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

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

                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

                                       OR

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

                FOR THE TRANSITION PERIOD FROM__________TO_____________

                         Commission file number 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.)

                                  40 IDX Drive
                           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 (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.


                                 Yes  X     No
                                    ----      ----

The number of shares outstanding of the registrant's common stock as of November
4, 2002 was 29,034,596.
================================================================================

                                  Page 1 of 34
<PAGE>



                             IDX SYSTEMS CORPORATION
                                    FORM 10-Q
                     For the Period Ended September 30, 2002


                                TABLE OF CONTENTS


                                                                            Page

PART I.   FINANCIAL INFORMATION

         Item 1.   Interim Financial Statements (Unaudited)
         Condensed Consolidated Balance Sheets .............................3
         Condensed Consolidated Statements of Operations ...................4
         Condensed Consolidated Statements of Cash Flows ...................5
         Notes to Condensed Consolidated Financial Statements ..............6
         Item 2.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations ............................13
         Item 3.  Quantitative and Qualitative Disclosures About
            Market Risk ....................................................27
         Item 4.  Controls and Procedures ..................................27

PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings ........................................29
         Item 2.  Changes In Securities and Use of Proceeds.................30
         Item 3.  Defaults Upon Senior Securities ..........................30
         Item 4.  Submission of Matters to a Vote of Security Holders ......30
         Item 5.  Other Information ........................................30
         Item 6.  Exhibits and Reports on Form 8-K .........................30


SIGNATURES..................................................................31

CERTIFICATIONS..............................................................32

EXHIBIT INDEX...............................................................34




                                  Page 2 of 34
<PAGE>



PART I.   FINANCIAL INFORMATION

ITEM 1.   INTERIM FINANCIAL STATEMENTS

                             IDX SYSTEMS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                             SEPTEMBER 30,       DECEMBER 31,
                                                  2002               2001
                                             --------------      -------------
                                             (unaudited)           (audited)
ASSETS
Cash and marketable securities               $   55,668          $   56,373
Accounts receivable, net                         96,036              95,478
Refundable income taxes                           5,283              12,100
Prepaid and other current assets                  9,631               6,189
Deferred tax asset                                4,073               7,718
                                             ------------        ------------
TOTAL CURRENT ASSETS                            170,691             177,858

Property and equipment, net                      84,120              77,636
Capitalized software costs, net                   2,381               2,055
Goodwill, net                                     1,511               1,391
Other assets                                     12,784               5,592
Deferred tax asset                                    -                 790
                                             ------------        ------------
TOTAL ASSETS                                 $  271,487          $  265,322
                                             ============        ============


LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and
  other liabilities                          $   41,983          $   51,963
Deferred revenue                                 19,196              20,361
Notes payable to bank                            18,727              15,000
                                             ------------        ------------
TOTAL CURRENT LIABILITIES                        79,906              87,324

Stockholders' equity                            191,581             177,998
                                             ------------        ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $  271,487          $  265,322
                                             ============        ============


          SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  Page 3 of 34


<PAGE>


Part I. Financial Information

ITEM 1.  INTERIM FINANCIAL STATEMENTS

                             IDX SYSTEMS CORPORATION
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                    (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

                                THREE MONTHS ENDED        NINE MONTHS ENDED
                                   SEPTEMBER 30,            SEPTEMBER 30,
                                2002          2001        2002          2001
                                ----          ----        ----         ----
REVENUES
Systems sales                   $ 30,404      $ 18,670    $ 83,802     $ 78,498
Maintenance and service fees      87,257        70,820     254,473      209,879
                                --------      --------    --------     --------
TOTAL REVENUES                   117,661        89,490     338,275      288,377


OPERATING EXPENSES
Cost of systems sales             10,816         6,192      28,629       25,964
Cost of maintenance and
  services                        65,428        62,483     192,523      176,836
Selling, general and
  administrative                  22,415        24,509      67,364       67,380
Software development costs        13,528        11,126      38,784       32,977
                                --------      --------    --------     --------
TOTAL OPERATING EXPENSE          112,187       104,310     327,300      303,157

OPERATING INCOME (LOSS)            5,474       (14,820)     10,975      (14,780)

OTHER INCOME

Other income                         826           460       1,334        1,769
Gain on sale of investment
  in subsidiary                        -             -       4,273       35,546
Gain on investment                     -             -           -        5,849
                                --------      --------    --------     --------
TOTAL OTHER INCOME                   826           460       5,607       43,164

Income before income taxes
  and equity in loss of
  unconsolidated affiliate         6,300       (14,360)     16,582       28,384

Equity in loss of
  unconsolidated affiliate             -        (6,057)          -      (17,559)
Income tax benefit (provision)    (2,079)        8,184      (5,472)      (5,575)
                                --------      --------    --------     --------
NET INCOME (LOSS)               $  4,221      $(12,233)   $ 11,110     $  5,250
                                ========      ========    ========     ========

BASIC EARNINGS PER SHARE
  (LOSS)                        $   0.15      $  (0.43)   $   0.38     $   0.18
                                ========      ========    ========     ========
Basic weighted average
  shares outstanding            $ 29,032      $ 28,665    $ 28,916     $ 28,525
                                ========      ========    ========     ========

DILUTED EARNINGS PER SHARE
  (LOSS)                        $   0.14      $  (0.43)   $   0.38     $   0.18
                                ========      ========    ========     ========
Diluted weighted average
  shares outstanding            $ 29,180      $ 28,665    $ 29,119     $ 28,800
                                ========      ========    ========     ========


          SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  Page 4 of 34
<PAGE>


PART I. FINANCIAL INFORMATION
ITEM 1.  INTERIM FINANCIAL STATEMENTS

                             IDX SYSTEMS CORPORATION
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)
                                                      NINE MONTHS ENDED
                                                         SEPTEMBER 30,
                                                      2002           2001
                                                      ----           ----
OPERATING ACTIVITIES:
Net income                                            $   11,110     $   5,250
Adjustments to reconcile net income to net cash
    provided by operating activities:
     Depreciation                                         11,977        11,344
     Amortization                                          1,945         1,634
     Deferred tax provision                                4,435          (313)
     Increase in allowance for doubtful accounts           2,432         1,853
     Minority interest                                         -           297
     Gain on investment                                        -        (5,849)
     Equity in loss of unconsolidated affiliate                -        17,559
     Gain on sale of investment in subsidiary             (4,273)      (35,546)
     Loss on disposition of assets                            93           404
     Changes in operating assets and liabilities:
         Accounts receivable                              (2,991)       17,774
         Prepaid expenses and other assets                (5,316)       (2,862)
         Accounts payable and accrued expenses            (5,707)      (11,304)
         Federal and state income taxes                    6,817           362
         Deferred revenue                                 (1,165)          130
                                                      -----------    ----------
         Net cash provided by operating activities        19,357           733

INVESTING ACTIVITIES:
Purchase of property and equipment, net                  (18,555)      (31,863)
Purchase of securities available-for-sale                (22,116)      (67,425)
Proceeds from sale of securities available-for-sale       30,523        98,790
Proceeds from sale of investment                               -        11,282
Business acquisitions                                          -        (2,080)
Other assets                                              (7,498)         (252)
                                                      -----------    ----------
        Net cash (used in) provided by investing
          activities                                     (17,646)        8,452

FINANCING ACTIVITIES:
Proceeds from sale of common stock                         2,222         2,879
Proceeds from notes payable to bank                        3,727        15,000
Contributions to affiliates, net                               -          (472)
                                                      -----------    ----------
        Net cash provided by financing activities          5,949        17,407
                                                      -----------    ----------
Increase in cash and cash equivalents                      7,660        26,592

Cash and cash equivalents at beginning of period          38,083        16,357
                                                      -----------    ----------
Cash and cash equivalents at end of period                45,743        42,949
Securities available-for-sale                              9,925        11,657
                                                      -----------    ----------
Total cash and securities available-for-sale          $   55,668     $  54,606
                                                      ===========    ==========
Noncash investing activities:
Fair value of stock received from sale of
  investment in subsidiary                            $        -     $  29,523
                                                      ===========    ==========
Deconsolidation of minority interest in
  real estate partnership                             $        -     $   8,979
                                                      ===========    ==========
Noncash financing activities:
Issuance of restricted stock                          $        -     $   1,201
                                                      ===========    ==========

          SEE NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  Page 5 of 34
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Nature of Business and Basis of Presentation

IDX Systems Corporation (IDX or the Company) provides healthcare information
systems and services to large integrated healthcare delivery enterprises
principally located in the United States. Revenues are derived from the
licensing of software, hardware sales, providing maintenance and services
related to systems sales and providing medical transcription services.

The interim  unaudited  condensed  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 accounting  principles  generally
accepted in the United States.  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
(consisting  of normal  recurring  accruals and  adjustments)  have been made to
provide a fair presentation.  The operating results for the three and nine month
periods ended September 30, 2002 are not  necessarily  indicative of the results
that  may be  expected  for the year  ending  December  31,  2002.  For  further
information,  refer  to the  consolidated  financial  statements  and  footnotes
included  in the  Company's  latest  annual  report on Form 10-K  filed with the
Securities and Exchange Commission on March 29, 2002.

Note 2 - New Accounting Standards

In March 2002, the Financial Accounting Standards Board (FASB) Emerging Issues
Task Force (EITF) issued EITF No. 01-14, "Issue No. 01-14 of the Financial
Accounting Standards Board (FASB) Emerging Issues Task Force" ("EITF No.
01-14"). EITF No. 01-14 states that customer reimbursements received for
"out-of-pocket" expenses incurred should be characterized on the income
statement as revenue. These expenses include, but are not limited to, airfare,
mileage, hotel stays, out-of-town meals, photocopies, and telecommunications and
facsimile charges. Service revenue and cost of service expenses have been
restated for all periods presented in order to reflect this change, resulting in
no change to net income.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)", ("EITF No. 94-3"). SFAS No. 146 requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. EITF No. 94-3 allowed for an exit
cost liability to be recognized at the date of an entity's commitment to an exit
plan. SFAS No. 146 also requires that liabilities recorded in connection with
exit plans be initially measured at fair value. The provisions of SFAS No. 146
are effective for exit or disposal activities that are initiated after December
31, 2002, with early adoption encouraged. The Company does not expect the
adoption of SFAS No. 146 will have a material impact on its financial position
or results of operations.


Note 3 - Deconsolidation, Acquisitions and Investments

In April 2002, the Company acquired a minority interest in Stentor, Inc., one of
the Company's strategic partners, by exercising a warrant to purchase 562,069
shares of preferred stock of Stentor, Inc. The Company paid approximately $7.5
million to purchase the preferred shares. Stentor, Inc. is a California based
medical informatics company with products for medical image and information
management. The warrant was issued to the Company in November 2000 in connection
with the alliance agreement that was entered into by the parties to jointly
develop a medical image and information management system (MIMS) combining the
Company's Imaging Suite product with the image distribution technology from
Stentor. This investment will be carried at cost. There is currently no public
market for the preferred shares.

                                  Page 6 of 34
<PAGE>


Through April 19, 2001, the Company's consolidated financial statements included
the accounts of the Company and BDP Realty Associates (BDP), a real estate trust
owned by certain stockholders and key employees of the Company whose real estate
was leased exclusively by the Company. Effective with the acquisition of the
Company's corporate headquarters from BDP on April 19, 2001, the Company
deconsolidated BDP and eliminated the net assets, principally real estate and a
minority interest, included in the Company's consolidated balance sheet. The
Company purchased its corporate headquarters from BDP for approximately $15
million in cash in the second quarter of 2001, the fair market value as
determined by independent appraisers. This amount has been recorded as
property and equipment on the Company's consolidated balance sheet.

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

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

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


Note 4 - Restructuring Charges

On September 28, 2001, the Company announced its plan to restructure and realign
its large physician group practice business. The Company implemented a workforce
reduction and restructuring program affecting approximately four percent of the
Company's employees. The restructuring program resulted in a charge to earnings
of approximately $19.5 million during the fourth quarter of 2001, comprised of
costs associated with employee severance arrangements of approximately $5.5
million, lease payment costs of approximately $5.2 million and equipment and
leasehold improvement write-offs related to the leased facilities and workforce
reduction of $8.8 million. Substantially all work force reduction related
actions were completed during the fourth quarter of 2001. As of September 30,
2002, the Company had an accrual balance of $3.0 million primarily related to
leased facilities, of which approximately $600,000 will be paid during the
remainder of 2002 and approximately $2.4 million thereafter.


Note 5 - Sale of Investment in Subsidiary and Other Related Matters

On January 8, 2001, the Company sold certain operations of its majority owned
subsidiary, ChannelHealth Incorporated ("ChannelHealth") to Allscripts
Healthcare Solutions, Inc. ("Allscripts"), a leading provider of point-of-care
e-prescribing and productivity solutions for physicians. In addition to the
sale, the Company entered into a ten-year strategic alliance whereby Allscripts
is the exclusive provider of point-of-care clinical applications sold by IDX to
physician practices.

Allscripts acquired  ChannelHealth in exchange for 8.6 million shares, or 21.3%,
of Allscripts  stock on a pro-forma  fully diluted basis,  of which IDX received
approximately  90% or 7.5 million  shares.  The Allscripts  shares  received are
subject  to  restrictions  on the  transfer  of more than 25% of the  Allscripts
shares in any one year,  and 16.67% of that 25%, or 4.164% of the total,  in any
one month.  Under certain  circumstances,  more favorable sale  restrictions may
apply. IDX recorded the Allscripts  shares at their fair value of $29.5 million,
which  included a discount  from market value due to  restrictions  on transfer,
resulting in a $35.5  million  gain on the  transaction.  The  reported  gain is
greater than the fair market value of the


                                  Page 7 of 34
<PAGE>

stock received due to the Company's negative carrying value of the ChannelHealth
investment at the time of the sale. Pursuant to the strategic alliance
agreement, IDX guaranteed that Allscripts would have gross revenues resulting
from the alliance (less any commissions paid to IDX) of at least $4.5 million
for fiscal year 2001. IDX deferred $4.5 million of the gain on sale as of the
date of the transaction. IDX and Allscripts finalized the analysis related to
the Allscripts 2001 eligible gross revenues guarantee, and IDX recognized an
additional $4.3 million gain on the sale during the first three months of 2002.

At September 30, 2002, IDX owns approximately 20% of the outstanding common
stock of Allscripts and accounts for its investment under the equity method of
accounting. Under the equity method of accounting, IDX recognized its pro-rata
share of Allscripts 2001 losses and recorded an equity loss during 2001 of $17.6
million, including $6.1 million during the third quarter of 2001 and $17.6
million during the first nine months of 2001. These equity losses resulted in
the elimination of the carrying value of the Allscripts investment during the
third quarter of 2001. Based on the quoted market price at September 30, 2002,
the Allscripts investment has a market value of approximately $21.0 million,
which is not currently reflected on the Company's consolidated balance sheet.

Summary audited financial information for Allscripts for the year ended December
31, 2001 is as follows in thousands:

                Revenue              $    70,754
                Gross profit               4,633
                Net loss                (418,931)

                Current assets            64,846
                Non current assets        52,598
                Current liabilities       18,485
                Non current liabilities      325


Summary unaudited financial information for Allscripts for the three and nine
month periods ended September 30, 2002 and 2001 is as follows in thousands:

FOR THE THREE MONTHS ENDED SEPTEMBER 30:
                                            2002                   2001
                                            ----                   ----
                  Revenue                   $20,006                $16,454
                  Gross profit                5,236                 (2,138)
                  Net loss                   (3,199)              (351,857)

FOR THE NINE MONTHS ENDED SEPTEMBER 30:
                                            2002                   2001
                                            ----                   ----
                  Revenue                   $37,765                $52,226
                  Gross profit               14,028                  1,178
                  Net loss                  (13,185)              (410,385)

Note 7 - Income Taxes

The Company's 2002 effective tax rate is lower than the statutory rate,
primarily due to research credits. The 2001 effective tax rate was higher than
the statutory rate principally due to the non-deductible nature of certain costs
related to the sale of ChannelHealth. The net deferred tax assets as of
September 30, 2002 of approximately $4.1 million are expected to be realized by
generating future taxable income and are otherwise recoverable through available
tax planning strategies.

                                  Page 8 of 34
<PAGE>


Note 8 - Segment Information

The Company views its operations and manages its business as principally two
segments, information systems and services that include software, hardware and
related services and medical transcription services. The Company's business
units have separate management teams and infrastructures that offer different
products and services. Accordingly, these business units have been classified as
reportable segments.

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

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

The accounting policies of the reportable segments are the same as those
described in Note 1 of the Notes to the Consolidated Financial Statements
included in Company's annual report on Form 10-K for the year ended December 31,
2001.

The Company evaluates the performance of its operating segments based on revenue
and operating income. Intersegment revenues are immaterial. No one customer
accounts for greater than 10% of revenue for any reportable segment.

                                  Page 9 of 34

<PAGE>


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


                                   Information      Medical
                                   Systems and      Transcription
                                   Services         Services          Total
                                   -----------      -------------     -----
FOR THE THREE MONTHS ENDED
  SEPTEMBER 30, 2002
Net operating revenues             $ 88,854         $ 28,807          $117,661
Operating income                      5,456               18             5,474
Income (loss) before income
  taxes and equity in loss
  of unconsolidated affiliate         7,251             (951)            6,300
Identifiable operating assets       224,926           46,561           271,487


FOR THE THREE MONTHS ENDED
  SEPTEMBER 30, 2001
Net operating revenues             $ 64,848         $ 24,642          $ 89,490
Operating income (loss)             (17,252)           2,432           (14,820)
Income (loss) before income
  taxes and equity in loss
  of unconsolidated affiliate       (15,958)           1,598           (14,360)
Identifiable operating assets       237,259           36,218           273,447


FOR THE NINE MONTHS ENDED
  SEPTEMBER 30, 2002
Net operating revenues             $254,838         $ 83,437          $338,275
Operating income (loss)              11,181             (206)           10,975
Income (loss) before income
  taxes and equity in loss
  of unconsolidated affiliate        19,533           (2,951)           16,582
Identifiable operating assets       224,926           46,561           271,487


FOR THE NINE MONTHS ENDED
  SEPTEMBER 30, 2001
Net operating revenues             $217,658         $ 70,719          $288,377
Operating income (loss)             (18,989)           4,209           (14,780)
Income before income taxes
  and equity in loss of
  unconsolidated affiliate           26,600            1,784            28,384
Identifiable operating assets       237,259           36,218           273,447

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

Note 9 - Comprehensive Income

Total comprehensive income for the quarter ended September 30, 2002 amounted to
$4.2 million compared to a comprehensive loss of $12.2 million for the same
period in 2001. Total comprehensive income for the nine months ended September
30, 2002 amounted to $11.1 million compared to a comprehensive income of $5.2
million for the same period in 2001. Comprehensive income/loss includes
unrealized gains or losses on the Company's available-for-sale securities that
are included as a component of stockholders' equity.

                                 Page 10 of 34

<PAGE>


Note 10 - Earnings Per Share Information

The following sets forth the computation of basic and diluted earnings (loss)
per share: (in thousands, except for per share data)

                                    Three Months Ended       Nine Months Ended
                                      September 30,            September 30,

                                    2002         2001        2002        2001
                                    ----         ----        ----        ----
   Numerator:
     Net income (loss)              $4,221       $(12,233)   $ 11,110    $ 5,250
                                    ------       ---------   --------    -------
   Numerator for basic and
    diluted income (loss)
    per share                       $4,221       $(12,233)   $ 11,110    $ 5,250
                                    ======       =========   ========    =======

   Denominator:

     Basic weighted-average
       shares outstanding            29,032        28,665     28, 916     28,525
     Effect of employee stock
       options                          148             -         203        275
                                    --------------------------------------------

   Denominator for diluted
     income per share                29,180        28,665      29,119     28,800
                                     ------        ------      ------     ------
   Basic income (loss) per share     $  .15        $ .(43)     $  .38     $  .18
                                     ======        =======     ======     ======
   Diluted income (loss) per share   $  .14        $ .(43)     $  .38     $  .18
                                     ======        =======     ======     ======


Options to acquire 4,529,862 and 3,315,893 shares for the three month periods
ended September 30, 2002 and 2001, respectively, were excluded from the
calculation of diluted earnings per share, as the effect would not have been
dilutive. Options to acquire 3,137,221 and 2,745,963 shares for the nine month
periods ended September 30, 2002 and 2001, respectively, were excluded from the
calculation of diluted earnings per share, as the effect would not have been
dilutive.



Note 11 - Legal Proceedings

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

Subsequently, Epic filed an Answer denying the essential elements of the
Company's claims, and asserted counterclaims against the Company. Epic alleged
that the Company's claims asserting its trade secret rights were brought in bad
faith, with an intent to injure Epic competitively, and thereby violated
Sections 1 and 2 of the Sherman Act because the Company allegedly possessed
monopoly power in the U.S. market for medical practice information systems. Epic
also claimed that this same alleged conduct constituted intentional interference
with its contract with the Foundation. The counterclaim sought treble damages.
The Company denied the counterclaims. On July 31, 2001, the Company's lawsuit
against Epic, the Foundation and the individuals was dismissed and the
counterclaims of Epic and the Foundation were dismissed. The Company appealed
the dismissal of its lawsuit to the United States Court of Appeals for the
Seventh Circuit, and on April 1, 2002, that appellate court affirmed the
District Court's dismissal of the trade secret claim, but reversed and remanded
the other related claims of the Company, including breach of contract and
tortuous interference claims against the defendants.

On August 13, 2000, the District Court granted the Company's motion for summary
judgment on the issue of whether the Foundation had violated its obligations to
keep confidential the Company's proprietary information and stated that it would
be reasonable to conclude that Epic intended to improperly receive the
information. On August 27, 2002, the defendants settled the litigation with the
Company.



                                 Page 11 of 34
<PAGE>

In April 2000, the Company commenced a lawsuit for damages caused by wrongful
cancellation and material breach of contract by St. John Health System (SJHS),
in the United States District Court for Eastern District of Michigan, entitled
IDX Systems Corporation v. St. John Health System. Subsequently, SJHS commenced
a lawsuit against the Company in the Circuit Court of Wayne County, Michigan,
claiming unspecified damages against the Company for anticipatory repudiation,
breach of contract, tort and fraud. On motion of the Company, SJHS's lawsuit was
removed to and consolidated in the federal court. In its answer to the Company's
lawsuit, SJHS asserted the same claims previously asserted in its state court
action. In September 2001, SJHS specified damage claims of approximately $77.0
million in allegedly lost savings, and in January 2002 raised another theory of
alleged unspecified damages for "cover". On September 30, 2002, the United
States District Court for the Eastern District of Michigan dismissed all of SJHS
claims of fraud, tort and breach of contract, leaving only its claim for
anticipatory repudiation. On October 15, 2002, SJHS requested reconsideration of
these rulings. The Company believes the claims of SJHS are without merit and
continues to vigorously defend itself and prosecute its own claims for damages.
The lawsuit is in the trial preparation stage and the parties are awaiting
scheduling of the trial by the court.

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

                                 Page 12 of 34

<PAGE>


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

YOU SHOULD READ THE FOLLOWING DISCUSSION TOGETHER WITH THE CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS
QUARTERLY REPORT ON FORM 10-Q. THIS ITEM CONTAINS FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E
OF THE SECURITIES AND EXCHANGE ACT OF 1934 THAT INVOLVE RISKS AND UNCERTAINTIES.
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE INCLUDED IN SUCH FORWARD-LOOKING
STATEMENTS. FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
INCLUDE THOSE SET FORTH UNDER "FORWARD-LOOKING INFORMATION AND FACTORS AFFECTING
FUTURE PERFORMANCE" COMMENCING ON PAGE 22, AS WELL AS THOSE OTHERWISE DISCUSSED
IN THIS SECTION AND ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q. UNLESS
OTHERWISE SPECIFIED OR THE CONTEXT REQUIRES OTHERWISE, THE TERMS "WE", "US",
"OUR" AND THE "COMPANY" REFER TO IDX SYSTEMS CORPORATION AND ITS SUBSIDIARIES.

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

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. We have identified
the following as our critical accounting policies: revenue recognition and
accounts receivable, income taxes and accounting for litigation, commitments and
contingencies. For a detailed discussion on the application of these and other
accounting policies, see Note 1 of Notes to Consolidated Financial Statements
included in the Company's annual report on Form 10-K for the year ended December
31, 2001.

o    REVENUE  RECOGNITION.  We recognize revenue when evidence of an arrangement
     exists, contractual obligations have been satisfied, title and risk of loss
     (in the  case of  hardware)  have  been  transferred  to the  customer  and
     collection of the resulting  receivable  is  reasonably  assured.  We defer
     revenue when initial payment terms exceed 90 days. We recognize  revenue on
     software licensing  arrangements  involving multiple elements by allocation
     of the fair value of the  transaction  to each element,  or more  typically
     using  the  residual  method  when  the  arrangement  includes  undelivered
     elements. Under the residual method, the fair value of undelivered elements
     is deferred and the remaining  portion of the  arrangement fee is allocated
     to the delivered elements and is recognized as revenue,  assuming all other
     conditions for revenue  recognition have been satisfied.  Substantially all
     of the  Company's  product  revenue is  recognized  in this manner.  If the
     Company cannot determine the fair value of any undelivered element included
     in an  arrangement,  the Company will defer  revenue until all elements are
     delivered,  services are performed,  or until fair value can be objectively
     determined.  As  part  of  an  arrangement,  customers  typically  purchase
     maintenance and support  contracts as well as consulting and  transcription
     services from the Company.  Revenue from software licensing arrangements is
     principally  recognized upon attainment of specified contractual milestones
     and dates.  Additionally,  we  periodically  enter into  certain  long-term
     contracts  where revenue is recognized on a percentage of completion  basis
     or the completed contract method, as appropriate measures of completion for
     each contract are achieved. We also generate service revenues from the sale
     of product maintenance  contracts,  consulting  contracts and transcription
     service arrangements. Vendor specific evidence of fair value of maintenance
     services is based upon the amount charged when these services are purchased
     separately,  which is typically the renewal rate.  Revenue from maintenance
     contracts is  recognized  ratably over the support  period,  including  the
     installation period through the term of the agreements,  which is typically
     one year. Vendor specific evidence of fair value of consulting  services is

                                 Page 13 of 34
<PAGE>


     based upon the price charged when these services are sold  separately,  and
     typically charged at an hourly rate. Vendor specific evidence of fair value
     of  transcription  services  is based  upon the price  charged  when  these
     services are sold separately and are typically  charged at a per line rate.
     Revenues from consulting and  transcription  services are recognized in the
     period in which  services are  performed.  Revenue from  hardware  sales is
     recognized upon transfer of title to customers.

     ALLOWANCES FOR DOUBTFUL ACCOUNTS RECEIVABLE. Management estimates
     allowances for doubtful accounts receivable based on historical experience
     and management's evaluation of the financial condition of the customer. The
     Company typically does not require collateral. Historically, management's
     estimates have been adequate to cover accounts receivable exposures. We
     believe our reported allowances at September 30, 2002, are adequate. If the
     financial conditions of those customers were to deteriorate, however,
     resulting in their inability to make payments, we may need to record
     additional allowances, which would result in additional selling, general
     and administrative expenses being recorded for the period in which such
     determination was made.

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

o    Accounting for litigation,  commitments and contingencies. We are currently
     involved in certain legal  proceedings,  which, if unfavorably  determined,
     could have a material adverse effect on our operating results and financial
     condition.  In  connection  with  management's  assessment  of these  legal
     proceedings,  management  must  determine  if  an  unfavorable  outcome  is
     probable  and  evaluate  the  costs for  resolution  of these  matters,  if
     reasonably estimable.  These determinations and related estimates have been
     developed  in  consultation  with outside  counsel  handling our defense in
     these matters and is based upon an analysis of potential results,  assuming
     a combination  of litigation and defense  strategies.  See Part II, Item 1.
     "Legal  Proceedings"  and  Note 11 to our  audited  consolidated  financial
     statements  included in the  Company's  annual  report on Form 10-K for the
     year ended December 31, 2001.

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

GENERAL
Revenues increased to $117.7 million for the third quarter of 2002 from $89.5
million for the same period in 2001. Systems sales increased $11.7 million
(62.8%) during the third quarter of 2002, while maintenance and service fees
increased $16.4 million (23.2%) as compared to the same period in the prior
year. The Company reported net income of $4.2 million, or $0.14 per share, for
the third quarter of 2002 as compared to a net loss of $12.2 million, or $0.43
per share, for the same period in 2001. Excluding the effects of the equity in
the loss of an unconsolidated affiliate of $6.1 million, the net income after
income taxes for the three months ended September 30, 2001 was $8.6 million or
$0.30 per share.

On January 8, 2001, the Company sold ChannelHealth Incorporated
("ChannelHealth"), including certain product lines, to Allscripts Healthcare
Solutions, Inc. ("Allscripts"), a leading provider of point-of-care


                                 Page 14 of 34
<PAGE>

e-prescribing and productivity solutions for physicians. ChannelHealth,
incorporated in September 1999, was a majority owned subsidiary of IDX. IDX
retained the Patient and eCommerce Channels, which were previously part of
ChannelHealth, enabling IDX to integrate an Internet solution that leverages its
core competencies in physician practice management systems. In addition to the
sale, the Company entered into a 10-year strategic alliance whereby Allscripts
will become the exclusive provider of point-of-care clinical applications sold
by IDX to physician practices. Allscripts acquired ChannelHealth in exchange for
8.6 million shares, or 21.3% of Allscripts stock on a pro-forma fully diluted
basis, of which IDX received approximately 7.5 million shares (approximately
90%). This investment in Allscripts stock is accounted for under the equity
method. Under this method, IDX is required to recognize a pro-rata share of
Allscripts net income or loss after elimination of certain related entity
transactions. IDX recorded approximately $17.6 million as its pro-rata share of
Allscripts losses in 2001, including $6.1 million during the third quarter of
2001, and reduced the carrying value of this investment to zero in 2001. In the
event Allscripts generates net income in the future, IDX would not record its
share of Allscripts net income until such time as IDX's share of such future net
income aggregated to an amount that was greater than the proportionate share of
cumulative losses IDX has not recorded subsequent to its investment being
written down to zero. IDX is not committed to and does not currently plan to
provide any future investments or advances to Allscripts. Allscripts has
reported losses since 1995 and may report losses in the future.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS
ENDED SEPTEMBER 30, 2001

REVENUES
The Company's total revenues increased to $117.7 million during the three months
ended September 30, 2002 from $89.5 million for the corresponding period in
2001, an increase of approximately $28.2 million or 31.5%. Revenues from systems
sales increased to $30.4 million during the three months ended September 30,
2002 (25.8% of total revenues) from $18.7 million for the corresponding period
in 2001 (20.9% of total revenues), an increase of $11.7 million or 62.8%. This
increase was primarily due to an increase from new sales and installations of
certain IDX systems.

Revenues from maintenance and service fees increased to $87.3 million during the
quarter ended September 30, 2002 (74.2% of total revenues) from $70.8 million
for the corresponding period in 2001 (79.1% of total revenues), an increase of
$16.4 million or 23.2%. The increase was due to a $4.4 million increase in
maintenance revenue primarily resulting from price increases and an increase in
the Company's installed base, as well as a $7.1 million increase in installation
and consulting services provided by IDX's core business, combined with a $4.2
million increase in EDiX's medical transcription service fee revenue.

COST OF SALES AND SERVICES
System sales and the corresponding category of cost of system sales are
attributable to IDX's core business segment, information systems and services.
The cost of system sales increased to $10.8 million during the quarter ended
September 30, 2002 from $6.2 million for the comparable period in 2001, an
increase of $4.6 million or 74.7%. Cost of system sales fluctuates primarily due
to the amount of hardware and third party software included as a component of
the Company's systems sales. The gross margin as a percentage of systems sales
decreased to 64.4% during the third quarter of 2002 from 66.8% for the same
period in 2001. Fluctuations in the gross profit margin as a percentage of
system sales typically result from the revenue mix of software license revenue,
which has a higher gross profit margin and hardware and third party software
sales, which have a lower gross profit.

The cost of services increased to $65.4 million during the third quarter of 2002
from $62.5  million  for the  comparable  period in 2001,  an  increase  of $2.9
million or 4.7%. The increase in cost of services resulted primarily from growth
in medical  transcription  staff and related costs. The gross profit margin as a
percentage of maintenance and service fee revenues increased to 25.0% during the
third  quarter of 2002 from 11.8% for the same period in 2001.  This increase in
gross profit margin as a percentage  of revenue is due to increased  maintenance
and  service  revenue  in IDX's  core  business  partially  offset  by growth in
maintenance  and service  expenses,  combined  with a decrease  in EDiX's  gross
profit  margin due to higher labor and related  costs as a  percentage  of total
revenue.

The gross profit margin as a percentage of maintenance and service fee revenues
of IDX's core business, information systems and services, increased to 27.8% in
the third quarter of 2002 from 11.8% for the same period in 2001 primarily due
to increased maintenance and installation revenue combined with a decrease in
maintenance and service expenses due to costs savings from the 2001
restructuring program. The gross profit margin as a percentage of revenues for
the Company's medical transcription business segment (EDiX) decreased to 19.3%

                                 Page 15 of 34

<PAGE>

for the third quarter of 2002 from 26.2% for the same period in 2001 due to
higher labor and related costs as a percentage of total revenue.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased to $22.4 million for the
third quarter of 2002 from $24.5 million for the same period in 2001, a decrease
of $2.1 million or 8.5%. As a percentage of total revenues, selling, general and
administrative expenses decreased to 19.1% for the third quarter of 2002 from
27.4% for the same period in 2001. IDX's core business, information systems and
services, selling, general and administrative expenses decreased $3.0 million
primarily due to a decrease in outside professional fees, a decrease in rent
expense related to the 2001 restructuring program, offset by increased personnel
costs during the third quarter of 2002 as compared to the same period in the
prior year. EDiX's selling, general and administrative expenses increased
approximately $1.0 million during the third quarter of 2002 as compared to the
same period in 2001 due to increased personnel and related costs in order to
support sales growth.

SOFTWARE DEVELOPMENT COSTS
Software development expenses increased to $13.5 million in 2002 from $11.1
million in 2001, an increase of $2.4 million or 21.6%. As a percentage of total
revenues, software development expenses decreased to 11.5% in the third quarter
of 2002 from 12.4% for the same period in 2001. As a percentage of system sales,
software development costs decreased to 44.5% in the third quarter of 2002 from
59.6% for the same period in 2001. The $2.4 million increase is primarily due to
increased personnel costs as compared to the prior year in IDX's core
information systems and services business segment combined with net amortization
expense related to capitalized research and development costs. Approximately
$380,000 of software development cost amortization, net of capitalized software
development costs, were expensed during the third quarter of 2002 as compared to
$240,000 of software development costs, net of amortization, capitalized during
the third quarter of for the same period in 2001. Research and development costs
in EDiX increased $565,000 to $992,000 for the third quarter of 2002 from
$427,000 for the same period in 2001 primarily due to increased personnel
expenses.

OTHER INCOME, NET
Interest income increased to approximately $934,000 during the third quarter of
2002 as compared to $475,000 for the same period in 2001. This increase was
primarily due to approximately $730,000 in nonrecurring interest income related
to federal and state tax refunds. Excluding the effect of interest income
related to tax refunds, interest income decreased to approximately $204,000
during the third quarter of 2002 as compared to $475,000 for the same period in
2001 due to lower average invested balances combined with lower interest rates
during the third quarter of 2002 as compared to the same period in 2001.
Interest expense during the third quarter of 2002 increased to $108,000 from
$15,000 during the comparable period in 2001.

MINORITY INTEREST
The Company's consolidated financial statements included the accounts of the
Company and BDP Realty Associates (BDP) through April 2001. BDP's real estate
was leased exclusively by the Company, and the Company was subject to
substantially all the risks of ownership through the date that this property was
acquired by the Company at the fair market value of approximately $15.0 million

                                 Page 16 of 34
<PAGE>


as determined by an independent appraiser. All transactions between the Company
and BDP have been eliminated. The minority interest, which was eliminated in
April 2001, represented the net income and equity of BDP.

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE
IDX, through a wholly owned subsidiary, currently owns approximately 20% of the
outstanding common stock of Allscripts and records its investment under the
equity method of accounting. IDX records its interest in the losses of
Allscripts as a reduction to its investment account. IDX recorded an equity loss
during the third quarter of 2001 of $6.1 million on a pre-tax basis. IDX's
interest in the losses of Allscripts in 2001 reduced the balance of IDX's
investment carrying balance in Allscripts to zero, and accordingly no share of
Allscripts loss has been recorded during the third quarter of 2002.

INCOME TAXES
The Company recorded income tax expense of approximately $2.1 million during the
third quarter of 2002, an effective tax rate of 33.0%. This is lower than the
Company's historical tax rate of 40.0% due to certain research and
experimentation credits. The Company recorded an income tax benefit of
approximately $8.2 million during the third quarter of 2001, an effective tax
rate of 40.0%. The Company anticipates a consolidated effective tax rate of
approximately 33.0% for the year ending December 31, 2002. This favorable rate
is primarily the result of research credits projected to be generated and
utilized in 2002. The Company anticipates that EDiX's effective tax rate in 2002
will also be less than the statutory rate due to the use of operating loss carry
forwards, subject to annual limitations. The net deferred tax assets as of
September 30, 2002 of approximately $4.1 million are expected to be realized by
generating future taxable income and are otherwise recoverable through available
tax planning strategies.

NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 2001

REVENUES
The Company's total revenues increased to $338.3 million during the nine months
ended September 30, 2002 from $288.4 million for the corresponding period in
2001, an increase of approximately $49.9 million or 17.3%. Revenues from systems
sales (attributable to IDX's core business, information systems and services
segment) increased to $83.8 million during the nine months ended September 30,
2002 (24.8% of total revenues) from $78.5 million for the corresponding period
in 2001 (27.2% of total revenues), an increase of $5.3 million or 6.8%. This
increase was primarily due to an increase in new sales and installations of
certain IDX systems.

Revenues from  maintenance  and service fees  increased to $254.5 million during
the nine months ended  September 30, 2002 (75.2% of total  revenues) from $209.9
million  for the  corresponding  period in 2001  (72.8% of total  revenues),  an
increase of $44.6  million or 21.2%.  The  increase  was due to a $12.7  million
increase in EDiX's medical  transcription  service fee revenue,  a $13.6 million
increase in maintenance  revenue  primarily  resulting  from the  combination of
price  increases and an increase in the Company's  installed base, as well as an
$15.0 million increase in installation and consulting services provided by IDX's
core business segment.

COST OF SALES AND SERVICES
System sales and the corresponding category of cost of system sales are
attributable to IDX's core business segment, information systems and services.
The cost of system sales increased to $28.6 million during the nine months ended
September 30, 2002 from $26.0 million for the comparable period in 2001, an
increase of $2.7 million or 10.3%. The increase in cost of system sales is
primarily a result of an increase in third party software included as a
component of sales of the Company's systems sales. The gross margin as a
percentage of system sales decreased to 65.8% during the first nine months of
2002 from 66.9% for the same period in 2001. Fluctuations in the gross profit
margin as a percentage of system sales result from the revenue mix of software
license revenues, which have a higher gross profit margin, and hardware and
third party software revenues, which have a lower gross profit margin.

                                 Page 17 of 34
<PAGE>


The cost of services increased to $192.5 million during the first nine months of
2002 from $176.8 million for the comparable period in 2001, an increase of $15.7
million or 8.9%. The increase in cost of services resulted from growth in client
services expenses,  primarily medical transcription staff and related costs. The
gross profit margin on maintenance  and service fee revenues  increased to 24.3%
during the first nine  months of 2002 from 15.7% for the same period in 2001 and
was due to increased maintenance revenue in IDX's core business partially offset
by growth in service  and  maintenance  expenses,  combined  with a decrease  in
EDiX's gross profit margin due to higher labor and related costs as a percentage
of total revenue.

The gross profit margin as a percentage of maintenance and service fee revenues
of IDX's core business, information systems and services, increased to 26.8% in
the first nine months of 2002 from 12.6% for the same period in 2001 primarily
due to increased maintenance and service revenue offset partially by growth in
maintenance and service expenses. This improvement in gross margin is a result
of restructuring programs and cost control initiatives. The gross profit margin
as a percentage of service revenues for the Company's medical dictation and
transcription business segment (EDiX) decreased to 19.3% for the first nine
months of 2002 from 22.0% for the same period in 2001 due to higher labor and
related costs as a percentage of total revenue.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased $16,000 to $67.4 million
for the first nine months of 2002 from $67.4 million for the same period in
2001, a decrease of 0.02%. As a percentage of total revenues, selling, general
and administrative expenses decreased to 19.9% for the first nine months of 2002
from 23.4% for the same period in 2001. IDX's core business, information systems
and services, selling, general and administrative expenses decreased $4.2
million primarily due to a decrease in general administrative expenses and
decreased personnel costs during the first nine months of 2002 as compared to
the same period in the prior year. This decrease is a result of restructuring
programs and cost control initiatives. EDiX's selling, general and
administrative expenses increased $4.2 million during the first nine months of
2002 as compared to the same period in 2001 due to an increase in the allowance
for doubtful accounts of $1.2 million combined with increased costs in order to
support sales growth.

SOFTWARE DEVELOPMENT COSTS
Software development expenses increased to $38.8 million during the first nine
months of 2002 from $33.0 million for the same period in 2001, an increase of
$5.8 million or 17.6%. As a percentage of total revenues, software development
expenses increased to 11.5% in the first nine months of 2002 from 11.4% for the
same period in 2001. As a percentage of system sales, software development costs
increased to 46.3% in the first nine months of 2002 from 42.0% for the same
period in 2001. The $5.8 million increase is primarily due to increased
personnel costs as compared to the prior year in IDX's core information systems
and services business segment. Approximately $364,000 of software development
costs, net of amortization, were capitalized during the first nine months of
2002 as compared to $1.2 million for the same period in 2001. Research and
development costs in the medical transcription business segment (EDiX) increased
to $2.2 million for the first nine months of 2002 from $1.4 million for the same
period in 2001.

OTHER INCOME, NET
Interest income decreased approximately $537,000 to $1.5 million during the
first nine months of 2002 as compared to $2.1 million for the same period in
2001. The first nine months of 2002 include approximately $730,000 in
nonrecurring interest income related to federal and state tax refunds. Excluding
the effect of interest income related to tax refunds, interest income decreased
to approximately $814,000 during the first nine months of 2002 as compared to
$2.1 million for the same period in 2001. This decrease was primarily due to a
lower average invested balance combined with lower interest rates during the
first nine months of 2002 as compared to the same period in 2001. Interest
expense during the first nine months of 2002 increased to $233,000 from $15,000
during the comparable period in 2001.

                                 Page 18 of 34

<PAGE>

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

GAIN ON SALE OF INVESTMENT IN SUBSIDIARY
On January 8, 2001, Allscripts acquired IDX's interest in ChannelHealth in
exchange for approximately 7.5 million shares of Allscripts common stock
(Allscripts shares). The Allscripts shares received are subject to restrictions
on the transfer of more than 25% of the Allscripts shares in any one year, and
16.67% of that 25%, or 4.164% of the total, in any one month. IDX recorded the
Allscripts shares at fair value of $29.5 million, which included a discount from
market value due to the four year restrictions on transfer, resulting in a $35.5
million gain on the transaction. IDX also entered into a ten-year strategic
alliance agreement with Allscripts. Pursuant to the strategic alliance
agreement, IDX had guaranteed that Allscripts will have gross revenues resulting
from the alliance (less any commissions paid to IDX) of at least $4.5 million
for fiscal year 2001. IDX accrued the $4.5 million liability as of the date of
the transaction. IDX and Allscripts have finalized the analysis related to the
Allscripts 2001 eligible gross revenues guarantee, and accordingly, IDX has
recognized an additional gain on the sale of ChannelHealth of $4.3 million
during the first quarter of 2002. IDX accounts for its investment in Allscripts
under the equity method of accounting. As a result of the transaction, the
Company is entitled to representation on Allscripts' Board of Directors.

REALIZED GAIN ON INVESTMENT
Other income during the nine months of 2001 includes a $5.8 million realized
gain from a distribution of marketable equity securities related to an
investment in an unrelated investment partnership.

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE
IDX, through a wholly owned subsidiary, currently owns approximately 20% of the
outstanding common stock of Allscripts and records its investment under the
equity method of accounting. IDX records its interest in the losses of
Allscripts as a reduction to its investment account. IDX recorded an equity loss
during the first nine months of 2001 of $17.6 million on a pre-tax basis. IDX's
interest in the losses of Allscripts in 2001 reduced the balance of IDX's
investment carrying balance in Allscripts to zero, and accordingly no share of
Allscripts loss has been recorded during the first nine months of 2002.

INCOME TAXES
The Company recorded income tax expense of approximately $5.5 million during the
first nine months of 2002, an effective tax rate of 33.0%. This is lower than
the Company's historical tax rate of 40.0% due to certain research and
experimentation credits. The Company recorded income tax expense of
approximately $5.6 million during the first nine months of 2001, an effective
tax rate of 52.0%. The higher rate in 2001 is principally due to transaction
costs related to the sale of ChannelHealth that are non-deductible for income
tax purposes. The Company anticipates a consolidated effective tax rate of
approximately 33.0% for the year ending December 31, 2002. This favorable rate
is primarily the result of research credits projected to be generated and
utilized in 2002. The Company anticipates that EDiX's effective tax rate in 2002
will also be less than the statutory rate due to the use of operating loss carry
forwards, subject to annual limitations. The net deferred tax assets as of
September 30, 2002 of approximately $4.1 million are expected to be realized by
generating future taxable income and are otherwise recoverable through available
tax planning strategies.

NEW ACCOUNTING STANDARDS
In March 2002, the Financial Accounting Standards Board (FASB) Emerging Issues
Task Force (EITF) issued EITF No. 01-14, "Issue No. 01-14 of the Financial
Accounting Standards Board (FASB) Emerging Issues Task Force" ("EITF No.
01-14"). EITF No. 01-14 states that customer reimbursements received for
"out-of-pocket" expenses incurred should be characterized on the income

                                 Page 19 of 34
<PAGE>


statement as revenue. These expenses include, but are not limited to, airfare,
mileage, hotel stays, out-of-town meals, photocopies, and telecommunications and
facsimile charges. Service revenue and cost of service expenses have been
restated for all periods presented in order to reflect this change, resulting in
no change to net income.

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

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," which
superseded SFAS No. 121, "Accounting for Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The Company adopted SFAS No. 144 in the first quarter
of fiscal 2002 and the adoption had no material impact on the Company's
financial position or results of its operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)", ("EITF No. 94-3"). SFAS No. 146 requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. EITF No. 94-3 allowed for an exit
cost liability to be recognized at the date of an entity's commitment to an exit
plan. SFAS No. 146 also requires that liabilities recorded in connection with
exit plans be initially measured at fair value. The provisions of SFAS No. 146
are effective for exit or disposal activities that are initiated after December
31, 2002, with early adoption encouraged. The Company does not expect the
adoption of SFAS No. 146 will have a material impact on its financial position
or results of operations.

LIQUIDITY AND CAPITAL RESOURCES
The Company principally has funded its operations, working capital needs and
capital expenditures from operations and short-term borrowings under revolving
secured bank lines of credit.

Net cash  provided by or used in  operations  is  principally  comprised  of net
income  and  depreciation  and is  primarily  affected  by the net effect of the
change in accounts receivable,  accounts payable,  accrued expenses and non-cash
items  relating  to  the  sale  of  ChannelHealth  and  certain   components  of
restructuring  charges.  Due to the nature of the Company's  business,  accounts
receivable, deferred revenue and accounts payable fluctuate considerably due to,
among other things, the length of installation  efforts which are dependent upon
the size of the transaction,  the changing  business plans of the customer,  the
effectiveness of customers'  management and general economic conditions.  During
the first nine months of 2002,  accounts  receivable  from  customers  have been
collected on average within 75 days,  which  represents a decrease of 14 days as
compared to the year ended December 31, 2001.

Cash flows related to investing activities have historically been related to the
purchase  of  computer  and office  equipment,  leasehold  improvements  and the
purchase  and  sale of  investment  grade  marketable  securities.  The  Company
invested  approximately $4.9 million on the acquisition and implementation of an
enterprise  resource  planning  system  during the first nine months of 2002 and
anticipates  investing an additional $2.5 million related to this implementation
during the remainder of 2002. The Company  purchased its corporate  headquarters
facility  from a related  party in April 2001 for  approximately  $15.0  million
based on an independent appraisal of its fair market value. This transaction was
reviewed and approved by a majority of the independent members of the Board of


                                 Page 20 of 34
<PAGE>

Directors of the Company that had no financial interest in the transaction. In
April 2000, the Company entered into a new operating lease for office space in
Seattle, Washington, commencing in 2003, for a period of 12 years. The Company
anticipates approximately $4.5 million in cash outlays for improvements related
to this Seattle lease in 2002.

In addition, investing activities may also include purchases of interests in,
loans to and acquisitions of businesses for access to complementary products and
technologies. The Company expects these activities to continue. In April 2002,
the Company acquired a minority interest in Stentor, Inc., one of the Company's
strategic partners, by exercising a warrant to purchase 562,069 shares of
preferred stock of Stentor, Inc. The Company paid approximately $7.5 million to
purchase the preferred shares. Stentor, Inc. is a California based medical
informatics company with products for medical image and information management.
The warrant was issued to the Company in November 2000 in connection with the
alliance agreement that was entered into by the parties to jointly develop a
medical image and information management system (MIMS) combining the Company's
Imaging Suite with the image distribution technology from Stentor. This
investment will be carried at cost. There is currently no public market for the
preferred shares. There can be no assurance that the Company will be able to
successfully complete any such purchases or acquisitions in the future.

Cash flows from  financing  activities  historically  relate to the  issuance of
common stock  through the exercise of employee  stock  options and in connection
with the employee stock purchase plan and proceeds from line of credit.

Cash, cash equivalents and securities  available-for-sale  at September 30, 2002
were $55.7  million,  a decrease of $705,000 from December 31, 2001. The Company
entered into a new revolving line of credit  agreement during the second quarter
of 2002  allowing  the  Company to borrow up to $40.0  million  based on certain
restrictions.  This line of credit is  secured  by  deposit  accounts,  accounts
receivable  and other  assets and bears  interest  at the bank's  base rate plus
..25%, which was approximately 5.0% as of September 30, 2002. This line of credit
is subject to certain terms and  conditions and will expire on June 27, 2005. At
September  30,  2002,  the  Company  had $18.7  million  outstanding  under this
arrangement and is in compliance with all covenants under this agreement.  As of
October 1, 2002 there was no outstanding balance on this line of credit.

In addition to existing financing arrangements, the Company owns, through a
wholly owned subsidiary, approximately 7.5 million shares of stock of Allscripts
Healthcare Solutions, Inc. ("Allscripts"), a public company listed on the Nasdaq
National Market under the symbol MDRX. This investment in Allscripts stock is
accounted for under the equity method. IDX recorded a non-cash equity loss
during the first nine months of 2001 of $17.6 million on a pre-tax basis that
reduced the balance of IDX's investment carrying balance in Allscripts to zero.
This investment has a quoted market value of approximately $21.0 million as of
September 30, 2002, and is subject to certain sale restrictions that may
significantly impact the market value.

The Company expects that its requirements for office facilities and other office
equipment will grow as staffing requirements dictate. The Company's operating
lease commitments consist primarily of office leases for the Company's operating
facilities. The Company plans to increase its professional staff during 2003 as
needed to meet anticipated sales volume and to support research and development
efforts for certain products. To the extent necessary to support increases in
staffing, the Company may obtain additional office space.

As of September 30, 2002, the Company has not entered into other material lease
or purchase commitments not disclosed above. The Company believes that currently
available funds will be sufficient to finance its operating requirements at
least through the next twelve months. To date, inflation has not had a material
impact on the Company's revenues or income.

During the nine month period ended September 30, 2002, IDX has not engaged in:

        o         Material off-balance sheet activities, including the use of
                  structured finance or special purpose entities, with the
                  exception of BDP Realty which has been given full recognition


                                 Page 21 of 34
<PAGE>


                  in the financial statements for all periods presented as
                  described below, and 4901 LBJ Ltd. Partnership ("LBJ") as
                  described below:

        o         Trading activities in non-exchange traded contracts: or

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

Through April 19, 2001, the Company's consolidated financial statements included
the accounts of the Company and BDP Realty Associates (BDP), a real estate trust
owned by certain stockholders and key employees of the Company, Robert H. Hoehl
and Richard E. Tarrant, whose real estate was leased exclusively by the Company.
Effective with the date of the acquisition of the Company's corporate
headquarters from BDP, the Company has deconsolidated BDP and eliminated the net
assets, principally real estate and minority interest, included in the Company's
consolidated balance sheet as of that date. The Company's corporate headquarters
were purchased from BDP for cash, at fair market value as determined by
independent appraisers, for approximately $15.0 million during the second
quarter of 2001. This amount has been recorded as property and equipment. This
transaction was reviewed and approved by certain independent members of the
Board of Directors of the Company that had no financial interest in the
transaction. Total rent expense includes $294,000 in 2001 related to this lease.

Mr. Tarrant is the President and a director of LBJ Real Estate Inc., a Vermont
corporation ("LBJ Real Estate"). Certain executive officers of LBJ Real Estate
are also executive officers of the Company, including Mr. Hoehl and John A.
Kane, the Company's Chief Financial Officer, who also serves as a director of
LBJ Real Estate. The stockholders of LBJ Real Estate include Messrs. Tarrant and
Hoehl. LBJ Real Estate holds a 1% general partnership interest in 4901 LBJ
Limited Partnership, a Vermont limited partnership ("LBJ"), and Messrs. Hoehl,
Tarrant, and Kane and Mr. Robert F. Galin, the Company's Senior Vice President
of Sales, and two other employees of the Company hold the remaining 72.95%
limited partnership interest.

The Company leases an office building from 4901 LBJ Ltd. Partnership, a real
estate partnership (REP) owned by certain stockholders and key employees of the
Company. Lease agreements are based on fair market value rents and are reviewed
and approved by independent members of the Board of Directors. Total rent
expense includes approximately $417,000 during each of the nine month periods
ending September 30, 2002 and September 30, 2001, respectively, related to this
lease. The Company has recently entered into a new lease that extends the terms
of the Lease through June 30, 2007.

FORWARD-LOOKING INFORMATION AND FACTORS AFFECTING FUTURE PERFORMANCE

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

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

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


                                 Page 22 of 34
<PAGE>

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

QUARTERLY OPERATING RESULTS MAY VARY. The Company's quarterly operating results
have varied in the past and may vary in the future. IDX expects its quarterly
results of operations to continue to fluctuate. Because a significant percentage
of IDX's expenses are relatively fixed, the following factors could cause these
fluctuations:

        o       delays in customers purchasing decisions due to a variety of
                factors such as consideration and management changes;
        o       long sales cycles;
        o       long installation and implementation cycles for the larger, more
                complex and costlier systems;
        o       recognizing revenue at various points during the installation
                process, typically based on milestones; and
        o       timing of new product and service introductions and product
                upgrade releases.

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

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

        o       the continuing evolution of industry standards, for example,
                transaction standards pursuant to the Health Insurance
                Portability and Accountability Act of 1996; and
        o       the creation of new technological developments, for example,
                Internet and application service provider technology.

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

CHANGES AND CONSOLIDATION IN THE HEALTHCARE INDUSTRY. IDX currently derives
substantially all of its revenues from sales of financial, administrative and
clinical healthcare information systems, medical transcription services and
other related services within the healthcare industry. As a result, the success
of IDX is dependent in part on the political and economic conditions in the
healthcare industry.

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

                                 Page 23 of 34

<PAGE>

other entities with which IDX has a business relationship could react to these
proposals and the uncertainty surrounding these proposals by curtailing or
deferring investments, including those for IDX's products and services.

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

COMPETITION FOR HEALTHCARE INFORMATION SYSTEMS. The market for healthcare
information systems is intensely competitive, rapidly evolving and subject to
rapid technological change. IDX believes that the principal competitive factors
in this market include the breadth and quality of system and product offerings,
the features and capabilities of the systems, the price of the system and
product offerings, the ongoing support for the systems, the potential for
enhancements and future compatible products.

Some  of  IDX's   competitors  have  greater   financial,   technical,   product
development, marketing and other resources than IDX, and some of its competitors
offer  products  that  it does  not  offer.  The  Company's  principal  existing
competitors include Eclipsys Corporation, McKesson Corporation,  Medquist, Inc.,
Siemans AG,  Epic  Systems  Corporation  and Cerner  Corporation.  Each of these
competitors offers a suite of products that compete with many of IDX's products.
There  are other  competitors  that  offer a more  limited  number of  competing
products.  In addition,  IDX expects  that major  software  information  systems
companies,  large information technology consulting service providers and system
integrators,  Internet-based  start-up companies and others  specializing in the
healthcare industry may offer competitive products or services. In October 2001,
Pfizer,  IBM and  Microsoft  announced  the creation of a joint venture known as
Amicore to develop  applications  to automate the  administrative,  clinical and
financial  functions  of a medical  practice and connect the practice to groups,
laboratories,  pharmacies  and other  providers  for  physicians  and  physician
groups.

POTENTIAL INFRINGEMENT OF PROPRIETARY RIGHTS OF OTHERS. If any of IDX's products
violate third party proprietary rights, IDX may be required to re-engineer its
products or seek to obtain licenses from third parties to continue offering its
products without substantial re-engineering. Any efforts to reengineer IDX's
products or obtain licenses from third parties may not be successful, in which
case IDX may be forced to stop selling the infringing product or remove the
infringing functionality or feature. IDX may also become subject to damage
awards as a result of infringing the proprietary rights of others, which could
cause IDX to incur additional losses and have an adverse impact on its financial
position. IDX does not conduct comprehensive patent searches to determine
whether the technologies used in its products infringe patents held by others.
In addition, product development is inherently uncertain in a rapidly evolving
technological environment in which there may be numerous patent applications
pending, many of which are confidential when filed, with regard to similar
technologies.

LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY. IDX's success and competitiveness
are dependent to a significant degree on the protection of its proprietary
technology. IDX relies primarily on a combination of copyrights, trade secret
laws, patents and restrictions on disclosure to protect its proprietary
technology. Despite these precautions, others may be able to copy or reverse
engineer aspects of IDX's products, to obtain and use information that IDX
regards as proprietary or to independently develop similar technology.
Litigation may continue to be necessary to enforce or defend IDX's proprietary
technology or to determine the validity and scope of the proprietary rights of
others. This litigation, whether successful or unsuccessful, could result in
substantial costs and diversion of management and technical resources.

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

        o       actual or anticipated quarterly variations in operating results;
        o       changes in expectations of future financial performance;

                                 Page 24 of 34
<PAGE>

        o       changes in estimates and/or ratings of securities analysts;
        o       market conditions particularly in the computer software and
                healthcare industries;
        o       announcements of technological innovations, including Internet
                delivery of information and use of application  service
                provider technology;
        o       new product introductions by IDX or its competitors;
        o       delay in customers purchasing decisions due to a variety of
                factors;
        o       market prices of competitors; and
        o       healthcare reform measures and healthcare regulation.

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

These fluctuations may affect operating results as follows:

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

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

FINANCIAL TRENDS. Although the Company's results from operations improved during
the first nine months of 2002, year over year operating results and cash from
operations generally declined during the period from 1998 through 2000. In 2001
and 2000, IDX generated a net loss of approximately $8.6 million and $36.0
million, respectively. If these trends continue, IDX may have difficulty
financing future growth and funding operating initiatives, including future
acquisitions.

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

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

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

The Federal  Anti-Kickback  Law,  among other  things,  prohibits  the direct or
indirect  payment or receipt of any  remuneration  for  Medicare,  Medicaid  and
certain  other  Federal  or  state  healthcare  program  patient  referrals,  or
arranging for or  recommending  referrals or other business paid for in whole or
in  part  by the  federal  health  care  programs.  Violations  of  the  Federal
Anti-Kickback  Law may  result in civil and  criminal  sanction  and  liability,
including the temporary or permanent  exclusion of the violator from  government

                                 Page 25 of 34

<PAGE>

health  programs,  treble damages and imprisonment for up to five years for each
violation. If the activities of a customer of IDX or other entity with which IDX
has a business  relationship were found to constitute a violation of the Federal
Anti-Kickback  Law and IDX, as a result of the provision of products or services
to such customer or entity,  was found to have  knowingly  participated  in such
activities,  IDX could be  subject to  sanction  or  liability  under such laws,
including the exclusion of IDX from government  health programs.  As a result of
exclusion from government health programs,  IDX customers would not be permitted
to make any payments to IDX.

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

The Health Insurance Portability and Accountability Act of 1996 ("HIPAA")
contains provisions regarding standardization, privacy, security and
administrative simplification in healthcare. As a result of regulations now
proposed under HIPAA, IDX intends to make investments to support customer
operations in areas such as:

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

Although it is not possible to anticipate the final form of all regulations
under HIPAA and similar state laws, IDX has made and expects to continue to make
investments in product enhancements to support customer operations that are
regulated by HIPAA and similar state laws. Responding to HIPAA's impact may
require IDX to make investments in new products or charge higher prices. It may
be expensive to implement security or other measures designed to comply with any
new legislation or regulation. Further, certain components of IDX are subject to
direct regulation under HIPPA. Under HIPPA, if IDX discloses protected health
information without authorization, or if IDX makes an improper use of protected
health information, IDX could be subject to sanction or liability, including the
exclusion of IDX from government health programs. As a result of exclusion from
government health programs, IDX customers would not be permitted to make any
payments to IDX.

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

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

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


                                 Page 26 of 34
<PAGE>

increasingly active in regulating computer software intended for use in
healthcare settings regardless of whether the draft is finalized or changed. The
FDA can impose extensive requirements governing pre- and post-market conditions
like service investigation, approval, labeling and manufacturing. In addition,
the FDA can impose extensive requirements governing development controls and
quality assurance processes.

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

RISKS ASSOCIATED WITH ACQUISITION  STRATEGY.  IDX intends to continue to grow in
part through either  acquisitions of  complementary  products,  technologies and
businesses or alliances with complementary businesses. IDX may not be successful
in these  acquisitions  or  alliances,  or in  integrating  any such acquired or
aligned  products,  technologies  or  businesses  into its current  business and
operations.  Factors  that may  affect  IDX's  ability  to  expand  successfully
include:

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

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

During the term of the alliance, IDX is prohibited from co-operating with direct
competitors of Allscripts to develop or provide any products similar to or in
competition with Allscripts products in the practice management systems market.
If the strategic alliance is not successful, or the restrictions placed on IDX
during the term of the strategic alliance prohibit IDX from successfully
marketing and selling certain products and services, IDX's operating results may
suffer. Additionally, if Allscripts breaches the strategic alliance, it may also
leave the Company without critical clinical components for its information
systems offerings in the physician group practice markets.

BUSINESS RELATIONSHIP WITH HEWLETT-PACKARD/COMPAQ. Compaq Computer Corporation
completed its proposed merger with Hewlett-Packard Company in May 2002. Prior to
the merger, Compaq had been a leading provider of hardware and operating system
software used by a majority of the applications offered by the Company. To date,
there has not been any significant change in the relationship between IDX and
the resulting company HP/Compaq but, to the extent the merger impacts the
product lines that IDX uses in its product offering, or the development
activities of the combined entity, it may adversely affect IDX's ability to
continue to offer its products on the historical hardware platforms. As a
result, the merger could have a material adverse effect upon the business of
IDX.

RESTRICTIONS ON LIQUIDATION OF INVESTMENT IN ALLSCRIPTS HEALTHCARE SOLUTIONS. In
January 2001, IDX received approximately 7.5 million shares of common stock of
Allscripts Healthcare Solutions, Inc. ("Allscripts") in connection with the
acquisition by Allscripts of IDX's majority owned subsidiary, ChannelHealth
Incorporated. IDX entered into a stock rights and restrictions agreement with
Allscripts, pursuant to which, among other things, IDX agreed to restrictions on
the sale of its shares of Allscripts common stock. In general, IDX is prohibited
from selling more than 25% of its shares of Allscripts common stock in any one
year, and 16.67% of the 25% or 4.10% of the total, in any one month. The
restrictions on IDX's ability to sell shares of Allscripts common stock may make


                                 Page 27 of 34
<PAGE>

it difficult for IDX to liquidate its investment in Allscripts and may adversely
affect the value of such investment.

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Internationally, IDX invoices customers in United States currency. The Company
is exposed to minimal foreign exchange rate fluctuations and does not enter into
foreign currency hedge transactions. Through September 30, 2002, foreign
currency fluctuations have not had a material impact on our financial position
or results of operations.

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

Interest rates on short-term borrowings with floating rates carry a degree of
interest rate risk. Our future interest expense may increase if interest rates
fluctuate. Interest expense was immaterial in the first nine months of 2002 and
2001.

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

ITEM 4.  CONTROLS AND PROCEDURES.

        (A) 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.


                                 Page 28 of 34
<PAGE>

         (B) 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.


PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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

Subsequently, Epic filed an Answer denying the essential elements of the
Company's claims, and asserted counterclaims against the Company. Epic alleged
that the Company's claims asserting its trade secret rights were brought in bad
faith, with an intent to injure Epic competitively, and thereby violated
Sections 1 and 2 of the Sherman Act because the Company allegedly possessed
monopoly power in the U.S. market for medical practice information systems. Epic
also claimed that this same alleged conduct constituted intentional interference
with its contract with the Foundation. The counterclaim sought treble damages.
The Company denied the counterclaims. On July 31, 2001, the Company's lawsuit
against Epic, the Foundation and the individuals was dismissed and the
counterclaims of Epic and the Foundation were dismissed. The Company appealed
the dismissal of its lawsuit to the United States Court of Appeals for the
Seventh Circuit, and on April 1, 2002, that appellate court affirmed the
District Court's dismissal of the trade secret claim, but reversed and remanded
the other related claims of the Company, including breach of contract and
tortuous interference claims against the defendants.

On August 13, 2000, the District Court granted the Company's motion for summary
judgment on the issue of whether the Foundation had violated its obligations to
keep confidential the Company's proprietary information and stated that it would
be reasonable to conclude that Epic intended to improperly receive the
information. On August 27, 2002, the defendants settled the litigation with the
Company.


In April 2000, the Company commenced a lawsuit for damages caused by wrongful
cancellation and material breach of contract by St. John Health System (SJHS),
in the United States District Court for Eastern District of Michigan, entitled
IDX Systems Corporation v. St. John Health System. Subsequently, SJHS commenced
a lawsuit against the Company in the Circuit Court of Wayne County, Michigan,
claiming unspecified damages against the Company for anticipatory repudiation,
breach of contract, tort and fraud. On motion of the Company, SJHS's lawsuit was
removed to and consolidated in the federal court. In its answer to the Company's
lawsuit, SJHS asserted the same claims previously asserted in its state court
action. In September 2001, SJHS specified damage claims of approximately $77.0
million in allegedly lost savings, and in January 2002 raised another theory of
alleged unspecified damages for "cover". On September 30, 2002, the United
States District Court for the Eastern District of Michigan dismissed all of SJHS
claims of fraud, tort and breach of contract, leaving only its claim for
anticipatory repudiation. On October 15, 2002, SJHS requested reconsideration of
these rulings. The Company believes the claims of SJHS are without merit and
continues to vigorously defend itself and prosecute its own claims for damages.
The lawsuit is in the trial preparation stage and the parties are awaiting
scheduling of the trial by the court.

                                 Page 29 of 34
<PAGE>

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

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

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

         None.

ITEM 5.  OTHER INFORMATION

         Shareholder's Proposal for 2003 Annual Meeting.

         As set forth in the Company's Proxy Statement for its 2002 Annual
         Meeting of Stockholders, proposals of stockholders intended to be
         included in the Company's proxy statement for the 2003 Annual Meeting
         of Stockholders must be received by the Company at its principal office
         in South Burlington, Vermont not later than December 23, 2002.

         Stockholders who wish to make a proposal at the 2003 Annual Meeting -
         other than one that will be included in the Company's proxy materials -
         must notify the Company no later than March 8, 2003. If a stockholder
         who wishes to present a proposal fails to notify the Company by this
         date, the proxies that management solicits for the meeting will have
         discretionary authority to vote on the stockholder's proposal if it is
         properly brought before the meeting.

ITEM 6.  EXHIBITS AND 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) There were no Forms 8-K filed during the third quarter of 2002.



                                 Page 30 of 34

<PAGE>



                                   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:  November 12, 2002                 By: /S/ JOHN A. KANE
                                             ________________________________
                                             John A. Kane,
                                             Sr. Vice President, Finance and
                                             Administration, Chief Financial
                                             Officer and Treasurer
                                             (Principal Financial and
                                             Accounting Officer)



                                 Page 31 of 34

<PAGE>


                                 CERTIFICATIONS

I, Richard E. Tarrant, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of IDX Systems
         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.


                                         /S/ RICHARD E.TARRANT
                                         ------------------------------------
Dated:   November 12, 2002               Richard E. Tarrant
                                         Chief Executive Officer

                                 Page 32 of 34
<PAGE>


                                 CERTIFICATIONS

I, John A. Kane, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of IDX Systems
         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.


                                 /S/ JOHN A. KANE
                                 -----------------------------------------------
Dated:    November 12, 2002      John A. Kane
                                 Sr. Vice President, Finance and Administration,
                                 Chief Financial Officer and Treasurer


                                 Page 33 of 34

<PAGE>




                                    EXHIBITS

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

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


10.1              Office Building Lease Agreement by and between
                  IDX Information Systems Corporation and 4901 LBJ
                  Limited Partnership executed on November 12, 2002
                  and effective as of July 1, 2002.

99.1              Certification pursuant to 18 U.S.C. Section 1350
















                                 Page 34 of 34