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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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

                                   FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2001

                                      OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE TRANSITION PERIOD FROM_________ TO__________

                       COMMISSION FILE NUMBER: 000-26816

                               -----------------
                            IDX SYSTEMS CORPORATION
            (Exact Name of Registrant as Specified in its Charter)

           Vermont                      03-0222230
(State or Other Jurisdiction         (I.R.S. Employer
             of                     Identification No.)
Incorporation or Organization)

40 IDX Drive, P.O. Box 1070,               05403
  South Burlington, Vermont             (Zip Code)
    (Address of Principal
     Executive Offices)

      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:

                         Common Stock, $.01 par value
                                Title of Class

   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. [X]

   The aggregate market value of voting Common Stock held by nonaffiliates of
the registrant was $335,949,760 based on the last reported sale price of the
Common Stock on the NASDAQ consolidated transaction reporting system on March
11, 2002.

   Number of shares outstanding of the registrant's class of Common Stock as of
March 11, 2002: 28,844,674.

                     DOCUMENTS INCORPORATED BY REFERENCE:

   Portions of the registrant's definitive Proxy Statement for its 2002 Annual
Meeting of Stockholders which will be filed with the Securities and Exchange
Commission within 120 days after the end of the registrant's fiscal year, are
incorporated by reference into Part III hereof.

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                            IDX SYSTEMS CORPORATION

                                   FORM 10-K

                    FOR THE PERIOD ENDED DECEMBER 31, 2001

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                  Page
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                                                PART I
<S>                                                                                               <C>
ITEM 1.     Business.............................................................................   3
ITEM 2.     Properties...........................................................................  21
ITEM 3.     Legal Proceedings....................................................................  21
ITEM 4.     Submission of Matters to a Vote of Security Holders..................................  22

                                               PART II
ITEM 5.     Market for Registrant's Common Equity and Related Stockholder Matters................  25
ITEM 6.     Selected Financial Highlights........................................................  26
ITEM 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations  27
ITEM 7A.    Quantitative and Qualitative Disclosures about Market Risk...........................  38
ITEM 8.     Financial Statements and Supplementary Data..........................................  39
            Consolidated Balance Sheets..........................................................  39
            Consolidated Statements of Operations................................................  40
            Consolidated Statements of Stockholders' Equity......................................  41
            Consolidated Statements of Cash Flows................................................  42
            Notes to Consolidated Financial Statements...........................................  43
            Report of Independent Auditors.......................................................  61
ITEM 9.     Changes in and Disagreements with Accountants on Accounting and Financial
              Disclosure.........................................................................  62

                                               PART III
ITEM 10.    Directors and Officers of the Registrant.............................................  62
ITEM 11.    Executive Compensation...............................................................  62
ITEM 12.    Security Ownership of Certain Beneficial Owners and Management.......................  62
ITEM 13.    Certain Relationships and Related Transactions.......................................  62

                                               PART IV
ITEM 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....................  62
SIGNATURES.......................................................................................  64
EXHIBIT INDEX....................................................................................  65
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                                    PART I

ITEM 1.  BUSINESS

Overview

   IDX Systems Corporation (IDX or the Company) is a leading provider of
information technology for physician groups, hospitals and integrated delivery
networks (IDNs). The Company's mission is to use information technology to
maximize value in the delivery of healthcare--by improving the quality of
patient service, enhancing medical outcomes, and reducing the cost of care. IDX
believes there will be a transformation in healthcare driven by information
technology, and the Company envisions itself as a key driver of the
transformation with software and connectivity solutions that enable healthcare
providers to access accurate information at all appropriate times and locations
in the continuum of healthcare delivery and to provide seamless access for
patients and referring physicians.

   IDX products and services improve healthcare administrative, financial, and
clinical providers' effectiveness by providing reliable contributions to
clinical knowledge, enhancements to the revenue cycle, and improvements to
administrative efficiency. IDX strives to provide innovative offerings that
will unite providers of healthcare with patients, payers and other partners in
the healthcare community. In addition, IDX products promote high-trust
relations between healthcare providers and healthcare consumers by empowering
providers to make better, more informed decisions using information technology.
IDX solutions are designed to enable healthcare providers to save money, time
and lives.

   As of December 31, 2001, IDX systems were deployed to serve approximately
134,000 physicians and were installed at over 3,200 client sites, including
over 175 large group practices with greater than 200 physicians, over 635
small- and mid-sized group practices with less than 199 physicians, and more
than 370 IDNs representing more than 660 hospitals. EDiX, a subsidiary of IDX,
serves over 220 health systems and physician groups throughout the United
States.

   IDX operates its business in two separate segments: Information Systems and
Services and Medical Transcription Services. The Company's core business
segment, providing information systems, services and connectivity for group
physician practices, hospitals and IDNs, operates under the IDX(R) brand name
and consists of software licensing, services, and hardware sales. In April
1999, IDX purchased EDiX Corporation, which IDX operates as a separate business
segment providing medical transcription services.

   In October 1999, IDX announced the organization of its Internet applications
and content business segment under the name of ChannelHealth. ChannelHealth
used Internet technology to integrate content, transactions, and information
systems through three product lines. In January 2001, IDX sold ChannelHealth
and its "Physician Channel" business, which delivers clinical solutions to
physician practices, to Allscripts Healthcare Solutions, Inc. (Allscripts), a
leading provider of clinical hand-held technology, in a merger transaction
pursuant to which a wholly owned subsidiary of Allscripts merged with and into
ChannelHealth, making ChannelHealth a wholly owned subsidiary of Allscripts. As
a result, IDX no longer reports as a separate business segment the Internet
services and content business of ChannelHealth. Also, IDX has a ten-year
strategic alliance with Allscripts, whereby IDX markets ChannelHealth's
Physician Channel service, now called "Touchworks Enterprise (TM)," and other
Physician Productivity Tools offered by Allscripts, to the IDX physician
practice management system customers on an exclusive basis.

   IDX retained ChannelHealth's "eCommerce Channel" service, now called "IDX
eCommerce Services/SM/," which provides applications for processing financial
electronic data interchange transactions (EDI), such as claims submission and
payment, and ChannelHealth's "Patient Channel" service, now called "Patient
Online(R)", which provides Internet connectivity between healthcare consumers
and providers. The eCommerce service business and the Patient Online service
business is now reported under IDX Information Systems and Services business
segment.

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   IDX financial, administrative, and patient access products are generally
packaged as IDXtend for the Web(TM) business performance solutions or the Group
Practice Management System(TM) (GPMS(TM)).

   Clinical solutions are generally packaged as the Carecast(TM) System,
launched in early 2002, and the LastWord(R) System.

   IDX's radiology and imaging products are marketed as IDXrad(TM) and Imaging
Suite(TM). Through a five-year strategic alliance agreement with Stentor, Inc.,
the Company markets the vnetix(TM) PACS system.

   IDX sells the EDiX(TM) line of medical dictation and transcription services
to IDNs, hospitals, and physician groups.

   IDX's Strategic Connectivity offering ties the entire IDX product line
together while also uniting Integrated Delivery Networks (IDNs).

   Through the Company's strategic alliance with Allscripts, IDX markets
Allscripts' clinical products and other physician productivity tools to IDX's
practice management systems customers.

   IDX was incorporated in Vermont on June 2, 1969. The Company's executive
offices are located at 40 IDX Drive, South Burlington, Vermont 05403-1070 and
its telephone number is (802) 862-1022.

Industry Background

   Healthcare costs in the United States have risen 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 payers utilize alternative reimbursement models that
shift the financial risk of delivering healthcare from payers to physicians,
institutional providers, and patients. There is an emerging trend of Managed
Care losing its influence in the U.S. healthcare system. Providers are better
able, as a result, to influence their own pricing and terms of care delivery.
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, IDX believes that ambulatory care providers,
particularly physician groups, continue to control a substantial portion of
total healthcare resources. IDX is the largest provider of systems to large
group practices in the U.S.

   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 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 reduce costs for patients and members. More recently, the number of
IDNs has declined somewhat, but the ones that remain are poised and committed
to better connect their various entities.

   IDX believes smaller physician groups will continue to form relationships to
consolidate information technology and practice management functions. The
Company also believes many existing large physician groups are growing and
their information technology needs are becoming increasingly complex. The
Company believes a key operational principle for healthcare organizations will
be to coordinate 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.

   IDX expects that continued growth in Internet usage will have a profound
impact on healthcare for both patients and providers. While commercial health
websites offer consumers valuable insight 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

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information. In addition, the Company believes healthcare organizations will be
concerned that use of commercial health websites by patients will undermine the
personal and local relationship between patients and physicians. The Company
expects these organizations will need to use the Internet to establish and
cultivate online relationships with patients and physicians that will improve
the effectiveness of healthcare delivery by establishing tight connectivity
between the IDN and patients and referring physicians.

   IDX believes 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.

   IDX believes increased consumer, government, employer and payer awareness of
the high incidence and resulting cost of medical errors will result in an
increased interest in clinical information systems. According to the report
published by the Institute of Medicine (IOM) of the National Academies, between
44,000 and 98,000 unnecessary deaths result in the United States 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 and unanticipated interactions with other drugs or patient
conditions that were not noted. The Company believes online information
processing, specifically computerized physician ordering of medications, can
decrease the incidence of adverse drug events resulting from medication errors.

   In a follow-up report issued by the IOM in March 2001, the IOM reiterated
the urgency of reducing medical errors, but stated that the United States
healthcare system is plagued with even deeper quality problems which together
detract from the "health, functioning, dignity, comfort, satisfaction and
resources of Americans." The use of information technology to support clinical
and administrative processes is prominent in the report's recommended
strategies to improve the overall quality of healthcare within the next ten
years. The Company anticipates that increased use of information technology
will be a significant factor in driving industry practices to higher quality
standards.

   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. Recently, proposed and final regulations
published under the Health Insurance Portability and Accountability Act of 1996
(HIPAA) have created significant operational challenges to healthcare providers
and payers. IDX believes well designed, up-to-date information solutions can
play significant roles in complementing the implementation of healthcare
organizations' internal compliance policies.

Strategy

   To accomplish its mission, IDX has positioned itself to make a contribution
to the transformation of healthcare with software and connectivity solutions
that give clinicians and other staff at healthcare organizations access to
accurate information at appropriate times and locations in the continuum of
healthcare delivery and provide patients with seamless access to the delivery
system. IDX develops software that is intended to save money, time and lives by
making healthcare administrative, financial, and clinical practices better
through smart, efficient, and reliable products and services. IDX strives to
provide innovative offerings that will unite providers of healthcare with
patients, payers, and other partners in the healthcare community. In addition,
IDX products are intended to promote high-trust relationships between
healthcare providers and healthcare consumers by empowering providers to make
better, more informed decisions using information technology.

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   The IDX strategy includes building on its success as a leading vendor of
comprehensive administrative and financial information systems and leveraging
the reputation of its LastWord clinical system product to create increased
opportunities for a wide range of information systems solutions. IDX believes
that information systems can play a significant role in supporting regulatory
compliance efforts of healthcare organizations and IDX offers products and
services to address these efforts.

   IDX intends 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 its core application software
with its connectivity system and EDiX transcription services position it 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:

   Connect the Delivery System.  The Company believes that while a truly
integrated delivery system is virtually impossible to achieve, its newly
introduced Connectivity Strategy offers more realistic connectivity solutions
to its customers. IDX's connectivity solutions offer seamless patient access
and physician connectivity to the IDN.

   Market Clinical Products as Comprehensive Clinical Solutions.  The Company
offers a broad range of products to support clinical processes including the
LastWord clinical system, and its next generation system called Carecast(TM),
IDXtend patient access applications, EDiX medical dictation and transcription
services, and IDXrad radiology information system. The Company seeks to
differentiate its clinical solutions by emphasizing the broad range of clinical
functions available from the combination of its diverse offerings.

   Provide Products and Services to Improve Business Performance.  Many large
healthcare organizations continue to experience significant financial and
regulatory pressures yet must stay focused on improving their patients'
experience. The Company intends to continue to invest in its IDXtend(R) and
IDXtend for the Web(TM) product lines to provide integrated enterprise-wide
financial and patient management solutions that are designed to significantly
improve the operational and financial performance of the large complex
healthcare organization.

   Provide Products that Support Regulatory and Compliance Efforts.  IDX
believes information tools supporting regulated customer business practices
will be beneficial to customers seeking greater reliability and predictability
of their business practices. The Company has invested in automated workflows,
primarily in its financial and clinical products, that can be tailored by
healthcare organizations to complement 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.

   Provide Robust Solutions to Meet the Needs of IDNs.  The Company intends to
continue investments in the integration of the ambulatory and acute care
components of IDXtend and the Carecast Enterprise Clinical system to meet IDN
enterprise requirements for clinical and administrative processes that span
complex healthcare enterprises. The Company believes market acceptance of
Carecast clinical system 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 the Carecast clinical
system enterprise functionality.

   Expand Medical Group Practice Market Share.  The Company seeks to expand its
group practice market leadership by increasing sales efforts. In addition, the
Company markets a combination of group practice products and consulting
services as combined solutions to address the needs of the group practice
market to continue achieving efficiency and reducing costs. Business process
redesign services allow customers to better leverage technology in their
environment. IDX incorporates consulting services to measure organizational and

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solution performance against industry best practices. IDX Patient Online and
eCommerce services as well as Allscripts' TouchWorks suite of solutions will
incorporate physician and business services into the core practice management
offerings. By emphasizing integration among the Carecast Enterprise Clinical
systems, IDXtend, and IDXrad, the Company expects to target independent imaging
centers and group practices with large radiology components. IDX intends to
focus on the expanding needs of its existing customer base through greater
connectivity tools and increased automated processes to solve business needs of
complex organizations.

   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 which uses a consultative process to align prioritized business
objectives directly to system functionality. Through detailed project scoping
and the use of prototypes in the design phase, customers are able to go-live on
key functionality more quickly and reduce overall implementation time.

Products and Services

   Below is a description of IDX and EDiX products and services as of February
28, 2002.

Products and Services of Information Systems and Services Business Segment

   Please see Note 4 to the Consolidated Financial Statements for the revenues,
profits and losses for the Information Systems and Services business segment
for each of the last three fiscal years.

IDXtend(R)/IDXtend for the Web

   The Enterprise Solutions Division of IDX (ESD) markets business performance
solutions for large group practices, academic medical centers, hospitals, and
IDNs. ESD products are sold under the brand name IDXtend for the Web(TM).
IDXtend for the Web integrates financial, administrative, and clinical
processes across healthcare enterprises to improve financial and patient
management.

   IDX believes that establishing a sound business environment is a fundamental
first step towards any effort to improve the quality of care. IDXtend for the
Web's focus is the improvement of business performance, conformance with
regulatory requirements (e.g., HIPAA, ABNs, APCs, etc.), and enhancement of
patient access and satisfaction.

   IDXtend for the Web is built on the foundation of IDXtend(R), a suite of
industry-leading financial and administrative software applications. IDXtend
for the Web is designed to leverage the robust functionality of IDXtend while
providing the benefits of advanced web technology. IDXtend for the Web is an
integrated, enterprise-wide, web-based business performance solution.

   Complementary applications include:

    .  Billing and Accounts Receivable (BAR)(TM) is a highly flexible system
       that enables large physician offices, group practices and clinics to
       manage financial data, maximize revenue collection and generate
       comprehensive reports for performance analysis.

    .  Hospital Patient Accounting (HPA) monitors patient billing, collections,
       and insurance management activities from the point of initial patient
       pre-registration through final resolution of payment to help
       organizations manage complex contracts and simplify patient accounting
       tasks.

    .  Enterprise-wide Scheduling (EWS) automates routine tasks, ensures
       convenient patient access to services, and provides a consistent view of
       patient information at every point of care. The results are improved
       patient satisfaction, less duplication of tasks, and better coordination
       of services.

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    .  Visit Management(TM) organizes workflow around the concept of the visit
       and helps share important information such as insurance and registration
       data between the hospital and physician practice. Visit Management is
       designed to improve the manner in which patients and care information
       flow through healthcare organizations, and helps ensure the most
       accurate and updated information is available for billing.

    .  Managed Care Application (MCA) includes comprehensive enrollment,
       referral, and case management tools to reduce administrative burdens and
       support the efficient delivery of patient services across care settings.

    .  Combined Billing Office (CBO) consolidates processes for patient
       financial services and patient access services to improve operational
       workflow and optimize organizational efficiencies.

    .  Electronic data interchange solutions (EDI) are designed to save money,
       streamline workflow, and accelerate a variety of key healthcare
       transactions to improve organizational, financial and administrative
       performance.

   IDXtend for the Web helps customers increase revenue by accelerating and
increasing collections and reducing administrative expenses. Capabilities
across the entire "revenue cycle" are enhanced so that interdependent
administrative and clinical activities effectively contribute to accurate,
timely capture and presentation of the information necessary for procuring
prompt payment for services.  Organizational efficiency and lower costs are
driven by fewer errors and less manual intervention and rework. Technology and
service components save customers time and money by automating work processes
and improving the way work flows in the healthcare environment.

   IDX believes that Hospitals, physician practices and IDNs benefit from
improved sharing of information across inpatient and outpatient settings, and
greater alignment between front and back-office activities.

   Other IDXtend for the Web solutions include Image Xchange (IMX) -- a
vertically integrated, electronic document capture and storage solution,
Enterprise Index (EI) for IDXtend(TM) -- an MPI (master person index) product
that checks for duplicate patient records during the registration process, and
Analyzer(TM) -- a decision-support product that provides an enterprise-wide
relational data warehouse for IDXtend for the Web. IDXtend for the Web is also
integrated with ambulatory clinical solutions from Allscripts Healthcare
Solutions.

   Using state-of-the-art technologies to deliver value to customers, IDXtend
for the Web leverages Intersystem's Cache database for data storage and backend
processing.

   IDXtend for the Web's Service Oriented Architecture enables business-to
-business interactions, cross-platform interoperability and new product
development.

   IDXtend for the Web solutions are available with two different deployment
models: the "in house" model for organizations that choose to support their own
IT environment; and an ASP, or application service provider, model where IDX
manages the applications and the infrastructure is hosted at an IDX data center.

   IDX expects that forthcoming solutions from IDXtend for the Web will
continue to enhance customers' ability to manage their business in smarter,
better, and more effective ways thus extending the life of their investment.
Enhanced EDI integration, new task management engines, and additional
role-based portals are expected to help ensure that IDXtend for the Web
customers maintain their status as leaders in their field.

   The Carecast(TM) Enterprise Clinical System represents the next generation
of electronic clinical information solutions, delivering sub-second response
time and exceptional reliability to support fast-paced clinical environments.
Developed by and for providers - in collaboration with some of the nation's
leading hospitals, clinicians and healthcare executives - Carecast builds on
more than 20 years of innovation with the LastWord enterprise clinical system.
The system automates workflow throughout the healthcare enterprise and enables
rapid access to patient records across the care continuum, from admission to
discharge, including

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pharmacy and ambulatory care. It integrates core clinical processes for orders,
results, pharmacy and clinical documentation with administrative and financial
processes for scheduling, registration, admitting, charging and billing. The
result is a comprehensive lifetime patient record that enhances the quality of
care and promotes operational efficiencies. IDX believes the Carecast Physician
Order Entry system is the only one in the industry that is integrated with the
pharmacy system. Critical components of the system are a 99.9% uptime guarantee
and "think speed" response time.

   The Carecast Web Framework facilitates information flow into and out of
patient records using a web-based user interface. The Carecast system's design
and web-based architecture help reduce training time and enhance user
interaction with the system. Clinical Information Management applications in
Carecast serve clinicians in a variety of inpatient and outpatient settings.
Automated workflow tools support caregiver activities such as assessments,
charting, and patient classification while protocols and outcomes management is
supported through access to a structured medical knowledge database. Additional
applications support population health management and provide comprehensive
order management and results reporting, supporting Physician Order Entry. Other
applications include Scheduling (to balance patient needs and clinical
workflow), Pharmacy (to increase efficiency while decreasing medical errors),
Emergency Department (to improve patient flow management and integrate care
activities with the patient's long-term record) and Image Access (which
provides access to notes, diagnostic reports and images).

   Administrative and Financial Information Management applications work to
impart a complete financial and administrative solution. Patient Accounting
captures billing details, triggered by medical activities at the point of care,
in the patient record and produces claim forms and reports, while supporting
compliance with regulatory requirements. Management Reporter creates queries
and retrieves data needed for departmental management and tactical analysis.
Intercept detects payer underpayments, assists in evaluating future contract
profitability and focuses on collection activities. Interactive Eligibility
Interface is designed to increase cash flow, reduce administrative costs and
enhance patient satisfaction by automating insurance verification. Medical
Records automates activities related to releasing patient record information to
external requesters, including tracking, billing and collection.

   Carecast runs on the Compaq(R) Nonstop(TM) Himalaya platform.

   Group Practice Management System(TM) (GPMS(TM)) provides a comprehensive
solution to address sound financial management, administrative efficiency,
clinical excellence, and patient satisfaction for the medical group practice,
management service organization, and other billing organizations that service
the physician group marketplace. GPMS helps clients streamline patient flow and
business processes at every step in the delivery of care such as scheduling,
registration, billing, collections, referrals, and reporting. Relational
reporting using Microsoft(R) SQL Server and Cognos(R) tools turn data into
meaningful information for decision makers, and built in integration with the
Allscripts Clinical solutions provides seamless access to the full range of
clinical information.

   GPMS is deployed in a web-based format designed to meet customers' growing
need to manage complex health care information. Key components of the
technology foundation include an advanced web-based architecture, the UNIX
operating system, and a relational database reporting platform.

   Complementary GPMS products include IDX eCommerce Services and Ingenix
ClaimsManager(TM). Through IDX eCommerce Services, IDX offers a HIPAA-ready EDI
solution to handle customer claims, remittances, statements, claims status, and
eligibility requirements. The Company provides full integration of the GPMS
billing application with the Ingenix ClaimsManager(TM) system. This combination
offers the sophisticated claims analysis and correction capability required for
timely reimbursement in today's regulatory environment.

   In addition to the traditional turnkey model, GPMS is available in a
remote-processing model. This application hosting arrangement enables customers
to purchase GPMS software applications on a subscription basis that are
deployed over the Internet and/or a private network. Users access the
applications through a standard web browser interface.

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   IDXrad(TM) automates and manages a radiology department's clinical,
demographic, administrative, billing, scheduling, and image management
information. Built on web architecture, IDXrad is a relational, scaleable,
N-tiered solution designed to streamline workflow and improve operational
efficiency. Its web architecture is designed for economy, accessibility,
flexibility of implementation, and easy expansion within and among facilities.

   The IDXrad Paperless Worklist Module provides centralized, electronic access
to all worklists and tools, facilitating unified information across the
enterprise in a web-based environment.

   The IDXrad Master Patient Index (MPI) links patients multiple medical
records across multiple organizations to present a complete clinical patient
history. With comprehensive image management, IDXrad users can readily identify
locations of a patient's images--whether film-based or digital--without
accessing a separate database.

   IDXrad includes a Mammography Administration Module that provides quality
assurance data to help users meet the Mammography Quality Standards Act (MQSA)
requirements.

   The Imaging Suite(TM) integrates patient and clinical information with
third-party modality and archiving functions. It enables bi-directional
communication among Radiology Information Systems (RIS), Picture Archiving
Communication Systems (PACS), and modalities to facilitate the transition from
a film-based department to a digital imaging environment.

   IDX offers a Medical Image and Information Management System (MIMS)
combining the advanced intelligence of the Imaging Suite with the innovative
image distribution technology of its vnetix solution. IDX believes this
database solution significantly improves the accessibility and timeliness of
radiology imaging studies while reducing the high capital expenditures
associated with PACS or traditional film-based systems.

   IDX eCommerce Services/SM/ provides Internet applications and services to
help manage the financial and administrative aspects of care delivery enabling
healthcare organizations to interact electronically with payers. By
establishing a single connection through IDX eCommerce Services, customers are
linked electronically to payers for the processing of transactions. Available
transactions include claims, remittance advice, and eligibility. Customers no
longer need to expend their own resources to connect directly with numerous
individual payers. This "one-stop-shopping" approach for connectivity
simplifies the process of exchanging information and reduces the technological
barriers that customers often face when implementing an EDI solution.

Services

   IDX maintains a Client Services organization to install its products and to
support and provide professional, technical and other consulting services to
its client base. IDX has the consulting 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 service 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 optimize the use of 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.

   Maintenance Services.   IDX provides ongoing software support to
substantially all of its clients of IDXtend and the Carecast system products
under contracts that are typically for a term of one or more years. These
contracts generally renew automatically unless terminated at the option of
either the client or IDX. Software maintenance services consist of providing
the client with certain new software upgrades, on an "if and when available"
basis, 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.

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   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 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 systems,
and gains information regarding future client needs.

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

Professional Services

  The Laureate Group

   Consulting services for all the Carecast system applications, implementation
process, project management, technical (systems and report writing), expert
rules, upgrades, release migration, programming and best practices.

  The Huntington Group

   Consulting Services in the areas of application consulting, contract
programming, process redesign, organization change management, outsourcing and
systems integration across the enterprise. Diagnostic assessments to improve
operational and financial performance and ensure adherence to HIPAA regulatory
requirements have resulted in significant returns on investment for IDX clients.

  Radiology Consulting Services

   System analysis and process redesign for radiology groups.

Medical Transcription Services Business Segment

   Please see Note 4 of the Notes to the Consolidated Financial Statements for
the revenues, profits and losses for the Medical Transcription Services
business segment for each of the last three fiscal years.

Medical Transcription Services from EDiX

   EDiX services employ innovative technology and an advanced digital
voice-capture system to automate the medical transcription process and deliver
fast, accurate electronic medical records. EDiX's network is a secure, private
national network connecting clients with a national pool of highly trained
medical transcriptionists (MTs) located throughout the continental United
States.

   EDiX is one of the nation's largest transcription services companies, with
more than 2,600 MTs producing and securely delivering over 40 million lines of
medical transcription every month. EDiX serves over 100,000
physicians at more than 220 health systems and physician groups throughout the
U.S. EDiX's network serves healthcare clients 24 hours a day, 7 days a week.
Transcribed reports can be immediately integrated with a facility's electronic
patient record system.

   IDX believes health systems and physician practices may use EDiX's full
outsourcing solution to help reduce costs and shorten turnaround time, increase
quality, and improve physician satisfaction. EDiX provides, installs, supports
and maintains its state-of-the-art digital dictation system and management
reporting equipment on-site at each facility, eliminating the facility's own
capital equipment and maintenance costs. EDiX's network is designed to increase
workflow efficiencies, enabling clients to monitor and control costs via
real-time tracking of every job. By using EDiX as an outsourcing solution, our
customers can eliminate their in-house MT staffing and benefit costs.

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   To achieve one of the highest quality and accuracy levels in the industry,
EDiX uses a system of internal quality checks, both systematic and managerial,
along with automatic monitoring of regulatory changes. Performance is
documented and measured via monthly quality and accuracy reports to the client.

   EDiX provides round-the-clock, toll-free telephone support for both
operational and technical issues. The EDiX technical support team performs
remote diagnostics and maintenance on a daily basis to proactively identify
potential problems at each of our customer sites of service. Committed to
complete customer service, EDiX assigns each client a local account manager,
with the ability to respond to any call. The account manager understands each
facility's needs, provides on-site training and technical support as needed
during implementation, then continues to provide these services on an ongoing
basis, including ongoing dictation training for physicians and staff.

BUSINESS RELATIONSHIPS

  Allscripts Healthcare Solutions, Inc.

   In January 2001, IDX entered into a ten-year strategic alliance with
Allscripts to cooperatively develop, market, and sell integrated clinical and
practice management products. The agreement between IDX and Allscripts
prohibits IDX from formally collaborating with another partner to integrate
GPMS or IDXtend products with products that would compete with the Allscripts
products. Allscripts may not develop any practice management products or enter
into a similar collaborative relationship with certain IDX competitors. The
alliance will enable IDX and Allscripts to offer a hand-held solution that
logically fits into the physician workflow. Consistent with the strategic
alliance agreement, the Company and Allscripts seek to provide this
complementary product in a seamless and coordinated manner.

  Stentor, Inc.

   In November 2000, IDX formed a five-year alliance with Stentor to jointly
develop vnetix(TM), a medical image and information management system (MIMS)
combining the advanced intelligence of the Imaging Suite with the innovative
image distribution technology from Stentor, Inc. This single database solution
is designed to improve the accessibility and timeliness of radiology imaging
studies while significantly reducing the high capital expenditures associated
with PACS or traditional film-based systems. The overall solution includes the
following components: (i) a web-based enterprise-wide medical image and
information system that enables clinicians and referring providers access to
full-fidelity images anytime, anyplace, on-demand across existing networks;
(ii) a specialized workstation designed for radiologists that includes a
navigation control panel where all user interface control is managed on a
separate monitor, dedicating the diagnostic monitor space for image display;
and (iii) a long-term medical image storage device designed to also accommodate
immediate accessibility of images for users.

  Picis

   Picis is a provider of documentation tools for use in patient care in
critical and monitored care settings. Through a reseller agreement, the Company
has been distributing the Critical Care system from Picis since 1995.

  Compaq

   Compaq is a leading provider of hardware and operating system software used
by a majority of the applications offered by IDX. The IDXtend suite of
applications operates on Compaq's Alpha platform using the OpenVMS operating
system. The Carecast suite of applications is powered by Compaq's NonStop
Himalaya platform. A number of other IDX applications, including Healthcare
Objects, Analyzer(TM), IDXRad v10, and Imaging Suite operating on Microsoft NT
and SQL Server, are powered by Compaq's Proliant platform. See Forward-Looking
Information and Risk Factors Affecting Future Performance - Business
Relationship with Compaq.

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  IBM

   IBM is a leading provider of hardware and operating systems software used by
many of the applications offered by IDX. The IDXtend and GPMS suite of
applications operates on the RISC System/6000 platform using the AIX operating
system. A number of other IDX applications, including Healthcare Objects,
Analyzer, IDXRad v10, and Imaging Suite, are powered by IBM's Series(TM)
servers using Microsoft operating systems and SQL Server.

  Intersystems

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

  Microsoft

   The Microsoft product suite is used in many different areas of IDX.
Internally, Microsoft operating systems, 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. IDXtend offers a number of
applications that are available on the Microsoft platform.

  WebMD

   IDX has an agreement with WebMD via its clearinghouse to process commercial
claims and other transactions gathered from IDX practice management customers.

SALES AND MARKETING

   IDX sells its products and the services of EDiX exclusively through a direct
sales force. The majority of IDX's initiatives are in response to requests from
existing customers or requests for proposals from prospects. 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 customer accounted for more than 10% of IDX's annual revenues in
1999, 2000 or 2001.

   At December 31, 2001, the Company had total backlog of $455.1 million,
including $150.2 million attributable to systems sales and $304.9 million
attributable to services. Systems sales backlog consists of fees due under
signed contracts that have not yet been recognized as revenue. Service backlog
represents contracted software maintenance services including anticipated
renewals, consulting services, remote computing service fees and medical
transcription service fees for a period of 12 months. At December 31, 2000, the
Company had total backlog of $386.9 million including $123.4 million
attributable to systems sales and $263.5 million attributable to services. Of
the total 2001 backlog of $455.1 million, the Company expects that $143.9
million will not be fulfilled in 2002.

PRODUCT DEVELOPMENT

   To ensure that the Company's products continue to meet the evolving needs of
the healthcare industry, IDX allocates a significant portion of annual
expenditures to research and development. IDX's research and development
expenses for 2001, 2000 and 1999 were $43.4 million, $49.4 million and $53.2
million, respectively.

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   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
Carecast system and IDX products 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 and services.

COMPETITION

   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 the system and product offerings, the ongoing support for
the systems, the potential for enhancements and future compatible products. 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. See
Item 1 below, Forward-Looking Information and Factors Affecting Future
Performance - Competition for Healthcare Information Systems.

   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, transcription services 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.

  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 further develop, additional competitors may enter
those markets and competition may intensify.

  Medical Transcription Services Business Segment

   With respect to dictation and transcription services, EDiX's 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.

PROPRIETARY RIGHTS AND LICENSES

   IDX depends upon a combination of trade secrets, copyright, patent, 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. IDX also utilizes a variety of intellectual
property rights that are licensed from third parties.

EMPLOYEES

   At December 31, 2001, IDX and its subsidiaries employed 4,755 full-time
employees, of which 2,664 were employed in its EDiX business segment.
Management believes our relations with employees are good and no employees are
covered by a collective bargaining agreement.

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     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 results 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, our business, financial condition and
operating results would likely suffer. In that event, the market price of IDX's
common stock could decline.

   The Company undertakes no obligation to update or revise forward-looking
statements to reflect changed assumptions, the occurrence of unanticipated
events or changes in future operating results, financial condition or business
over time.

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

   QUARTERLY OPERATING RESULTS MAY VARY.  The Company's quarterly operating
results have varied in the past and may vary in the future. 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:

    .  delays in customers purchasing decisions due to a variety of factors
       such as consideration and management changes;

    .  long sales cycles;

    .  long installation and implementation cycles for the larger, more complex
       and costlier systems;

    .  recognizing revenue at various points during the installation process,
       typically based on milestones; and

    .  timing of new product and service introductions and product upgrade
       releases

   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.

   VOLATILITY OF STOCK PRICE.  IDX has experienced, and expects to continue to
experience, fluctuations in its stock price due to a variety of factors
including:

    .  actual or anticipated quarterly variations in operating results;

    .  changes in expectations of future financial performance;

    .  changes in estimates of securities analysts;

    .  market conditions particularly in the computer software and Internet
       industries;

    .  announcements of technological innovations, including Internet delivery
       of information and use of application service provider technology;

    .  new product introductions by IDX or its competitors;

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<PAGE>

    .  delay in customers purchasing decisions due to a variety of factors;

    .  market prices of competitors; 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.

   FINANCIAL TRENDS.  Although the Company's results from operations improved
in 2001, year over year operating results and cash from operations generally
declined during the period from 1998 through 2000. In 2001 and 2000, IDX
generated a net loss of approximately $8.6 million and $36.0 million,
respectively. If these trends continue, IDX may have difficulty financing
future growth and funding operating initiatives, including future acquisitions.

   DISRUPTION IN THE ECONOMY.  The terrorist events of September 11, 2001 have
sensitized the Company and many other businesses to the potential disruption
that such activities can have on the economy, the business cycle and,
ultimately on the financial performance of these organizations. It is
impossible to know whether such terrorist activities will continue, and
whether, and to what extent, they may cause a disruption which may have a
material adverse effect on the business and financial condition of the Company.

   NEW PRODUCT DEVELOPMENT AND 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; 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 architecture 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.

   CHANGES AND CONSOLIDATION IN THE HEALTHCARE INDUSTRY.  IDX currently derives
substantially all of its revenues from sales of financial, administrative and
clinical healthcare information systems, medical transcription services and
other 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.

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   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.

   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 likely decrease. As the healthcare industry
consolidates, competition for customers will become more intense and the
importance of acquiring each customer will become greater.

   COMPETITION FOR HEALTHCARE INFORMATION SYSTEMS.  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 the system and
product offerings, the ongoing support for the systems, the potential for
enhancements and future compatible products.

   Some of 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, Eclipsys Corporation, McKesson Medquist, Inc.,
Shared Medical Systems Corporation, which was acquired by Siemans AG in 2000,
Epic Systems Corporation, and Cerner Corporation. Each of these competitors
offer 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. In October 2001, Pfizer, IBM and Microsoft
announced the creation of a joint venture known as Amicore to develop
applications to automate the administrative, clinical and financial functions
of a medical practice and connect the practice to groups, laboratories,
pharmacies and other providers for physicians and physician groups.

   PRODUCT LIABILITY CLAIMS.  Any failure by IDX's products that provide
applications relating to patient medical histories, diagnostic procedures, 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 make assurances that it will continue to have appropriate insurance
available to it in the future at commercially reasonable rates.

   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 and systems architects skilled in the technical environments in
which IDX's products operate. Competition for such

                                      17

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personnel in the software and information services industries is intense. IDX
does not maintain "key man" life insurance policies on any of its executives
with the exception of Richard E. Tarrant. Not all of IDX personnel have
executed noncompetition agreements.

   GOVERNMENT REGULATION.  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.

   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. In addition the Medicare/Medicaid and other Federal statutes
provide for criminal penalties for such false claims. 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.

   The Health Insurance Portability and Accountability Act of 1996 (HIPAA)
contains provisions regarding standardization, privacy, security and
administrative simplification in healthcare. As a result of regulations now
proposed under HIPAA, IDX intends to 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 all 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;

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<PAGE>

    .  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. 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 AND WARRANTIES.  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 expenses 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.

   POTENTIAL INFRINGEMENT OF PROPRIETARY RIGHTS OF OTHERS.  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.

   LIMITED PROTECTION OF 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, patents, 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 continue to be necessary 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.

   RISKS ASSOCIATED WITH 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

                                      19

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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.

   STRATEGIC ALLIANCE WITH ALLSCRIPTS HEALTHCARE SOLUTIONS.  In 2001, IDX
entered into a ten-year strategic alliance with Allscripts Healthcare Solutions
to cooperatively develop, market and sell integrated clinical and practice
management products.

   During the term of the alliance, IDX is prohibited from cooperating with
direct competitors of Allscripts to develop or provide any products similar to
or in competition with Allscripts products in the practice management systems
market. Pursuant to the strategic alliance agreement, IDX has guaranteed that
Allscripts will have gross revenues resulting from the alliance (less any
commissions paid to IDX) of at least $4.5 million for fiscal year 2001. IDX has
accrued the $4.5 million liability and as of the time of this filing had not
received information related to Allscripts eligible gross revenues for 2001.
Accordingly, no payments have been processed related to this term of the
alliance. If the strategic alliance is not successful, or the restrictions
placed on IDX during the term of the strategic alliance prohibit IDX from
successfully marketing and selling certain products and services, IDX's
operating results may suffer. Additionally, if Allscripts breaches the
strategic alliance, it may also leave the Company without critical clinical
components for its information systems offerings in the physician group
practice markets.

   BUSINESS RELATIONSHIP WITH COMPAQ.  Compaq Computer Corporation has
announced a proposed merger with Hewlett-Packard Company. Compaq is a leading
provider of hardware and operating system software used by a majority of the
applications offered by the Company. To the extent the merger impacts the
product lines that IDX uses in its product offering, or the development
activities of the merged Compaq/Hewlett-Packard entity, it may adversely affect
IDX's ability to continue to offer its products on the historical hardware
platforms. As a result, such merger could have a material adverse effect upon
the business of IDX.

   RESTRICTIONS ON LIQUIDATION OF INVESTMENT IN ALLSCRIPTS HEALTHCARE
SOLUTIONS.  In January 2001, IDX received approximately 7.5 million shares of
common stock of Allscripts Healthcare Solutions in connection with the
acquisition by Allscripts of IDX's majority owned subsidiary, ChannelHealth
Incorporated. IDX entered into a stock rights and restrictions agreement with
Allscripts, pursuant to which, among other things, IDX agreed to restrictions
on the sale of its shares of Allscripts common stock. In general, IDX is
prohibited from selling any shares for one year after the date of Allscripts'
acquisition of ChannelHealth, and after one year, IDX is prohibited from
selling more than 25% of it shares of Allscripts common stock in any one year,
and 16.67% in any one month. The restrictions on IDX's ability to sell shares
of Allscripts common stock may make it difficult for IDX to liquidate its
investment in Allscripts and may adversely affect the value of such investment.

   ANTI-TAKEOVER DEFENSES.  IDX's Second Amended and Restated Articles of
Incorporation and Second Amended and Restated Bylaws contain certain
anti-takeover provisions, which could deter an unsolicited offer to acquire
IDX. For example, IDX's board of directors is divided into three classes, only
one of which will be elected at each annual meeting. These provisions may delay
or prevent a change in control of IDX.

                                      20

<PAGE>

ITEM 2.  PROPERTIES

   The Company's principal corporate offices are located at 40 IDX Drive, South
Burlington, Vermont 05403. The Company maintains sales, research and support
facilities in South Burlington, Vermont; Boston, Massachusetts; and Seattle,
Washington. The Company maintains data centers in Boston, Massachusetts and
St. Petersburg, Florida. The Company maintains regional sales, support and
administrative offices in the greater metropolitan areas of Arlington,
Virginia; Chicago, Illinois; Dallas, Texas; San Francisco, California;
Clearwater, Florida; Deerfield Beach, Florida; Atlanta, Georgia; San Diego,
California; Louisville, Kentucky and Hammersmith, London, United Kingdom. The
principal corporate offices are housed in three Company owned office buildings
in South Burlington, Vermont, consisting of approximately 291,000 square feet
of office space. The Company purchased the main headquarters office building in
South Burlington, Vermont on April 19, 2001 for approximately $15.0 million
from BDP Realty; a related entity that was included in the Company's
consolidated financial statements through that date. As a result, the net
assets of BDP Realty, principally real estate and related minority interest of
approximately $9.0 million, were eliminated in the Company's consolidated
balance sheet. The real estate was purchased for $15.0 million in cash based
upon an independent appraisal of fair market value and was capitalized in
property and equipment. The Company has substantially completed construction on
an expansion of its corporate headquarters facility in South Burlington,
Vermont, which began in November 1999. The Company leases all of its other
facilities which, in the aggregate, constitute approximately 525,000 square
feet of office space. The Company's leases will expire between June 30, 2002
and September 30, 2014. From time to time, based on the Company's requirements,
the Company may consider other purchases of land or the construction of
additional office space. The Company believes that its facilities are adequate
for its current needs and that suitable additional space will be available as
required.

ITEM 3.  LEGAL PROCEEDINGS

   On January 18, 2001, the Company commenced a lawsuit against Epic Systems
Corporation, a competitor of the Company, the University of Wisconsin Medical
Foundation (the Foundation), and two individuals, claiming, among other things,
that trade secrets of the Company involving its IDXtend medical group practice
system were wrongfully disclosed to, and misappropriated by, Epic, in a series
of meetings that took place in 1998 and 1999. The defendants deny the Company's
claims. The Company's lawsuit seeks damages and injunctive relief and was
brought in the United States District Court for the Western District of
Wisconsin and is entitled, IDX Systems Corporation v. Epic Systems Corporation,
et al. The Foundation brought a counterclaim against the Company claiming that
its lawsuit interferes with a contract between the Foundation and Epic, and
that the confidentiality provisions in IDX's contracts with the Foundation are
invalid. The counterclaim seeks damages and declaratory judgment. The Company
denies the counterclaim.

   Subsequently, Epic filed an Answer denying the essential elements of the
Company's claims, and asserted counterclaims against the Company. Epic alleges
that the Company's claims asserting its trade secret rights were brought in bad
faith, with an intent to injure Epic competitively, and thereby violated
Sections 1 and 2 of the Sherman Act because the Company allegedly possesses
monopoly power in the U.S. market for medical practice information systems.
Epic also claims that this same alleged conduct constitutes intentional
interference with its contract with the Foundation. The counterclaim seeks
treble damages. The Company denies the counterclaims. On July 31, 2001, the
Company's lawsuit against Epic, the Foundation and the individuals was
dismissed and the counterclaims of Epic and the Foundation were dismissed. The
Company appealed the dismissal of its lawsuit to the United States Court of
Appeals, and Epic appealed the dismissal of its counterclaims. Appellate
argument was heard by the United States Court of Appeals for the Seventh
Circuit on January 24, 2002. The Company expects to receive a decision in the
future.

   In April 2000, the Company commenced a lawsuit for damages caused by
wrongful cancellation and material breach of contract by St. John Health System
("SJHS"), in the United States District Court for Eastern District of Michigan,
entitled IDX Systems Corporation v. St. John Health System. Subsequently, SJHS
commenced a lawsuit against the Company in the Circuit Court of Wayne County,
Michigan, claiming

                                      21

<PAGE>

unspecified damages against the Company for anticipatory repudiation, breach of
contract, tort and fraud. On motion of the Company, SJHS's lawsuit was removed
to and consolidated in the federal court. In its answer to the Company's
lawsuit, SJHS asserted the same claims previously asserted in its state court
action. In September 2001, SJHS specified damage claims of approximately $77
million in allegedly lost savings, and in January 2002 raised another theory of
alleged unspecified damages for "cover". The Company believes the claims of
SJHS are without merit and continues to vigorously defend itself and prosecute
its own claims for damages, which the Company believes may exceed approximately
$9 million. The lawsuit is in the trial preparation stage and the parties are
awaiting scheduling of the trial by the court.

   From time to time, the Company is a party to or may be threatened with other
litigation in the ordinary course of its business. The Company regularly
analyzes current information including, as applicable, the Company's defenses
and insurance coverage and as necessary, provides accruals for probable and
estimable liabilities for the eventual disposition of these matters. The
ultimate outcome of these matters is not expected to materially affect the
Company's business, financial condition or results of operations.

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

   None.

                                      22

<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.

<TABLE>
<CAPTION>
Executive Officer    Age Position
-----------------    --- --------
<S>                  <C> <C>
Richard E. Tarrant.. 59  Chief Executive Officer and Director

James H. Crook, Jr.. 45  President and Chief Operating Officer

Gene H. Barduson.... 63  Senior Vice President, EDiX

Thomas W. Butts..... 41  President/General Manager, Enterprise Solutions Division

Robert F. Galin..... 57  Senior Vice President, Sales

Stephen C. Gorman... 36  Vice President, Systems Division

William F. Grieco... 48  Senior Vice President, General Counsel, and Secretary

John A. Kane........ 49  Senior Vice President, Finance and Administration, Chief Financial
                         Officer, and Treasurer

Lawrence A. Krassner 56  President, Integrated Solutions Division

Walt N. Marti....... 46  Vice President, Radiology and Imaging Solutions Division

William F. Vogt..... 54  Senior Vice President, The Huntington Group
</TABLE>

   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. He also
served as a trustee of the University of Vermont and of Saint Michael's
College. He is currently a member of the Vermont Business Roundtable and is a
director of Fletcher Allen Healthcare, an academic medical center. Mr. Tarrant
is also a member of the Board of Directors of Allscripts Healthcare Solutions,
Inc.

   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. Barduson has served as Senior Vice President of the Company since May
2001 and served as Vice President of the Company from December 1999 to May
2001. Prior to the acquisition of EDiX Corporation by the Company in April
1999, Mr. Barduson served as President and Chief Executive Officer of EDiX.
Since the acquisition of EDiX, Mr. Barduson has served as Vice President of
EDiX. Prior to joining EDiX, Mr. Barduson served as Vice President of Western
Operations and National Health Services for Shared Medical Systems Corporation,
a medical software company.

   Mr. Butts joined the Company as President/General Manager of the Enterprise
Solutions Division in January 2002. Prior to joining the Company, Mr. Butts
served in various capacities including: General Manager of Business
Development, General Manager of X-Ray Sales and Marketing and Vice President of
OEC Medical Systems at GE Medical Systems of Milwaukee, WI, a global leader in
medical imaging, interventional procedures, healthcare services, and
information technology, since 1984. Mr. Butts graduated from Western New
England College and received a Bachelors Degree in Business Administration.

   Mr. Galin has served as Senior Vice President, Sales since June 2000 and
served as Vice President, Sales since August 1992. He served as Director of
Sales from April 1982 to August 1992.

                                      23

<PAGE>

   Mr. Gorman, who joined the Company as a sales representative in June 1991,
has served as Vice President, Systems Division since December 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. Grieco has been with the Company since November 2001 as Senior Vice
President, General Counsel and Secretary. Prior to joining the Company, Mr.
Grieco was Managing Director of Arcadia Strategies, LLC, a business consulting
group which provided services to health information and technology, life
sciences, and health care organizations. From 1995 to 1999, Mr. Grieco was
Senior Vice President and General Counsel of Fresenius Medical Care Holdings,
Inc., the largest integrated provider of dialysis products and services in the
world. He has practiced law for over twenty years, and is also a former senior
partner in the healthcare practice group at Choate, Hall & Stewart, a major
Boston law firm. Mr. Grieco graduated from Boston College Law School and Boston
College, and received a Masters Degree in Health Policy and Management from
Harvard University.

   Mr. Kane has served as the Senior Vice President, Finance and
Administration, Chief Financial Officer and Treasurer since May 2001 and as the
Vice President, Finance and Administration, Chief Financial Officer and
Treasurer from October 1984 when he joined the Company to May 2001. Mr. Kane is
a CPA.

   Mr. Krassner joined the Company as President of the Integrated Solutions
Division in June, 2001. Prior to joining the Company, Mr. Krassner was
President/General Manager of the Outsourcing Services Division of McKesson
HBOC, a leading health care service and technology company, since March 1997.
From June 1987 to March 1997, Mr. Krassner served in various capacities
including: Senior Vice President of Worldwide Marketing and Sales, Senior Vice
President/General Manager of North America, and Senior Vice President of
Sales/Customer Service of Alltel Information Services-Health Division (formerly
TDS Healthcare Systems), a provider of information processing management,
outsourcing services, professional consulting services and application software
to the financial, mortgage and telecommunications industries.

   Mr. Marti, who joined the Company as a sales representative in March 1989,
has served as Vice President, Radiology and Imaging Solutions Division since
December 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.

   Mr. Vogt joined the Company as Senior Vice President, Huntington Group in
June 2001, when the Company acquired Vogt Management Consulting, Inc. Mr. Vogt
leads The Huntington Group, the Company's consulting group which assists
healthcare organizations to improve business operations. Prior to joining the
Company, Mr. Vogt was the President and Founder of Vogt Management Consulting,
Inc., a consulting company providing consulting assistance to healthcare
management organizations, since 1990. He has more than thirty years of academic
medical center, faculty practice plan, and healthcare management consulting
experience. Mr. Vogt graduated from the University of Washington and received a
Masters Degree in Business Administration from the University of Washington.

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


                                      24

<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.

<TABLE>
<CAPTION>
                                                 High   Low
                                                ------ ------
                     Quarter/Year                   2000
                     ------------               -------------
                     <S>                        <C>    <C>
                     First Quarter 2000........ $49.13 $26.56
                     Second Quarter 2000....... $28.00 $10.38
                     Third Quarter 2000........ $19.38 $12.63
                     Fourth Quarter 2000....... $33.75 $15.88
                                                    2001
                                                -------------
                     First Quarter 2001........ $31.81 $16.38
                     Second Quarter 2001....... $22.00 $12.01
                     Third Quarter 2001........ $19.57 $ 9.25
                     Fourth Quarter 2001....... $13.56 $ 8.64
</TABLE>

   On March 11, 2002, the Company had approximately 610 stockholders of record.
(This number does not include stockholders for whom shares are held in a
"nominee" or "street" name.) On March 11, 2002, the closing price of the
Company's Common Stock on the Nasdaq National Market was $16.48.

   The Company has not declared or paid a dividend since the Company's initial
public offering in 1995. 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 21, 2001, the Company
issued a total of 3,431 shares of Common Stock to the seven outside directors
of the Company in consideration of one year's 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.

                                      25

<PAGE>

ITEM 6.  SELECTED FINANCIAL HIGHLIGHTS

   The following selected consolidated financial data is derived from the
Company's consolidated financial statements. The selected consolidated
financial data set forth below should be read in conjunction with the
consolidated financial statements and the notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the other financial information appearing elsewhere in this Annual Report on
Form 10-K. In addition, the consolidated financial data set forth below
includes the results of operations and accounts of PHAMIS and EDiX for all
periods presented. Both of these acquisitions were accounted for as
pooling-of-interests. See Note 1 for basis of presentation.

<TABLE>
<CAPTION>
                                                       Year Ended December 31,
                                           -----------------------------------------------
                                             2001      2000      1999      1998     1997
                                           --------  --------  --------  -------- --------
                                              (in thousands, except for per share data)
<S>                                        <C>       <C>       <C>       <C>      <C>
Statements of Operations Data:
 Revenues................................. $379,929  $341,893  $340,999  $350,187 $272,007
 Operating income (loss)..................  (34,168)  (66,065)  (12,649)   34,994   (4,890)
 Net income (loss)........................   (8,598)  (35,968)   (7,944)   16,834   (7,982)
 Diluted net income (loss) per share...... $  (0.30) $  (1.28) $  (0.29) $   0.60 $  (0.30)
Balance Sheet Data:
 Cash and investments..................... $ 56,373  $ 70,683  $ 68,359  $125,132 $116,567
 Working capital..........................   90,534   139,492   136,732   169,671  140,015
   Total assets...........................  265,322   297,491   271,147   289,223  245,459
 Long-term debt, less current portion.....       --        --        --     2,261    4,876
 Redeemable convertible preferred stock of
   subsidiary.............................       --    33,140        --        --       --
   Total stockholders' equity............. $177,998  $179,110  $206,514  $210,211 $177,855
</TABLE>

   The results of operations for the periods presented above include certain
significant pre-tax charges and gains in the following periods as described
below:

2001

   A charge of $19.5 million related to a restructuring program, a gain on sale
of an investment in ChannelHealth of $35.5 million, a realized gain on
investment in an unrelated entity of $5.8 million and the equity in the loss of
an unconsolidated affiliate of $17.6 million.

2000

   Charges of $21.0 million related to a product discontinuance and
restructuring program, a $5.8 million loss on impairment of goodwill associated
with ChannelHealth, Inc. and a realized gain on investment in an unrelated
entity of $7.3 million.

1999

   Charges for merger and other costs related to the EDiX acquisition of $4.0
million and an investment impairment charge of $1.6 million.

1998

   A charge related to the write-off of acquired research and development costs
of $3.2 million.

1997

   Charges for merger and other costs related to the Phamis acquisition of
$20.0 million and a $2.3 million write-off of acquired research and development
costs.

                                      26

<PAGE>

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

   You should read the following discussion together with the consolidated
financial statements and related notes appearing elsewhere in this Annual
Report on Form 10-K. This Item contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities and Exchange Act of 1934 that involve risks and uncertainties.
Actual results may differ materially from those included in such
forward-looking statements. Factors which could cause actual results to differ
materially include those set forth under "Forward-Looking Information and the
Factors Affecting Future Performance", included in Item 1, as well as those
otherwise discussed in this section and elsewhere in this Annual Report on Form
10-K. Unless otherwise specified or the context requires otherwise, the terms
"we", "our" and "us" refer to IDX Systems Corporation and its subsidiaries.

CRITICAL ACCOUNTING POLICIES

   The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States. The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amount of assets and
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities at the date of our financial statements. Those estimates are
based on our historical experience, terms of existing contracts, and our
observance of trends in the industry, information provided by our customers and
information available from other outside sources, as appropriate. Actual
results may differ from these estimates under different assumptions or
conditions.

   Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. We have
identified the following as critical accounting policies to our Company:
revenue recognition and accounts receivable, income taxes and accounting for
litigation, commitments and contingencies. For a detailed discussion on the
application of these and other accounting policies, see Note 1 of Notes to
Consolidated Financial Statements.

    .  Revenue recognition and accounts receivable. We recognize revenue when
       evidence of an arrangement exists, contractual obligations have been
       satisfied, title and risk of loss (in the case of hardware) have been
       transferred to the customer and collection of the resulting receivable
       is reasonably assured. We defer revenue when initial payment terms
       exceed 90 days. We recognize revenue on software licensing arrangements
       involving multiple elements by allocation of the fair value of the
       transaction to each element, or more typically using the residual
       method. Fair value determination requires management's judgement on a
       number of factors including typical sales price. Revenue from software
       licensing arrangements is principally recognized upon attainment of
       specified contractual milestones and dates. Additionally, we
       periodically enter into certain long-term contracts where revenue is
       recognized on a percentage of completion basis or the completed contract
       method, as appropriate measures of completion for each contract are
       achieved. We also generate service revenues from the sale of product
       maintenance contracts, consulting contracts and transcription service
       arrangements. Revenue from maintenance contracts is recognized ratably
       over the support period, including the installation period through the
       term of the agreements, which is typically one year. Revenues from
       consulting and transcription services are recognized in the period in
       which services are performed. Revenue from hardware sales is recognized
       upon transfer of title to customers.

       Management estimates allowances for doubtful accounts receivable based
       on historical experience and management's evaluation of the financial
       condition of the customer. The Company typically does not require
       collateral. Historically, management's estimates have been adequate to
       cover accounts receivable exposures.

                                      27

<PAGE>

    .  Income taxes. Our valuation allowance relating to the net deferred tax
       assets is based on our assessment of historical pre-tax income as well
       as tax planning strategies designed to generate future taxable income.
       These strategies include estimates and involve judgement relating to
       certain favorable lease rights and unrealized gains in the Company's
       investment in common stock of an equity investee. To the extent that
       fact and circumstances change, these tax planning strategies may no
       longer be sufficient to support the deferred tax assets and the Company
       may be required to increase the valuation allowance. As we generate
       future taxable income against which these tax assets may be applied,
       some portion or all of the valuation allowance would be reversed and an
       increase in net income would consequently be reported in future years.

    .  Accounting for litigation, commitments and contingencies. We are
       currently involved in certain legal proceedings, which, if unfavorably
       determined, could have a material adverse effect on our operating
       results and financial condition. In connection with management's
       assessment of these legal proceedings, management must determine if an
       unfavorable outcome is probable and evaluate the costs for resolution of
       these matters, if reasonably estimable. These determinations and related
       estimates have been developed in consultation with outside counsel
       handling our defense in these matters and is based upon an analysis of
       potential results, assuming a combination of litigation and defense
       strategies. See Item 3. "Legal Proceedings" and Note 14 to our audited
       consolidated financial statements included in this annual report on Form
       10-K.

   The above listing is not intended to be a comprehensive list of all of our
accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by generally accepted accounting
principles, with no need for management's judgement in their application. There
are also areas in which management's judgement in selecting any available
alternative would not produce a materially different result. See our audited
consolidated financial statements and notes thereto contained in this Annual
Report on Form 10-K which contain accounting policies and other disclosures
required by generally accepted accounting principles.

GENERAL

   Revenues increased to $379.9 million in 2001 from $341.9 million in 2000.
Systems sales increased 1.4% in 2001, while maintenance and service fees grew
15.7% as compared to the prior year. Operating loss decreased from $66.1
million in 2000 to $34.2 million in 2001, a decrease of $31.9 million. The
Company reported a net loss of $8.6 million, or $0.30 per share, for 2001 as
compared to a net loss of $36.0 million, or $1.28 per share, for 2000.
Excluding the effect of pre-tax charges of $19.5 million related to a
restructuring program announced on September 28, 2001, the gain on sale of an
investment in ChannelHealth of $35.5 million, a realized gain on investment in
an unrelated entity of $5.8 million and the equity in the loss of an
unconsolidated affiliate of $17.6 million, the net loss after income taxes for
the year ended December 31, 2001 was $7.5 million or $0.26 per share. Excluding
the effect of charges of $21.0 million related to a product discontinuance and
restructuring program announced on June 21, 2000, the $5.8 million loss on
impairment of goodwill associated with ChannelHealth, Inc., and the realized
gain on investment in an unrelated entity of $7.3 million, the net loss after
income taxes for the year ended December 31, 2000 was $21.8 million or $0.78
per share.

   During 2000 and continuing into 2001, certain of the Company's customers
delayed making purchasing decisions with respect to certain of the Company's
software systems resulting in longer sales cycles for such systems. Management
believes such delays are due to a number of factors, including customer
organization changes, government approvals, pressures to reduce expenses,
product complexity, competition, the September 11 National Tragedy and in 2000
customer preoccupation with internal Year 2000 issues. While the Company
believes these factors are temporary, they may continue to cause reductions or
delays in spending for new systems and services in the future. If these delays
occur, they may cause unanticipated revenue volatility and affect the future
financial performance of the Company.

                                      28

<PAGE>

   On January 8, 2001, the Company sold ChannelHealth, including certain
product lines, to Allscripts Healthcare Solutions, Inc. (Allscripts), a leading
provider of point-of-care e-prescribing and productivity solutions for
physicians. ChannelHealth, incorporated in September 1999, was a majority owned
subsidiary of IDX. IDX retained the Patient and eCommerce Channels, which were
previously part of Channelhealth, enabling IDX to integrate an Internet
solution that leverages its core competencies in physician practice management
systems. In addition to the sale, the Company entered into a 10-year strategic
alliance whereby Allscripts will become the exclusive provider of point-of-care
clinical applications sold by IDX to physician practices. Allscripts acquired
Channelhealth Incorporated in exchange for 8.6 million shares, or 21.3% of
Allscripts stock on a pro-forma fully diluted basis, of which IDX received
approximately 7.5 million shares (approximately 90%). This investment in
Allscripts stock is accounted for under the equity method. Under this method,
IDX is required to recognize a pro-rata share of Allscripts net income or loss
after elimination of certain related entity transactions. IDX has recorded
approximately $17.6 million in its pro-rata share of Allscripts losses in 2001
and has reduced the carrying value of this investment to zero. IDX will not
record its share of Allscripts future net income or loss until its share of
Allscripts cumulative income and losses exceed zero. Allscripts has reported
losses since 1995 and may report losses in the future.

   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. Additionally, the Company assumed EDiX debt of
approximately $14.0 million that subsequently has been paid.

YEARS ENDED DECEMBER 31, 2001 AND 2000

Revenues

   The Company's total revenues increased to $379.9 million in 2001 from $341.9
million in 2000, an increase of approximately $38.0 million or 11.1%. Revenues
from systems sales increased to $111.1 million in 2001 (29.2% of total
revenues) from $109.6 million in 2000 (32.1% of total revenues), an increase of
$1.5 million or 1.4%. This increase was primarily due to an increase in new
sales and installations of certain IDX systems.

   Revenues from maintenance and service fees increased to $268.8 million in
2001 (70.8% of total revenues) from $232.3 million in 2000 (67.9% of total
revenues), an increase of $36.5 million or 15.7%. The increase was due to a
$23.4 million increase in EDiX's medical transcription service fee revenue, a
$10.0 million increase in maintenance revenue primarily resulting from price
increases and an increase in the Company's installed base, as well as an
increase in consulting services provided by IDX's core business. Professional
and technical services revenues increased to $25.7 million in 2001 (6.8% of
total revenues) from $23.8 million in 2000 (7.0% of total revenues), an
increase of $1.9 million, or 8.0%. The Company's Internet services and content
business segment (ChannelHealth), which was sold on January 8, 2001,
contributed approximately $6.1 million in revenue, primarily services, during
2000.

Cost of Sales

   The cost of system sales decreased to $33.8 million in 2001 from $34.7
million in 2000, a decrease of $942,000 or 2.7%. The decrease in cost of sales
is primarily a result of a decrease in hardware included as a component of
sales of the Company's systems sales. The gross margin on systems sales
increased to 69.6% in 2001 from 68.2% in 2000. The increase in the gross profit
margin as a percentage of sales was primarily due to the increase in software
license revenue which has a higher gross profit margin than hardware sales. The
cost of services increased to $229.3 million in 2001 from $209.4 million in
2000, an increase of $19.9 million or 9.5%. The increase in cost of services
resulted from growth in client services expenses, primarily medical
transcription staff, as well as maintenance, installation and consulting staff.
The gross profit margin on maintenance and service fees increased to 14.7% in
2001 from 9.9% in 2000 and was due to increased maintenance revenue in IDX's
core business which was partially offset by growth in service and maintenance
expenses combined with operational efficiencies related to process improvements
at EDiX.

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<PAGE>

   The gross profit margin of system sales of IDX's core business, information
systems and services, increased to 69.6% in 2001 from 68.2% in 2000 primarily
due to the effect of an increase in software license revenue which has a higher
gross profit margin than hardware sales. The gross profit margin of services of
IDX's core business, information systems and services, increased to 11.0% in
2001 from 8.6% in 2000 primarily due to increased maintenance revenue which was
partially offset by growth in service and maintenance expenses. The gross
profit margin for the Company's medical dictation and transcription business
segment (EDiX) increased as a percentage of sales to 21.4% in 2001 from 17.5%
in 2000 due to efficiencies in operations related to process improvements. The
gross margin for the Company's Internet services and content business segment,
operated by ChannelHealth was a negative 42.9% in 2000 primarily due to high
fixed costs and low sales volume due to the early stage of this business'
development.

Selling, General and Administrative Expenses

   Selling, general and administrative expenses increased to $88.1 million in
2001 from $87.6 million in 2000, an increase of $437,000 or 0.5%. As a
percentage of total revenues, selling, general and administrative expenses
decreased to 23.2% in 2001 from 25.6% in 2000. IDX's core business, information
systems and services, selling, general and administrative expenses increased
$8.9 million due to the reduction in absorption of corporate overhead by
ChannelHealth and increased outside professional fees offset by decreased
employee costs and rent expenses. EDiX's selling, general and administrative
expenses increased $5.7 million due to increased costs in order to support
sales growth.

Research and Development

   Research and development expenses decreased to $43.4 million in 2001 from
$49.4 million in 2000, a decrease of $6.0 million or 12.1%. As a percentage of
total revenues, research and development expenses decreased to 11.4% in 2001
from 14.4% in 2000. As a percentage of system sales, research and development
expenses decreased to 39.1% in 2001 from 45.1% in 2000. The $6.0 million
decrease is primarily due to the decrease in research and development costs in
the Internet applications and content business segment (ChannelHealth) that was
sold in January 2001 combined with the capitalization of $2.1 million, net of
amortization, in software development costs in 2001. Research and development
costs related to IDX's core information systems and services business segment
remained level as compared to the prior year due to an increase in research and
development expenses, primarily $2.2 million in increased employee expenses,
offset by the capitalization of $2.1 million in software development costs in
2001. Research and development costs in the medical dictation and transcription
business segment (EDiX) increased from $1.3 million in 2000 to $1.6 million in
2001.

   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, however, as the Company develops products to operate using other
more complex 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
more significant in future reporting periods. Approximately $2.1 million of
software development costs, net of amortization, were capitalized in 2001.

Restructuring Charges

   On September 28, 2001, the Company announced the implementation of a program
to restructure and realign its group practice businesses in order to gain
efficiencies and provide more focus on its premier customer base. As a result,
the Company implemented a workforce reduction affecting approximately four
percent of the Company's employees. Though the Company reduced certain expenses
in the cost of sales and services, and selling, general and administrative
areas resulting in estimated annual savings in excess of $20.0 million, the
Company continues to evaluate and invest resources in the development of
various products and new initiatives

                                      30

<PAGE>

that management believes will provide appropriate returns to shareholders. The
restructuring program resulted in a charge to earnings of approximately $19.5
million in the fourth quarter of 2001, in connection with costs associated with
severance arrangements of $5.5 million, lease payments of $5.2 million and
non-cash write-offs of certain equipment and leasehold improvements of $8.8
million. Workforce related accruals, consisting principally of employee
severance costs, were established based on specific identification of employees
to be terminated, along with their job classification or functions and their
location. Substantially all workforce related actions were completed during the
fourth quarter of 2001, with the exception of a minimal number of staff
assigned to transition teams. As of December 31, 2001, the Company had a
balance of $1.7 million related to accrued severance costs and $4.6 million
related to leased facilities. Cash expenditures related to these accruals is
expected to be approximately $3.7 million in 2002 and approximately $2.4
million thereafter.

   On June 21, 2000, the Company announced the implementation of product
discontinuance and restructuring program. The Company halted development and
discontinued sales efforts on certain product lines that have failed to achieve
business targets or were deemed non-strategic to the business going forward. As
a result, the Company implemented a workforce reduction affecting approximately
five percent of the Company's employees. Though the Company reduced certain
expenses as a result of the workforce restructuring program, the Company
continues to evaluate and invest resources in the development of various
products and new initiatives that management believes will provide appropriate
returns to shareholders. The restructuring program resulted in a charge to
earnings of approximately $21.0 million in the second quarter of 2000, in
connection with costs associated with product discontinuations, principally
settlements with existing users, of approximately $16.0 million and employee
severance arrangements of approximately $5.0 million. Workforce related
accruals, consisting principally of employee severance costs, were established
based on specific identification of employees to be terminated, along with
their job classification or functions, and their location. Substantially all
workforce related actions were completed during the third quarter of 2000, with
the exception of product related "sunset" support teams. As of December 31,
2001 the Company had a balance of $1.7 million related to accrued restructuring
costs. Cash expenditures related to these accruals are estimated to be
$928,000. The remaining balance of approximately $772,000 represents a
provision for the estimated write-off of accounts receivable that will not
affect cash. These account receivable write-offs are expected to be finalized
by June 30, 2002.

Loss on Impairment of Goodwill

   During the first quarter of 2000, the Company determined that an asset
impairment existed related to goodwill acquired in the 1999 purchase of the
Company's initial investment in an Internet services and content provider. In
January 2000, the Company made the decision to use an external provider of
content and transactions for ChannelHealth and discontinued the use of certain
assets. This goodwill impairment was recognized during the first quarter of
2000 and is reflected as a pre-tax loss on impairment of goodwill of
approximately $5.8 million.

Interest Income (Expense)

   Interest income decreased to approximately $2.4 million during 2001 as
compared to $4.8 million for the same period in 2000. This decrease was
primarily due to a lower average invested balance combined with lower interest
rates in 2001 as compared to 2000. Interest expense increased from
approximately $6,000 during 2000 to $42,000 in 2001.

Minority Interest

   The Company's consolidated financial statements included the accounts of the
Company and BDP Realty Associates (BDP) through April 2001. BDP's real estate
was leased exclusively by the Company, and the Company was subject to
substantially all the risks of ownership through the date that this property
was acquired by the Company at fair market value of $15.0 million, determined
by an independent appraiser. All transactions between the Company and BDP have
been eliminated. Minority interest, which was eliminated in April 2001,
represented the net income and equity of BDP.

                                      31

<PAGE>

Gain on Sale of Investment in Subsidiary

   On January 8, 2001, Allscripts acquired IDX's interest in ChannelHealth in
exchange for approximately 7.5 million shares of Allscripts common stock
(Allscripts shares). The Allscripts shares received are subject to restrictions
on any transfer of the securities for a period of one year from the date of the
transaction and after one year, on the transfer of more than 25% of the
Allscripts shares in any one year, and 16.67% in any one month. IDX recorded
the Allscripts shares at fair value of $29.5 million, which included a discount
from market value due to the four year restrictions on transfer, resulting in a
$35.5 million gain on the transaction. IDX also entered into a ten year
strategic alliance agreement with Allscripts. Pursuant to the strategic
alliance agreement, IDX has guaranteed that Allscripts will have gross revenues
resulting from the alliance (less any commissions paid to IDX) of at least $4.5
million for fiscal year 2001. IDX has accrued the $4.5 million liability and as
of the time of this filing had not received information related to Allscripts
eligible gross revenues for 2001. Accordingly, no payments have been processed
related to this term of the alliance. IDX accounts for its investment in
Allscripts under the equity method of accounting. As a result of the
transaction, the Company is entitled to representation on Allscripts Board of
Directors.

Realized Gain on Investment

   Other income in 2001 includes a $5.8 million realized gain from a
distribution of marketable equity securities related to an investment in an
unrelated investment partnership.

Equity in Loss of Unconsolidated Affiliate

   IDX, through a wholly owned subsidiary, currently owns approximately 20% of
the outstanding common stock of Allscripts and records its investment under the
equity method of accounting. IDX records its interest in the losses of
Allscripts as a reduction to its investment account. IDX recorded an equity
loss during the first nine months of 2001 of $17.6 million on a pre-tax basis
that reduced the balance of IDX's investment carrying balance in Allscripts to
zero.

Income Taxes

   The Company recorded income tax expense of approximately $311,000, an
effective tax rate of (3.8%). This is lower than the Company's historical tax
rate of 40.0% due to certain costs incurred as part of the restructuring charge
recorded in the fourth quarter of 2001, that were not benefited, and
non-deductible stock-based compensation charges related to the sale of
ChannelHealth. The Company's pre-tax loss for the year ended December 31, 2000
was benefited at approximately 34.5%, which reflects a lower rate than the
Company's historical effective and statutory rate of 40%. The lower rate in
2000 is principally due to a lower state effective tax rate. The Company
anticipates a consolidated effective tax rate of approximately 33.0% for the
year ending December 31, 2002. This favorable rate is primarily the result of
research credits projected to be generated and utilized in 2002. The Company
anticipates that EDiX's effective tax rate in 2002 will be less than the
statutory rate due to the use of operating loss carry forwards, subject to
annual limitations. The net deferred tax assets as of December 31, 2001, of
approximately $8.5 million are expected to be realized by generating future
taxable income and are otherwise recoverable through available tax planning
strategies.

YEARS ENDED DECEMBER 31, 2000 AND 1999

Revenues

   The Company's total revenues increased to $341.9 million in 2000 from $341.0
million in 1999, an increase of approximately $900,000 or 0.3%. Revenues from
systems sales decreased to $109.6 million in 2000 (32.1% of total revenues)
from $124.6 million in 1999 (36.5% of total revenues), a decrease of $15.0
million or 12.0%. This decrease was primarily due to a decrease in new sales
and installations of certain IDX systems during the first six months of 2000
due to certain of the Company's customers delay 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.

                                      32

<PAGE>

   Revenues from maintenance and service fees increased to $232.3 million in
2000 (67.9% of total revenues) from $216.4 million in 1999 (63.5% of total
revenues), an increase of $15.9 million or 7.3%. The increase was due to a
$25.3 million increase in EDiX's medical transcription service fee revenue
combined with a $9.8 million increase in maintenance revenue resulting from
price increases offset by a decrease in consulting services provided by IDX's
core business of $7.5 million and a decrease of software installation services
of $5.9 million. Professional and technical services revenues decreased to
$23.8 million in 2000 (7.0% of total revenues) from $31.3 million in 1999 (9.2%
of total revenues), a decrease of $7.5 million, or 24.0%. The Company's
Internet services and content business segment, operated by ChannelHealth,
contributed approximately $5.7 million in service revenue during 2000. Due to
the sale of ChannelHealth in early 2001 revenues from Internet services and
content were eliminated.

Cost of Sales

   The cost of system sales increased to $34.7 million in 2000 from $33.7
million in 1999, an increase of $968,000 or 2.9%. The increase in cost of sales
is a result of an increase in hardware included as a component of sales of the
Company's systems sales. The gross margin on systems sales decreased to 68.2%
in 2000 from 72.9% in 1999. The decrease in gross profit margin as a percentage
of sales was primarily due to a decrease in software license revenue which has
a higher gross profit margin than hardware sales. The cost of services
increased to $209.4 million in 2000 from $182.8 million in 1999, an increase of
$26.6 million or 14.5%. The increase in cost of services resulted from growth
in client services expenses, primarily medical transcription staff, as well as
maintenance, installation and consulting staff. The gross profit margin on
maintenance and service fees decreased to 9.9% in 2000 from 15.5% in 1999
primarily due to a decrease in installation revenue in 2000 relative to a fixed
expense base offset by operational efficiencies at EDiX.

   The gross profit margin of system sales of IDX's core business, information
system and services, decreased to 68.2% in 2000 from 72.9% in 1999 primarily
due to the effect of a decrease in software license revenue. The gross profit
margin of services of IDX's core business, information systems and services,
decreased to 8.6% in 2000 from 15.7% in 1999 primarily due to a decrease in
installation revenue in 2000 relative to a fixed expense base. The gross profit
margin for the Company's medical dictation and transcription business segment
(EDiX) increased as a percentage of sales to 17.5% in 2000 from 14.4% in 1999
due to increased utilization of a new, more efficient transcription processing
system as compared to the prior year, combined with other efficiencies in
editing and telecommunications. The gross margin for the Company's Internet
services and content business segment, operated by ChannelHealth declined to a
negative 42.9% from a positive margin of 40.6% in 1999 primarily due to high
fixed costs relative to sales volume due to the early stage of this business'
development.

Selling, General and Administrative Expenses

   Selling, general and administrative expenses increased to $87.6 million in
2000 from $79.9 million in 1999, an increase of $7.8 million or 9.7%. As a
percentage of total revenues, selling, general and administrative expenses
increased to 25.6% in 2000 from 23.4% in 1999. The increase resulted from a
$9.3 million increase in selling, general and administrative expense related to
the Internet business segment (ChannelHealth) combined with a $2.0 million
increase in EDiX's expenses, offset by a $3.5 million decrease in IDX's core
business expenses due to reductions in variable expenses combined with cost
savings related to the restructuring program announced in June 2000.

Research and Development

   Research and development expenses decreased to $49.4 million in 2000 from
$53.2 million in 1999, a decrease of $3.8 million or 7.1%. As a percentage of
total revenues, research and development expenses decreased to 14.4% in 2000
from 15.6% in 1999. The decrease was primarily due to a reduction in costs to
address Year 2000 issues, combined with the cost savings related to the
restructuring program announced in June 2000 in IDX's core business of $6.6
million, offset by an increase of $2.5 million related to research and

                                      33

<PAGE>

development costs in the Internet applications and content business segment
(ChannelHealth). As a percentage of system sales, research and development
expenses increased to 45.1% in 2000 from 42.7% in 1999. Research and
development expenses decreased $3.8 million in 2000 as compared to 1999. System
sales also declined in 2000 as compared to 1999. The combination of these
factors resulted in an increase of research and development as a percentage of
sales. Research and development costs in the medical dictation and
transcription business segment (EDiX) increased from $1.0 million in 1999 to
$1.3 million in 2000.

Merger and Related Costs

   During the second quarter of 1999, the Company recorded a charge of $4.0
million related to the acquisition of EDiX. The charge was 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
and the termination of leases and other contractual obligations.

Restructuring Charges

   On June 21, 2000 the Company announced the implementation of a product
discontinuance and restructuring program. The Company halted development and
discontinued sales efforts on certain product lines that have failed to achieve
business targets or were deemed non-strategic to the business going forward. As
a result, the Company implemented a workforce reduction of approximately five
percent. The restructuring program resulted in a charge to earnings of
approximately $21.0 million in the second quarter, in connection with costs
associated with product discontinuations, principally settlements with existing
users, of approximately $16.0 million and employee severance arrangements of
approximately $5.0 million. Workforce related accruals, consisting principally
of employee severance costs, were established based on specific identification
of employees to be terminated, along with their job classification or
functions, and their location. Substantially all workforce related actions were
completed during the third quarter of 2000, with the exception of product
related "sunset" support teams. As of December 31, 2000, the Company had a
balance of $11.5 million related to accrued restructuring costs. Cash
expenditures related to these accruals are estimated to be $8.9 million. The
remaining balance of approximately $2.6 million represents a provision for the
estimated write-off of accounts receivable that will not affect cash.

Loss on Impairment of Goodwill

   During the first quarter of 2000, the Company determined that an asset
impairment existed related to goodwill acquired in the 1999 purchase of the
Company's initial investment in an Internet services and content provider. In
January 2000, the Company made the decision to use an external provider of
content and transactions for ChannelHealth and discontinued the use of certain
assets. This goodwill impairment was recognized during the first quarter of
2000 and is reflected as a pre-tax loss on impairment of goodwill of
approximately $5.8 million.

Interest Income (Expense)

   Interest income increased to approximately $4.8 million during 2000 compared
to $4.1 million for the same period in 1999 due to an increase in the average
interest rates earned during 2000. Interest expense decreased from
approximately $900,000 during 1999 to $6,000 in 2000. The decrease in interest
expense is due to the payment of all outstanding EDiX debt after the
acquisition during the second quarter of 1999.

Loss on Investment Impairment

   This loss is 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 a decision to dissolve the business.

                                      34

<PAGE>

Minority Interest

   The Company's consolidated financial statements include the accounts of the
Company and BDP Realty Associates (BDP), whose real estate was leased
exclusively by the Company and for which the Company was subject to
substantially all the risks of ownership. All transactions between the Company
and BDP are eliminated. Minority interest represents net income and equity of
BDP.

Realized Gain on Investment

   Other income in 2000 includes a $7.3 million realized gain from a
distribution of marketable equity securities related to an investment in an
unrelated investment partnership.

Income Taxes

   The Company's pre-tax loss for the year ended December 31, 2000 was
benefited at approximately 34.5%, which reflects a lower rate than the
Company's historical effective rate and the statutory rate of 40%. The lower
rate in 2000 is principally due to a lower state effective tax rate. Pre-tax
losses for the year ended December 31, 1999 were benefited at approximately
35%. The lower rate in 1999 was due to a portion of the charges incurred in the
second quarter ended June 30, 1999 related to the acquisition of EDiX, that
were non-deductible for income tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

   Since its inception in 1969, the Company principally has funded its
operations, working capital needs and capital expenditures from operations and
the proceeds from its initial public offering, excluding the net cash used in
operations of ChannelHealth in 1999 and 2000.

   Net cash provided by (used in) operations is principally comprised of net
income (loss) and depreciation and is primarily affected by the net effect of
the change in accounts receivable, accounts payable, accrued expenses and
non-cash items relating to the sale of Channelhealth and certain components of
restructuring charges. 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 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
2001, accounts receivable from customers have been collected on average within
92 days which represents a decrease of 26 days in terms of average days to
collect receivables from customers as compared to 2000.

   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. The Company
purchased its Corporate Headquarters facility from a related party in April
2001 for approximately $15.0 million based on an independent appraisal of its
fair market value. This transaction was reviewed and approved by certain
independent members of the Board of Directors of the Company that had no
financial interest in the transaction. In 1999, the Company purchased two
buildings located in South Burlington, Vermont for additional office space.
Through December 31, 2001, the Company has spent approximately $16.0 million on
construction related to an expansion of its Corporate Headquarters facility
that is substantially complete. In April 2000, the Company entered into a new
operating lease for office space in Seattle, Washington, commencing in 2003,
for a period of 12 years. The Company anticipates approximately $8.5 million in
cash outlays for improvements related to this Seattle lease in 2002.

   In addition, investing activities may also include purchases of interests
in, loans to and acquisitions of businesses for access to complementary
products and technologies. The Company expects these activities to continue.
The Company is currently evaluating a $15.0 million investment in a strategic
partner. There can be no assurance that the Company will be able to
successfully complete any such purchases or acquisitions in the future.

                                      35

<PAGE>

   Cash flows from financing activities historically relate to the issuance of
common stock through the exercise of employee stock options and in connection
with the employee stock purchase plan. In addition, during the first quarter of
2000, an unrelated party invested approximately $30.0 million, and related
parties invested approximately $3.1 million in Channelhealth Incorporated, at
the time a majority owned subsidiary, by purchasing redeemable preferred stock.
The redemption provision of this preferred stock was satisfied in connection
with the ChannelHealth sale transaction on January 8, 2001 and, accordingly,
required no use of the Company's cash. During 1999, all outstanding debt of
EDiX of approximately $14.0 million was paid.

   Cash, cash equivalents and securities available-for-sale at December 31,
2001 were $56.4 million, a decrease of $14.3 million from December 31, 2000.
The Company has a revolving demand line of credit with a bank allowing the
Company to borrow up to $18.0 million bearing interest at the bank's base rate,
approximately 4.0% in 2001. This line of credit is subject to certain terms and
conditions including the requirement that the Company must maintain deposits
with the bank that are in excess of the amounts borrowed. At December 31, 2001
and 2000, the Company had $15.0 million and $0 outstanding, respectively, under
this arrangement. As of March 26, there was no outstanding balance on this line
of credit.

   In addition to existing financing arrangements, the Company owns, through a
wholly owned subsidiary, approximately 7.5 million shares of Allscripts stock,
a public company listed on the Nasdaq National Market (MDRX.) This investment
in Allscripts stock is accounted for under the equity method. IDX recorded an
equity loss during the first nine months of 2001 of $17.6 million on a pre-tax
basis that reduced the balance of IDX's investment carrying balance in
Allscripts to zero. This investment has a quoted market value of approximately
$24.4 million as of December 31, 2001, and is subject to certain sale
restrictions that may significantly impact the market value.

   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 increase the number of its
professional staff during 2002 as needed to meet anticipated sales volume and
to support research and development efforts for certain products. To the extent
necessary to support increases in staffing, the Company may obtain additional
office space.

   As of December 31, 2001 the Company has not entered into other material
lease or purchase commitments not disclosed above or in footnote 10 to the
financial statements. The Company believes that currently available 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.

   During the year ended December 31, 2001, IDX has not engaged in:

    .  Material off-balance sheet activities, including the use of structured
       finance or special purpose entities, with the exception of BDP Realty
       which has been given full recognition in the financial statements for
       all periods presented as described below.

    .  Trading activities in non-exchange traded contracts, or

    .  Transactions with persons or entities that benefit from their
       non-independent relationship with IDX, other than described below:

   Through April 19, 2001, the Company's consolidated financial statements
included the accounts of the Company and BDP Realty Associates (BDP), a real
estate trust owned by certain stockholders and key employees of the Company,
Robert H. Hoehl and Richard E. Tarrant, whose real estate was leased
exclusively by the Company. Effective with the date of the acquisition of the
Company's corporate headquarters from BDP, the Company has deconsolidated BDP
and eliminated the net assets, principally real estate and minority interest,

                                      36

<PAGE>

included in the Company's consolidated balance sheet as of that date. The
Company's corporate headquarters were purchased from BDP for cash, at fair
market value as determined by independent appraisers, for approximately $15.0
million during the second quarter of 2001. This amount has been recorded as
property and equipment. This transaction was reviewed and approved by certain
independent members of the Board of Directors of the Company that had no
financial interest in the transaction. Total rent expense includes $294,000,
$1.2 million and $1.3 million in 2001, 2000 and 1999, respectively, related to
this lease.

   The Company leases an office building from 4901 LBJ Ltd. Partnership a real
estate partnership (REP) owned by certain stockholders and key employees of the
Company. Lease agreements are based on fair market value rents, and are
reviewed and approved by independent members of the Board of Directors. Total
rent expense includes $557,000, $619,000 and $546,000 in 2001, 2000 and 1999,
respectively, related to this lease.

NEW ACCOUNTING STANDARDS

   In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities" as amended by SFAS No. 137
and SFAS No. 138, 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. The Company was required to implement SFAS No. 133 in the first
quarter of 2001. The Company has adopted SFAS No. 133 and has determined that
it had no significant impact on its financial condition or results of
operations.

   In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 applies to all business combinations completed after June
30, 2001, which among other things, requires the use of the purchase method of
accounting. SFAS No. 141 also establishes new criteria for determining whether
intangible assets should be recognized separately from goodwill. SFAS No. 142
provides that goodwill and intangible assets with indefinite lives will not be
amortized, but rather will be reviewed for impairment at least annually. SFAS
No. 142 is effective for fiscal years beginning after December 15, 2001. The
Company will apply SFAS No. 142 beginning in the first quarter of 2002.
Management does not expect that the application of SFAS No. 141 or No. 142 will
have a significant impact on the results of operations or financial position of
the Company.

   In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
superseded SFAS No. 121, "Accounting for Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The Company is required to adopt SFAS No. 144 in the
first quarter of fiscal 2002. The adoption of SFAS No. 144 is not expected to
have a material effect on the Company's financial position or results of its
operations.

BACKLOG

   At December 31, 2001, the Company had total backlog of $455.1 million,
including $150.2 million attributable to systems sales and $304.9 million
attributable to services. Systems sales backlog consists of fees due under
signed contracts that have not yet been recognized as revenues. Service backlog
represents contracted software maintenance services including anticipated
renewals, consulting services, remote computing service fees and medical
transcription service fees for a period of 12 months. At December 31, 2000, the
Company had total backlog of $386.9 million, including $123.4 million
attributable to systems sales and $263.5 million attributable to services. Of
the total 2001 backlog of $455.1 million, the Company expects that $143.9
million will not be fulfilled in the current fiscal year.

   See Forward-Looking Information and Factors Affecting Future Performance in
Item 1 of this annual report on Form 10-K.

                                      37

<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   IDX does not currently use derivative financial instruments. The Company
generally places its securities available-for-sale 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.

   Internationally, IDX invoices customers in United States currency. The
Company is exposed to minimal foreign exchange rate fluctuations and does not
enter into foreign currency hedge transactions. Through December 31, 2001,
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 may experience 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 rates on short term borrowings with floating rates carry a degree
of interest rate risk. Our future interest expense may increase if interest
rates fluctuate. Interest expense was immaterial in 2001 and 2000, and in 1999
amounted to $866,000 related to EDiX's pre-acquisition financing.

   Interest income on the Company's investments is included in "Other Income."
The Company accounts for cash equivalents and securities available-for-sale in
accordance with Statement of Financial Accounting Standards 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 investments are classified as securities
available-for-sale and are recorded at fair value with any unrealized gain or
loss recorded as an element of stockholders' equity.

                                      38

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                                   ------------------
                                                                                     2001      2000
                                                                                   --------  --------
                                                                                     (in thousands)
<S>                                                                                <C>       <C>
                                      ASSETS
Current assets:
 Cash and cash equivalents........................................................ $ 38,083  $ 16,357
 Securities available-for-sale....................................................   18,290    54,326
 Accounts receivable, less allowance for doubtful accounts of $4,156 in 2001 and
   $4,297 in 2000.................................................................   95,478   110,360
 Refundable income taxes..........................................................   12,100    21,816
 Prepaid and other current assets.................................................    6,189     6,927
 Deferred tax asset...............................................................    7,718     6,265
                                                                                   --------  --------
     Total current assets.........................................................  177,858   216,051
Property and equipment:
 Equipment and leasehold improvements, net of accumulated depreciation and
   amortization...................................................................   37,351    53,479
 Real estate, net of accumulated depreciation.....................................   40,285    18,111
                                                                                   --------  --------
                                                                                     77,636    71,590
Other:
 Capitalized software costs, net of accumulated amortization of $1,900 in 2001 and
   $799 in 2000...................................................................    2,055       191
 Goodwill, net of accumulated amortization of $1,300 in 2001 and $1,100 in 2000...    1,391     1,371
 Other assets.....................................................................    5,592     5,921
 Deferred tax asset...............................................................      790     2,367
                                                                                   --------  --------
     Total assets................................................................. $265,322  $297,491
                                                                                   ========  ========
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable................................................................. $ 15,943  $ 18,040
 Accrued expenses.................................................................   36,020    38,606
 Deferred revenue.................................................................   20,361    19,913
 Notes payable to bank............................................................   15,000        --
                                                                                   --------  --------
     Total current liabilities....................................................   87,324    76,559
Commitments and contingencies.....................................................       --        --
Redeemable convertible preferred stock of subsidiary..............................       --    33,140
Minority interest.................................................................       --     8,682
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 28,839 shares and 28,399 shares in 2001 and 2000, respectively.....      289       284
 Additional paid-in capital.......................................................  196,525   187,896
 Deferred compensation............................................................   (1,051)       --
 Accumulated deficit..............................................................  (17,754)   (9,156)
 Cumulative unrealized (losses) gains on securities available-for-sale............      (11)       86
                                                                                   --------  --------
     Total stockholders' equity...................................................  177,998   179,110
                                                                                   --------  --------
Total liabilities and stockholders' equity........................................ $265,322  $297,491
                                                                                   ========  ========
</TABLE>

                            See accompanying notes.

                                      39

<PAGE>

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                                       ----------------------------
                                                                         2001      2000      1999
                                                                       --------  --------  --------
                                                                         (in thousands, except for
                                                                              per share data)
<S>                                                                    <C>       <C>       <C>
Revenues:
 Systems sales........................................................ $111,113  $109,621  $124,609
 Maintenance and service fees.........................................  268,816   232,272   216,390
                                                                       --------  --------  --------
Total revenues........................................................  379,929   341,893   340,999
Operating expenses:
 Cost of system sales.................................................   33,769    34,711    33,743
 Cost of maintenance and services.....................................  229,316   209,373   182,811
 Selling, general and administrative..................................   88,078    87,641    79,873
 Research and development.............................................   43,418    49,394    53,176
 Merger and related costs.............................................       --        --     4,045
 Restructuring charges................................................   19,516    21,029        --
 Loss on impairment of goodwill.......................................       --     5,810        --
                                                                       --------  --------  --------
Total operating expenses..............................................  414,097   407,958   353,648
                                                                       --------  --------  --------
Operating loss........................................................  (34,168)  (66,065)  (12,649)
Other income (expense):
 Interest income......................................................    2,384     4,834     4,113
 Interest expense.....................................................      (42)       (6)     (866)
 Gain on sale of investment in subsidiary.............................   35,546        --        --
 Loss on investment impairment........................................       --        --    (1,642)
 Minority interest....................................................     (297)     (978)   (1,129)
 Gains on investments.................................................    5,849     7,318        --
                                                                       --------  --------  --------
Total other income....................................................   43,440    11,168       476
                                                                       --------  --------  --------
Income (loss) before income taxes and equity in loss of unconsolidated
  affiliate...........................................................    9,272   (54,897)  (12,173)
Income tax (provision) benefit........................................     (311)   18,929     4,229
Equity in loss of unconsolidated affiliate............................  (17,559)       --        --
                                                                       --------  --------  --------
Net loss.............................................................. $ (8,598) $(35,968) $ (7,944)
                                                                       ========  ========  ========
Basic net loss per share.............................................. $  (0.30) $  (1.28) $  (0.29)
                                                                       ========  ========  ========
Basic weighted-average shares outstanding.............................   28,566    28,090    27,723
                                                                       ========  ========  ========
Diluted net loss per share............................................ $  (0.30) $  (1.28) $  (0.29)
                                                                       ========  ========  ========
Diluted weighted-average shares outstanding...........................   28,566    28,090    27,723
                                                                       ========  ========  ========
</TABLE>

                            See accompanying notes.

                                      40

<PAGE>

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                            Common Stock
                                            ------------
                                                                                               Cumulative
                                                                                               Unrealized
                                                                      Retained                 Gain (loss)
                                                         Additional   Earnings                on Securities     Total
                                                    Par   Paid-in   (Accumulated   Deferred    Available-   Stockholders'
                                            Shares Value  Capital     Deficit)   Compensation   for-Sale       Equity
                                            ------ ----- ---------- ------------ ------------ ------------- -------------
                                                                           (in thousands)
<S>                                         <C>    <C>   <C>        <C>          <C>          <C>           <C>
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 net 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 director stock option
 plan......................................      2   --         33          --          --           --             33
Stock issued to retirement savings 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
Comprehensive loss:
 Net loss..................................     --   --         --     (35,968)         --           --        (35,968)
 Unrealized gains on securities available-
  for-sale.................................     --   --         --          --          --          302            302
                                                                                                              --------
Comprehensive net loss.....................     --   --         --          --          --           --        (35,666)
Stock issued upon exercise of
 nonqualified stock options................    140    1        156          --          --           --            157
Tax benefit related to exercise of
 nonqualified stock options................     --   --      2,136          --          --           --          2,136
Stock issued upon exercise of incentive
 stock options.............................     65    1        820          --          --           --            821
Stock issued pursuant to employee
 stock purchase plan.......................    378    4      5,098          --          --           --          5,102
Stock issued under director stock option
 plan......................................      3   --         46          --          --           --             46
                                            ------ ----   --------    --------     -------        -----       --------
Balances at December 31, 2000.............. 28,399  284    187,896      (9,156)                      86        179,110
Comprehensive income:
 Net loss..................................     --   --         --      (8,598)         --           --         (8,598)
 Unrealized losses on securities
  available-for-sale.......................     --   --         --          --          --          (97)           (97)
                                                                                                              --------
Comprehensive net loss.....................     --   --         --          --          --           --         (8,695)
Stock issued upon exercise of
 nonqualified stock options................     38   --        216          --          --           --            216
Tax benefit related to exercise of
 nonqualified stock options................     --   --        312          --          --           --            312
Stock issued upon exercise of incentive
 stock options.............................     45    1        372          --          --           --            373
Stock issued pursuant to employee
 stock purchase plan.......................    279    3      3,282          --          --           --          3,285
Stock issued under director stock
 option plan...............................      3   --         61          --          --           --             61
Issuance of restricted stock...............     75    1      1,201          --      (1,201)          --              1
Amortization of restricted stock...........     --   --         --          --         150           --            150
Effect of acceleration of IDX options
 retained by employees of unconsolidated
 affiliate.................................     --   --      3,185          --          --           --          3,185
                                            ------ ----   --------    --------     -------        -----       --------
Balances at December 31, 2001.............. 28,839 $289   $196,525    $(17,754)    $(1,051)       $ (11)      $177,998
                                            ====== ====   ========    ========     =======        =====       ========
</TABLE>

                            See accompanying notes.

                                      41

<PAGE>

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                             Year Ended December 31,
                                                                                          -----------------------------
                                                                                            2001      2000      1999
                                                                                          --------  --------  ---------
                                                                                                  (in thousands)
<S>                                                                                       <C>       <C>       <C>
Operating Activities:
Net loss................................................................................. $ (8,598) $(35,968) $  (7,944)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
  Depreciation...........................................................................   15,174    15,013     13,965
  Amortization...........................................................................    2,603       633      1,407
  Deferred tax provision (benefit).......................................................      124    (5,568)     3,763
  Increase in allowance for doubtful accounts, net.......................................      359       997        685
  Minority interest......................................................................      297       978      1,129
  Gain on investments....................................................................   (5,849)   (7,318)        --
  Loss on impairment of goodwill.........................................................       --     5,810         --
  Equity in loss of unconsolidated affiliate.............................................   17,559        --         --
  Gain on sale of investment in subsidiary...............................................  (35,546)       --         --
  Loss on disposition of assets..........................................................      404        --         --
  Loss on investment impairment..........................................................       --        --      1,642
  Tax benefit related to exercise of non-qualified stock options.........................      312     2,139        428
  Restructuring charges..................................................................   19,516    21,029         --
Changes in operating assets and liabilities:
  Accounts receivable....................................................................   13,496    (4,103)    (9,279)
  Prepaid expenses and other assets......................................................   (3,946)   (1,405)     3,011
  Accounts payable and accrued expenses..................................................  (18,340)      990       (514)
  Federal and state income taxes.........................................................    9,716   (13,790)   (13,255)
  Deferred revenue.......................................................................      476     2,454       (780)
                                                                                          --------  --------  ---------
Net cash provided by (used in) operating activities......................................    7,757   (18,109)    (5,742)
Investing Activities:
Purchase of property and equipment, net..................................................  (38,420)  (28,387)   (35,519)
Proceeds from sale of property and equipment.............................................      264        --         --
Purchase of securities available-for-sale................................................  (78,209)  (22,260)  (194,027)
Proceeds from sale of securities available-for-sale......................................  102,851    25,426    257,366
Proceeds from sale of investment.........................................................   11,282        --         --
Business acquisitions....................................................................   (2,080)       --     (6,500)
Other assets.............................................................................     (182)    3,434     (4,058)
                                                                                          --------  --------  ---------
Net cash (used in) provided by investing activities......................................   (4,494)  (21,787)    17,262
Financing Activities:
Proceeds from sale of common stock.......................................................    3,935     6,126      4,181
Proceeds from notes payable to bank......................................................   15,000        --      3,501
Distributions from affiliates, net.......................................................     (472)   (1,500)      (900)
Proceeds from issuance of redeemable convertible preferred stock of subsidiary...........       --    33,140         --
Principal repayments of long-term debt...................................................       --        --    (11,373)
                                                                                          --------  --------  ---------
Net cash provided by (used in) financing activities......................................   18,463    37,766     (4,591)
                                                                                          --------  --------  ---------
Increase (decrease) in cash and cash equivalents.........................................   21,726    (2,130)     6,929
Cash and cash equivalents at beginning of year...........................................   16,357    18,487     11,558
                                                                                          --------  --------  ---------
Cash and cash equivalents at end of year................................................. $ 38,083  $ 16,357  $  18,487
                                                                                          ========  ========  =========
Supplemental Cash Flow Information.......................................................
Cash paid for interest................................................................... $     42  $      1  $     764
Cash paid for income taxes............................................................... $  3,726  $    479  $   5,266
                                                                                          --------  --------  ---------
Noncash Investing Activity:
  Deconsolidation of real estate trust................................................... $  8,979  $     --  $      --
Noncash Financing Activity:
  Issuance of restricted stock........................................................... $  1,201  $     --  $      --
</TABLE>

                            See accompanying notes.

                                      42

<PAGE>

                            IDX SYSTEMS CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2001


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 large integrated healthcare delivery enterprises
principally located in the United States. Revenues are derived from the
licensing of software, hardware sales, providing maintenance and services
related to systems sales and providing medical transcription services.

   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 IDX common stock were issued in connection with the EDiX
Merger. EDiX is a provider of medical transcription services.

   On January 8, 2001, the Company sold Channelhealth Incorporated
(ChannelHealth), including certain product lines to Allscripts Healthcare
Solutions, Inc. (Allscripts). ChannelHealth, Incorporated in September 1999,
was a majority owned subsidiary of IDX. Allscripts acquired ChannelHealth in
exchange for 8.6 million shares, or 21.3% of Allscripts stock on a pro-forma
fully diluted basis, of which IDX received approximately 7.5 million shares or
90%. This investment in Allscripts stock is accounted for under the equity
method. IDX records its interest in the losses of Allscripts as a reduction to
its investment account. IDX recorded an equity loss during the first nine
months of 2001 of $17.6 million on a pre-tax basis which reduced the balance of
IDX's investment carrying balance in Allscripts to zero. IDX will not record
its share of Allscripts future net income or loss until its share of Allscripts
cumulative income and losses exceed zero. Allscripts has reported losses since
1995 and may report losses in the future.

   Through April 19, 2001 the Company's consolidated financial statements
include the accounts of the Company and BDP Realty Associates (BDP), a real
estate trust owned by certain stockholders and key employees of the Company
whose real estate was leased exclusively by the Company. Effective with the
date of the acquisition of the Company's corporate headquarters from BDP, the
Company has deconsolidated BDP and eliminated the net assets, principally real
estate and minority interest, included in the Company's consolidated balance
sheet as of that date. The Company's corporate headquarters were purchased from
BDP for cash, at fair market value as determined by independent appraisers, for
approximately $15.0 million during the second quarter of 2001. This amount has
been recorded as property and equipment.

Principles of Consolidation

   The consolidated financial statements include the accounts of the Company,
its subsidiaries and through April 19, 2001, a real estate trust. Investments
in entities over which IDX exerts no significant influence and representing an
ownership interest of less than 20%, are accounted for under the cost method.

   During 1999 through 2001, the Company leased a substantial portion of its
space, including its corporate headquarters and sales and support offices, from
real estate partnerships and trusts owned by certain stockholders and key
employees of the Company. These real estate partnerships and trusts include 116
Huntington Avenue Limited Partnership (HLP) through July 1999, BDP Realty
Associates (BDP) through April 2001 and one other real estate partnership and
trust (REP), which continues to be owned by certain stockholders and key
employees

                                      43

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

of the Company. Real estate owned by HLP and the REP is leased to the Company
under operating leases. All transactions between the Company and BDP through
April 19, 2001 were eliminated. Minority interest represents net income and
equity of BDP through April 2001.

   On January 8, 2001, Allscripts acquired IDX's ownership interest in
ChannelHealth in exchange for approximately 7.5 million shares of Allscripts
common stock (Allscripts shares). The Allscripts shares received are subject to
restrictions on any transfer of the securities for a period of one year from
the date of the transaction, and after one year, on the transfer of more than
25% of the Allscripts shares in any one year, and 16.67% in any one month. IDX
recorded the Allscripts shares at fair value of $29.5 million, which included a
discount from market value due to the four year restrictions on transfer,
resulting in a $35.5 million gain on the transaction. IDX accounts for its
investment in Allscripts under the equity method of accounting. As a result of
the transaction, the Company is entitled to representation on Allscripts Board
of Directors.

   Certain reclassifications have been made in the accompanying financial
statements in order to conform with the 2001 presentation.

Revenue Recognition

   The Company recognizes revenue in accordance with the provisions of
Statement of Position (SOP) No. 97-2, "Software Revenue Recognition," as
amended by SOP No. 98-4 and SOP 98-9. SOP No. 97-2, as amended, 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 the elements in a multiple-element arrangement, revenue from the
arrangement is deferred until such evidence exists or until all elements are
delivered. When evidence of fair value exists only for the undelivered
elements, the residual method, provided for under SOP No. 98-9, is required to
be used. Additionally, 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 on a percentage of completion basis or under
the completed contract method, as appropriate measures of completion for each
contract are achieved. Certain contracts which provide for the license of
software applications on a monthly basis are accounted for under the
subscription basis of accounting. In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin (SAB) No. 101 "Revenue Recognition
in Financial Statements." The Company adopted SAB 101 in 2000 and the adoption
had no significant impact on its revenue recognition policy, financial
condition or results of operations.

   Systems sales are comprised of software license and hardware sales. The
Company also generates service revenues from the sale of product maintenance
contracts, consulting contracts, including implementation and other consulting
services, and transcription service arrangements. Revenue from software
licensing arrangements is principally recognized upon delivery when evidence of
an arrangement exists, there are no uncertainties surrounding product
acceptance, the fees are fixed and determinable and collection is probable,
subject to specified contractual milestones and dates. Revenue from hardware
sales is recognized upon transfer of title to the customer. Revenues from
consulting and transcription services are recognized in the period in which
services are performed. Revenue from maintenance contracts is recognized
ratably over the term of the support period, including the installation period
through the term of the agreement, 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,

                                      44

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 using the straight-line method over a one to two year life or the product's
estimated economic life, if shorter. Capitalized software development costs are
$2.1 million and $191,000 at December 31, 2001 and 2000, respectively, net of
accumulated amortization. Amortization of capitalized software, which is
included in research and development costs, amounted to $2,132,000, $223,000
and $251,000 in 2001, 2000 and 1999, respectively.

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 generally places its securities available-for-sale 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.

   Substantially all of the Company's customers are large integrated healthcare
delivery enterprises principally located in the United States. 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,
2001. 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 periods. Significant estimates and assumptions by
management affect the Company's revenue recognition, allowance for doubtful
accounts, deferred tax assets, certain accrued expenses, amortization periods,
capitalized software, intangible and long-lived assets and restructuring
charges. Actual results could differ from those estimates.

Securities Available-for-sale

   The Company accounts for investment securities based on Statement of
Financial Accounting Standard (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-

                                      45

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

sale securities at December 31, 2001 and 2000. Securities available-for-sale
are carried at fair value with unrealized gains and losses, net of income tax
effect, reported as a separate component of stockholders' equity.

Property and Equipment

   Real estate, which includes land, buildings and related improvements owned
directly by the Company and through April 19, 2001 BDP (see Note 1), 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, accounted for under the provisions of SOP No. 98-1, "Accounting for the
Costs of Computer Software Developed for Internal Use," in Property and
Equipment.

Goodwill

   Goodwill, which represents the excess of acquisition costs over the net
assets acquired in business combinations, is amortized using the straight-line
method over periods of 3 to 5 years. The carrying amount of goodwill is
reviewed annually for impairment, when impairment indicators exist, using
undiscounted cash flows for the businesses acquired over the remaining
amortization periods. Amortization of goodwill amounted to $512,000 for 2001,
$633,000 for 2000 and $1.4 million for 1999.

Long-lived Asset Impairment

   Through December 31, 2001, the Company accounted for impairment of its
long-lived assets 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 fair
value using an analysis of discounted cash flows estimated to be derived from
the impaired asset.

   In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
superseded SFAS No. 121, "Accounting for Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The Company is required to adopt SFAS No. 144 in the
first quarter of fiscal 2002. The adoption of SFAS No. 144 is not expected to
have a material effect on the Company's financial position or results of its
operations.

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 the end
of each reporting period. 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.

                                      46

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Stock-based Compensation

   The Company generally 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 (APB) No. 25, "Accounting for Stock Issued to Employees" and
related Interpretations including FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25," (the Interpretation or FIN 44), in accounting for its employee
stock options. The Company accounts for stock options under APB No. 25 because
it believes the alternative fair value accounting provided for under SFAS No.
123, "Accounting for Stock-Based Compensation," requires the use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB No. 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 and EITF 96-18, "Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services."

New Accounting Standards

   In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities" as amended by SFAS No. 137
and SFAS No. 138, 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. The Company adopted SFAS No. 133 effective January 1, 2001; the
effect of which had no significant impact on its financial condition or results
of operations.

   In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 applies to all business combinations completed after June
30, 2001, which among other things, requires the use of the purchase method of
accounting. SFAS No. 141 also establishes new criteria for determining whether
intangible assets should be recognized separately from goodwill. SFAS No. 142
provides that goodwill and intangible assets with indefinite lives will not be
amortized, but rather will be reviewed for impairment at least annually. SFAS
No. 142 is effective for fiscal years beginning after December 15, 2001. The
Company will apply SFAS No. 142 beginning in the first quarter of 2002.
Management does not expect that the application of SFAS No. 141 or No. 142 will
have a significant impact on the results of operations or financial position of
the Company.

   In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
superseded SFAS No. 121, "Accounting for Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The Company is required to adopt SFAS No. 144 in the
first quarter of fiscal 2002. The adoption of SFAS No. 144 is not expected to
have a material effect on the Company's financial position or results of its
operations.

2.  BUSINESS COMBINATIONS AND DIVESTITURES

   In May 2001, the Company acquired PVI, LLC for approximately $1.0 million.
This acquisition has been accounted for under the purchase method of
accounting. The purchase price has been allocated based on estimated fair
market values at the date of acquisition, principally software. There are
contingent payments based on a percentage of future sales related to this
purchase, however, there have been no sales to date.

   In June 2001, the Company acquired Vogt Management Consulting, Inc. for
approximately $1.1 million. This acquisition has been accounted for under the
purchase method of accounting. The purchase price has been allocated,
principally to goodwill, based on estimated fair market values at the date of
acquisition.

                                      47

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   On January 8, 2001 the Company sold certain operations of ChannelHealth to
Allscripts, a leading provider of point-of-care e-prescribing and productivity
solutions for physicians. ChannelHealth provides a set of Internet-based
clinical and productivity solutions for physicians that brings the power of the
Internet to the practice of medicine. IDX retained the operations of the
Patient and e-Commerce Channels, which were previously part of Channelhealth
Incorporated. In addition to the sale, the Company has entered into a ten-year
strategic alliance whereby Allscripts will become the exclusive provider of
point-of-care clinical applications sold by IDX to physician practices.

   Allscripts acquired ChannelHealth in exchange for 8.6 million shares, or
21.3% of Allscripts stock on a pro-forma fully diluted basis, of which IDX
received approximately 90% or 7.5 million shares of Allscripts stock. The
Allscripts shares received are subject to restrictions on any transfer of the
securities for a period of one year from the date of the transaction and, after
one year, on the transfer of more than 25% of the Allscripts shares in any one
year, and 16.67% in any one month, and under certain circumstances, more
favorable sale restrictions may apply. IDX recorded the Allscripts shares at
fair value of $29.5 million, which included a discount from market value due to
restrictions on transfer, resulting in a $35.5 million gain on the transaction.
The reported gain is greater than the fair value of the stock received due to
the Company's negative carrying value at the time of the sale of the underlying
investment in ChannelHealth. IDX accounts for its investment in Allscripts
under the equity method of accounting. Under the equity method of accounting,
IDX has recognized its pro-rata share of Allscripts 2001 losses which resulted
in the elimination of the carrying value of this investment during the third
quarter of 2001.

   At December 31, 2001 IDX owns approximately 20% of the outstanding common
stock of Allscripts and records its investment under the equity method of
accounting. This investment has a market value, which is not currently
reflected on the balance sheet, of approximately $24.4 million based on the
quoted market price as of December 31, 2001, however, as outlined above the
Company's investment is subject to certain sale restrictions.

   IDX records its interest in the losses of Allscripts as a reduction to its
investment account. IDX recorded an equity loss during the first nine months of
2001 of $17.6 million on a pre-tax basis which reduced the balance of IDX's
investment carrying balance in Allscripts to zero.

   Summary financial information for Allscripts for the years ended December
31, 2001 is as follows (in thousands):

<TABLE>
                       <S>                     <C>
                       Revenue................  $70,754
                       Gross profit...........    4,633
                       Net loss............... (418,931)
                       Current assets.........   64,846
                       Non current assets.....   52,598
                       Current liabilities....   18,485
                       Non current liabilities      325
</TABLE>

   ChannelHealth's revenues, net losses and total assets included in the
Company's consolidated financial statements were as follows:

<TABLE>
<CAPTION>
                                   Years Ended December 31,
                                   -----------------------
                                      2000          1999
                                    --------      -------
                      <S>          <C>           <C>
                      Revenues.... $  6,098      $ 1,865
                      Net loss.... $(19,660)     $(5,479)
                      Total assets $ 21,641      $11,744
</TABLE>

                                      48

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   In April 1999, the Company completed its 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 consolidated 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 incompatible computer equipment
of $1.4 million and other merger related costs of $0.2 million, principally
related to integration costs and the termination of leases and other
contractual obligations.

   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. In November 1999, ChannelHealth, Inc.
was merged into Channelhealth Incorporated, a Delaware corporation formed by
the Company in September 1999.

   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. The acquisition was accounted for
under the purchase method.

   Had these purchase acquisitions occurred as of the beginning of the year in
which they occurred, the Company's pro forma operating results would not be
materially different than as reported in the accompanying consolidated
financial statements.

3.  RESTRUCTURING CHARGES

   On September 28, 2001 the Company announced its plan to restructure and
realign its large physician group practice businesses. The Company implemented
a workforce reduction and restructuring program affecting approximately four
percent of the Company's employees. Though the Company reduced certain expenses
in the cost of sales and services and selling, general and administrative areas
as a result of the workforce restructuring program, the Company continues to
evaluate and invest resources in the development of various products, new
opportunities and initiatives that management believes will provide appropriate
returns to shareholders. The restructuring program resulted in a charge to
earnings of approximately $19.5 million during the fourth quarter of 2001, in
connection with costs associated with employee severance arrangements of
approximately $5.5 million, lease payment costs of approximately $5.2 million
and equipment and leasehold improvement write-offs related to the leased
facilities and workforce reduction of $8.8 million. Workforce related accruals,
consisting principally of employee severance costs, were based on specific
identification of employees to be terminated, along with their job
classification and functions, and their location. Substantially all work-force
related actions were completed during the fourth quarter of 2001, with the
exception of a minimal number of staff assigned to transition teams. As of
December 31, 2001, the Company had an accrual balance of $1.7 million related
to severance costs and $4.6 million related to leased facilities. Cash
expenditures related to these accruals are expected to be approximately $3.7
million in 2002 and approximately $2.4 million thereafter.

   On June 21, 2000 the Company announced the implementation of a restructuring
program. The Company halted development and discontinued sales efforts on
certain products that had failed to achieve business targets or were deemed
non-strategic to the business going forward. As a result, the Company
implemented a workforce reduction affecting approximately five percent of the
Company's employees. Though the Company reduced certain expenses in the cost of
sales and services, selling, general and administrative and research and
development areas as a result of the workforce restructuring program, the
Company continues to evaluate and invest resources in the development of
various products, new opportunities and initiatives that management believes
will provide appropriate returns to shareholders. The restructuring program
resulted in a charge to

                                      49

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

earnings of approximately $21.0 million in the second quarter of 2000, in
connection with costs associated with product discontinuations, principally
settlements with existing users, of approximately $16.0 million and employee
severance arrangements of approximately $5.0 million. Workforce related
accruals, consisting principally of employee severance costs, were established
based on specific identification of employees to be terminated, along with
their job classification or functions, and their location. Substantially all
work-force related actions were completed during the third quarter of 2000,
with the exception of product related "sunset" support teams. As of December
31, 2001, the Company had a balance of $1.7 million related to accrued
restructuring costs. Cash expenditures related to these accruals are estimated
to be $928,000. The remaining balance of approximately $772,000 represents a
provision for the estimated write-off of accounts receivable that will not
affect cash. These write-offs are expected to be finalized by June 30, 2002.

4.  SEGMENT INFORMATION

   The Company is required to disclose segment information in accordance with
the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information." 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 reclassified
for 2000 and 1999 in order to conform to the 2001 presentation.

   The Company's business units have separate management teams and
infrastructures that offer different products and services. Accordingly, these
business units have been classified as reportable segments (information systems
and services, medical transcription services, and in 2000 and 1999, Internet
services and content).

   Information Systems and Services: This reportable segment consists of IDX
Systems Corporation's healthcare information solutions that includes 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, a majority owned subsidiary
until January 8, 2001, offers 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. This segment is not reported in 2001 as a separate business
segment due to the acquisition of ChannelHealth by Allscripts on January 8,
2001.

   Medical Transcription Services: This reportable segment consists of EDiX, a
provider of medical 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

                                      50

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10% of revenue for any reportable segment, with the exception of EDiX in 2000
and 1999 in which revenues from one major customer amounted to 10.3% and 11.0%
of EDiX's total revenue, respectively.

   Summarized financial information concerning the Company's reportable
segments is shown in the following table:

<TABLE>
<CAPTION>
                                 IDX Healthcare
                                  Information      Channelhealth
                              Systems and Services Incorporated   EDiX     Total
                              -------------------- ------------- -------  --------
                                                 (in thousands)
<S>                           <C>                  <C>           <C>      <C>
For the year ended December 31, 2001
Net operating revenues.......       $284,358         $     --    $95,571  $379,929
Operating income (loss)......        (39,431)              --      5,263   (34,168)
Identifiable operating assets        227,403               --     37,919   265,322
For the year ended December 31, 2000
Net operating revenues.......       $263,620         $  6,098    $72,175  $341,893
Operating income (loss)......        (40,572)         (28,880)     3,387   (66,065)
Identifiable operating assets        249,441           21,641     26,409   297,491
For the year ended December 31, 1999
Net operating revenues.......       $292,261         $  1,865    $46,873  $340,999
Operating loss...............           (542)          (7,930)    (4,177)  (12,649)
Identifiable operating assets        242,773           11,744     16,630   271,147
</TABLE>

   Corporate headquarter assets and related operating costs are included in IDX
Healthcare Information Systems and Services segment information. Substantially
all of the Company's operations are in the United States.

5.  SECURITIES AVAILABLE-FOR-SALE

   The following is a summary of securities available-for-sale at December 31,
2001 and 2000:
<TABLE>
<CAPTION>
                                            Gross      Gross
                                          Unrealized Unrealized Estimated
                                   Cost     Gains      Losses   Fair Value
                                  ------- ---------- ---------- ----------
                                               (in thousands)
     <S>                          <C>     <C>        <C>        <C>
     December 31, 2001
     U.S. government securities.. $11,439    $ 54       $ --     $11,493
                                  -------    ----      -----     -------
      Total debt securities......  11,439      54         --      11,493
     Tax-deferred municipal funds   2,366      --        (80)      2,286
     Equity securities...........       4      --         --           4
     Money-market funds..........   4,507      --         --       4,507
                                  -------    ----      -----     -------
                                  $18,316    $ 54      $ (80)    $18,290
                                  =======    ====      =====     =======
     December 31, 2000
     U.S. government securities.. $11,554    $ 10       $ --     $11,564
     Other debt securities.......   4,047      55         --       4,102
                                  -------    ----      -----     -------
      Total debt securities......  15,601      65         --      15,666
     Tax-deferred municipal funds  23,728      --        (66)     23,662
     Equity securities...........   5,570      87         --       5,657
     Money-market funds..........   9,341      --         --       9,341
                                  -------    ----      -----     -------
                                  $54,240    $152      $ (66)    $54,326
                                  =======    ====      =====     =======
</TABLE>

                                      51

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   Unrealized gains and losses on securities available-for-sale are recorded,
net of any tax effect, as a separate component of stockholders equity. A
portion of the Company's investment in a venture capital fund was converted to
marketable equity securities, which were sold, resulting in realized gains of
$5.8 million and $7.3 million for 2001 and 2000, respectively.

   The amortized cost and estimated fair value of debt securities at December
31, 2001 by contractual
maturity, are shown below:

<TABLE>
<CAPTION>
                                                          Estimated
                                                   Cost   Fair Value
                                                  ------- ----------
                                                    (in thousands)
           <S>                                    <C>     <C>
           Due in one year or less............... $17,406  $17,367
           Due after one year through three years     450      456
           Due after three years.................     460      467
                                                  -------  -------
                                                  $18,316  $18,290
                                                  =======  =======
</TABLE>

6.  PROPERTY AND EQUIPMENT

   Equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
                                                         December 31,
                                                        ---------------
                                                         2001    2000
                                                        ------- -------
                                                        (in thousands)
         <S>                                            <C>     <C>
         Computer equipment and software............... $65,638 $57,502
         Furniture and fixtures........................   9,833   8,663
         Leasehold improvements........................  10,044  23,415
                                                        ------- -------
                                                         85,515  89,580
         Less accumulated depreciation and amortization  48,164  36,101
                                                        ------- -------
                                                        $37,351 $53,479
                                                        ======= =======
         Real estate consists of the following:
                                                         December 31,
                                                        ---------------
                                                         2001    2000
                                                        ------- -------
                                                        (in thousands)
         Corporate headquarters........................ $40,995 $20,477
         Less accumulated depreciation.................     710   2,366
                                                        ------- -------
                                                        $40,285 $18,111
                                                        ======= =======
</TABLE>

7.  OTHER ASSETS

   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, the Company
purchased a minority equity interest in this developer for approximately
$957,000. During 1997 and 1998, an additional $685,000 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 total
investment of $1,642,000 was written off in the first quarter of 1999 and
charged to the IDX healthcare information segment as a loss on investment
impairment.

                                      52

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   A portion of the Company's investment in a venture capital fund was
converted to marketable equity securities, which were sold, resulting in
realized gains of $5.8 million and $7.3 million for 2001 and 2000, respectively.

8.  ACCRUED EXPENSES

   Accrued expenses consist of the following:
<TABLE>
<CAPTION>
                                                    December 31,
                                                   ---------------
                                                    2001    2000
                                                   ------- -------
                                                   (in thousands)
              <S>                                  <C>     <C>
              Employee compensation and benefits.. $12,161 $14,195
              Restructuring charges...............   7,259   8,905
              Accrued expenses....................   5,630   8,196
              Accrued contractual minimum payments   4,398      --
              Other...............................   6,572   7,310
                                                   ------- -------
                                                   $36,020 $38,606
                                                   ======= =======
</TABLE>

9.  REDEEMABLE CONVERTIBLE PREFERRED STOCK

   On January 10, 2000, ChannelHealth sold 2,719,429 shares of Series A
Preferred Stock (3,000,000 total authorized shares) to Pequot Private Equity
Fund II, L.P. (Pequot) and other investors for a purchase price of $33.1
million. Pequot's ownership interest represented approximately 9.0% of the
outstanding shares of stock, on an as converted basis, of ChannelHealth. Under
certain circumstances, the Series A Preferred Stock was convertible into common
stock of ChannelHealth.

   The Series A Preferred Stock was subject to mandatory conversion in the
event of an initial public offering resulting in at least $35.0 million of net
proceeds to ChannelHealth and a market capitalization of at least
$500.0 million. The Series A Preferred Stock was also redeemable at the option
of the holder commencing on the fifth anniversary of the date of the issuance.
Each holder of outstanding shares of Series A Preferred Stock was entitled to
the number of votes equal to the number of whole shares into which shares of
Series A Preferred Stock held were then convertible. The redemption was equal
to $11.80 per share plus any declared but unpaid dividends, payable in three
equal installments over three years.

   The redemption provision of the Series A Preferred Stock was satisfied in
connection with the ChannelHealth sale transaction on January 8, 2001,
described in Note 2 in these financial statements, and accordingly required no
use of the Company's cash.

10.  FINANCING ARRANGEMENTS

   The Company has a revolving demand line of credit with a bank allowing the
Company to borrow up to $18.0 million bearing interest at the bank's base rate,
approximately 4.0% in 2001. This line of credit is subject to certain terms and
conditions including the requirement that the Company must maintain deposits
with the bank that are in excess of the amounts borrowed. At December 31, 2001
and 2000, the Company had $15.0 million and $0 outstanding, respectively, under
this arrangement.

                                      53

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Operating Leases

   At December 31, 2001, future obligations due under the operating leases for
sales and support offices are as follows:

<TABLE>
<CAPTION>
                           Year           Total
                           ----       --------------
                                      (in thousands)
                           <S>        <C>
                           2002......    $ 11,026
                           2003......      14,326
                           2004......      13,617
                           2005......      13,895
                           2006......      12,078
                           Thereafter      99,231
                                         --------
                                         $164,173
                                         ========
</TABLE>

   Of the $11.0 million due in 2002, $279,000 is due to a related party REP.
All other amounts are due to unrelated third parties.

   The Company leased approximately 47% of the office space in a commercial
office building owned by HLP (owned and controlled by certain stockholders and
key employees of the Company) until July 1999 when the building was sold to an
unrelated party. The building lease was assumed by the new owner of the
building and lease obligations to this unrelated third party are included in
the amounts above. Total rent expense amounted to $10.1 million, $11.1 million
and $9.7 million during 2001, 2000 and 1999, respectively. Total rent expense
includes $1.6 million in 1999 related to the lease with HLP. Total rent expense
includes $557,000, $619,000 and $546,000 in 2001, 2000 and 1999, respectively,
related to the leases with REPs.

11.  INCOME TAXES

   The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                           2001   2000     1999
                                           ---- --------  -------
                                               (in thousands)
              <S>                          <C>  <C>       <C>
              Currently payable (refundable):
              Federal..................... $100 $(13,790) $(7,506)
              State.......................   87      429     (486)
                                           ---- --------  -------
                                            187  (13,361)  (7,992)
              Deferred provision (benefit)  124   (5,568)   3,763
                                           ---- --------  -------
                                           $311 $(18,929) $(4,229)
                                           ==== ========  =======
</TABLE>

   A reconciliation of the federal statutory rate to the effective income tax
rate during 2001, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                        2001    2000   1999
                                                        -----   ----   ----
   <S>                                                  <C>     <C>    <C>
   Taxes at federal statutory rate.....................  35.0%  35.0%  35.0%
   State taxes, net of federal benefit.................   3.0%   3.0%   5.4%
   Non-deductible costs of acquisition.................   0.0%   0.0%  (8.0)%
   Restructuring charges not benefited................. (30.2)%  0.0%   0.0%
   Non-deductible charges related to sale of subsidiary (15.4)%  0.0%   0.0%
   Other, net..........................................   3.8%  (3.5)%  2.3%
                                                        -----   ----   ----
                                                         (3.8)% 34.5%  34.7%
                                                        =====   ====   ====
</TABLE>

                                      54

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Significant components of the Company's deferred tax assets:

<TABLE>
<CAPTION>
                                                   2001      2000
                                                 --------  --------
                                                   (in thousands)
           <S>                                   <C>       <C>
           Deferred tax assets:
            Net operating loss carryforwards.... $ 15,318  $ 15,318
            Research and experimentation credits    6,446        --
            Allowances and accruals.............    5,561     4,078
            Depreciation........................    3,290     2,367
            Deferred revenue....................    2,157     2,187
                                                 --------  --------
            Total deferred tax assets...........   32,772    23,950
            Valuation allowance.................  (24,264)  (15,318)
                                                 --------  --------
            Net deferred tax assets.............    8,508     8,632
            Less current portion................    7,718     6,265
                                                 --------  --------
                                                 $    790  $  2,367
                                                 ========  ========
</TABLE>

   At December 31, 2001, the Company had net operating loss carry forwards
(NOLs) of approximately $38.3 million generated by EDiX and available to offset
the Company's future taxable income subject to an annual limitation of
$800,000. These NOLs will expire, if not used, during the years 2009 through
2018.

   At December 31, 2001, the Company had research and experimentation credits
of approximately $6.4 million available to offset the Company's future tax
liabilities subject to limitations. These research and experimentation credits
will expire, if not used, during the years 2018 through 2021.

   The Company believes that, based upon a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realization of
certain deferred tax assets, principally NOLs and research and experimentation
credits, such that a partial valuation allowance has been recorded. The
remaining balance is considered recoverable on a more likely than not basis as
a result of tax planning strategies related to certain favorable lease rights
and unrealized gains on the Company's investment in the common stock of an
equity investee. The Company will continue to assess the realization of the
deferred tax assets based on available tax planning strategies and actual and
forecasted operating results.

   Certain reclassifications have been made to prior year balances to reflect
an increase in currently refundable income taxes as a result of the filing of
amended income tax returns for prior years.

12.  NET LOSS PER SHARE

   The following sets forth the computation of basic and diluted loss per share:


<TABLE>
<CAPTION>
                                                   2001           2000        1999
                                                  -------       --------    -------
                                                (in thousands, except per share data)
<S>                                             <C>            <C>         <C>
Numerator:
 Net loss...................................... $(8,598)       $(35,968)   $(7,944)
                                                  -------       --------    -------
 Numerator for basic and diluted loss per share $(8,598)       $(35,968)   $(7,944)
                                                  -------       --------    -------
Denominator:
  Denominator for basic loss per share
   weighted-average shares.....................  28,566          28,090     27,723
  Effect of employee stock options.............      --              --         --
                                                  -------       --------    -------
  Denominator for diluted loss per share.......  28,566          28,090     27,723
Basic net loss per share....................... $ (0.30)       $  (1.28)   $ (0.29)
                                                  -------       --------    -------
Diluted net loss per share..................... $ (0.30)       $  (1.28)   $ (0.29)
                                                  =======       ========    =======
</TABLE>

                                      55

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


13.  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. 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, 2001, 2000 and
1999, the Company has expensed $161,000, $3,572,000, and $0, respectively.

  401(K) Retirement Savings Plan

   Under the 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 plan were
$3.1 million, $3.3 million and $3.3 million for the year ended December 31,
2001, 2000 and 1999, respectively.

  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 and May 2001, (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 2,100,000 shares of Common Stock have been reserved for
issuance under the ESPP, which is an increase of 700,000 shares from December
31, 2000. During the years ended December 31, 2001, 2000, and 1999, an
aggregate of approximately 279,000, 378,000, and 125,000 shares, respectively,
were purchased under the ESPP. No additional shares of stock were issued under
the ESPP subsequent to the end of the year. The Company has approximately
1,009,000 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, 2001, options to purchase 27,750 and 43,616 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 and May 2001, (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,

                                      56

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 8,500,000 shares of Common Stock
may be issued upon the exercise of options granted under the 1995 Option Plan.
At December 31, 2001, options to purchase 3,826,113 shares of Common Stock were
outstanding under the 1995 Option Plan, of which 1,638,313 were exercisable.

   In September 1995, IDX's Board of Directors approved the 1995 Director Stock
Option Plan, as amended, in May 1997, July 1997, and May 2001, (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. In addition, options are granted periodically to
members of the Board of Directors. 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 160,000 shares of Common Stock
for issuance under the IDX Director Plan. At December 31, 2001, options to
purchase 80,061 shares of Common Stock were outstanding under the IDX Director
Plan, of which 60,346 were 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 acquisition of PHAMIS by IDX in 1997
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 acquisition. The
aforementioned PHAMIS plans were terminated for purposes of prospective
eligibility at the effective time of the acquisition. At December 31, 2001,
options to purchase 3,611, 60,063 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.

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
                                 ----------------  ----------------
                                 2001  2000  1999  2001  2000  1999
                                 ----  ----  ----  ----  ----  ----
           <S>                   <C>   <C>   <C>   <C>   <C>   <C>
           Expected life (years)  4.0   4.0   4.0   0.5   0.5   0.5
           Interest rate........  3.5%  5.8%  5.9%  1.8%  4.8%  5.7%
           Volatility........... 52.4% 77.6% 74.6% 52.4% 77.6% 74.6%
           Dividend yield.......  0.0%  0.0%  0.0%  0.0%  0.0%  0.0%
</TABLE>

                                      57

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   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.

   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 loss per share
information):

<TABLE>
<CAPTION>
                                          2001      2000      1999
                                        --------  --------  --------
           <S>                          <C>       <C>       <C>
           Pro forma net loss.......... $(14,327) $(41,946) $(13,136)
           Pro forma net loss per share $  (0.50) $  (1.49) $  (0.47)
</TABLE>

   The effects on 2001, 2000 and 1999 pro-forma net loss and net 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 SFAS No. 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>
                                       2001                 2000                 1999
                               -------------------- -------------------- --------------------
                                          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........................ 3,370,900   $20.60   2,605,886   $22.77   1,889,019   $26.36
Granted....................... 1,042,478   $16.24   1,508,060   $18.45   1,098,009   $14.33
Exercised.....................   (80,590)  $10.67    (206,120)  $15.17    (234,642)  $ 5.75
Forfeited.....................  (288,124)  $22.71    (536,926)  $25.89    (146,500)  $33.12
                               ---------   ------   ---------   ------   ---------   ------
Outstanding at end of year.... 4,044,664   $19.52   3,370,900   $20.60   2,605,886   $22.77
                               ---------   ------   ---------   ------   ---------   ------
Exercisable at end of year.... 1,837,299   $22.32   1,346,099   $23.74   1,155,276   $23.00
                               ---------   ------   ---------   ------   ---------   ------
Weighted-average fair value of
  options granted during the
  year........................             $ 7.10               $11.29               $ 8.53
                                           ======               ======               ======
Available for future grants... 4,288,400              965,319            1,936,453
                               =========            =========            =========
</TABLE>

                                      58

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The following table presents weighted-average price and life information
about significant option groups outstanding at December 31, 2001:

<TABLE>
<CAPTION>
                          Options Outstanding              Options Exercisable
                        -----------------------           ---------------------
                                     Weighted-
                                      Average   Weighted-             Weighted-
                                     Remaining   Average               Average
                          Number    Contractual Exercise    Number    Exercise
Range of Exercise Price Outstanding    Life       Price   Exercisable   Price
----------------------- ----------- ----------- --------- ----------- ---------
<S>                     <C>         <C>         <C>       <C>         <C>
    $ 4.32--$12.61.....    245,616  7.41 years   $ 9.44       87,966   $ 5.73
    $13.01--$15.88.....  1,120,596  8.09 years   $14.33      514,597   $13.84
    $16.02--$17.75.....  1,303,531  8.80 years   $16.88      214,190   $16.63
    $17.78--$31.56.....  1,144,629  6.01 years   $26.49      849,633   $27.84
    $31.63--$51.19.....    230,292  6.87 years   $35.92      170,913   $36.09
                         ---------  ----------   ------    ---------   ------
                         4,044,664                         1,837,299
                         =========                         =========
</TABLE>

14.  COMMITMENTS AND CONTINGENCIES

   On January 18, 2001, the Company commenced a lawsuit against Epic Systems
Corporation ("Epic"), a competitor of the Company, the University of Wisconsin
Medical Foundation (the Foundation), and two individuals, claiming, among other
things, that trade secrets of the Company involving its IDXtend medical group
practice system were wrongfully disclosed to, and misappropriated by, Epic, in
a series of meetings that took place in 1998 and 1999. The defendants deny the
Company's claims. The Company's lawsuit seeks damages and injunctive relief and
was brought in the United States District Court for the Western District of
Wisconsin and is entitled, IDX Systems Corporation v. Epic Systems Corporation,
et al. The Foundation brought a counterclaim against the Company claiming that
its lawsuit interferes with a contract between the Foundation and Epic, and
that the confidentiality provisions in IDX's contracts with the Foundation are
invalid. The counterclaim seeks damages and declaratory judgment. The Company
denies the counterclaim.

   Subsequently, Epic filed an Answer denying the essential elements of the
Company's claims, and asserted counterclaims against the Company. Epic alleges
that the Company's claims asserting its trade secret rights were brought in bad
faith, with an intent to injure Epic competitively, and thereby violated
Sections 1 and 2 of the Sherman Act because the Company allegedly possesses
monopoly power in the U.S. market for medical practice information systems.
Epic also claims that this same alleged conduct constitutes intentional
interference with its contract with the Foundation. The counterclaim seeks
treble damages. The Company denies the counterclaims. On July 31, 2001, the
Company's lawsuit against Epic, the Foundation and the individuals was
dismissed and the counterclaims of Epic and the Foundation were dismissed. The
Company appealed the dismissal of its lawsuit to the United States Court of
Appeals, and Epic appealed the dismissal of its counterclaims. Appellate
argument was heard by the United States Court of Appeals for the Seventh
Circuit on January 24, 2002. The Company expects to receive a decision in the
future.

   In April 2000, the Company commenced a lawsuit for damages caused by
wrongful cancellation and material breach of contract by St. John Health System
("SJHS"), in the United States District Court for Eastern District of Michigan,
entitled IDX Systems Corporation v. St. John Health System. Subsequently, SJHS
commenced a lawsuit against the Company in the Circuit Court of Wayne County,
Michigan, claiming unspecified damages against the Company for anticipatory
repudiation, breach of contract, tort and fraud. On motion of the Company,
SJHS's lawsuit was removed to and consolidated in the federal court. In its
answer to the Company's lawsuit, SJHS asserted the same claims previously
asserted in its state court action. In September 2001, SJHS specified damage
claims of approximately $77 million in allegedly lost savings, and in January
2002 raised another theory of alleged unspecified damages for "cover". The
Company believes the claims of SJHS are

                                      59

<PAGE>

                            IDX SYSTEMS CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

without merit and continues to vigorously defend itself and prosecute its own
claims for damages, which the Company believes may exceed approximately $9
million. The lawsuit is in the trial preparation stage and the parties are
awaiting scheduling of the trial by the court.

   From time to time, The Company is a party to or may be threatened with other
litigation in the ordinary course of its business. The Company regularly
analyzes current information including, as applicable, the Company's defenses
and insurance coverage and as necessary, provides accruals for probable and
estimable liabilities for the eventual disposition of these matters. The
ultimate outcome of these matters is not expected to materially affect the
Company's business, financial condition or results of operations.

15.  QUARTERLY INFORMATION (UNAUDITED)

   A summary of operating results for the quarterly periods in the two years
ended December 31, 2001 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, 2001
Total revenues..................... $ 91,809  $101,393    $ 86,599    $100,128   $379,929
Gross profit.......................   28,461    36,301      20,815      31,267    116,844
Net income (loss)..................   19,760    (2,277)    (12,233)    (13,848)    (8,598)
Net income (loss) per share-basic.. $   0.69  $  (0.08)   $  (0.43)   $  (0.48)  $  (0.30)
Net income (loss) per share-diluted $   0.68  $  (0.08)   $  (0.43)   $  (0.48)  $  (0.30)
Year ended December 31, 2000
Total revenues..................... $ 76,722  $ 79,596    $ 87,578    $ 97,997   $341,893
Gross profit.......................   21,562    18,936      26,896      30,415     97,809
Net income (loss)..................  (10,499)  (22,023)     (4,777)      1,331    (35,968)
Net income (loss) per share-basic.. $  (0.38) $  (0.79)   $  (0.17)   $   0.05   $  (1.28)
Net income (loss) per share-diluted $  (0.38) $  (0.79)   $  (0.17)   $   0.05   $  (1.28)
</TABLE>

   The results of operations for the periods presented above include certain
significant pre-tax charges and gains in the following periods as described
below:

2001

   A gain on sale of an investment in ChannelHealth of $35.5 million during the
first quarter, a realized gain on investment in an unrelated entity of $5.8
million during the first quarter, a charge of $19.5 million related to a
restructuring program during the fourth quarter, and the equity in the loss of
an unconsolidated affiliate of $6.0 million, $5.5 million and $6.1 million
during the first, second and third quarters, respectively.

2000

   A $5.8 million loss on impairment of goodwill associated with ChannelHealth,
Inc. during the first quarter, charges of $21.0 million related to a product
discontinuance and restructuring program during the second quarter and a
realized gain on investment in an unrelated entity of $7.3 million in the
fourth quarter.

                                      60

<PAGE>

                        REPORT OF INDEPENDENT AUDITORS

Board of Directors
IDX Systems Corporation

   We have audited the accompanying consolidated balance sheets of IDX Systems
Corporation, as of December 31, 2001 and 2000, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2001. 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, at December 31, 2001 and 2000, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001, 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, presents fairly in all material respects the information set forth
therein.

                                          /S/ ERNST & YOUNG LLP

Boston, Massachusetts
February 4, 2002

                                      61

<PAGE>

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

   None.

                                   PART III

   Certain information required by Part III of this Form 10-K is omitted
because the Company will file a definitive proxy statement pursuant to
Regulation 14A (the Proxy Statement) not later than 120 days after the end of
the fiscal year covered by this Form 10-K, and certain information to be
included therein is incorporated herein by reference.

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 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 Proxy Statement under the
caption "Compliance with Section 16 Reporting Requirements" and is incorporated
herein by reference.

ITEM 11.   EXECUTIVE COMPENSATION

   The response to this item is contained in the 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 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 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, 2001 and 2000.
   Consolidated Statements of Operations for the Years Ended December 31, 2001,
2000 and 1999.
   Consolidated Statements of Stockholders' Equity for the Years Ended December
31, 2001, 2000 and 1999.
   Consolidated Statements of Cash Flows for the Years Ended December 31, 2001,
2000 and 1999.
   Notes to Consolidated Financial Statements.
   Report of Independent Auditors.

2. The consolidated financial statement Schedule II is as follows: All other
   schedules are omitted, as the information required is either presented in
   the consolidated financial statements or is inapplicable.

                                      62

<PAGE>

                SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                                           Deductions-
                                                                            Bad Debts
                                        Balance at  Charged to             Written-Off Balance at
                                       Beginning of Costs and  Deductions-   Net of      End of
Description                               Period     Expenses   Other ##   Collections   Period
-----------                            ------------ ---------- ----------- ----------- ----------
<S>                                    <C>          <C>        <C>         <C>         <C>
Year ended December 31, 2001 Allowance
  for doubtful accounts...............  $4,297,000  $2,382,000  $500,000   $2,023,000  $4,156,000
Year ended December 31, 2000 Allowance
  for doubtful accounts...............  $3,300,000  $2,918,000        --   $1,921,000  $4,297,000
Year ended December 31, 1999 Allowance
  for doubtful accounts...............  $2,615,000  $  685,000        --           --  $3,300,000
</TABLE>
--------
## Reduction in the allowance for doubtful accounts related to the sale of
   ChannelHealth.

3.  The Exhibits listed in the Exhibit Index immediately preceding the Exhibits
    are filed as a part of this Annual Report on Form 10K.

   On October 2, 2001, the Company filed a report on Form 8-K, reporting a news
release dated September 28, 2001, updating the guidance for the 2001 fiscal
year.

                                      63

<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 26th day of
March, 2002.

                                          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.

          Signature                       Title                   Date
          ---------                       -----                   ----

   /s/  RICHARD E. TARRANT    Chief Executive                March 26, 2002
-----------------------------   Officer and Director
     Richard E. Tarrant         (Principal Executive
                                 Officer)

      /s/  JOHN A. KANE       Senior Vice President, Finance March 26, 2002
-----------------------------   and Administration, Chief
        John A. Kane            Financial Officer and
                                 Treasurer
                                (Principal Financial and
                                Accounting Officer)

     /s/  HENRY M. TUFO       Director                       March 26, 2002
-----------------------------
     Henry M. Tufo, M.D.

    /s/  ROBERT H. HOEHL      Director                       March 26, 2002
-----------------------------
       Robert H. Hoehl

    /s/  STUART H. ALTMAN     Director                       March 26, 2002
-----------------------------
   Stuart H. Altman, Ph.D.

    /s/  MARK F. WHEELER      Director                       March 26, 2002
-----------------------------
       Mark F. Wheeler

      /s/  ALLEN MARTIN       Director                       March 26, 2002
-----------------------------
        Allen Martin

    /s/  DAVID P. HUNTER      Director                       March 26, 2002
-----------------------------
       David P. Hunter

                                      64

<PAGE>

                                  EXHIBIT INDEX

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

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C>         <S>
   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.
  10.6#*    Description of Registrant's Executive Bonus Plan.
  10.10#*   Employment, Noncompetition and Nondisclosure Agreement between the Registrant and Richard
            E. Tarrant.
  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.
  10.17*    First Amendment to Redemption Agreement between the Registrant, Richard E. Tarrant and
            Robert H. Hoehl dated September 19, 1995.
  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.
  10.24*    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.
  10.36+    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.
  10.42#    Amended and Restated Lease Agreement between BDP Realty Associates and IDX Systems
            Corporation relating to 1400 Shelburne Road (now known as 40 IDX Drive) dated as of November
            1, 1997.
</TABLE>

                                      65

<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C>         <S>
   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.
   10.46&   Second Addendum to Lease Agreement between 4901 LBJ Limited Partnership and IDX Systems
            Corporation dated April 21, 1997.
   10.47&   Third Amendment to Lease between Huntington Avenue Limited Partnership and IDX Systems
            Corporation.
   10.48&   Fourth Amendment to Lease between Huntington Avenue Limited Partnership and IDX Systems
            Corporation.
   10.50(   Letter Agreement between BDP Realty Associates and IDX Systems Corporation dated as of
            March 23, 1999.
   10.51(   Lease Extension between IDS Realty Trust and IDX Systems Corporation dated as of June 15,
            1998 and executed April 12, 1999.
   10.52)   Sample Indemnification Agreement signed by all Directors and Officers as of September 13, 1999.
   10.53=   Series A Convertible Preferred Stock Purchase Agreement by and between Channelhealth
            Incorporated, IDX Systems Corporation and Purchasers named on Schedule I dated as of
            January 10, 2000.
   10.54[   Stock Restriction and Voting Agreement by and among Richard E. Tarrant and Amy E. Tarrant
            effective April 29, 1999 and executed June 8, 2000.
   10.55%   Stock Rights and Restriction Agreement between Allscripts Healthcare Solutions, Inc. and IDX
            Systems Corporation dated as of January 8, 2001.
   10.56%   Strategic Alliance Agreement by and between Allscripts Healthcare Solutions, Inc. and IDX
            Systems Corporation dated as of January 8, 2001.
   10.57%   Stock Option Agreement by and between IDX Systems Corporation and James H. Crook, Jr. dated
            as of October 16, 2000.
   10.58!   Employment, Noncompetition and Nondisclosure Agreement by and between the Company and
            Lawrence A. Krassner dated as of June 11, 2001.
   10.59!   1995 Stock Option Plan as amended through May 21, 2001.
   10.60!   1995 Employee Stock Purchase Plan as amended through May 21, 2001.
   10.61!   1995 Director Stock Option Plan as amended through May 21, 2001.
   10.62?   Second Amendment to Redemption Agreement by and among the Company, Richard E. Tarrant
            and Robert H. Hoehl and other shareholders dated as of September 13, 2001.
   10.63~   Joinder, dated September 30, 2001, by and among Allscripts Healthcare Solutions, Inc., IDX
            Systems Corporation and IDX Investment Corporation.
   21.1     Subsidiaries
   23.1     Consent of Ernst & Young LLP
   23.2     Consent of KPMG LLP regarding Allscripts Healthcare Solutions, Inc.
   99.1     Consolidated Financial Statements for Allscripts Healthcare Solutions, Inc (incorporated by
            reference to Allscripts Healthcare Solutions, Inc. financial statements included in its report on
            Form 10-K, filed on or before April 1, 2002.
</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.


                                      66

<PAGE>

(less than) Incorporated herein by reference from the Company's Annual Report
   on Form 10-K for the fiscal year ended December 31, 1999.
&  Incorporated herein by reference from the Company's Quarterly Report on Form
   10-Q for the quarterly period ended March 31, 1998.
$  Incorporated herein by reference from the Company's Quarterly Report on Form
   10-Q for the quarterly period ended September 30, 1998.
(  Incorporated herein by reference from the Company's Quarterly Report on Form
   10-Q for the quarterly period ended March 31, 1999.
)  Incorporated herein by reference from the Company's Quarterly Report on Form
   10-Q for the quarterly period ended September 30, 1999.
=  Incorporated herein by reference from the Company's Quarterly Report on Form
   10-Q for the quarterly period ended March 31, 2000.
[  Incorporated herein by reference from the Company's Quarterly Report on Form
   10-Q for the quarterly period ended June 30, 2000.
%  Incorporated herein by reference from the Company's Annual Report on Form
   10-K for the fiscal year ended December 31, 2000.
!  Incorporated herein by reference from the Company's Quarterly Report on Form
   10-Q for the quarterly period ended June 30, 2001.
?  Incorporated herein by reference from the Company's Quarterly Report on Form
   10-Q for the quarterly period ended September 30, 2001.
~  Incorporated herein by reference from the Company's Report on Amendment No.
   1 to Schedule 13D for the event of January 10, 2002.

                                      67