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                                                            Exhibit 13.1


               SUNQUEST INFORMATION SYSTEMS, INC.
  Table of Contents for Financial Section of 1998 Annual Report
                                
                                
                                
Management's Discussion and Analysis               1

Report of Independent Auditors                    13

Consolidated Financial Statements and Notes       14

Selected Consolidated Financial Data              34

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              MANAGEMENT'S DISCUSSION AND ANALYSIS


Overview

     Sunquest Information Systems, Inc. (the "Company") designs,
develops, markets, installs and supports health care information
systems for large and mid-sized hospitals, clinics and other
facilities, including integrated delivery networks ("IDNs").  The
Company was established in 1979 and became a public company on
June 10, 1996, when it closed its initial offering to the public
of Common Stock.

     At December 31, 1998, the Company had an installed customer
base of more than 1,140 sites in the United States, Canada,
United Kingdom, Mexico, Saudi Arabia, Ireland and Denmark.  Total
revenues are derived from the licensing of software, the
provision of value-added services and the sale of related
hardware.  To date, the majority of the Company's revenues have
been derived from the sale of its laboratory information systems
("LISs") and related hardware, support and services.

     On November 26, 1996, the Company purchased all of the
outstanding stock of Antrim Corporation ("Antrim") from Antrim's
parent corporation, The Compucare Company, for $5.0 million in
cash in a transaction accounted for under the purchase method of
accounting.  The results of operations of Antrim have been
included in the Company's financial statements since the date of
acquisition.  See Note 1 of Notes to Consolidated Financial
Statements.

     On August 29, 1997, MSC Acquisition, Inc., a newly formed
subsidiary of the Company, purchased certain inpatient pharmacy
software systems comprising the PreciseCare Medication Management
System ("PreciseCare") from Medintell Systems Corporation
("Medintell"), for $1.4 million in cash and the assumption of
certain obligations and transition costs.  MSC Acquisition, Inc.
was subsequently renamed "Sunquest Pharmacy Information Systems,
Inc." ("Sunquest Pharmacy") and the product was renamed
"FlexiMed."  The addition of pharmacy systems is an important
component in the Company's strategy to be a "best-of-suite
vendor" in enterprise clinical departmental systems.  See Note 1
of Notes to Consolidated Financial Statements.

     On November 26, 1997, Sunquest Pharmacy entered into a
Software License Agreement ("Agreement") with MEDITrust
Healthcare Services, Inc. ("Meditrust") for an outpatient
pharmacy system for $750,000 in cash.  The Agreement grants the
Company a perpetual, fully paid-up, worldwide, non-exclusive
license to modify, interface, market, sublicense, support, copy
and otherwise use the software, including the source code and
object code. The Company plans to continue to develop and to
market these pharmacy systems through Sunquest Pharmacy.

     During 1997, the Company decided to refocus its technology
and development efforts on the integration of its suite of
laboratory, radiology and pharmacy systems, the Clinical Event
Manager rules-based alerts system and the Laboratory Data Network
system for medical laboratory consortia.  The Company reduced the
carrying value of IntelliCare software

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development costs by $2.4 million.  The after-tax effect was a reduction
to net income of $1.5 million, or $.10 per diluted share.  See Note 7 of
Notes to Consolidated Financial Statements.
     
     During the quarter ended June 30, 1998, the Company sold the
assets comprising its Managed Care Manager Payor ("MCM") software
product line to Monument Systems, Inc. ("Monument") for
approximately $1.1 million.  Monument assumed the existing
contracts and future support of customer installations.  The pre-
tax gain resulting from the sale, after associated write-offs,
was approximately $404,000.  The after-tax gain was approximately
$238,000, or $.02 per diluted share.  The sale of the MCM product
line is consistent with the Company's strategy to focus on its
clinical suite of products.

     Net income for 1998 and 1997 and pro forma net income for
1996 was $8.3 million, $2.8 million and $4.0 million,
respectively.  Diluted net income per share was $.54 in 1998 and
$.18 in 1997, and pro forma diluted net income per share was $.29
in 1996.  The effect of the previously described charges to
operations and gain on sale of assets on diluted net income per
share follows:

                                        Year Ended December 31,
                                       --------------------------
                                         1998     1997     1996
                                       -------- -------- --------
Diluted net income and pro forma net                             
  income per share excluding gain on
  sale of assets and charges to
  operations                              $.52   $  .35   $  .52
Gain on sale of assets                     .02        -        -
Acquired, in-process technology, net         -     (.07)    (.23)
  of tax
Capitalized software development                                 
  cost adjustments, net of tax
  provision                                  -     (.10)       -
                                          ----   ------   ------
                                          $.54   $  .18   $  .29
                                          ====   ======   ======

     Revenues from system sales include revenues from software
licenses, related hardware, relicensed software and resold
software.  Revenues from software licenses are generated from
contracts that grant the right to use the Company's software
products.  Hardware revenues are generated from sales of third-
party manufactured hardware which is typically sold in
conjunction with the Company's software.  Revenues from
relicensed software and resold software are generated from the
Company's licensing and sale of third-party software.  Support
and service revenues include revenues from installation, training
and documentation related to software license revenues,
consulting revenues, custom-programming revenues and revenues
associated with maintenance and support services.

     The sales cycle for the Company's LISs is typically nine to
18 months from initial contact to contract execution, and
depending upon the combination of products purchased and the
client's installation schedule, an installation typically takes
from eight to 15 months.  The sales cycle for the Company's
commercial and medical reference laboratory systems is typically
six to 12 months, and an installation typically takes from nine
to 12 months.  Revenues from the software portion of system sales
are recognized on the percentage-of-completion method and are

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determined based upon actual hours incurred related to total
estimated installation hours in accordance with Statement of
Position ("SOP") 97-2, "Software Revenue Recognition," and SOP 81-
1, "Accounting for Performance of Construction-Type and Certain
Production-Type Contracts," as amended.  Anticipated losses are
recorded in the earliest period in which such losses become
evident.  Revenues from the hardware portion of system sales are
recognized upon shipment.  Maintenance and support services are
provided under multi-year renewable agreements with revenues
recognized ratably over the term of the agreement.  Fees for
other services are recognized as the work is performed or on a
percentage-of-completion basis.

     At December 31, 1998, the Company had a total contract
backlog of $122.0 million, which consisted of $61.1 million of
system sales and $60.9 million of support and services.  At
December 31, 1997, total contract backlog was $99.5 million,
which consisted of $49.3 million of system sales and $50.2
million of support and services.  System sales backlog consists
of the unearned amounts of signed contracts which have not yet
been recognized as revenues.  Support and service backlog
consists primarily of contracted software support for a period of
12 months.  The Company is unable to predict accurately the
amount of backlog it expects to fill in any particular period,
since it adjusts the timing of installations to accommodate
clients' needs and since installations typically require eight to
15 months to complete.

     Capitalized software development costs are stated at the
lower of net amortized cost or net realizable value.  The Company
capitalizes software development costs incurred from the point of
technological feasibility until the product is ready for general
release to the public. Amortization of capitalized software costs
begins when the related product is available for general release
to customers and is provided for each product based on the
greater of the relationship of current year revenues of the
product to anticipated total revenues or the straight-line
amortization of such costs over a five-year period.


Year 2000 Compliance

     The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the
applicable year.  Any of the Company's software programs, whether
sold as products of the Company or used internally, may recognize
a date using "00" as the year 1900 rather than the Year 2000.
This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a
temporary inability to process transactions, send invoices, or
engage in similar normal business activities.

     Based on a current assessment, the Company believes that
virtually all of the current releases of its products are Year
2000 compliant, and with respect to those that are not, the
Company anticipates releasing Year 2000 compliant versions by the
end of the first quarter of 1999.  The Company plans to release a
Year 2000 compliant version of its IntelliCare software in
October of 1999 for the one customer using the IntelliCare
system.  The Company believes that the costs incurred to make its
products Year 2000 compliant will be immaterial.  The Company
plans to have all clients converted to Year 2000 compliant
versions of its products by October 1999.  Pursuant to contract
terms, clients are obligated to cooperate with the Company in the

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installation of system enhancements, including the current Year
2000 compliant versions.  As of December 31, 1998, approximately
94% of the Company's clients were using or installing Year 2000
compliant versions of its products.
     
     The Company is also assessing the Year 2000 readiness of its
third-party suppliers and business partners.  Although the
Company believes that these third-party suppliers and business
partners are taking appropriate action to ensure that their
products are, or will be, Year 2000 compliant, failure by such
suppliers and business partners to adequately address their Year
2000 readiness could affect the Company's business.  The Company
continues to review the Year 2000 readiness of its third-party
suppliers and business partners.
     
     Although the Company expects all of its products and systems
to be Year 2000 compliant and all clients to have installed Year
2000 compliant versions of its products before December 31, 1999,
it cannot predict with complete accuracy the outcome of its Year
2000 program.  If its Year 2000 program is not successful or if
the systems of suppliers and clients material to the Company fail
or malfunction in the Year 2000, the Company's business,
financial condition or results of operations may be adversely
affected.
     
     The Company has determined that a portion of software
programs developed by other vendors and utilized internally will
require upgrades to new versions to properly utilize dates beyond
December 31, 1999.  After reviewing the plans of these vendors,
the Company believes that the upgrades to such software programs
will be completed by the fourth quarter of 1999.  The cost of
Year 2000 compliant software related to systems developed by
other vendors and used internally is included in the related
software maintenance agreements.  The Company believes that
consulting costs incurred in accomplishing the installation of
Year 2000 compliant software will be immaterial.

     Efforts by clients to address their Year 2000 issues may
absorb a significant portion of their information technology
budgets in the near term and may cause them to either delay or
accelerate the purchase and implementation of new applications
and systems.  While these purchasing decisions may increase
demand for certain of the Company's products and services,
including its Year 2000 offerings, it could also decrease demand
for other offerings.  The outcome of these purchasing decisions
could affect the Company's revenues or change its revenue
patterns.

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Results of Operations

     The following table sets forth, for the periods indicated,
certain items from the Company's consolidated statements of
income expressed as a percentage of total revenues.


                                 Year Ended December 31, 
                              ----------------------------
                                1998      1997      1996    
                              --------  --------  --------
Revenues:                                                 
  System sales                  50.1 %    51.6 %    55.6 %
  Support and service           49.9      48.4      44.4   
                               -----     -----     -----
    Total revenues             100.0     100.0     100.0   
                               -----     -----     -----
Operating expenses:                                       
  Cost of system sales          22.7      25.4      24.8   
  Client services               27.3      26.8      22.7   
  Research and development      12.7      12.9      12.3   
  Sales and marketing           14.5      13.7      13.5   
  General and administrative    11.7      12.1      12.0   
  Gain on sale of assets        (0.3)        -         -   
  Capitalized software                                    
    development cost
    adjustments                    -       2.4         -   
  Acquired, in-process             
    technology                     -       1.2       4.0
                               -----     -----     -----
    Total operating expenses    88.6      94.5      89.3   
                               -----     -----     -----
Operating income                11.4       5.5      10.7   
Other income (expense):                                   
  Interest income                1.1       1.1       1.6   
  Interest expense              (0.9)     (1.2)     (1.7)   
  Other                            -      (0.3)     (0.1)   
                               -----     -----     -----
Income before income taxes      11.6       5.1      10.5   
Income tax provision:                                     
  Current year operations        4.7       2.4       3.4   
  Change in tax status             -         -       1.4   
                               -----     -----     -----
Net income                       6.9 %     2.7 %     5.7 %
                               =====     =====     =====
                                                         
Pro forma data (unaudited):
  Historical income               
    before income taxes            - %       - %    10.5 %
  Pro forma income tax               
    provision                      -         -       5.5
                               -----     -----     ----- 
  Pro forma net income             - %       - %     5.0 %
                               =====     =====     =====

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Comparison of Years Ended December 31, 1998 and December 31, 1997

     Revenues.  The Company's total revenues were $120.8 million
in 1998 compared to $102.3 million in 1997, an increase of $18.4
million, or 18.0%.  Revenues from system sales were $60.6 million
in 1998 compared to $52.8 million in 1997, an increase of $7.8
million, or 14.8%.  This increase was attributable to an increase
in installations of software and hardware to existing customers.
Revenues from support and service were $60.2 million in 1998
compared to $49.6 million in 1997, an increase of $10.7 million,
or 21.5%.  This increase was primarily attributable to the
Company's increased installed customer base and other services
for existing customers.

     Cost of System Sales.  Cost of system sales includes the
costs of computer hardware, relicensed software and resold
software purchased from third parties and amortization of
previously capitalized software development costs.  Cost of
system sales was $27.4 million in 1998 compared to $26.0 million
in 1997, an increase of $1.4 million, or 5.4%.  As a percentage
of total revenues, cost of system sales was 22.7% in 1998
compared to 25.4% in 1997.  The dollar increase was primarily
attributable to an increase in deliveries of resold operating
systems.  Amortization of previously capitalized software
development costs was $3.4 million for 1998 compared to $3.6
million for 1997, a decrease of $255,000, or 7.0%.  The decrease
in amortization was primarily attributable to the reduction in
carrying value of IntelliCare software in 1997 and decreased
amortization related to the clinical laboratory product,
partially offset by increased amortization of the Company's
pharmacy and reference laboratory products.

     Client Services.  Client services expenses include salaries
and expenses of product installation, support and consulting.
Client services expenses were $32.9 million in 1998 compared to
$27.4 million in 1997, an increase of $5.5 million, or 20.1%.  As
a percentage of total revenues, client services expenses were
27.3% in 1998 compared to 26.8% in 1997.  The dollar increase in
client services expenses was primarily attributable to additional
staff and outside consultants dedicated to support and
installation of the Company's systems and to providing consulting
services to customers.

     Research and Development.  Research and development expenses
include salaries and expenses related to development and
documentation of software systems reduced by capitalized software
development costs.  Research and development expenses were $15.3
million in 1998 compared to $13.2 million in 1997, an increase of
$2.1 million, or 15.6%.  As a percentage of total revenues,
research and development expenses were 12.7% in 1998 compared to
12.9% in 1997.  The dollar increase in research and development
expenses was primarily attributable to increased staff dedicated
to the development, enhancement and documentation of the
Company's clinical laboratory, reference laboratory and pharmacy
systems partially offset by decreased expenses and capitalization
related to the IntelliCare suite of products and the MCM product
line. The Company capitalized $3.1 million of its software
development costs in 1998 compared to $3.7 million in 1997, a
decrease of $514,000, or 14.0%.  The decrease in capitalized
software development costs was primarily attributable to the
discontinuation of development related to IntelliCare and the MCM
software product lines, partially offset by increased
capitalization for the clinical laboratory and pharmacy products.

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     Sales and Marketing.  Sales and marketing expenses include
salaries, commissions, advertising, trade show costs, and user
group costs related to the sale and marketing of the Company's
systems.  Sales and marketing expenses were $17.6 million in 1998
compared to $14.0 million in 1997, an increase of $3.5 million,
or 25.3%.  As a percentage of total revenues, sales and marketing
expenses were 14.5% in 1998 compared to 13.7% in 1997.  The
dollar increase was primarily attributable to increases in
commissions resulting from a 21.5% growth in sales bookings in
1998, additional sales staff and related travel costs for new
products and the European market.

     General and Administrative. General and administrative
expenses include salaries and expenses for the corporate
administration, finance, legal, human resources, corporate
education, facilities administration, internal systems and
internal purchasing departments as well as depreciation, profit
sharing, variable executive compensation, insurance and capital
lease amortization net of rental credit.  General and
administrative expenses were $14.2 million in 1998 compared to
$12.3 million in 1997, an increase of $1.9 million, or 15.0%.  As
a percentage of total revenues, general and administrative
expenses were 11.7% in 1998 compared to 12.1% in 1997.  The
dollar increase was primarily attributable to increases related
to depreciation expense resulting from additions of property and
equipment, additional employees, variable compensation, the
addition of Sunquest Pharmacy and contributions to the Company's
Profit Sharing Plan partially offset by decreased sales tax
accruals.

     Transition Costs.  For the year ended December 31, 1998, the
Company paid previously accrued transition costs established at
the time of the acquisition of Antrim of $1.5 million as compared
to $1.9 million paid in 1997.  These costs were primarily
associated with replacing certain Antrim software products with
Sunquest products and employee-related costs.  At December 31,
1998, $1.8 million remains accrued for these costs which will
substantially cover the remaining transition and be paid during
the next operating period.  In 1998, the Company also paid
transition costs related to the purchase of the PreciseCare
pharmacy software systems of  $163,000 compared to $217,000 paid
in 1997.  These costs were primarily employee-related costs and
professional services related to the purchase.

     Income Taxes.  Income taxes were $5.7 million in 1998
compared to $2.5 million in 1997, an increase of $3.2 million, or
129.6%.  This increase was primarily attributable to higher
taxable income in 1998 compared to 1997 partially offset by a
6.5% decrease in the Company's effective tax rate.  The decrease
in the effective tax rate is primarily the result of no acquired,
in-process technology being charged to operations during 1998.
At December 31, 1998, the Company had an operating loss for tax
purposes of approximately $3.3 million that was generated by
Antrim.  This amount can be carried forward and used to offset
Antrim's future taxable income.  This loss carry forward is
subject to limitations as to the amount and timing of its use.
Accordingly, a valuation allowance of $950,000 has been provided.
The minimum amount of future taxable income that would have to be
generated by Antrim to realize the loss carry forward of $3.3
million, tax-effected at $1.3 million and net of the $950,000
valuation allowance, would be approximately $840,000.  The
Company anticipates that future taxable

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income will be sufficient to realize the net operating loss carry forward.
See Note 9 of Notes to Consolidated Financial Statements.


Comparison of Years Ended December 31, 1997 and December 31, 1996

     Revenues.  The Company's total revenues were $102.3 million
in 1997 compared to $81.0 million in 1996, an increase of $21.3
million, or 26.3%.  Revenues from system sales were $52.8 million
in 1997 compared to $45.1 million in 1996, an increase of $7.7
million, or 17.1%.  This increase was primarily attributable to
the addition of Antrim, increases in installations of hardware
for existing customers and increases in installations of software
for existing and new customers. Revenues from support and service
were $49.6 million in 1997 compared to $35.9 million in 1996, an
increase of $13.6 million, or 38.0%.  This increase was primarily
attributable to the addition of Antrim, the Company's increased
installed customer base, and increases in consulting and custom
services.

     Cost of System Sales.  Cost of system sales was $26.0
million in 1997 compared to $20.1 million in 1996, an increase of
$6.0 million, or 29.7%.  As a percentage of total revenues, cost
of system sales was 25.4% in 1997 compared to 24.8% in 1996.  The
dollar increase was primarily attributable to the addition of
Antrim and increases in hardware and operating system deliveries.
Amortization of previously capitalized software development costs
was $3.6 million for 1997 compared to $2.2 million for 1996, an
increase of $1.4 million, or 65.4%.  This increase in
amortization was primarily attributable to the addition of Antrim
and to the licensing of third-party software.

     Client Services.  Client services expenses were $27.4
million in 1997 compared to $18.4 million in 1996, an increase of
$9.0 million, or 49.1%.  As a percentage of total revenues,
client services expenses were 26.8% in 1997 compared to 22.7% in
1996.  The dollar increase in client services expenses was
primarily attributable to the addition of Antrim, additional
staff dedicated to the support and installation of the Company's
systems and additional staff dedicated to providing consulting
services to customers.

     Research and Development.  Research and development expenses
were $13.2 million in 1997 compared to $10.0 million in 1996, an
increase of $3.3 million, or 32.6%.  As a percentage of total
revenues, research and development expenses were 12.9% in 1997
compared to 12.3% in 1996.  The dollar increase in research and
development expenses was attributable to additional staff
dedicated to the development of new releases of the laboratory
systems, the addition of Antrim, development costs related to the
new pharmacy products and to additional staff dedicated to the
evaluation and development of new technologies. The Company
capitalized $3.7 million of its software development costs in
1997 compared to $2.8 million in 1996, an increase of $877,000,
or 31.5%. This increase in capitalized software development costs
was primarily attributable to the addition of Antrim's product
lines.

     Sales and Marketing.  Sales and marketing expenses were
$14.0 million in 1997 compared to $10.9 million in 1996, an
increase of $3.1 million, or 28.6%.  As a percentage of

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total revenues, sales and marketing expenses were 13.7% in 1997
compared to 13.5% in 1996.  The dollar increase was primarily
attributable to the addition of Antrim, increased sales and
marketing staff, increased commissions resulting from a 28.6%
growth in sales bookings in 1997 and increased advertising and
promotional allowances.

     General and Administrative.  General and administrative
expenses were $12.3 million in 1997 compared to $9.8 million in
1996, an increase of $2.6 million, or 26.5%.  As a percentage of
total revenues, general and administrative expenses were 12.1% in
1997 compared to 12.0% in 1996.  The dollar increase was
primarily attributable to the addition of Antrim, increased
depreciation expense resulting from additions of property and
equipment, the addition of Sunquest Pharmacy and additional
employees and increased professional service costs related to the
Company's public status. These increases were partially offset by
decreased variable compensation relating to operating income
below expectations and increased rental income received from
leasing a portion of the building the Company purchased in
February 1997.

     Transition Costs.  For the year ended December 31, 1997, the
Company paid previously accrued transition costs established at
the time of the acquisition of Antrim of $1.9 million as compared
to $109,000 paid in 1996.  These costs were primarily associated
with replacing certain Antrim software products with Sunquest
products and employee costs and professional services related to
the acquisition.  In 1997, the Company also paid transition costs
related to the purchase of the PreciseCare pharmacy software
systems of $217,000.  These costs were also primarily associated
with employee costs and professional services related to the
purchase.

     Income Taxes.  Income taxes were $2.5 million in 1997
compared to $3.9 million in 1996, a decrease of $1.4 million, or
35.7%.  This decrease was primarily attributable to lower taxable
income in 1997 compared to 1996.


Liquidity and Capital Resources

     At December 31, 1998, the Company had cash, cash equivalents
and short-term investments of $34.3 million, which consisted of
cash of $7.0 million and short-term investments of $27.3 million.
This compares to cash and cash equivalents of $23.7 million at
December 31, 1997, an increase of $10.6 million.  Cash provided
by operating activities was $18.8 million, $11.2 million and $6.6
million in 1998, 1997 and 1996, respectively.

     As of December 31, 1998, the Company had net trade
receivables of $40.3 million which consisted of $25.0 million in
net billed trade receivables and $15.3 million in unbilled trade
receivables.  See Note 5 of Notes to Consolidated Financial
Statements.  At December 31, 1997, the Company had net trade
receivables of $36.5 million which consisted of $27.9 million in
net billed trade receivables and $8.6 million in unbilled trade
receivables.  Net trade receivables have increased by $3.8
million since December 31, 1997, with $6.7 million related to the
unbilled portion partially offset by a decrease in net billed
trade receivables of $2.9 million.  The unbilled receivables
represent revenue that has been recognized in accordance with the
percentage-of-completion accounting method, but which has not yet
been billed to customers under contractual

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milestone billings.  The Company believes that this increase in unbilled
receivables is primarily a result of increased revenues and the timing of
system sales and installations in the year.  Generally, the
unbilled amounts will be billed and collected within the
following twelve months.  The Company maintains an allowance for
doubtful accounts that it believes is adequate to cover potential
credit losses.  The average collection period, a rolling twelve-
month average, on net billed trade receivables was 69 days at
December 31, 1998 compared to 91 days at December 31, 1997.  Days
sales outstanding ("DSO") was 112 at December 31, 1998 compared
to 103 at September 30, 1998 and 129 at December 31, 1997.

     Cash used in investing activities was $34.7 million, $14.8
million and $7.7 million in 1998, 1997 and 1996, respectively.
During 1998, purchases of investments totaled $89.6 million and
proceeds from the maturity or sale of investments totaled $62.3
million.  Capitalized software development costs totaled $4.1
million.  Of this amount, $1.0 million was related to the second
payment under the Value Added Reseller ("VAR") agreement with
Dynamic Healthcare Technologies, Inc. ("Dynamic") for the license
of a software program known as CoPath Plus ("CoPath").  CoPath is
a computer clinical information system used in surgical
pathology, cytology and autopsy.  Purchases of property and
equipment totaled $2.6 million and consisted primarily of
purchases of computers, computer-related equipment, computer
software, office equipment and leasehold improvements.  Costs
related to acquisitions totaled $1.9 million.  Of this amount,
approximately $1.5 million was related to the payment of
previously accrued transition costs established at the time of
the acquisition of Antrim and was primarily associated with
replacing certain Antrim software products with Sunquest products
and employee-related costs.  In addition, the Company also paid
transition costs related to the purchase of the PreciseCare
software of approximately $163,000.  These costs were primarily
employee-related costs and professional services related to the
purchase.  The proceeds from the sale of assets consisted of $1.1
million from the sale of the MCM software product line to
Monument.

     Cash used in financing activities was $658,000 in 1998 and
$4.5 million in 1997.  Cash provided by financing activities was
$32.5 million in 1996.  During 1998, the Company made principal
payments on capital leases of $800,000.  In addition, the Company
issued 18,498 shares of Common Stock with net proceeds of
approximately $142,000 in connection with the Employee Stock
Purchase Plan.

     At December 31, 1998, working capital was $48.5 million, an
increase of $10.4 million from December 31, 1997.

     At December 31, 1998, the Company had a revolving line of
credit with a bank allowing the Company to borrow up to $10.0
million.  Any borrowings under the line of credit will bear
interest at the bank reference rate unless the Company elects a
fixed rate or certain variable rates contemplated by the
agreement.  All outstanding principal and interest under the line
of credit is due April 30, 1999 except for any amounts
outstanding under standby letters of credit which have a maximum
maturity of 365 days.  Borrowings under the line of credit are
secured by all of the Company's assets.  Approximately $440,000
of the line of credit is used to secure letters of credit and is
not available for immediate expenditure.  There were no
borrowings outstanding as of December 31, 1998.  See Note 8 of
Notes to Consolidated Financial Statements.

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     Other than the final payment of $1.0 million due in the
first quarter of 1999 related to the VAR agreement with Dynamic,
the Company has no significant purchase commitments at this time.
The Company continues to be actively involved in identifying and
evaluating potential acquisitions, which may result in the future
expenditure of funds.

     Management believes that existing cash, cash equivalents,
short-term investments, cash available under its revolving line
of credit and funds generated from operations will be sufficient
to meet operating requirements for at least the next twelve
months.

     To date, inflation has not had a material impact on the
Company's revenues or income, and the Company does not expect
inflation to have a material impact in the foreseeable future.


New Accounting Standards

     In October 1997, the Accounting Standards Executive
Committee ("AcSEC") of the American Institute of Certified Public
Accountants ("AICPA") issued SOP 97-2, "Software Revenue
Recognition."  The AcSEC amended this Statement of Position twice
during 1998.  The Company's revenue recognition policy is in
compliance with SOP 97-2, as subsequently amended.
     
     As of January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"), which requires businesses to disclose
comprehensive income and its components in general purpose
financial statements with reclassification of prior period
financial statements.  The adoption of SFAS No. 130 had no
significant impact on the Company's financial statements.

     In March 1998, the AICPA issued SOP 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal
Use."  SOP 98-1 requires companies to capitalize qualifying
computer software costs incurred during the application
development stage.  SOP 98-1 is effective for fiscal years
beginning after December 15, 1998 and permits early adoption.
The Company adopted SOP 98-1 in the first quarter of 1998.  The
adoption had no impact on net income, as the Company's policy was
materially consistent with the requirements of SOP 98-1.

     As of December 31, 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No.
131"), which redefines how operating segments are determined and
requires disclosure of certain financial and descriptive
information about a company's operating segments.  The adoption
of SFAS No. 131 had no impact on the Company's disclosure of its
historical data.

     Statements of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pensions and Other Postretirement
Benefits," and No. 133, "Accounting for Derivative Instruments
and Hedging Activities," currently have no impact on the
Company's financial statements.

                                  11
<PAGE>

Forward-Looking Statements

     This report, and other reports and communications to
shareholders, contains forward-looking statements, including
statements which contain words such as "will," "expects,"
"believes," "plans," "anticipates" and words of similar impact.
Certain risk factors, including but not limited to dependence on
LIS products, competition in the marketplace, year 2000 readiness
of the Company's products and of other vendors' products utilized
by the Company, purchase and installation decisions of customers,
pricing decisions of competitors, changes in regulatory
requirements, and product status and development risks and
uncertainties could cause actual results to differ materially
from such forward-looking statements.  These and other risks are
detailed in the Company's Securities and Exchange Commission
filings.

                                  12

<PAGE>



REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Shareholders
Sunquest Information Systems, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of
Sunquest Information Systems, Inc. and subsidiaries as of
December 31, 1998 and 1997 and the related consolidated
statements of income and comprehensive income, shareholders'
equity, and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the
responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.  We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Sunquest Information Systems, Inc. and
subsidiaries at December 31, 1998 and 1997 and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.



                                            /s/ Ernst & Young LLP
                                            ---------------------

Pittsburgh, Pennsylvania
February 5, 1999


                                  13

<PAGE>



               Sunquest Information Systems, Inc.
                   Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                             December 31,
                                        ----------------------
                                          1998          1997
                                        --------      --------
                                   (in thousands, except share data)
<S>                                     <C>           <C>             
                ASSETS                                     
Current assets:                                            
  Cash and cash equivalents               $7,057      $23,692
  Short-term investments                  27,283            -
  Receivables, less allowance for                          
    doubtful accounts of
    $2,045 in 1998 and $1,952 in 1997     40,302       36,547
  Other receivables                          314          392
  Inventory                                  566          665
  Prepaid expenses and other               1,227        1,109
  Deferred tax assets                      1,473        1,898
                                        --------      -------
      Total current assets                78,222       64,303
                                                           
Property and equipment, net of           
  accumulated depreciation                10,246       11,513
Capital leases from related party, net    
  of accumulated amortization              3,304        4,096
Software development costs, net of       
  accumulated amortization                11,146       12,252
Other receivables                            114          195
Deferred tax assets                            -          346
Intangibles, net of accumulated           
  amortization                             1,136        1,392
Other assets                                  76           76
                                        --------      -------
      Total assets                      $104,244      $94,173
                                        ========      =======
                                                           
 LIABILITIES AND SHAREHOLDERS' EQUITY                      
Current liabilities:                                       
  Accounts payable                        $3,721       $3,401
  Obligations under capital leases,         
    primarily from related party             917          800
  Accrued compensation and related        
    taxes                                  4,599        4,523
  Accrued expenses                         6,141        4,957
  Deferred revenue                        13,266       11,519
  Deferred income taxes                      115           13
  Other liabilities                        1,000        1,000
                                        --------      ------- 
      Total current liabilities           29,759       26,213
                                                           
Obligations under capital leases,        
  primarily from related party             4,163        5,080
Deferred income taxes                      2,128        1,167
Transition costs                               -          891
Other liabilities                              -        1,000
Commitments and contingencies (Note 11)        -            -
Shareholders' equity:                                      
  Preferred stock, 15,000,000 shares          
    authorized, no shares issued               -            -
  Common stock, no par value,                              
    35,000,000 shares authorized,
    15,394,460 and 15,375,962 shares      
    issued and outstanding                50,616       50,474
  Retained earnings                       17,692        9,403
  Accumulated other comprehensive loss      (114)         (55)
                                        --------      -------
      Total shareholders' equity          68,194       59,822
                                        --------      -------
          Total liabilities and       
            shareholders' equity        $104,244      $94,173
                                        ========      =======
</TABLE>

See accompanying notes.

                                  14

<PAGE>

               Sunquest Information Systems, Inc.
   Consolidated Statements of Income and Comprehensive Income

<TABLE>
<CAPTION>
                                
                                        Year Ended December 31,
                                     ----------------------------
                                       1998      1997      1996
                                     --------  --------  -------- 
                                 (in thousands, except per share data)
<S>                                   <C>       <C>       <C>
Revenues:                                                   
  System sales                        $60,549   $52,761   $45,059
  Support and service                  60,226    49,576    35,937
                                     --------  --------   -------
    Total revenues                    120,775   102,337    80,996
                                     --------  --------   -------
Operating expenses:                                         
  Cost of system sales                 27,424    26,015    20,056
  Client services                      32,945    27,438    18,401
  Research and development             15,309    13,244     9,988
  Sales and marketing                  17,556    14,007    10,896
  General and administrative           14,196    12,343     9,758
  Gain on sale of assets                 (404)        -         -
  Capitalized software                                      
    development cost adjustments            -     2,419         -
  Acquired, in-process technology           -     1,211     3,252
                                     --------  --------   -------
    Total operating expenses          107,026    96,677    72,351
                                     --------  --------   -------
Operating income                       13,749     5,660     8,645
Other income (expense):                                     
  Interest income                       1,348     1,154     1,345
  Interest expense                     (1,090)   (1,237)   (1,395)
  Other                                     2      (316)      (98)
                                     --------  --------   -------
Income before income taxes             14,009     5,261     8,497
Income tax provision:                                       
  Current year operations               5,720     2,491     2,755
  Change in tax status                      -         -     1,122
                                     --------  --------   -------
Net income                              8,289     2,770     4,620
                                                            
Other comprehensive (loss)                                  
  income, net of tax:
  Foreign currency translation            (64)     (148)      111
    adjustment
  Unrealized gain on                  
    securities available-for-sale           5         -         -
                                     --------  --------   -------
Comprehensive income                   $8,230    $2,622    $4,731
                                     ========  ========   =======
                                                            
Pro forma data (unaudited):                                 
  Historical income before                
    income taxes                       $    -    $    -    $8,497
  Pro forma income tax               
    provision                               -         -     4,459
                                     --------  --------   -------
  Pro forma net income                 $    -    $    -    $4,038
                                     ========  ========   =======
                                                            
Net income per common share:                                
  Basic and diluted                      $.54      $.18      $.29
                                     ========  ========   =======
                                                            
Weighted-average number of                                  
  common shares outstanding:                                       
  Basic                                15,383    15,369    13,919
                                     ========  ========   =======
  Diluted                              15,404    15,428    13,919
                                     ========  ========   =======

</TABLE>
See accompanying notes.


                                  15

<PAGE>

                                       Sunquest Information Systems, Inc.
                                Consolidated Statements of Shareholders' Equity
                                        
<TABLE>
<CAPTION>
                                                                                             Accumulated
                                                                                                Other        Total
                               Common Stock          Common Stock      Total Share Retained Comprehensive Shareholders'
                             Shares     Amount     Shares      Amount    Capital   Earnings (Loss) Income    Equity
                           ---------- ---------- ---------- ---------- ----------- -------- ------------- -------------
                                                         (in thousands, except share data)                            
<S>                        <C>         <C>              <C>      <C>         <C>   <C>             <C>         <C>
Balance at
 December 31, 1995         11,904,000  $      57          3      $   -       $  17 $ 20,645        $  (18)     $ 20,701
 S corporation
  distributions                     -          -          -          -           -  (18,931)            -       (18,931)
 Issuance of common                                                                          
   stock through public
   offering, net            3,450,000     50,146          -          -           -        -             -        50,146
 Transfer of outstanding
   stock of Sunquest Europa
   Limited and Sunquest
   Germany GmbH to the
   Company as a capital
   contribution                     -         17         (3)         -         (17)       -             -             -
 Issuance of common stock
   through Employee Stock
   Purchase Plan                8,587        120          -          -           -        -             -           120
 Foreign currency
   translation adjustment           -          -          -          -           -        -           111           111
 Net income                         -          -          -          -           -    4,620             -         4,620
                           ----------   --------    -------     ------       ----- --------        ------      --------
Balance at
 December 31, 1996         15,362,587     50,340          -          -           -    6,334            93        56,767
 S corporation
   distribution adjustment          -          -          -          -           -      299             -           299
 Issuance of common stock
   through Employee Stock
   Purchase Plan, net          13,375        134          -          -           -        -             -           134
 Foreign currency
   translation adjustment           -          -          -          -           -        -          (148)         (148)
 Net income                         -          -          -          -           -    2,770             -         2,770
                           ----------   --------    -------     ------       ----- --------        ------      --------
Balance at
 December 31, 1997         15,375,962     50,474          -          -           -    9,403           (55)       59,822
 Issuance of common stock 
   through Employee Stock
   Purchase Plan, net          18,498        142          -          -           -        -             -           142
 Foreign currency
   translation adjustment           -          -          -          -           -        -           (64)          (64)
 Net change in unrealized
   gain on securities
   available-for-sale               -          -          -          -           -        -             5             5
 Net income                         -          -          -          -           -    8,289             -         8,289
                           ----------   --------    -------     ------       ----- --------        ------      --------
Balance at
 December 31, 1998         15,394,460   $ 50,616          -      $   -       $   - $ 17,692         $(114)     $ 68,194
                           ==========   ========    =======     ======       ===== ========        ======      ========
</TABLE>

See accompanying notes.

                                  16

<PAGE>

                                
               Sunquest Information Systems, Inc.
              Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                      Year Ended December 31,
                                                    ----------------------------
                                                      1998      1997      1996
                                                    --------  --------  --------  
                                                           (in thousands)
<S>                                                  <C>       <C>       <C>                            
Cash flows from operating activities:
  Net income                                          $8,289    $2,770    $4,620
  Adjustments to reconcile net income to net cash                             
    provided by operating activities:
    Depreciation and amortization                      8,108     7,773     5,077
    Capitalized software development            
      cost adjustments                                     -     2,419         -
    Acquired, in-process technology                        -     1,211     3,252
    Loss on disposition of equipment                       -        10       102
    Bad debt expense                                     670     1,125       506
    Deferred revenue                                   1,811      (395)    1,627
    Deferred income taxes                              1,830     1,087       347
    Gain on sale of assets                              (404)        -         -
  Changes in operating assets and                              
    liabilities, net of acquisitions:
    Receivables                                       (4,831)   (6,822)   (9,860)
    Inventory                                             27     1,178      (107)         
    Prepaid expenses and other                          (118)     (118)      (48)
    Other assets                                         159     1,347      (107)
    Accounts payable                                     320       568      (245)
    Accrued compensation and related taxes                76      (160)    1,007
    Other accrued expenses                             2,896      (771)      463
                                                     -------   -------   -------
        Net cash provided by operating activities     18,833    11,222     6,634
                                                     -------   -------   -------
                                                               
Cash flows from investing activities:
  Acquisition of Antrim Corporation,                           
    net of cash acquired                                   -        13    (4,493)
  Purchase of PreciseCare Pharmacy System                  -    (1,410)        -
  Repayment of notes receivable to related party           -         -     3,271
  Purchase of property and equipment                  (2,559)   (4,931)   (3,701)
  Costs related to acquisitions                       (1,894)   (3,103)        -
  Capitalized software development costs              (4,148)   (5,412)   (2,785)
  Purchase of investments                            (89,594)        -         -         
  Proceeds from sale or maturity of investments       62,319         -         -
  Proceeds from sale of assets                         1,130         -         -
                                                     -------   -------   -------
        Net cash used in investing activities        (34,746)  (14,843)   (7,708)
                                                     -------   -------   -------
                                                               
Cash flows from financing activities:
  Net repayments on line of credit                         -         -    (1,900)
  Principal payments on debt                               -      (289)     (297)
  Principal payments on capitalized leases,
    primarily from related party                        (800)     (694)     (516)
  Net proceeds from issuance of stock                    142       134    50,266
  S corporation distribution                               -    (3,601)  (15,031)
                                                     -------   -------   -------
        Net cash (used in) provided                       
          by financing activities                       (658)   (4,450)   32,522
                                                     -------   -------   -------                       
Foreign currency translation adjustment                  (64)     (148)      111
                                                     -------   -------   -------
        Net (decrease) increase in                             
          cash and cash equivalents                  (16,635)   (8,219)   31,559
Cash and cash equivalents at beginning of year        23,692    31,911       352
                                                     -------   -------   -------
Cash and cash equivalents at end of year              $7,057   $23,692   $31,911
                                                     =======   =======   =======
                                                               
Supplemental disclosure of cash flow information:
  Cash paid for income taxes                          $2,550    $2,325    $3,306
  Cash paid for interest                              $   15    $   53    $   92
                                                               
Supplemental disclosure of non cash investing and
  financing activities:                                        
  Disposal of property and equipment                  $3,768    $2,543    $1,206
  Debt related to Dynamic Agreement                   $    -    $2,000    $    -
  Capitalized software development cost adjustments   $    -    $3,542    $    -
  Dividend declared but not paid                      $    -    $    -    $3,900

</TABLE>

See accompanying notes.

                                  17

<PAGE>

               SUNQUEST INFORMATION SYSTEMS,  INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
                        December 31, 1998
                                
1.   Significant Accounting Policies
------------------------------------

     Nature of Business

     Sunquest Information Systems, Inc. ("the Company") designs,
develops, markets, installs and supports health care information
systems for large and mid-sized hospitals, clinics and other
health care facilities in the United States, Canada, United
Kingdom, Mexico, Saudi Arabia, Ireland and Denmark.  Total
revenues are derived from the licensing of software, the
provision of value-added services and the sale of related
hardware.  To date, the Company has derived the majority of its
revenues from sales of laboratory information systems ("LISs")
and related implementation and support services in the United
States.  The Company expects that it will continue to derive a
significant portion of its total revenues for the foreseeable
future from sales of LISs and related implementation and support
services.

     Principles of Consolidation

     Effective with the initial public offering (Note 2), the
consolidated financial statements include the accounts of the
Company, Sunquest Europa Limited ("Sunquest Europa") and Sunquest
Germany GmbH ("Sunquest Germany").  Antrim Corporation ("Antrim")
was acquired on November 26, 1996.  On August 29, 1997, the
Company purchased the PreciseCare Medication Management System
("PreciseCare") and formed a wholly owned subsidiary, Sunquest
Pharmacy Information Systems, Inc. ("Sunquest Pharmacy").  All
transactions between the Company and Sunquest Europa, Sunquest
Germany, Antrim and Sunquest Pharmacy have been eliminated in
preparing the consolidated financial statements.  Prior to the
initial public offering, the financial statements of the Company,
Sunquest Europa and Sunquest Germany were combined for
presentation purposes because these entities were under common
control.

     Use of Estimates

     The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period.  Actual results could
differ from those estimates.

     Revenue Recognition

     Revenues for the proprietary software, training and
installation portion of system sales are recognized using the
percentage-of-completion method and are determined based upon
actual

                                  18

<PAGE>

hours incurred related to total estimated installation
hours in accordance with Statement of Position ("SOP") 97-2,
"Software Revenue Recognition," and SOP 81-1, "Accounting for
Performance of Construction-Type and Certain Production-Type
Contracts," as amended.  Anticipated losses are recorded in the
earliest period in which such losses become evident.

     Revenues for the hardware portion of system sales are
recognized upon shipment.  Support and maintenance fees are
recognized ratably over the contract period as the related costs
are incurred.  Revenues for other services are recognized as the
services are rendered.

     Customer payment terms vary and are typically different from
the revenues recognized.  Revenues recognized in advance of
billings are classified with current assets as unbilled
receivables and are included in the balance sheet as receivables.
Billings recognized in advance of revenues are classified with
current liabilities as deferred revenue.

     Software Development Costs

     Software development costs incurred internally are expensed
as research and development until the technological feasibility
of the newly designed product is established.  Thereafter, all
software development costs are capitalized until the product is
ready for general release to the public.  Capitalized software
development costs are stated at the lower of unamortized cost or
net realizable value.  Net realizable value relating to a
particular software product is assessed based on anticipated
gross margins applicable to sales of the product in future
periods.  Amortization of capitalized software development costs
begins when the related product is available for general release
to clients and is provided for each product based on the greater
of the relationship of current year revenues of the product to
anticipated total revenues or the straight-line amortization of
such costs over a five-year period.  Historically, the straight-
line approach has produced the greater amortization amount.

     Cash and Cash Equivalents

     The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.  Cash equivalents are stated at cost, which
approximates market value.

      Investment Securities

     The Company accounts for investment securities based on
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," ("SFAS
No. 115").  SFAS No. 115 provides the accounting and reporting
requirements for investments in securities that have readily
determinable fair values and for all investments in debt
securities.  At December 31, 1998, all of the Company's
investments in debt securities have been classified as available-
for-sale securities.  Available-for-sale securities are carried
at fair value with net unrealized gains and losses on such
securities, net of tax, reported as a component of shareholders'
equity and associated changes as an element of comprehensive
income.  See Note 3 of Notes to Consolidated Financial
Statements.

                                 19

<PAGE>

      Inventory

     Inventory consists primarily of computer hardware held for
resale and is recorded at the lower of cost (first-in, first-out)
or market.

     Property and Equipment

     Property and equipment are recorded at cost.  Depreciation
is provided principally on the straight-line basis over estimated
useful lives of three or five years for equipment and software
and five or seven years for furniture and fixtures. Leasehold
improvements are depreciated over the estimated useful life of
the asset or the term of the lease, whichever is less.

     Income Taxes

     The Company elected on January 1, 1990 to be taxed under
Subchapter S of the Internal Revenue Code of 1986, as amended,
and was treated as an S corporation in states where Sunquest was
qualified to do business.  As an S corporation, the Company's
shareholders were responsible for any federal and state income
taxes resulting from the Company's taxable income.

     Accordingly, the 1996 financial statements prior to the
initial public offering effective date do not include a provision
for federal or certain state income taxes.  The unaudited pro
forma income tax provision for 1996 represents federal and the
additional state income tax expense that would have been required
had the Company not made the S corporation election at an
estimated 43% tax rate.  The S corporation election was
terminated on May 30, 1996.  This change in tax status, which
transpired just prior to the initial public offering of the
Company's stock in the second quarter of 1996, resulted in the
Company recording a $1,122,000 tax provision for deferred taxes
associated with previously untaxed temporary differences.

      Intangibles/Acquisitions

     Certain intangible assets were acquired in connection with
the purchase of the PreciseCare software and the acquisition of
Antrim.  These acquisitions were accounted for as purchases.
Total consideration for PreciseCare and Antrim was $1,410,000 and
$5,000,000, respectively, plus assumed obligations in both
acquisitions.  These assets include in-process technology related
to the purchase of the PreciseCare software and the Antrim
acquisition, and assembled work force, trademark and trade names
and customer-related intangibles related to the Antrim
acquisition.  The in-process technology acquired of $1,265,000,
or $.07 per diluted share, related to the purchase of the
PreciseCare software in the third quarter of 1997 and the in-
process technology acquired of $3,252,000, or $.23 per diluted
share, related to the Antrim acquisition in the fourth quarter of
1996 were charged to operations as the underlying products had
not reached technological feasibility. The remaining intangible
assets related to the Antrim acquisition are being amortized over
their remaining useful lives of five and seven years.
Amortization expense related to these intangibles for the years
ended December 31, 1998, 1997 and 1996 was $256,000, $266,000 and
$29,000, respectively, and accumulated amortization was $551,000,
$295,000 and $29,000, respectively.

                                 20

<PAGE>

     The following unaudited pro forma data presents the results
of operations as if the Antrim acquisition had occurred on
January 1, 1996.  This summary is provided for information
purposes only and does not necessarily reflect the actual results
that would have occurred had the acquisition been made on that
date or of results that may occur in the future.

                                        1996
                                   --------------
                                   (in thousands)
Total revenues                        $96,152
Net income                              1,799
Pro forma net income                    1,217
Pro forma basic and diluted net           .09
income per share

      Stock-Based Compensation

     In 1996, the Company adopted the disclosure provisions of
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation"  ("SFAS No. 123").  SFAS No. 123
permits the Company to continue accounting for stock-based
compensation as set forth in Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion
No. 25"), provided the Company discloses the pro forma effect on
net income and earnings per share of adopting the full provisions
of SFAS No. 123.  Accordingly, the Company continues to account
for stock-based compensation under APB Opinion No. 25 and has
provided the required pro forma disclosures.  See Note 13 of
Notes to Consolidated Financial Statements.

      Impact of Recently Issued Accounting Standards

     In October 1997, the Accounting Standards Executive
Committee ("AcSEC") of the American Institute of Certified Public
Accountants issued SOP 97-2, "Software Revenue Recognition."  The
AcSEC amended this Statement of Position twice during 1998.  The
Company's revenue recognition policy is in compliance with SOP 97-
2, as subsequently amended.

     As of January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"), which requires businesses to disclose
comprehensive income and its components in general purpose
financial statements with reclassification of prior period
financial statements.  The adoption of SFAS No. 130 had no
significant impact on the Company's financial statements.

     In March 1998, the American Institute of Certified Public
Accountants issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use."  SOP
98-1 requires companies to capitalize qualifying computer
software costs incurred during the application development stage.
SOP 98-1 is effective for fiscal years beginning after December
15, 1998 and permits early adoption.  The Company adopted SOP 98-1
in the first quarter of

                                 21

<PAGE>


1998.  The adoption had no impact on net income, as the Company's policy
was materially consistent with the requirements of SOP 98-1.

     As of December 31, 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No.
131"), which redefines how operating segments are determined and
requires disclosure of certain financial and descriptive
information about a company's operating segments.  The adoption
of SFAS No. 131 had no impact on the Company's disclosure of its
historical data.

     Statements of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pensions and Other Postretirement
Benefits," and No. 133, "Accounting for Derivative Instruments
and Hedging Activities," currently have no impact on the
Company's financial statements.


2.   Initial Public Offering
----------------------------

     On June 10, 1996, the Company completed its initial offering
of stock to the public.  A total of 3,450,000 shares of Common
Stock were sold for net proceeds to the Company of approximately
$50,146,000, after deducting expenses of the offering of
approximately $1,190,000 and underwriters' discounts and
commissions of approximately $3,864,000.  Distributions of
previously taxed S corporation earnings of $15,031,000 and
$3,601,000 were made in 1996 and 1997, respectively, in
connection with going public.


3.   Investments
----------------

     The following is a summary of securities available-for-sale
at December 31, 1998:
  
                                          Gross        
                                       Unrealized    Estimated
                            Cost          Gain       Fair Value
                          ---------  --------------  ----------
                                    (in thousands)
Tax-exempt Municipals       $20,269          $    8     $20,277
Short-term Demand Notes       7,006               -       7,006
                            -------          ------     -------
  Total                     $27,275          $    8     $27,283
                            =======          ======     =======
  
     At December 31, 1998, unrealized gains totaled $8,413 and
are reflected, net of tax, in shareholders' equity and
comprehensive income.

                                  22

<PAGE>
         
     The amortized cost and estimated fair value of debt
securities at December 31, 1998, by contractual maturity, are
shown below.
     
                                       Estimated
                         Cost          Fair Value
                       --------        ----------
                            (in thousands)
Within one year         $ 9,175           $ 9,183
One to five years         2,400             2,400
Five to ten years         4,000             4,000
Over ten years           11,700            11,700
                        -------           -------
  Total                 $27,275           $27,283
                        =======           =======


4.   Net Income Per Share
-------------------------

     The following table sets forth the computation of basic and
diluted net income per share:

                                           Year Ended December 31,
                                   ---------------------------------------
                                      1998          1997           1996
Numerator for basic and            ----------    ----------     ----------     
  diluted net income per share:                                         
  Net income and pro
  forma net income                 $8,289,000    $2,770,000     $4,038,000
                                   ==========    ==========     ==========
                                                            
Denominator:                                                
Denominator for basic net
  income and pro forma net                                  
  income per share --
  weighted-average shares          15,382,508    15,368,771     13,918,693
Effect of diluted securities:
  Stock options                        21,950        59,553            116      
                                   ----------    ----------     ----------
Denominator for diluted                                  
  net income and pro forma
  net income per share --
  adjusted weighted-
  average shares                   15,404,458    15,428,324     13,918,809
                                   ==========    ==========     ==========
                                                            
Basic net income and pro                                  
  forma net income per share             $.54          $.18           $.29
                                         ====          ====           ====
Diluted net income and pro                                  
  forma net income per share             $.54          $.18           $.29
                                         ====          ====           ====
 

     Options to purchase 920,473, 22,775 and 707,454 shares of
common stock were outstanding at December 31, 1998, 1997 and
1996, respectively, but were not included in the computation of
diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares
and, therefore, the effect would be antidilutive.

                                  23

<PAGE>


5.   Receivables
----------------

     Receivables consist of the following:

                                     December 31,
                                  ------------------
                                    1998      1997
                                  --------  --------
                                    (in thousands)
Billed receivables                 $27,062   $29,900
Unbilled receivables                15,285     8,599
                                   -------   -------
                                    42,347    38,499
Allowance for doubtful accounts     (2,045)   (1,952)
                                   -------   -------
  Total receivables                $40,302   $36,547
                                   =======   =======
                       

     Unbilled receivables represent recorded revenue that is
billable by the Company at future dates based on contractual
payment terms.

     Substantially all receivables are derived from sales and
related support and maintenance of the Company's clinical
information systems to health care providers located throughout
the United States and in certain foreign countries.  Included in
receivables at December 31, 1998 and 1997 are amounts due from
European health care providers of approximately $1,478,000 and
$1,586,000, respectively.  Total revenues include European
revenues of $1,312,000 and $1,612,000 for the years ended
December 31, 1998 and 1997, respectively.

     Credit is extended based on an evaluation of the customer's
financial condition and generally collateral is not required.
The provision for bad debt expense recognized in 1998, 1997 and
1996 was $670,000, $1,125,000 and $506,000, respectively.  During
1998, 1997 and 1996, $577,000, $2,616,000 and $185,000,
respectively, of receivables were charged against the allowance.

     The substantial charge against the allowance in 1997 was
primarily due to writing off Antrim's receivables that had been
reduced by a valuation reserve at the time of the acquisition.


                                  24

<PAGE>


6.  Property and Equipment
--------------------------

     Property and equipment consist of the following:

                                          December 31,
                                      -------------------
                                        1998       1997
                                      --------   --------
                                         (in thousands)
Building                               $ 2,000    $ 2,000
Land                                       257        257
Computers and software                   9,355     10,536
Furniture and fixtures                   1,379      1,815
Leasehold improvements                   3,865      3,610
Other equipment and vehicles               262        286
                                       -------    -------
                                        17,118     18,504
Accumulated depreciation                (6,872)    (6,991)
                                       -------    -------
  Total property and equipment, net    $10,246    $11,513
                                       =======    =======

     Depreciation expense for the years ended December 31, 1998,
1997 and 1996 was approximately $3,605,000, $3,005,000 and
$2,059,000, respectively.


7.  Capitalized Software Development Costs
------------------------------------------

     During the years ended December 31, 1998, 1997 and 1996, the
Company capitalized $3,148,000, $3,662,000 and $2,785,000,
respectively, of total software development costs of $18,457,000,
$16,906,000 and $12,773,000, respectively.  Amortization expense
related to capitalized software development costs for the years
ended December 31, 1998, 1997 and 1996 was $3,364,000, $3,619,000
and $2,188,000, respectively, and accumulated amortization was
$16,350,000, $13,105,000 and $10,609,000, respectively.

     During the third and fourth quarters of 1997, the Company
reduced the carrying value of IntelliCare software development
costs by $1,529,000 and $890,000, respectively. The third quarter
adjustment was related to certain modules incorporated into the
Company's IntelliCare suite of products that had not generated
sufficient sales to justify continued capitalization.  The fourth
quarter adjustment was related to the Company's decision to
discontinue the sale of the IntelliCare suite of products as an
enterprise-wide computerized patient record solution and to
discontinue the development of a nurse clinical documentation
system.  The after-tax effect of both the third and fourth
quarter charges to operations was a reduction to net income of
$1,451,000, or $.10 per diluted share.

                                  25

<PAGE>


8.  Line of Credit
------------------

     On December 30, 1997, the Company entered into a $10,000,000
line of credit agreement with the Bank of America National Trust
and Savings Association ("Bank of America").  Unless the Company
elects one of the optional interest rates (the "Optional Rates"),
the interest rate is the reference rate as announced from time to
time by the Bank of America (the "Bank of America Rate").

     At December 31, 1998, the Optional Rates and the Bank of
America Rate ranged from 6.213% to 7.750%.  All outstanding
principal and interest under the line of credit are due April 30,
1999 except for any amounts under the line of credit outstanding
under financing standby letters of credit which have a maximum
maturity of 365 days.  Amounts borrowed under the line of credit
are secured by all of the Company's assets.  Approximately
$440,000 of the line of credit is used to secure letters of
credit and is not available for immediate expenditure.  The
amount of letters of credit outstanding at any one time may not
exceed $5,000,000.

     The line of credit contains requirements as to minimum
levels of working capital, net worth and cash flow and places
certain restrictions on new debt, acquisitions, capital
expenditures and loans to related parties.  The agreement
prohibits the payment of any capital distributions or dividends.

     There were no borrowings outstanding as of December 31, 1998
and 1997 under the line of credit.


9.  Income Taxes
----------------

     The provision for income taxes, reconciliation of income tax
expense and components of deferred tax assets and liabilities are
set forth below.

     Provision for Income Taxes

                                        Year Ended December 31,
                                      ----------------------------
                                        1998      1997      1996
                                      --------  --------  --------  
                                             (in thousands)
Current tax expense:                                
  Federal                               $3,223    $1,107    $1,928
  State                                    813       297       480
                                        ------    ------    ------
      Total current tax expense          4,036     1,404     2,408
                                        ------    ------    ------
Deferred tax expense:                                        
  Federal                                1,449     1,057       211
  State                                    235        30       136
  Change in tax status                       -         -     1,122
                                        ------    ------    ------
      Total deferred tax expense         1,684     1,087     1,469
                                        ------    ------    ------
      Total income tax expense          $5,720    $2,491    $3,877
                                        ======    ======    ======

                                  26

<PAGE>

     Reconciliation of Income Tax Expense

                                          Year Ended December 31,
                                       ----------------------------
                                         1998      1997      1996
                                       --------  --------  --------
                                              (in thousands)
Income tax provision at the
  statutory rate                         $4,763    $1,871    $2,974
Increases (decreases):                                       
  State income taxes                        647       185       680
  Foreign taxes                             105         -         -
  Deferred taxes attributable to
    conversion from S corporation             -         -     1,122
  Acquired, in-process technology             -       500     1,138
  Taxes absorbed by the shareholders
     of the Company prior to
     conversion from S corporation            -         -    (1,725)
  Other                                     205       (65)     (312)
                                         ------    ------    ------
        Total income tax expense         $5,720    $2,491    $3,877
                                         ======    ======    ======


     Components of Deferred Tax Assets and Liabilities

                                                December 31,
                                            --------------------             
                                              1998        1997
                                            --------    --------
                                               (in thousands)
Deferred tax assets:                               
  Net operating loss carry forwards acquired  $1,282      $1,389
  Transition costs accruals                      840       1,238
  Capital leases                                 673         867
  Vacation and compensation accruals             570         754
  Bad debt allowance                             663         737
  Deferred revenue                               195         437
  Accrued expenses                                25          29
  Other                                          693         582
                                              ------      ------
      Total deferred tax assets                4,941       6,033
                                              ------      ------
Deferred tax liabilities:                          
   Book basis in excess of tax basis:
    Software development                       3,732       3,308
    Acquired intangibles                         438         527
    Fixed assets                                 493         184
    Other                                         98           -
                                              ------      ------
      Total deferred tax liabilities           4,761       4,019
                                              ------      ------    
Less: valuation allowance                       (950)       (950)
                                              ------      ------
      Net deferred tax (liabilities) assets    ($770)     $1,064
                                              ======      ======

                                  27

<PAGE>

     The Company has net operating losses of approximately
$3,300,000 that were generated by Antrim.  This amount can be
carried forward and used to offset Antrim's future taxable
income.  The loss carry forward is subject to limitations as to
the amount and timing of its use. Accordingly, a valuation
allowance of $950,000 has been provided.  The minimum amount of
future taxable income that would have to be generated by Antrim
to realize the loss carry forward of $3,300,000, tax-effected at
$1,282,000 and net of the $950,000 valuation allowance, would be
approximately $840,000.  The valuation allowance will be treated
as a reduction to goodwill and other Antrim intangibles in the
event the full benefit of the net operating loss is realized. The
net operating loss carry forward will expire in the years 2010
and 2011.
     

10.  Leases
-----------

     The Company leases two buildings from Any Travel, Inc. ("Any
Travel"), an affiliated entity, under capital leases.  The
affiliation is through common ownership of the Company and Any
Travel.  The Company also leases certain buildings and equipment
from third parties under noncancelable lease arrangements that
may be adjusted for increases in maintenance and insurance costs
and the consumer price index.  These capital and operating leases
expire in various years through May 2004 and may be renewed for
periods ranging from one to five years.

     Amortization of leased assets of $883,000 is included in
depreciation and amortization expense.

     Future minimum payments under capital leases and
noncancelable operating leases with initial terms of one year or
more consisted of the following at December 31, 1998:

                                  Capital      Operating
                                  Leases        Leases
                                -----------  -------------
                                      (in thousands)
1999                                $2,099         $1,144
2000                                 2,066            902
2001                                 2,066            435
2002                                 1,378            100
2003                                   885            108
Thereafter                             295              -
                                    ------         ------
Total minimum lease payments         8,789         $2,689
                                                   ======
Amounts representing interest        3,709            
                                    ------
  Present value of net minimum                    
    lease payments (including
    current portion of $917)        $5,080            
                                    ======

     At December 31, 1998, aggregate future minimum rental
payments to be received under noncancelable leases and subleases
were approximately $1,210,000.

                                  28

<PAGE>

     Rental expense for the years ended December 31, 1998, 1997
and 1996 was approximately $1,227,000, $1,158,000 and $474,000,
respectively.


11.  Commitments and Contingencies
----------------------------------

     The Company has granted liens on all of its assets to a
vendor to secure amounts due for purchases of hardware and other
equipment.


12.  Related Party Transactions
-------------------------------

     During 1996, the Company received management fees from an
affiliate of $240,000.  In December 1996, the affiliate sold its
assets and discontinued business.  The Company did not receive
any management fees from this affiliate during 1998 and 1997.

     As of September 1, 1995, the Company purchased land and a
building from related parties for $380,000.  The purchase was
financed through the issuance of a 7.0% demand note to the
affiliate from whom the related parties had borrowed the money to
purchase the property.  This note was paid in full in March 1996.


13.  Employee Benefit Plans
---------------------------

     Profit Sharing Plan

     The Company has a Profit Sharing Plan covering substantially
all of its employees.  Under provisions of the plan, participants
may contribute up to 12% of their eligible compensation to the
plan and the Company can make discretionary contributions to the
plan.  Effective January 1, 1998, the Company began matching 100%
of up to the first 3% of employee contributions and the vesting
period was reduced from five years to three years.  Matching
contributions were $912,000 in 1998.  The Company incurred
expenses of approximately $704,000 and $729,000 for the years
ended December 31, 1997 and 1996, respectively, related to this
plan.

     Employee Stock Purchase Plan

     The Employee Stock Purchase Plan authorizes the sale of up
to 450,000 shares of Common Stock to substantially all employees
of the Company and its subsidiaries.  Offerings under the plan
commence on the first day of each calendar quarter and end on the
last day of the same calendar quarter at a purchase price that is
equal to 90% of the last sale price of the Common Stock, as
reported on the National Association of Security Dealers, Inc.
Automated Quotation System ("Nasdaq"), on the commencement date
of the offering.  During 1998, 1997 and 1996, 18,498, 13,375 and
8,587 shares, respectively, of Common Stock were issued under the
plan for net proceeds to the Company of $142,000, $134,000 and
$120,000, respectively.  The weighted-average fair value of
shares sold under the Employee Stock Purchase Plan was

                                  29

<PAGE>

$2.08 in 1998, $2.79 in 1997 and $4.03 in 1996.  These fair values were
estimated using the Black-Scholes option pricing model with the
following weighted-average assumptions for 1998, 1997 and 1996,
respectively: risk-free interest rate of 5.06%, 5.00% and 5.00%;
dividend yield of 0%; volatility factor of the expected market
price of the Company's Common Stock of .62, .62 and .79; and a
weighted-average expected life of the options of .25 years.

     Stock Incentive Plan

     The Stock Incentive Plan of 1996, as amended, authorizes the
issuance of up to 3,800,000 shares of Common Stock pursuant to
stock options or other awards granted to employees and other
eligible persons at prices not less than the fair market value of
the stock at the date of grant.  All options granted have ten-
year terms and become exercisable as specified in the stock
option agreements. The plan will expire in March 2006.

     The Company has complied with the pro forma requirements of
SFAS No. 123 for those companies which choose not to account for
the effects of stock-based compensation in the financial
statements under SFAS No. 123.  The fair value of these options
was estimated at the dates of grant using the Black-Scholes
option pricing model with the following weighted-average
assumptions for 1998, 1997 and 1996, respectively: risk-free
interest rate of 5.24%, 6.54% and 6.52%; dividend yield of 0%;
volatility factor of the expected market price of the Company's
Common Stock of .64, .61 and .62; and a weighted-average expected
life of the options of 4.3, 4.1 and 4.9 years.

     The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable.  In addition,
option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's options under the Employee Stock Purchase
Plan and the Stock Incentive Plan of 1996, as amended, have
characteristics significantly different from those of traded
options and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's
opinion, the Black-Scholes option valuation model does not
necessarily provide a reliable measure of the fair value of its
employee stock options.

                                 30

<PAGE>

     For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options'
vesting periods.  The Company's pro forma information follows:

                                       Year Ended December 31,
                                     ----------------------------
                                       1998      1997      1996
                                     --------  --------  --------
                                 (in  thousands, except per share data)
Net income - as reported               $8,289    $2,770    $4,038
Pro forma net income                    7,105     1,393     3,469
Net income per share - as reported:
  Basic and diluted                       .54       .18       .29
Pro forma net income per share:
  Basic and diluted                       .46       .09       .25

     
     A summary of the Company's stock option activity and related
information for the years ended December 31, 1998, 1997 and 1996
follows:
  
                                                Weighted-Average
                                    Options      Exercise Price
                                  -----------   ----------------
Balance - December 31, 1995                 -        $     -
Granted                               821,217        $ 15.95
Exercised                                   -        $     -
Forfeited                             (77,656)       $ 16.00
                                   ----------
Balance - December 31, 1996           743,561        $ 15.95
Granted                             1,409,593        $ 10.85
Exercised                                   -        $     -
Forfeited                            (985,550)       $ 15.11
                                   ----------
Balance - December  31, 1997        1,167,604        $ 10.50
Granted                               303,760        $ 10.42
Exercised                                   -        $     -
Forfeited                            (320,731)       $ 10.71
                                   ----------
Balance - December  31, 1998        1,150,633        $ 10.42
                                   ==========
Exercisable at December 31, 1998      284,201        $ 10.12
                                   ==========
Exercisable at December 31, 1997       51,240        $ 10.50
                                   ==========
Exercisable at December 31, 1996            -        $     -
                                   ==========
Reserved for Future Options         2,649,367
                                   ==========           

     The weighted-average fair value of options granted during
1998, 1997 and 1996 was $5.67, $5.72 and $9.28, respectively.

     Exercise prices for options outstanding as of December 31,
1998 ranged from $7.1875 to $15.1875.  The weighted-average
remaining contractual life of those options is 8.25 years.

                                  31

<PAGE>


     On April 3, 1997, the Compensation Committee of the Board of
Directors modified the exercise price applicable to outstanding
options to purchase 800,282 shares of Common Stock which had been
granted under the Stock Incentive Plan of 1996.  As a result of
such modification, the exercise prices of such options were
reduced to $10.50 per share, the average of the high and low
reported trading prices of the Common Stock on April 3, 1997.


14.  Fair Value of Financial Instruments
----------------------------------------

     The carrying amounts of the Company's financial instruments
approximate the fair values at December 31, 1998 and 1997.

                                  32

<PAGE>


15.  Quarterly Financial Data (Unaudited)
------------------------------------------

Summarized quarterly financial data for the years ended December 31, 1998
and 1997, appear below:

<TABLE>
<CAPTION>
                                  1st      2nd      3rd      4th            
                                Quarter  Quarter  Quarter  Quarter    Total
                                -------  -------  -------  -------  --------
                                  (in thousands, except per share amounts)
<S>                             <C>      <C>      <C>      <C>      <C>
1998                                                                     
Total revenues                  $28,614  $27,697  $32,200  $32,264  $120,775
Operating expenses <F1>          26,936   24,888   28,098   27,104   107,026
Operating income <F1>             1,678    2,809    4,102    5,160    13,749
Net income <F1>                     927    1,790    2,438    3,134     8,289
Net income per common share <F1>
  Basic and diluted                $.06     $.12     $.16     $.20      $.54
Weighted-average number of                                                  
  common shares outstanding:                                                  
  Basic                          15,376   15,381   15,385   15,389    15,383
  Diluted                        15,394   15,393   15,401   15,429    15,404
                                                                            
1997                                                                         
Total revenues                  $24,607  $27,980  $24,271  $25,479  $102,337
Operating expenses <F2>          22,415   24,366   24,168   25,728    96,677
Operating income (loss) <F2>      2,192    3,614      103     (249)    5,660
Net income (loss) <F2>            1,303    2,120     (268)    (385)    2,770
Net income (loss) per common                                                
  share <F2>, <F3>
  Basic and diluted                $.08     $.14    ($.02)   ($.03)     $.18
Weighted-average number of                                                  
  common shares outstanding:                                                 
  Basic                          15,364   15,365   15,372   15,375    15,369
  Diluted                        15,364   15,432   15,372   15,375    15,428

</TABLE>

[FN]
<F1>  During the second quarter, the Company sold the assets comprising its
      Managed Care Manager Payor software product line to Monument Systems,
      Inc. for approximately $1.1 million.  The pre-tax gain resulting from
      the sale, after associated write-offs, was approximately $404,000.  The
      after-tax gain was approximately $238,000, or $.02 per diluted share.
<F2>  Third quarter results of operations include a charge of $1,265,000
      ($1,113,000 after-tax, or $.07 per diluted share) related to the
      purchase of the PreciseCare software and a charge of $1,529,000
      ($917,000 after-tax, or $.06 per diluted share) related to the reduction
      in the carrying value of IntelliCare software development costs.  Fourth
      quarter results of operations include a charge of $890,000 ($534,000
      after-tax, or $.04 per diluted share) related to the reduction in the
      carrying value of IntelliCare software development costs.
<F3>  Individual quarterly net income (loss) per common share may not equal
      the year-end amount due to changes in the number of common shares
      outstanding during the year.

</FN>

                                  33

<PAGE>

                   SELECTED CONSOLIDATED FINANCIAL DATA
                                     
     The following selected consolidated financial data for the five years
ended December 31, 1998, should be read in conjunction with "Management's
Discussion and Analysis" and the Consolidated Financial Statements and
Notes thereto included herein.  The balance sheet data as of December 31,
1998, 1997, 1996, 1995 and 1994 and the statement of income data for each
of the five years in the period ended December 31, 1998 have been derived
from the Company's Consolidated Financial Statements, which have been
audited (except for pro forma data) by Ernst & Young LLP, independent
auditors.

<TABLE>
<CAPTION>
 
                                                       Year Ended December 31,
                                          ------------------------------------------------
                                            1998      1997      1996      1995      1994
                                          --------  --------  --------  --------  --------
                                              (in thousands, except per share amounts)
<S>                                        <C>       <C>       <C>       <C>       <C>    
Statement of Income Data:                                                  
Revenues:                                                                  
  System sales                             $60,549   $52,761   $45,059   $32,262   $38,416
  Support and service                       60,226    49,576    35,937    29,270    24,202
                                           -------   -------   -------   -------   -------
    Total revenues                         120,775   102,337    80,996    61,532    62,618
                                           -------   -------   -------   -------   -------
Operating expenses:                                                        
  Cost of system sales                      27,424    26,015    20,056    14,085    16,711
  Client services                           32,945    27,438    18,401    17,764    17,116
  Research and development                  15,309    13,244     9,988     9,040     7,734
  Sales and marketing                       17,556    14,007    10,896     8,734     6,957
  General and administrative                14,196    12,343     9,758     7,068     6,847
  Gain on sale of assets <F1>                 (404)        -         -         -         -
  Capitalized software development                                                    
    cost adjustments <F2>                        -     2,419         -         -         -
  Acquired, in-process     
    technology <F3>                              -     1,211     3,252         -         -
                                           -------   -------   -------   -------   -------
    Total operating expenses               107,026    96,677    72,351    56,691    55,365
                                           -------   -------   -------   -------   -------
Operating income                            13,749     5,660     8,645     4,841     7,253
Other income (expense):                                                    
  Interest income                            1,348     1,154     1,345       408       317
  Interest expense                          (1,090)   (1,237)   (1,395)   (1,465)   (1,288)
  Other                                          2      (316)      (98)       78        23
                                           -------   -------   -------   -------   -------
Income before income taxes                  14,009     5,261     8,497     3,862     6,305
Income tax provision:                                                      
  Current year operations                    5,720     2,491     2,755        73        91
  Change in tax status                           -         -     1,122         -         -
                                           -------   -------   -------   -------   -------
Net income                                  $8,289    $2,770    $4,620    $3,789    $6,214
                                           =======   =======   =======   =======   =======
                                                                           
Pro forma data (unaudited): <F4>
  Historical income before income taxes     $    -    $    -    $8,497    $3,862    $6,305
  Pro forma income tax provision                 -         -     4,459     1,661     2,711
                                           -------   -------   -------   -------   -------
  Pro forma net income                      $    -    $    -    $4,038    $2,201    $3,594
                                           =======   =======   =======   =======   =======
                                                                          
Net income per common share: <F4>
  Basic and diluted                           $.54      $.18      $.29      $.18      $.30
                                           =======   =======   =======   =======   =======                                
Weighted-average number of common
  shares outstanding:                                                      
  Basic                                     15,383    15,369    13,919    11,904    11,904
                                           =======   =======   =======   =======   =======
  Diluted                                   15,404    15,428    13,919    11,904    11,904
                                           =======   =======   =======   =======   =======
                                                                           
Balance Sheet Data (at end of period):
Cash and cash equivalents                   $7,057   $23,692   $31,911      $352    $1,189
Short-term investments                      27,283         -         -         -         -
Working capital                             48,463    38,090    39,065     3,963     5,078
Total assets                               104,244    94,173    96,911    43,874    42,068
Long-term debt and obligations under
  capital leases, primarily from                                                   
  related party, net of current portion      4,163     6,080     5,921     6,396     7,107
Total shareholders' equity                  68,194    59,822    56,767    20,701    21,251

</TABLE>

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<PAGE>

[FN]
<F1> In 1998, the Company sold the assets comprising its Managed Care
     Manager Payor software product line to Monument Systems, Inc. for
     approximately $1.1 million.  The pre-tax gain resulting from the sale,
     after associated write-offs, was approximately $404,000.  The after-tax
     gain was approximately $238,000, or $.02 per diluted share.
<F2> In 1997, the Company charged operations $2,419,000 ($1,451,000 after-
     tax, or $.10 per diluted share) related to the reduction in the carrying
     value of IntelliCare software development costs.
<F3> In 1997, the Company charged operations $1,265,000 ($1,113,000 after-
     tax, or $.07 per diluted share) for acquired, in-process technology in
     conjunction with the purchase of the PreciseCare software.  In 1996, the
     Company charged operations $3,252,000, or $.23 per diluted share, for
     acquired, in-process technology in conjunction with the Antrim
     acquisition.
<F4> Pro forma data for the years prior to 1997 has been computed as if the
     Company had been subject to federal and all applicable state income
     taxes.

</FN>

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