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



FORM 10-Q

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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

COMMISSION FILE NUMBER: 000-24539

ECLIPSYS CORPORATION
(Exact name of registrant as specified in its charter)

|                         |  |                                     
|------------------------ |  | ------------------------------------
|DELAWARE                 |  | 65-0632092                          
|(State of Incorporation) |  | (IRS Employer Identification Number)

1750 Clint Moore Road
Boca Raton, Florida
33487
(Address of principal executive offices)

561-322-4321
(Telephone number of registrant)

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 for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b02 of the Exchange Act).
Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuers classes
of common stock as of the latest practicable date.

|                             |  |                                             
|---------------------------- |  | --------------------------------------------
|Class                        |  | Shares outstanding as
        of May 9, 2003
|Common Stock, $.01 par value |  | 45,431,522                                  

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ECLIPSYS CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2003

INDEX

|               |  |                                                                                                                                  |  |     
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I.        |  | Financial Information                                                                                                            |  | Page
|               |  |                                                                                                                                  |  |     
|Item 1.        |  | Condensed Consolidated Balance
        Sheets (unaudited)  As of March 31, 2003 and December 31, 2002                           |  | 3   
|               |  |                                                                                                                                  |  |     
|               |  | Condensed Consolidated Statements
        of Operations (unaudited)  For the Three Months ended March 31,
        2003 and 2002 |  | 4   
|               |  |                                                                                                                                  |  |     
|               |  | Condensed Consolidated Statements
        of Cash Flows (unaudited)  For the Three Months ended March 31,
        2003 and 2002 |  | 5   
|               |  |                                                                                                                                  |  |     
|               |  | Notes to Condensed Consolidated
        Financial Statements (unaudited)                                                         |  | 6   
|               |  |                                                                                                                                  |  |     
|Item 2.        |  | Managements Discussion
        and Analysis of Financial Condition and Results of Operations                                    |  | 10  
|               |  |                                                                                                                                  |  |     
|Item 3.        |  | Quantitative and Qualitative
        Disclosures About Market Risk                                                               |  | 20  
|               |  |                                                                                                                                  |  |     
|Item 4.        |  | Controls and Procedures                                                                                                          |  | 20  
|               |  |                                                                                                                                  |  |     
|PART II.       |  | Other Information                                                                                                                |  |     
|               |  |                                                                                                                                  |  |     
|Item 1.        |  | Legal Proceedings                                                                                                                |  | 21  
|               |  |                                                                                                                                  |  |     
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                                                                 |  | 21  
|               |  |                                                                                                                                  |  |     
|Signatures     |  |                                                                                                                                  |  | 22  
|               |  |                                                                                                                                  |  |     
|Certifications |  |                                                                                                                                  |  | 23  

2



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##### 



PART I.

ITEM 1.

ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)

|                                                      |                                                |                |                           |          |   |   |         |          |  
|----------------------------------------------------- | ---------------------------------------------- | -------------- | ------------------------- | -------- | - | - | ------- | -------- | -
|                                                      |                                                | MARCH 31, 2003 | DECEMBER 31,
        2002
|                                                      |                                               
|ASSETS                                                |                                                |                |                           |          |   |   |         |         
|Current
          assets:                             |                                                |                |                           |          |   |   |         |         
|                                                      | Cash
          and cash equivalents            |                | $                         | 127,512  |   |   | $       | 183,500  |  
|                                                      | Marketable
          securities                |                |                           | 52,449   |   |   |         |         |  
|                                                      | Accounts
          receivable, net             |                |                           | 44,692   |   |   |         | 46,822   |  
|                                                      | Inventory                                      |                |                           | 811      |   |   |         | 656      |  
|                                                      | Other
          current assets                 |                |                           | 14,996   |   |   |         | 16,921   |  
|                                                      |                                                |                |                           |          |   |   |         |          |  
|Total
          current assets                        |                                                |                | 240,460                   |          |   |   | 247,899 |         
|Property
          and equipment, net                 |                                                |                | 27,064                    |          |   |   | 26,800  |         
|Capitalized
          software development costs, net |                                                |                | 17,258                    |          |   |   | 16,375  |         
|Acquired
          technology, net                    |                                                |                | 131                       |          |   |   | 267     |         
|Goodwill                                              |                                                |                | 454                       |          |   |   | 454     |         
|Other
          assets                                |                                                |                | 9,311                     |          |   |   | 9,402   |         
|                                                      |                                                |                |                           |          |   |   |         |          |  
|TOTAL
          ASSETS                                |                                                | $              | 294,678                   |          |   | $ | 301,197 |         
|                                                      |                                                |                |                           |          |   |   |         |         
|LIABILITIES
          AND STOCKHOLDERS EQUITY        |                                                |                |                           |          |   |   |         |         
|Current
          liabilities:                        |                                                |                |                           |          |   |   |         |         
|                                                      | Deferred
          revenue                     |                | $                         | 84,986   |   |   | $       | 79,235   |  
|                                                      | Accrued
          compensation costs           |                |                           | 12,177   |   |   |         | 14,442   |  
|                                                      | Other
          current liabilities            |                |                           | 16,108   |   |   |         | 13,854   |  
|                                                      |                                                |                |                           |          |   |   |         |          |  
|Total
          current liabilities                   |                                                |                | 113,271                   |          |   |   | 107,531 |         
|Deferred
          revenue                            |                                                |                | 901                       |          |   |   | 843     |         
|Other
          long-term liabilities                 |                                                |                | 270                       |          |   |   | 226     |         
|Stockholders
          equity:                       |                                                |                |                           |          |   |   |         |         
|                                                      | Common
          stock                         |                |                           | 452      |   |   |         | 451      |  
|                                                      | Unearned
          stock compensation          |                |                           | (964     | ) |   |         | (1,021   | )
|                                                      | Additional
          paid-in capital           |                |                           | 405,978  |   |   |         | 405,380  |  
|                                                      | Accumulated
          deficit                  |                |                           | (224,839 | ) |   |         | (211,814 | )
|                                                      | Accumulated
          other comprehensive loss |                |                           | (391     | ) |   |         | (399     | )
|                                                      |                                                |                |                           |          |   |   |         |          |  
|Total
          stockholders equity                  |                                                |                | 180,236                   |          |   |   | 192,597 |         
|                                                      |                                                |                |                           |          |   |   |         |         
|TOTAL LIABILITIES AND STOCKHOLDERS
        EQUITY    |                                                | $              | 294,678                   |          |   | $ | 301,197 |         
|                                                      |                                                |                |                           |          |   |   |         |         

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

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ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

|                                                             |                                         |   |                                      |        |      |   |        |        | 
|------------------------------------------------------------ | --------------------------------------- | - | ------------------------------------ | ------ | ---- | - | ------ | ------ | 
|                                                             |                                         |   | THREE MONTHS ENDED
        MARCH 31,
|                                                             |                                         |   | 2003                                 |        | 2002
|                                                             |                                         |   |                                      |        |     
|REVENUES                                                     |                                         |   |                                      |        |      |   |        |       
|                                                             | Systems
          and services          |   | $                                    | 53,697 |      |   | $      | 57,130 | 
|                                                             | Hardware                                |   |                                      | 3,139  |      |   |        | 5,689  | 
|                                                             |                                         |   |                                      |        |      |   |        |       
|TOTAL
          REVENUES                                     |                                         |   | 56,836                               |        |      |   | 62,819 |       
|                                                             |                                         |   |                                      |        |      |   |        |       
|COSTS
          AND EXPENSES                                 |                                         |   |                                      |        |      |   |        |       
|                                                             | Cost of systems and services revenues   |   | 32,804                               |        |      |   | 27,700 |       
|                                                             | Cost
          of hardware revenues     |   |                                      | 2,684  |      |   |        | 4,612  | 
|                                                             | Sales
          and marketing           |   |                                      | 16,556 |      |   |        | 11,380 | 
|                                                             | Research
          and development      |   |                                      | 12,984 |      |   |        | 10,239 | 
|                                                             | General
          and administrative    |   |                                      | 3,364  |      |   |        | 2,534  | 
|                                                             | Depreciation
          and amortization |   |                                      | 2,369  |      |   |        | 1,989  | 
|                                                             |                                         |   |                                      |        |      |   |        |        | 
|TOTAL
          COSTS AND EXPENSES                           |                                         |   | 70,761                               |        |      |   | 58,454 |       
|                                                             |                                         |   |                                      |        |      |   |        |        | 
|(LOSS) INCOME
          FROM OPERATIONS                      |                                         |   | (13,925                              | )      |      |   | 4,365  |       
|Interest
          income, net                               |                                         |   | 900                                  |        |      |   | 1,109  |       
|                                                             |                                         |   |                                      |        |      |   |        |        | 
|(LOSS) INCOME
          BEFORE INCOME TAXES                  |                                         |   | (13,025                              | )      |      |   | 5,474  |       
|Provision
          for income taxes                         |                                         |   |                                     |        |      |   | 165    |       
|                                                             |                                         |   |                                      |        |      |   |        |        | 
|NET
          (LOSS) INCOME                                  |                                         | $ | (13,025                              | )      |      | $ | 5,309  |       
|                                                             |                                         |   |                                      |        |      |   |        |        | 
|BASIC
          NET (LOSS) INCOME PER COMMON SHARE           |                                         | $ | (0.29                                | )      |      | $ | 0.12   |       
|                                                             |                                         |   |                                      |        |      |   |        |        | 
|DILUTED
          NET (LOSS) INCOME PER COMMON SHARE         |                                         | $ | (0.29                                | )      |      | $ | 0.11   |       
|                                                             |                                         |   |                                      |        |      |   |        |        | 
|BASIC
          WEIGHTED AVERAGE COMMON SHARES OUTSTANDING   |                                         |   | 45,069                               |        |      |   | 44,498 |       
|                                                             |                                         |   |                                      |        |      |   |        |        | 
|DILUTED
          WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |                                         |   | 45,069                               |        |      |   | 46,938 |       
|                                                             |                                         |   |                                      |        |      |   |        |        | 

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

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ECLIPSYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)

|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |         |         |       |         |  
|---------------------------------------------------------------------------------------- | -------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------- | ------- | ---------------------------- | ------- | ------- | ------- | ----- | ------- | -
|                                                                                         |                                        |                                                                                               |                                           |         | THREE MONTHS ENDED MARCH 31,
|                                                                                         |                                        |                                                                                               |                                           |         |                             
|                                                                                         |                                        |                                                                                               |                                           |         | 2003                         |         | 2002   
|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |        
|OPERATING ACTIVITIES                                                                     |                                        |                                                                                               |                                           |         |                              |         |         |        
|Net (loss) income                                                                        |                                        | $                                                                                             | (13,025                                   | )       |                              | $       | 5,309   |        
|Adjustments to reconcile net (loss) income to net cash provided by operating activities: |                                        |                                                                                               |                                           |         |                              |         |         |        
|Depreciation and amortization                                                            |                                        |                                                                                               | 4,791                                     |         |                              |         | 5,805   |        
|Provision for bad debts                                                                  |                                        |                                                                                               | 550                                       |         |                              |         | 150     |        
|Stock compensation expense                                                               |                                        |                                                                                               | 57                                        |         |                              |         | 32      |        
|Changes in operating assets and liabilities:                                             |                                        |                                                                                               |                                           |         |                              |         |         |        
|                                                                                         | Accounts receivable                    |                                                                                               |                                           | 1,580   |                              |         |         | (2,712  | )    
|                                                                                         | Inventory                              |                                                                                               |                                           | (155    | )                            |         |         | 253     |      
|                                                                                         | Other current assets                   |                                                                                               |                                           | 1,925   |                              |         |         | 3,082   |      
|                                                                                         | Other assets                           |                                                                                               |                                           | (412    | )                            |         |         | (547    | )    
|                                                                                         | Deferred revenue                       |                                                                                               |                                           | 5,809   |                              |         |         | 1,620   |      
|                                                                                         | Accrued compensation costs             |                                                                                               |                                           | (2,265  | )                            |         |         | (4,425  | )    
|                                                                                         | Other current liabilities              |                                                                                               |                                           | 2,254   |                              |         |         | 1,877   |      
|                                                                                         | Other liabilities                      |                                                                                               |                                           | 44      |                              |         |         | 44      |      
|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |         |        
|                                                                                         |                                        | Total adjustments to reconcile net (loss) income to net cash provided by
operating activities |                                           |         | 14,178                       |         |         |         | 5,179 |        
|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |         |        
|                                                                                         |                                        |                                                                                               | NET CASH PROVIDED BY OPERATING ACTIVITIES |         |                              | 1,153   |         |         |       | 10,488  |  
|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |         |        
|INVESTING ACTIVITIES                                                                     |                                        |                                                                                               |                                           |         |                              |         |         |        
|                                                                                         | Purchase of property and equipment     |                                                                                               |                                           | (2,633  | )                            |         |         | (3,915  | )    
|                                                                                         | Purchase of marketable securities, net |                                                                                               |                                           | (52,449 | )                            |         |         | (60,551 | )    
|                                                                                         | Capitalized software development costs |                                                                                               |                                           | (2,666  | )                            |         |         | (1,989  | )    
|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |         |        
|                                                                                         |                                        |                                                                                               | NET CASH USED IN INVESTING ACTIVITIES     |         |                              | (57,748 | )       |         |       | (66,455 | )
|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |         |        
|FINANCING ACTIVITIES                                                                     |                                        |                                                                                               |                                           |         |                              |         |         |        
|                                                                                         | Exercise of stock options              |                                                                                               |                                           | 8       |                              |         |         | 694     |      
|                                                                                         | Employee stock purchase plan           |                                                                                               |                                           | 591     |                              |         |         | 584     |      
|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |         |        
|                                                                                         |                                        |                                                                                               | NET CASH PROVIDED BY FINANCING ACTIVITIES |         |                              | 599     |         |         |       | 1,278   |  
|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |         |        
|EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS                                    |                                        |                                                                                               | 8                                         |         |                              |         |        |        
|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |         |        
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                |                                        |                                                                                               | (55,988                                   | )       |                              |         | (54,689 | )      
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                           |                                        |                                                                                               | 183,500                                   |         |                              |         | 168,942 |        
|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |         |        
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                 |                                        | $                                                                                             | 127,512                                   |         |                              | $       | 114,253 |        
|                                                                                         |                                        |                                                                                               |                                           |         |                              |         |         |        

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

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ECLIPSYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

The condensed consolidated financial statements include all adjustments
that, in the opinion of management, are necessary for a fair presentation of
the results for the periods presented. All such adjustments are considered of
a normal recurring nature. Quarterly results of operations are not necessarily
indicative of annual results. Certain prior period amounts have been
reclassified to conform to the 2003 presentation (Note 8). Eclipsys
Corporation, or the Company, manages its business as one reportable segment.

Certain financial information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These unaudited condensed
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and the notes thereto included in the
Companys Annual Report on Form 10-K filed March 28, 2003.

2. STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees, and related Interpretations. Under
this method, compensation cost for stock options is measured as the excess, if
any, of the estimated market price of the Companys stock at the date of the
grant over the amount an employee must pay to acquire the stock. Accordingly,
the Company provides the additional disclosures required under Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation as amended by SFAS No. 148 Accounting for Stock-Based
Compensation  Transition and Disclosure.

The Company has adopted the disclosure-only provisions of FAS 123. Had
compensation cost for the Companys stock option grants described above been
determined based on the fair value at the grant date for awards in 2002 and
2003, consistent with the provisions of FAS 123, the Companys net (loss)
income and (loss) income per share would have been the pro forma
amounts indicated below for the three month periods ended March 31, (in
thousands, except per share data):

|                                     |                                                                                                                                    |  |      |         |      |  |  |  |  |  |   |        |  
|------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  |  |  |  |  | - | ------ | -
|                                     |                                                                                                                                    |  | 2003 |         | 2002
|                                     |                                                                                                                                    |  |      |         |     
|Net (loss) income:                   |                                                                                                                                    |  |      |         |      |  |  |  |  |  |   |       
|                                     | As reported                                                                                                                        |  | $    | (13,025 | )    |  |  |  |  |  | $ | 5,309  |  
|                                     | Add: Stock-based
employee compensation expense included in reported net (loss) income, net of related tax
effects                  |  |      | 56      |      |  |  |  |  |  |   | 32     |  
|                                     | Deduct: Total stock-based compensation expense determined under
fair value based method for all awards, net of related tax
effects |  |      | (5,031  | )    |  |  |  |  |  |   | (6,030 | )
|                                     |                                                                                                                                    |  |      |         |      |  |  |  |  |  |   |        |  
|                                     | Pro forma                                                                                                                          |  | $    | (18,000 | )    |  |  |  |  |  | $ | (689   | )
|Basic net (loss) income per share:   |                                                                                                                                    |  |      |         |      |  |  |  |  |  |   |       
|                                     | As reported                                                                                                                        |  | $    | (0.29   | )    |  |  |  |  |  | $ | 0.12   |  
|                                     | Pro forma                                                                                                                          |  | $    | (0.40   | )    |  |  |  |  |  | $ | (0.02  | )
|Diluted net (loss) income per share: |                                                                                                                                    |  |      |         |      |  |  |  |  |  |   |       
|                                     | As reported                                                                                                                        |  | $    | (0.29   | )    |  |  |  |  |  | $ | 0.11   |  
|                                     | Pro forma                                                                                                                          |  | $    | (0.40   | )    |  |  |  |  |  | $ | (0.02  | )

6



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3. MARKETABLE SECURITIES

Marketable securities consist of funds that are highly liquid and are
classified as available-for-sale. Marketable securities are recorded at fair
value, and unrealized gains and losses are recorded as a component of other
comprehensive income.

4. ACCOUNTS RECEIVABLE

Accounts receivable was comprised of the following (in thousands):

|                     |                                                                               |  |           |        |              |  |   |        | 
|-------------------- | ----------------------------------------------------------------------------- |  | --------- | ------ | ------------ |  | - | ------ | 
|                     |                                                                               |  | March 31, |        | December 31,
|                     |                                                                               |  | 2003      |        | 2002        
|                     |                                                                               |  |           |        |             
|Accounts Receivable: |                                                                               |  |           |        |              |  |   |       
|                     | Billed accounts receivable, net                                               |  | $         | 40,285 |              |  | $ | 42,280 | 
|                     | Unbilled accounts receivable related to long-term contracts
(current portion) |  |           | 3,047  |              |  |   | 2,860  | 
|                     | Other unbilled accounts receivable, net                                       |  |           | 1,360  |              |  |   | 1,682  | 
|                     |                                                                               |  |           |        |              |  |   |       
|                     | Total unbilled accounts receivable, net                                       |  |           | 4,407  |              |  |   | 4,542  | 
|                     |                                                                               |  |           |        |              |  |   |       
|                     | Total accounts receivable, net                                                |  | $         | 44,692 |              |  | $ | 46,822 | 
|                     |                                                                               |  |           |        |              |  |   |       

The non-current portion of unbilled accounts receivable is included in
other assets and was $1.3 million and $1.5 million as of March 31, 2003 and
December 31, 2002, respectively.

5. INTANGIBLE ASSETS

As of March 31, 2003, the Company had the following balances for acquired
technology and intangible assets (in thousands):

|                                         |                               |  |        |                |              |             |             |        |  |  |   |     | 
|---------------------------------------- | ----------------------------- |  | ------ | -------------- | ------------ | ----------- | ----------- | ------ |  |  | - | --- | 
|                                         |                               |  |        | Gross Carrying |              | Accumulated |             |        |  | 
|                                         |                               |  | Amount |                | Amortization |             | Net Balance
|                                         |                               |  |        |                |              |             |            
|Amortized
          intangible assets:   |                               |  |        |                |              |             |             |        |  |  |   |    
|                                         | Acquired
          technology |  | $      | 95,795         |              |             | $           | 95,664 |  |  | $ | 131 | 
|Unamortized
          intangible assets: |                               |  |        |                |              |             |             |        |  |  |   |    
|                                         | Goodwill                      |  |        |                |              |             |             |        |  |  | $ | 454 | 

Amortization of acquired technology for the three months ended March 31,
2003 was $136,000. The estimated amortization expense for the next five fiscal
years is as follows (in thousands):

|                         |       |  |     |     | 
|------------------------ | ----- |  | --- | --- | 
|For year ending 12/31/03 |       |  | 267 |    
|Thereafter               |       |  |    |    
|                         |       |  |     |    
|                         | Total |  | $   | 267 | 
|                         |       |  |     |    

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6. OTHER COMPREHENSIVE INCOME

The components of other comprehensive (loss) income were as follows (in
thousands):

|                                                                                      |  |                              |         |      |  |   |       |  
|------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | ---- |  | - | ----- | -
|                                                                                      |  | Three Months Ended March 31,
|                                                                                      |  |                             
|                                                                                      |  | 2003                         |         | 2002
|                                                                                      |  |                              |         |     
|Net (loss) income                                                                     |  | $                            | (13,025 | )    |  | $ | 5,309 |  
|Unrealized loss on available-for-sale marketable securities
arising during the period |  |                              |        |      |  |   | (294  | )
|Foreign currency translation adjustment                                               |  |                              | 8       |      |  |   |      |  
|                                                                                      |  |                              |         |      |  |   |       |  
|Total comprehensive (loss) income                                                     |  | $                            | (13,017 | )    |  | $ | 5,015 |  
|                                                                                      |  |                              |         |      |  |   |       |  

7. LEGAL ACTION

From July through September 2002, the Company and three of its then
current officers (Messrs. Colletti, Patton and Wilson) were named in seven
complaints filed by purported shareholders of the Company in the United States
District Court, Southern District of Florida, West Palm Beach Division, or the
District Court. Each complaint sought certification as a class and monetary
damages, and alleged that the Company and the named officers violated federal
securities laws. The Company believes that the actions are without merit, and
intends to conduct a vigorous defense against these allegations.

In September 2002, various parties filed motions to be appointed as lead
plaintiffs and to consolidate all of the shareholder suits described above. On
February 4, 2003, the District Court issued an order consolidating all seven
cases into one single case and appointing the City of Philadelphia Board of
Pensions and Retirement, Louis Giannakokas and Norman K. Mielziner to serve as
lead plaintiffs, or the Consolidation Order. The Consolidation Order, as
amended, sets certain timelines by which responsive pleadings must be filed by
the Company and the lead plaintiffs in the consolidated case. On April 30,
2003, the lead plaintiffs filed with the District Court an amended,
consolidated complaint. The Company has until June 30, 2003, to answer or move
to dismiss the amended, consolidated complaint.

The Company is involved in other litigation incidental to its business
from time to time. In the opinion of management, after consultation with legal
counsel, the ultimate outcome of such litigation will not have a material
adverse effect on the Companys financial position or results of operations or
cash flows.

8. RECENT ACCOUNTING PRONOUNCEMENTS

In January 2002, the Emerging Issues Task Force, or the EITF, reached a
consensus on EITF Issue 01-14, Income Statement Characterization of
Reimbursements Received for Out-of-Pocket Expenses Incurred. This consensus
requires that reimbursements received for out-of-pocket expenses incurred be
characterized as revenue in the income statement. The Company adopted EITF
01-14 effective January 1, 2002, and has made the appropriate reclassifications
as required by EITF 01-14. The effect of adopting EITF 01-14 was to increase
both revenues and expenses by the following amounts (in thousands):

|                                       |  |      |  |      |  |  |     |  |   |  |  |  |  |     |  | 
|-------------------------------------- |  | ---- |  | ---- |  |  | --- |  | - |  |  |  |  | --- |  | 
|                                       |  | 2003 |  | 2002
|                                       |  |      |  |     
|Three
          months ended March 31, |  | $    |  |      |  |  | 844 |  | $ |  |  |  |  | 582

8



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In June 2002, the Financial Accounting Standards Board, or the FASB,
issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. SFAS 146 requires that a liability for a cost that is associated
with an exit or disposal activity be recognized when the liability is incurred.
It nullifies the guidance in EITF Issue 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). Under EITF 94-3, an
entity recognized a liability for an exit cost on the date that the entity
committed itself to an exit plan. In SFAS 146, the Board acknowledges that an
entitys commitment to a plan does not, by itself, create a present obligation
to other parties that meets the definition of a liability. SFAS 146 also
establishes that fair value is the objective for the initial measurement of the
liability. SFAS 146 became effective for exit or disposal activities that were
initiated after December 31, 2002. The adoption of SFAS 146 has not had a
material impact on the Companys financial position, results of operations or
cash flows.

In November 2002, the FASB reached a consensus on EITF Issue 00-21,
Accounting for Revenue Arrangements with Multiple Deliverables (the Issue).
The guidance in the Issue is effective for revenue arrangements entered into
in fiscal years beginning after June 15, 2003. The Issue addresses certain
aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue-generating activities. Specifically, the Issue
addresses how to determine whether an arrangement involving multiple
deliverables contains more than one earnings process and, if it does, how to
divide the arrangement into separate units of accounting consistent with the
identified earnings processes for revenue recognition purposes. The Issue also
addresses how arrangement consideration should be measured and allocated to the
separate units of accounting in the arrangement. The Company currently follows
the appropriate accounting pronouncement and anticipates that the Issue will
not have a material impact on the results of operations, financial position or
cash flows.

In November 2002, the FASB issued FASB Interpretation 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others. This interpretation clarifies the
requirements of SFAS 5, Accounting for Contingencies, relating to guarantors
accounting for, and disclosure of, the issuance of certain types of guarantees.
This interpretation is intended to improve the comparability of financial
reporting by requiring identical accounting for guarantees issued with a
separately identified premium and guarantees issued without a separately
identified premium. The interpretations provisions for initial recognition
and measurement are required on a prospective basis to guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective
for financial statements of both interim and annual periods that ended after
December 15, 2002. The Company has adopted the provisions of this
interpretation and it did not have a material impact on our financial position,
results of operations, or cash flows.

In December 2002, the FASB issued SFAS 148, Accounting for Stock Based
Compensation-Transition and Disclosure- an Amendment to SFAS 123. SFAS 148
provides two additional transition methods for entities that adopt the
preferable method of accounting for stock based compensation. Further, the
statement requires disclosure of comparable information for all companies
regardless of whether, when, or how an entity adopts the preferable, fair value
based method of accounting. These disclosures are now required for interim
periods in addition to the traditional annual disclosure. The amendments to
SFAS 123, which provides for additional methods, became effective for periods
beginning after December 15, 2002. The amendments to the disclosure
requirements are required for financial reports containing condensed financial
statements for interim periods beginning after December 15, 2002. The Company
has adopted the additional disclosure requirements of SFAS 148 for interim and
annual filings (Note 2) and will continue to account for stock based
compensation under APB No. 25.

In January 2003, the FASB issued FASB Interpretation 46, Consolidation of
Variable Interest Entities. This interpretation of Accounting Research
Bulletin 51, Consolidated Financial Statements, addresses consolidation by
business enterprises of variable interest entities that possess certain
characteristics. The interpretation requires that if a business enterprise has
a controlling financial interest in a variable interest entity, the assets,
liabilities, and results of the activities of the variable interest entity must
be included in the consolidated financial statements with those of the business
enterprise. This interpretation applies immediately to variable interest
entities created after January 31, 2003 and to variable interest entities in
which an enterprise obtains an interest after that date. The Company does not
currently have any ownership in any variable interest entities as of March 31,
2003. The Company will apply the consolidation requirement of the
interpretation in future periods if it should own any interest in any variable
interest entity.

9



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ITEM 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

This report contains
  forward-looking statements. For this purpose, any statements contained
  herein that are not statements of historical fact may be deemed to be forward-looking
  statements. Without limiting the foregoing, the words believes,
  anticipates, plans, expects, intends,
  and similar expressions are intended to identify forward-looking statements.
  The important factors discussed under the caption Certain Factors That
  May Affect Future Operating Results, presented below, could cause actual
  results to differ materially from those indicated by forward-looking statements
  made herein. We undertake no obligation to publicly update or revise any forward-looking
  statements, whether as a result of new information, future events or otherwise.

OVERVIEW

Eclipsys is a healthcare information technology company that provides
advanced software solutions and services that assist healthcare organizations
in improving their outcomes by augmenting the quality of care and the level of
patient satisfaction, reducing costs and enhancing revenues.

Our Internet website address is www.eclipsys.com. Our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments thereto that have been filed with the SEC are available to you free
of charge through a hyperlink on our website.

We are continuing our development of SunriseXATM, which is our
next-generation product and service offering. During 2002 we began releasing
certain workflows and related components of SunriseXA. SunriseXA is a
Web-based solution that builds upon the knowledge-driven, workflow enhancing
components of our Sunrise suites. SunriseXAs extended architecture is built
on Microsoft Corporations Web-based infrastructure, .NET.

As we continue our product transition to SunriseXA, a key component of our
strategy is to invest heavily in the areas of research and development, sales,
sales support and marketing. Also, we have begun to offer additional
contracting alternatives to our prospects and customers. We believe these new
contracting alternatives will be attractive to prospects and customers.

In addition, we provide a wide range of complementary services to our
customers, including implementation, integration, support, maintenance and
training. We also provide outsourcing, remote hosting, network services and
business solutions consulting to assist customers in meeting their healthcare
information technology requirements. Through our comprehensive services
offering and integrated software components, we provide our customers with
solutions for their clinical, financial and administrative information needs.

CRITICAL ACCOUNTING POLICIES

We prepare our consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America. Our
significant accounting policies are discussed in detail in Note 2 to the
consolidated financial statements contained in our Form 10-K, filed on March
28, 2003. We believe there are several accounting policies that are critical
to understanding our historical and future performance, as these policies
affect the reported amount of revenue and other significant areas involving
managements judgments and estimates. These significant accounting policies
relate to revenue recognition, allowance for doubtful accounts and software
development.

10



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Revenue Recognition

We recognize revenues in accordance with the provisions of Statement of
Position, or SOP, No. 97-2, Software Revenue Recognition, as amended by SOP
98-9 and clarified by Staff Accounting Bulletin, or SAB, 101 Revenue
Recognition in Financial Statements. 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.

Our contractual arrangements are evaluated on a contract-by-contract basis
and often require judgment and estimates that affect the timing of revenue
recognized in our statements of operations. Specifically, we may be required
to make judgments about:



| |  |  | whether the fees associated with our products and services are fixed or determinable;                                             
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | whether or not collection of our fees is reasonably assured;                                                                      
|
| |  |  | whether professional services are essential to the functionality of the related software product;                                 
|
| |  |  | whether we have the ability to make reasonably dependable estimates
in the application of the percentage-of-completion method; and
|
| |  |  | whether we have verifiable objective evidence of fair value for our
products and services.                                        

We generally contract under multiple element arrangements, which include
software license fees, hardware and services including implementation,
consulting and software maintenance. Under these arrangements, where
vendor-specific objective evidence exists for all undelivered elements, we
account for the delivered elements in accordance with the residual method.
Under the residual method, we allocate revenue to each element in a multiple
element arrangement based on the elements respective fair value, with the fair
value determined by the price charged when that element is sold separately.
For arrangements in which vendor-specific objective evidence does not exist for
each element, including specified upgrades, revenue is deferred and not
recognized until delivery of all of the elements without vendor-specific
objective evidence has occurred.

We enter into long-term multiple element arrangements in which we provide
our customers with comprehensive technology solutions. These arrangements
typically include multiple software products (including the right to future
products within the suites purchased), implementation and consulting services,
maintenance, and, where desired by the customer, outsourcing and remote hosting
services. These contracts generally provide for monthly or annual payments
over the term of the contracts, which typically range from seven to ten years.
We generally recognize revenues under these arrangements on a monthly basis
evenly over the term of the contract.

During 2002, we began to enter into arrangements that consist of fees for
a multi-year, time-based software license, hardware and services including
implementation, consulting and software maintenance. We recognize the revenue
under these arrangements in accordance with SOP No. 97-2, including the AICPA
Software Revenue Recognition Task Force Technical Practice Aid 5100.54. During
the transition to these new contracts, we expect our operating results to
reflect lower revenues and cash flows. However, we believe that these new
contracting alternatives will provide for more predictable revenues over the
term of the arrangement.

For arrangements bundled with services and maintenance where such services
are considered essential to the functionality of the software and provide for
payments upon the achievement of implementation milestones, we recognize
revenues using the percentage-of-completion method, following the guidance in
the AICPA Statement of Position No. 81-1, or SOP 81-1, Accounting for
Performance of Construction-Type and Certain Production-Type Contracts. Under
the percentage-of-completion method, revenues are recognized based upon the
proportion of labor hours incurred in relation to the total labor hours
estimated under the agreement. Determining factors for
percentage-of-completion include the nature of services required and the
provision for payments of software and services upon the achievement of
implementation milestones. Under the percentage-of-completion method, revenue
and profit are recognized throughout the term of the contract, based upon
estimates of the total labor hours to be incurred and revenues to be generated
throughout the term of the contract. Changes in estimates of total labor hours
and the related effect on the timing of revenues and profits are recognized in
the period in which they are determinable. Accordingly, changes in these
estimates could occur and could have a material effect on our operating results
in the period of change.

11



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Remote hosting and outsourcing services are marketed under long-term
arrangements generally over periods of five to ten years. Revenues from these
arrangements are recognized as the services are performed.

Software support and maintenance fees are marketed under annual and
multi-year arrangements and are recognized as revenue ratably over the
contracted maintenance term. Hardware sales are generally recognized upon
delivery to the customer.

Deferred revenue consists of payments received for which the revenue has
not yet been recognized in accordance with the above revenue recognition
policies. Long-term deferred revenue, at March 31, 2003, represents amounts
received from license fees, maintenance and other services to be earned after
March 31, 2004.

Allowance for Doubtful Accounts

In evaluating the collectibility of our accounts receivable, we assess a
number of factors including a specific customers ability to meet its financial
obligations to us, as well as general factors, such as the length of time the
receivables are past due and historical collection experience. Based on these
assessments, we record both specific and general reserves for bad debt to
reduce the related receivables to the amount we ultimately expect to collect
from customers. If circumstances related to specific customers change or
economic conditions worsen such that our past collection experience is no
longer relevant, our estimate of the recoverability of our accounts receivable
could be further reduced from the levels provided for in the consolidated
financial statements.

Capitalized Software Development Costs

At each balance sheet date, we perform a detailed assessment of our
capitalized software development costs to be marketed which includes a review
of, among other factors, projected revenues, customer demand requirements,
product lifecycle, changes in software and hardware technologies and product
development plans. Based on this analysis, we record adjustments, when
appropriate, to reflect the net realizable value of our capitalized software
development costs. The estimates of expected future revenues generated by the
software, the remaining economic life of the software, or both, could change,
materially affecting the carrying value of capitalized software development
costs as well as our consolidated operating results in the period of change.

RESULTS OF OPERATIONS

Total revenues decreased $6.0 million, or 9.5%, to $56.8 million for the
quarter ended March 31, 2003, compared with $62.8 million for the first quarter
of 2002. Systems and services revenues decreased $3.4 million, or 6.0%, to
$53.7 million for the quarter ended March 31, 2003, compared with $57.1 million
for the first quarter of 2002. The decrease in systems and services revenues
was due to lower software license fees primarily related to a change in
contracting method beginning in the third quarter of 2002, in which we began to
predominantly contract under arrangements that provide for payments to be
spread more evenly over the term of the contract, as compared to our historical
contracting methods. The decrease in software license fees was partially
offset by increases in revenues from our remote hosting, outsourcing and
networking services.

Hardware revenues decreased $2.6 million, or 44.8%, to $3.1 million for
the quarter ended March 31, 2003, compared with $5.7 million for the first
quarter of 2002. The decrease in hardware revenues was due to decreased
shipments primarily attributable to a higher percentage of new contracts being
for remote hosting and outsourcing, as well as the impact of the new
contracting method.

Cost of systems and services revenues increased $5.1 million, or 18.4%, to
$32.8 million, or 61.1% of systems and services revenues, for the quarter ended
March 31, 2003, compared to $27.7 million, or 48.5% of systems and services
revenues, for the first quarter of 2002. The increase was primarily related to
higher costs associated with providing our remote hosting, outsourcing and
networking services. Additionally, amortization of capitalized software
development costs increased due to the Company releasing certain clinical
products of our new SunriseXA product line during 2002. These higher costs
were partially offset by lower amortization of acquired technology due to
certain assets becoming fully amortized during 2002 and the first quarter of
2003.

12



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Cost of hardware revenues decreased $1.9 million, or 41.8%, to $2.7
million, or 85.5% of hardware revenues, for the quarter ended March 31, 2003,
compared to $4.6 million, or 81.1% of hardware revenues, for the first quarter
of 2002. The decrease in the cost of hardware revenues was primarily
attributable to the decrease in hardware revenues.

Sales and marketing expenses increased $5.2 million, or 45.5%, to $16.6
million, or 29.1% of total revenues, for the quarter ended March 31, 2003, from
$11.4 million, or 18.1% of total revenues, for the first quarter of 2002. The
increase in sales and marketing expenses was primarily related to increased
payroll and related costs, including commissions and travel, due to a program
we initiated during the fourth quarter of 2001 to significantly expand the size
of our sales and marketing organization. This program is expected to continue
to result in higher expenses in the future.

Research and development expenses increased nearly $2.8 million, or 26.8%,
to $13.0 million, or 22.8% of total revenues, for the quarter ended March 31,
2003, compared to $10.2 million, or 16.3% of total revenues, for the first
quarter of 2002. The increase in research and development expenses was due
primarily to an initiative we implemented in the fourth quarter of 2001. This
program accelerates the migration of our products onto the Microsoft .NET
platform. This initiative, which increased the number of employees in our
product delivery organization, which include research and development, is
expected to result in continuing higher research and development expenses. The
percentage of research and development expenditures capitalized for the three
months ended March 31, 2003 was 17.0%, or $2.7 million, compared to 16.3%, or
$2.0 million, for the first quarter of 2002. As discussed above, amortization
of capitalized software development costs, which is included as a component of
cost of systems and systems revenues, increased by approximately $0.5 million,
to $1.8 million for the three months ended march 31, 2003, compared to $1.3
million for first quarter of 2002.

General and administrative expenses increased approximately $0.8 million,
or 32.8%, to $3.4 million, or 5.9% of total revenues, for the quarter ended
March 31, 2003, compared to $2.5 million, or 4.0% of total revenues, for the
first quarter of 2002. The increase was primarily due to higher insurance and
legal costs.

Depreciation and amortization increased $0.4 million, or 19.1%, to $2.4
million, or 4.2% of total revenues, for the quarter ended March 31, 2003, from
$2.0 million, or 3.2% of total revenues, for the first quarter of 2002. The
increase was primarily the result of higher depreciation related to fixed
assets purchased over the past 12 months, partially offset by lower
amortization of certain intangibles, which became fully amortized during the
first quarter of 2002.

Interest income decreased $0.2 million, or 18.8%, to $0.9 million for the
quarter ended March 31, 2003, from $1.1 million for the first quarter of 2002.
This decrease was due to a decline in yields on our cash and marketable
securities from the same period in the prior year, partially offset by higher
cash and marketable securities balances.

As a result of these factors, we had a net loss of $13.0 million for the
quarter ended March 31, 2003, compared to net income of $5.3 million for the
first quarter in 2002.

LIQUIDITY AND CAPITAL RESOURCES

During the quarter ended March 31, 2003, operations provided $1.2 million
of cash. Investing activities used $57.7 million of cash, consisting of $52.4
million for the purchase of marketable securities, $2.7 million for the funding
of capitalized software development costs and $2.6 million for the purchase of
property and equipment. Financing activities provided $0.6 million of cash,
primarily from issuance of common stock under our employee stock purchase plan.

As of March 31, 2003, our principal source of liquidity is our combined
cash and marketable securities balance of $180.0 million. Although our cash
flows have been positive year-to-date through March 31, 2003, it is likely that
we may have negative cash flows from operations over the remainder of 2003 due
to our sales and marketing and research and development initiatives, as well as
the growing popularity of our new contract arrangements, which provide for
payments to be spread more evenly over the term of the contract. These
arrangements result in a proportionately smaller amount of fees being collected
upon new contract signing. Our future liquidity requirements will depend upon
a number of factors, including our sales volumes and the timing and level of
research and development activities. As of March 31, 2003, we did not have any
material commitments for capital expenditures. We believe that our current
cash and marketable securities balances and anticipated cash generated from our
future operations will be sufficient to meet our operating requirements for at
least the next 12 months.

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CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

There are a number of important factors that could affect our business and
future operating results, including without limitation, the factors set forth
below. The information contained in this report should be read in light of
such factors. Any of the following factors could harm our business and future
operating results.

Given the length of our sales and implementation cycles, if a significant
number of our customers delay implementation, our future operating results may
suffer

We have experienced long sales and implementation cycles. How and when to
implement, replace, expand or substantially modify an information system, or
modify or add business processes, are major decisions for healthcare
organizations. Furthermore, the solutions we provide typically require
significant capital expenditures by the customer. The sales cycle for our
systems has ranged from 6 to 18 months or more from initial contact to contract
execution. Historically, our implementation cycle has ranged from 6 to 36
months from contract execution to completion of implementation. During the
sales cycle and the implementation cycle, we will expend substantial time,
effort and financial resources preparing contract proposals, negotiating the
contract and implementing the solution. We may not realize any revenues to
offset these expenditures, and, if we do, accounting principles may not allow
us to recognize the revenues during corresponding periods, which could harm our
future operating results. Additionally, any decision by our customers to delay
implementation may adversely affect our revenues.

The healthcare industry faces financial constraints that could adversely affect
the demand for our products and services

The healthcare industry has faced, and will likely continue to face,
significant financial constraints. For example, the shift to managed healthcare
in the 1990s put pressure on healthcare organizations to reduce costs, and the
Balanced Budget Act of 1997 dramatically reduced Medicare reimbursement to
healthcare organizations. Our solutions often involve a significant financial
commitment by our customers, and, as a result, our ability to grow our business
is largely dependent on our customers information technology budgets. To the
extent healthcare information technology spending declines or increases more
slowly than we anticipate, demand for our products would be adversely affected.

We have a history of operating losses and we cannot predict future
profitability

We had a net loss of $13.0 million in the quarter ended March 31, 2003.
We also had net losses of $29.8 million in 2002, $34.0 million in 2000, $9.4
million in 1999, $35.3 million in 1998, and $126.3 million in 1997. In 2001,
we had net income of $4.4 million, although we had a loss from operations of
$1.6 million. We may continue to incur net losses and cannot predict when or
if we will be profitable in the future.

Our operating results may fluctuate significantly and may cause our stock price
to decline

We have experienced significant variations in revenues and operating
results from quarter to quarter. Our operating results may continue to
fluctuate due to a number of factors, including:



| | - | the timing, size and complexity of our product sales and
implementations;                      
| | - | -----------------------------------------------------------------------------------------------
|
| | - | overall demand for healthcare information technology;                                          
|
| | - | the financial condition of our customers and potential customers;                              
|
| | - | market acceptance of new services, products and product enhancements by
us and our competitors;
|
| | - | product and price competition;                                                                 

14



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| | - | the relative proportions of revenues we derive from systems and services
and from hardware;
| | - | -------------------------------------------------------------------------------------------



| | - | changes in our operating expenses;                                                               
| | - | -------------------------------------------------------------------------------------------------
|
| | - | the timing and size of future acquisitions;                                                      
|
| | - | personnel changes;                                                                               
|
| | - | the performance of our products; and                                                             
|
| | - | fluctuations in general economic and financial
      market conditions, including interest rates.

It is difficult to predict the timing of revenues from product sales
because the sales cycle can vary depending upon several factors. These factors
include the size and terms of the transaction, the changing business plans of
the customer, the effectiveness of the customers management and general
economic conditions. In addition, depending upon the extent to which our
customers elect to license our products under comprehensive bundled
arrangements, including subscription pricing, the timing of revenue recognition
could vary considerably. Under comprehensive bundled arrangements, revenues
are recognized under the terms of the contract consistent with the timing of
performance of all services offered under the arrangement. Generally, less
revenue is recognized under these arrangements during the first 12 to 24 months
compared to our more traditional licensing arrangements. We will also continue
to offer contracts using our more traditional licensing arrangements. Because
a significant percentage of our expenses will be relatively fixed, a variation
in the timing of sales and implementations could cause significant variations
in operating results from quarter to quarter. We believe that period-to-period
comparisons of our historical results of operations are not necessarily
meaningful. You should not rely on these comparisons as indicators of future
performance.

We operate in an intensely competitive market that includes companies that have
greater financial, technical and marketing resources than we do

We operate in a market that is intensely competitive. Our principal
competitors include Cerner Corp., McKessonHBOC, Inc., GE Medical Systems, IDX
Systems Corp., Epic Systems Corporation and Siemens. We also face competition
from providers of practice management systems, general decision support and
database systems and other segment-specific applications, as well as from
healthcare technology consultants. A number of existing and potential
competitors are more established than we are and have greater name recognition
and financial, technical and marketing resources than we do. We expect that
competition will continue to increase. Increased competition could harm our
business.

If the healthcare industry continues to undergo consolidation, this could
impose pressure on our products prices, reduce our potential customer base and
reduce demand for our products

Many healthcare providers have consolidated to create larger healthcare
delivery enterprises with greater market power. If this consolidation
continues, it could erode our customer base and could reduce the size of our
target market. In addition, the resulting enterprises could have greater
bargaining power, which may lead to erosion of the prices for our products.

Potential regulation by the U.S. Food and Drug Administration of our products
as medical devices could impose increased costs, delay the introduction of new
products and hurt our business

The U.S. Food and Drug Administration, or FDA, is likely to become
increasingly active in regulating computer software intended for use in the
healthcare setting. The FDA has increasingly focused on the regulation of
computer products and computer-assisted products as medical devices under the
federal Food, Drug, and Cosmetic Act, or FDC Act. If the FDA chooses to
regulate any of our products as medical devices, it can impose extensive
requirements upon us, including the following:

15



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| | - | requiring us to seek FDA clearance of a pre-market
      notification submission demonstrating that the product is substantially
      equivalent to a device already legally marketed, or to obtain FDA approval
      of a pre-market approval application establishing the safety and effectiveness
      of the product;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - | requiring us to comply with rigorous regulations
      governing the pre-clinical and clinical testing, manufacture, distribution,
      labeling and promotion of medical devices; and                                                                                                                                     
|
| | - | requiring us to comply with the FDC Acts
      general controls, including establishment registration, device listing,
      compliance with good manufacturing practices, reporting of specified device
      malfunctions and adverse device events.                                                                     

If we fail to comply with applicable requirements, the FDA could respond
by imposing fines, injunctions or civil penalties, requiring recalls or product
corrections, suspending production, refusing to grant pre-market clearance or
approval of products, withdrawing clearances and approvals, and initiating
criminal prosecution. Any final FDA policy governing computer products, once
issued, may increase the cost and time to market of new or existing products or
may prevent us from marketing our products.

Changes in federal and state regulations relating to patient data could depress
the demand for our products and impose significant product redesign costs on us

The demand for health care information systems is affected by state and
federal laws and regulations that govern the collection, use, transmission and
other disclosures of electronic health information. These laws and regulations
may change rapidly and may be unclear or difficult to apply.

Federal regulations issued in accordance with the Health Insurance
Portability and Accountability Act of 1996, or HIPAA, impose national health
data standards on health care providers that conduct electronic health
transactions, health care clearinghouses that convert health data between
HIPAA-compliant and non-compliant formats and health plans. Collectively,
these groups are known as covered entities. These HIPAA standards prescribe
transaction formats and code sets for electronic health transactions; protect
individual privacy by limiting the uses and disclosures of individually
identifiable health information; and require covered entities to implement
administrative, physical and technological safeguards to ensure the
confidentiality, integrity, availability and security of individually
identifiable health information in electronic form.

There are several HIPAA compliance deadlines for covered entities. All
covered entities must comply with the transaction and code set standards by
October 16, 2003. The compliance deadline for the privacy standards was April
14, 2003 for most covered entities. The compliance deadline for the data
security standards is April 20, 2005 for most covered entities. Any failure or
perception of failure of our products to comply with HIPAA standards could
adversely affect demand for our products and force us to expend significant
capital, research and development and other resources to modify our products to
address the privacy and security requirements of our customers.

States may adopt privacy standards that are more stringent than the
federal HIPAA privacy standards. This may lead to different restrictions for
handling individually identifiable health information. As a result, our
customers may demand information technology solutions that are adaptable to
reflect different and changing regulatory requirements. In the future,
federal or state governmental authorities may impose additional restrictions on
the collection, use, transmission and other disclosures of health information.
We cannot predict the potential impact that these future rules, as finally
approved, may have on our business. However, the demand for our products may
decrease if we are not able to develop and offer products that can address the
regulatory challenges and compliance obligations facing our customers.

16



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Our products are used to assist clinical decision-making and provide
information about patient medical histories and treatment plans, and if these
products fail to provide accurate and timely information, our customers could
assert claims against us that could result in substantial cost to us, harm our
reputation in the industry and cause demand for our products to decline

We provide products that assist clinical decision-making and relate to
patient medical histories and treatment plans. If these products fail to
provide accurate and timely information, customers could assert liability
claims against us. Litigation with respect to liability claims, regardless of
its outcome, could result in substantial cost to us, divert managements
attention from operations and decrease market acceptance of our products. We
attempt to limit by contract our liability for damages arising from negligence,
errors or mistakes. In addition, we require that our customers approve all
system rules and protocols. Despite these precautions, the limitations of
liability set forth in our contracts may not be enforceable or may not
otherwise protect us from liability for damages. We maintain general liability
insurance coverage, including coverage for errors or omissions. However, this
coverage may not continue to be available on acceptable terms or may not be
available in sufficient amounts to cover one or more large claims against us.
In addition, the insurer might disclaim coverage as to any future claim. One
or more large claims could exceed our available insurance coverage.

Highly complex software products such as ours often contain undetected
errors or failures when first introduced or as updates and new versions are
released. It is particularly challenging for us to test our products because
it is difficult to simulate the wide variety of computing environments in which
our customers may deploy them. Despite extensive testing, from time to time we
have discovered defects or errors in our products. Defects, errors or
difficulties could cause delays in product introductions and shipments, result
in increased costs and diversion of development resources, require design
modifications or decrease market acceptance or customer satisfaction with our
products. In addition, despite testing by us and by current and potential
customers, errors may be found after commencement of commercial shipments,
resulting in loss of or delay in market acceptance.

If we undertake additional acquisitions, they may be disruptive to our business
and could have an adverse effect on our future operations and the market price
of our common stock

An important element of our business strategy has been expansion through
acquisitions. Since 1997, we have completed eight acquisitions. Any future
acquisitions would involve a number of risks, including the following:



| |  | - | The anticipated benefits from any acquisition
      may not be achieved. The integration of acquired businesses requires substantial
      attention from management. The diversion of the attention of management
      and any difficulties encountered in the transition process could hurt our
      business.
| |  | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | - | In future acquisitions, we could issue additional
      shares of our capital stock, incur additional indebtedness or pay consideration
      in excess of book value, which could have a dilutive effect on future net
      income, if any, per share.                                                          
|
| |  | - | New business acquisitions must be accounted
      for under the purchase method of accounting. These acquisitions may generate
      significant intangible assets and result in substantial related amortization
      charges to us.                                                                            

If we fail to attract, motivate and retain highly qualified technical,
marketing, sales and management personnel, our ability to execute our business
strategy could be impaired

Our success depends, in significant part, upon the continued services of
our key technical, marketing, sales and management personnel and on our ability
to continue to attract, motivate and retain highly qualified employees.
Competition for these employees is intense. In addition, the process of
recruiting personnel with the combination of skills and attributes required to
execute our business strategy can be difficult, time-consuming and expensive.
We believe that our ability to implement our strategic goals depends to a
considerable degree on our senior management team. The loss of any member of
that team could hurt our business.

17



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##### 



Changing customer requirements could decrease the demand for our products,
which could harm our business and decrease our revenues

The market for our products and services is characterized by rapidly
changing technologies, evolving industry standards and new product
introductions and enhancements that may render existing products obsolete or
less competitive. As a result, our position in the healthcare information
technology market could erode rapidly due to unforeseen changes in the features
and functions of competing products, as well as the pricing models for such
products. Our future success will depend in part upon our ability to enhance
our existing products and services, particularly our ability to continue to
release our products onto the .Net Framework under the SunriseXA initiative,
and to develop and introduce new products and services to meet changing
customer requirements. The process of developing products and services such as
those we offer is extremely complex and is expected to become increasingly
complex and expensive in the future as new technologies are introduced. If we
are unable to enhance our existing products or develop new products to meet
changing customer requirements, demand for our products could suffer.

We depend on licenses from third parties for rights to the technology used in
several of our products, and if we are unable to continue these relationships
and maintain our rights to this technology, our business could suffer

We depend upon licenses for some of the technology used in our products
from a number of third-party vendors, including Computer Corporation of
America, Computer Associates, Oracle Corporation and Microsoft. Most of these
licenses expire within one to five years, can be renewed only by mutual consent
and may be terminated if we breach the terms of the license and fail to cure
the breach within a specified period of time. We may not be able to continue
using the technology made available to us under these licenses on commercially
reasonable terms or at all. As a result, we may have to discontinue, delay or
reduce product shipments until we obtain equivalent technology, which could
hurt our business. Most of our third-party licenses are non-exclusive. Our
competitors may obtain the right to use any of the technology covered by these
licenses and use the technology to compete directly with us. In addition, if
our vendors choose to discontinue support of the licensed technology in the
future or are unsuccessful in their continued research and development efforts,
particularly with regard to Microsoft, we may not be able to modify or adapt
our own products.

Our products rely on our intellectual property, and any failure by us to
protect our intellectual property, or any misappropriation of it, could enable
our competitors to market products with similar features, which could reduce
demand for our products

We are dependent upon our proprietary information and technology. Our
means of protecting our proprietary rights may not be adequate to prevent
misappropriation. The laws of some foreign countries may not protect our
proprietary rights as fully as do the laws of the United States. Also, despite
the steps we have taken to protect our proprietary rights, it may be possible
for unauthorized third parties to copy aspects of our products, reverse
engineer our products or otherwise obtain and use information that we regard as
proprietary. In some limited instances, customers can access source-code
versions of our software, subject to contractual limitations on the permitted
use of the source code. Although our license agreements with these customers
attempt to prevent misuse of the source code, the possession of our source code
by third parties increases the ease and likelihood of potential
misappropriation of such software. Furthermore, others could independently
develop technologies similar or superior to our technology or design around our
proprietary rights. In addition, infringement or invalidity claims or claims
for indemnification resulting from infringement claims could be asserted or
prosecuted against us. Regardless of the validity of any claims, defending
against these claims could result in significant costs and diversion of our
resources. The assertion of infringement claims could also result in
injunctions preventing us from distributing products. If any claims or actions
are asserted against us, we might be required to obtain a license to the
disputed intellectual property rights, which might not be available on
reasonable terms or at all.

18



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##### 



We face litigation that could force us to pay significant damages and could
distract our management team

Our Company and three of our officers were named in seven complaints filed
in the United States District Court for the Southern District of Florida, West
Palm Beach Division, or the District Court, by purported shareholders of the
Company over the months of July through September 2002. Each complaint
individually sought class certification and monetary damages for alleged
violations of the federal securities laws. On February 4, 2003, the District
Court issued an order consolidating all seven cases into one single case and
appointing two persons and one entity to serve as lead plaintiffs.
On April 30, 2003, the lead plaintiffs filed an amended, consolidated complaint. The Company has until
June 30, 2003, to answer or move to dismiss the amended, consolidated complaint. Although we
believe that these actions are without merit, we cannot assure you that they
will not, if successful, require that we pay substantial damages in excess of
existing insurance coverage. Regardless of the outcome of these matters, we
might incur substantial defense costs, and defending the actions may cause a
diversion of management time and attention.

Provisions of our charter documents and Delaware law may inhibit potential
acquisition bids that a stockholder may believe is desirable, and the market
price of our common stock may be lower as a result

Our board of directors has the authority to issue up to 4,900,000 shares
of preferred stock. The board of directors can fix the price, rights,
preferences, privileges and restrictions of the preferred stock without any
further vote or action by our stockholders. The issuance of shares of preferred
stock may discourage, delay or prevent a merger or acquisition of our company.
The issuance of preferred stock may result in the loss of voting control to
other stockholders. We have no current plans to issue any shares of preferred
stock. In August 2000, our board of directors adopted a shareholder rights plan
under which we issued preferred stock purchase rights that would adversely
affect the economic and voting interests of a person or group that seeks to
acquire us or a 15% or more interest in our common stock without negotiations
with our board of directors.

Our charter documents contain additional anti-takeover devices including:



| | - | only one of the three classes of directors
      is elected each year;                                                 
| | - | -----------------------------------------------------------------------------------------------------------------------
|
| | - | the ability of our stockholders to remove directors
      without cause is limited;                                    
|
| | - | the right of stockholders to act by written
      consent has been eliminated;                                         
|
| | - | the right of stockholders to call a special
      meeting of stockholders has been eliminated; and                     
|
| | - | advance notice must be given to nominate directors
      or submit proposals for consideration at stockholder meetings;

Section 203 of the Delaware corporate statute may inhibit potential
acquisition bids for our company. We are subject to the anti-takeover
provisions of the Delaware corporate statute, which regulate corporate
acquisitions. Delaware law will prevent us from engaging, under specified
circumstances, in a business combination with any interested stockholder for
three years following the date that the interested stockholder became an
interested stockholder unless our board of directors or a supermajority of our
uninterested stockholders agree. For purposes of Delaware law, a business
combination includes a merger or consolidation involving us and the interested
stockholder and the sale of more than 10% of our assets. In general, Delaware
law defines an interested stockholder as any holder beneficially owning 15% or
more of the outstanding voting stock of a corporation and any entity or person
affiliated with or controlling or controlled by the holder.

These provisions could discourage potential acquisition proposals and
could delay or prevent a change in control transaction. They could also have
the effect of discouraging others from making tender offers for our common
stock. As a result, these provisions may prevent the market price of our common
stock from increasing substantially in response to actual or rumored takeover
attempts. These provisions may also prevent changes in our management.

19



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##### 



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not currently use derivative financial instruments. We generally
buy investments that are highly liquid. Based upon the nature of our
investments, we do not expect any material loss from our investments.

Investments in both fixed-rate and floating-rate interest-earning
instruments carry a degree of interest rate risk. Fixed-rate securities may
have their fair market value adversely impacted due to a rise in interest
rates, while floating-rate securities may produce less income than expected if
interest rates fall. Due in part to these factors, our future investment
income may fall short of expectations due to changes in interest rates, or we
may suffer losses in principal if forced to sell securities that have seen a
decline in market value due to changes in interest rates. The following table
illustrates potential fluctuation in annualized interest income based upon
hypothetical values for blended interest rates and cash and marketable
securities account balances.

Annualized interest income based upon hypothetical values for cash and
marketable securities combined balances and interest rates:*

|                                 |  |                                                       |         |  |  |   |         |  |  |   |         | 
|-------------------------------- |  | ----------------------------------------------------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                 |  | Combined cash and
        cash equivalents and       
|                                 |  | marketable securities
        balances (in thousands)
|                                 |  |                                                      
|Hypothetical
      Interest Rate |  | $                                                     | 150,000 |  |  | $ | 170,000 |  |  | $ | 190,000 | 
|                                 |  |                                                      
|1.5%                             |  | $                                                     | 2,250   |  |  | $ | 2,550   |  |  | $ | 2,850   | 
|2.0%                             |  |                                                       | 3,000   |  |  |   | 3,400   |  |  |   | 3,800   | 
|2.5%                             |  |                                                       | 3,750   |  |  |   | 4,250   |  |  |   | 4,750   | 
|3.0%                             |  |                                                       | 4,500   |  |  |   | 5,100   |  |  |   | 5,700   | 
|3.5%                             |  |                                                       | 5,250   |  |  |   | 5,950   |  |  |   | 6,650   | 
|4.0%                             |  |                                                       | 6,000   |  |  |   | 6,800   |  |  |   | 7,600   | 



---

|* |  | (This sensitivity analysis is not a forecast of future interest income.)
|- |  | ------------------------------------------------------------------------



We account for cash equivalents and marketable securities in accordance
with SFAS No. 115. Accounting for Certain Investments in Debt and Equity
Securities. Cash equivalents are short-term highly liquid investments with
original maturity dates of three months or less. Cash equivalents are carried
at cost, which approximates fair market value. Marketable securities consist
of funds that are highly liquid and are classified as available-for-sale.
Marketable securities are recorded at fair value, and unrealized gains and
losses are recorded as a component of other comprehensive income.

We do not currently enter into foreign currency hedge transactions.
Through March 31, 2003, foreign currency fluctuations have not had a material
impact on our financial position or results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. Based on their
evaluation of the Companys disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of
a date within 90 days of the filing date of this Quarterly Report on Form 10-Q,
the Companys chief executive officer and chief financial officer have
concluded that the Companys disclosure controls and procedures are designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules
and forms and are operating in an effective manner.

Changes in internal controls. There were no significant changes in the
Companys internal controls or in other factors that could significantly affect
these controls subsequent to the date of their most recent evaluation.

20



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##### 



PART II.

ITEM 1. LEGAL PROCEEDINGS

From July through September 2002, the Company and three of its then
current officers (Messrs. Colletti, Patton and Wilson) were named in seven
complaints filed by purported shareholders of the Company in the United States
District Court, Southern District of Florida, West Palm Beach Division, or the
District Court. Each complaint sought certification as a class and monetary
damages, and alleged that the Company and the named officers violated federal
securities laws. The Company believes that the actions are without merit, and
intends to conduct a vigorous defense against these allegations.

In September 2002, various parties filed motions to be appointed as lead
plaintiffs and to consolidate all of the shareholder suits described above. On
February 4, 2003, the District Court issued an order consolidating all seven
cases into one single case and appointing the City of Philadelphia Board of
Pensions and Retirement, Louis Giannakokas and Norman K. Mielziner to serve as
lead plaintiffs, or the Consolidation Order. The Consolidation Order, as
amended, sets certain timelines by which responsive pleadings must be filed by
the Company and the lead plaintiffs in the consolidated case. On April 30,
2003, the lead plaintiffs filed with the District Court an amended,
consolidated complaint. The Company has until June 30, 2003, to answer or move
to dismiss the amended, consolidated complaint.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits: See Index to exhibits.

(b)  Reports on Form 8-K:



| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | (1) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended March 31, 2003.

21



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##### 



SIGNATURES

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

|      |              |  |                                                                                                                                                                               |                     
|----- | ------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------
|      |              |  |                                                                                                                                                                               | ECLIPSYS CORPORATION
|     
|Date: | May 15, 2003 |  | /s/ Robert J. Colletti
        Robert J. Colletti
        Senior Vice President and Chief Financial Officer
        (Principal financial officer and duly authorized officer)

22



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##### 



CERTIFICATIONS

I, Paul L. Ruflin, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Eclipsys
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|       |              |  |                                                                           |  |  | 
|------ | ------------ |  | ------------------------------------------------------------------------- |  |  | 
|Dated: | May 15, 2003 |  | /s/ Paul L. Ruflin
        Paul L. Ruflin
        Chief Executive Officer |  | 

23



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##### 



CERTIFICATIONS

I, Robert J. Colletti, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Eclipsys
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants
  other certifying officers and I have indicated in this quarterly report whether
  or not there were significant changes in internal controls or in other factors
  that could significantly affect internal controls subsequent to the date of
  our most recent evaluation, including any corrective actions with regard to
  significant deficiencies and material weaknesses.

|       |                    |  |                                                                               |  |  | 
|------ | ------------------ |  | ----------------------------------------------------------------------------- |  |  | 
|Dated: | May
      15, 2003 |  | /s/ Robert J. Colletti
      Robert J. Colletti
      Chief Executive Officer |  | 



24



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ECLIPSYS CORPORATION
EXHIBIT INDEX

|        |  |                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                      
|NO.     |  | DESCRIPTION                                                                                          
|        | 
|10.1    |  | Amendment No. 1 to the
        Amended and Restated 2000 Stock Incentive Plan of Eclipsys Corporation
|10.2    |  | Agreement with Mr. Harvey
        J. Wilson                                                          
|10.3    |  | Consulting Agreement with
        Mr. Harvey J. Wilson                                               
|10.4    |  | Agreement with Mr. John
        S. Cooper                                                            
|99.1    |  | Certification Pursuant to
        18 U.S.C. Section 1350                                             





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25