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

                                    FORM 10-Q

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

                  For the Quarterly Period Ended June 30, 1998
                      -------------------------------

                         Commission File Number 0-26816

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

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

                               1400 Shelburne Road
                           South Burlington, VT 05403
                    (Address of principal executive offices)

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

         Indicate  by check mark  whether the  registrant  has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports).

                          Yes    X           No
                               ----             ----
         Indicate by check mark whether the  registrant has been subject to such
filing requirements for the past 90 days.

                          Yes    X            No
                               ----             ----  
      The number of shares  outstanding of the  registrant's  common stock as of
August 7, 1998 was 26,424,943.

                        [Exhibit index begins on Page 21]
                                                      --

<PAGE>

                                  
                             IDX SYSTEMS CORPORATION
                                    FORM 10-Q
                  For the Quarterly Period Ended June 30, 1998

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                           Page
                                                                           ----
PART I.  FINANCIAL INFORMATION
<S>     <C>                                                                <C>

ITEM 1.  Interim Financial Statements:

         a) Condensed consolidated balance sheets as of
            June 30, 1998 and December 31, 1997 (unaudited)................3

         b) Condensed  consolidated   statements  of  income  and
            comprehensive  income  for the three  and six  months
            ended   June   30,   1998   and   1997    (unaudited)..........4

         c) Condensed consolidated statements of cash flows
            for the three and six months ended June 30, 1998  and 1997 
            (unaudited)....................................................5

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

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

PART II. OTHER INFORMATION

ITEM 1.  Legal proceedings.................................................18

ITEM 2.  Changes in securities.............................................18

ITEM 3.  Defaults upon senior securities...................................18

ITEM 4.  Submission of matters to a vote of security holders...............18

ITEM 5.  Other information.................................................19

ITEM 6.  Exhibits and reports on Form 8-K..................................19

SIGNATURES.................................................................20

EXHIBIT INDEX..............................................................21

</TABLE>
                                  Page 2 of 21

<PAGE>


PART I.   FINANCIAL INFORMATION

Item 1.   Interim Financial Statements

                            IDX SYSTEMS CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                            JUNE 30                DECEMBER 31
                                             1998                     1997
                                             ----                     ----
<S>                                         <C>                    <C>

ASSETS
Cash and securities                         $ 118,007              $ 115,887
Accounts receivable, net                       76,874                 66,587
Other current assets                           10,601                 14,718
                                            ---------              ---------
Total current assets                          205,482                197,192
                                            

Property and equipment, net                    29,711                 28,277
Capitalized software costs, net                   789                    368
Other assets                                   14,704                 11,480
                                            ---------              ---------
                                               45,204                 40,125
                                            ---------              ---------
Total assets                                $ 250,686              $ 237,317
                                            =========              =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses
   and other liabilities                   $   29,755              $  34,748
Deferred revenue                               17,556                 21,538
                                           ----------              ---------
Total current liabilities                      47,311                 56,286
                                           ----------              ---------
Long term debt                                      -                  2,508
Minority interest                               8,440                  1,919
Stockholders' equity                          194,935                176,604
                                           ----------              ---------
                                              203,375                181,031
                                           ----------              ---------
Total liabilities and stockholders' equity $  250,686              $ 237,317
                                           ==========              =========

</TABLE>


              See Notes to the Condensed Consolidated Financial Statements

NOTE: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date.

                                  Page 3 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION

Item 1.   Interim Financial Statements

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

                             THREE MONTHS ENDED          SIX MONTHS ENDED
                                   JUNE 30                    JUNE 30
                             1998         1997           1998        1997
                             ----         ----           ----        ----
<S>                          <C>          <C>            <C>         <C>
                             
REVENUES
Systems sales                $  43,719    $  29,886      $  82,685   $  63,326
Maintenance and service fees    35,645       27,546         69,416      53,665
                             ---------    ---------      ---------   ---------
Total revenues                  79,364       57,432        152,101     116,991

OPERATING EXPENSES
Cost of sales                   40,408       31,061         77,656      61,025
Selling, general and 
  administrative                14,947       12,575         28,699      25,306
Research and development        11,762        8,607         22,078      17,085
Write-off of acquired 
  in-process research and
  development costs                                          3,201       2,290
                            ----------    ---------      ---------    ---------
Total operating expenses        67,117       52,243        131,634     105,706

Operating income                12,247        5,189         20,467      11,285
Interest and other income, 
   net                          (1,259)      (1,479)        (2,381)     (2,674)
                            ----------    ----------     ---------    --------
Income before income taxes      13,506        6,668         22,848      13,959
Income tax provision             5,400        2,793         10,340       5,587
                            ----------    ---------      ---------    --------
Net income                  $    8,106    $   3,875      $  12,508    $  8,372
                            ==========    =========      =========    ========

Unrealized gain on securities
   available-for-sale               45           10             42          23
                            ----------    ---------      ---------    --------
Comprehensive income        $    8,151    $   3,885      $  12,550    $  8,395
                            ==========    =========      =========    ========

Basic earnings per share    $     0.31    $    0.15      $    0.48    $   0.33
                            ==========    =========      =========    ========
Basic weighted average 
   shares outstanding           26,294       25,570         26,225      25,528
                            ==========    =========      =========    ========

Diluted earnings per share  $     0.30    $    0.15      $    0.46    $   0.32
                            ==========    =========      =========    ========
Diluted weighted average 
   shares outstanding           27,181       26,488         27,094      26,357
                            ==========    =========      =========    ========

</TABLE>


           See Notes to the Condensed Consolidated Financial Statements

                                  Page 4 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION

Item 1.   Interim Financial Statements

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

                                                         SIX MONTHS ENDED
                                                               JUNE 30
                                                      1998             1997
                                                      ----             ----
<S>                                                   <C>              <C>
            
OPERATING ACTIVITIES
Net income                                            $ 12,508         $  8,372
Adjustments to reconcile net income to net cash 
provided by operating activities:
    Depreciation and amortization                        5,197            3,883
    Deferred tax benefit                                  (517)           1,506  
    Increase in allowance for doubtful accounts             88              411
    Minority interest                                       21             (170)
    Write-off of acquired in-process research and
         development costs                               3,201            2,290
    Changes in operating assets and liabilities:
          Accounts receivable                          (10,375)          (7,007)
          Prepaid expenses and other assets              3,489           (8,370)
          Accounts payable and accrued expenses         (4,412)             437
          Federal and state taxes payable                3,007            1,158
          Deferred revenue                              (3,982)           6,192
          Short-term debt                                                 1,373
                                                      ---------        --------
           Net cash provided by operating activities     8,225           10,075

INVESTING ACTIVITIES
Purchase of property and equipment, net                 (6,552)          (7,564)
Purchase of securities available-for-sale, net         (47,168)         (56,601)
Sale of securities available-for-sale                   43,430           53,438
Purchase of certain net assets                          (5,778)           1,779
                                                      --------         --------
           Net cash used in investing activities       (16,068)          (8,948)

FINANCING ACTIVITIES
Proceeds from sale of common stock                       5,917            3,084
Increase in minority interest                            6,500
Principal repayments of long-term debt                  (6,097)            (148)
                                                      --------         --------
           Net cash provided by financing activities     6,320            2,936
                                                      --------         --------
Decrease in cash and cash equivalents                   (1,523)           4,063
Cash and cash equivalents at beginning of period        14,061           12,326
                                                      --------         --------
Cash and cash equivalents at end of period            $ 12,538         $ 16,389
                                                      ========         ========

</TABLE>

          See Notes to the Condensed Consolidated Financial Statements

                                  Page 5 of 21


<PAGE>

PART I.   FINANCIAL INFORMATION

Notes to Condensed Consolidated Financial Statements


Note 1 - Basis of Presentation

All  financial  information  for  previously  reported  periods  included in the
accompanying  interim unaudited condensed  consolidated  financial statements of
IDX Systems  Corporation  ("Company"  or "IDX") has been restated to reflect the
combined  operations  of IDX and  PHAMIS,  Inc.  ("PHAMIS")  as a result  of the
merger,  more  fully  described  in Note 2,  which has been  accounted  for as a
pooling of interests in the quarter ended  September  30, 1997.  No  adjustments
were required to conform the financial  reporting policies of IDX and PHAMIS for
the periods presented.

The interim unaudited  consolidated  financial  statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission and in accordance  with  generally  accepted  accounting  principles.
Accordingly,  certain information and footnote  disclosures normally included in
annual  financial  statements have been omitted or condensed.  In the opinion of
management,  all  necessary  adjustments  have  been  made  to  provide  a  fair
presentation.  The operating results for the three and six months ended June 30,
1998 are not necessarily  indicative of the results that may be expected for the
year  ending  December  31,  1998.  For  further   information,   refer  to  the
consolidated financial statements and footnotes included in the Company's 
Annual Report on Form 10-K for the year ended December 31, 1997.


Note 2 - Business Acquisitions

On February 23, 1998, the Company  recorded  charges of $3.2 million  related to
the acquisition of a contract  management  system technology from Trego Systems,
Inc. for cash of $4.0  million.  The  acquisition  was  accounted  for under the
purchase  method.   The  charges  were  expensed  as  in-process   research  and
development  in  connection  with  the  Company's  development  of a  healthcare
contract management system.

In July 1997,  the  Company  completed  the Merger with  PHAMIS  which  became a
wholly-owned  subsidiary of the Company.  The transaction was accounted for as a
pooling-of-interests  and  accordingly,  the accompanying  financial  statements
include the accounts of PHAMIS for all periods presented.


Note 3 - Income Taxes

The  provision for income taxes for the quarter ended June 30, 1998 was provided
for at the taxable  income rate of 40%. The  provision  for income taxes for the
six months ended June 30, 1998 was  provided  for at the taxable  income rate of
approximately 45% which is more than the Company's  historical rate of 40%. This
higher  rate is due to a portion of the charges  incurred  in the first  quarter
ended  March  31,  1998  in  the  acquisition  of  Trego  Systems,   Inc.  being
non-deductible for income tax purposes. 

                                  Page 6 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION

Note 4 - Earnings Per Share Information

In February 1997, the Financial  Accounting Standards Board issued Statement No.
128, Earnings Per Share, which the Company adopted on December 31, 1997. At that
time,  the Company  changed the method  used to compute  earnings  per share and
restated all prior periods.  Under the new requirements for calculating  primary
earnings  per share,  the  dilutive  effect of stock  options is  excluded.  The
following sets forth the computation of basic and diluted earnings per share:

<TABLE>
<CAPTION>

                                      Three Months Ended     Six Months Ended
                                            June 30              June 30
                                      1998         1997      1998       1997
                                      ----         ----      ----       ----
<S>                                   <C>          <C>       <C>        <C>

Numerator:
   Net income                         $ 8,106      $ 3,875   $12,508    $ 8,372
                                      -------      -------   -------    -------
      Numerator for basic and 
      diluted earnings per share      $ 8,106      $ 3,875   $12,508    $ 8,372
Denominator:
   Denominator for basic earnings 
   per share--weighted-average shares  26,294       25,570    26,225     25,528
   Effect of employee stock options       887          918       869        829
                                      -------      -------   -------    -------
       Denominator for diluted 
       earnings per share              27,181       26,448    27,094     26,357
                                      -------      -------   -------    -------
Basic earning per share                 $0.31        $0.15     $0.48      $0.33
                                      =======      =======   =======    =======
Diluted earnings per share              $0.30        $0.15     $0.46      $0.32
                                      =======      =======   =======    =======
</TABLE>


Note 5 - Reclassifications

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

                                  Page 7 of 21


<PAGE>

PART I.   FINANCIAL INFORMATION

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

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

GENERAL

The  Company  reported  net income of $8.1  million,  or $0.30 per share for the
three months ended June 30, 1998 as compared to $3.9 million, or $0.15 per share
for the three months ended June 30, 1997. For the six months ended June 30, 1998
the  Company  reported  net  income of $12.5  million,  or $0.46 per  share,  as
compared to net income of $8.4 million,  or $0.32 per share, for the same period
in 1997.

This Management's Discussion and Analysis of Financial Conditions and Results of
Operations  includes a number of  forward-looking  statements  which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking  statements are subject to certain risks and uncertainties
including  those  discussed  below that  could  cause  actual  results to differ
materially  from  historical  results  or  those  anticipated.   Words  such  as
"believes,"  "may," "plans,"  "anticipates,"  "expects,"  "intends," and similar
expressions are intended to identify forward-looking statements, but are not the
exclusive means of identifying such statements.  In addition, the disclosures in
the  section on page 13 under the caption  "Factors  Affecting  Future  Results"
consists  principally  of a discussion of risks which may affect future  results
and, are thus, in their entirety forward-looking in nature. Readers are urged to
carefully  review and  consider the various  disclosures  made by the Company in
this report and in the Company's  other reports  filed with the  Securities  and
Exchange  Commission that attempt to advise interested  parties of the risks and
factors that may affect the Company's business.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997.

REVENUES
The Company's total revenues  increased to $79.4 million during the three months
ended June 30, 1998 from $57.4 million in the  corresponding  period in 1997, an
increase of $22.0 million or 38.2%.  Revenues  from systems  sales  increased to
$43.7  million  during  the three  months  ended June 30,  1998  (55.1% of total
revenues)  from $29.9  million  (52.0% of total  revenues) in the  corresponding
period in 1997,  an  increase  of $13.8  million  or  46.3%.  The  increase  was
primarily  due to an  increase  in  installations  of certain  of the  Company's
IDXtend and  LastWord  systems.  Revenues  from  maintenance  and  service  fees
increased to $35.7 million during the three months ended June 30, 1998 (44.9% of
total   revenues)  from  $27.5  million   (48.0%  of  total   revenues)  in  the
corresponding period in 1997, an increase of $8.2 million or 29.4%. The increase
in revenues from  maintenance and service fees was due principally to additional
maintenance  revenues  resulting  from the  continued  growth  in the  Company's
installed client base.

COST OF SALES
The cost of sales and  services  increased  to $40.4  million  during  the three
months  ended June 30, 1998 from $31.0  million in the  corresponding  period in
1997,  an increase of $9.4 million or 

                                  Page 8 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION

30.1%. The gross profit margin on systems sales and services  increased to 49.1%
during  the three  months  ended June 30,  1998 from 45.9% in the  corresponding
period in 1997. The increase in gross profit was due primarily to an increase in
the installations of certain of the Company's IDXtend and LastWord systems.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling,  general and administrative  expenses increased to $14.9 million during
the three  months  ended June 30, 1998 from $12.6  million in the  corresponding
period in 1997,  an increase of $2.3 million or 18.9%.  As a percentage of total
revenues, selling, general and administrative expenses decreased to 18.8% during
the three months ended June 30, 1998 from 21.9% in the  corresponding  period in
1997. The increase in selling,  general and  administrative  expenses during the
three  months  ended June 30,  1998 was  principally  due to an  increase in the
Company's  sales and marketing staff which  management  believes is necessary to
support the continued growth of the Company.

RESEARCH AND DEVELOPMENT
Research and  development  expenses  increased to $11.8 million during the three
months  ended June 30,  1998 from $8.6  million in the  corresponding  period in
1997,  an increase of $3.2 million or 36.7%.  The increase is  attributed  to an
increase  in  personnel   expenses  and  outside   consultants  to  support  the
development  of  additional  products for the Company.  As a percentage of total
revenues,  research and development  expenses decreased slightly to 14.8% during
the three  months ended June 30, 1998 from 15.0% for the three months ended June
30, 1997. Software development costs incurred subsequent to the establishment of
technological  feasibility  until  general  release of the related  products are
capitalized.  Prior to the  merger,  technological  feasibility  was  determined
differently  by  IDX  and  PHAMIS.   Subsequent  to  the  merger  the  Company's
determination of technological  feasibility for all product development is based
on the  completion  of a working  model  which has been  approved  for beta site
testing.  Historically  costs  incurred  during beta site  testing have not been
material.  Although the Company  presently  expects  costs to complete beta site
testing in the future to be  insignificant,  as the Company develops products to
operate using other technologies as well as more comprehensive clinical systems,
the time and effort required to complete beta site testing may be  significantly
more extensive. Consequently,  capitalized software development costs may become
material in future reporting periods.

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

REVENUES
The Company's  total revenues  increased to $152.1 million during the six months
ended June 30, 1998 from $117.0 million in the corresponding  period in 1997, an
increase of $35.1 million or 30.0%.  Revenues  from systems  sales  increased to
$82.7  million  during  the six  months  ended  June 30,  1998  (54.4%  of total
revenues)  from $63.3  million  (54.1% of total  revenues) in the  corresponding
period in 1997,  an  increase  of $19.4  million  or  30.6%.  The  increase  was
primarily  due to an  increase  in  installations  of certain  of the  Company's
IDXtend and  LastWord  systems.  Revenues  from  maintenance  and  service  fees
increased to $69.4  million  during the six months ended June 30, 1998 (45.6% of
total   revenues)  from  $53.7  million   (45.9%  of  total   revenues)  in  the
corresponding  period in 1997,  an  increase  of $15.7  million  or  29.4%.  The
increase in 

                                  Page 9 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION

revenues from  maintenance  and service fees was due  principally to
additional  maintenance  revenues  resulting  from the  continued  growth in the
Company's installed client base.

COST OF SALES
The cost of sales and services  increased to $77.6 million during the six months
ended June 30, 1998 from $61.0 million in the  corresponding  period in 1997, an
increase of $16.6 million or 27.3%. The gross profit margin on systems sales and
services increased to 48.9% during the six months ended June 30, 1998 from 47.8%
in the  corresponding  period in 1997.  The  increase  in gross  profit  was due
primarily  to an  increase  in the  installations  of certain  of the  Company's
IDXtend and LastWord systems.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling,  general and administrative  expenses increased to $28.7 million during
the six months  ended  June 30,  1998 from  $25.3  million in the  corresponding
period in 1997,  an increase of $3.4 million or 13.4%.  As a percentage of total
revenues, selling, general and administrative expenses decreased to 18.9% during
the six months  ended  June 30,  1998 from  $21.6  million in the  corresponding
period in 1997.  The increase in selling,  general and  administrative  expenses
during the six months ended June 30, 1998 was  principally due to an increase in
the Company's sales and marketing staff which  management  believes is necessary
to support the continued growth of the Company.

RESEARCH AND DEVELOPMENT
Research and  development  expenses  increased to $22.1  million  during the six
months  ended June 30, 1998 from $17.1  million in the  corresponding  period in
1997,  an increase of $5.0 million or 29.2%.  The increase is  attributed  to an
increase  in  personnel   expenses  and  outside   consultants  to  support  the
development  of  additional  products for the Company.  As a percentage of total
revenues,  research and development  expenses decreased slightly to 14.5% during
the six months  ended June 30,  1998 from 14.6% in the  corresponding  period in
1997.  Software  development  costs incurred  subsequent to the establishment of
technological  feasibility  until  general  release of the related  products are
capitalized.  

WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
On February 23, 1998, the Company recorded  nonrecurring charges of $3.2 million
related to the acquisition of contract management technology from Trego Systems,
Inc. for cash of $4.0  million.  The  acquisition  was  accounted  for under the
purchase  method.   The  charges  were  expensed  as  in-process   research  and
development  in  connection  with  the  Company's  development  of a  healthcare
contract management system.

INCOME TAXES
The  provision for income taxes for the quarter ended June 30, 1998 was provided
for at the taxable  income rate of  approximately  40%. The provision for income
taxes for the six months  ended June 30,  1998 was  provided  for at the taxable
income rate of  approximately  45%, which is 

                                 Page 10 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION

more than the  Company's  historical  rate of 40%.  This higher rate is due to a
portion of the charges incurred in the acquisition of Trego Systems,  Inc. which
are non-deductible for income tax purposes. For 1998, the Company anticipates an
effective tax rate of approximately 40% of pre-tax income.

LIQUIDITY AND CAPITAL RESOURCES
Since its  inception  in 1969,  the Company has funded its  operations,  working
capital needs and capital  expenditures  primarily from  operations,  except for
real estate owned by certain partnerships and trusts financed through industrial
development  bonds.  The proceeds from its initial public  offering in 1995 were
(i)  distributed to stockholders of the Company in connection with the Company's
prior status as an S  corporation  under the Internal  Revenue Code of 1986,  as
amended, and (ii) used for general corporate purposes, including working capital
purposes,  payment of current  expenses and  strategic  transactions,  including
acquisitions of businesses, products and technologies.

Cash  flows  from  operations  are  principally  comprised  of  net  income  and
depreciation  and are  primarily  affected  by the net  effect of the  change in
accounts receivable, accounts payable and accrued expenses. Due to the nature of
the  Company's  business,  accounts  receivable,  deferred  revenue and accounts
payable  fluctuate  considerably  due to, among other things,  the length of the
sales cycle and  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 general  accounts
receivable from customers have been collected consistently within 90 days.

Cash flows related to investing  activities have principally been related to the
purchase of  computer  and office  equipment,  leasehold  improvements,  and the
purchase and sale of investment grade marketable securities. The Company expects
these activities to continue. investing activities may also include purchases of
interests  in and  acquisitions  of  complementary  products,  technologies  and
businesses.  There  can be no  assurance  that  the  Company  will  be  able  to
successfully complete any such purchases or acquisitions in the future.

Cash, cash  equivalents  and marketable  securities at June 30, 1998 were $118.0
million,  an  increase  from the June 30,  1997  balance of $96.5  million.  The
Company  has a  revolving  line of credit  with a bank  allowing  the Company to
borrow up to $5.0  million  bearing  interest at the prime  rate.  There were no
borrowings as of June 30, 1998 or 1997.

The Company expects that its requirements for office facilities and other office
equipment will grow as staffing  requirements  dictate.  The Company's operating
lease  commitments  consist  primarily  of  office  leasing  for  the  Company's
operating facilities. The Company plans to continue increasing the number of its
professional  staff during 1998 to meet anticipated  sales volume and to support
research and development  efforts.  To the extent necessary to support increases
in staffing, the Company intends to obtain additional office space.

The Company believes that current  operating 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 11 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION


NEW ACCOUNTING STANDARDS
In October,  1997, the American Institute of Certified Public Accountants issued
Statement of Position  ("SOP")  97-2,  Software  Revenue  Recognition,  revising
certain  aspects  of SOP 91-1,  which the  Company  adopted  on January 1, 1998.
SOP97-2 did not materially  affect the Company's  revenue  recognition  policies
with  respect to  software  license  fees  which are based upon  vendor-specific
objective information and relate principally to its proprietary systems software
which   generally   requires  no   significant   production,   modification   or
customization.  License  revenue,  accordingly,  is deferred and  recognized  as
customer  payments  become due based  upon  specified  milestones  and due dates
including delivery, installation and final systems acceptance.

In June 1997, the Financial  Accounting  Standards Board issued SFAS No. 130 and
No. 131, "Reporting  Comprehensive Income" and "Disclosures About Segments of an
Enterprise  and Related  Information,"  which the Company  adopted on January 1,
1998.  The adoption of these new  accounting  standards  did not have a material
impact on the Company's financial statements.

In February 1997, the Financial  Accounting Standards Board issued SFAS No. 128,
Earnings per Share, which the Company adopted on December 31, 1997. SFAS No. 128
replaced the  calculation  of primary and fully diluted  earnings per share with
basic and diluted earnings per share.  Unlike primary earnings per share,  basic
earnings  per share  excludes  any  dilutive  effects of options,  warrants  and
convertible  securities.  Diluted earnings per share is not materially different
from the previously reported fully diluted earnings per share.

YEAR 2000
The Company has assessed its  internal use systems and its  currently  supported
products,  including  tools,  equipment  and  software  supplied by others,  for
possible  problems in processing,  reporting,  displaying,  functioning with and
otherwise  handling  date data  containing  the year 2000 and beyond ("Year 2000
problems").  The  Company  believes it has  formulated  and is in the process of
implementing  or has  completed  all plans to make  Year  2000  ready all of its
critical internal use systems and facilities and all of its currently supported
products,  including  tools,  equipment,  and software  supplied by others.  The
Company is in the process of formulating  contingency plans in the event that it
might not be successful in implementing all of its plans to make Year 2000 ready
all of its systems, facilities and products.

At  December  31,  1997,  substantially  all  of the  core  databases  and  data
processing functions of the Company's significant products were Year 2000 ready.
All such products  installed after such date, and many of the Company's products
installed prior to such date, were Year 2000 ready at the time of  installation.
The Company  expects that the elements of the  Company's  products that were not
Year 2000 ready at December  31, 1997,  such as certain  screens and reports and
some tools, equipment,  and software supplied by others, will be Year 2000 ready
in 1998.

                                 Page 12 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION


The Company has  expensed  amounts  incurred as of December 31, 1997 to make its
products  Year  2000  ready,  and  such  amounts  have not  been  material.  The
additional  costs to make all such  remaining  systems and  products,  including
tools, equipment, and software supplied by others, Year 2000 ready by the end of
1998 will be expensed as  incurred,  are expected to be incurred in 1998 and are
not  expected to be  material.  The  Company  under its  maintenance  agreements
commenced delivery to its installed customers of Year 2000 ready versions of all
of its significant  products in 1998 and expects to complete most  installations
of such versions by mid 1999.  The costs to install Year 2000 ready  versions of
the Company's  products at customer sites, as well as the ability of the Company
to assist  customers  in the  installation  of Year 2000 ready  versions  of its
products,  will depend in part on the  readiness,  ability,  and  cooperation of
customers to install such versions.

Any of the  Company's  internal  use  systems,  and  facilities,  and any of the
products supplied by the Company to its customers,  including tools,  equipment,
facilities and software supplied by others,  could have Year 2000 problems.  Any
failure  of the  Company to make Year 200 ready its  internal  use  systems  and
facilities could cause significant  operational  problems for the Company.  Any
failure  of a  customer  to be ready or able to timely  install  Year 2000 ready
versions of the Company's  products,  including tools,  equipment,  and software
supplied by others,  or any other  products used by such customers in connection
with the Company's products,  could cause significant  operational  problems for
the customer.  Further,  a failure of the Company to timely make  available Year
2000 ready versions of its products,  including tools,  equipment,  and software
supplied  by others,  or a failure of the  Company  to timely  provide  adequate
resources to assist its customers in installing  Year 2000 ready versions of its
products,  including tools,  equipment,  and software supplied by others,  could
result in claims by or liability to customers, which may have a material adverse
effect on the business, operations, and future financial results of the Company.

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

                                 Page 13 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION


relatively  fixed,  a variation in the timing of systems sales and  installation
can cause  significant  variations in operating results from quarter to quarter.
The Company's  future  operating  results may fluctuate as a result of these and
other  factors,  such as  customer  purchasing  patterns,  and the timing of new
product and service  introductions  and product  upgrade  releases.  The Company
believes that  quarterly  results of  operations  will continue to be subject to
significant  fluctuations  and that its results of operations for any particular
quarter or fiscal year may not be indicative of results of operations for future
periods.  There can be no assurance  that future  period to period  fluctuations
will  continue  and will not have a  material  adverse  effect on the  Company's
results of operations, financial condition or business.

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

Integrating  the  operations and management of the Company and PHAMIS has been a
time-consuming process, and will require the dedication of management resources,
which has and may continue to temporarily distract attention from the day-to-day
business  of  the  combined  Company.  There  can  be  no  assurance  that  this
integration  will be completed  smoothly or  successfully,  and the inability of
management to  successfully  integrate  the  operations or management of the two
companies  could  have a material  adverse  effect on the  business,  results of
operations  or  financial  condition  of the  combined  Company.  As  previously
discussed  in the section  "Merger and Related  Costs" the Company has  incurred
significant merger and related costs.  Additional  unanticipated expenses may be
incurred in  connection  with the continued  integration  of the business of the
Company and PHAMIS.

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

                                 Page 14 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION


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

Any of the  Company's  internal use systems and any of the products  supplied by
the Company to its  customers  could fail to  adequately  or  properly  process,
display,  report,  or otherwise  handle date data  containing  the Year 2000 and
beyond.  Any  failure of a customer to be ready or able to timely  install  Year
2000  ready  versions  of  the  Company's   products  could  cause   significant
operational  problems  for the  customer.  Further,  a failure of the Company to
timely make available Year 2000 ready versions of its products,  or a failure of
the Company to timely  provide  adequate  resources  to assist its  customers in
installing  Year 2000 ready versions of its products,  could result in claims by
customers,  which  may  have  a  material  adverse  effect  on  the  results  of
operations, financial condition or business of the Company.

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

Certain of the Company's  products provide  applications  that relate to patient
medical histories and treatment plans. Any failure by the Company's  products to
provide  accurate,  secure  and  timely  information  could  result  in  product
liability  claims  against  the Company by its  clients or their  affiliates  or
patients.  The  Company  maintains  insurance  that it  believes  is adequate to
protect against claims associated with the use of its products, but there can be
no  assurance  that its  insurance  coverage  would  adequately  cover any claim
asserted against the Company.  A successful claim brought against the Company in
excess of its insurance  coverage  could have a material  adverse  effect on the
Company's  results  of  operations,   financial  condition  or  business.   Even
unsuccessful  claims could result in the expenditure of funds in litigation,  as
well as 

                                 Page 15 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION


diversion of management  time and resources.  There can be no assurance that the
Company will not be subject to product liability  claims,  that such claims will
not  result  in  liability  in  excess  of its  insurance  coverage  or that the
Company's  insurance will cover such claims or that  appropriate  insurance will
continue to be available to the Company in the future at commercially reasonable
rates.

The  success of the  Company is  dependent  to a  significant  degree on its key
management,  sales and marketing,  and technical personnel. The Company believes
that its continued  future success will also depend upon its ability to attract,
motivate  and  retain  highly  skilled,  managerial,  sales and  marketing,  and
technical  personnel,  including  software  programmers  and systems  architects
skilled in the  computer  languages  in which the  Company's  products  operate.
Competition  for  such  personnel  in  the  software  and  information  services
industries is intense.  The loss of key  personnel,  or the inability to hire or
retain  qualified  personnel,  could  have  a  material  adverse  effect  on the
Company's results of operations,  financial condition or business.  Although the
Company  has  been  successful  to  date in  attracting  and  retaining  skilled
personnel,  there can be no  assurance  that the  Company  will  continue  to be
successful in attracting and retaining the personnel it requires to successfully
develop  new  and  enhanced  products  and  to  continue  to  grow  and  operate
profitably.

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

The U.S. Food and Drug Administration (the "FDA") has promulgated a draft policy
for the  regulation of certain  computer  software  products as medical  devices
under the 1976 Medical Device  Amendments to the Federal Food, Drug and Cosmetic
Act (the "FDC Act") and has  recently  indicated it may modify such draft policy
or create a new policy. To the extent that computer software is a medical device
under  the  policy,  the  manufacturers  of such  products  could  be  required,
depending on the product,  to (i) register and list their products with the FDA,
(ii) notify the FDA and demonstrate substantial equivalence to other products on
the market  before  marketing  such  products,  or (iii)  obtain FDA approval by
demonstrating  safety and  effectiveness  before marketing a product.  Depending
upon the  intended  use of a device,  IDX could be required by the FDA to obtain
extensive data from clinical studies to demonstrate safety or effectiveness,  or
substantial equivalence. If the FDA requires such 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
and there can be no assurance  

                                 Page 16 of 21

<PAGE>

PART I.   FINANCIAL INFORMATION


that the FDA will approve or clear a device after the completion of such trials.
In  addition,  such  products  would be subject to FDC Act's  general  controls,
including those relating to good manufacturing  practices and adverse experience
reporting. Although it is not possible to anticipate the final form of the FDA's
policy with regard to computer  software,  the Company expects that,  whether or
not the draft is finalized or changed,  the FDA is likely to become increasingly
active in  regulating  computer  software that is intended for use in healthcare
settings.   The  FDA  can  impose  extensive  requirements  governing  pre-  and
post-market  conditions such as service  investigation,  approval,  labeling and
manufacturing.  In addition, the FDA can impose extensive requirements governing
development controls and quality assurance processes.  There can be no assurance
that actions taken by the FDA to regulate  computer  software  products will not
have a material adverse effect on the Company's results of operations, financial
condition or business.

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

                                 Page 17 of 21

<PAGE>


PART II. OTHER INFORMATION


Item 1.  LEGAL PROCEEDINGS

                  None.


Item 2.  CHANGES IN SECURITIES

                  None.


Item 3.  DEFAULTS UPON SENIOR SECURITIES

                  Not applicable.


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

     The Company held its 1998 Annual Meeting of Shareholders on May 18, 1998. 
Of the  26,263,353  shares of common stock  outstanding  and entitled to vote at
this meeting, 21,770,204 shares were represented at the meeting, in person or by
proxy. The following matters were voted upon at the Annual Meeting.

1.   Robert H. Hoehl, Stuart H. Altman, Ph.D. and Malcolm A. Gleser,  M.D.,Ph.D.
     were elected to serve for a term of three years as Class III Directors. The
     remaining  terms of  Richard  E.  Tarrant,  Henry M.  Tufo,  M.D.,  Paul L.
     Egerman,  Steven M. Lash and Frank T. Sample  continued  after the meeting.
     The  result of the vote with  respect  to each  nominee  for  office was as
     follows:
                                           Votes "Against"              Broker
     Nominee                 Votes "For"   or "Withheld"   Abstained   Non-Votes
      
     Robert H. Hoehl         21,764,434    0               5,670       100
     Stuart H. Altman, Ph.D. 21,762,079    0               8,025       100
     Malcolm A. Gleser, 
        M.D., Ph.D.          21,760,818    0               9,286       100

2.   Holders of 21,746,427 shares of common stock of the Company voted to ratify
     the  selection of Ernst & Young LLP as the Company's  independent  auditors
     for the  current  fiscal  year.  Holders  of  5,088  shares  voted  against
     ratifying such selection and 18,589 shares abstained from voting,  with 100
     broker non-votes.

                                 Page 18 of 21

<PAGE>

PART II. OTHER INFORMATION

Item 5.  OTHER INFORMATION

         Shareholders Proposals for 1999 Annual Meeting

                  As set forth in the  Company's  Proxy  Statement  for its 1998
Annual Meeting of Shareholders,  shareholders  proposals  submitted  pursuant to
Rule 14a-8 under the Exchange Act for inclusion in the Company's proxy materials
for its 1999 Annual Meeting of Shareholders must be received by the Secretary of
the Company at the  principal  offices of the Company no later than December 18,
1998.

                  In addition,  in  accordance  with recent  amendments to Rules
14a-4,  14a-5 and 14a-8 under the Exchange Act,  written  notice of  shareholder
proposals submitted outside the processes of Rule 14a-8 for consideration at the
1999 Annual Meeting of Shareholders must be received by the Company on or before
March 1, 1999 in order to be considered  timely for purposes of Rule 14a-4.  The
persons  designated in the Company's proxy  statement and management  proxy card
will be granted discretionary authority with respect to any shareholder proposal
with respect to which the Ccompany does not receive timely notice.

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) No Current  Reports on Form 8-K were filed by the  Company
during the last quarter of the period covered by this report.


                                 Page 19 of 21

<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:    August 13, 1998                    By:/s/ John A. Kane
                                               ------------------
                                               John A. Kane,
                                               Vice President, Finance and
                                               Administration, Chief Financial
                                               Officer and Treasurer
                                               (Principal Financial and
                                               Accounting Officer)
                                
                                 Page 20 of 21

<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>

27                Financial Data Schedule                                 22

</TABLE>


                                 Page 21 of 21