<PAGE>
                                                     Exhibit 13.1


               SUNQUEST INFORMATION SYSTEMS, INC.
  Table of Contents for Financial Section of 1999 Annual Report



Management's Discussion and Analysis of Financial
   Condition and Results of Operations                  1

Report of Independent Auditors                         11

Consolidated Financial Statements and Notes            12

Selected Consolidated Financial Data                   31

<PAGE>

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


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, 1999, the Company had an installed customer
base of more than 1,200 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 August 29, 1997, Sunquest Pharmacy Information Systems,
Inc. ("Sunquest Pharmacy") purchased certain inpatient pharmacy
software systems comprising the PreciseCare Medication Management
System ("PreciseCare") from Medintell Systems Corporation, for
$1.4 million in cash and the assumption of certain obligations
and transition costs.  The PreciseCare system was subsequently
renamed "FlexiMed."

     On November 26, 1997, Sunquest Pharmacy entered into a
Software License Agreement ("Agreement") with MEDITrust
Healthcare Services, Inc. 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.

     During 1997, the Company decided to refocus its technology
and development efforts on its core competencies.  The Company
reduced the carrying value of IntelliCare software 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
6 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.

     During the quarter ended March 31, 1999, the Company sold
its Enterprise Master Person Index ("EMPI") product to New Era of
Networks, Inc. ("NEON") for net proceeds of

                                   1
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approximately $750,000.  The pre-tax gain resulting from the sale was
approximately $681,000.  The after-tax gain was approximately
$429,000, or $.03 per diluted share.

     During the quarter ended December 31, 1999, the Company
charged operations $971,000 related to the reduction in carrying
value of pharmacy software development costs.  The carrying value
was reduced to recognize that future anticipated revenues would
not be sufficient to recover these costs.  The after-tax effect
was a reduction to net income of approximately $656,000, or $.04
per diluted share.  See Note 6 of Notes to Consolidated Financial
Statements.

     Net income for 1999, 1998 and 1997 was $15.8 million, $8.3
million and $2.8 million, respectively.  Diluted net income per
share was $1.01 in 1999, $.54 in 1998 and $.18 in 1997.  The
effect of the previously described charges to operations and
gains on sales of assets, and a change in tax law on diluted net
income per share follows:

                                           Year Ended December 31,
                                        ----------------------------
                                          1999      1998      1997
                                        --------  --------  --------
Diluted net income per share
 excluding gain on sale of assets,
 charges to operations and change
 in tax law                               $ .97       $.52     $ .35
Gain on sale of assets, net of tax          .03        .02         -
Change in tax law                           .06          -         -
Acquired, in-process technology, net
  of tax                                      -          -      (.07)
Capitalized software development
  cost adjustments, net of tax             (.04)         -      (.10)
                                          -----       ----     -----
                                          $1.01       $.54     $ .18
                                          =====       ====     =====

     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 14 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 and related
installation portions of system sales are recognized on the
percentage-of-completion method and are determined based upon
actual hours incurred related to total estimated installation
hours in accordance with Statement of Position ("SOP") 97-2, "Software

                                   2
<PAGE>

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, 1999, the Company had a total contract
backlog of $124.6 million, which consisted of $55.9 million of
system sales and services and $68.7 million of support.  At
December 31, 1998, total contract backlog was $122.0 million,
which consisted of $61.1 million of system sales and services and
$60.9 million of support.  System sales and services backlog
consists of the unearned amounts of signed contracts which have
not yet been recognized as revenues.  Support 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 14 months to
complete.

     During the third quarter of 1999, the Company experienced a
delay in sales signings, although the pipeline of potential sales
increased.  Customers have indicated that the delay was the
result of the effects of Year 2000 issues and the Balanced Budget
Amendment of 1997. Sales signings during the fourth quarter of
1999 increased 62% over those of the third quarter of 1999.
Total sales signings for 1999 were 13.6% below 1998 and estimated
gross profit on sales signings was 7.2% below 1998.  The
percentage decline in estimated gross profit percentage on sales
was less than the percentage decline in sales due to a more
favorable product mix in 1999 compared to 1998 sales signings.
Hardware sales, which have lower estimated margins compared to
software and service sales, were 25% of total sales in 1999
compared to 33% in 1998.  Given historical experience and
carryover projects related to the Year 2000, the Company
anticipates that sales signings in the first quarter of 2000 will
be less than the fourth quarter of 1999.  The Company anticipates
that sales signings will accelerate beginning in the second
quarter of 2000.

     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.

                                   3
<PAGE>

Year 2000 Compliance
--------------------

     In prior years, the Company discussed the nature and
progress of its plans to become Year 2000 ready.  In late 1999,
the Company completed the remediation and testing of its
products, internal systems and the products and services of third
parties.  As a result of the Company's planning and
implementation efforts, the Company experienced no significant
disruptions in mission critical information technology and non-
information technology systems and believes that all systems
successfully responded to the Year 2000 date change.  The Company
is unaware of any material problems resulting from Year 2000
issues with its products, its internal systems, or the products
and services of third parties.  The Company will continue to
monitor its mission critical computer applications and those of
its suppliers and vendors throughout 2000 to ensure that any
latent Year 2000 matters that may arise are addressed promptly.


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,
                                    ----------------------------
                                      1999      1998      1997
                                    --------  --------  --------
Revenues:
  System sales                          40.7%     50.1%     51.6%
  Support and service                   59.3      49.9      48.4
                                       -----     -----     -----
    Total revenues                     100.0     100.0     100.0
                                       -----     -----     -----
Operating expenses:
  Cost of system sales                  16.7      22.7      25.4
  Client services                       27.9      27.3      26.8
  Research and development              12.2      12.7      12.9
  Sales and marketing                   13.1      14.5      13.7
  General and administrative            11.9      11.7      12.1
  Gain on sale of assets                (0.5)     (0.3)        -
  Capitalized software
    development cost adjustments         0.7         -       2.4
  Acquired, in-process technology          -         -       1.2
                                       -----     -----     -----
    Total operating expenses            82.0      88.6      94.5
                                       -----     -----     -----
Operating income                        18.0      11.4       5.5
Other income (expense):
  Interest income                        1.3       1.1       1.1
  Interest expense                      (0.9)     (0.9)     (1.2)
  Other                                 (0.6)        -      (0.3)
                                       -----     -----     -----
Income before income taxes              17.8      11.6       5.1
Income tax provision                     5.8       4.7       2.4
                                       -----     -----     -----
Net income                              12.0%      6.9%      2.7%
                                       =====     =====     =====

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<PAGE>

Comparison of Years Ended December 31, 1999 and December 31, 1998

     Revenues.  The Company's total revenues were $131.7 million
in 1999 compared to $120.8 million in 1998, an increase of $10.9
million, or 9.0%.  Revenues from system sales were $53.7 million
in 1999 compared to $60.6 million in 1998, a decrease of $6.9
million, or 11.4%.  This decrease was attributable to decreases
in hardware and operating system deliveries partially offset by
increases in installations of software.  Revenues from support
and service were $78.0 million in 1999 compared to $60.2 million
in 1998, an increase of $17.8 million, or 29.6%.  This increase
was primarily attributable to increased installations, growth in
support services to the Company's installed customer base and
growth in other services including consulting.

     Over the last three years, the Company has been experiencing
a favorable trend in revenue mix.  As a percentage of total
revenues, software license fee and services revenues have been
increasing and hardware revenues, which have lower margins, have
been decreasing. Hardware revenues as a percentage of total
revenues were 14% in 1999 compared to 24% and 26% in 1998 and
1997, respectively.  The Company cannot determine with certainty
whether this trend in decreasing hardware revenues will continue
in future periods.

     Cost of System Sales.  Cost of system sales includes the
costs of computer hardware, relicensed software and resold
software purchased from third parties, hardware maintenance
contracts and amortization of previously capitalized software
development costs.  Cost of system sales was $21.9 million in
1999 compared to $27.4 million in 1998, a decrease of $5.5
million, or 20.0%.  As a percentage of total revenues, cost of
system sales was 16.7% in 1999 compared to 22.7% in 1998. The
dollar decrease was primarily attributable to decreases in
hardware and operating system deliveries partially offset by
increased hardware related costs.  Amortization of previously
capitalized software development costs was $3.6 million for 1999
compared to $3.4 million for 1998, an increase of $198,000, or
5.9%. The increase in amortization was primarily attributable to
increased amortization of the Company's reference laboratory
product.

     Client Services.  Client services expenses include salaries
and expenses of product installation, support and consulting.
Client services expenses were $36.7 million in 1999 compared to
$32.9 million in 1998, an increase of $3.8 million, or 11.5%.  As
a percentage of total revenues, client services expenses were
27.9% in 1999 compared to 27.3% in 1998. The dollar increase in
client services expenses was primarily attributable to additional
staff and outside consultants dedicated to the 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 $16.1
million in 1999 compared to $15.3 million in 1998, an increase of
$819,000, or 5.3%.  As a percentage of total revenues, research
and development expenses were 12.2% in 1999 compared to 12.7% in
1998. The dollar increase in research and development expenses
was primarily attributable to increased efforts related to the
development, enhancement and documentation of the Company's
clinical laboratory systems, legal and professional fees
associated with the United States Food and Drug

                                   5
<PAGE>

Administration registration of the Company's Blood Bank product and
increased efforts related to the development, enhancement and documentation
of the Company's e-Suite and Clinical Event Manager systems.  The
increases were partially offset by decreased expenses related to
non-laboratory products and the discontinuance of the MCM and
EMPI products.  The Company capitalized $3.0 million of its
software development costs in 1999 compared to $3.1 million in
1998, a decrease of $198,000, or 6.3%.  The decrease in
capitalized software development costs was primarily attributable
to decreased capitalization for the Company's reference
laboratory and pharmacy products.  The decreases were partially
offset by increased capitalization for the clinical laboratory
systems.

     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 $17.3 million in 1999
compared to $17.6 million in 1998, a decrease of $252,000, or
1.4%.  As a percentage of total revenues, sales and marketing
expenses were 13.1% in 1999 compared to 14.5% in 1998.  The
dollar decrease was primarily attributable to decreased
commissions resulting from a decline of 13.6% in sales bookings
in 1999 partially offset by additional sales staff for the
Company's reference laboratory products and the European market
and increased advertising and marketing expense.

     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 $15.6 million in 1999 compared to
$14.2 million in 1998, an increase of $1.4 million, or 10.2%.  As
a percentage of total revenues, general and administrative
expenses were 11.9% in 1999 compared to 11.7% in 1998.  The
dollar increase was primarily attributable to increased variable
compensation relating to employee incentives and additional
employees and related hiring expenses. Employee incentive goals
required for variable compensation were not achieved in the prior
year.  The increases were partially offset by decreased
depreciation expense.

     Transition Costs.  For the year ended December 31, 1999, the
Company paid previously accrued transition costs established at
the time of the acquisition of 100% of the outstanding capital
stock of Antrim Corporation ("Antrim") of $1.4 million, as
compared to $1.5 million paid in 1998.  These costs were
primarily associated with replacing certain Antrim software
products with Sunquest products.  At December 31, 1999,
approximately $305,000 remains accrued for these costs which will
cover the remaining transition and be paid during the next
operating period.

     Income Taxes.  Income taxes were $7.6 million in 1999
compared to $5.7 million in 1998, an increase of $1.9 million, or
32.8%.  This increase was primarily attributable to higher
taxable income in 1999 compared to 1998 partially offset by an
8.3% decrease in the Company's effective tax rate.  The decrease
in the effective tax rate is primarily attributable to a decrease
in the Company's valuation allowance and research and development
credits.  The decrease in valuation allowance is due to a change
in tax law that has mitigated certain limitations on pre-

                                  6
<PAGE>

acquisition net operating loss carry forwards.  Based on the tax
law change, management has determined that it is more likely than
not that the pre-acquisition net operating loss obtained in
connection with the Antrim acquisition will be realized.
Therefore, the previously recorded valuation allowance of
$950,000 provided for Antrim's separate company net operating
loss was eliminated.  Recently issued accounting rules resulted
in this non-recurring reduction to the valuation allowance being
recognized as a credit to income taxes.

     At December 31, 1999, the Company had an acquired net
operating loss carry forward for tax purposes of approximately
$2.2 million that was generated by Antrim.  This amount can be
carried forward and used to offset future taxable income.  This
loss carry forward is subject to limitations as to the amount and
timing of its use.  The Company anticipates that future taxable
income will be sufficient to realize the net operating loss carry
forward.  See Note 8 of Notes to Consolidated Financial
Statements.


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 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 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
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

                                   7
<PAGE>

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.

     Sales and Marketing. 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 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.  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.


Liquidity and Capital Resources
-------------------------------

     At December 31, 1999, the Company had cash, cash equivalents
and short-term investments of $46.9 million, which consisted of
cash of $9.7 million and short-term investments

                                   8
<PAGE>

of $37.2 million.  This compares to cash, cash equivalents and short-term
investments of $34.3 million at December 31, 1998, an increase of
$12.5 million.  Cash provided by operating activities was $19.8
million, $18.8 million and $11.2 million in 1999, 1998 and 1997,
respectively.

     As of December 31, 1999, the Company had net trade
receivables of $43.1 million which consisted of $31.0 million in
net billed trade receivables and $12.1 million in unbilled trade
receivables.  See Note 4 of Notes to Consolidated Financial
Statements.  At 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.  Net trade receivables have increased by $2.8
million since December 31, 1998, with $6.0 million related to the
net billed trade receivables partially offset by a decrease in
the unbilled portion of $3.2 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 milestone billings.
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
76 days at December 31, 1999 compared to 69 days at December 31,
1998.  The Company is responding to the increase in average
collection period with intensified collection efforts.  Days
sales outstanding ("DSO") was 120 at December 31, 1999 compared
to 110 at September 30, 1999 and 112 at December 31, 1998.

     Cash used in investing activities was $17.7 million, $34.7
million and $14.8 million in 1999, 1998 and 1997, respectively.
During 1999, purchases of investments totaled $42.1 million,
proceeds from the sale of investments totaled $30.0 million and
proceeds from the maturity of investments totaled $2.2 million.
Capitalized software development costs totaled $4.0 million.  Of
this amount, $1.0 million was related to the final payment under
the Value Added Reseller agreement with Dynamic Healthcare
Technologies, Inc. for the license of a software program known as
CoPathPlus ("CoPath").  CoPath is a computer clinical information
system used in surgical pathology, cytology and autopsy.
Purchases of property and equipment totaled $3.2 million and
consisted primarily of purchases of computers, computer-related
equipment, computer software and leasehold improvements.  Costs
related to acquisitions totaled $1.4 million and were primarily
associated with replacing certain Antrim software products with
Sunquest products.  In addition, the proceeds from the sale of
assets consisted of $750,000 from the sale of the EMPI product to
NEON in the first quarter of 1999.

     Cash provided by financing activities was $706,000 in 1999.
Cash used in financing activities was $658,000 and $4.5 million
in 1998 and 1997, respectively.  During 1999, the Company issued
142,088 shares of Common Stock for approximately $1.5 million
under the Stock Incentive Plan of 1996, as amended, and 10,652
shares of Common Stock for approximately $129,000 under the
Employee Stock Purchase Plan.  Cash used by financing activities
was $917,000 related to principal payments on capital leases.

                                   9

<PAGE>

     At December 31, 1999, working capital was $67.7 million, an
increase of $19.2 million from December 31, 1998.

     At December 31, 1999, 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 28, 2000 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 $785,000
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, 1999.  See Note 7 of
Notes to Consolidated Financial Statements.

     The Company has no significant purchase commitments at this
time.  However, 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.


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 other factors affecting future performance, 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 factors affecting future performance
are detailed in the Company's Securities and Exchange Commission
filings.

                                  10

<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, 1999 and 1998 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, 1999. 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 auditing standards
generally accepted in the United States.  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, 1999 and 1998 and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United
States.



                                        /s/ Ernst & Young LLP

Pittsburgh, Pennsylvania
February 8, 2000

                                  11

<PAGE>

               Sunquest Information Systems, Inc.
                  Consolidated Balance Sheets
[CAPTION]
<TABLE>
                                               December 31,
                                            ------------------
                                              1999      1998
                                            --------  --------
                                     (in thousands, except share data)
<S>                                         <C>       <C>
            ASSETS
Current assets:
  Cash and cash equivalents                 $  9,660  $  7,057
  Short-term investments                      37,218    27,283
  Receivables, less allowance for
    doubtful accounts of $1,970 in
    1999 and $2,045 in 1998                   43,079    40,302
  Other receivables                              312       314
  Inventory                                      612       566
  Prepaid expenses and other                   1,469     1,227
  Deferred tax assets                          1,888     1,473
                                            --------  --------
      Total current assets                    94,238    78,222

Property and equipment, net of
  accumulated depreciation                    10,100    10,246
Capital leases from related party,
  net of accumulated amortization              2,512     3,304
Software development costs, net of
  accumulated amortization                     9,493    11,146
Other receivables                                 31       114
Deferred tax assets                              479         -
Other assets                                     410     1,212
                                            --------  --------
      Total assets                          $117,263  $104,244
                                            ========  ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                          $  2,485  $  3,721
  Obligations under capital leases,
    primarily from related party               1,064       917
  Accrued compensation and related taxes       5,646     4,599
  Accrued expenses                             5,468     6,141
  Deferred revenue                            11,919    13,266
  Deferred income taxes                            -       115
  Other liabilities                                -     1,000
                                            --------  --------
      Total current liabilities               26,582    29,759

Obligations under capital leases from
  related party                                3,099     4,163
Deferred income taxes                          1,959     2,128
Commitments and contingencies (Note 10)            -         -
Shareholders' equity:
  Preferred stock, 15,000,000 shares
    authorized, no shares issued                   -         -
  Common stock, no par value, 35,000,000
    shares authorized,15,547,200 and
    15,394,460 shares issued and
    outstanding in 1999 and 1998,
    respectively                              52,460    50,616
  Retained earnings                           33,490    17,692
  Accumulated other comprehensive loss          (327)     (114)
                                            --------  --------
      Total shareholders' equity              85,623    68,194
      Total liabilities and                 --------  --------
        shareholders' equity                $117,263  $104,244
                                            ========  ========

</TABLE>
See accompanying notes.

                                  12

<PAGE>

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

[CAPTION]
<TABLE>
                                                Year Ended December 31,
                                             ----------------------------
                                               1999      1998      1997
                                             --------  --------  --------
                                        (in thousands, except per share data)
<S>                                          <C>       <C>       <C>
Revenues:
  System sales                               $ 53,656  $ 60,549  $ 52,761
  Support and service                          78,049    60,226    49,576
                                             --------  --------  --------
    Total revenues                            131,705   120,775   102,337
                                             --------  --------  --------
Operating expenses:
  Cost of system sales                         21,930    27,424    26,015
  Client services                              36,720    32,945    27,438
  Research and development                     16,128    15,309    13,244
  Sales and marketing                          17,304    17,556    14,007
  General and administrative                   15,640    14,196    12,343
  Gain on sale of assets                         (681)     (404)        -
  Capitalized software development cost
    adjustments                                   971         -     2,419
  Acquired, in-process technology                   -         -     1,211
                                             --------  --------  --------
    Total operating expenses                  108,012   107,026    96,677
                                             --------  --------  --------
Operating income                               23,693    13,749     5,660
Other income (expense):
  Interest income                               1,710     1,348     1,154
  Interest expense                             (1,211)   (1,090)   (1,237)
  Other                                          (796)        2      (316)
                                             --------  --------  --------
Income before income taxes                     23,396    14,009     5,261
Income tax provision                            7,598     5,720     2,491
                                             --------  --------  --------
Net income                                     15,798     8,289     2,770
Other comprehensive (loss) income, net
  of tax:
  Foreign currency translation adjustment        (208)      (64)     (148)
  Unrealized (loss) gain on securities
    available-for-sale                             (5)        5         -
                                             --------  --------  --------
Comprehensive income                         $ 15,585  $  8,230  $  2,622
                                             ========  ========  ========

Net income per common share:
  Basic                                         $1.02      $.54      $.18
                                                =====      ====      ====
  Diluted                                       $1.01      $.54      $.18
                                                =====      ====      ====

Weighted-average number of common
  shares outstanding:
  Basic                                        15,445    15,383    15,369
                                               ======    ======    ======
  Diluted                                      15,609    15,404    15,428
                                               ======    ======    ======
</TABLE>


See accompanying notes.

                                  13

<PAGE>

                    Sunquest Information Systems, Inc.
              Consolidated Statements of Shareholders' Equity
[CAPTION]
<TABLE>
                                                                  Accumulated
                                                                     Other          Total
                                     Common Stock       Retained  Comprehensive  Shareholders'
                                  Shares      Amount    Earnings  Income (Loss)     Equity
                                ----------  ----------  --------  -------------  -------------
                                              (in thousands, except share data)
<S>                             <C>            <C>       <C>              <C>          <C>
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
  Issuance of common stock
    through Employee Stock
    Purchase Plan, net              10,652         129         -              -            129
  Issuance of common stock
    upon the exercise of
    nonqualified stock options     142,088       1,494         -              -          1,494
  Tax benefit related to
    exercise of nonqualified
    stock options                        -         221         -              -            221
  Foreign currency translation
    adjustment                           -           -         -           (208)          (208)
  Net change in unrealized
    gain on securities
    available-for-sale                   -           -         -             (5)            (5)
  Net income                             -           -    15,798              -         15,798
                                ----------     -------   -------          -----        -------
Balance at December 31, 1999    15,547,200     $52,460   $33,490          ($327)       $85,623
                                ==========     =======   =======          =====        =======
</TABLE>

See accompanying notes.

                                        14
<PAGE>

                       Sunquest Information Systems, Inc.
                      Consolidated Statements of Cash Flows
[CAPTION]
<TABLE>

                                                         Year Ended December 31,
                                                      ----------------------------
                                                        1999      1998      1997
                                                      --------  --------  --------
                                                             (in thousands)
<S>                                                   <C>       <C>       <C>
Cash flows from operating activities:
  Net income                                          $ 15,798  $  8,289  $  2,770
  Adjustments to reconcile net income to net
    cash provided by operating activities:
    Depreciation and amortization                        8,273     8,108     7,773
    Capitalized software development
      cost adjustments                                     971         -     2,419
    Acquired, in-process technology                          -         -     1,211
    Loss on disposition of equipment                         -         -        10
    Bad debt expense                                     1,497       670     1,125
    Deferred revenue                                    (1,347)    1,811      (395)
    Deferred income taxes                               (1,176)    1,830     1,087
    Gain on sale of assets                                (681)     (404)        -
  Changes in operating assets and
    liabilities, net of acquisitions:
    Receivables                                         (4,274)   (4,831)   (6,822)
    Inventory                                              (46)       27     1,178
    Prepaid expenses and other                            (242)     (118)     (118)
    Other assets                                            85       159     1,347
    Accounts payable                                    (1,236)      320       568
    Accrued compensation and related taxes               1,047        76      (160)
    Other accrued expenses                               1,135     2,896      (771)
                                                      --------  --------  --------
        Net cash provided by operating activities       19,804    18,833    11,222
                                                      --------  --------  --------

Cash flows from investing activities:
  Acquisition of Antrim Corporation,
    net of cash acquired                                     -         -        13
  Purchase of PreciseCare Pharmacy System                    -         -    (1,410)
  Purchase of property and equipment                    (3,195)   (2,559)   (4,931)
  Costs related to acquisitions                         (1,362)   (1,894)   (3,103)
  Capitalized software development costs                (3,950)   (4,148)   (5,412)
  Purchase of investments                              (42,103)  (89,594)        -
  Proceeds from sale of investments                     29,996    62,319         -
  Proceeds from maturity of investments                  2,165         -         -
  Proceeds from sale of assets                             750     1,130         -
                                                      --------  --------  --------
        Net cash used in investing activities          (17,699)  (34,746)  (14,843)
                                                      --------  --------  --------

Cash flows from financing activities:
  Principal payments on debt                                 -         -      (289)
  Principal payments on capitalized
    leases, primarily from related party                  (917)     (800)     (694)
  Net proceeds from issuance of stock                    1,623       142       134
  S corporation distribution                                 -         -    (3,601)
                                                      --------  --------  --------
        Net cash provided by (used in)
          financing activities                             706      (658)   (4,450)
                                                      --------  --------  --------
Foreign currency translation adjustment                   (208)      (64)     (148)
                                                      --------  --------  --------
        Net increase (decrease) in cash
          and cash equivalents                           2,603   (16,635)   (8,219)
Cash and cash equivalents at beginning of year           7,057    23,692    31,911
                                                      --------  --------  --------
Cash and cash equivalents at end of year              $  9,660  $  7,057  $ 23,692
                                                      ========  ========  ========

Supplemental disclosure of cash flow information:
  Cash paid for income taxes                          $  8,108  $  2,550  $  2,325
                                                      ========  ========  ========
  Cash paid for interest                              $      1  $     15  $     53
                                                      ========  ========  ========

Supplemental disclosure of non cash investing
  and financing activities:
  Disposal of property and equipment                  $  2,345  $  3,768  $  2,543
                                                      ========  ========  ========
  Tax benefit related to exercise of
    nonqualified stock options                        $    221  $      -  $      -
                                                      ========  ========  ========
  Capitalized software development cost adjustments   $  1,662  $      -  $  3,542
                                                      ========  ========  ========
  Debt related to Dynamic Agreement                   $      -  $      -  $  2,000
                                                      ========  ========  ========
</TABLE>
See accompanying notes.

                                  15
<PAGE>

               SUNQUEST INFORMATION SYSTEMS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999

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

     The consolidated financial statements include the accounts
of the Company, Sunquest Europa Limited ("Sunquest Europa"),
Sunquest Germany GmbH ("Sunquest Germany"), Antrim Corporation
("Antrim") and 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.

     Certain prior year amounts have been reclassified to conform
to the current year presentation.

     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 hours incurred related to total estimated installation
hours in accordance with Statement of

                                  16
<PAGE>

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.  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.

     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, 1999 and 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 2 of Notes to Consolidated Financial
Statements.

                                  17
<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.

      Intangibles/Acquisitions

     Certain intangible assets were acquired in connection with
the purchase of the PreciseCare software and the acquisition of
100% of the outstanding capital stock 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 other related intangibles.  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 was 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.

      Stock-Based Compensation

     The Company has 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 11 of
Notes to Consolidated Financial Statements.

                                 18
<PAGE>

2. Investments
--------------

     The following is a summary of securities available-for-sale
at December 31, 1999 and 1998:

                                               1999
                           --------------------------------------------
                                          (in thousands)
                                            Gross
                                          Unrealized       Estimated
                               Cost          Gain          Fair Value
                           ------------   -----------    --------------
Tax-exempt municipals           $12,300           $ -           $12,300
Short-term demand notes          24,918             -            24,918
                                -------           ---           -------
  Total                         $37,218           $ -           $37,218
                                =======           ===           =======


                                               1998
                           --------------------------------------------
                                          (in thousands)
                                            Gross
                                          Unrealized       Estimated
                               Cost          Gain          Fair Value
                           ------------   -----------    --------------
Tax-exempt municipals           $20,269           $ 8           $20,277
Short-term demand notes           7,006             -             7,006
                                -------           ---           -------
  Total                         $27,275           $ 8           $27,283
                                =======           ===           =======

     There were no gross unrealized gains or losses at December
31, 1999.  The gross unrealized gains on securities available-for-
sale totaled $8,413 at December 31, 1998 and are reflected, net
of tax, in shareholders' equity with the associated changes as an
element of comprehensive income.

     In determining gross realized gains and losses on sales or
maturities of securities, specific identification is used.  Gross
realized losses were $6,702 in 1999.  There were no gross
realized gains or losses in 1998.

     The amortized cost and estimated fair value of debt
securities at December 31, 1999, by contractual maturity, are
shown below.

                                             Estimated
                                    Cost     Fair Value
                                  --------  -----------
                                      (in thousands)
          Within one year         $26,818       $26,818
          One to five years             -             -
          Five to ten years         1,000         1,000
          Over ten years            9,400         9,400
                                  -------       -------
            Total                 $37,218       $37,218
                                  =======       =======

                                  19
<PAGE>

3. Net Income Per Share
-----------------------

     The following table sets forth the computation of basic and
diluted net income per share:
[CAPTION]
<TABLE>
                                                 Year Ended December 31,
                                        ----------------------------------------
                                            1999          1998          1997
                                        ------------  ------------  ------------
<S>                                      <C>           <C>           <C>
Numerator for basic and
  diluted net income per share:
  Net income                             $15,798,000   $ 8,289,000   $ 2,770,000
                                         ===========   ===========   ===========
Denominator:
   Denominator for basic net income
     per share - weighted-average shares  15,445,125    15,382,508    15,368,771
   Effect of stock options                   163,734        21,950        59,553
                                         -----------   -----------   -----------
   Denominator for diluted net income
     per share - adjusted weighted-
     average shares                       15,608,859    15,404,458    15,428,324
                                         ===========   ===========   ===========

Basic net income per share                     $1.02          $.54          $.18
                                               =====          ====          ====
Diluted net income per share                   $1.01          $.54          $.18
                                               =====          ====          ====

     Options to purchase 410,006, 920,473 and 22,775 shares of
common stock were outstanding at December 31, 1999, 1998 and
1997, 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.

                                  20
<PAGE>

4. Receivables
--------------

     Receivables consist of the following:

                                              December 31,
                                         ----------------------
                                            1999        1998
                                         ----------  ----------
                                             (in thousands)
          Billed receivables                $32,922     $27,062
          Unbilled receivables               12,127      15,285
                                            -------     -------
                                             45,049      42,347
          Allowance for doubtful accounts    (1,970)     (2,045)
                                            -------     -------
            Total receivables               $43,079     $40,302
                                            =======     =======

     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, 1999 and 1998 are amounts due from
European health care providers of approximately $2,932,000 and
$1,478,000, respectively.  Total revenues include European
revenues of $2,895,000 and $1,312,000 for the years ended
December 31, 1999 and 1998, 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 1999, 1998 and
1997 was $1,497,000, $670,000 and $1,125,000, respectively.
During 1999, 1998 and 1997, $1,572,000, $577,000 and $2,616,000,
respectively, of receivables were charged against the allowance.

                                  21
<PAGE>

5. Property and Equipment
-------------------------

     Property and equipment consist of the following:

                                                  December 31,
                                             ----------------------
                                                1999        1998
                                             ----------  ----------
                                                 (in thousands)
          Building                              $ 2,000     $ 2,000
          Land                                      257         257
          Computers and software                  9,840       9,355
          Furniture and fixtures                  1,542       1,379
          Leasehold improvements                  4,292       3,865
          Other equipment and vehicles               37         262
                                                -------     -------
                                                 17,968      17,118
          Accumulated depreciation               (7,868)     (6,872)
                                                -------     -------
            Total property and equipment, net   $10,100     $10,246
                                                =======     =======

     Depreciation expense for the years ended December 31, 1999,
1998 and 1997 was approximately $3,296,000, $3,605,000 and
$3,005,000, respectively.


6. Capitalized Software Development Costs
-----------------------------------------

     During the years ended December 31, 1999, 1998 and 1997, the
Company capitalized $2,950,000, $3,148,000 and $3,662,000,
respectively, of total software development costs of $19,078,000,
$18,457,000 and $16,906,000, respectively.  Amortization expense
related to capitalized software development costs for the years
ended December 31, 1999, 1998 and 1997 was $3,562,000, $3,364,000
and $3,619,000, respectively, and accumulated amortization was
$19,210,000, $16,350,000 and $13,105,000, 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.

     During the quarter ended December 31, 1999, the Company
charged operations $971,000 related to the reduction in carrying
value of pharmacy software development costs.  The carrying value
was reduced to recognize that future anticipated revenues would
not be sufficient to

                                  22
<PAGE>

recover these costs.  The after-tax effect was a reduction to net
income of approximately $656,000, or $.04 per diluted share.


7. 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, 1999, the Optional Rates and the Bank of
America Rate ranged from 6.71% to 8.5%.  All outstanding
principal and interest under the line of credit are due April 28,
2000 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
$785,000 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, 1999
and 1998 under the line of credit.

                                  23
<PAGE>

8. 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,
                                          ----------------------------
                                            1999      1998      1997
                                          --------  --------  --------
                                                  (in thousands)
Current tax expense:
  Federal                                  $ 7,176   $ 3,223   $ 1,107
  State                                      1,600       813       297
                                           -------   -------   -------
    Total current tax expense                8,776     4,036     1,404
                                           -------   -------   -------
Deferred tax (benefit) expense:
  Federal                                   (1,108)    1,449     1,057
  State                                        (70)      235        30
                                           -------   -------   -------
    Total deferred tax (benefit) expense    (1,178)    1,684     1,087
                                           -------   -------   -------
    Total income tax expense               $ 7,598   $ 5,720   $ 2,491
                                           =======   =======   =======

     Reconciliation of Income Tax Expense

                                             Year Ended December 31,
                                          ----------------------------
                                            1999      1998      1997
                                          --------  --------  --------
                                                 (in thousands)
Income tax provision at the
  statutory rate                           $ 7,955   $ 4,763   $ 1,871
Increases (decreases):
  State income taxes                         1,081       647       185
  Valuation allowance reduction               (950)        -         -
  Research and development credit             (300)        -         -
  Foreign taxes                                (63)      105         -
  Acquired, in-process technology                -         -       500
  Other                                       (125)      205       (65)
                                           -------   -------   -------
    Total income tax expense               $ 7,598   $ 5,720   $ 2,491
                                           =======   =======   =======

     The decrease in valuation allowance is due to a change in
tax law that has mitigated certain limitations on pre-acquisition
net operating loss carry forwards.  Based on the tax law change,
management has determined that it is more likely than not that
the pre-acquisition net operating loss obtained in connection
with the Antrim acquisition will be realized.  In accordance with
Emerging Issues Task Force Issue 99-15, the Company has recorded
the non-recurring reduction in valuation allowance as a credit to
income tax expense.

                                  24
<PAGE>

     Components of Deferred Tax Assets and Liabilities

                                                           December 31,
                                                        ------------------
                                                          1999      1998
                                                        --------  --------
                                                          (in thousands)
        Deferred tax assets:
          Net operating loss carry forwards acquired      $  846    $1,282
          Transition costs accruals                          228       840
          Capital leases                                     638       673
          Vacation and compensation accruals               1,165       570
          Bad debt allowance                                 745       663
          Deferred revenue                                    56       195
          Accrued expenses                                     -        25
          Other                                              622       693
                                                          ------    ------
              Total deferred tax assets                    4,300     4,941
                                                          ------    ------
        Deferred tax liabilities:
          Book basis in excess of tax basis:
            Software development                           3,604     3,732
            Acquired intangibles                             129       438
            Fixed assets                                      84       493
            Other                                             75        98
                                                          ------    ------
              Total deferred tax liabilities               3,892     4,761
                                                          ------    ------
          Less: valuation allowance                            -      (950)
                                                          ------    ------
                 Net deferred tax assets (liabilities)    $  408     ($770)
                                                          ======    ======

     The Company has an acquired net operating loss carry forward
of approximately $2,191,000 that was generated by Antrim.  This
amount can be carried forward and used to offset future taxable
income.  The loss carry forward is subject to limitations as to
the amount and timing of its use.  The net operating loss carry
forward will expire in the year 2010.


9. 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 expense related to leased assets for the years
ended December 31, 1999, 1998 and 1997 was $838,000, $883,000 and
$883,000, respectively.

                                  25
<PAGE>

     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, 1999:

                                  Capital    Operating
                                  Leases      Leases
                                  -------    ---------
                                     (in thousands)
2000                               $2,104      $1,102
2001                                2,104         601
2002                                1,402         266
2003                                  900         200
2004                                  300           6
Thereafter                              -           -
                                   ------      ------
Total minimum lease payments        6,810      $2,175
                                               ======
Amounts representing interest       2,647
                                   ------
  Present value of net minimum
    lease payments (including
    current portion of $1,064)     $4,163
                                   ======

     At December 31, 1999, aggregate future minimum rental
payments to be received under noncancelable leases and subleases
were approximately $975,000.

     Rental expense for the years ended December 31, 1999, 1998
and 1997 was approximately $1,199,000, $1,227,000 and $1,158,000,
respectively.


10. 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.


11. 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 15% 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 $1,050,000 and $912,000 in 1999 and 1998,
respectively.  The Company incurred expenses of approximately
$704,000 for the year ended December 31, 1997 related to this
plan.

                                  26
<PAGE>

     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 1999, 1998 and 1997, 10,652, 18,498 and
13,375 shares, respectively, of Common Stock were issued under
the plan for net proceeds to the Company of $129,000, $142,000
and $134,000, respectively.  The weighted-average fair value of
shares sold under the Employee Stock Purchase Plan was $3.01 in
1999, $2.08 in 1998 and $2.79 in 1997.  These fair values were
estimated using the Black-Scholes option pricing model with the
following weighted-average assumptions for 1999, 1998 and 1997,
respectively: risk-free interest rate of 4.59%, 5.06% and 5.00%;
dividend yield of 0%; volatility factor of the expected market
price of the Company's Common Stock of .62, .62 and .62; 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 1999, 1998 and 1997, respectively: risk-free
interest rate of 4.98%, 5.24% and 6.54%; dividend yield of 0%;
volatility factor of the expected market price of the Company's
Common Stock of .64, .64 and .61; and a weighted-average expected
life of the options of 4.3, 4.3 and 4.1 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.

                                  27
<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,
                              ----------------------------
                                1999      1998      1997
                              --------  --------  --------
                          (in thousands, except per share data)
Net income:
  As reported                  $15,798    $8,289    $2,770
  Pro forma                     13,873     7,105     1,393
Net income per share:
  As reported:
    Basic                         1.02       .54       .18
    Diluted                       1.01       .54       .18
  Pro forma:
    Basic                          .90       .46       .09
    Diluted                        .89       .46       .09

     A summary of the Company's stock option activity and related
information for the years ended December 31, 1999, 1998 and 1997
follows:
<CAPTION>

</TABLE>
<TABLE>

                                            1999                     1998                     1997
                                   ---------------------------------------------------------------------
                                             Weighted-                Weighted-                Weighted-
                                               Average                  Average                  Average
                                              Exercise                 Exercise                 Exercise
                                   Options       Price      Options       Price      Options       Price
                                   ---------------------------------------------------------------------
<S>                                <C>          <C>       <C>            <C>       <C>            <C>
Outstanding at beginning of year   1,150,633    $10.42    1,167,604      $10.50      743,561      $15.95
Granted                              654,706    $13.58      303,760      $10.42    1,409,593      $10.85
Exercised                           (142,088)   $10.51            -      $    -            -      $    -
Forfeited                           (162,197)   $11.23     (320,731)     $10.71     (985,550)     $15.11
                                   ---------              ---------                ---------
Outstanding at end of year         1,501,054    $11.70    1,150,633      $10.42    1,167,604      $10.50
                                   =========              =========                =========
Exercisable at end of year           482,670    $10.19      284,201      $10.12       51,240      $10.50
                                   =========              =========                =========
Weighted-average fair value of
  options granted during the year               $ 7.36                   $ 5.67                   $ 5.72
Reserved for future options        2,156,858              2,649,367                1,332,396

</TABLE>

                                  28
<PAGE>

     The following table presents weighted-average price and life
information about significant option groups outstanding at
December 31, 1999:

[CAPTION]
<TABLE>
                                         Options Outstanding         Options Exercisable
                                    ----------------------------   -----------------------
                                       Weighted-       Weighted-                 Weighted-
                                        Average         Average                   Average
Range of                Number         Remaining       Exercise       Number     Exercise
Exercise Prices       Outstanding   Contractual Life     Price     Exercisable     Price
-------------------   -----------   ----------------   ---------   -----------   ---------
<S>                     <C>               <C>             <C>          <C>          <C>
$7.1875 - $9.375          211,895         8.05 years      $ 8.30       116,808      $ 8.27
$10.125 - $12.8125        751,153         7.44 years      $11.03       359,139      $10.74
$13.125 - $15.1875        459,075         9.07 years      $13.67         6,723      $14.38
$15.5625 - $17.1875        78,931         9.54 years      $15.78             -      $    -
                        ---------                                      -------
                        1,501,054         8.13 years                   482,670
                        =========                                      =======
</TABLE>

12. Fair Value of Financial Instruments
---------------------------------------

     The carrying amounts of the Company's financial instruments
approximate the fair values at December 31, 1999 and 1998.

                                  29
<PAGE>

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

Summarized quarterly financial data for the years ended December 31, 1999
and 1998, appear below:

[CAPTION]
<TABLE>
                                        1st      2nd      3rd      4th
                                      Quarter  Quarter  Quarter  Quarter   Total
                                      -------  -------  -------  -------  --------
                                        (in thousands, except per share amounts)
<S>                                   <C>      <C>      <C>      <C>       <C>
1999
Total revenues                        $32,720  $33,765  $33,032  $32,188   $131,705
Operating expenses <F1>                28,009   27,731   25,598   26,674    108,012
Operating income <F1>                   4,711    6,034    7,434    5,514     23,693
Net income <F1>, <F2>                   2,890    3,948    4,400    4,560     15,798
Net income per common share <F1>, <F2>
  Basic                                  $.19     $.26     $.28     $.29      $1.02
  Diluted                                $.19     $.25     $.28     $.29      $1.01
Weighted-average number of common
  shares outstanding:
  Basic                                15,394   15,402   15,441   15,542     15,445
  Diluted                              15,512   15,550   15,698   15,674     15,609

1998
Total revenues                        $28,614  $27,697  $32,200  $32,264   $120,775
Operating expenses <F3>                26,936   24,888   28,098   27,104    107,026
Operating income <F3>                   1,678    2,809    4,102    5,160     13,749
Net income <F3>                           927    1,790    2,438    3,134      8,289
Net income per common share <F3>
  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
</TABLE>

[FN]
<F1> During the first quarter, the Company sold its Enterprise Master
     Person Index product for net proceeds of approximately $750,000.  The pre-
     tax gain resulting from the sale was approximately $681,000.  The after-tax
     gain was approximately $429,000, or $.03 per diluted share.  In addition,
     during the fourth quarter the Company charged operations $971,000 ($656,000
     after-tax, or $.04 per diluted share) related to a reduction in the
     carrying value of pharmacy software development costs.
<F2> Pursuant to a change in tax law, the Company's income tax expense for
     the fourth quarter of 1999 was reduced by $950,000.  This resulted in an
     increase in earnings per diluted share of $.06.
<F3> During the second quarter, the Company sold the assets comprising its
     Managed Care Manager Payor software product line 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.
</FN>
                                  30

<PAGE>

                   SELECTED CONSOLIDATED FINANCIAL DATA

     The following selected consolidated financial data for the five years
ended December 31, 1999, should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and the Consolidated Financial Statements and Notes thereto included herein.
The selected consolidated financial data presented below 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.

[CAPTION]
<TABLE>
                                                     Year Ended December 31,
                                        ------------------------------------------------
                                          1999      1998      1997      1996      1995
                                        --------  --------  --------  --------  --------
                                            (in thousands, except per share amounts)
<S>                                     <C>       <C>       <C>       <C>       <C>
Statement of Income Data:
Revenues:
  System sales                          $ 53,656  $ 60,549  $ 52,761  $ 45,059  $ 32,262
  Support and service                     78,049    60,226    49,576    35,937    29,270
                                        --------  --------  --------  --------  --------
    Total revenues                       131,705   120,775   102,337    80,996    61,532
                                        --------  --------  --------  --------  --------
Operating expenses:
  Cost of system sales                    21,930    27,424    26,015    20,056    14,085
  Client services                         36,720    32,945    27,438    18,401    17,764
  Research and development                16,128    15,309    13,244     9,988     9,040
  Sales and marketing                     17,304    17,556    14,007    10,896     8,734
  General and administrative              15,640    14,196    12,343     9,758     7,068
  Gain on sale of assets <F1>, <F4>         (681)     (404)        -         -         -
  Capitalized software development
    cost adjustments <F2>, <F5>              971         -     2,419         -         -
  Acquired, in-process
    technology <F6>                            -         -     1,211     3,252         -
                                        --------  --------  --------  --------  --------
    Total operating expenses             108,012   107,026    96,677    72,351    56,691
                                        --------  --------  --------  --------  --------
Operating income                          23,693    13,749     5,660     8,645     4,841
Other income (expense):
  Interest income                          1,710     1,348     1,154     1,345       408
  Interest expense                        (1,211)   (1,090)   (1,237)   (1,395)   (1,465)
  Other                                     (796)        2      (316)      (98)       78
                                        --------  --------  --------  --------  --------
Income before income taxes                23,396    14,009     5,261     8,497     3,862
Income tax provision:
  Current year operations <F3>             7,598     5,720     2,491     2,755        73
  Change in tax status                         -         -         -     1,122         -
                                        --------  --------  --------  --------  --------
Net income                              $ 15,798  $  8,289  $  2,770  $  4,620  $  3,789
                                        ========  ========  ========  ========  ========

Pro forma data (unaudited): <F7>
  Historical income before
    income taxes                           $   -     $   -     $   -  $  8,497  $  3,862
  Pro forma income tax provision               -         -         -     4,459     1,661
                                           -----     -----     -----  --------  --------
  Pro forma net income                     $   -     $   -     $   -  $  4,038  $  2,201
                                           =====     =====     =====  ========  ========

Net income per common share: <F7>
  Basic                                    $1.02     $ .54     $ .18  $    .29  $    .18
                                           =====     =====     =====  ========  ========
  Diluted                                  $1.01     $ .54     $ .18  $    .29  $    .18
                                           =====     =====     =====  ========  ========

Weighted-average number of common
  shares outstanding:
  Basic                                   15,445    15,383    15,369    13,919    11,904
                                          ======    ======    ======    ======    ======
  Diluted                                 15,609    15,404    15,428    13,919    11,904
                                          ======    ======    ======    ======    ======

Balance Sheet Data (at end of period):
Cash and cash equivalents               $  9,660  $  7,057   $23,692   $31,911   $   352
Short-term investments                    37,218    27,283         -         -         -
Working capital                           67,656    48,463    38,090    39,065     3,963
Total assets                             117,263   104,244    94,173    96,911    43,874
Long-term debt and obligations
  under capital leases, primarily
  from related party, net
  of current portion                       3,099     4,163     6,080     5,921     6,396
Total shareholders' equity                85,623    68,194    59,822    56,767    20,701

</TABLE>

                                  31
<PAGE>

[FN]
<F1> In 1999, the Company sold its Enterprise Master Person Index product
     for net proceeds of approximately $750,000.  The pre-tax gain resulting
     from the sale was approximately $681,000.  The after-tax gain was
     approximately $429,000, or $.03 per diluted share.
<F2> In 1999, the Company charged operations $971,000 ($656,000 after-tax,
     or $.04 per diluted share) related to a reduction in the carrying value of
     pharmacy software development costs.
<F3> Pursuant to a change in tax law, the Company's income tax expense for
     1999 was reduced by $950,000.  This resulted in an increase in earnings per
     diluted share of $.06.
<F4> In 1998, the Company sold the assets comprising its Managed Care
     Manager Payor software product line 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.
<F5> 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.
<F6> 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.
<F7> Pro forma data for the years 1996 and 1995 has been computed as if the
     Company had been subject to federal and all applicable state income taxes.
</FN>

                                  32