================================================================================

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

                                    FORM 10-Q

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
                        -------------------------------

                         Commission File Number 0-26816

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

      VERMONT                                              03-0222230
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)

                               1400 SHELBURNE ROAD
                           SOUTH BURLINGTON, VT 05403
                    (Address of principal executive offices)

   Registrant's telephone number, including area code:  (802-862-1022)

         Indicate  by check mark  whether the  registrant  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).

                              Yes   X           No

         Indicate by check mark whether the registrant has been subject to such
filing requirements for the past 90 days.

                              Yes   X           No

       The number of shares outstanding of the registrant's common stock as of
August 11, 1997 was 25,738,751.

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                        [Exhibit index begins on Page 20]
                                                      -- 



<PAGE>


                            IDX SYSTEMS CORPORATION
                                    FORM 10-Q
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S>     <C>      <C>                                                       <C>
                                                                           
PART I.  FINANCIAL INFORMATION                                             PAGE
                                                                           ----       
ITEM 1.  Interim Financial Statements:

         a)       Condensed consolidated balance sheets as of
                  June 30, 1997 and December 31, 1996 (unaudited).............3

         b)       Condensed consolidated statements of income for the six
                  months ended June 30, 1997 and 1996 (unaudited).............4

         c)       Condensed consolidated statements of cash flows
                  for the six months ended June 30, 1997 and 1996
                  (unaudited).................................................5

         d)       Notes to condensed consolidated financial statements........6

ITEM 2. Management's discussion and analysis of financial
        condition and results of operations...................................8

PART II. OTHER INFORMATION

ITEM 1.  Legal proceedings...................................................17

ITEM 2.  Changes in securities...............................................17

ITEM 3.  Defaults upon senior securities.....................................17

ITEM 4.  Submission of matters to a vote of security holders.................17

ITEM 5.  Other information...................................................18

ITEM 6.  Exhibits and reports on Form 8-K....................................18

SIGNATURES...................................................................19

EXHIBIT INDEX................................................................20

                                  Page 2 of 22
</TABLE>



<PAGE>


PART I.  FINANCIAL INFORMATION



Item 1.  Interim Financial Statements


                             IDX SYSTEMS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
                                    ---------  

<TABLE>
<CAPTION>

                                    JUNE 30           DECEMBER 31
                                     1997                 1996
                                     ----                 ----      
<S>                                  <C>              <C>

ASSETS
Cash and securities                 $ 96,502          $ 94,554
Accounts receivable, net              46,041            39,092
Other current assets                   6,679             5,221
                                    --------          --------  
Total current assets                 149,222           138,867

Property and equipment, net           20,722            17,188

Other assets                           2,499             2,520
                                    --------          --------
Total assets                        $172,443          $158,575
                                     =======           =======  

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued
  expenses                         $  20,857          $ 17,555
Deferred revenue                       9,342             8,951
                                   ---------          --------
Total current liabilities             30,199            26,506

Long term debt                         2,500             2,600

Minority interest                      1,909             2,079

Stockholders' equity                 137,835           127,390
                                   ---------          --------    
Total liabilities and      
 stockholders' equity               $172,443          $158,575
                                     =======           ======= 
</TABLE>

     See Notes to the Condensed Consolidated Financial Statements


NOTE:  The balance sheet at December 31, 1996 has been derived from the 
audited financial statements at that date.

                                  Page 3 of 22

<PAGE>

PART I.  FINANCIAL INFORMATION

Item 1.  Interim Financial Statements.


                             IDX SYSTEMS CORPORATION
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
                                   ---------    
<TABLE>
<CAPTION>

                                  THREE MONTHS ENDED        SIX MONTHS ENDED
                                       JUNE 30                   JUNE 30
                                  1997          1996        1997        1996
                                  ----          ----        ----        ----      
<S>                               <C>           <C>         <C>         <C>

REVENUES                   
Software license fees             $14,724       $ 13,810    $31,784     $26,238
Maintenance and service fees       22,736         17,734     43,449      34,514
Hardware sales                     10,088          7,538     17,373      15,675
                                  -------       --------    -------     -------
Total revenues                     47,548         39,082     92,606      76,427

OPERATING EXPENSES
Cost of license, maintenance
   and service fees                16,665         13,205     32,598      25,984
Cost of hardware sales              7,727          6,145     13,290      12,757
Selling, general and administrative 9,259          8,337     18,806      15,828
Research and development            6,722          5,912     13,761      11,698
Write-off of acquired in-process
   research and development costs                             2,290
                                 --------       --------   --------    --------
                                   40,373         33,599     80,745      66,267

Operating income                    7,175          5,483     11,861      10,160
Interest and other income, net     (1,187)          (939)    (2,167)     (1,849)
                                 --------       --------   --------    --------       
Income before income taxes          8,362          6,422     14,028      12,009
Income tax provision                3,345          2,566      5,611       4,800
                                 --------       --------   --------    --------  
Net income                       $  5,017       $  3,856   $  8,417    $  7,209
                                 ========       ========   ========    ======== 
Net income per share             $   0.23       $   0.18   $   0.39    $   0.34
                                 ========       ========   ========    ========
Average shares outstanding       $ 21,639       $ 21,420   $ 21,589    $ 21,351
                                 ========       ========   ========    ========
</TABLE>

       See Notes to the Condensed Consolidated Financial Statements

                                  Page 4 of 22


<PAGE>

PART I.  FINANCIAL INFORMATION

Item 1.  Interim Financial Statements

                             IDX SYSTEMS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
                                    ---------         
<TABLE>
<CAPTION>

                                                      SIX MONTHS ENDED
                                                            JUNE 30
                                                  1997                1996
                                                  ----                 ---- 
<S>                                               <C>                 <C>

OPERATING ACTIVITIES
Net income                                        $ 8,417             $ 7,209
Adjustments to reconcile net income to
   net cash provided by operating activities:
      Depreciation and amortization.                3,126               2,306
      Increase in allowance for doubtful
        accounts                                      205                  54
      Minority interest                              (170)                332
      Write-off of acquired in-process
         research & development costs               2,290
     Changes in operating assets and
         liabilities, net of effects of
         acquired business
             Accounts receivable                   (6,708)            (6,904)
             Prepaid expenses                      (1,363)               149
             Accounts payable                      (3,252)               (55)
             Accrued expenses                       2,651               (160)
             Federal and state taxes payable        2,528              2,331
             Deferred revenue                         391               (179)
             Short-term debt                        1,375                 (3)
             Other, net                              (310)               374
                                                     -----               ---
Net cash provided by operating activities           9,180              5,454
INVESTING ACTIVITIES
Purchase of property and equipment, net            (6,660)            (3,177)
Purchase of securities available-for-sale, net    (28,887)           (80,032)
Sale of securities available-for-sale              26,675             56,466
Purchase of certain net assets                     (2,500) 
                                                   ------             ------
Net cash used in investing activities             (11,372)           (26,743)

FINANCING ACTIVITIES
Proceeds from sale of common stock                  2,005              3,851
Payments on long-term debt related to real estate    (100)              (207)
                                                   ------             ------
Net cash provided by financing activities           1,905              3,644
                                                   ------             ------  
Decrease in cash and cash equivalents                (287)           (17,645)
Cash and cash equivalents at beginning of period   12,326             33,262
                                                   ------             ------   
Cash and cash equivalents at end of period        $12,039            $15,617
                                                  =======            =======
</TABLE>

        See Notes to the Condensed Consolidated Financial Statements

                                  Page 5 of 22

<PAGE>

PART I.  FINANCIAL INFORMATION

Notes to Condensed Consolidated Financial Statements


Note 1 - Interim Statement Presentation

The  unaudited  consolidated  financial  statements  have been  prepared  by the
Company  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission and in accordance  with  generally  accepted  accounting  principles.
Accordingly,  certain information and footnote  disclosures normally included in
annual  financial  statements have been omitted or condensed.  In the opinion of
management,  all  necessary  adjustments  have  been  made  to  provide  a  fair
presentation.  The operating  results for the six months ended June 30, 1997 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending  December 31, 1997. For further  information,  refer to the  consolidated
financial  statements  and  footnotes  included in the  Company's  latest annual
report on Form 10-K.

Note 2 - Business Acquisitions

On July 10, 1997 (the  "Closing  Date"),  pursuant to an  Agreement  and Plan of
Merger  dated as of March 25,  1997 (the  "Merger  Agreement")  by and among IDX
Systems  Corporation,   a  Vermont  corporation  ("IDX"),   Penguin  Acquisition
Corporation,  a  Washington  corporation  and  wholly-owned  subsidiary  of  IDX
("Penguin") and PHAMIS, Inc., a Washington corporation ("PHAMIS"),  IDX acquired
PHAMIS by means of a merger (the "Merger") of Penguin with and into PHAMIS, with
PHAMIS remaining as the surviving  corporation in the Merger. As a result of the
Merger, PHAMIS became a wholly-owned subsidiary of IDX. PHAMIS offers healthcare
information  solutions that are part of a complete  software and hardware system
strategy  design for integrated  healthcare  delivery  enterprises.  Penguin was
formed solely for the purpose of effecting the Merger.

Pursuant to the Merger Agreement,  each outstanding share of PHAMIS Common Stock
was  converted  into  .73 of a  share  of  IDX  Common  Stock.  Based  upon  the
capitalization  of PHAMIS as of the Closing Date, IDX issued  approximately  4.6
million shares of IDX Common Stock to former PHAMIS  stockholders in the Merger.
No fractional shares were issued in the Merger.  PHAMIS  stockholders  otherwise
entitled  to  receive a fraction  of a share of IDX  Common  Stock in the Merger
instead  received  an amount of cash equal to such  fraction  multiplied  by the
price per share of IDX Common Stock on the Nasdaq National  Market,  as reported
by Nasdaq, on the business day immediately preceding the Closing Date.  
MANAGEMENT EXPECTS THAT THE MERGER WILL BE ACCOUNTED FOR UNDER THE POOLING OF
INTERESTS METHOD COMMENCING WITH THE QUARTER ENDING SEPTEMBER 30, 1997.  ALL
PREVIOUSLY REPORTED OPERATING RESULTS WILL BE RESTATED TO REFLECT THE COMBINED
OPERATIONS OF IDX AND PHAMIS.

All options to purchase PHAMIS Common Stock outstanding immediately prior to the
Merger were  effectively  assumed by IDX pursuant to the Merger  Agreement.  IDX
registered on a Registration  Agreement on Form S-8 approximately 865,568 shares
of IDX Common Stock for issuance  upon the  exercise of stock  options  formerly
exercisable  for shares of PHAMIS Common Stock and in connection with the PHAMIS
Salary Savings and Deferral Plan.

                                  Page 6 of 22



<PAGE>

PART I.  FINANCIAL INFORMATION

Note 3 - Earnings Per Share Information

In February 1997, the Financial  Accounting Standards Board issued Statement No.
128,  EARNINGS PER SHARE,  which is required to be adopted on December 31, 1997.
At that time,  the Company will be required to change the method  currently used
to compute  earnings per share and to restate all prior  periods.  Under the new
requirements for calculating  primary earnings per share, the dilutive effect of
stock options will be excluded. Earnings per share as calculated under Statement
128 is not materially different from the primary and fully diluted earnings per 
share amounts contained herein.

Note 4 - Reclassifications

Certain  prior  period  amounts have been  reclassified  to conform with current
period presentations.

                                  Page 7 of 22



<PAGE>

PART I.  FINANCIAL INFORMATION

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

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

GENERAL
-------
This Management's Discussion and Analysis of Financial Conditions and Results of
Operations  includes a number of  forward-looking  statements  which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking  statements are subject to certain risks and uncertainties
including  those  discussed  below that  could  cause  actual  results to differ
materially  from  historical  results  or those  anticipated.  The  Company  has
identified  by italics or all capital  letters,  various  sentences  within this
Quarterly Report which contain such forward-looking  statements,  and words such
as "believes," "may," "plans," "anticipates,"  "expects," "intends," and similar
expressions are intended to identify forward-looking statements, but are not the
exclusive means of identifying such statements.  In addition, the disclosures in
the section on page 10 under the caption  "Factors  Affecting  Future  Results,"
which is not  italicized  for improved  readability,  consists  principally of a
discussion  of risks which may affect  future  results and,  are thus,  in their
entirety  forward-looking  in nature.  Readers are urged to carefully review and
consider the various  disclosures  made by the Company in this report and in the
Company's  other reports filed with the Securities and Exchange  Commission that
attempt to advise  interested  parties of the risks and factors  that may affect
the Company's business.

RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996.

REVENUES
The Company's total revenues  increased to $47.5 million during the three months
ended June 30, 1997 from $39.1 million in the  corresponding  period in 1996, an
increase of $8.4 million or 21.7%. Revenues from software license fees increased
to $14.7  million  during the three  months  ended June 30, 1997 (31.0% of total
revenues)  from $13.8  million  (35.3% of total  revenues) in the  corresponding
period in 1996,  an increase of $.9 million or 6.6%.  The increase was primarily
due to an  increase  in  installations  of  certain  of the  Company's  software
products from its Ambulatory  Suite.  Revenues from maintenance and service fees
increased to $22.7 million during the three months ended June 30, 1997 (47.8% of
total   revenues)  from  $17.7  million   (45.4%  of  total   revenues)  in  the
corresponding period in 1996, an increase of $5.0 million or 28.2%. The increase
in revenues from  maintenance and service fees was due principally to additional
maintenance  revenues  resulting  from the  continued  growth  in the  Company's
installed client base.  Hardware revenues  increased to $10.1 million during the
three  months  ended June 30, 1997 (21.2% of total  revenues)  from $7.6 million
(19.3% of total  revenues) in the  corresponding  period in 1996, an increase of
$2.5 million or 33.8%. The increase in hardware  revenues was principally due to
shipments  for new customer  contracts and customers  upgrading  their  hardware
systems.  THE  COMPANY  ANTICIPATES  THE  LEVEL  OF  HARDWARE  SALES  WILL  VARY
CONSIDERABLY  FROM  PERIOD  TO  PERIOD  AND  NOT  NECESSARILY  IN  A  CONSISTENT
RELATIONSHIP WITH OTHER REVENUE.

                                  Page 8 of 22

<PAGE>

PART I.  FINANCIAL INFORMATION

COST OF LICENSE, MAINTENANCE AND SERVICE FEES
The cost of license,  maintenance  and service fees  increased to $16.7  million
during  the  three  months  ended  June  30,  1997  from  $13.2  million  in the
corresponding  period in 1996,  an increase of $3.5 million or 26.2%.  The gross
profit margin on license, maintenance and service fees decreased to 55.5% during
the three months ended June 30, 1997 from 58.1% in the  corresponding  period in
1996. The decrease in gross profit was due primarily to the decrease in software
license fees as a percentage to total revenue.

COST OF HARDWARE SALES
The cost of hardware  sales  increased to $7.7  million  during the three months
ended June 30, 1997 from $6.1 million in the  corresponding  period in 1996,  an
increase of $1.6  million or 25.7%.  The gross profit  margin on hardware  sales
increased to 23.4% of hardware  revenues  during the three months ended June 30,
1997,  from  18.5%  in the  corresponding  period  in  1996.  The  increase  was
principally  due to the  sale  of  higher  margin  hardware  configurations  and
hardware  operating  systems during the quarter ended June 30, 1997.  THIS GROSS
PROFIT MARGIN TREND IS NOT ANTICIPATED TO CONTINUE IN THE FUTURE.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling,  general and  administrative  expenses increased to $9.3 million during
the three  months  ended June 30,  1997 from $8.4  million in the  corresponding
period in 1996,  an increase of $.9 million or 11.1%.  As a percentage  of total
revenues, selling, general and administrative expenses decreased to 19.5% during
the three months ended June 30, 1997 from 21.3% in the  corresponding  period in
1996. The increase in selling,  general and  administrative  expenses during the
three  months  ended June 30,  1997 was  principally  due to an  increase in the
Company's sales and marketing staff.

RESEARCH AND DEVELOPMENT
Research and  development  expenses  increased to $6.7 million  during the three
months  ended June 30,  1997 from $5.9  million in the  corresponding  period in
1996,  an increase of $.8 million or 13.7%.  The increase was due to an increase
of staff and  outside  consultants  to support  the  development  of  additional
products  for the  Company.  As a  percentage  of total  revenues,  research and
development  expenses  decreased to 14.1% during the three months ended June 30,
1997 compared to 15.1% in the corresponding period in 1996.


SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996

REVENUES
The Company's  total  revenues  increased to $92.6 million during the six months
ended June 30, 1997 from $76.4 million in the  corresponding  period in 1996, an
increase  of $16.2  million  or  21.2%.  Revenues  from  software  license  fees
increased to $31.8  million  during the six months ended June 30, 1997 (34.3% of
total   revenues)  from  $26.2  million   (34.3%  of  total   revenues)  in  the
corresponding period in 1996, an increase of $5.6 million or 21.1%. The increase
was  primarily due to an increase in  installations  of certain of the Company's
software  products from its  Ambulatory  Suite.  Revenues from  maintenance  and
service  fees  increased to $43.4  million  during the six months ended June 30,
1997 (46.9% of total  revenues) from $34.5 million (45.2% 

                                  Page 9 of 22

<PAGE>

PART I.  FINANCIAL INFORMATION

of total  revenues)  in the  corresponding  period in 1996,  an increase of $8.9
million or 25.9%. The increase in revenues from maintenance and service fees was
due principally to additional  maintenance revenues resulting from the continued
growth in the Company's  installed client base.  Hardware revenues  increased to
$17.4  million  during  the six  months  ended  June 30,  1997  (18.8%  of total
revenues)  from $15.7  million  (20.5% of total  revenues) in the  corresponding
period in 1996,  an increase of $1.7 million or 10.8%.  The increase in hardware
revenues  was  principally  due to  shipments  for new  customer  contracts  and
customers upgrading their hardware systems.

COST OF LICENSE, MAINTENANCE AND SERVICE FEES
The cost of license,  maintenance  and service fees  increased to $32.6  million
during  the  six  months  ended  June  30,  1997  from  $26.0   million  in  the
corresponding  period in 1996,  an increase of $6.6 million or 25.5%.  The gross
profit margin on license, maintenance and service fees decreased to 56.7% during
the six months  ended June 30,  1997 from 57.2% in the  corresponding  period in
1996.  The slight  decrease in gross profit was due  primarily to the  unchanged
percentage to total revenue of software license fees during the six months ended
June 30, 1997 compared to the corresponding period in 1996.

COST OF HARDWARE SALES
The cost of hardware  sales  increased  to $13.3  million  during the six months
ended June 30, 1997 from $12.8 million in the  corresponding  period in 1996, an
increase  of $.5 million or 4.2%.  The gross  profit  margin on  hardware  sales
increased  to 23.5% of hardware  revenues  during the six months  ended June 30,
1997,  from  18.6%  in the  corresponding  period  in  1996.  The  increase  was
principally  due to the  sale  of  higher  margin  hardware  configurations  and
hardware operating systems during the six months ended June 30, 1997. THIS GROSS
PROFIT MARGIN TREND IS NOT ANTICIPATED TO CONTINUE IN THE FUTURE.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling,  general and administrative  expenses increased to $18.8 million during
the six months  ended  June 30,  1997 from  $15.8  million in the  corresponding
period in 1996,  an increase of $3.0 million or 18.8%.  As a percentage of total
revenues,  selling,  general and  administrative  expenses decreased slightly to
20.3% during the six months ended June 30, 1997 from 20.7% in the  corresponding
period in 1996.  The increase in selling,  general and  administrative  expenses
during the six months ended June 30, 1997 was  principally due to an increase in
the Company's sales and marketing staff.

RESEARCH AND DEVELOPMENT
Research and  development  expenses  increased to $13.8  million  during the six
months  ended June 30, 1997 from $11.7  million in the  corresponding  period in
1996, an increase of $2.1 million or 17.6%.  The increase was due to an increase
in staff and  outside  consultants  to support  the  development  of  additional
products  for the  Company.  As a  percentage  of total  revenues,  research and
development  expenses  decreased  slightly to 14.9%  during the six months ended
June 30, 1997 from 15.3% in the corresponding period in 1996.

                                 Page 10 of 22


<PAGE>

PART I.  FINANCIAL INFORMATION

SIGNIFICANT AGREEMENTS
On July 10, 1997 (the  "Closing  Date"),  pursuant to an  Agreement  and Plan of
Merger  dated as of March 25,  1997 (the  "Merger  Agreement")  by and among IDX
Systems  Corporation,   a  Vermont  corporation  ("IDX"),   Penguin  Acquisition
Corporation,  a  Washington  corporation  and  wholly-owned  subsidiary  of  IDX
("Penguin") and PHAMIS, Inc., a Washington corporation ("PHAMIS"),  IDX acquired
PHAMIS by means of a merger (the "Merger") of Penguin with and into PHAMIS, with
PHAMIS remaining as the surviving  corporation in the Merger. As a result of the
Merger, PHAMIS became a wholly-owned subsidiary of IDX. PHAMIS offers healthcare
information  solutions that are part of a complete  software and hardware system
strategy  design for integrated  healthcare  delivery  enterprises.  Penguin was
formed solely for the purpose of effecting the Merger.

Pursuant to the Merger Agreement,  each outstanding share of PHAMIS Common Stock
was  converted  into  .73 of a  share  of  IDX  Common  Stock.  Based  upon  the
capitalization  of PHAMIS as of the Closing Date, IDX issued  approximately  4.6
million shares of IDX Common Stock to former PHAMIS  stockholders in the Merger.
No fractional shares were issued in the Merger.  PHAMIS  stockholders  otherwise
entitled  to  receive a fraction  of a share of IDX  Common  Stock in the Merger
instead  received  an amount of cash equal to such  fraction  multiplied  by the
price per share of IDX Common Stock on the Nasdaq National  Market,  as reported
by Nasdaq, on the business day immediately preceding the Closing Date.
MANAGEMENT EXPECTS THAT THE MERGER WILL BE ACCOUNTED FOR UNDER THE POOLING OF
INTERESTS METHOD COMMENCING WITH THE QUARTER ENDING SEPTEMBER 30, 1997.  ALL
PREVIOUSLY REPORTED OPERATING RESULTS WILL BE RESTATED TO REFLECT THE COMBINED
OPERATIONS OF IDX AND PHAMIS.

All options to purchase PHAMIS Common Stock outstanding immediately prior to the
Merger were  effectively  assumed by IDX pursuant to the Merger  Agreement.  IDX
registered on a Registration  Agreement on Form S-8 approximately 865,568 shares
of IDX Common Stock for issuance  upon the  exercise of stock  options  formerly
exercisable  for shares of PHAMIS Common Stock and in connection with the PHAMIS
Salary Savings and Deferral Plan.

LIQUIDITY AND CAPITAL RESOURCES
Since its  inception  in 1969,  the Company has funded its  operations,  working
capital needs and capital  expenditures  primarily from  operations,  except for
real estate owned by certain partnerships and trusts financed through industrial
development bonds.

Cash  flows  from  operations  are  principally  comprised  of  net  income  and
depreciation  and are  primarily  affected  by the net  effect of the  change in
accounts payable and accrued  expenses.  Due to the seasonality of the Company's
business,  accounts receivable,  deferred revenue and accounts payable fluctuate
considerably  but almost  completely due to the volume of business and timing of
the recognition of revenue. In general,  accounts receivable from customers have
been collected consistently within 90 days.

Cash flows related to investing  activities have principally been related to the
purchase of  computer  and office  equipment,  leasehold  improvements,  and the
purchase and sale of investment grade marketable securities.  MANAGEMENT EXPECTS
THESE ACTIVITIES TO CONTINUE. INVESTING ACTIVITIES MAY ALSO INCLUDE PURCHASES OF
INTERESTS  IN  AND  ACQUISITIONS  OF  COMPANIES  WITH  COMPLEMENTARY   PRODUCTS,
TECHNOLOGIES AND BUSINESSES.



                                 Page 11 of 22

<PAGE>
PART I.  FINANCIAL INFORMATION

Cash and cash  equivalents  at June 30, 1997 were $12.0  million,  a decrease of
$3.6 million from December 31, 1996. The majority of the decrease was due to the
purchase of investment grade marketable securities.  The Company has a revolving
line of credit with a bank  allowing  the  Company to borrow up to $2.0  million
bearing interest at the prime rate. There were no borrowings as of June 30, 1997
or 1996.

The Company's  operating lease  commitments  consist primarily of office leasing
for  the  Company's   operating   facilities.   THE  COMPANY  EXPECTS  THAT  ITS
REQUIREMENTS  FOR OFFICE  FACILITIES  AND OTHER  OFFICE  EQUIPMENT  WILL GROW AS
STAFFING  REQUIREMENTS  DICTATE.  THE COMPANY PLANS TO CONTINUE  INCREASING  THE
NUMBER OF ITS PROFESSIONAL  STAFF DURING 1997 TO MEET  ANTICIPATED  SALES VOLUME
AND TO SUPPORT  RESEARCH AND  DEVELOPMENT  EFFORTS.  TO THE EXTENT  NECESSARY TO
SUPPORT  INCREASES IN STAFFING,  THE COMPANY  ANTICIPATES  OBTAINING  ADDITIONAL
OFFICE SPACE.

THE COMPANY BELIEVES THAT CURRENT  OPERATING FUNDS WILL BE SUFFICIENT TO FINANCE
ITS OPERATING  REQUIREMENTS AT LEAST THROUGH  DECEMBER 1997. To date,  inflation
has not had a material impact on the Company's revenues or income.

INCOME TAXES
FOR THE  FORESEEABLE  FUTURE,  THE COMPANY  ANTICIPATES  AN EXPECTED TAX RATE OF
APPROXIMATELY 40% OF PRE-TAX INCOME.

NEW ACCOUNTING STANDARDS
At its August 6, 1997  meeting,  the  American  Institute  of  Certified  Public
Accountants  cleared a Standard  Operating  Procedure  ("SOP")  revising certain
aspects of SOP91-1.  The SOP will be  effective  for  transactions  occurring in
years  beginning  after  December 15, 1997.  THE COMPANY DOES NOT EXPECT THE SOP
WILL MATERIALLY AFFECT ITS REVENUE RECOGNITION POLICIES WITH RESPECT TO SOFTWARE
LICENSE FEES WHICH ARE PRINCIPALLY RECOGNIZED IN CONNECTION WITH THE FULFILLMENT
OF CONTRACTUAL OBLIGATIONS BASED UPON ACHIEVEMENTS OF MILESTONES.

FACTORS AFFECTING FUTURE RESULTS
As announced on July 10, 1997, the Company  completed its acquisition of PHAMIS,
Inc. ("PHAMIS"). The operations of IDX and PHAMIS involve the creation, sale and
support of computer  systems for  healthcare  clients.  Such  operations  differ
primarily with respect to the nature of each of IDX's and PHAMIS's clientele and
product technologies. Integrating the operations (including product development,
installation of information and software  systems,  client  services,  marketing
plans and activities,  employee hiring and training, and expansion strategy) and
management of the two companies will be a time-consuming  process, and there can
be no assurance that this  integration  will result in the achievement of any of
the  anticipated  synergies and other benefits  expected to be realized from the
Merger.  Moreover,  the  integration  of these  organizations  will  require the
dedication of management  resources,  which may temporarily  distract  attention
from the  day-to-day  business of the Company.  The  inability of  management to
successfully integrate the operations of the two companies could have a material
adverse  effect on the business and operating  results of the  operations of IDX
and PHAMIS after the Merger. The Company expects to incur Merger related pre-tax
charges  covering  the  costs of the  Merger,  the  costs of  restructuring  the
combined  operations,  and for other related costs principally in the quarter in
which the  Merger  is  consummated.  Additional  unanticipated  

                                 Page 12 of 22

<PAGE>

PART I.  FINANCIAL INFORMATION

expenses may be incurred in connection  with the  integration of the business of
the Company and PHAMIS.

The Company's revenues and operating results can vary significantly from quarter
to quarter as a result of a number of factors,  including  the volume and timing
of systems sales and installations,  and length of sales cycles and installation
efforts.  The timing of revenues  from  systems  sales is  difficult to forecast
because the Company's  sales cycle can vary  depending  upon factors such as the
size of the  transaction,  the  changing  business  plans of the  customer,  the
effectiveness  of customer's  management,  and general economic  conditions.  In
addition,   because   revenue  is  recognized  at  various   points  during  the
installation  process,  the timing of revenue  recognition  varies  considerably
based on a number of factors, including availability of personnel,  availability
of the  customer's  resources  and  complexity  of the  needs of the  customer's
organization. The Company's initial contact with a potential customer depends in
significant part on the customer's decision to replace, expand, or substantially
modify its existing  information systems, or modify or add business processes or
lines of business. How and when to implement,  replace,  expand or substantially
modify an information  system,  or modify or add business  processes or lines of
business,  are major decisions for health care organizations.  Accordingly,  the
sales cycle for the  Company's  systems is typically  three to 18 months or more
from contract  execution to completion of  installation.  During the sales cycle
and the installation  cycle, the Company expends  substantial  time,  effort and
funds preparing  contract  proposals,  negotiating the contract and implementing
the system.  Because a  significant  percentage  of the  Company's  expenses are
relatively  fixed,  a variation in the timing of systems sales and  installation
can cause  significant  variations in operating results from quarter to quarter.
The Company's  future  operating  results may fluctuate as a result of these and
other  factors,  such as  customer  purchasing  patterns,  and the timing of new
product and service introductions and product upgrade releases.

The Company's revenues have historically followed seasonal patterns with a lower
level  of  sales  and  installations  occurring  in the  fiscal  quarter  ending
September  30 and a greater  level of sales and  installations  occurring in the
fiscal quarter ending June 30 (formerly the fiscal year end of the Company). The
Company  believes that such seasonal  fluctuation is attributable to a number of
factors,  including  the vacation  schedules of its clients.  The Company is not
able to predict what impact,  if any, the change will have on the seasonality of
the  Company's  business.   The  Company  believes  that  quarterly  results  of
operations will continue to be subject to significant  fluctuations and that its
results of  operations  for any  particular  quarter  or fiscal  year may not be
indicative  of  results  of  operations  for  future  periods.  There  can be no
assurance that future seasonal and quarterly fluctuations will continue and will
not have a material  adverse  effect on the  Company's  results  of  operations,
financial condition or business.

The stock market has,  from time to time,  experienced  extreme price and volume
fluctuations,  particularly in the high  technology and health care  information
technology sectors, which have often been unrelated to the operating performance
of particular companies. The Company experiences fluctuations in its stock price
related to these general market swings as well as announcements of technological
innovations, new product introductions by the Company or its competitors, market
conditions in the computer software or hardware industries and healthcare reform
measures.  These  fluctuations  could  have a  significant  impact on the future
market price of the Company's Common Stock.


                                 Page 13 of 22

<PAGE>

PART I.  FINANCIAL INFORMATION

As a developer of information  systems, the Company must anticipate and adapt to
evolving industry standards and new technological  developments.  The market for
the Company's  products is  characterized  by continued and rapid  technological
advances  in  both  hardware  and  software   development,   requiring   ongoing
expenditures  for research and  development  and the timely  introduction of new
products and enhancements to existing  products.  The establishment of standards
is largely a function of user acceptance.  Therefore, such standards are subject
to change.  The Company's future success will depend in part upon its ability to
enhance its existing products,  to respond effectively to technology changes, to
migrate  its clients to new  technologies,  to sell  additional  products to its
existing client base and to introduce new products and  technologies to meet the
evolving needs of its clients in the health care information systems market. The
Company is currently  devoting  significant  resources toward the development of
enhancements to its existing  products and the migration of existing products to
new hardware and software platforms.  There can be no assurance that the Company
will  successfully  complete the development of these products or this migration
in a timely  fashion  or that the  Company's  current  or future  products  will
satisfy the needs of the health care information systems market.  Further, there
can be no assurance that products or  technologies  developed by others will not
adversely  affect the Company's  competitive  position or render its products or
technologies noncompetitive or obsolete.

The Company  currently  derives a  significant  percentage  of its revenues from
sales of financial and administrative  information systems and related services.
As a result, any factor adversely affecting sales of these products and services
could have a material  adverse  effect on the Company's  results of  operations,
financial condition or business. Although the Company has experienced increasing
annual sales, revenues associated with existing products may decline as a result
of several factors, including price competition.  There can be no assurance that
the Company will continue to be successful in marketing its current  products or
any new or enhanced products or maintaining the current pricing for its existing
products.

Certain of the Company's  products provide  applications  that relate to patient
medical histories and treatment plans. Any failure by the Company's  products to
provide  accurate,  secure  and  timely  information  could  result  in  product
liability  claims  against  the Company by its  clients or their  affiliates  or
patients.  The  Company  maintains  insurance  that it  believes  is adequate to
protect against claims associated with the use of its products, but there can be
no  assurance  that its  insurance  coverage  would  adequately  cover any claim
asserted against the Company.  A successful claim brought against the Company in
excess of its insurance  coverage  could have a material  adverse  effect on the
Company's  results  of  operations,   financial  condition  or  business.   Even
unsuccessful  claims could result in the expenditure of funds in litigation,  as
well as diversion of management  time and  resources.  There can be no assurance
that the  Company  will not be subject to product  liability  claims,  that such
claims will not result in liability in excess of its insurance  coverage or that
the Company's  insurance  will cover such claims or that  appropriate  insurance
will  continue  to be  available  to the  Company in the future at  commercially
reasonable rates.

The  success of the  Company is  dependent  to a  significant  degree on its key
management,  sales and marketing,  and technical personnel. The Company believes
that its continued  future success will also depend upon its ability to attract,
motivate  and  retain  highly  skilled,  managerial,  sales and  marketing,  and
technical  personnel,  including  software  programmers  and systems  architects
 

                                 Page 14 of 22

<PAGE>

PART I.  FINANCIAL INFORMATION

skilled in the  computer  languages  in which the  Company's  products  operate.
Competition  for  such  personnel  in  the  software  and  information  services
industries is intense.  The loss of key  personnel,  or the inability to hire or
retain  qualified  personnel,  could  have  a  material  adverse  effect  on the
Company's results of operations,  financial condition or business.  although the
Company  has  been  successful  to  date in  attracting  and  retaining  skilled
personnel,  there can be no  assurance  that the  Company  will  continue  to be
successful in attracting and retaining the personnel it requires to successfully
develop  new  and  enhanced  products  and  to  continue  to  grow  and  operate
profitably.

The health care industry in the United States is subject to changing  political,
economic and regulatory influences that may affect the procurement practices and
operations of health care organizations.  The Company's products are designed to
function  within the structure of the health care  financing  and  reimbursement
system currently being used in the United States. During the past several years,
the health care industry has been subject to increasing  levels of  governmental
regulation  of,  among other  things,  reimbursement  rates and certain  capital
expenditures.  From time to time,  certain  proposals  to reform the health care
system have been  considered  by  Congress.  These  proposals,  if enacted,  may
increase  government  involvement in health care, lower  reimbursement rates and
otherwise  change the operating  environment for the Company's  clients.  Health
care organizations may react to these proposals and the uncertainty  surrounding
such proposals by curtailing or deferring  investments,  including those for the
Company's  products and services.  The Company cannot predict with any certainty
what impact,  if any,  such  proposals or health care reforms  might have on its
results of operations, financial condition or business.

The U.S. Food and Drug Administration (the "FDA") has promulgated a draft policy
for the  regulation of certain  computer  software  products as medical  devices
under the 1976 Medical Device  Amendments to the Federal Food, Drug and Cosmetic
Act (the "FDC Act") and has  recently  indicated it may modify such draft policy
or create a new policy. To the extent that computer software is a medical device
under  the  policy,  the  manufacturers  of such  products  could  be  required,
depending on the product,  to (i) register and list their products with the FDA,
(ii) notify the FDA and demonstrate substantial equivalence to other products on
the market  before  marketing  such  products,  or (iii)  obtain FDA approval by
demonstrating  safety and effectiveness before marketing a product. In addition,
such products  would be subject to FDC Acts general  controls,  including  those
relating  to good  manufacturing  practices  and adverse  experience  reporting.
Although it is not  possible to  anticipate  the final form of the FDA's  policy
with regard to computer  software,  the Company expects that, whether or not the
draft is finalized or changed,  the FDA is likely to become  increasingly active
in  regulating  computer  software  that  is  intended  for use in  health  care
settings.   The  FDA  can  impose  extensive  requirements  governing  pre-  and
post-market  conditions  such as device  investigation,  approval,  labeling and
manufacturing.  In addition, the FDA can impose extensive requirements governing
development controls and quality assurance processes.  There can be no assurance
that actions taken by the FDA to regulate  computer  software  products will not
have a material adverse effect on the Company's results of operations, financial
condition or business.

The  Company  intends  to  continue  to  grow in part  through  acquisitions  of
complementary   products,   technologies   and   businesses  or  alliances  with
complementary  businesses.  The Company's ability to expand successfully through
acquisitions or alliances depends on many

                                 Page 15 of 22

<PAGE>

PART I.  FINANCIAL INFORMATION

factors,  including the successful  identification  and acquisition of products,
technologies or businesses and management's ability to effectively integrate and
operate the acquired or aligned products,  technologies or businesses.  There is
significant competition for acquisition and alliance opportunities in the health
care information  systems industry,  which may intensify due to consolidation in
the  industry,   thereby   increasing   the  costs  of   capitalizing   on  such
opportunities.  The Company competes for acquisition and alliance  opportunities
with other companies that have  significantly  greater  financial and management
resources.  There can be no  assurance  that the Company will be  successful  in
acquiring  or  aligning  with  any  complementary   products,   technologies  or
businesses;  or, if acquired or aligned  with,  that the Company will be able to
successfully  integrate any such products,  technologies  or businesses into its
current  business and  operations.  The failure to  successfully  integrate  any
significant  products,  technologies or businesses could have a material adverse
effect on the Company's results of operations, financial condition or business.

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

                                 Page 16 of 22






<PAGE>


PART II. OTHER INFORMATION





Item 1.  LEGAL PROCEEDINGS

                  None.


Item 2.  CHANGES IN SECURITIES

                  None.


Item 3.  DEFAULTS UPON SENIOR SECURITIES

                  Not applicable.


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

The Company held its Annual  Meeting of  Shareholders  on May 19,  1997.  Of the
21,017,420  shares of common  stock  outstanding  and  entitled  to vote at this
meeting,  18,100,982  shares were  represented  at the meeting,  in person or by
proxy. The following matters were voted upon at the Annual Meeting:

1.    Steven M. Lash and Henry M. Tufo, M.D. were elected to serve for a term  
      of three years as Class II Directors.  The remaining terms of Richard E. 
      Tarrant, Paul L. Egerman, Stuart H. Altman, Ph.D. and Robert H. Hoehl 
      continued after the meeting.  The result of the vote with respect to each
      nominee for office was as follows:
                                       Votes "Against"              Broker
Nominee               Votes "For"      or "Withheld"   Abstained    Non-Votes
-------               -----------      -------------   ---------    ---------  
Steven M. Lash        18,054,993       0               45,674       315
Henry M.Tufo, M.D.    18,052,925       0               47,742       315

2.   Holders  of  17,286,619  shares of  Common  Stock of the  Company  voted to
     approve  amendments  to the  Company's  1995  Director  Stock  Option  Plan
     ("Plan").  Holder of 808,269  shares voted  against such approval and 5,779
     shares abstained from voting, with 315 broker non-votes.

3.   Holders of  18,098,095  shares of the Common Stock of the Company  voted to
     ratify  the  selection  of Ernst & Young LLP as the  Company's  independent
     auditors for the current fiscal year. Holders of 1,448 shares voted against
     ratifying such selection and 1,124 shares  abstained from voting,  with 315
     broker non-votes.

                                 Page 17 of 22

<PAGE>

PART II.  OTHER INFORMATION


Item 5.  OTHER INFORMATION

                  None.

Item 6.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, & REPORTS ON FORM 8-K

         (a) The  exhibits  filed as part of this  Form  10-Q are  listed on the
Exhibit  Index  immediately  preceding  such  exhibits,  which  Exhibit Index is
incorporated herein by reference.

         (b) On April 3, 1997, the Company filed a report on Form 8-K, reporting
an  Agreement  and Plan of  Merger  dated  as of March  25,  1997  (the  "Merger
Agreement") with Penguin Acquisition  Corporation,  a Washington corporation and
wholly-owned  subsidiary of the Company  ("Sub") and PHAMIS,  Inc., a Washington
corporation  ("PHAMIS")  whereby the Sub would be merged  with and into  PHAMIS,
with  PHAMIS  being  the  surviving  corporation  and  becoming  a  wholly-owned
subsidiary of the Company. No financial statements were filed with such report.

                                 Page 18 of 22


<PAGE>


SIGNATURES






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.

                                          IDX SYSTEMS CORPORATION


Date:    August 13, 1997             By:/s/ JOHN A. KANE
                                        ----------------------------
                                        John A. Kane,
                                        Vice President, Finance and 
                                        Administration, Chief Financial
                                        Officer and Treasurer
                                        (Principal Financial and
                                         Accounting Officer)

                                 Page 19 of 22


<PAGE>


EXHIBIT INDEX






                                 Exhibit Index
                                 -------------

         The following  exhibits are filed as part of this  Quarterly  Report on
Form 10-Q:

<TABLE>
<CAPTION>


Exhibit No.       Description                                              Page
-----------       -----------                                              ----

<S>               <C>                                                      <C>

11                Statement regarding computation of per share earnings    21
                  for three months ended June 30, 1997.


12                Statement regarding computation of per share earnings    22
                  for six months ended June 30, 1997.

</TABLE>

                                 Page 20 of 22

<PAGE>


                                   EXHIBIT 11

                            IDX SYSTEMS CORPORATION
                       SCHEDULES OF NET INCOME PER SHARE
                   (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>


                                 PRIMARY                    FULLY DILUTED
                        --------------------------- ----------------------------
                       THREE MONTHS ENDED JUNE 30,   THREE MONTHS ENDED JUNE 30,
                       1997                  1996    1997                 1996
                       ----------------------------  ---------------------------
<S>                    <C>                   <C>     <C>                  <C>


Weighted average shares
   outstanding         21,043                20,683  21,043               20,683

Net dilutive effect of
 stockoptions-based 
 on the treasury stock
 method using the 
 average price for 
 primary and ending
 price, if higher, for 
 fully diluted           596                   737     489                   737

                       ----------------------------  ---------------------------
Total shares           21,639                21,420  21,532               21,420
                       ============================  ===========================

Net income             $5,017                $3,856 $5,017                $3,856
                        =====                 =====  =====                 =====
Net income per share   $ 0.23                $ 0.18 $ 0.23                $ 0.18
                       ======                ====== ======                ======

</TABLE>

                                 Page 21 of 22


<PAGE>

                                   EXHIBIT 12

                            IDX SYSTEMS CORPORATION
                       SCHEDULES OF NET INCOME PER SHARE
                   (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>



                              PRIMARY                     FULLY DILUTED
                      ---------------------------   ----------------------------
                      SIX MONTHS ENDED JUNE 30,      SIX MONTHS ENDED JUNE 30,
                      1997                  1996    1997                 1996
                      ----------------------------  ---------------------------
<S>                   <C>                   <C>     <C>                  <C>


Weighted average shares
   outstanding        21,023                20,546  21,023               20,546

Net dilutive effect of
 stockoptions-based 
 on the treasury stock
 method using the 
 average price for 
 primary and ending
 price, if higher, for 
 fully diluted           566                   805     513                   805

                       ----------------------------- ---------------------------
Total shares           21,589                21,351  21,536               21,351
                       ============================  ===========================

Net income             $8,417                $7,209 $8,417                $7,209
                        =====                 =====  =====                 =====
Net income per share   $ 0.39                $ 0.34 $ 0.39                $ 0.34
                       ======                ====== ======                ======

</TABLE>

                                 Page 22 of 22