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

                                  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, 2001 OR

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

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

                         Commission File Number 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
October 31, 2001 was 28,679,880.
================================================================================
                                  Page 1 of 33


<PAGE>



                             IDX SYSTEMS CORPORATION
                                    FORM 10-Q
                     FOR THE PERIOD ENDED SEPTEMBER 30, 2001


                                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.....................12

         Item 3.  Quantitative and Qualitative Disclosures
                  About Market Risk ......................................24

PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings ......................................25

         Item 2.  Changes In Securities ..................................26

         Item 3.  Defaults Upon Senior Securities ........................26

         Item 4.  Submission of Matters to a Vote of Security Holders ....26

         Item 5.  Other Information ......................................26

         Item 6.  Exhibits And Reports On Form 8-K .......................26


SIGNATURES ...............................................................27

EXHIBIT INDEX.............................................................28
                                  Page 2 of 33

<PAGE>



PART I.   FINANCIAL INFORMATION

ITEM 1.   INTERIM FINANCIAL STATEMENTS

                             IDX SYSTEMS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                           SEPTEMBER 30,        DECEMBER 31,
                                               2001                  2000
                                           -------------        ------------
                                            (unaudited)           (audited)
<S>                                        <C>                  <C>

ASSETS
Cash and marketable securities             $    54,606          $   70,683
Accounts receivable, net                        89,704             110,360
Refundable income taxes                         13,337              13,699
Prepaid and other current assets                 6,123               6,927
Deferred tax asset                              12,234               9,021
                                           -----------          ----------
TOTAL CURRENT ASSETS                           176,004             210,690

Property and equipment, net                     83,770              71,590
Other assets                                     8,875               7,483
Deferred tax asset                               4,828               7,728
                                           -----------          ----------
TOTAL ASSETS                               $   273,477          $  297,491
                                           ===========          ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and
  other liabilities                        $    48,079          $   56,646
Deferred revenue                                20,015              19,913
Line of credit                                  15,000                  -
                                           -----------          ----------
TOTAL CURRENT LIABILITIES                       83,094              76,559

Redeemable convertible preferred
  stock of subsidiary                                -              33,140
Minority interest                                    -               8,682
Stockholders' equity                           190,383             179,110
                                           -----------          ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
  EQUITY                                   $   273,477          $  297,491
                                           ===========          ==========
</TABLE>

          See Notes to the Condensed Consolidated Financial Statements


                                  Page 3 of 33

<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)
<TABLE>
<CAPTION>

                              THREE MONTHS ENDED          NINE MONTHS ENDED
                                 SEPTEMBER 30,               SEPTEMBER 30,
                             ---------------------       --------------------
                             2001         2000           2001          2000
                             ---------------------       --------------------
<S>                          <C>          <C>            <C>           <C>

REVENUES
Systems sales                $ 18,670    $ 28,940        $ 78,498      $ 71,680
Maintenance and service fees   67,929      58,638         201,303       172,216
                             --------    --------        --------      --------
TOTAL REVENUES                 86,599      87,578         279,801       243,896

OPERATING EXPENSES
Cost of sales and services     65,784      60,682         194,224       176,502
Selling, general and
  administrative               24,509      23,325          67,380        63,112
Research and development       11,126      12,074          32,977        37,414
Loss on impairment of
  goodwill                          -           -               -         5,810
Restructuring charge                -           -               -        21,029
                             --------    --------        --------      ---------
TOTAL OPERATING EXPENSES      101,419      96,081         294,581       303,867
                             --------    --------        --------      --------
OPERATING LOSS                (14,820)     (8,503)        (14,780)      (59,971)

OTHER INCOME
Other income, net                 460         798           1,769         2,928
Gain on sale of investment
  in subsidiary                     -           -          35,546             -
Realized gain on investment         -           -           5,849             -
                             --------    --------        --------      --------
TOTAL OTHER INCOME                460         798          43,164         2,928
                             --------    --------        --------      --------

Income (loss) before taxes
  and equity in loss of
  unconsolidated affiliate    (14,360)     (7,705)         28,384       (57,043)
Equity in loss of
  unconsolidated affiliate     (6,057)          -         (17,559)            -
Income tax benefit
  (provision)                   8,184       2,928          (5,575)       19,744
                             --------    --------        --------      --------
NET INCOME (LOSS)            $(12,233)   $ (4,777)       $  5,250      $(37,299)
                             ========    ========        ========      =========
Basic earnings (loss)
  per share                  $  (0.43)   $  (0.17)       $   0.18      $  (1.33)
                             ========    ========        ========      ========
Basic weighted average
  shares outstanding           28,665      28,154          28,525        28,047
                             ========    ========        ========      ========
Diluted earnings (loss)
  per share                  $  (0.43)   $  (0.17)       $   0.18      $ (1.33)
                             ========    ========        ========      =======
Diluted weighted average
  shares outstanding           28,665      28,154          28,800       28,047
                             ========    ========        ========      =======
</TABLE>

          See Notes to the Condensed Consolidated Financial Statements

                                  Page 4 of 33
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1.  INTERIM FINANCIAL STATEMENTS

                             IDX SYSTEMS CORPORATION
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                       NINE MONTHS ENDED
                                                           SEPTEMBER 30,
                                                      2001           2000
                                                      ----------     ---------
<S>                                                   <C>            <C>

OPERATING ACTIVITIES
Net income (loss)                                     $   5,250      $ (37,299)
Adjustments to reconcile net income (loss) to
  net cash provided by (used in) operating
  activities:
     Depreciation                                        11,344         11,153
     Amortization                                         1,634            474
     Deferred taxes                                        (313)        (8,359)
     Increase in allowance for doubtful accounts            442          1,541
     Minority interest                                      297            736
     Gain on investment                                  (5,849)             -
     Write-off of goodwill                                    -          5,810
     Equity in loss of unconsolidated affiliate          17,559              -
     Gain on sale of subsidiary common stock            (35,546)             -
     Loss on disposition of assets                          404              -
     Restructuring charge                                     -         21,029
     Changes in operating assets and liabilities,
       net of business acquisitions:
         Accounts receivable                             19,185          8,596
         Prepaid expenses and other assets               (2,862)        (3,590)
         Accounts payable and accrued expenses          (11,304)        (6,044)
         Federal and state income taxes                     362        (11,994)
         Deferred revenue                                   130          1,215
                                                      ---------      ---------
         Net cash provided by (used in)
           operating activities                             733        (16,732)

INVESTING ACTIVITIES
Purchase of property and equipment, net                 (31,863)       (21,481)
Purchase of securities available-for-sale               (67,425)       (14,962)
Sale of securities available-for-sale                    98,790         21,203
Proceeds from sale of investment                         11,282              -
Business acquisitions                                    (2,080)             -
Other assets                                               (255)         1,861
                                                      ---------      ---------
        Net cash provided by (used in)
          investing activities                            8,449        (13,379)

FINANCING ACTIVITIES
Proceeds from sale of common stock                        2,879          5,435
Proceeds from debt issuance                              15,000              -
Contributions to affiliates, net                           (469)          (900)
Proceeds from sale of redeemable
  convertible preferred stock of
  subsidiary                                                  -         33,140
                                                      ---------      ---------
        Net cash provided by financing
          activities                                     17,410         37,675
                                                      ---------      ---------
 Increase in cash and cash equivalents                   26,592          7,564

Cash and cash equivalents at beginning
  of period                                              16,357         18,487
                                                      ---------      ---------
Cash and cash equivalent at end
  of period                                              42,949         26,051


                                  Page 5 of 33

<PAGE>

Securities available-for-sale                            11,657         43,718
                                                      ---------      ---------
Total cash and securities
  available-for-sale                                  $  54,606      $  69,769
                                                      =========      =========

Noncash Investing Activity:
Deconsolidation of minority interest
  in real estate                                      $   9,102     $       -

Noncash Financing Activity:
   Issuance of restricted stock                       $   1,201     $       -
                                                      =========     =========
</TABLE>

          See Notes to the Condensed Consolidated Financial Statements



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

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 nine months ended
September 30, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. 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.


Note 2 - New Accounting Standards

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards (SFAS) No. 133, "Accounting for Derivatives and
Hedging  Activities"  ("SFAS No. 133"),  as amended by SFAS No. 137 and SFAS No.
138,  which  establishes  accounting  and  reporting  standards  for  derivative
instruments,  including  derivative  instruments  embedded  in other  contracts,
(collectively  referred  to as  derivatives)  and for  hedging  activities.  The
Company  adopted  SFAS No. 133 in the first  quarter of 2001 and has  determined
that it had no  significant  impact on its  financial  condition  or  results of
operations.

In June 2001,  the  Financial  Accounting  Standards  Board issued SFAS No. 141,
"Business  Combinations"  ("SFAS No. 141") and SFAS No. 142, "Goodwill and Other
Intangible Assets" ("SFAS No. 142"),  effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill and intangible assets deemed to
have indefinite  lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.

The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. The Company is in the
process of determining the impact of the application of the non-amortization
provisions of the Statement. During 2002, the Company will perform the first of
the required impairment tests of goodwill and indefinite lived intangible assets
as of January 1, 2002 and has not yet determined what the effect of these tests
will be on the earnings and financial position of the Company.


                                  Page 6 of 33

<PAGE>

Note 3 - Deconsolidation and Acquisitions

Through April 19, 2001 the Company's consolidated financial statements include
the accounts of the Company and BDP Realty Associates ("BDP"), a real estate
trust owned by stockholders and certain key employees of the Company whose real
estate was leased exclusively by the Company. Effective with the date of the
acquisition of the Company's headquarter facilities 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 headquarter facilities was 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, which has been recorded as
property and equipment.

In May 2001, the Company acquired PVI, LLC for approximately $1.0 million. This
acquisition has been accounted for under the purchase method of accounting. The
purchase price has been allocated based on estimated fair market values at the
date of acquisition, principally software, which will be amortized over a three
year period.

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

Note 4 - Subsequent Event - 2001 Restructuring Charge

On September 28, 2001 the Company announced its plan to restructure and realign
its group practice businesses, however, as of September 30, 2001, details of the
plan were not sufficiently developed or approved to permit accounting
recognition as of that date. As a result of this plan, the Company will
implement a workforce reduction and restructuring program. The Company expects
to record a charge of $20 to $21 million in the fourth quarter of 2001
associated with its realignment related to severance arrangements, lease
payments, and non-cash write-offs of certain fixed assets. IDX expects cash
outlays related to the charge of approximately $5.0 million in the fourth
quarter of 2001, approximately $5.0 million in 2002 and approximately $3.0
million thereafter.

Note 5 - 2000 Restructuring Charge

On June 21, 2000 the Company announced the implementation of a product
discontinuance and restructuring program. The Company halted development and
discontinued sales efforts on certain product lines that have failed to achieve
business targets or were deemed non-strategic to the business going forward. As
a result, the Company implemented a workforce reduction of approximately five
percent. The restructuring program resulted in a charge to earnings of
approximately $21.0 million in the second quarter of 2000, in connection with
costs associated with product discontinuations, principally settlements with
existing users, of approximately $16.0 million and employee severance
arrangements of approximately $5.0 million. Workforce related accruals,
consisting principally of employee severance costs, were established based on
specific identification of employees to be terminated, along with their job
classification or functions, and their location. Substantially all workforce
related actions were completed during the third quarter of 2000, with the
exception of product related "sunset" support teams. As of September 30, 2001
the Company had a balance of $8.0 million related to accrued restructuring
costs. Cash expenditures related to these accruals are estimated to be
approximately $6.3 million. The remaining balance of approximately $1.7 million
represents a provision for the estimated write-off of accounts receivable that
will not affect cash. These accounts receivable write-offs are expected to be
finalized by March 31, 2002.

                                  Page 7 of 33
<PAGE>


Note 6 - Sale of Investment in Subsidiary and Other Related Matters

On January 8, 2001, the Company sold certain operations of Channelhealth
Incorporated (ChannelHealth) to Allscripts, Inc., a leading provider of
point-of-care e-prescribing and productivity solutions for physicians.
ChannelHealth provides a set of Internet-based clinical and productivity
solutions for physicians that brings the power of the Internet to the practice
of medicine. IDX retained the Patient and e-Commerce 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 has 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. As a result of the
transaction, the Company is entitled to representation on Allscripts Board of
Directors.

On January 8, 2001 Allscripts acquired ChannelHealth in exchange for 8.6 million
shares, or 21.3% of Allscripts common stock. IDX received approximately 7.5
million shares of Allscripts common stock (the Allscripts shares) in exchange
for its shares of ChannelHealth stock. The Allscripts shares received are
subject to restrictions on any transfer of the securities for a period of one
year from the date of the transaction and, after one year, on the transfer of
more than 25% of the Allscripts shares in any one year, and 16.67% in any one
month. IDX recorded the Allscripts shares at fair value of $29.5 million, which
included a discount from market value due to restrictions on transfer, resulting
in a $35.5 million gain on the transaction. The reported gain is greater than
the fair value of the stock received due to the Company's negative carrying
value at the time of the sale of the underlying investment in ChannelHealth. IDX
accounts for its investment in Allscripts under the equity method of accounting.
Under the equity method of accounting, IDX has recognized its pro-rata share of
Allscripts losses which has resulted in the elimination of the carrying value of
this investment as of September 30, 2001.

Summary financial information for Allscripts for the three and nine months ended
September 30, 2001 is as follows:
<TABLE>
<CAPTION>
                                           (in thousands)
                          Three months ended             Nine months ended
                          September 30, 2001             September 30, 2001
                          ------------------             ------------------
  <S>                     <C>                            <C>

  Revenue                  $16,415                        $52,133
  Gross profit                  63                          3,379
  Net loss               (351,857)                       (410,385)

</TABLE>

In the first quarter of 2000, the Company determined that an asset impairment
existed related to goodwill acquired in the purchase of ChannelHealth, Inc., a
Massachusetts corporation acquired in April 1999. In January 2000, the Company
made the decision to seek a primary provider of content and transactions for
Channelhealth Incorporated, and decided to no longer utilize certain assets
acquired in connection with the purchase of ChannelHealth, Inc., the Company's
initial investment in an Internet services and content provider. The Company
recognizes impairment losses on long-lived assets when indicators of impairment
are present and future undiscounted cash flows are insufficient to support the
assets' recovery. The amount of the impairment loss is recognized based on an
analysis of discounted cash flows estimated to be derived from the impaired
asset. This asset impairment was recognized during the first quarter of 2000 and
is reflected as a pre-tax loss on impairment of goodwill of approximately $5.8
million.

Note 7 - Income Taxes

The 2001 effective tax rate is higher than the statutory rate principally due to
the non-deductible nature of certain costs related to the sale of ChannelHealth.
The effective tax rate for the remainder of 2001 is expected to be lower due to
the absence of nondeductible transaction costs in subsequent interim reporting
periods. The 2000 tax benefit is lower than the statutory rate due to the
non-deductible loss on impairment of goodwill related to ChannelHealth, Inc. for
which no tax benefit was recognizable.

                                  Page 8 of 33
<PAGE>


Note 8 - Segment Information

SFAS No. 131 requires the reporting of information regarding operating segments
in annual financial statements and requires selected information for those
segments to be presented in interim financial reports issued to stockholders.
SFAS No. 131 also requires related disclosures about major customers, products
and services, and geographic areas. Operating segments are identified as
components of an enterprise about which separate discrete financial information
is available for evaluation by the chief operating decision maker, or decision
making group, in making decisions regarding how to allocate resources and assess
performance. During the second quarter of 1999, the Company acquired two
companies that have separate and distinct financial information and operating
characteristics. As discussed in Note 6 above, the Company sold certain
operations of ChannelHealth, specifically its Internet Services and Content
segment on January 8, 2001. Accordingly, this segment is not reported in 2001.

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

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

Internet Services and Content: This segment is not reported in 2001 as a
separate business segment due to the acquisition of the Internet Services and
Content operations of ChannelHealth by Allscripts on January 8, 2001.

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

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 for the
three and nine month periods ended September 30, 2001. No one customer accounts
for greater than 10% of revenue for any reportable segment for the three and
nine month periods ended September 30, 2000 with the exception of EDiX. EDiX's
revenues from one major customer amounted to 10.5% and 10.3% of EDiX's total
revenue for the three and nine month periods ended September 30, 2000,
respectively.

                                  Page 9 of 33
<PAGE>


Summarized financial information concerning the Company's reportable segments is
shown in the following table (in thousands):
<TABLE>
<CAPTION>
                              IDX
                              HEALTHCARE
                              INFORMATION
                              SYSTEMS AND   CHANNELHEALTH
                              SERVICES      INCORPORATED  EDIX        TOTAL
                             ---------------------------------------------------
<S>                           <C>           <C>           <C>         <C>

FOR THE THREE MONTHS
  ENDED SEPTEMBER 30, 2001
Net operating revenues         $ 61,957     $    -        $ 24,642     $ 86,599
Operating income (loss)         (17,252)         -           2,432      (14,820)
Identifiable operating assets   237,259          -          36,218      273,477


FOR THE NINE MONTHS
  ENDED SEPTEMBER 30, 2001
Net operating revenues         $209,082     $    -       $ 70,719     $ 279,801
Operating income (loss)         (18,989)         -          4,209       (14,780)
Identifiable operating assets   237,259          -         36,218       273,447


FOR THE THREE MONTHS
  ENDED SEPTEMBER 30, 2000
Net operating revenues         $ 67,857     $ 1,591      $ 18,130     $  87,578
Operating income (loss)          (3,175)     (6,138)          810        (8,503)
Identifiable operating assets   237,646      24,991        22,616       285,253

FOR THE NINE MONTHS
  ENDED SEPTEMBER 30, 2000
Net operating revenues         $187,151     $ 4,342      $ 52,403     $ 243,896
Operating income (loss)         (39,280)    (23,230)        2,539       (59,971)
Identifiable operating assets   237,646      24,991        22,616       285,253
</TABLE>


Corporate headquarters' assets are included in the Information Systems and
Services segment. Substantially all of the Company's operations are in the
United States. The financial information disclosed herein represents all of the
material financial information related to the Company's principal operating
segments.

Note 9 - Comprehensive Income

Total comprehensive loss for the quarter ended September 30, 2001 amounted to
$12.2 million compared to a comprehensive loss of $4.8 million for the same
period in 2000. Total comprehensive income for the nine months ended September
30, 2001 amounted to $5.2 million compared to a comprehensive loss of $37.2
million for the same period in 2000. 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 33
<PAGE>


Note 10 - Earnings Per Share Information

The following sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
                                     Three Months Ended    Nine Months Ended
                                        September 30,        September 30,

                                     2001       2000       2001        2000
                                     ----       ----       ----        ----
   <S>                               <C>        <C>        <C>         <C>
   Numerator:
     Net income (loss)               $(12,233)  $ (4,777)  $ 5,250     $(37,299)
                                     --------   --------   -------     --------
   Numerator for basic and diluted
     income (loss) per share        $ (12,233)  $ (4,777)  $ 5,250    $ (37,299)
                                    =========   ========   =======    =========

   Denominator:

     Basic weighted-average shares
       outstanding                     28,665     28,154    28,525       28,047
     Effect of employee stock
       options                              -          -       275            -
                            ----------------------------------------------------

Denominator for diluted income
  (loss) per share                     28,665     28,154    28,800       28,047
                                    ---------   --------   -------     --------

   Basic income (loss) per share    $   (0.43)  $ (0.17)   $  0.18     $ (1.33)
                                    =========   =======    =======     ========
   Diluted income (loss) per share  $   (0.43)  $ (0.17)   $  0.18     $ (1.33)
                                    =========   =======    =======     =======
</TABLE>










                                 Page 11 of 33

<PAGE>


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

YOU SHOULD READ THE FOLLOWING DISCUSSION TOGETHER WITH THE 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 THE FACTORS AFFECTING FUTURE
PERFORMANCE" COMMENCING ON PAGE 18, AS WELL AS THOSE OTHERWISE DISCUSSED IN THIS
SECTION AND ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q.


GENERAL

The Company reported a net loss of $12.2 million, or $0.43 per diluted share,
for the third quarter of 2001 as compared to a net loss of $4.8 million or $0.17
per diluted share for the third quarter of 2000. Excluding the effect of the
equity in loss of an unconsolidated affiliate of $6.1 million, the net loss for
the three months ended September 30, 2001 was $8.6 million or $0.30 per diluted
share. The Company reported net income of $5.3 million, or $0.18 per diluted
share, for the nine months ended September 30, 2001 as compared to a net loss of
$37.3 million or $1.33 per diluted share for the same period in 2000. Excluding
the effects of the gain on sale of an investment in ChannelHealth of $35.5
million, a realized gain on investment in an unrelated entity of $5.8 million
and the equity in loss of an unconsolidated affiliate of $17.6 million, the net
loss for the nine months ended September 30, 2001 was $7.8 million or $0.27 per
share. Excluding the effect of charges of $21.0 million related to a product
discontinuance and restructuring program announced on June 21, 2000 and the $5.8
million loss on impairment of goodwill associated with ChannelHealth, Inc., the
net loss for the nine months ended September 30, 2000 was $18.6 million or $0.66
per share.


RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2000

REVENUES
The Company's total revenues decreased to $86.6 million during the three months
ended September 30, 2001 from $87.6 million in the corresponding period in 2000,
a decrease of $979,000 or 1.1%. Revenues from systems sales decreased to $18.7
million during the three months ended September 30, 2001 (21.6% of total
revenues) compared to $28.9 million (33.0% of total revenues) in the
corresponding period in 2000, a decrease of $10.3 million or 35.5%. This
decrease was primarily due to a decrease in sales of the Company's systems which
were affected by the September 11th National Tragedy. Revenues from maintenance
and service fees increased to $67.9 million during the three months ended
September 30, 2001 (78.4% of total revenues) from $58.6 million (67.0% of total
revenues) in the corresponding period in 2000, an increase of $9.3 million or
15.8%. The increase in revenues from maintenance and service fees is primarily
due to increased medical transcription service fee revenue from EDiX combined
with increased maintenance revenue from IDX's core business.

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

                                 Page 12 of 33
<PAGE>

COST OF SALES AND SERVICES
The cost of sales and services increased to $65.8 million during the three
months ended September 30, 2001 from $60.7 million in the corresponding period
in 2000, an increase of $5.1 million or 8.4%. The increase in cost of sales and
services as compared to the prior year resulted from growth in client services
expenses, primarily related to medical transcription costs. The gross profit
margin on systems sales and services decreased to 24.0% in the third quarter of
2001 from 30.7% for the same period in 2000. The decrease in gross profit margin
as a percentage of sales is primarily due to a decrease in sales of certain IDX
systems with higher margins, offset by the ChannelHealth's negative gross margin
of 50.5% during the third quarter of 2000 primarily due to high fixed costs and
low sales volume due to the early stage of this business' development. Within
IDX's core business, information systems and services, gross profit margin as a
percentage of sales decreased to 23.2% during the third quarter of 2001 from
35.8% for the same period in 2000 primarily due to a decrease in higher margin
systems sales. The gross profit margin for the Company's medical dictation and
transcription business segment (EDiX) increased as a percentage of sales to
26.2% in 2001 from 18.7% in 2000 due to increased operational efficiencies.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $24.5 million during
the three months ended September 30, 2001 from $23.3 million during the
corresponding period in 2000, an increase of $1.2 million or 5.1%. As a
percentage of total revenues, selling, general and administrative expenses
increased to 28.3% during the three months ended September 30, 2001 from 26.6%
for the same period in 2000. IDX's core business selling, general and
administrative expenses increased $3.6 million primarily due to an increase in
general administrative costs combined with a decrease in corporate overhead
absorption related to the sale of ChannelHealth. EDiX's selling, general and
administrative expenses increased $1.4 million or 62.2% during the third quarter
of 2001 as compared to the same period in the prior year primarily due to
increased costs to support sales growth. In the prior year ChannelHealth's
selling, general and administrative expenses were $3.8 million during the third
quarter of 2000 which includes sales and marketing expenses and administrative
start-up expenses.

RESEARCH AND DEVELOPMENT
Research and development expenses decreased to $11.1 million during the three
months ended September 30, 2001 from $12.1 million in the corresponding period
in 2000, a decrease of $948,000 or 7.9%. The decrease is primarily due to the
sale of ChannelHealth on January 8, 2001. ChannelHealth incurred approximately
$1.5 million in research and development costs in the comparable period in the
prior year. As a percentage of total revenues, research and development expenses
decreased to 12.8% of revenue for the third quarter of 2001 from 13.8% for the
corresponding period in 2000. IDX's core business research and development
expenses increased $506,000 primarily due to an increase in personnel costs
offset by the capitalization of $240,000 of software development costs during
the three months ended September 30, 2001. Research and development costs in the
medical dictation and transcription business segment (EDiX) increased from
$353,000 in 2000 to $427,000 in 2001.

OTHER INCOME, NET
Interest income was approximately $460,000 during the third quarter of 2001 as
compared to $798,000 for the same period in 2000. The decrease in interest
income is primarily due to a lower average invested balance combined with lower
interest rates in 2001 as compared to 2000.

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE
IDX 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 which reduced the balance of IDX's investment
in Allscripts to zero.

INCOME TAXES
Income taxes for the quarter ended September 30, 2001 were benefited at 40.1%.
Income taxes for the quarter ended September 30, 2000 were benefited at 38.0%.
The lower rate in 2000 was principally due to a lower state effective tax.
Excluding the impact of transaction costs related to the sale of ChannelHealth

                                 Page 13 of 33
<PAGE>


that are non-deductible for income tax purposes, the Company anticipates an
incremental effective tax rate of approximately 40.0% for the remainder of the
year ending December 31, 2001 which may result in an overall lower effective tax
rate in subsequent interim reporting periods. The ultimate annual effective tax
rate depends on the extent of pre-tax earnings subject to the incremental tax
rate of 40.0%. The net deferred tax assets of approximately $17.1 million are
expected to be realized by reducing future taxable income.

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2000

REVENUES
The Company's total revenues increased to $279.8 million during the nine months
ended September 30, 2001 from $243.9 million in the corresponding period in
2000, an increase of $35.9 million or 14.7%. Revenues from systems sales
increased to $78.5 million during the nine months ended September 30, 2001
(28.1% of total revenues) compared to $71.7 million (29.4% of total revenues) in
the corresponding period in 2000, an increase of $6.8 million or 9.5%. This
increase was primarily due to additional sales of the Company's systems.
Revenues from maintenance and service fees increased to $201.3 million during
the nine months ended September 30, 2001 (71.9% of total revenues) from $172.2
million (70.6% of total revenues) in the corresponding period in 2000, an
increase of $29.1 million or 16.9%. The increase in revenues from maintenance
and service fees is primarily due to increased medical transcription service fee
revenue from EDiX combined with an increase in maintenance and consulting
services provided by IDX's core business.

COST OF SALES AND SERVICES
The cost of sales and services increased to $194.2 million during the nine
months ended September 30, 2001 from $176.5 million in the corresponding period
in 2000, an increase of $17.7 million or 10.0%. The increase in cost of sales
and services as compared to the prior year resulted from growth in client
services expenses, primarily related to medical transcription costs combined
with an increase in personnel costs. The gross profit margin on systems sales
and services increased to 30.6% in the first nine months of 2001 from 27.6% for
the same period in 2000. The increase in gross profit margin as a percentage of
sales is due to a number of factors including: an increase in sales of certain
IDX systems with higher margins; ChannelHealth's negative gross margin of 42.9%
during the first nine months of 2000 primarily due to high fixed costs and low
sales volume due to the early stage of this business' development; and increased
maintenance and service revenue. IDX's core business, information systems and
services, gross profit margin as a percentage of sales increased to 33.5% during
the first nine months of 2001 from 31.8% for the same period in 2000 due to an
increase in higher margin system sales and increased maintenance and service
revenue. The gross profit margin for the Company's medical dictation and
transcription business segment (EDiX) increased as a percentage of sales to
22.0% during the first nine months of 2001 from 18.5% for the same period in
2000 due to increased operational efficiencies.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $67.4 million during
the nine months ended September 30, 2001 from $63.1 million during the
corresponding period in 2000, an increase of $4.3 million or 6.8%. As a
percentage of total revenues, selling, general and administrative expenses
decreased to 24.1% during the nine months ended September 30, 2001 from 25.9%
for the same period in 2000. IDX's core business selling, general and
administrative expenses increased $11.1 million primarily due to a decrease in
corporate overhead absorption related to the sale of ChannelHealth combined with
an increase in general administrative costs. EDiX's selling, general and
administrative expenses increased $3.8 million or 60.7% during the first nine
months of 2001 as compared to the same period in the prior year primarily due to
increased costs to support sales growth. In the prior year ChannelHealth's
selling, general and administrative expenses were $10.6 million during the first
nine months of 2000 which includes sales and marketing expenses and
administrative start-up expenses.

                                 Page 14 of 33
<PAGE>


RESEARCH AND DEVELOPMENT
Research and development expenses decreased to $33.0 million during the nine
months ended September 30, 2001 from $37.4 million in the corresponding period
in 2000, a decrease of $4.4 million or 11.9%. The decrease is primarily due to
the sale of ChannelHealth on January 8, 2001. ChannelHealth incurred
approximately $5.0 million in research and development costs during the same
period in the prior year. As a percentage of total revenues, research and
development expenses decreased to 11.8% of revenue for the first three quarters
of 2001 from 15.3% for the corresponding period in 2000. IDX's core business
research and development expenses increased $69,000 primarily due to increased
personnel costs offset by the capitalization of approximately $1.2 million of
software development costs (net of amortization) during the nine months ended
September 30, 2001. Research and development costs in the medical dictation and
transcription business segment (EDiX) increased from $943,000 during the nine
month period in 2000 to $1.4 million for the same period in 2001.

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

OTHER INCOME
Interest income was approximately $1.8 million during the first nine months of
2001 as compared to $2.9 million for the same period in 2000. The decrease in
interest income is primarily due to a lower average invested balance combined
with lower interest rates in 2001 as compared to 2000.

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

REALIZED GAIN ON INVESTMENT
Other income in 2001 includes a $5.8 million realized gain on an investment in
an unrelated investment partnership that was recorded during the first quarter
of 2001.

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE
IDX 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 which reduced the balance of IDX's
investment in Allscripts to zero.

INCOME TAXES
Income taxes for the nine months ended September 30, 2001 were provided for at
44.0% which reflects a higher rate than the Company's historical effective rate
and the statutory rate of 40.0%. 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. Income taxes for the nine months ended September 30,
2000 were benefited at 34.6%. The lower rate in 2000 was principally due to a
lower state effective tax rate combined with the non-deductible nature of the
loss on goodwill impairment related to ChannelHealth Inc. in January of 2000.
Excluding the impact of transaction costs related to the sale of ChannelHealth

                                 Page 15 of 33
<PAGE>


that are non-deductible for income tax purposes, the Company anticipates an
incremental effective tax rate of approximately 40.0% for the remainder of the
year ending December 31, 2001 which may result in an overall lower effective tax
rate in subsequent interim reporting periods. The ultimate annual effective tax
rate depends on the extent of pre-tax earnings subject to the incremental tax
rate of 40.0%. The net deferred tax assets of approximately $17.1 million are
expected to be realized by reducing future taxable income.

NEW ACCOUNTING STANDARDS

In June 2001,  the  Financial  Accounting  Standards  Board issued SFAS No. 141,
"Business  Combinations"  ("SFAS No. 141") and SFAS No. 142, "Goodwill and Other
Intangible  Assets ("SFAS No. 142"),  effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill and intangible assets deemed to
have indefinite  lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.

The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. The Company is in the
process of determining the impact of the application of the non-amortization
provisions of the Statement. During 2002, the Company will perform the first of
the required impairment tests of goodwill and indefinite lived intangible assets
as of January 1, 2002 and has not yet determined what the effect of these tests
will be on the earnings and financial position of the Company.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents and marketable securities available-for-sale at September
30, 2001 were $54.6 million, a decrease of $16.1 million from December 31, 2000.

Net cash (used in) provided by operations is principally comprised of net income
(loss) and depreciation and is primarily affected by the net effect of the
change in accounts receivable, accounts payable and accrued expenses. Due to the
nature of the Company's business, accounts receivable, deferred revenue and
accounts payable fluctuate due to, among other things, the length of
installation efforts which are dependent upon the size of the transaction, the
changing business plans of the customer, the effectiveness of customers'
management and general economic conditions. In the first nine months of 2001,
accounts receivable from customers have been collected on average within 100
days. This represents a decrease of 18 days in terms of average days to collect
receivables from customers as compared to the annual average in 2000 of 118
days. 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. Through
September 30, 2001 the Company has spent approximately $16.0 million on
construction-in-progress related to an expansion of its Corporate Headquarters
facility which is substantially complete. In addition, the Company purchased its
Corporate Headquarters facility from a related party on April 19, 2001 for
approximately $15.0 million. Investing activities may also include purchases of
interests in, loans to and acquisitions of businesses for access to
complementary products and technologies. During the second quarter of 2001, the
Company acquired a consulting firm for approximately $1.0 million and a software
company for approximately $1.1 million. The Company expects these activities to
continue. 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. In addition during the first quarter of
2000, an unrelated party invested approximately $30.0 million, and related
parties invested approximately $3.1 million in Channelhealth Incorporated, at
the time a majority owned subsidiary, by purchasing redeemable preferred stock.

                                 Page 16 of 33
<PAGE>

The Company has a revolving demand line of credit with a bank allowing the
Company to borrow up to $18.0 million bearing interest at the bank's base rate.
As of September 30, 2001 the Company had $15.0 million outstanding on the line
of credit.

The Company expects that its requirements for office facilities and other office
equipment may grow in the future as business needs change. The Company's
operating lease commitments consist primarily of office leasing for the
Company's operating facilities. In April 2000, the Company entered into a new
12-year term operating lease for office space in Seattle, Washington, commencing
in 2003. The Company plans to decrease the number of its professional staff
during the remainder of 2001 pursuant to the restructuring plan announced on
September 28, 2001 to coincide with anticipated sales volume and to support
research and development efforts.

The Company purchased its headquarters in South Burlington, Vermont on April 19,
2001 for approximately $15.0 million from BDP Realty; a related entity that was
included in the Company's consolidated financial statements through that date.
As a result, the net assets of BDP Realty, principally real estate and related
minority interest of approximately $9.1 million were eliminated in the Company's
consolidated balance sheet. The real estate was purchased for $15.0 million in
cash based upon an independent appraisal of fair market value and was
capitalized in property and equipment. The Company has substantially completed
construction on an expansion of its corporate headquarters facility in South
Burlington, Vermont, which began in November 1999, and is considering various
options for financing including a bank financing or funding from operations.
From time to time, based on the Company's requirements, the Company may consider
other purchases of land or the construction of additional office space.
Currently, the Company has made no material lease or purchase commitments other
than the purchase of the Company's headquarters mentioned above.

The Company believes that 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.


                                 Page 17 of 33
<PAGE>


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 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, IDX's business, financial condition and operating
results would likely suffer. In that event, the market price of IDX's common
stock could decline and you could lose all or part of the money you paid to buy
IDX's common stock.

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

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

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

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

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;
o   timing of new product and service introductions and product upgrade
    releases;
o   long sales and implementation cycles of IDX's customers; and
o   changes in economic factors affecting the national economy.

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

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

o   actual or anticipated  quarterly variations in operating results;
o   changes in expectations of future financial performance;
o   changes in estimates of securities analysts;
o   market conditions particularly in the computer software and Internet
    industries;

                                 Page 18 of 33

<PAGE>



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

FINANCIAL TRENDS. Year over year net income and cash from operations have
generally declined since 1998. In 2001 year to date, IDX has generated an
operating loss of approximately $15 million. If these negative trends continue,
IDX may have difficulty financing future growth and funding operating
initiatives, including future acquisitions.

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 such as transaction standards
    pursuant to the Health Insurance Portability and Accountability Act of 1996;
    and
o   the creation of new technological developments such as Internet and
    application service provider technology.

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

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 and related services within the
healthcare industry. As a result, the success of IDX is dependent in part on the
political and economic conditions in the healthcare industry.

Virtually all of IDX's customers and the other entities with which IDX has a
business relationship operate in the healthcare industry and, as a result, are
subject to governmental regulation, including Medicare and Medicaid regulation.
Accordingly, IDX's customers and the other entities with which IDX has a
business relationship are affected by changes in such regulations and
limitations in governmental spending for Medicare and Medicaid programs. Recent
actions by Congress have limited governmental spending for the Medicare and
Medicaid programs, limited payments to hospitals and other providers under such
programs, and increased emphasis on competition and other programs that
potentially could have an adverse effect on IDX's customers and the other
entities with which IDX has a business relationship. In addition, Federal and
state legislatures have considered proposals to reform the U.S. healthcare

                                 Page 19 of 33
<PAGE>


system at both the federal and state level. If enacted, these proposals could
increase government involvement in healthcare, lower reimbursement rates and
otherwise change the business environment of IDX's customers and the other
entities with which IDX has a business relationship. IDX's customers and the
other entities with which IDX has a business relationship could react to these
proposals and the uncertainty surrounding these proposals by curtailing or
deferring investments, including those for IDX's products and services.

In addition, many healthcare providers are consolidating to create integrated
healthcare delivery systems with greater market power. These providers may try
to use their market power to negotiate price reductions for IDX's products and
services. If IDX is forced to reduce its prices, its operating margins would
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 system and product
offerings, the ongoing support for the systems, and 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 Cerner Corporation, Eclipsys Corporation, McKesson
Corporation, Epic Systems Corporation, Siemans AG , and Medical Manager
Corporation, each of which offers a suite of products that compete with many of
IDX's products. There are other competitors that offer a more limited number of
competing products. Many of IDX's competitors have also announced or introduced
Internet strategies that will compete with IDX's Internet applications and
services. IDX may be unable to compete successfully against these organizations.
In addition, IDX expects that major software information systems companies,
large information technology consulting service providers and system
integrators, Internet-based start-up companies and others specializing in the
healthcare industry may offer competitive products or services.

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

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

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

                                 Page 20 of 33
<PAGE>

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

The Federal Civil False Claims Act and the Medicare/Medicaid Civil Money
Penalties regulations prohibit, among other things, the filing of claims for
services that were not provided as claimed, which were for services that were
not medically necessary, or which were otherwise false or fraudulent. Violations
of these laws may result in civil damages, including treble and civil penalties.
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 will 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, IDX has made and expects to continue to make investments in product
enhancements to support customer operations that are regulated by HIPAA.
Responding to HIPAA's impact may require IDX to make investments in new products
or charge higher prices. It may be expensive to implement security or other
measures designed to comply with any new legislation or regulation.

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

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

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

                                 Page 21 of 33
<PAGE>


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

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

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

                                 Page 22 of 33

<PAGE>


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, and restrictions on disclosure to protect its proprietary technology.
Despite these precautions, others may be able to copy or reverse engineer
aspects of IDX's products, to obtain and use information that IDX regards as
proprietary or to independently develop similar technology. Litigation may be
necessary in the future to enforce or defend IDX's proprietary technology or to
determine the validity and scope of the proprietary rights of others. This
litigation, whether successful or unsuccessful, could result in substantial
costs and diversion of management and technical resources.

CONFLICTS OF INTERESTS. Richard E. Tarrant, Chief Executive Officer and
Director, and Robert H. Hoehl, Chairman of the Board of Directors, indirectly
own, through various entities, real estate which IDX leases in connection with
its operations. During 2000, IDX paid an aggregate of approximately $1.8 million
in connection with these leases including the Company's headquarters facilities
in South Burlington, Vermont. IDX purchased the headquarter facility from a real
estate entity majority owned by Richard E. Tarrant and Robert H. Hoehl for a
purchase price of approximately $15.0 million on April 19, 2001. In connection
with the remaining related entity arrangements, the economic interests of these
executives and directors and IDX may diverge.

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

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 January 2001, IDX
entered into a ten-year strategic alliance with Allscripts Healthcare Solutions
to cooperatively develop, market and sell integrated clinical and practice
management products. During the term of the alliance, IDX is prohibited from
cooperating with direct competitors of Allscripts to develop or provide any
products similar to or in competition with Allscripts products in the practice
management systems market. Also, pursuant to the strategic alliance agreement,
IDX has guaranteed that Allscripts will have gross revenues resulting from the
alliance (less any commissions paid to IDX) of at least $4.5 million for fiscal
year 2001, and IDX will have to pay Allscripts the excess, if any, of $4.5
million over Allscripts' actual gross revenues for fiscal year 2001. As of
September 30, 2001 the liability related to this guarantee has been accrued as a
reduction of the gain on sale of ChannelHealth to Allscripts. If the strategic
alliance is not successful, Allscripts' gross revenues for fiscal year 2001 are
less than $4.5 million, 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.

                                 Page 23 of 33

<PAGE>


RESTRICTIONS ON LIQUIDATION OF INVESTMENT IN ALLSCRIPTS HEALTHCARE SOLUTIONS. In
January 2001 IDX received approximately 7.5 million shares of common stock of
Allscripts Healthcare Solutions in connection with the acquisition by Allscripts
of IDX's majority owned subsidiary, ChannelHealth Incorporated. IDX entered into
a stock rights and restrictions agreement with Allscripts, pursuant to which,
among other things, IDX agreed to restrictions on the sale of its shares of
Allscripts common stock. In general, IDX is prohibited from selling any shares
for one year after the date of Allscripts' acquisition of ChannelHealth, and
after one year, IDX is prohibited from selling more than 25% of it shares of
Allscripts common stock in any one-year, and 16.67% in any one month. The
restrictions on IDX's ability to sell shares of Allscripts common stock will
make it difficult for IDX to liquidate its investment in Allscripts. As of
September 30, 2001, there is no financial risk as this investment has been
written down to zero.

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 DISCLOSURE 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 primarily invoices customers in United States currency. The
Company is not currently  exposed to foreign exchange rate fluctuations and does
not enter into foreign currency hedge transactions.  Through September 30, 2001,
foreign  currency  fluctuations  have not had a material impact on our financial
position or results of operations.

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

Interest 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  (SFAS) No. 115
"Accounting  for  Certain  Investments  in Debt  and  Equity  Securities."  Cash
equivalents  are short-term  highly liquid  investments  with original  maturity
dates of three  months or less.  Cash  equivalents  are  carried at cost,  which
approximates  fair market value.  The Company's  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.

                                 Page 24 of 33

<PAGE>


PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS


         On January 18, 2001, the Company commenced a lawsuit against Epic
         Systems Corporation, a competitor of the Company, the University of
         Wisconsin Medical Foundation (the Foundation), and two individuals
         claiming, among other things, that trade secrets of the Company
         involving its IDXtend medical group practice system were wrongfully
         disclosed to, and misappropriated by, Epic in a series of meetings that
         took place in 1998 and 1999. All of the defendants deny the Company's
         claims. The Company's lawsuit seeks damages and injunctive relief and
         was brought in the United States District Court for the Western
         District of Wisconsin and is entitled, IDX SYSTEMS CORPORATION V. EPIC
         SYSTEMS CORPORATION, ET AL., NO. 01C-0037-S. The Foundation has brought
         a counterclaim against the Company claiming that its lawsuit interferes
         with a contract between the Foundation and Epic, and that the
         confidentiality provisions in IDX's contracts with the Foundation are
         invalid. The counterclaim seeks damages and declaratory judgment. The
         Company denies the counterclaim.

         On April 2, 2001, Epic filed an Answer denying the essential elements
         of the Company's claims, and asserted counterclaims against the
         Company. Epic alleges that the Company's claims asserting its trade
         secret rights were brought in bad faith, with an intent to injure Epic
         competitively, and thereby violated Sections 1 and 2 of the Sherman Act
         because the Company allegedly possesses monopoly power in the U.S.
         market for medical practice information systems. Epic also claims that
         this same alleged conduct constitutes intentional interference with its
         contract with the Foundation. The counterclaim seeks treble damages.
         The Company denies the counterclaims.

         On July 31, 2001, the Company's lawsuit against Epic, the Foundation
         and the individuals was dismissed with prejudice and the counterclaims
         of Epic and the Foundation were dismissed with prejudice. The Company
         has appealed the dismissal of its lawsuit to the United States Court of
         Appeals, and Epic has appealed the dismissal of its counterclaims.

         On April 4, 2000, the Company commenced a lawsuit for damages caused by
         wrongful cancellation and material breach of contract by St. John
         Health System, in the United States District Court for Eastern District
         of Michigan, Civil Action Number 00-71631, entitled IDX SYSTEMS
         CORPORATION VS. ST. JOHN HEALTH SYSTEM. On April 10, 2001, St. John
         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, St. John's lawsuit was removed to the federal court and
         dismissed. In its answer to the Company's lawsuit, St. John asserted
         the same claims previously asserted in its state court lawsuit. In
         September 2001, St. John specified damage claims of approximately $77
         million in allegedly lost savings. The Company believes the claims of
         St. John are without merit and intends to vigorously defend itself and
         prosecute its own claims for damages, which the Company believes may
         exceed approximately $9 million. The lawsuit is in the trial
         preparation stage and trial is currently scheduled for January 2002.

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


                                 Page 25 of 33
<PAGE>



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 2001 Annual Meeting.

         As set forth in the Company's Proxy Statement for its 2001 Annual
         Meeting of Stockholders, proposals of stockholders intended to be
         included in the Company's proxy statement for the 2002 Annual Meeting
         of Stockholders must be received by the Company at its principal office
         in South Burlington, Vermont not later than December 24, 2001.

         Stockholders who wish to make a proposal at the 2002 Annual
         Meeting--other than one that will be included in the Company's proxy
         materials--must notify the Company no later than March 9, 2002. 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.

         On September 10, 2001, David P. Hunter was elected as a Class II
         director of the Company. On October 23, 2001, Frank T. Sample resigned
         as a Class I director of the Company.

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 2001:





                                 Page 26 of 33


<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 6, 2001        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 27 of 33

<PAGE>



                                  EXHIBIT INDEX

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

<TABLE>
<CAPTION>


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

10                Second Amendment to Redemption Agreement by and       29
                  among the Company, Richard E. Tarrant and Robert
                  H. Hoehl and other shareholders dated as of
                  September 13, 2001.

</TABLE>





























                                 Page 28 of 33


<PAGE>

                                                                      EXHIBIT 10


                                SECOND AMENDMENT

                                       TO

                              REDEMPTION AGREEMENT


         THIS AMENDMENT is made as of the 13th day of September, 2001 (the
"Amendment"), by and among IDX SYSTEMS CORPORATION, a Vermont corporation (the
"Company"), RICHARD E. TARRANT ("Tarrant"), ROBERT H. HOEHL ("Hoehl") and the
other shareholders listed on the signature pages hereto (Tarrant, Hoehl and such
other shareholders are hereinafter collectively referred to as the
"Shareholders"), to the Redemption Agreement by and among the Company, Tarrant
and Hoehl, dated as of April 1, 1993, and as amended by the First Amendment to
Redemption Agreement, executed as of September 19, 1995 (the "Redemption
Agreement"). Except as set forth below, the Redemption Agreement shall remain in
full force and effect. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Redemption Agreement.

         WHEREAS, the Redemption Agreement currently provides that any
transferee, other than the Company or any Shareholder ("Third Party
Transferee"), to whom a Shareholder Transfers his shares of Common Stock of the
Company, shall take such shares of Common Stock subject to all provisions,
conditions and covenants of the Redemption Agreement, unless such shares had
been effectively registered under the Securities Act of 1933, as amended, prior
to such Transfer; and

         WHEREAS, the parties hereto, acting in accordance with Section 13 of
the Redemption Agreement, desire to amend the Redemption Agreement to provide
that neither a Third Party Transferee nor any shares of Common Stock Transferred
by a Shareholder in accordance with the Redemption Agreement to a Third Party
Transferee shall be subject to the Redemption Agreement upon such Transfer.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

         1.       Section 7.1 of the Redemption Agreement shall be deleted in
its entirety and the following shall be substituted in its place:



                                 Page 29 of 33
<PAGE>


                  "7.1     Attachment to Shares.
                           --------------------

                           (i) In the event that, at any time or from time to
         time, any shares of Common Stock are Transferred by a Shareholder to
         any party pursuant to and in accordance with the provisions of this
         Agreement or otherwise, then the transferee shall take such shares of
         Common Stock subject to all provisions, conditions and covenants of
         this Agreement, and, as a condition precedent to the transfer of such
         shares of Common Stock, the transferee shall agree, for and on behalf
         of himself and itself, his or its legal representatives, and his or its
         transferees and assigns, in writing to be bound by all provisions of
         this Agreement as a party hereto and in the capacity of a Shareholder.
         In the event that there shall be any Transfer to any Person in
         accordance with the foregoing, all references herein to the
         "Shareholders" or to any "Shareholder" shall thereafter be deemed to
         include such transferee, and the provisions of this Agreement shall
         thereafter be applicable to such transferee (and not the transferor
         Shareholder).

                           (ii) Notwithstanding the provisions of Paragraph
         7.1(i), a transferee and any Transferred shares of Common Stock shall
         not be subject to the Agreement upon a Transfer, if such shares of
         Common Stock are Transferred by a Shareholder pursuant to and in
         accordance with the provisions of this Agreement and either (i) the
         transferee is a Person other than the Company, a Shareholder or an
         Affiliate of the Company or a Shareholder, or (ii) prior to such
         Transfer, such shares of Common Stock have been effectively registered
         under the Securities Act in accordance with the provisions of this
         Agreement."

         2.       The first sentence of Section 13 of the Redemption Agreement
shall be deleted in its entirety and the following shall be substituted in its
place:

                  "No change or modification of this Agreement shall be valid
         unless the same is in writing and signed by each of the Company,
         Tarrant, Hoehl and the other Shareholders, who together with Tarrant
         and Hoehl, hold at least 51% of the shares subject to this Agreement."

         3. For avoidance of doubt, the First Amendment to Redemption Agreement,
executed by the parties as of September 19,1995 (the "First Amendment"), is
hereby ratified and approved.

         4.       Transfers by a Shareholder pursuant to the Redemption
Agreement effected prior to the date hereof shall also be subject to the
provisions of this Amendment.

         5. The Redemption Agreement, as supplemented and modified by each of
the First Amendment and this Amendment, together with the other writings
referred to in the Redemption Agreement or delivered pursuant thereto which form
a part thereof, contain the entire agreement among the parties with respect to
the subject matter thereof and amend, restate and supersede all prior and
contemporaneous arrangements or understandings with respect thereto.



                                 Page 30 of 33
<PAGE>



         6. Upon effectiveness of this Amendment, on and after the date hereof,
each reference in the Redemption Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import, and each reference in the other
documents entered into in connection with the Redemption Agreement, shall mean
and be a reference to the Redemption Agreement, as amended hereby. Except as
specifically amended above, the Redemption Agreement shall remain in full force
and effect and hereby ratified and confirmed.

         7.       This Amendment shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State
of Vermont.

         8. This Amendment may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement. This Amendment may be
executed by facsimile signature.



[The remainder of this page has intentionally been left blank.]

                                 Page 31 of 33

<PAGE>


         IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.


                                        IDX SYSTEMS CORPORATION


                                        By: /S/ RICHARD E. TARRANT
                                            -------------------------------
                                            Richard E. Tarrant
                                            CEO



                                            RICHARD E. TARRANT


                                            /S/ RICHARD E. TARRANT
                                            ------------------------------



                                            ROBERT H. HOEHL


                                            /S/ ROBERT H. HOEHL
                                            -----------------------------



                                            AMY E. TARRANT


                                            /S/ AMY E. TARRANT
                                            -----------------------------


                                           CYNTHIA K. HOEHL


                                           /S/ CYNTHIA K. HOEHL
                                           -----------------------------



                                          HOEHL FAMILY FOUNDATION


                                          /S/ ROBERT H.HOEHL
                                          ------------------------------
                                              Robert H. Hoehl
                                              [Title]

                                 Page 32 of 33
<PAGE>


                                          RICHARD E. TARRANT FOUNDATION


                                          /S/ RICHARD E. TARRANT
                                          -----------------------------
                                          By:   Richard E. Tarrant
                                                [Title]


                                         AMY E. TARRANT FOUNDATION


                                         /S/ AMY E. TARRANT
                                         ------------------------------
                                         By:   Amy E. Tarrant
                                               [Title]

                                         [HOEHL TRUSTS]


                                         /S/ CYNTHIA K. HOEHL
                                         ------------------------------
                                         By:   Cynthia K. Hoehl
                                               Trustee


                                         [TARRANT TRUSTS]


                                         /S/ AMY E. TARRANT
                                         ------------------------------
                                         By:   Amy E. Tarrant
                                               Trustee


                                  Page 33 of 33