of this  increase,  approximately  $3.7 million is
related to research and development  costs in the Internet  services and content
business sement  (ChannelHealth).  Research and development costs in the medical
dictation  and  transcription  business  segement  (EDiX)  increased  from  $700
thousand in 1998 to $1.0 million in 1999.

As  described  in Note 1 to the  Notes  to  Consolidated  Financial  Statements,
software   development  costs  incurred   subsequent  to  the  establishment  of
technological  feasibility  until  general  release of the related  products are
capitalized.  Historically costs incurred during beta site testing have not been
material.  Although the Company  presently  expects  costs to complete beta site
testing in the future to be  insignificant,  as the Company develops products to
operate using other technologies as well as more comprehensive clinical systems,
the time and effort required to complete beta site testing may be  significantly
more extensive. Consequently,  capitalized software development costs may become
material in future reporting periods.

MERGER  AND  RELATED  COSTS.  During the second  quarter  of 1999,  the  Company
recorded charges of $4.0 million related to the acquisition of EDiX Corporation.
The charges were comprised of transaction costs of $2.4 million,  write-offs and
adjustments for long-lived assets, principally noncompatible computer equipment,
of $1.4  million and other merger  related  costs of $0.2  million,  principally
related to integration  costs incurred  during the period and the termination of
leases and other contractual obligations. At December 31, 1999, accounts payable
and accrued expenses  included $1.3 million related to terminations of lease and
other contractual obligations.

WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. On February 23, 1998,
the Company  recorded  charges of $3.2  million  related to the  acquisition  of
contract management system technology from Trego Systems,  Inc. for cash of $4.0
million.  The  acquisition  was  accounted  for under the purchase  method.  The
charges were expensed as in-process  research and development in connection with
the Company's development of a healthcare contract management system.

INTEREST AND OTHER INCOME (EXPENSE).  Interest income decreased to approximately
$4.1  million  during 1999  compared to $6.4 million for the same period in 1998
due to a decrease in average  invested  balances during 1999.  Interest  expense
decreased to approximately $900,000 during 1999 compared to $1.3 million for the
same period in the prior year.  The  decrease in interest  expense is due to the
payment of all outstanding  EDiX debt after the merger during the second quarter
of 1999.

                                    Page 24
<PAGE>

LOSS ON  INVESTMENT  IMPAIRMENT.  Other  expense  included  the  write-off of an
investment  of $1.6  million  in the  quarter  ended  March 31,  1999 due to the
investees  inability  to raise  additional  equity and  decision to dissolve the
business.

INCOME TAXES.  Income taxes for the year ended  December 31, 1999 were benefited
at approximately 35%, which reflects a lower rate than the Company's  historical
statutory rate of 40%. This rate is due to a portion of the charges  incurred in
the second  quarter  ended June 30,  1999  related  to the  acquisition  of EDiX
Corporation,  which are non-deductible for income tax purposes.  Income taxes in
1998 were provided at 56.8%.  The higher rate in 1998 is due to the inclusion in
the financial statements, of the net loss of EDiX Corporation,  for which no tax
benefit was recognized.  In addition,  a portion of the charges  incurred in the
first quarter ended March 31, 1998 related to the  acquisition of Trego Systems,
Inc. were  non-deductible  for income tax purposes.  The Company  anticipates an
effective tax rate of approximately 38% on continuing  operations for IDX's core
business  and for  ChannelHealth  for the year ending  December  31,  2000.  The
Company anticipates that EDiX's effective tax rate in 2000 will be less than the
statutory  rate due to the use of  operating  loss  carry  forwards,  subject to
annual limitation.

NET INCOME.  Net income (loss) decreased ($24.8) million to a net loss of ($7.9)
million in 1999  compared  to net income of $16.8  million in 1998.  In February
2000, the Company  announced that, during the first quarter of 2000, it expected
a net loss  excluding  one time charges  related to the  impairment  of goodwill
related to ChannelHealth of approximately ($0.11)-($0.19) per share in the first
quarter of 2000.

YEAR ENDED DECEMBER 31, 1998 AND 1997.

REVENUES.  The Company's total revenues increased to $350.2 million in 1998 from
$272.0  million in 1997,  an increase of $78.2  million or 28.7%.  Revenues from
systems sales increased to $178.6 million in 1998 (51.0% of total revenues) from
$134.5 million in 1997 (49.4% of total  revenues),  an increase of $44.1 million
or 32.8%.  The increase was  primarily  due to  installations  of certain of the
Company's  systems.  Revenues  from  maintenance  and service fees  increased to
$171.6  million in 1998 (49.0% of total  revenues)  from $137.5  million in 1997
(50.6% of total revenues), an increase of $34.1 million or 24.8%.  Approximately
$12.8  million  of the  increase  was  due  to  additional  maintenance  revenue
resulting  from the  continued  growth in the Company's  installed  client base.
EDiX's  revenues  increased to $28.5 million in 1998 from $20.6 million in 1997,
an  increase  of $7.9  million or 38.5%.  Professional  and  technical  services
revenues  increased to $28.8 million in 1998 (8.9% of total revenues) from $20.4
million in 1997 (8.1% of total  revenues),  an increase of $8.4 million or 41.2%
as a result of the Company's increased marketing efforts in that area.

COST OF SALES.  The cost of sales and services  increased  to $196.5  million in
1998 from $154.6  million in 1997,  an increase of $41.9  million or 27.1%.  The
gross profit  margin on systems  sales and  services  increased to 43.9% in 1998
from 43.2% in 1997. The increase in gross profit margin was due primarily to the
increase of additional  license revenues in the  installations of certain of the
Company's  products  from its  IDXtend,  Radiology,  GPMS/IDXsite  and  LastWord
systems,  as well as growth in service  revenues.  EDiX's  gross  profit  margin
decreased to ($4.9) million in 1998 from ($3.6)  million in 1997,  primarily due
to increased costs due to introduction of (TWS), a new transcription  processing
system  which was not  fully  utilized  during  the year.  EDiX's  gross  margin
expressed as a percentage  of sales  remained  consistent  at (17.2%) in 1998 as
compared to (17.4%) in 1997.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative expenses increased to $68.2 million in 1998 from $62.6 million in
1997, an increase of $5.7 million or 9.0%.  As a percentage  of total  revenues,
selling,  general and  administrative  expenses  decreased to 19.5% in 1998 from
23.0% in 1997. The additional expenses incurred in 1998 were primarily due to an
increase in the Company's sales and marketing staff.  EDiX's selling general and
administrative  expenses decreased to $6.5 million in 1998 from $10.8 million in
1997,  a  decrease  of  $4.3  million  or  39.8%.  This  decrease  is due to the
write-down of goodwill recorded in 1997.

                                    Page 25
<PAGE>

RESEARCH AND DEVELOPMENT.  Research and development  expenses increased to $47.3
million  in 1998 from $37.4  million in 1997,  an  increase  of $9.9  million or
26.4%.  As a percentage of total  revenues,  research and  development  expenses
remained  consistent at 13.5% in 1998 and 13.7% in 1997. The increase was due to
the hiring of additional staff to support the development of additional products
and for the costs to address Year 2000 issues for the Company.  EDiX's  research
and development expenses decreased to $700 thousand in 1998 from $1.1 million in
1997, a decrease of $368 thousand or 34.0%.

MERGER AND RELATED COSTS. During the third quarter of 1997, the Company recorded
charges of $20.0  million  related to the merger with  PHAMIS.  The charges were
comprised of transaction  costs of $5.1 million,  write-offs and  adjustments of
$7.4 million of long-lived assets,  principally capitalized software development
costs and equipment, attributable to the elimination of overlapping and obsolete
products and operations, employee termination and related costs of $2.7 million,
and  other  merger  related  costs  of  $4.8  million,  principally  related  to
integration  costs  incurred  during the year and the  termination of leases and
other  contractual  obligations.  At December  31,  1997,  accounts  payable and
accrued  expenses  included  accrued  costs  of  $3.1  million  related  to  the
termination of employees, leases and other contractual obligations substantially
all of which were paid during 1998.

WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. On February 26, 1997,
the Company  recorded  charges of $2.3  million  related to the  acquisition  of
certain data model technology from Medaphis  Healthcare  Information  Technology
Company for cash of $2.5 million.  The  acquisition  was accounted for under the
purchase  method.   The  charges  were  expensed  as  in-process   research  and
development in connection  with the Company's  development of a healthcare  data
model.

NET INCOME.  Net income  (loss)  increased  $24.8 million to net income of $16.8
million in 1998 as compared to a net loss of ($8.0)  million in 1997. Net income
(loss) as a percentage of net sales was 4.8% in 1998 compared to (2.9%) in 1997.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception in 1969, the Company  principally has funded its operations,
working capital needs and capital  expenditures  primarily from operations.  The
proceeds from its initial public  offering were (i)  distributed to stockholders
of the Company in connection with the Company's prior status as an S corporation
under the Internal  Revenue Code of 1986, as amended,  and (ii) used for general
corporate  purposes,  including working capital purposes as needed and strategic
transactions, including acquisitions of businesses, products and technologies.

Cash flows from  operations are  principally  comprised of net income (loss) and
depreciation  and are  primarily  affected  by the net  effect of the  change in
accounts receivable, accounts payable and accrued expenses. Due to the nature of
the  Company's  business,  accounts  receivable,  deferred  revenue and accounts
payable  fluctuate  considerably  due to, among other things,  the length of the
sales cycle and  installation  efforts which are dependent  upon the size of the
transaction,  the changing business plans of the customer,  the effectiveness of
customers'  management  and  general  economic  conditions.  In  1999,  accounts
receivable  from customers have been collected on average within 119 days.  This
represents  an  increase  of 13  days  in  terms  of  average  days  to  collect
receivables from customers.  The increase is partially  attributable to unbilled
receivables  related  to  contracts  accounted  for  using  long  term  contract
accounting combined with a lengthening of customer payment patterns.

Cash flows related to investing activities have historically been related to the
purchase of  computer  and office  equipment,  leasehold  improvements,  and the
purchase and sale of investment grade marketable  securities and in 1999 include
the  purchase  of  two  buildings  located  in  South  Burlington,  Vermont  for
additional  office  space.  The Company  expects  these  activities to continue.
Investing  activities  may also include  purchases of interests in, loans to and
acquisitions of complementary products,  technologies and businesses.  There can
be no assurance that the Company will be able to successfully  complete any such
purchases or acquisitions in the future.

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<PAGE>

Cash flows from financing activities  historically relate to purchases of common
stock through the exercise of employee stock options and in connection  with the
employee  stock  purchase  plan.  During  1999,  all  outstanding  debt  of EDiX
Corporation  was paid.  During 1998 other  financing  activities  related to the
recapitalization of the real estate affiliate from debt to equity.

Cash, cash equivalents and marketable securities at December 31, 1999 were $68.4
million,  a decrease of $56.8 million from  December 31, 1998.  The decrease was
due to equipment and leasehold  improvements  of $28.0 million,  payment of EDiX
Corporation's  debt and other  liabilities of approximately  $14.0 million,  two
building purchases in South Burlington, Vt., for approximately $7.5 million, the
purchase of an 80% interest in  ChannelHealth  for $6.5 million and cash used by
operating  activities  offset  by  proceeds  related  to the  exercise  of stock
options.  The Company has a revolving  line of credit with a bank  allowing  the
Company to borrow up to $5.0  million  bearing  interest at the prime rate which
will expire on June 30, 2000.  There were no  borrowings as of December 31, 1999
or 1998.

The Company expects that its requirements for office facilities and other office
equipment will grow as staffing  requirements  dictate.  The Company's operating
lease  commitments  consist  primarily  of  office  leasing  for  the  Company's
operating facilities. The Company plans to continue increasing the number of its
professional  staff during 2000 to meet anticipated  sales volume and to support
research and development  efforts.  To the extent necessary to support increases
in staffing, the Company intends to obtain additional office space.

The Company is currently  negotiating to acquire the Company's  headquarters  in
South  Burlington,  Vermont for  approximately  $15 million  from BDP Realty,  a
related  entity  which  is  included  in the  Company's  consolidated  financial
statements.  The Company  started  construction on an expansion of its corporate
headquarters  facility in South  Burlington,  Vermont,  in November 1999, and is
considering  various options for financing  including a construction  loan, sale
lease-back arrangement or funding from operations.  The Company anticipates that
it will spend  approximately $16 million on construction to expand its Corporate
Headquarters facility.  From time to time, based on the Company's  requirements,
the Company may consider other purchases of additional land or the  construction
of additional office space. Currently, the Company has made no material lease or
purchase  commitments  other than the  purchase  of the  Company's  headquarters
mentioned above.

The Company believes that current  operating funds will be sufficient to finance
its operating  requirements  at least through the next twelve  months.  To date,
inflation has not had a material impact on the Company's revenues or income.

NEW ACCOUNTING STANDARDS

In October 1997, the Accounting  Standards  Executive  Committee of the American
Institute (ACSEC) of Certified Public  Accountants  issued Statement of Position
("SOP") No. 97-2,  "Software Revenue  Recognition," which the Company adopted on
January 1, 1998. SOP 98-4, "Deferral of the Effective Date of a Provision of SOP
97-2,  Software  Revenue  Recognition"  deferred the  effective  date of certain
aspects of SOP 97-2.  These  statements  supersede  SOP 91-1,  Software  Revenue
Recognition,  and provide  guidance on applying  generally  accepted  accounting
principles  in  recognizing  revenue on software  transactions  entered  into in
fiscal years  beginning  after  December 15, 1997.  The adoption of SOP 97-2, as
amended by SOP 98-4,  did not have a material  impact on the Company's  revenues
and results of operations.

The Company  periodically  enters into certain long-term  contracts to which SOP
No.  81-1   "Accounting  for  Performance  of   Construction-Type   and  Certain
Production-Type  Contracts"  is  applied.  For  these  agreements,   revenue  is
recognized  under a percentage of completion  basis as  appropriate  measures of
completion for contract are achieved.

                                    Page 27
<PAGE>

In June 1997,  the  Financial  Accounting  Standards  Board issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. The Company
adopted  SFAS No. 131  effective  with the fiscal year ended  December 31, 1998.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial  statements and requires  selected  information for
those  segments  to  be  presented  in  interim   financial  reports  issued  to
stockholders.  SFAS No. 131 also establishes  standards for related  disclosures
about major  customers,  products and services and geographic  areas.  Operating
segments are  identified as components  of an  enterprise  about which  separate
discrete  financial  information  is  available  for  evaluation  by  the  chief
operating  decision maker, or decision making group, in making  decisions how to
allocate resources and assess performance.  The Company views its operations and
manages  its  business  as three  operating  segments  categorized  as  follows:
information  systems and services,  Internet  services and content,  and medical
transcription services. Substantially all of the Company's operations are in the
United States.

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging  Activities" ("SFAS No. 133") as amended
by SFAS No. 137,  which  establishes  accounting  and  reporting  standards  for
derivative  instruments,  including derivative  instruments  embedded.  In other
contracts, (collectively referred to as derivatives) and for hedging activities.
SFAS No. 133 is  effective  for all fiscal  quarters of fiscal  years  beginning
after June 15, 2000. The Company is presently analyzing the impact, if any, that
the adoption of SFAS No. 133 will have on its financial  condition or results of
operations.

In December 1999. The Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101 "Revenue  Recognition in Financial  Statements."  The SAB
formalizes  positions the staff has  expressed in speeches and comment  letters.
SAB 101 is effective no later than the second fiscal  quarter of the fiscal year
beginning  after  December 15,  1999.  The Company is  presently  analyzing  the
impact,  if any,  that  the  adherence  to the SAB  will  have on its  financial
condition or results of operations.

BACKLOG

At December 31, 1999, the Company had total backlog of $340.6 million, including
$110.2 million  attributable to systems sales and $230.4 million attributable to
services.  Systems  sales  backlog  consists of fees due under signed  contracts
which have not yet been  recognized  as  revenues.  Service  backlog  represents
contracted software maintenance services,  consulting services, remote computing
service fees and medical  transcription  service fees for a period of 12 months.
At December 31, 1998, the Company had total backlog of $299.3 million, including
$129.0 million  attributable to systems sales and $170.3 million attributable to
services.  Of the total 1999 backlog of $340.6 million, the Company expects that
$40.9 million will not be fulfilled in the current fiscal year.


YEAR 2000

In prior years,  the Company  discussed  the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company  completed its remediation and
testing of its internal use systems  (both  information  technology  related and
non-information  technology  related)  and its products  (including  third party
products   included  in  its  products)  and  also  completed  and   implemented
contingency  planning.  As a result of those efforts, the Company experienced no
significant disruptions in its products (including third party products included
in its products),  internal use information technology systems, and internal use
non-information  technology  systems,  and the  Company  believes  all of  those
systems successfully  responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues,  either with its
products,  its internal systems,  or the products and services of third parties.
The Company expensed  approximately  $9.6 million during 1999 in connection with
remediating its systems.  The total remaining project costs,  approximately $2.1
million,  relate to staffing for Year 2000 issues pursuant to contingency  plans
and remediation  efforts for internal  systems and will be charged to expense as
incurred.  The Company will  continue to monitor its products  (including  third
party  products   included  in  its   products),   mission   critical   computer
applications, and those of its suppliers and vendors throughout the Year 2000 to
ensure that any latent Year 2000 matters that may arise are addressed promptly.

                                   Page 28
<PAGE>

FORWARD-LOOKING INFORMATION AND FACTORS AFFECTING FUTURE PERFORMANCE

This Annual Report on Form 10-K contains "forward-looking statements" as defined
in Section 21E of the Securities  and Exchange  Commission Act of 1934. For this
purpose,  any statements contained in this Annual Report that are not statements
of historical fact may be deemed to be forward-looking statements. Words such as
"believes,"  "anticipates,"  "plans,"  "expects," "will" and similar expressions
are  intended  to  identify  forward-looking  statements.  There are a number of
important  factors  that could cause the results of IDX Systems  Corporation  to
differ  materially  from those  indicated  by these  forward-looking  statements
including among others,  the factors set forth below. If any risk or uncertainty
identified in the following factors actually occurs,  IDX's business,  financial
condition and operating  results would likely suffer.  In that event, the market
price of IDX's common stock could  decline and you could lose all or part of the
money you paid to buy IDX's common stock.

The following  important factors affect IDX's business and operations  generally
or affect more than one segment of our business and operations:

IDX STOCK PRICES MAY CONTINUE TO BE VOLATILE.  IDX has experienced,  and expects
to continue to  experience  fluctuations  in its stock price due to a variety of
factors including:

-    delay in customers purchasing decisions due to a variety of factors such
     as consolidation, management changes and regulatory developments;
-    market prices of competitors;
-    announcements of technological innovations, including Internet delivery of
     information and use of alication service provider technology;
-    new product introductions by IDX or its competitors;
-    market conditions particularly in the computer software and Internet
     industries; and
-    healthcare reform measures and healthcare regulation.

These  fluctuations  have had a  significant  impact on the market  price of our
common stock,  and may have a  significant  impact on the future market price of
our common stock.

These fluctuations may affect operating results as follows:

-    ability to transact stock acquisitions; and
-    ability to retain and incent key employees.

ADVERSE FINANCIAL TRENDS INCLUDING DECLINING NET INCOME AND CASH FROM OPERATIONS
HAVE AND MAY CONTINUE.  Year over year net income and cash from  operations have
generally   declined   since  1995.  In  1999,  IDX  generated  a  net  loss  of
approximately  $7.9 million.  If these negative trends  continue,  IDX will have
difficulty financing future growth and funding operating initiatives,  including
future acquisitions.

IDX EXPECTS ITS QUARTERLY  OPERATING RESULTS TO FLUCTUATE AND ITS CUSTOMER SALES
AND INSTALLATION  REQUIREMENTS TO CHANGE.  IDX expects its quarterly  results of
operations to continue to fluctuate.  Because a significant  percentage of IDX's
expenses  are  relatively   fixed,  the  following  factors  could  cause  these
fluctuations:

-    delay in customers purchasing decisions due to a variety of factors such
     as consolidation and management changes;
-    delay in customers' purchasing decisions due to customers' year 2000
     problems;
-    the  volume  and  timing of systems  sales and  installations;
-    recognizing revenue at various points during the installation  process;
-    the timing of new product and service introductions and product upgrade
     releases;  and
-    the sales and implementation cycles of IDX's customers.

In light of the above,  IDX  believes  that its  results of  operations  for any
particular  quarter or fiscal year are not  necessarily  meaningful  or reliable
indicators of future performance.

                                    Page 29
<PAGE>

IDX MAY NOT BE SUCCESSFUL IN IMPLEMENTING ITS ACQUISITION STRATEGY.  IDX intends
to  continue  to grow in  part  through  either  acquisitions  of  complementary
products,   technologies   and  businesses  or  alliances   with   complementary
businesses.  IDX may not be successful in these acquisitions or alliances, or in
integrating  any such acquired or aligned  products,  technologies or businesses
into its current business and operations. Factors which may affect IDX's ability
to expand successfully include:

-    the  generation of sufficient  financing to fund  potential  acquisitions
     and alliances;
-    the  successful   identification  and  acquisition  of  products,
     technologies  or  businesses;
-    effective  integration  and  operation  of the
     acquired or aligned products, technologies or businesses despite
     technical difficulties, geographic limitations and personnel issues; and
-    overcoming   significant   competition   for   acquisition   and   alliance
     opportunities from companies that have significantly  greater financial and
     management resources.

IDX'S SUCCESS  DEPENDS ON NEW PRODUCT  DEVELOPMENT AND ITS ABILITY TO RESPOND TO
RAPIDLY  CHANGING  TECHNOLOGY.  To be successful,  IDX must enhance its existing
products,  respond  effectively to technology changes and help its clients adopt
new technologies.  In addition, IDX must introduce new products and technologies
to meet the evolving needs of its clients in the healthcare  information systems
market. IDX may have difficulty in accomplishing this because of:

-    the continuing  evolution of industry standards,  for example,  transaction
     standards  pursuant to the Health Insurance  Portability and Accountability
     Act of 1996 (HIPAA); and

-    the creation of new technological  developments,  for example, Internet and
     application service provider technology.

IDX is  currently  devoting  significant  resources  toward the  development  of
enhancements   to  its   existing   products,   particularly   in  the  area  of
Internet-based  functionality  and the  migration  of  existing  products to new
hardware and  software  platforms,  including  relational  database  technology,
object-oriented   programming  and  application  service  provider   technology.
However,  IDX may not  successfully  complete these product  developments or the
adaptation in a timely  fashion,  and IDX's  current or future  products may not
satisfy the needs of the healthcare  information  systems  market.  Any of these
developments  may  adversely  affect  IDX's  competitive  position or render its
products or technologies noncompetitive or obsolete.

POLITICAL,  ECONOMIC AND REGULATORY  CHANGES AND CONSOLIDATION IN THE HEALTHCARE
INDUSTRY  MAY  CAUSE  IDX  TO  SUFFER   FINANCIALLY.   IDX   currently   derives
substantially  all of its revenues from sales of financial,  administrative  and
clinical  healthcare   information  systems  and  related  services  within  the
healthcare industry. As a result, the success of IDX is dependent in part on the
political and economic conditions in the healthcare industry.

Virtually  all of IDX's  customers  and the other  entities with which IDX has a
business  relationship  operate in the healthcare industry and, as a result, are
subject to governmental regulation,  including Medicare and Medicaid regulation.
Accordingly,  IDX's  customers  and the  other  entities  with  which  IDX has a
business   relationship   are  affected  by  changes  in  such  regulations  and
limitations in governmental spending for Medicare and Medicaid programs.  Recent
actions by Congress  have  limited  governmental  spending  for the Medicare and
Medicaid programs,  limited payments to hospitals and other providers under such
programs,  and  increased  emphasis  on  competition  and  other  programs  that
potentially  could  have an  adverse  effect  on IDX's  customers  and the other
entities with which IDX has a business  relationship.  In addition,  Federal and
state  legislatures  have  considered  proposals  to reform the U.S.  healthcare
system at both the federal and state level.  If enacted,  these  proposals could
increase  government  involvement in healthcare,  lower  reimbursement rates and
otherwise  change the  business  environment  of IDX's  customers  and the other
entities  with which IDX has a business  relationship.  IDX's  customers and the
other entities with which IDX has a business  relationship  could react to these
proposals  and the  uncertainty  surrounding  these  proposals by  curtailing or
deferring investments, including those for IDX's products and services.

                                    Page 30
<PAGE>

In addition,  many healthcare  providers are  consolidating to create integrated
healthcare  delivery systems with greater market power.  These providers may try
to use their market power to negotiate  price  reductions for IDX's products and
services.  If IDX is forced to reduce its prices,  its  operating  margins would
decrease.  As the healthcare  industry  consolidates,  competition for customers
will become more intense and the  importance  of acquiring  each  customer  will
become greater.

THERE IS INTENSE  COMPETITION IN THE MARKET FOR HEALTHCARE  INFORMATION  SYSTEMS
AND IF IDX FAILS TO COMPETE SUCCESSFULLY, IT WILL SUFFER FINANCIALLY. The market
for healthcare  information systems is intensely  competitive,  rapidly evolving
and subject to rapid  technological  change.  IDX  believes  that the  principal
competitive factors in this market include the breadth and quality of system and
product  offerings,  the features and capabilities of the systems,  the price of
system and product  offerings,  the ongoing  support  for the  systems,  and the
potential for enhancements and future compatible products.

Some  of the  IDX's  competitors  have  greater  financial,  technical,  product
development, marketing and other resources than IDX, and some of its competitors
offer  products  that  it does  not  offer.  The  Company's  principal  existing
competitors include Cerner  Corporation,  Eclipsys  Corporation,  McKesson HBOC,
Inc. and Shared  Medical  Systems  Corporation,  each of which offers a suite of
products that compete with many of IDX's products.  There are other  competitors
that  offer  a  more  limited  number  of  competing  products.  Many  of  IDX's
competitors  have also  announced or introduced  Internet  strategies  that will
compete with IDX's  Internet  applications  and  services.  IDX may be unable to
compete successfully against these organizations.  In addition, IDX expects that
major software  information  systems  companies,  large  information  technology
consulting  service providers and system  integrators,  Internet-based  start-up
companies  and  others   specializing  in  the  healthcare  industry  may  offer
competitive products or services.

IDX MAY BE FACED WITH PRODUCT LIABILITY CLAIMS EXCEEDING ITS INSURANCE COVERAGE.
Any failure by IDX's  products  that  provide  applications  relating to patient
medical  histories  and  treatment  plans could expose IDX to product  liability
claims.  These  potential  claims may exceed IDX's current  insurance  coverage.
Unsuccessful  claims  could be costly to defend and divert  management  time and
resources.  In  addition,  IDX cannot  assure you that it will  continue to have
appropriate  insurance available to it in the future at commercially  reasonable
rates.

IDX'S SUCCESS IS SIGNIFICANTLY DEPENDENT ON KEY PERSONNEL. The success of IDX is
dependent to a significant degree on its key management,  sales, marketing,  and
technical  personnel.  To be successful  IDX must  attract,  motivate and retain
highly skilled managerial, sales, marketing, consulting and technical personnel,
including programmers,  consultants, systems architects skilled in the technical
environments in which IDX's products operate.  Competition for such personnel in
the  software  and  information  services  industries  is intense.  IDX does not
maintain "key man" life insurance policies on any of its executives. Not all IDX
personnel have executed noncompetition agreements.

GOVERNMENT REGULATION MAY IMPOSE BURDENS AND COSTS ON IDX'S OPERATIONS.
Virtually  all of IDX's  customers  and the other  entities with which IDX has a
business  relationship  operate in the healthcare industry and, as a result, are
subject to  governmental  regulation.  Because  IDX's  products and services are
designed  to function  within the  structure  of the  healthcare  financing  and
reimbursement  systems currently in place in the United States,  and because IDX
is pursuing a strategy of developing  and  marketing  products and services that
support its customers' regulatory and compliance efforts, IDX may become subject
to the reach of, and liability under, these regulations.

                                    Page 31
<PAGE>

The Federal  Anti-Kickback  Law,  among other  things,  prohibits  the direct or
indirect  payment or receipt of any  remuneration  for  Medicare,  Medicaid  and
certain  other  Federal  or  state  healthcare  program  patient  referrals,  or
arranging for or  recommending  referrals or other business paid for in whole or
in  part  by the  federal  health  care  programs.  Violations  of  the  Federal
Anti-Kickback  Law may  result in civil and  criminal  sanction  and  liability,
including the temporary or permanent  exclusion of the violator from  government
health  programs,  treble damages and imprisonment for up to five years for each
violation. If the activities of a customer of IDX or other entity with which IDX
has a business  relationship were found to constitute a violation of the Federal
Anti-Kickback  Law and IDX, as a result of the provision of products or services
to such customer or entity,  was found to have  knowingly  participated  in such
activities,  IDX could be  subject to  sanction  or  liability  under such laws,
including the exclusion of IDX from government  health programs.  As a result of
exclusion from government health programs,  IDX customers would not be permitted
to make any payments to IDX.

The  Federal  Civil  False  Claims  Act and the  Medicare/Medicaid  Civil  Money
Penalties  regulations  prohibit,  among other things,  the filing of claims for
services  that were not provided as claimed,  which were for services  that were
not medically necessary, or which were otherwise false or fraudulent. Violations
of these laws may result in civil damages,  including treble and civil penalties
up to $11,000 for each false claim filed. In addition the  Medicare/Medicaid and
other  Federal  statutes  provide for criminal  penalties for such false claims,
including  fines of up to  $25,000  and  imprisonment  up to five years for each
offense.  If, as a result of the provision by IDX of products or services to its
customers  or other  entities  with which IDX has a business  relationship,  IDX
provides  assists with the  provision  of  inaccurate  financial  reports to the
government under these  regulations,  or IDX is found to have knowingly recorded
or  reported  data  relating  to  inappropriate  payments  made to a  healthcare
provider, IDX could be subject to liability under these laws.

HIPAA contains provisions  regarding  standardization,  privacy,  security,  and
administrative  simplification  in healthcare.  As a result of  regulations  now
proposed under HIPAA, IDX will make  investments to support customer  operations
in areas, such as:

-   electronic data transactions;
-   computer system security; and
-   patient privacy.

Although it is not possible to anticipate  the final form of  regulations  under
HIPAA,  IDX has made and  expects to  continue  to make  investments  in product
enhancements  to  support  customer  operations  that are  regulated  by  HIPAA.
Responding to HIPAA's impact may require IDX to make investments in new products
or charge  higher  prices.  It may be expensive  to implement  security or other
measures  designed to comply with any new legislation or regulation.

The United States Food and Drug  Administration  has  promulgated a draft policy
for the regulation of computer  software  products as medical  devices under the
1976 Medical  Device  Amendments to the Federal Food,  Drug and Cosmetic Act. To
the extent that computer software is a medical device under the policy,  IDX, as
a manufacturer  of such products,  could be required,  depending on the product,
to:

-    register and list its products with the FDA;
-    notify the FDA and demonstrate substantial equivalence to other products
     on the market before marketing such products; or
-    obtain FDA approval by demonstrating safety and effectiveness before
     marketing a product.

Depending on the intended use of a device,  the FDA could  require IDX to obtain
extensive data from clinical studies to demonstrate safety or effectiveness,  or
substantial equivalence. If the FDA requires this data, IDX would be required to
obtain  approval  of an  investigational  device  exemption  before  undertaking
clinical trials.  Clinical trials can take extended periods of time to complete.
IDX cannot provide  assurances that the FDA will approve or clear a device after
the completion of such trials.  In addition,  these products would be subject to
the Federal Food,  Drug and Cosmetic  Act's general  controls,  including  those
relating  to good  manufacturing  practices  and adverse  experience  reporting.

                                    Page 32
<PAGE>

Although it is not  possible to  anticipate  the final form of the FDA's  policy
with regard to computer  software,  IDX expects that the FDA is likely to become
increasingly  active  in  regulating  computer  software  intended  for  use  in
healthcare settings regardless of whether the draft is finalized or changed. The
FDA can impose extensive  requirements governing pre- and post-market conditions
like service investigation,  approval, labeling and manufacturing.  In addition,
the FDA can impose extensive  requirements  governing  development  controls and
quality assurance processes.

SYSTEM ERRORS IN IDX'S  HEALTHCARE  INFORMATION  SYSTEMS COULD CAUSE  UNFORESEEN
LIABILITIES.  IDX's  healthcare  information  systems are very complex.  As with
complex  systems offered by others,  IDX's  healthcare  information  systems may
contain errors,  especially when first introduced.  IDX's healthcare information
systems are intended to provide  information to healthcare  providers for use in
the diagnosis and treatment of patients.  Therefore, users of IDX's products may
have a greater  sensitivity  to  system  errors  than the  market  for  software
products generally. Failure of an IDX customer's system to perform in accordance
with its documentation  could constitute a breach of warranty and require IDX to
incur  additional   expense  in  order  to  make  the  system  comply  with  the
documentation.  If such failure is not timely  remedied,  it could  constitute a
material breach under a contract  allowing the client to cancel the contract and
subject IDX to liability.

CLAIMS BY OTHER COMPANIES THAT IDX'S PRODUCTS INFRINGE THEIR PROPRIETARY  RIGHTS
COULD  HINDER  OR BLOCK  IDX'S  ABILITY  TO SELL ITS  PRODUCTS,  SUBJECT  IDX TO
SIGNIFICANT  MONETARY  LIABILITY  AND  DIVERT  THE  TIME  AND  ATTENTION  OF ITS
MANAGEMENT. If any of IDX's products violate third party proprietary rights, IDX
may be required to reengineer its products or seek to obtain licenses from third
parties to continue offering its products without substantial reengineering. Any
efforts to reengineer  IDX's products or obtain  licenses from third parties may
not be  successful,  in  which  case  IDX  may be  forced  to stop  selling  the
infringing  product or remove the infringing  functionality or feature.  IDX may
also become subject to damage awards as a result of infringing  the  proprietary
rights of others,  which could cause IDX to incur additional  losses and have an
adverse  impact on its financial  position.  IDX does not conduct  comprehensive
patent  searches to  determine  whether the  technologies  used in its  products
infringe patents held by others. In addition,  product development is inherently
uncertain in a rapidly evolving technological  environment in which there may be
numerous patent applications pending, many of which are confidential when filed,
with regard to similar technologies.

IDX'S  COMPETITIVE  POSITION  WOULD BE  ADVERSELY  AFFECTED IF IT WERE UNABLE TO
PROTECT  ITS  PROPRIETARY  TECHNOLOGY.  IDX's  success and  competitiveness  are
dependent  to  a  significant  degree  on  the  protection  of  its  proprietary
technology.  IDX relies  primarily on a combination of copyrights,  trade secret
laws and  restrictions  on  disclosure  to protect its  proprietary  technology.
Despite  these  precautions,  others  may be able to  copy or  reverse  engineer
aspects of IDX's  products,  to obtain and use  information  that IDX regards as
proprietary or to independently  develop similar  technology.  Litigation may be
necessary in the future to enforce or defend IDX's proprietary  technology or to
determine  the  validity  and scope of the  proprietary  rights of others.  This
litigation,  whether  successful or  unsuccessful,  could result in  substantial
costs and diversion of management and technical resources.

IDX MAY HAVE  CONFLICTS OF  INTERESTS  WITH SOME OF ITS  EXECUTIVES.  Richard E.
Tarrant,  President,  Chief Executive Officer and Director, and Robert H. Hoehl,
Chairman of the Board of Directors,  indirectly own,  through various  entities,
real estate which IDX leases in connection with its operations. During 1999, IDX
paid an aggregate of approximately $2.1 million in connection with these leases.
IDX is currently negotiating to contract to purchase its headquarters facilities
in South  Burlington,  Vermont  from a real  estate  entity  owned by Richard E.
Tarrant and Robert H. Hoehl for a purchase price of approximately $15.0 million.
IDX has  commenced  a $16  million  construction  project  to expand  its office
facilities at that location. In connection with these arrangements, the economic
interests of these executives and directors and IDX may diverge.

                                    Page 33
<PAGE>

The  following  important  factors  affect our  Internet  services  and  content
business segement or "ChannelHealth" business:

CHANNELHEALTH'S  LIMITED  OPERATING  HISTORY MAY MAKE IT  DIFFICULT TO VALUE AND
EVALUATE ITS BUSINESS AND FUTURE PROSPECTS.  ChannelHealth  commenced operations
October  1999 and only  recently  commercially  released its first  product.  An
evaluation of the risks and  uncertainties of  ChannelHealth's  business will be
difficult because of  ChannelHealth's  limited operating  history.  In addition,
ChannelHealth's  limited  operating  history means that it has less insight into
how  technological  and market trends may affect its  business.  The revenue and
income potential of  ChannelHealth's  business and market are unproven,  and its
business model is emerging and unproven.  ChannelHealth's business and prospects
must be considered in light of the risks and difficulties  typically encountered
by businesses in their early stages of  development,  particularly  those in new
and rapidly evolving markets such the Internet healthcare information industry.

CHANNELHEALTH  HAS  INCURRED  SUBSTANTIAL  LOSSES TO DATE AND MAY NOT BE ABLE TO
ACHIEVE OR MAINTAIN  PROFITABILITY.  ChannelHealth  has incurred losses since it
began  operations.  ChannelHealth  incurred a net loss of ($3.5)  million in the
fourth  quarter  of 1999 and a net loss of  ($5.5)  million  for the year  ended
December 31, 1999, and its  accumulated  deficit  through  December 31, 1999 was
($5.5)  million.  ChannelHealth  cannot  be  certain  if or when it will  become
profitable.  ChannelHealth's  failure to become  profitable within the timeframe
expected by IDX investors or at all may adversely affect the market price of IDX
common Stock.  ChannelHealth  expects to continue to increase its expenses in an
effort  to  develop  its  business  and,  as a  result,  will  need to  generate
significant revenue to achieve profitability. Even if ChannelHealth does achieve
profitability,  there can be no  assurance  that  ChannelHealth  can  sustain or
increase profitability on a quarterly or annual basis in the future.

CURRENTLY,  CHANNELHEALTH'S  BUSINESS  DEPENDS ON  INTEGRATING  INTERNET-RELATED
TECHNOLOGY INTO ITS CUSTOMERS'  BUSINESSES,  AND, AS A RESULT, ITS BUSINESS WILL
SUFFER IF USE OF THE INTERNET AS A MEANS FOR COMMERCE  DECLINES.  If commerce on
the Internet does not continue to grow or grows slower than  expected,  the need
for ChannelHealth's  Internet healthcare information products and services could
decline,  resulting  in fewer  projects  and  reduced  revenues.  Consumers  and
businesses may reject the Internet as a viable commercial medium for a number of
reasons, including:

-        actual or perceived lack of security of information;
-        lack of access and ease of use;
-        congestion of Internet traffic or other usage delays;
-        inconsistent quality of service;
-        increase in access costs to the Internet;
-        evolving government regulation;
-        uncertainty regarding intellectual property ownership;
-        costs associated with the obsolescence of existing infrastructure; and
-        economic viability of the Internet commerce model.

Because of these and other  factors,  past financial  performance  should not be
considered  an  indicator  of  future  performance.  Investors  should  not  use
historical trends to anticipate future results.

The adoption of Internet solutions by healthcare  participants will require the
acceptance of a new way of conducting business and exchanging  information.  The
healthcare industry, in particular,  relies on legacy systems that may be unable
to benefit from ChannelHealth's  Internet healthcare  information  services.  To
maximize the benefits of ChannelHealth's services,  healthcare participants must
be  willing  to allow  sensitive  information  to be stored  in  ChannelHealth's
databases.  ChannelHealth can process  transactions for healthcare  participants
that maintain  information  on their own  proprietary  databases.  However,  the
benefits of ChannelHealth's  connectivity and sophisticated services are limited
under these circumstances.  Customers using legacy and client-server systems may
refuse  to adopt  new  systems  when they  have  made  extensive  investment  in
hardware, software and training for older systems.

                                    Page 34
<PAGE>

GOVERNMENT   REGULATION   COULD  ADVERSELY  AFFECT   CHANNELHEALTH'S   BUSINESS.
ChannelHealth's  business will be subject to government regulation.  Existing as
well as new laws and regulations  could adversely affect its business.  Laws and
regulations  may be  adopted  with  respect  to the  Internet  or other  on-line
services covering issues such as:

-        user privacy;
-        system security;
-        pricing;
-        content;
-        copyrights;
-        distribution; and
-        characteristics and quality of products and services.

The  applicability  to the  Internet of existing  laws in various  jurisdictions
governing issues such as property  ownership,  sales and other taxes,  libel and
personal  privacy  is  uncertain  and may take  years  to  resolve.  Demand  for
ChannelHealth's   applications  and  services  may  be  adversely   affected  by
additional regulation of the Internet.

IF CHANNELHEALTH SYSTEMS EXPERIENCE SECURITY BREACHES OR ARE OTHERWISE PERCEIVED
TO BE INSECURE,  CHANNELHEALTH'S REPUTATION AND BUSINESS WILL SUFFER. A material
security  breach could damage  ChannelHealth's  reputation,  cause users to lose
confidence in ChannelHealth's systems or result in liability. ChannelHealth will
retain confidential  customer and patient information in its processing centers.
ChannelHealth may be required to spend  significant  capital and other resources
to  protect  against  security  breaches  or to  alleviate  problems  caused  by
breaches. Any well-publicized compromise of Internet security could deter people
from  using  the  Internet  or  from   conducting   transactions   that  involve
transmitting   confidential   information,   including  confidential  healthcare
information.  Therefore, it is critical that these facilities and infrastructure
remain secure and are  perceived by the  marketplace  to be secure.  Despite the
implementation of security  measures,  this  infrastructure may be vulnerable to
physical  break-ins,  computer  viruses,  programming  errors,  attacks by third
parties or similar disruptive problems. Any damage to ChannelHealth's reputation
or loss of user  confidence  as a result of a security  breach  could reduce the
willingness  of patients  and  physicians  to use  ChannelHealth's  products and
services and as a result, adversely affect ChannelHealth's business.

CHANNELHEALTH DEPENDS UPON A SINGLE TRANSACTION SERVICE PROVIDER TO PROVIDE MOST
OF CHANNELHEALTH'S  TRANSACTION  SERVICES  AND IF THAT  PROVIDER  IS  UNABLE OR
UNWILLING TO PROVIDE  SUCH  SERVICES,  CHANNELHEALTH  MAY NOT BE ABLE TO PROVIDE
SERVICE TO ITS CUSTOMERS. ChannelHealth currently relies on ProxyMed for most of
its  electronic  transaction  services.  ChannelHealth's  reliance  on a  single
provider  of these  services  exposes  ChannelHealth,  and IDX as a reseller  of
ChannelHealth's  products and services, to a number of risks, including the loss
of customer  goodwill  and  possible  liability,  if  ProxyMed  fails to provide
transaction  services.  If  ProxyMed  is unable or  unwilling  to  provide  such
services to  ChannelHealth  on a timely  basis,  ChannelHealth  may be forced to
engage  additional or  replacement  providers,  which could result in additional
expenses and delays and disruptions in ChannelHealth's service.

PERFORMANCE  PROBLEMS WITH THE SYSTEMS OF CHANNELHEALTH'S  TRANSACTION,  SERVICE
AND CONTENT PROVIDERS COULD HARM  CHANNELHEALTH'S  BUSINESS.  ChannelHealth will
depend on service and content providers to provide  transactions and information
on a timely basis.  ChannelHealth's  Web sites could  experience  disruptions or
interruptions  in service  due to the  failure or delay in the  transmission  or
receipt of this information. In addition,  ChannelHealth's customers will depend
on Internet  service  providers,  online  service  providers  and other Web site
operators for access to our Web sites.  All of these providers have  experienced
significant outages in the past and could experience  outages,  delays and other
difficulties in the future due to system failures  unrelated to  ChannelHealth's
systems. Any significant  interruptions in ChannelHealth's services or increases
in response  time could  result in a loss of  potential  or existing  customers,
strategic partners, advertisers or sponsors and, if sustained or repeated, would
likely reduce the attractiveness of ChannelHealth's services.

                                    Page 35
<PAGE>

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

IDX does  not  currently  use  derivative  financial  instruments.  The  Company
generally  places its marketable  security  investments  in high credit  quality
instruments primarily U.S. Government and Federal Agency obligations, tax-exempt
municipal obligations and corporate obligations with contractual maturities of a
year or less.  We do not expect any material loss from our  marketable  security
investments and therefore  believe that our potential  interest rate exposure is
not material.

Internationally,  IDX invoices customers in United States currency.  The Company
is not  currently  exposed to foreign  exchange rate  fluctuations  and does not
enter into  foreign  currency  hedge  transactions.  Through  December 31, 1999,
foreign  currency  fluctuations  have not had a material impact on our financial
position or results of operations.

Investments  in both fixed rate and floating rate interest  earning  instruments
carry a degree of interest rate risk.  Fixed rate securities may have their fair
market value adversely  impacted due to a rise in interest rates, while floating
rate  securities  may produce less income than expected if interest  rates fall.
Due in part to these  factors,  our future  investment  income may fall short of
expectations  due to  changes  in  interest  rates or we may  suffer  losses  in
principal if forced to sell  securities that have seen a decline in market value
due to changes in interest  rates.  A  hypothetical  10% increase or decrease in
interest  rates,  however,  would  not have a  material  adverse  effect  on our
financial condition.

Interest income on the Company's investments is included in "Other income, net."
The  Company  accounts  for  cash  equivalents  and  marketable   securities  in
accordance  with  Statement of Financial  Accounting  Standards  (SFAS) No. 115.
"Accounting  for  Certain  Investments  in Debt  and  Equity  Securities."  Cash
equivalents  are short-term  highly liquid  investments  with original  maturity
dates of three  months or less.  Cash  equivalents  are  carried at cost,  which
approximates  fair  market  value.  The  Company's  marketable   securities  are
classified  as  available-for-sale  and are  recorded  at fair  value  with any
unrealized gain or loss recorded as an element of stockholder's equity.

                                    Page 36
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                           CONSOLIDATED BALANCE SHEETS
                    (in thousands, except for per share data)
<TABLE>
<CAPTION>
                                                            December 31,
                                                        1999         1998
                                                    --------------------------
<S>                                                     <C>          <C>
Assets
Current assets:
    Cash and cash equivalents                           $  18,487    $ 11,558
    Securities available-for-sale                          49,872     113,574
    Accounts receivable, less allowance of $3,300
      in 1999 and $2,615 in 1998 for doubtful
      accounts                                            110,759     102,179
    Prepaid and other current assets                        5,352       5,403
    Deferred tax asset                                      7,691       4,720
                                                       ----------------------
       Total current assets                               192,161     237,434

Property and equipment:
    Equipment and leasehold improvements, net of
      accumulated depreciation and
        amortization                                      39,877      27,688
    Real estate, net of accumulated depreciation          18,388       8,261
                                                       ---------------------
                                                          58,265      35,949
Other:
    Capitalized software costs, net                          414         665
    Other assets                                          17,107      12,868
    Deferred tax asset                                     3,200       2,307
                                                       ---------------------
Total assets                                           $ 271,147    $289,223
                                                       =====================

Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                                   $  15,782    $ 17,535
    Accrued expenses                                      22,188      20,949
    Federal and state taxes payable                           --       5,429
    Deferred revenue                                      17,459      18,239
    Note payable and current portion of long-term debt        --       5,611
                                                       ---------------------
        Total current liabilities                         55,429      67,763
Long-term debt, less current portion                          --       2,261
Commitments and contingencies                                 --          --
Minority interest                                          9,204       8,988
Stockholders' equity:
    Preferred stock, par value $0.01 per share,
      5,000 shares  authorized,  none issued
    Common stock, par value $0.01 per share,
      100,000 shares authorized, issued and
      outstanding 27,813 shares and 27,393
      shares in 1999 and 1998, respectively                 278         274
    Additional paid-in capital                          179,640     175,035
    Retained earnings                                    26,812      34,756
    Cumulative unrealized gains (losses)
      on securities available-for-sale                     (216)        146
                                                       --------------------
          Total stockholders' equity                    206,514     210,211
                                                       --------------------
Total liabilities and stockholders' equity             $271,147    $289,223
                                                       ====================
</TABLE>

See accompanying notes.
                                    Page 37

<PAGE>

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except for per share data)
<TABLE>
<CAPTION>
                                             Year Ended December 31,
                                              ----------------------
                                      1999            1998            1997
                                     ------------------------------------------
<S>                                   <C>             <C>             <C>
Revenues:
   Systems sales                      $124,609        $178,555        $134,499
   Maintenance and service fees        216,390         171,632         137,508
                                     ------------------------------------------
Total revenues                         340,999         350,187         272,007

Operating expenses:
     Cost of sales                     216,554         196,480         154,605
     Selling, general and
       administrative                   79,873          68,234          62,577
     Research and development           53,176          47,278          37,395
     Write-off of acquired
       research and development costs        -           3,201           2,290
     Merger and related costs            4,045               -          20,030
                                      -----------------------------------------
Total operating expenses               353,648         315,193         276,897
                                      -----------------------------------------
Operating income (loss)                (12,649)          34,994         (4,890)
Other (income) expense:
     Interest income                    (4,113)         (6,382)         (6,322)
     Interest expense                      866           1,312             637
     Loss on investment impairment       1,642               -               -
     Minority interest                   1,129           1,070             539
                                      -----------------------------------------
Total other income                        (476)         (4,000)         (5,146)
                                      -----------------------------------------
Income (loss) before income taxes      (12,173)          38,994             256

Income tax provision (benefit)          (4,229)          22,160           8,238
                                      ------------------------------------------

Net income (loss)                     $ (7,944)        $ 16,834        $(7,982)
                                      =========================================

Basic net income (loss) per share     $  (0.29)        $   0.62        $ (0.30)
                                      =========================================
Basic weighted average shares
  outstanding                           27,723          27,345          26,672
                                      =========================================

Diluted net income (loss) per share   $ (0.29)        $  0.60         $ (0.30)
                                      =========================================
Diluted weighted average shares
  outstanding                          27,723          28,170          26,672
                                      =========================================
</TABLE>

See accompanying notes.
                                    Page 38

<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
                                  (in thousands)
<TABLE>
<CAPTION>
                                                        Unrealized
                                                       Gain
                     Common Stock                      (Loss) on
                     ------------  Additional          Securities  Total
                            Par    Paid In   Retained  Available-  Stockholders'
                    Shares  Value  Capital   Earnings  for-Sale    Equity
                  --------------------------------------------------------------
<S>                 <C>     <C>    <C>       <C>       <C>         <C>

Balances at
December 31, 1996   25,867  $ 259  $133,015   $25,904  $   (7)     $ 159,171

 Comprehensive loss:
  Net loss                                     (7,982)                (7,982)
  Unrealized gains on
   securities
   available for sale                                     143            143
                                                                         ---
Comprehensive loss                                                   (7,839)
 Stock issued upon
   exercise of
   nonqualified
   stock options        73      1     1,153                            1,154
 Tax benefit related
   to exercise of
   nonqualified
   stock options                      3,059                            3,059
 Stock issued upon
   exercise of
   incentive stock
   options             419      4     3,887                            3,891
 Stock issued
   pursuant to
   employee stock
   purchase plan        54            1,408                            1,408
 Stock issued to
   401(k) plan          21              437                              437
 Issuance of stock     340      4    16,570                           16,574
                  --------------------------------------------------------------
Balances at
December 31, 1997   26,774    268   159,529    17,922     136        177,855

 Comprehensive income:
  Net income                                   16,834                 16,834
  Unrealized gains on
   securities
   available for sale                                      10             10
                                                                          --
Comprehensive income                                                 16,844
 Stock issued upon
  exercise of
  nonqualified
  stock options        137      1     3,971                            3,972
 Tax benefit
  related to
  exercise of
  nonqualified
  stock options                       2,335                            2,335
 Stock issued upon
  exercise of
  incentive stock
  options              293      3     4,277                            4,280
 Stock issued
  pursuant to
  employee stock
  purchase plan         96      1     2,878                            2,879
 Stock issued to
  401(k) plan            5              198                              198
 Issuance of stock      88      1     1,847                            1,848
                  --------------------------------------------------------------
Balances at
December 31, 1998   27,393    274   175,035    34,756     146        210,211

 Comprehensive loss:
  Net loss                                     (7,944)                (7,944)
  Unrealized losses
   on securities
   available for sale                                    (362)          (362)
                                                                        -----
Comprehensive loss                                                   (8,306)
 Stock issued
  upon exercise
  of nonqualified
  stock options         38              145                              145
 Tax benefit
  related to
  exercise of
  nonqualified
  stock options                         428                              428
 Stock issued upon
  exercise of
  incentive stock
  options               87      1       777                              778
 Stock issued
  pursuant to
  employee stock
  purchase plan        125      1     3,206                            3,207
 Stock issued
  under IDX director
  stock option plan      2               33                               33
 Stock issued to
  401(k) plan            1               16                               16
 Issuance of stock     167      2                                          2
                  --------------------------------------------------------------
Balances at
December 31, 1999   27,813  $ 278  $179,640  $ 26,812  $ (216)      $206,514
                  ==============================================================
</TABLE>

See accompanying notes.
                                    Page 39


<PAGE>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                  Year Ended December 31,
                                             1999          1998        1997
                                           ------------------------------------
<S>                                          <C>           <C>         <C>
OPERATING ACTIVITIES
Net income (loss)                            $(7,944)      $16,834     $(7,982)
Adjustments to reconcile net income
  (loss) to net cash (used in)
  provided by operating activities:
  Depreciation                                13,965        13,733       9,652
  Amortization                                 1,407           209         813
  Deferred tax (benefit) provision,
    net of business acquisitions              (3,864)        2,937      (5,864)
  Increase in allowance for doubtful
    accounts                                     685         1,512         815
  Minority interest                            1,129         1,070         539
  Loss on investment impairment                1,642             -           -
  Write-off of acquired in-process
    research and development costs                 -         3,201       2,290
  Write-off of goodwill                            -             -       4,831
  Write-off of capitalized software
    costs and equipment                            -             -       7,406
  Changes in operating assets and
    liabilities, net of business
    acquisitions:
      Accounts receivable                     (9,279)      (34,283)    (19,390)
      Prepaid expenses and other assets        3,011         2,062      (2,636)
      Accounts payable and accrued expenses     (514)        2,535      11,261
      Federal and state taxes payable         (5,628)        5,429      (6,815)
      Deferred revenue                          (780)       (3,299)      4,805
                                            -----------------------------------
Net cash (used in) provided by
  operating activities                        (6,170)       11,940        (275)

INVESTING ACTIVITIES
Purchase of property and equipment, net      (35,519)      (16,962)    (18,311)
Purchase of securities available-for-sale   (194,027)     (250,035)   (151,537)
Proceeds from sale of securities available-
  for-sale                                   257,366       238,297     150,919
Business acquisitions                         (6,500)       (5,293)     (6,762)
Other assets                                  (4,058)       (5,316)     (1,649)
                                            -----------------------------------
Net cash provided by (used in)
  investing activities                        17,262       (39,309)    (27,340)

FINANCING ACTIVITIES
Proceeds from sale of common stock             4,181        13,178      23,401
Tax benefit related to exercise of
  nonqualified stock options                     428         2,335       3,059
Proceeds from debt issuances                   3,501        12,332       3,123
Contributions to (distributions from)
  affiliates, net                               (900)        6,000        (700)
Proceeds from note payable                         -             -       3,350
Principal repayments of long-term debt       (11,373)       (9,659)     (2,697)
                                            -----------------------------------
Net cash (used in) provided by financing
  activities                                  (4,163)       24,186      29,536

                                            -----------------------------------
Increase (decrease) in cash and cash
  equivalents                                  6,929       (3,183)       1,921
Cash and cash equivalents at beginning
  of year                                     11,558       14,741       12,820
                                            -----------------------------------
Cash and cash equivalents at end of year     $18,487      $11,558      $14,741
                                            ===================================

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest                         $ 764      $ 1,274        $ 631
                                            ===================================
Cash paid for income taxes                    $5,266      $ 5,362      $17,382

                                            ===================================
NONCASH INVESTING ACTIVITIES:
Issuance of common stock related
to acquisitions                                    -            -        $ 64
                                            ===================================
</TABLE>
See accompanying notes.
                                    Page 40

<PAGE>

                             IDX SYSTEMS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1999

1.   SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS AND BASIS OF PRESENTATION

IDX Systems  Corporation (IDX or the Company)  provides  healthcare  information
systems and services to physician groups,  management services,  hospitals,  and
large integrated  healthcare  delivery  enterprises  principally  located in the
United  States.  Revenues  are  derived  from the  licensing  of  software,  the
provision of maintenance and services related to systems sales, the provision of
medical  dictation and transcription  services,  and Internet based services and
content.

In July 1997,  IDX completed  its merger  ("Phamis  Merger")  with PHAMIS,  Inc.
("PHAMIS")  in a  stock  for  stock  transaction.  The  transaction,  which  was
accounted for as a  pooling-of-interests,  was effected  through the exchange of
 .73 shares of IDX common stock in exchange  for each PHAMIS  share  outstanding.
Approximately  4.6 million shares of common stock were issued in connection with
the Phamis  Merger.  PHAMIS was a  Seattle-based  provider  of  enterprise-wide,
patient-centered healthcare information systems.

In April 1999,  IDX completed its merger ("EDiX  Merger") with EDiX  Corporation
("EDiX") in a stock for stock transaction. The transaction,  which was accounted
for as a pooling-of-interests,  was effected through the exchange of .084 shares
of IDX common stock in exchange for each EDiX share  outstanding.  Approximately
1.0  million  shares of common  stock were  issued in  connection  with the EDiX
Merger. EDiX is a provider of medical transcription services.

The consolidated financial statements for all periods prior to the Phamis Merger
and EDiX  Merger  have been  restated  to include  the  accounts  and results of
operations  of PHAMIS and EDiX.  No  adjustments  were  required  to conform the
financial reporting policies of IDX, PHAMIS and EDiX for the periods presented.

PRINCIPLES OF CONSOLIDATION

The consolidated  financial  statements include the accounts of the Company, its
subsidiaries and a real estate trust.  Investments in entities,  representing an
ownership interest of less than 20%, are accounted for under the cost method.

The Company leases a substantial  portion of its space,  including its corporate
headquarters   and  certain  sales  and  support   offices,   from  real  estate
partnerships  and trusts owned by stockholders  and certain key employees of the
Company. These real estate partnerships and trusts include 116 Huntington Avenue
Limited Partnership ("HLP"), BDP Realty Associates ("BDP") and other real estate
partnerships  and  trusts  ("REPs").   The  Company's   consolidated   financial
statements  include  the accounts  of the  Company and BDP, whose real estate is
leased  exclusively  by the  Company  and for which the  Company  is  subject to
substantially  all the risks of ownership.  Real estate owned by HLP and REPs is
leased to the Company  under  operating  leases.  All  transactions  between the
Company and BDP are  eliminated.  Minority  interest  represents  net income and
equity of BDP.

REVENUE RECOGNITION

In 1997,  the Company  recognized  revenue in accordance  with the provisions of
Statement  of Position  ("SOP") No. 91-1,  "Software  Revenue  Recognition."  In
October  1997 and December  1998,  the  American  Institute of Certified  Public
Accountants  issued SOP No. 97-2, as amended by SOP No. 98-4,  "Software Revenue
Recognition," and SOP 98-9 respectively which  supersedes SOP 91-1. In 1998, the
Company  adopted  SOP No.  97-2,  which  generally  requires  revenue  earned on
software  arrangements  involving  multiple  elements  to be  allocated  to each
element based on the relative fair values of those  elements.  The fair value of
an element must be based on objective  evidence  that is specific to the vendor.
If the vendor does not have evidence of the fair value for all the elements in a
multiple-element arrangement, all revenue from the arrangement is deferred until
such  evidence  exists or until all elements are  delivered.  Additionally,  the
Company  periodically enters into certain long term contracts to which SOP 81-1,
"Accounting for  Performance of  Construction-Type  and Certain  Production-Type
Contracts,"  is applied.  For these  agreements,  revenue is recognized  under a
percentage of completion  basis as  appropriate  measures of completion for each
contract are achieved. The Company also generates service revenues from the sale
of product maintenance contracts and consulting contracts.

                                    Page 41
<PAGE>

Accordingly,   revenue  from  software  licensing  arrangements  is  principally
recognized upon delivery subject to specified milestones and dates. Revenue from
consulting services is recognized in the period in which services are performed.
Revenue  from  hardware  sales  is  recognized   upon  delivery.   Revenue  from
maintenance contracts is recognized ratably over the term of the support period,
which is typically one year.

RESEARCH AND DEVELOPMENT COSTS

Research and development  costs are expensed as incurred.  Software  development
costs incurred after the  establishment of  technological  feasibility and until
the  product  is  available  for  general  release  are  capitalized,   provided
recoverability is reasonably assured.  Technological  feasibility is established
upon the  completion  of a  working  model.  Software  development  costs,  when
material,  are stated at the lower of unamortized cost or net realizable  value.
Net realizable  value for each software product is assessed based on anticipated
profitability  applicable to revenues of the related  product in future periods.
Amortization  of capitalized  software costs begins when the related  product is
available  for general  release to  customers  and is provided  for each product
based on the  greater  of the  amount  computed  using (i) the ratio of  current
revenues  to total  current  and  anticipated  future  revenues  for the related
software  or  (ii)  the  straight-line  method  over a  three-year  life  or the
product's estimated economic life, if shorter.  Capitalized software development
costs of $414,000 and $665,000 at December 31, 1999 and 1998, respectively,  net
of accumulated  amortization,  are included in other assets in the  accompanying
balance  sheets.  Amortization  of  capitalized  software  amounted to $251,000,
$203,000 and $806,000 in 1999, 1998 and 1997,  respectively.  In connection with
the  Phamis Merger in  1997,  the  Company  wrote-off  $5.6  million  of
capitalized  software  development  costs  attributable  to the  elimination  of
overlapping and obsolete products.

CASH EQUIVALENTS

The Company  considers  highly liquid  investments  generally with a maturity of
three months or less when purchased,  to be cash  equivalents.

RISKS AND UNCERTAINTIES

CONCENTRATION OF CREDIT RISK

Financial  instruments which potentially  subject the Company to a concentration
of credit  risk  principally  consist of cash and cash  equivalents,  securities
available-for-sale and trade receivables. The carrying value of these financial
instruments approximates fair value.

The Company  invests  excess cash primarily in money market mutual funds and tax
exempt  municipal  funds with high credit  ratings,  debt securities with highly
rated  issuers  and  treasury  notes  and  bonds  issued  by the  United  States
Government and the State of Vermont.

The  Company's  customers  are  substantially  all large  integrated  healthcare
delivery enterprises  principally located in the United States. To reduce credit
risk, the Company performs ongoing credit evaluations of the financial condition
of its customers and generally does not require collateral. Although the Company
is directly  affected  by the  overall  financial  condition  of the  healthcare
industry, management does not believe significant credit risk exists at December
31,  1999.  The  Company's  losses  related  to  collection  of  trade  accounts
receivables have consistently been within management's expectations.

SIGNIFICANT ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires  management to make significant
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Significant estimates and assumptions by management
affect the Company's  allowance for doubtful accounts,  revenue  recognition and
certain accrued expenses. Actual results could differ from those estimates.

                                    Page 42
<PAGE>

AVAILABLE-FOR-SALE SECURITIES

The  Company  accounts  for  investment   securities  based  on  SFAS  No.  115,
"Accounting for Certain Investments in Debt and Equity Securities." 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.   All  of  the  Company's   investments   have  been  classified  as
available-for-sale  securities at December 31, 1999 and 1998. Available-for-sale
securities are carried at fair value with  unrealized  gains and losses reported
as a component of stockholders' equity.

PROPERTY AND EQUIPMENT

Real estate,  which  includes  land,  buildings and related  improvements  owned
directly  by the  Company  and BDP,  is stated at cost.  Buildings  and  related
improvements are depreciated using the straight-line method over their estimated
useful lives of 30 to 40 years.

Equipment is stated at cost and is depreciated over its estimated useful life
using the  straight-line  method.  Depreciation  is generally  computed based on
useful lives of two to five years for computer  equipment  and software and five
to ten years for furniture and fixtures.  Leasehold  improvements  are amortized
using the  straight-line  method  over the lesser of the term of the  respective
lease or the estimated useful life of the asset.

The Company  includes  costs of developing  and obtaining  software for internal
use,  following  its  adoption  of SOP No.  98-1,  "Accounting  for the Costs of
Computer Software Developed for Internal Use," in Property and Equipment.

LONG-LIVED ASSET IMPAIRMENT

In accordance with SFAS No. 121 "Impairment of Long-Lived  Assets and Long-Lived
Assets  to  be  Disposed  Of,"  the  Company  recognizes  impairment  losses  on
long-lived   assets  when  indicators  of  impairment  are  present  and  future
undiscounted  cash flows are insufficient to support the assets'  recovery.  The
amount of the impairment  loss is recognized  based on an analysis of discounted
cash flows estimated to be derived from the impaired asset.

INCOME TAXES

The Company  accounts for income taxes using the liability method as required by
SFAS No. 109, "Accounting for Income Taxes." Under this method,  deferred income
taxes are recognized for the future tax consequences of differences  between the
tax and  financial  accounting  of  assets  and  liabilities  at each  year end.
Deferred  income  taxes are based on enacted  tax laws and  statutory  tax rates
applicable  to the  periods  in which the  differences  are  expected  to affect
taxable income.  A valuation  allowance is established  when necessary to reduce
deferred tax assets to the amounts  expected to be realized.  Income tax expense
is the tax payable  for the period and the change  during the period in deferred
tax assets and liabilities.

STOCK-BASED COMPENSATION

The Company  grants stock options to employees for a fixed number of shares with
an  exercise  price  equal to the fair  value of the  shares  at the date of the
grant. The Company has elected to follow Accounting Principles Board Opinion No.
25,   "Accounting  for  Stock  Issued  to  Employees"  ("APB  25")  and  related
Interpretations  in  accounting  for its  employee  stock  options  because  the
alternative fair value accounting  provided for under SFAS No. 123,  "Accounting
for Stock-Based Compensation," requires use of option valuation models that were
not developed for use in valuing  employee stock options.  Under APB 25, because
the exercise  price of the Company's  employee  stock options  equals the market
price of the underlying  stock on the date of grant, no compensation  expense is
recognized.  Stock options and other  stock-based  awards to  non-employees  are
accounted for based on the provisions of SFAS No. 123.

NET INCOME (LOSS) PER SHARE

In 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings
per Share." SFAS No. 128 replaced the  calculation  of primary and fully diluted
earnings  per share with basic and diluted  earnings per share.  Unlike  primary
earnings per share,  basic earnings per share  excludes any dilutive  effects of
options,  warrants and  convertible  securities.  Diluted  earnings per share
which includes the dilutive effect of options, warrants and other convertible
securities,  is similar to the previously  reported  fully diluted  earnings per
share.

                                    Page 43
<PAGE>


In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging  Activities" ("SFAS No. 133") as amended
by SFAS No. 137,  which  establishes  accounting  and  reporting  standards  for
derivative  instruments,  including derivative  instruments  embedded.  In other
contracts, (collectively referred to as derivatives) and for hedging activities.
SFAS No. 133 is  effective  for all fiscal  quarters of fiscal  years  beginning
after June 15, 2000. The Company is presently analyzing the impact, if any, that
the adoption of SFAS No. 133 will have on its financial  condition or results of
operations.

In December 1999. The Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101 "Revenue  Recognition in Financial  Statements."  The SAB
formalizes  positions the staff has  expressed in speeches and comment  letters.
SAB 101 is effective  no later than the first fiscal  quarter of the fiscal year
beginning  after  December 15,  1999.  The Company is  presently  analyzing  the
impact,  if any,  that  the  adherence  to the SAB  will  have on its  financial
condition or results of operations.


2.  BUSINESS COMBINATIONS

In April 1999,  the Company  completed  the EDiX Merger with EDiX, a provider of
medical  transcription  services,  which became a wholly owned subsidiary of the
Company.  The  transaction  was  accounted  for  as a  pooling-of-interests  and
accordingly,  the accompanying financial statements include the accounts of EDiX
for all periods  presented.  In connection with the merger, the Company incurred
approximately $4.0 million of merger and related costs consisting principally of
transaction  costs of $2.4 million,  write-offs  and  adjustments  of long-lived
assets,  principally computer equipment of $1.4 million and other merger related
costs of $0.2 million,  principally related to integration costs incurred during
the period and the termination of leases and other contractual obligations.

The results of operations  previously  reported by the separate  enterprises and
the consolidated amounts for the three months ended March 31, 1999 and the years
ended December 31, 1998 and 1997 are summarized below.
<TABLE>
<CAPTION>


                    Three months ended,   Year ended,          Year ended,
                    March 31, 1999        December 31, 1998    December 31, 1997
                    ------------------------------------------------------------
                                         (in thousands)
<S>                 <C>                   <C>                  <C>
Total revenues:
    IDX             $ 60,181              $ 321,676            $ 251,417
    EDiX               9,469                 28,511               20,590
                    -----------------------------------------------------------
Consolidated        $ 69,650              $ 350,187            $ 272,007
                    ============================================================

Net income (loss):
    IDX             $ (6,900)             $  30,228            $   7,962
    EDiX              (1,678)               (13,394)             (15,944)
                    ------------------------------------------------------------
Consolidated        $ (8,578)             $  16,834            $  (7,982)
                    ============================================================
</TABLE>

On April 1, 1999, the Company acquired an 80% interest in Channelhealth, Inc., a
Massachusetts  corporation,  for $6.5 million. The acquisition was accounted for
under the purchase method.

On June 23, 1999, the Company acquired all of the assets of DietSite.com, Inc.
for $1.5 million.  DietSite.com is a website which includes disease-oriented
dietary information with extensive proprietary content on diets, vitamins,
herbals and nutritionals.

                                    Page 44
<PAGE>

On May 5, 1998, the Company acquired the net assets of Laureate Enterprises Inc.
a provider of project and process consulting  services for cash of $1.3 million.
The acquisition was accounted for under the purchase method.

On February 23, 1998, the Company  recorded  charges of $3.2 million  related to
the  acquisition of contract  management  system  technology from Trego Systems,
Inc. for cash of $4.0  million.  The  acquisition  was  accounted  for under the
purchase  method.   The  charges  were  expensed  as  in-process   research  and
development  in  connection  with  the  Company's  development  of a  healthcare
contract management system.

In February  1997,  the Company  acquired  certain  data model  technology  from
Medaphis Healthcare Information Technology Company for cash of $2.5 million. The
acquisition  was accounted  for under the purchase  method.  Approximately  $2.3
million  of  the  purchase  price  was  expensed  as  in-process   research  and
development in connection  with the Company's  development of a healthcare  data
model.

Had these  acquisitions  occurred as of the beginning of the years in which they
occurred,  the pro forma operating  results for 1999, 1998 and 1997 would not be
materially different than as reported in the accompanying consolidated financial
statements.

In July 1997, the Company completed the Phamis Merger with PHAMIS which became a
wholly owned  subsidiary of the Company.  The transaction was accounted for as a
pooling-of-interests  and,  accordingly,  the accompanying  financial statements
include the accounts of PHAMIS for all periods presented. In connection with the
Merger, the Company incurred  approximately  $20.0 million of merger and related
costs consisting  principally of transaction  costs of $5.1 million,  write-offs
and  adjustments  of $7.4 million of long-lived  assets,  primarily  capitalized
software  development  costs and equipment due to the elimination of overlapping
and obsolete products and operations,  employee termination and related costs of
$2.7  million  and  other  merger  related  costs  of $4.8  million  related  to
integration  costs  incurred  during the year and the  termination of leases and
other contractual obligations.

Computerized Patient Record Services, Inc.

In June  1997,  EDiX  purchased  all of the  outstanding  stock of  Computerized
Patient Record  Services,  Inc.  ("CPRS") for $250,000 cash and 15,900 shares of
Series A preferred  stock  valued at $63,600.  Direct  costs of the  acquisition
totaled  $63,177.  Excess of purchase price over net assets acquired of $353,769
was recorded as a covenant not-to-compete and is being amortized over its useful
life  of  three  years.  The  transaction  was  accounted  for  as  a  purchase;
accordingly,  the  results of  operations  of CPRS have been  included in EDiX's
consolidated financial statements from the date of acquisition. In addition, the
purchase  agreement includes the issuance ofup to 70,750 shares of EDiX Series A
convertible  preferred stock valued at $283,000  contingent upon the achievement
of certain profitability based milestones.

In connection with the  acquisition,  EDiX entered into an employment  agreement
with a former shareholder of CPRS whereby additional consideration may be earned
subject to certain revenue targets. These amounts will be recorded as additional
purchase price upon achievement of such targets.

Rocky Mountain Transcription

In  February  1997,   EDiX  purchased  all  of  the  assets  of  Rocky  Mountain
Transcription ("RMT") for $12,500  cash and note for  $87,500,  payable in seven
equal  quarterly  installments  of  $12,500  beginning  July 1, 1997 and  ending
January 1, 1999. The agreement  includes a contingent  payment of $25,000 based
on the  execution of a contract with a certain  customer.  The  transaction  was
accounted for as a purchase.  Excess of purchase price over net assets  acquired
of $125,000 was  recorded as a covenant  not-to-compete  and is being  amortized
over its useful life of three years.  In  connection  with the  agreement,  EDiX
entered into a three-year employment agreement with a principal of RMT.


                                    Page 45
<PAGE>

Health Information Associates, L.L.C.

In  January  1997,  EDiX  purchased  all of the  membership  interest  of Health
Information  Associates, L.L.C. ("HIA") for $3,895,294 cash. Direct costs of the
acquisition  totaled  $21,076.  Net assets  acquired were $945,738  resulting in
goodwill of $2,970,632 which was subsequently written off in 1997 based on the
Company's analysis that future cash flows were insufficient to support the value
of goodwill.

3.  SEGMENT INFORMATION

In June 1997,  the  Financial  Accounting  Standards  Board issued SFAS No. 131,
"Disclosures  about  Segments of an  Enterprise  and Related  Information."  The
Company  adopted SFAS No. 131 effective  with the fiscal year ended December 31,
1998. SFAS No. 131  establishes  standards for reporting  information  regarding
operating  segments  in  annual  financial   statements  and  requires  selected
information  for those  segments to be  presented in interim  financial  reports
issued to  stockholders.  SFAS No. 131 also  establishes  standards  for related
disclosures about major customers,  products and services, and geographic areas.
Operating  segments are  identified as  components of an enterprise  about which
separate discrete financial information is available for evaluation by the chief
operating  decision maker, or decision making group, in making  decisions how to
allocate resources and assess performance. Up to and including the first quarter
of 1999,  the Company  has viewed its  operations  and  managed its  business as
principally one segment, healthcare information solutions that include software,
hardware and related  services.  During the second  quarter of 1999, the Company
acquired two companies that have separate and distinct financial information and
operating  characteristics.  When applicable, the information for the reportable
segments  has been  restated  for the prior year in order to conform to the 1999
presentation.

The  Company's  three  business  units  have  separate   management   teams  and
infrastructures that offer different products and services.  Accordingly,  these
business units have been classified as three  reportable  segments  (information
systems and services, Internet services and content, and medical transcription
services).

Information  Systems  and  Services:  This  reportable  segment  consists of IDX
Systems  Corporation's  healthcare  information solutions that include software,
hardware and related services. IDX solutions enable healthcare  organizations to
redesign  patient  care  and  other  workflow  processes  in  order  to  improve
efficiency and quality. The principal markets for this segment include physician
groups,  management service  organizations,  hospitals,  and integrated delivery
networks primarily located in the United States.

Internet  Services and Content:  Channelhealth  Incorporated,  a majority  owned
subsidiary  , will offer  three  Internet  channels  that  integrate  IDX's core
practice   management  systems  with  extensive   Internet-based   services  and
clinically-valid  content.  ChannelHealth  services are  available to physicians
through group practices,  hospitals,  integrated  delivery  networks and managed
care organizations.

Medical Dictation and Transcription  Services:  This reportable segment contains
EDiX, a provider of medical  dictation and transcription  outsourcing  services.
The principal  markets for this segment  include  hospitals and large  physician
group practices primarily located in the United States.

The  accounting  policies  of the  reportable  segments  are the  same as  those
described  in Note 1 of the  Notes to  Consolidated  Financial  Statements.  The
Company evaluates the performance of its operating segments based on revenue and
operating income. Intersegment revenues are immaterial. No one customer accounts
for greater than 10% of revenue for any reportable  segment,  with the exception
of EDiX.  During the year ended December 31, 1999 EDiX's revenues from one major
customer  amounted to 11.0%.  During the years ended December 31, 1998 and 1997,
no single customer represented more than 10% of total revenues.

                                    Page 46
<PAGE>

Summarized financial information concerning the Company's reportable segments is
shown in the following table (in millions):
<TABLE>
<CAPTION>
                         IDX Healthcare
                         Information
                         Systems and    Channelhealth
                         Services       Incorporated     EDiX         Total
                         -------------------------------------------------------
<S>                      <C>            <C>              <C>          <C>
FOR THE YEAR ENDED
 DECEMBER 31, 1999
Net operating revenues   $ 292,261      $ 1,865          $ 46,873     $ 340,999
Operating income (loss)       (542)      (7,930)           (4,177)      (12,649)
Identifiable operating
  assets                   242,773       11,744            16,630       271,147

FOR THE YEAR ENDED
 DECEMBER 31, 1998
Net operating revenues   $ 321,676            -          $ 28,511     $ 350,187
Operating income (loss)     47,144            -           (12,150)       34,994
Identifiable operating
  assets                   281,324            -             7,899       289,223

FOR THE YEAR ENDED
 DECEMBER 31, 1997
Net operating revenues   $ 251,417            -          $ 20,590     $ 272,007
Operating income (loss)     10,614            -           (15,504)       (4,890)
Identifiable operating
  assets                   237,318            -             8,141       245,459
</TABLE>
Corporate headquarters assets are included on IDX Healthcare Information Systems
and Services.  Substantially  all of the Company's  operations are in the United
States. As a result, the financial  information  disclosed herein represents all
of  the  material  financial  information  related  to the  Company's  principal
operating segments.


4.  SECURITIES AVAILABLE-FOR-SALE

The following is a summary of securities available-for-sale at December 31, 1999
and 1998:
<TABLE>
<CAPTION>
                                         Gross        Gross        Estimated
                                         Unrealized   Unrealized    Fair
                            Cost         Gains        (Losses)     Value
                            ----------   ----------   ----------   ---------
                                            (in thousands)
<S>                         <C>          <C>           <C>          <C>
DECEMBER 31, 1999
U.S. government securities  $ 8,914                    $ (79)       $ 8,835

Other debt securities         2,520                      (22)         2,498
                           ---------     ---------    ----------   ---------
  Total debt securities      11,434                     (101)        11,333
Tax-deferred municipal
  funds                      22,640                     (115)        22,525
Money-market funds           16,014                                  16,014
                           ----------    ---------     ---------   ---------
                           $ 50,088                    $(216)      $ 49,872
                           ==========    =========     =========   =========

DECEMBER 31, 1998
U.S. government securities $ 17,357      $   49                   $ 17,406
Other debt securities        23,762          51                     23,813
                            --------     ---------     ---------  ---------
  Total debt securities      41,119         100                     41,219

Tax-deferred municipal       36,958          46                     37,004
  funds
Money-market funds           35,351                                  35,351

                          ---------      ---------     ---------  ---------
                           $113,428      $  146                   $113,574
                          =========     =========      =========  =========
</TABLE>

                                    Page 47
<PAGE>

The net unrealized  (loss) and net unrealized gain on securities  available-for-
sale included as a separate component of stockholders' equity totaled ($216,000)
and $146,000 at December 31, 1999 and 1998, respectively.

The amortized cost and estimated  fair value of securities available-for-sale
at December 31, 1999 by contractual maturity, are shown below.

<TABLE>
<CAPTION>
                                                                Estimated Fair
                                              Cost               Value
                                              ----------         ---------
<S>                                           <C>                <C>

Due in one year or less                       $45,135            $44,996
Due after one year through three years          4,043              3,984
Due after three years                             910                892
                                              ----------         ---------
                                              $50,088            $49,872
                                              ==========         =========
</TABLE>

5.  PROPERTY AND EQUIPMENT

Equipment and leasehold improvements consists of the following:
<TABLE>
<CAPTION>
                                                     December 31,
                                                1999            1998

                                                ----------      --------
                                                     (in thousands)
<S>                                             <C>             <C>

Computer equipment and software                 $66,727         $48,573
Furniture and fixtures                            9,406           7,872
Leasehold improvements                           12,219           7,380
                                                ----------      ---------
                                                 88,352          63,825
Less accumulated depreciation and
  amortization                                   48,475          36,137
                                                ----------      ---------
                                                $39,877         $27,688
                                                ==========      =========
</TABLE>

Real estate consists of the following:
<TABLE>
<CAPTION>

                                                    December 31,
                                                1999            1998
                                                ----------      --------
                                                     (in thousands)
<S>                                             <C>             <C>
Corporate headquarters                          $20,301         $ 9,903
Less accumulated depreciation                     1,913           1,642
                                                ---------       --------
                                                $18,388         $ 8,261
                                                =========       ========
</TABLE>

                                    Page 48
<PAGE>

6.  OTHER INVESTMENTS AND ADVANCES

In February 1996,  PHAMIS signed a Distribution  Agreement (the  Agreement) with
Point-of-Care  Systems Inc, a software  developer of mobile computing  solutions
for the home  healthcare  marketplace.  In  addition  to the  Agreement,  PHAMIS
purchased a minority equity interest in the developer for approximately $950,000
in cash.  During  1997 and  1998 an  additional  $600,000  was  invested  by the
Company. During 1999, the Company was informed that the legal entity, Point-of-
Care Systems Inc. would be dissolved.  Accordingly, the investment was written
off in the first quarter of 1999 and changed to the IDX healthcare information
segment as a loss on investment impairment.

7.  ACCRUED EXPENSES

Accrued expenses consist of the following:
<TABLE>
<CAPTION>

                                                 December 31,
                                             1999          1998
                                             --------      --------
                                                (in thousands)
<S>                                         <C>            <C>

Employee compensation and benefits          $ 8,188        $13,442
Accrued expenses                              9,709          3,812
Other                                         4,291          3,695
                                            --------       --------
                                            $22,188        $20,949
                                            ========       ========
</TABLE>

8.  FINANCING ARRANGEMENTS

Under a line of credit  arrangement  with a bank,  the  Company may borrow up to
$5,000,000  on a demand  basis  subject to terms and  conditions  upon which the
Company and the bank may mutually agree. The line of credit arrangement  expires
on June 30,  2000.  At December  31, 1999 and for each of the three years in the
period then ended, there were no borrowings under this arrangement.

OPERATING LEASES

At December 31, 1999, future obligations due under the operating lease with REPs
and unrelated parties for sales and support offices are as follows:

<TABLE>
<CAPTION>

                                REPs         Unrelated          Total
Year ending December 31:                     Parties
                                ---------------------------------------
                                           (in thousands)
   <S>                         <C>           <C>               <C>
   2000                        $  498        $11,336           $11,834
   2001                           454         11,168            11,622
   2002                           206         10,545            10,751
   2003                                       10,150            10,150
   2004                                        7,701             7,701
   Thereafter                                 35,121            35,121
                               ----------------------------------------
                               $1,158        $86,021           $87,179
                               ========================================
</TABLE>

The Company leased  approximately 47% of the office space in a commercial office
building  owned by HLP (owned and  controlled  by  stockholders  and certain key
employees  of the  Company)  until  July  1999 when the  building  was sold to a
unrelated party. The building lease was assumed by the new owner of the building
and is disclosed as a lease obligation with an unrelated third party in 2000 and
beyond.  Total rent expense  amounted to $9,708,000,  $7,971,000 and $6,906,000,
during  1999,  1998  and  1997,   respectively.   Total  rent  expense  includes
$1,564,000,  $2,898,000  and  $3,024,000 in 1999,  1998 and 1997,  respectively,
related to the lease with HLP. Total rent expense  includes  $546,000,  $525,000
and $448,000 in 1999,  1998 and 1997,  respectively,  related to the leases with
REPs.

                                    Page 49
<PAGE>


9.  INCOME TAXES

The provision for income taxes consists of the following:
<TABLE>
<CAPTION>

Currently payable:                       1999        1998          1997
                                       ------------------------------------
                                                (in thousands)
   <S>                                  <C>          <C>           <C>
   Federal                              $   100      $15,918       $11,282
   State                                   (486)       3,805         2,820
                                       ------------------------------------
                                           (386)      19,723        14,102
   Deferred (benefit),
     principally federal                 (3,843)       2,437        (5,864)
                                       ------------------------------------
                                        $(4,229)     $22,160       $ 8,238
                                        ====================================
</TABLE>

A reconciliation  of the federal statutory rate to the effective income tax rate
during 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>

                                         1999        1998        1997
                                       ---------------------------------
   <S>                                   <C>         <C>         <C>
   Tax at federal statutory rate         35.0%       35.0%         34.0%
   State taxes, net of federal
     benefit                              5.4%        5.4%          5.4%
   Non-deductible costs of
     acquisitions                        (8.0)          -         783.0%
   Change in valuation
     allowance                              -        13.7%       2298.9
   Other, net                             2.3         2.7%         96.7%
                                       ---------------------------------
                                         34.7%       56.8%       3218.0%
                                       =================================
</TABLE>

Significant components of the Company's deferred tax assets (liabilities) are as
follows:
<TABLE>
<CAPTION>

                                                1999        1998
                                                --------------------
                                                  (in thousands)
   <S>                                          <C>         <C>
   Deferred tax assets:
     Net Operating loss carry
       forward                                  $14,502     $14,502
     Allowances and accruals                      5,178       3,317
     Depreciation                                 3,200       2,307
     Deferred revenue                             2,513       1,403
                                                --------------------
         Total deferred tax assets               25,393      21,529
         Valuation allowance                    (14,502)    (14,502)
                                                --------------------
         Net deferred tax assets                 10,891       7,027
         Less current portion                     7,691       4,720
                                                --------------------
                                                $ 3,200     $ 2,307
                                                ====================
</TABLE>

At December 31, 1999, the Company had net operating loss carry forward (NOLs)
of approximately $36.3 million generated by EDiX and available to offset the
Company's future taxable income subject to an annual limitation of $900,000.
These NOLs will expire, if not used, during the years 2009 and 2018.

                                    Page 50
<PAGE>

The  Company  believes  that,  based  upon a number of  factors,  the  available
objective evidence creates sufficient  uncertainty  regarding the realization of
the deferred tax assets such that a valuation  allowance has been recorded.  The
Company will continue to assess the realization of the deferred tax assets based
on actual and forecasted operating results.


10.  NET INCOME (LOSS) PER SHARE

The  following  sets forth the  computation  of basic and diluted  earnings  per
share:
<TABLE>
<CAPTION>

                                        1999            1998          1997
                                       -----------------------------------------
<S>                                    <C>              <C>          <C>
   Numerator:
     Net income (loss)                 $(7,944)         $16,834      $(7,982)
                                       -----------------------------------------
   Numerator for basic and diluted
     earnings per share                $(7,944)         $16,834      $(7,982)
   Denominator:
     Denominator for basic
     earnings per share
     weighted-average shares            27,723           27,345       26,672
   Effect of employee
     stock options                           -              825            -
                                       -----------------------------------------
   Denominator for diluted
     earnings per share                 27,723           28,170       26,672
                                       =========================================
   Basic net income (loss)
     per share                         $ (0.29)          $ 0.62      $ (0.30)
                                       =========================================
   Diluted net income
     (loss) per share                  $ (0.29)          $ 0.60      $ (0.30)
                                       =======================================
</TABLE>



11.  BENEFIT PLANS

RETIREMENT PLANS:

PROFIT SHARING RETIREMENT PLAN

The Company  maintains a profit  sharing  retirement  plan for all IDX employees
meeting age and service requirements.In 1998, PHAMIS employees were not eligible
for the profit sharing  retirement  plan due to their  eligibility in the PHAMIS
401(k) plan described below.  Effective  January 1, 1999,  PHAMIS employees were
eligible for profit sharing contributions when the former PHAMIS 401(k) plan was
merged  into  the  new  IDX  Systems   Corporation   Retirement   Income   Plan.
Contributions  to the plan are  discretionary,  as  determined  by the  Board of
Directors.  The Company expects to continue the plan indefinitely;  however, IDX
has reserved the right to modify,  amend or  terminate  the plan.  For the years
ended December 31, 1999, 1998 and 1997, the Company has expensed $0,  $4,184,000
and $4,316,000, respectively.

401(K) RETIREMENT SAVINGS PLAN

Effective  January 1, 1999,  the  Company  merged the PHAMIS  401(k)  retirement
savings  plan into the IDX  Systems  Corporation  Retirement  Income  Plan which
covers all  full-time  employees  eligible to  participate.  Under the IDX plan,
employees are eligible to  participate in the plan on the first day of the month
following the date of employment.  The Company matches participant contributions
up to 3%.  Matching  contributions  to the IDX plan were $3,271,000 for the year
ended December 31, 1999.

                                    Page 51
<PAGE>

During 1997 and 1998, the Company maintained two 401(k) retirement savings plans
which covered all eligible  employees.  One plan,  which  covered  former PHAMIS
employees, matched 50% of participant contributions up to a maximum contribution
of $1,500 per employee in company stock. The second plan, covering IDX employees
had no matching provision. The PHAMIS 401(k) retirement savings plan was amended
in July  1997 to  provide  for the  Company  match to be made in cash.  Matching
contributions to the plan were $413,000 and $357,000 in the years ended December
31, 1998, and 1997 respectively.  A total of 240,000 shares of Common Stock have
been reserved for issuance under the 401(k) retirement savings

STOCK PURCHASE PLAN

In September 1995, IDX's Board of Directors and  stockholders  approved the 1995
Employee Stock Purchase Plan, as amended in July 1997,  (the "ESPP") under which
eligible  employees may purchase  Common Stock at a price per share equal to 85%
of the lower of the fair market  value of the Common  Stock at the  beginning or
end of each offering period.  Participation in the offering is limited to 10% of
an employee's  compensation  (not to exceed amounts allowed under Section 423 of
the Internal  Revenue  Code),  may be terminated at any time by the employee and
automatically  ends on  termination of employment  with the Company.  A total of
1,400,000 shares of Common Stock have been reserved for issuance under the ESPP.
During the years  ended  December  31,  1999,  1998 and 1997,  an  aggregate  of
approximately 125,000, 96,000, and 54,000 shares,  respectively,  were purchased
under  the  ESPP.  Subsequent  to the  end  of  the  year,  the  Company  issued
approximately   100,000  shares  of  stock  under  the  ESPP.  The  Company  has
approximately  868,000  additional shares of common stock available for issuance
pursuant to the ESPP.

STOCK OPTION PLANS:

IDX OPTION PLANS

During 1985 and 1994,  the Company  established  incentive  stock  option  plans
providing  for the grant of options  for the  issuance  of 959,540  and  183,200
shares, respectively, of Common Stock. Options were granted at fair market value
at the time of  grant  and  became  immediately  exercisable  at the time of the
initial public offering. The options expire on the tenth anniversary of the date
of the grant or upon  termination  of  employment.  The 1994 Plan was terminated
upon the completion of the initial public offering. The 1985 Plan was terminated
for purposes of  prospective  eligibility  in March 1995.  At December 31, 1999,
options to purchase  53,350 and 73,476  shares of Common Stock were  outstanding
and exercisable under the 1994 Plan and the 1985 Plan, respectively.

In September  1995,  the Company's  stockholders  approved the 1995 Stock Option
Plan as amended in July 1997,  (the "1995  Option  Plan").  The 1995 Option Plan
provides for the grant of stock options to employees, officers and directors of,
and  consultants  or advisors to, the Company.  Under the 1995 Option Plan,  the
Company  may grant  options  that are  intended  to qualify as  incentive  stock
options under provisions of the Internal Revenue Code or options not intended to
qualify as incentive stock options.  The option grants,  exercise price, vesting
and expiration are authorized by a compensation  committee  comprised of certain
of the Company's  directors.  A total of 4,500,000 shares of Common Stock may be
issued upon the  exercise of options  granted  under the 1995  Option  Plan.  At
December 31,  1999,  options to purchase  2,370,321  shares of Common Stock were
outstanding under the 1995 Option Plan, of which 923,759 were exercisable.

In September  1995,  IDX's Board of Directors  approved the 1995 Director  Stock
Option Plan, as amended, in May and July 1997, (the "IDX Director Plan"),  which
provides that each non-employee  director of the Company be granted an option to
acquire 2,000 shares of Common Stock on the date that person  becomes a director
but, in any event, not earlier than the effective date of the IDX Director Plan.
Options are  granted at a price  equal to the fair  market  value on the date of
grant.  The option becomes  exercisable on the first  anniversary of the date of
grant,  and the term of the  option  is ten years  from the date of  grant.  The
Company has reserved  80,000  shares of Common Stock for issuance  under the IDX

                                    Page 52
<PAGE>

Director Plan. At December 31, 1999, options to purchase 25,488 shares of Common
Stock were  outstanding  under the IDX  Director  Plan,  of which  13,940  where
exercisable.

PHAMIS STOCK OPTION PLANS

Options to purchase shares of PHAMIS Common Stock under the PHAMIS, Inc. Amended
and Restated 1983  Combined  Nonqualified  and Incentive  Stock Option Plan (the
"1983 Option Plan"),  the PHAMIS,  Inc. 1993 Combined Incentive and Nonqualified
Stock  Option  Plan  (the  "1993  Option  Plan")  and  the  PHAMIS,   Inc.  1994
Non-employee  Director Stock Option Plan (the "PHAMIS Director Plan") which were
outstanding at the effective date of the Merger were effectively  assumed by IDX
based on the exchange  ratio of .73 shares of IDX Common Stock for each share of
PHAMIS  Common Stock.  Pursuant to the terms of the  aforementioned  plans,  all
unvested  and   unexercisable   option  grants  were  fully  vested  and  became
exercisable  immediately prior to the Merger.  The  aforementioned  PHAMIS plans
were terminated for purposes of prospective eligibility at the effective time of
the Merger.  At December 31, 1999,  options to purchase 9,512,  80,089 and 3,650
shares of IDX  Common  Stock were  outstanding  and  exercisable  under the 1983
Option Plan, the 1993 Option Plan and the PHAMIS Director Plan, respectively.

EDIX STOCK OPTION PLANS

Options to  purchase  shares of EDiX Common  Stock under the EDiX 1994  Combined
Incentive and  Nonqualified  Stock Option Plan (the "1994 Plan"),  the EDiX 1996
Combined  Incentive and Nonqualified Stock Option Plan (the "1996 Plan") and the
EDiX 1997 Stock  Incentive Plan (the "1997 Plan") which were  outstanding at the
effective date of the Merger were exchanged for IDX shares of common stock based
on the fair  value of each  option at the  exchange  ratio of .08 shares of IDX
Common Stock for each share of EDiX Common  Stock.  Pursuant to the terms of the
aforementioned  plans, all unvested and  unexercisable  option grants were fully
vested  and  became   exercisable   immediately   prior  to  the   Merger.   The
aforementioned  EDiX plans were  terminated  for purposes of  eligibility at the
effective time of the Merger.

STOCK BASED COMPENSATION

Pro forma  information  regarding  net income  (loss) and net income  (loss) per
share is required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options and shares issued  pursuant to the ESPP
under the fair value method of that Statement.  The fair value for these options
and shares issued pursuant to the ESPP were estimated at the date of grant using
the  Black-Scholes  option  pricing  model with the following  weighted  average
assumptions:
<TABLE>
<CAPTION>

                                      Options                   ESPP
                               1999    1998     1997    1999    1998     1997
                               ----------------------------------------------
   <S>                         <C>     <C>      <C>     <C>     <C>      <C>
   Expected life (years)        4.0     6.4      6.3      .5      .5       .5
   Interest rate                5.9%    5.7%     6.0%    5.7%    5.5%     6.1%
   Volatility                  74.6%   41.4%    42.7%   74.6%   41.4%    42.7%
   Dividend yield               0.0%    0.0%     0.0%    0.0%    0.0%     0.0%
</TABLE>

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

                                    Page 53
<PAGE>

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options'  vesting  period.  The  Company's  pro
forma information follows (in thousands,  except for net income (loss) per share
information):
<TABLE>
<CAPTION>

                                          1999          1998       1997
                                         ------------------------------------
   <S>                                    <C>           <C>        <C>
   Pro forma net income (loss)            $(13,136)     $12,296    $(15,477)

   Pro forma net income (loss) per share  $  (0.47)     $  0.46    $  (0.58)

</TABLE>

The  effects on 1997,  1998 and 1999 pro forma net income  (loss) and net income
(loss) per share of  expensing  the  estimated  fair value of stock  options and
shares issued  pursuant to the ESPP are not  necessarily  representative  of the
effects on reporting the results of  operations  for future years as the periods
presented   include  only  stock  options  granted  under  the  Company's  plans
subsequent to the adoption of FASB 123 in 1996.

A summary of the Company's stock option  activity,  and related  information for
the three years ended December 31 follows:
<TABLE>
<CAPTION>

                             1999                1998              1997
                            --------            --------          --------
                                Weighted            Weighted           Weighted
                                Average             Average            Average
                                Exercise            Exercise           Exercise
                      Options   Price     Options   Price    Options   Price
                      ----------------------------------------------------------
<S>                   <C>       <C>       <C>       <C>      <C>       <C>
Outstanding at
  beginning of year   1,889,019 $26.36    2,085,729 $24.95   1,955,221 $18.13
Granted               1,098,009 $14.33      289,710 $26.35     685,007 $31.23
Exercised              (234,642)$ 5.75     (424,051)$19.03   (495,478) $12.47
Forfeited              (146,500)$33.12      (62,369)$29.00    (59,021) $29.56
                      ----------------------------------------------------------
Outstanding at end
  of year             2,605,886 $22.77    1,889,019 $26.37   2,085,729 $23.46
                      ==========================================================
Exercisable at end
  of year             1,155,276 $23.00      743,697 $21.23     805,073 $16.73
                      ==========================================================
Weighted-average
  fair value of
  options granted
  during the year              $ 8.53               $17.67             $16.56
Available for
  future grants       1,477,453           2,435,276          2,553,424
                      ==========================================================

</TABLE>
                                    Page 54
<PAGE>

The following table presents  weighted-average  price and life information about
significant option groups outstanding at December 31, 1999:
<TABLE>
<CAPTION>

                                 Options Outstanding       Options Exercisable
                                 -------------------       -------------------
                                 Weighted
                                 Average     Weighted                  Weighted
                                 Remaining   Average                   Average
 Range of           Number       Contractual Exercise    Number        Exercise
 Exercise Prices    Outstanding  Life        Price       Exercisable   Price
-------------------------------------------------------------------------------
<S>                 <C>          <C>         <C>       <C>            <C>
$ 4.32 - $18.00      1,295,544   8.30 years  $13.48      492,149       $12.56
$18.22 - $30.25        215,065   7.19 years  $26.25      129,520       $26.80
$30.63 - $31.22        499,162   6.89 years  $30.72      301,379       $30.70
$31.56 - $51.19        596,115   7.75 years  $33.68      232,228       $33.13
                     ---------                         ---------
                     2,605,886                         1,155,276
                     =========                         =========
</TABLE>


12.  COMMITMENTS AND CONTINGENCIES

The Company is from time to time  involved in routine  litigation  incidental to
the conduct of its business. The Company believes that no such currently pending
routine  litigation to which it is party will have a material  adverse effect on
its financial condition or results of operations of the Company.


13.  SUBSEQUENT EVENTS

On January 10, 2000,  Channelhealth  Incorporated,  a majority owned  subsidiary
incorporated  in Delaware  announced  that Pequot  Private  Equity  invested $30
million in Channelhealth for an equity interest of approximately 9%.

On January 24, 2000, IDX and  Channelhealth  Incorporated  announced a strategic
alliance  with  Healtheon/WebMD,  and  Channelhealth  Incorporated  announced an
investment  in  Healtheon/WebMD.  The  strategic  alliance is  contingent on the
acquisition by Channelhealth Incorporated of an interest in Healtheon/WebMD,  in
exchange for approximately 3% of the common stock of Channelhealth Incorporated.
Channelhealth  Incorporated's  acquisition of an interest in Healtheon/WebMD is
subject to regulatory approval, and therefore the strategic alliance will not be
consummated without regulatory approval of the stock acquisition transaction.
On March 24, 2000 the Company  received a request from the U. S.  Department  of
Justice for  additional  information  and documents with respect to the proposed
transaction with Healtheon/WebMD. As a result, the regulatory review process may
continue  for an extended  period of time.  There can be no  assurance  that the
proposed  transaction with  Healtheon/WebMD  will receive regulatory approval or
will ever be implemented.

The interest in Healtheon/WebMD to be acquired by Channelhealth  Incorporated is
valued  at  approximately  $20  million,  based  on  the  closing  price  of the
Healtheon/WebMD  common stock as of January 21, 2000. The Healtheon/WebMD common
stock to be acquired constitutes restricted securities.

Healtheon/WebMD will issue approximately 84,000 shares of common stock valued at
approximately  $5 million  as of January  21,  2000 to IDX in  exchange  for the
execution   and  delivery  of  the  alliance   agreement  and  the  transfer  to
Healtheon/WebMD  of IDX's  mailing  services  line of  business  which  provides
patient statement printing and mailing services for customers. Upon consummation
of the transaction,  the Company expects to recognize a one-time pre-tax gain on
the sale of these operations.

As a result of the  proposed  strategic  alliance  with  Healtheon/WebMD,  upon
regulatory approval Healtheon/WebMD would become the primary provider of content
and transactions for ChannelHealth.

                                    Page 55
<PAGE>

Channelhealth   Incorporated  has  determined  that  there  has  been  an  asset
impairment  related to  goodwill  acquired in the  purchase  of a  Massachusetts
corporation  Channelhealth  Inc. in April,  1999. This asset  impairment will be
written off during the first  quarter of 2000 and will be reflected as a pre-tax
one-time loss on impairment of assets of approximately $5.5 million.

14.  QUARTERLY INFORMATION (UNAUDITED)

A summary of operating  results for the quarterly periods in the two years ended
December 31, 1999 is set forth below:
<TABLE>
<CAPTION>
                                      Quarter Ended
                     March 31   June 30    September 30   December 31  Total
                     -----------------------------------------------------------
                           (in thousands, except per share amounts)
<S>                  <C>        <C>        <C>            <C>          <C>
YEAR ENDED
 DECEMBER 31, 1999

Total revenues      $ 69,650    $ 91,255   $92,218        $87,876      $340,999
Gross profit          20,847      34,960    35,776         32,862       124,445
Net income (loss)     (8,578)     (2,250)    1,178          1,706        (7,944)
Net income (loss)
 per share-basic    $  (0.31)   $  (0.08)  $  0.04        $  0.06       $ (0.29)
Net income (loss)
 per share-diluted  $  (0.31)   $  (0.08)  $  0.04        $  0.06       $ (0.29)

YEAR ENDED
 DECEMBER 31, 1998

Total revenues      $78,809     $ 86,162   $90,937        $94,279       $350,187
Gross profit         34,442       38,068    40,575         40,622        153,707
Net income            1,798        5,566     6,199          3,271         16,834
Net income per
 share-basic        $  0.07     $   0.20   $  0.23        $  0.12       $   0.62
Net income per
 share-diluted      $ 0.06       $  0.20   $  0.22        $  0.12       $   0.60

</TABLE>

The first quarter of 1999 and all quarters of 1998 amounts have been restated to
reflect  the  Merger  with  EDiX  which  was  accounted  for as a pooling-of-
interests.

                                    Page 56
<PAGE>

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>

                        Balance at Charged    Charged   Bad Debts     Balance
                        Beginning  to Costs   to        Written-Off   at
                        of         and        Other     Net           End of
  Description           Period     Expenses   Accounts  Collections   Period
  ------------------------------------------------------------------------------
  <S>                   <C>        <C>        <C>       <C>           <C>
  Year ended
   December 31, 1999
   Allowance for
   doubtful accounts   $2,615,000  $ 685,000                          $3,300,000

  Year ended
   December 31, 1998
   Allowance for
   doubtful accounts   $1,664,000  $1,512,000            $561,000     $2,615,000

  Year ended
   December 31, 1997
   Allowance for
   doubtful accounts   $  817,000  $  815,000 $32,000                 $1,664,000
</TABLE>
                                    Page 57
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


Board of Directors
IDX Systems Corporation

We have  audited the  accompanying  consolidated  balance  sheets of IDX Systems
Corporation,  its  subsidiaries  and affiliate as of December 31, 1999 and 1998,
and the related consolidated statements of operations,  shareholders' equity and
comprehensive  income  (loss) and cash flows for each of the three  years in the
period ended December 31, 1999. Our audits also included the financial statement
schedule  listed in the Index at Item  14(a).  These  financial  statements  and
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of IDX Systems
Corporation,  its  subsidiaries and affiliate at December 31, 1999 and 1998, and
the  consolidated  results of their  operations and their cash flows for each of
the three years in the period  ended  December  31,  1999,  in  conformity  with
accounting  principles  generally  accepted in the United  States.  Also, in our
opinion,  the related financial statement schedule,  when considered in relation
to the  basic  financial  statements  taken as a whole,  present  fairly  in all
material respects the information set forth therein.

                                              /s/ Ernst & Young LLP

Boston, Massachusetts
February 4, 2000

                                    Page 58


<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.
                                    PART III

ITEM 10.  DIRECTORS AND OFFICERS OF THE REGISTRANT

The  response to this item is  contained  in part under the  caption  "Executive
Officers of the Registrant" in Part I hereof,  and the remainder is contained in
the Company's 2000 Proxy Statement under the caption "Election of Directors" and
is incorporated herein by reference.  Information relating to delinquent filings
of Forms 3, 4 and 5 of the  Company is  contained  in the  Company's  2000 Proxy
Statement under the caption "Compliance with Section 16 Reporting Requirements."

ITEM 11.  EXECUTIVE COMPENSATION

The response to this item is contained in this  Company's  2000 Proxy  Statement
under the  captions  "Board of  Directors  Compensation"  and  "Compensation  of
Executive Officers" and is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  response to this item is contained in the  Company's  2000 Proxy  Statement
under  the  caption  "Security   Ownership  of  Certain  Beneficial  Owners  and
Management" and is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  response to this item is contained in the  Company's  2000 Proxy  Statement
under the captions "Compensation Committee Interlocks and Insider Participation"
and "Certain  Relationships and Related Transactions" and is incorporated herein
by reference.

                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K



(a) The following consolidated financial statements of IDX Systems Corporation
are included in Item 8.

1.  Consolidated Balance Sheets at December 31, 1999 and 1998.
    Consolidated  Statements  of  Operations  for the Years Ended  December 31,
      1999, 1998 and 1997.
    Consolidated  Statements of Stockholders'  Equity and Comprehensive Income
       (Loss) for the Years Ended December 31, 1999,  1998 and 1997.
    Consolidated  Statements of Cash Flows for the Years Ended
       December 31, 1999,  1998 and 1997.
    Notes to Consolidated Financial Statements.
    Report of Independent Auditors.

2.  The consolidated financial statement Schedule II is included in Item 8.
    All other schedules are omitted as the information required is inapplicable.

3. The Exhibits listed in the Exhibit Index  immediately  preceding the Exhibits
are filed as a part of this Annual Report on Form 10-K.  (b) No Current  Reports
on Form 8-K were  filed by the  Company  during  the last  quarter of the period
covered by this report.

                                    Page 59
<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of the  Section  13 or 15(d)  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  on the 30th day of
March, 2000.

                                          IDX SYSTEMS CORPORATION


                                          By: /s/ Richard E. Tarrant
                                          ----------------------------------
                                          Richard E. Tarrant,
                                          Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

Signature                       Title                            Date
---------                       -----                            ----
<S>                             <C>                              <C>

/s/ Richard E. Tarrant          Chief Executive                  March 30, 2000
----------------------------    Officer and Director
Richard E. Tarrant              Principal Executive Officer)


/s/ James H. Crook, Jr.         President and Chief Operating    March 30, 2000
-----------------------------   Officer
James H. Crook, Jr.


/s/ John A. Kane                Vice President, Finance          March 30, 2000
-----------------------------   and Administration, Chief
John A. Kane                    Financial Officer and Treasurer
                                (Principal Financial and
                                Accounting Officer)


/s/ Henry M. Tufo               Director                         March 30, 2000
----------------------------
Henry M. Tufo, M.D.


/s/ Robert H. Hoehl             Director                         March 30, 2000
----------------------------
Robert H. Hoehl


/s/ Stuart H. Altman            Director                         March 30, 2000
----------------------------
Stuart H. Altman, Ph.D.


/s/ Steven M. Lash              Director                         March 30, 2000
----------------------------
Steven M. Lash
</TABLE>

                                    Page 60
<PAGE>
<TABLE>
<S>                             <C>                              <C>

/s/ Frank T. Sample             Director                         March 30, 2000
----------------------------
Frank T. Sample


/s/ Mark F. Wheeler             Director                         March 30, 2000
----------------------------
Mark F. Wheeler, M.D.


/s/ Allen Martin                Director                         March 30, 2000
---------------------------
Allen Martin, Esq.


/s/ Peter VanEtten              Director                         March 30, 2000
---------------------------
Peter VanEtten

</TABLE>
                                    Page 61
<PAGE>


                                  EXHIBIT INDEX

The following exhibits are filed as part of this Annual Report on Form 10-K.
<TABLE>
<CAPTION>

Exhibit No.   Description
-----------   -----------
<S>           <C>

 3.1*         Second Amended and Restated Articles of Incorporation.

 3.2*         Second Amended and Restated Bylaws.

 4.1*         Specimen Certificate for shares of Common Stock, $.01 par value,
              of the Registrant.

10.1#*        1985 Incentive Stock Option Plan.

10.2#*        1994 Incentive Stock Option Plan.

10.3#*        1995 Stock Option Plan.

10.4#*        1995 Director Stock Option Plan.

10.5#*        1995 Employee Stock Purchase Plan.

10.6#*        Description of Registrant's Executive Bonus Plan.

10.7*         Agreement between Richard E. Tarrant, Robert H. Hoehl and Paul L.
              Egerman dated as of June 24, 1994.

10.8*         Agreement between the Registrant, Richard E. Tarrant, Robert H.
              Hoehl and Paul L. Egerman dated as of September 18, 1995.

10.9#*        Amended and Restated Consulting/Employment Agreement between the
              Registrant and Henry M. Tufo, dated as of March 7, 1995, and
              related Letter Agreement between Mr. Tufo and the Registrant
              dated August 11, 1995.

10.10*        Employment, Noncompetition and Nondisclosure Agreement between the
              Registrant and Richard E. Tarrant.

10.11*        Employment, Noncompetition and Nondisclosure Agreement between the
              Registrant and Robert H. Hoehl.

10.12*        Employment, Nondisclosure and Noncompetition Agreement between the
              Registrant and Jeffrey M. Blanchard.

10.13*        Employment, Noncompetition and Nondisclosure Agreement between the
              Registrant and James H. Crook, Jr. dated September 19, 1995.

10.14*        Agreement between the Registrant and Robert F. Galin dated
              April 5, 1982.

10.15*        Employment Agreement between the Registrant and John A. Kane dated
              October 15, 1984.

10.16*        Redemption Agreement between the Registrant, Richard E. Tarrant
              and Robert H. Hoehl dated as of April 1, 1993.
</TABLE>

                                    Page 62
<PAGE>
<TABLE>
<CAPTION>


Exhibit No.   Description
-----------   -----------
<S>           <C>

10.17*        First Amendment to Redemption Agreement between the Registrant,
              Richard E. Tarrant and Robert H. Hoehl.

10.18*        Amended and Restated Certificate and Agreement of Limited
              Partnership of 4901 LBJ Limited Partnership between the Registrant
              and Richard E. Tarrant, Robert H. Hoehl,  Paul L. Egerman, John A.
              Kane, Robert F. Galin and certain of the Registrant's employees
              dated as of April 1, 1992, as amended on July 1, 1993.

10.19*        Lease  Agreement  between the Registrant and 4901  LBJ Limited
              Partnership dated as of April 7, 1992.


10.20*        Indenture  of Lease  between the  Registrant and IDS Realty Trust
              dated as of December 1, 1981, as amended on June 29, 1995.

10.21*        Lease Agreement between the Registrant and BDP Realty  Associates
              relating  to  1500 Shelburne Road dated July 6, 1979.

10.22         Extensions of Lease Agreement between the Registrant and BDP
              Realty Associates relating to 1500 Shelburne Road dated as of
              August 16, 1995 and March 23, 1999.

10.23*        Guaranty Modification Agreement relating to 1400 Shelburne Road
              dated as of September 15, 1995.

10.24*        Reimbursement Agreement among the Registrant, BDP Realty
              Associates and State Street Bank and Trust Company dated as of
              January 25, 1993.

10.25*        Agreement of Lease between the Registrant and Huntington Avenue
              Limited Partnership dated as of April 13, 1994, as amended through
              January 1, 1995.

10.26*        Guaranty Release Agreement relating to 116 Huntington Avenue.

10.27*        Option Agreement between the Registrant and BDP Realty Associates.

10.28*        Tax Indemnification Agreement between the Registrant and the
              stockholders listed on Schedule A thereto.

10.29*        Employment, Noncompetition and Nondisclosure Agreement between the
              Registrant and Pamela J. Pure effective April 3, 1995.

10.30#*       Letter Agreement between the Registrant and Pamela J. Pure dated
              March 7, 1995.

10.31#*       Letter Agreement between the Registrant and Pamela J. Pure dated
              October 23, 1995.

10.32#*       Nonqualified Stock Option Agreement dated as of September 1, 1991
              between the Registrant and John A. Kane.

10.33#*       Nonqualified Stock Option Agreement dated as of September 1, 1992
              between the Registrant and John A. Kane.

</TABLE>
                                    Page 63
<PAGE>
<TABLE>
<CAPTION>


Exhibit No.   Description
-----------   ----------------
<S>           <C>

10.34#        Letter Agreement between the Registrant and Jeffrey V. Sutherland,
              Ph.D. dated August 16, 1996

10.35#        Employment, Noncompetition and Nondisclosure Agreement between the
              Registrant and Jeffrey V. Sutherland, Ph.D. dated September, 1996.

10.36+        Agreement and Plan of Merger dated as of March 25, 1997 by and
              among the  Registrant,  Penguin Acquisition Corporation and
              PHAMIS, Inc.

10.37#@       PHAMIS, Inc. Amended and Restated 1983 Combined Nonqualified and
              Incentive Stock Option Plan

10.38#@       PHAMIS, Inc. 1993 Combined Incentive and Nonqualified Stock Option
              Plan as amended through May 14, 1996

10.39#@       PHAMIS, Inc. 1994 Non-employee Director Stock Option Plan as
              amended through January 1, 1996

10.40#@       PHAMIS, Inc. Salary Savings and Deferral Plan and Trust as amended
              through February 22, 1996

10.41#@       Stock Option Agreement dated August 20, 1990 between PHAMIS, Inc.
              and Michael Cain.

10.42#        Amended and Restated Lease Agreement between BDP Realty Associates
              and IDX Systems Corporation dated as of November 1, 1997

10.43#        Amendment to Amended and Restated Consulting/Employment Agreement
              between the Registrant and Henry M. Tufo, M. D. dated
              February 16, 1999

10.44^        Specimens of Stock Option Agreements under the 1995 Stock Option
              Plan

10.45^        Third  Addendum to Lease  Agreement  between  4901 LBJ Limited
              Partnership and IDX Systems  Corporation  dated as of
              February 1, 1998.

23.1          Consent of Ernst & Young LLP

27.1          Restated Financial Data Schedule for each 12 Month Period
              from 1997-1999

27.2          Restated Financial Data Schedule for First Three Quarters of 1998

27.3          Restated Financial Data Schedule for First Three Quarters of 1999

</TABLE>

# Management contract or compensatory plan or arrangement filed as an exhibit to
or incorporated by reference into this Form pursuant to Items 14(a) and 14(c) of
Form 10-K.
* Incorporated  herein by reference  from the Company's  Registration
Statement on Form S-1, as amended (File No. 33-97104).
+ Incorporated herein by
reference  from the  Company's  Registration  Statement  on Form S-4, as amended
(File No.  333-2891).
@  Incorporated  herein by reference  from the  Company's Registration
Statement on Form S-8, as amended (File No. 333-31045).
^  Incorporated herein by reference from the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998.

                                    Page 64
<PAGE>

                                                                    Exhibit 23.1



                         CONSENT OF INDEPENDENT AUDITORS


         We  consent  to the  incorporation  by  reference  in the  Registration
Statement  (Form S-4 No.  333-67891  as  amended  as of March 22,  1999) and the
Registration  Statements (Forms S-8 Nos. 33-1502,  333-31047)  pertaining to the
1985 Incentive Stock Option Plan, the 1994 Incentive Stock Option Plan, the 1995
Director  Stock Option Plan,  the 1995 Employee  Stock  Purchase  Plan, the 1995
Stock Option Plan and  non-statutory  stock  options  granted to  directors  and
officers of IDX Systems Corporation and in the Registration  Statement (Form S-8
No. 333-31045) pertaining to the PHAMIS, Inc. Amended and Restated 1983 Combined
Nonqualified  and Incentive  Stock Option Plan,  the PHAMIS,  Inc. 1993 Combined
Incentive and  Nonqualified  Stock Option Plan as amended  through May 14, 1996,
the PHAMIS Inc. 1994  Nonemployee  Director Stock Option Plan as amended through
January 1, 1996, the PHAMIS,  Inc. Salary Savings and Deferral Plan and Trust as
amended through February 22, 1996 and the PHAMIS, Inc. Cain Option Agreement, of
our report dated February 3, 2000,  with respect to the  consolidated  financial
statements  and  schedule  of IDX  Systems  Corporation  included in this Annual
Report (Form 10-K) for the year ended December 31, 1999.

                                            Ernst & Young LLP

Boston, Massachusetts
March 29, 2000