UNITED STATES

SECURITIES AND EXCHANGE COMMISSION







FORM 10-K


FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE


SECURITIES EXCHANGE ACT OF 1934




| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Annual report pursuant to Section 13 or 15(d) of the
	Securities Exchange Act of 1934

for the fiscal year ended December 31, 2000 or



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Transition report pursuant to Section 13 or 15(d) of the
	Securities Exchange Act of 1934

Commission File Number: 000-24539




ECLIPSYS CORPORATION


(Exact name of registrant as specified in its
charter)


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|-------------------------------- |  | -------------------------------------------------
|                                
|                                
|                                
|                                
|Delaware(State of Incorporation) |  | 65-0632092(I.R.S. Employer Identification Number)

777 East Atlantic Avenue

Suite 200


Delray Beach, Florida


33483


(Address of principal executive
offices)


(561) 243-1440

(Registrants telephone number, including
area code)


Securities registered pursuant to Section 12(b) of the
Act: None

Securities registered pursuant to Section 12(g) of the
Act: Common Stock, $.01 par value

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.
Yes  No

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.

The aggregate market value of the voting stock (Common Stock)
held by non-affiliates of the registrant as of March 1,
2001 based upon the closing price of the Common Stock on the
Nasdaq National Market for such date was $736,347,984.

Indicate the number of shares outstanding of each of the
issuers classes of common stock as of the latest
practicable date.

|                             |  |                   |            | 
|---------------------------- |  | ----------------- | ---------- | 
|                             |  | Shares           
|                             |  | outstanding as of
|Class                        |  | March 1, 2001    
|                             |  |                  
|Common Stock, $.01 par value |  |                   | 43,180,733 | 

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Companys definitive Proxy
Statement to be used in connection with the annual meeting of
stockholders for the year 2001 will be incorporated by reference
into Part III of this Form 10-K.



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Part I

This report contains forward-looking statements. For this
purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking
statements. Without limiting the forgoing, the words
believes, anticipates,
plans, expects, intends and
similar expressions are intended to identify forward-looking
statements. The important factors discussed below under the
caption Certain Factors That May Affect Future Operating
Results/ Risk Factors, among others, could cause actual
results to differ materially from those indicated by
forward-looking statements made herein and presented elsewhere
by management from time to time. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise.

Item 1.  Business

Overview

We are a healthcare information technology company. Our
solutions assist healthcare organizations in achieving balanced
outcomes through an appropriate and sustainable combination of
clinical quality, efficient use of resources and patient
satisfaction. We have designed our solutions to help our
customers deliver better healthcare through information. Our
solutions consist of a comprehensive service offering and seven
integrated software suites that we market under the Sunrise
brand name.

Our software applications consist of individual product modules
that can be implemented in any combination and integrated with
our customers existing information technology systems. We
believe the open, modular nature of our software architecture
reduces the overall cost of ownership and reduces the time to
productive use because our solutions do not require the initial
investment and disruption associated with a complete replacement
of a customers existing legacy systems. To facilitate
rapid adoption by our customers, we have engineered our
solutions to take advantage of Web-based technologies. Our
software applications are available to our customers for
implementation in-house or through our remote hosting service,
and are designed to work in a variety of healthcare settings.

In addition, we provide a range of services to our customers,
including implementation, integration, support, maintenance and
training. We also provide outsourcing, remote hosting, network
services and business solutions consulting to assist customers
in meeting their healthcare information technology requirements.
Through this comprehensive service offering and our integrated
software suites, we provide our customers with an end-to-end
solution for their clinical, financial, and administrative
information needs.

We market our solutions primarily to large healthcare
organizations, particularly academic medical centers. We have
one or more of our products installed or being installed in over
1,400 facilities in the United States and 9 other countries. We
maintain decentralized sales and customer support teams in each
of our five North American regions to provide direct, sustained
customer contact.

Industry Background

A History of Low Investment in Healthcare Information
Technology. Historically, the healthcare industry has
invested relatively less in information technology than some
other industries. For example, the Gartner Group, an independent
research firm, reported that in 1999 healthcare organizations
invested 3% of their revenues in information technology as
compared to over 5% invested by financial services companies. As
a result, while physicians, nurses and other care givers are
using leading edge diagnostic and therapeutic technologies, we
believe information and workflow remain largely paper-based and
depend heavily on word-of-mouth communication. As a result of
industry trends, healthcare providers are beginning to make
greater investments in healthcare information technology that
capitalize on evolving information management technologies.
Industry analysts estimate that healthcare organizations spent
approximately $17 billion in 1997 for information technology
solutions, and anticipate that such expenditures will increase
to approximately $28 billion annually by 2002.

Rapid Change in the Healthcare Industry Increases the Need
for Information Technology. The healthcare industry
continues to undergo dramatic change. Throughout the 1990s, the
increasing cost of

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In 1996, Congress passed the Healthcare Information Portability
	and Accountability Act, referred to as HIPAA, which required the
	Department of Health and Human Services, referred to as HHS, to
	establish standards for information sharing, security and
	patient confidentiality in healthcare organizations. In
	December 2000, HHS published its final health data privacy
	regulations, which will require compliance by April 2003.
	Although HHS has not yet issued final rules on most of the other
	topics under HIPAA and has yet to issue proposed rules on some
	topics, we believe these regulations will create a need for
	advanced information technology that enables healthcare
	organizations to comply with these emerging requirements.
|
| |  | In 1999, the Institute of Medicine, or IOM, published a report
	entitled To Err is Human: Building a Safer Health
	System chronicling the high rate of avoidable error in
	patient care, which result in an estimated 44,000 to 98,000
	deaths annually.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Since the IOM report was released, California has passed
	legislation requiring the eventual adoption of information
	technologies aimed at reducing avoidable medical errors. In
	addition, a consortium of large employers called the Leapfrog
	Group, which includes such companies as General Motors, General
	Electric, AT&T and IBM, and whose members reportedly spend
	$40 billion annually on healthcare, has announced its intention
	to begin steering its members employees toward hospitals
	that, among other things, invest in computerized systems
	designed to prevent avoidable medical errors.                                                                                                                                              

As a result, healthcare providers have begun to evaluate the
changes they must make to their systems and processes in order
to address these developments.

Shortcomings of Traditional Healthcare Information
Systems. Traditional healthcare information systems are
limited in their ability to support the modernization of
healthcare delivery processes or the evolving requirements of
managed care, new healthcare legislation and regulations and
patient safety initiatives. Traditional systems have generally
been oriented toward financial functions, which have focused
primarily on the ability to capture charges and generate bills.
These traditional systems do not provide updated, real-time
information to healthcare organizations to aid clinical
decision-making and lessen the increased administrative burdens
they face. Furthermore, individual clinical and administrative
departments have purchased or developed their own proprietary
ancillary systems, resulting in disparate information systems
within a single healthcare delivery network that frequently do
not operate well with one another. In addition, traditional
systems were typically designed to operate in a single facility,
which has made them less effective in todays
geographically dispersed integrated health networks.

These forces have increased the need among healthcare
organizations for clinical, financial and administrative
information technology to help achieve cost-effective,
high-quality outcomes. As a result, healthcare providers are
increasingly demanding greater investment in integrated
information technology solutions that offer all of the core
functions required to manage the entire healthcare delivery
process. Furthermore, the Internet now allows disparate
participants in geographically dispersed health networks to
communicate easily with one another to share data and facilitate
the flow of information.

The Eclipsys Solution

Our solutions assist healthcare organizations in achieving
balanced outcomes through an appropriate and sustainable
combination of clinical quality, resource utilization and
patient satisfaction. They provide comprehensive functionality
to focus on solving the business issues healthcare organizations
face.

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Our solutions are designed to:



| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | provide automated processes that improve clinical workflow and
	support clinical decision-making;                                                                                                                        
|
| |  | integrate clinical, financial and patient satisfaction
	information to support balanced outcomes;                                                                                                                        
|
| |  | provide tools that permit healthcare organizations to analyze
	past performance, model new plans for the future and measure and
	monitor the effectiveness of those plans;                                               
|
| |  | leverage our modular product architecture in order to offer our
	customers a solution targeted at their particular needs while
	preserving their investment in existing systems;                                         
|
| |  | provide for rapid and cost-effective implementation, whether
	through the installation of an in-house system or the option of
	remote hosted services;                                                                   
|
| |  | enable healthcare providers to access patient information and
	other supporting clinical information, such as medical journals,
	both through wireless devices within the healthcare facility and
	over the Internet; and
|
| |  | assist our customers in their efforts to improve workflow
	processes and implement best practices within their
	organizations through our comprehensive service offerings.                                               

The Eclipsys Strategy

Our objective is to become the leading provider of healthcare
information technology solutions to the healthcare industry. Key
elements of our strategy include the following:

Provide Comprehensive, Integrated Healthcare Information
Technology Solutions. Our goal is to continue to provide an
integrated software and service offering that represents a
comprehensive healthcare information technology solution for our
customers. We intend to continue to enhance our existing
products and develop new solutions to meet the evolving
healthcare information needs of our customers. For example, we
have been enhancing our products to take advantage of our
eHealthSource architecture, which is a browser-enabled,
database-neutral software architecture that supports multiple
operating system platforms and can be used across a broad range
of computing environments, including the Internet, client-server
systems and older mainframe computer systems. We have a team of
over 400 internal research, development and technical support
professionals dedicated to developing, enhancing, supporting and
commercializing new and enhanced healthcare information
technology products. For example, we recently began development
of a software application focused on the needs of pharmacies
within healthcare organizations.

Provide Flexible Product Options. We intend to continue
to offer our customers flexible product and product-delivery
options in order to meet their varying information technology
requirements. Our software suites can be purchased individually
or in any combination, and can be integrated with a
customers existing systems, thereby minimizing cost and
disruption. On a combined basis, our software suites provide an
integrated solution to the major clinical, financial and
administrative needs of a healthcare organization. In addition,
we intend to continue to offer our products on both an in-house
and a remote-hosted basis, depending on the needs of the
customer.

Further Penetrate Our Existing Customer Base. We believe
there is a significant opportunity to sell our integrated
healthcare technology solutions to our existing customers, which
include large healthcare organizations, particularly academic
medical centers. Of these customers, only a few have
enterprise-wide healthcare information systems. Our products are
installed or being installed in more than 1,400 facilities, and
most of these facilities have only one or two of our software
applications. We intend to continue to market our solutions
aggressively to our customers in order to capitalize on the
growth opportunity within our existing customer base.

Employ a Targeted Marketing Approach. We intend to
continue to target large healthcare organizations, particularly
academic medical centers. We believe that these entities are the
first to adopt new technology. In addition, we believe that
physicians are becoming increasingly involved in the process of
selecting information technology. We believe that our clinically
oriented products and our inclusion of

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Products

Our products perform the core information technology functions
required by large healthcare organizations and other healthcare
providers throughout the healthcare enterprise. Our software
applications are available to our customers for implementation
in-house or through our remote hosting service, and are designed
to work in a variety of healthcare settings. In addition, our
products are designed to work both through wireless devices
within a healthcare facility and over the Internet. The
following table summarizes our product offerings:

|                                                   |  |                                                                                                                                                                                    
|-------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                  
|                                                  
|Product                                            |  | Primary Functions                                                                                                                                                                  
|                                                  
|                                                  
|Sunrise Clinical Manager                           |  | - Provide clinical rules and information to facilitate
	clinical decision-making
	- Access to patient records
	- On-line ordering of clinical services and prescriptions           
|                                                  
|Sunrise Access Manager                             |  | - Access to patient information and coordination of
	gathering of additional information at each stage of patient
	care
	- Coordinate scheduling of appointments                   
|                                                  
|Sunrise Patient Financial Manager                  |  | - Coordinate compliance with managed-care contract
	reimbursement terms, patient billing, and third-party
	reimbursement                                                           
|                                                  
|Sunrise Decision Support Manager                   |  | - Clinical and financial data repository to analyze past
	clinical, operational and financial performance
	- Model future plans and alternatives
	- Measure and monitor performance
|                                                  
|Sunrise Record Manager                             |  | - Automated medical record management system
	- Enterprise-wide document and image-management                                                                                      
|                                                  
|Sunrise ERP Manager                                |  | - Supply and materials management, along with other
	financial management tools                                                                                                    
|                                                  
|Sunrise Enterprise Application Integrator (eWebIT) |  | - Tools to enable integration of data from existing legacy
	systems                                                                                                                
|                                                  

Sunrise Clinical Manager. Sunrise Clinical Manager is a
physician-oriented application that provides patient information
to physicians, nurses and other clinicians at the point-of-care.
Sunrise Clinical Manager also allows a physician to enter orders
quickly and efficiently into the system and provides clinical
decision support at the time of order entry. Sunrise Clinical
Manager is designed for use in ambulatory, acute care and other
healthcare settings, and includes the following features:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Knowledge-based orders, which is a clinical decision support
	system that automatically provides real-time guidance to
	physicians by alerting them to possible problems with or
	conflicts between newly entered orders and existing patient
	information using the systems rules database. A
	comprehensive set of clinical rules developed by physicians is
	available with knowledge-based orders. Customers can modify
	these existing rules or can develop their own clinical rules.
|
| |  | Clinical decision support, which triggers alerts, including by
	email or pager, upon the occurrence of a specified change in a
	patients condition or any other physician-designated
	event, such as the delivery of unfavorable laboratory results,
	while relating the new information to information already in the
	system for that patient.                                                                                                                                          
|
| |  | Clinical pathways and scheduled activities lists, which provide
	access to standardized patient-care profiles and assist in the
	scheduling of clinical treatment procedures.                                                                                                                                                                                                                                                                                                              

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| |   |                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Order entry, communication and management, which enables
	physicians to order online prescriptions and laboratory or
	diagnostic tests or procedures and routes the order to the
	appropriate department or party within the organization for
	fulfillment.
|
| |  | Clinical documentation, which gathers and presents organized,
	accurate and timely patient information by accepting and
	arranging input from caregivers, laboratories or monitoring
	equipment.                                                           
|
| |  | Sunrise Universal Viewer, which provides physicians with
	Web-based access to patient information from within the
	healthcare facility or at a remote location.                                                                                            
|
| |  | Health data repository, which permanently stores clinical and
	financial information in easily accessible patient care records.                                                                                                                            

Sunrise Access Manager. Sunrise Access Manager enables
the healthcare provider to identify the patient at any point in
the healthcare delivery system and to collect and maintain
patient information throughout the entire process of patient
care on an enterprise-wide basis. The single database structure
of Sunrise Access Manager permits simultaneous access to the
entire patient record by authorized personnel from any access
point on the system. The elements of Sunrise Access Manager
include:



| |   |                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Patient registration, admission, discharge and transfer.                                                                                                                                                                                                                        
|
| |  | Patient scheduling and resource management, which is used to
	schedule patient appointments throughout an organization while
	accounting for patient preferences and resource availability.                                                                                     
|
| |  | Enterprise person identifier, which is a single index of all
	patients and healthcare plan members within a healthcare
	providers system that supports searches on the basis of a
	variety of characteristics, such as name, Social Security number
	or other demographic data.
|
| |  | Managed-care support features, such as verifying insurance
	eligibility online and compliance with managed-care plan rules
	and procedures.                                                                                                                                     

Sunrise Patient Financial Manager. Sunrise Patient
Financial Manager uses a single, integrated database for
patient-accounting processes, including the automatic generation
of patient billing and accounts receivable functions, a system
of reimbursement management to monitor receivables, the
automation of collection activities and contract compliance
analysis, as well as follow-up processing and reporting
functions. This product suite supports the growing trend toward
the centralized business office for multiple entities, which
improves compliance with managed care contracts. Sunrise Patient
Financial Manager includes the following functions:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Patient accounting, which automates the patient-billing and
	accounts receivable functions, including bill generation,
	reimbursement calculation, account follow-up and account
	write-offs. Paperless processing is achieved through real-time
	inquiry, editing, sorting, reporting, commenting and updating
	from other applications, including modules in Sunrise Access
	Manager and Sunrise Clinical Manager.
|
| |  | Contract management, which includes a repository for the payment
	terms, restrictions, approval requirements and other rules and
	regulations of each insurance plan and managed care contract
	accepted by an organization. Contract management is used in
	conjunction with other Sunrise products to ensure that patient
	care complies with these rules and regulations.                                        
|
| |  | Reimbursement management, which facilitates the monitoring of
	receivables, performance of collection activity, reconciliation
	with third parties and analysis of contract compliance and
	performance.                                                                                                                                                                                                            

Sunrise Decision Support Manager. Sunrise Decision
Support Manager creates a clinical and financial data repository
by integrating data from throughout the enterprise. Sunrise
Decision Support Manager gathers information from the many
different departmental information systems through connections
that enable concurrent updating of distributed data. The data
can then be analyzed to determine the patient-level costs of
care and identify areas for improvement. This information allows
the organization to evaluate its cost structure, make changes in
clinical processes to reduce costs and accurately price
reimbursement contracts on a profitable basis. Sunrise Decision
Support Manager also analyzes and measures clinical process and
outcomes data, helping to identify the practice patterns that
most consistently result in the highest quality care at the
lowest cost. Sunrise Decision Support Manager is an important
component of our customers ability to

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| |   |                                                    
| | - | ---------------------------------------------------
| |  | case mix, reimbursement and utilization management;
|
| |  | cost and profitability analysis; and               
|
| |  | strategic planning, modeling and forecasting.      

Sunrise Record Manager. Sunrise Record Manager is
designed to meet the healthcare information management needs of
organizations of virtually any size. It includes comprehensive
applications for clinical data management and enterprise-wide
document and image-management functions designed to improve
productivity, efficiency and accountability. Sunrise Record
Manager provides multiple users with convenient and concurrent
access to information, wherever they may be throughout the
organization. Sunrise Record Manager includes:



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | management of patient charts, including tracking, chart requests
	and release of information;

  transcription and electronic signature functions;



| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | medical records abstracting and medical image viewer, which make
	medical information more readily accessible to caregivers; and
|
| |  | concurrent care manager, which facilitates coordination of the
	efforts of all providers involved in the care of the patient.   

Sunrise ERP Manager. Sunrise ERP Manager is an enterprise
resource planning product that has been specifically designed
for the healthcare industry. Among other things, it recognizes
the close relationship between the materials management function
and the surgery department, which is generally the largest
consumer of medical supplies in a hospital. Sunrise ERP Manager
largely automates the cost-intensive process of ordering, paying
for and tracking supplies. It includes tools for managing
materials and accounts payable.

Sunrise Enterprise Application Integrator (eWebIT).
Sunrise Enterprise Application Integrator provides tools to
enable the integration of data from a customers existing
systems. As integrated health networks emerge, the individual
entities within the network will often have their own different
information systems. The clinical and financial data in these
disparate systems must be integrated to provide an
enterprise-wide view. Sunrise Enterprise Application
Integrators product suite includes tools to achieve this
integration, primarily through the use of Web-based integration
technologies. Sunrise Enterprise Application Integrator achieves
a comprehensive integration solution which provides:



| |   |                                                                        
| | - | -----------------------------------------------------------------------
| |  | a Web-based composite view of data from different information
	systems;
|
| |  | data sharing among disparate information systems; and                  
|
| |  | enterprise security and single system sign-on capabilities.            

Hardware and Related Offerings. Finally, as part of our
commitment to being a comprehensive healthcare information
solutions provider, we also sell a variety of desktop, network
and platform solutions including hardware, middleware and
related services.

Services

Drawing on the functionality and flexibility of our software
products, we offer a range of professional services as part of
our healthcare information technology solutions. These services
consist of the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Implementation, Integration, Product Support, Training and
	Maintenance  To facilitate successful product
	implementation, our consultants assist our customers with
	initial installation of a system, conversion and integration of
	their historical data and ongoing training and support. We offer
	24-hour support and electronic distribution to provide our
	customers with the latest information regarding our products. We
	also provide regular maintenance releases to our customers. Our
	service and support

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | activities are supplemented by comprehensive training programs,
	including introductory training courses for new customers and
	seminars for existing customers, to allow them to take full
	advantage of the capabilities of our products. We believe that a
	high level of service and support is critical to our success.
	Furthermore, we believe that a close and active service and
	support relationship is important to customer satisfaction and
	provides us with important information regarding evolving
	customer requirements and additional sales opportunities.
|
| |  | Outsourcing Services  We assume the management
	of the customers entire information-technology function
	onsite using our employees. Outsourcing services include
	facilities management, network outsourcing and transition
	management.                                                                                                                                                                                                                                                                                                                                    



| |   |                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Facilities management enables our customers to improve their
	information-technology operations by having us assume
	responsibility for all aspects of the customers onsite
	information-technology operations, from equipment to human
	resources.
|
| |  | Network outsourcing provides our customers with total healthcare
	information network support, relieving them of the need to
	secure and maintain expensive resources in a rapidly changing
	technological environment.                             
|
| |  | Transition management offers our customers a solution for
	migrating their information technology to new processes,
	technologies or platforms without interfering with the existing
	rules and initiatives critical to the delivery of healthcare. 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Remote Hosting Services  We assume the
	complete processing of our customers applications from our
	Technology Solutions Center using our equipment and personnel.
	This service frees an organization from the need to maintain the
	environment, equipment and technical staff required for systems
	processing and offers support for an organizations
	fault-management, configuration-management and
	utilization-management processes.                                                                                                                                                                         
|
| |  | Network Services  We offer a comprehensive
	package of services that enable our customers to receive
	critical data quickly and accurately without incurring a
	substantial increase in cost. We assess changes in network
	utilization and function, forecast any necessary upgrades to
	accommodate the customers growth and design any changes
	necessary to provide the customer with the required performance
	and functionality. We offer our services in various forms,
	ranging from onsite assistance on a time-and-expense basis to
	complete turnkey project deliveries with guaranteed fixed price
	rates.
|
| |  | Business Solutions Consulting  Our business
	solutions services aid our customers in achieving improved
	return on investment through their use of information obtained
	from our products. The members of our business solutions group
	have wide and varied experience in healthcare delivery and
	healthcare information management, enabling them to help
	customers effectively manage change that will ensure maximum
	return on investment and improved outcomes.                                                                                                                                               

Technology

We have defined a single, unifying software architecture for our
products, referred to as SOLA, which stands for Structured
Object Layered Architecture. We have continually enhanced and
expanded SOLA and recently renamed it eHealthSource.
eHealthSource is engineered to achieve the following objectives:



| |   |                                         
| | - | ----------------------------------------
| |  | to remain open and modular;             
|
| |  | to be scalable and flexible;            
|
| |  | to increase speed of implementation; and
|
| |  | to reduce the total cost of ownership.  

We are in the process of enhancing each software suite to take
advantage of our eHealthSource architecture, which we believe
will facilitate integration, enhance automation, increase
reliability and improve security and workflow processes.
eHealthSource draws on a Web-based, thin-client architecture to
integrate

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eHealthSource also features a high-performance rules engine to
implement a sizable portion of the business logic for our
products. These rules guide clinical and business workflow,
clinical decision support for order entry, clinical and
financial event monitoring and screen logic, enabling structured
development of new applications while maintaining consistency
across applications. Because the rules are managed and stored as
data, customers are able to update the business logic without
modifying and distributing new code. This enables customers to
reduce programming expenses, while enhancing the flexibility of
our applications and facilitating their rapid adoption.
eHealthSource features a seamless and consistent architecture
which promotes reliability.

eHealthSource also uses advanced technology to maintain security
both across Internet connections and within an
organizations internal network. This ability to support
secure communications and incorporate reliable protocols for
authenticating users and services enhances the ability of an
organization to maintain the confidentiality of patient
information.

Customers, Marketing and Sales

Our marketing and sales efforts focus on large health care
organizations, primarily academic medical centers. We sell our
products and services in North America exclusively through our
direct sales force. Management of the sales force is
decentralized, with five regional presidents having primary
responsibility for sales and marketing within their regions.
National account representatives manage some multi-region
accounts. Within each region, the direct sales force is
generally organized into two groups, one focused principally on
generating sales to new customers and the other focused on
additional sales to existing customers. The direct sales force
works closely with our implementation and product line
specialists. Supporting the field staff is a team of domain
experts who have extensive experience and expertise in their
specific field. A significant component of compensation for all
direct sales personnel is performance based, although we base
incentive compensation on a number of factors in addition to
actual sales, including customer satisfaction and accounts
receivable performance.

In addition to the United States, we have customers in
Australia, Belgium, Canada, France, Germany, The Netherlands,
New Zealand, Singapore and the United Kingdom.

Research and Development

We believe that our future success depends in large part on our
ability to maintain and enhance our current product line,
develop new products, maintain technological competitiveness and
meet an expanding range of customer requirements. Our current
development efforts are focused on enhancing our products to
utilize the eHealthSource architecture and the development of
additional functionality and applications for our existing
software applications.

As of December 31, 2000, our research, development and
technical support organization consisted of over 400 employees.
Our research and development expenses were $37.1 million, $43.8
million and $37.4 million for the years ended December 31,
1998, 1999 and 2000, respectively.

Competition

The market for our products and services is intensely
competitive and is characterized by rapidly changing technology,
evolving user needs and the frequent introduction of new
products. Our principal competitors include Cerner Corp.,
McKessonHBOC Inc., IDX Systems Corp. and Shared Medical Systems,
which was acquired by Siemens AG in 2000. We also face
competition from providers of practice-management systems,
general decision support and database systems and other
segment-specific applications, as well as from healthcare
technology consultants.

9



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A number of our competitors are more established, benefit from
greater name recognition and have substantially greater
financial, technical and marketing resources than we do. We also
expect that competition will continue to increase as a result of
consolidation in both the information technology and healthcare
industries. We believe that the principal factors affecting
competition in the healthcare information technology market
include product functionality, performance, flexibility and
features, use of open standards technology, quality of service
and support, company reputation, price and overall cost of
ownership.

Employees

As of December 31, 2000, we employed 1,460 people,
including 689 in field operations, sales, account management,
implementation and education; 631 in research, development and
product delivery; and 140 in marketing, finance, human
resources, legal and other administrative functions. Our success
depends on our continued ability to attract and retain highly
skilled and qualified personnel. Competition for such personnel
is intense in the information-technology industry, particularly
for talented software developers, service consultants, and sales
and marketing personnel. We cannot assure you that we will be
able to attract and retain qualified personnel in the future.
Our employees are not represented by any labor unions. We
consider our relations with our employees to be good.

Risk Factors

You should carefully consider the following risk factors and all
other information contained in this annual report before
investing in our common stock. Investing in our common stock
involves a high degree of risk. Any of the following factors
could harm our business and future operating results.

Given the length of our sales and implementation cycles, if a
significant number of our customers delay implementation, our
future operating results may suffer

We have experienced long sales and implementation cycles. How
and when to implement, replace, expand or substantially modify
an information system, or modify or add business processes, are
major decisions for healthcare organizations. Furthermore, the
solutions we provide typically require significant capital
expenditures by the customer. The sales cycle for our systems
has ranged from 6 to 18 months or more from initial contact
to contract execution. Historically, our implementation cycle
has ranged from 6 to 36 months from contract execution to
completion of implementation. During the sales cycle and the
implementation cycle, we will expend substantial time, effort
and financial resources preparing contract proposals,
negotiating the contract and implementing the solution. We may
not realize any revenues to offset these expenditures, and, if
we do, accounting principles may not allow us to recognize the
revenues during corresponding periods, which could harm our
future operating results. Additionally, any decision by our
customers to delay implementation may adversely affect our
revenues.

The healthcare industry faces financial constraints which
could adversely affect the demand for our products and
services

The healthcare industry has faced, and will likely continue to
face, significant financial constraints. For example, the shift
to managed healthcare in the 1990s put pressure on healthcare
organizations to reduce costs, and the Balanced Budget Act of
1997 dramatically reduced Medicare reimbursement to healthcare
organizations. Our solutions often involve a significant
financial commitment by our customers, and, as a result, our
ability to grow our business is largely dependent on our
customers information technology budgets. To the extent
healthcare information technology spending declines or increases
more slowly than we anticipate, demand for our products would be
adversely affected.

Our operating results may be adversely affected as we
complete contracts we inherited from acquisitions and as our
customers elect to license our products under comprehensive
bundled arrangements

In 2000, in response to our customers desire for flexible
pricing and more comprehensive bundled information technology
solutions, we began to offer our customers the option of
purchasing our solutions under

10



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The shift toward providing comprehensive bundled solutions was a
factor contributing to the decline in our revenue in 2000,
particularly in the second and third quarters. Under these
comprehensive bundled arrangements, revenues are recognized over
the term of the contract consistent with the timing of the
performance of all services offered under the arrangement.
Generally, less revenue is recognized under these arrangements
during the first 12 to 24 months compared to traditional
licensing arrangements that we sell. We will continue to offer
our solutions under our traditional licensing arrangements. Our
initial experience leads us to believe that customers will
increasingly elect to purchase our solutions under comprehensive
bundled arrangements. If we continue to increase contract
signings under these type of arrangements as opposed to our
traditional licensing arrangements, our revenues may continue to
be adversely affected for the next two to three years as
compared to historic results.

In addition, in connection with certain acquisitions, we
inherited contracts that did not provide a reasonable margin for
the cost and scope of the services involved. In order to build
customer loyalty, we continued to honor our commitments under
these contracts during 2000 and in some cases performed work
outside the scope of these contracts for which we received
nominal or no fees. This adversely impacted our margins in the
second, third and fourth quarters of 2000 as we continued to
incur costs with minimal incremental revenues. Our margins may
continue to be adversely affected as we continue to provide
services under these contracts.

We have a history of operating losses and we cannot predict
when, or if, we will achieve profitability

We have incurred net losses in each year since our inception,
including net losses of $126.3 million in 1997, $35.3 million in
1998, $9.4 million in 1999 and $34.0 million in 2000. We expect
to continue to incur net losses, and we cannot predict when or
if we will achieve profitability.

Our operating results may fluctuate significantly and may
cause our stock price to decline

We have experienced significant variations in revenues and
operating results from quarter to quarter. Our quarterly
operating results may continue to fluctuate due to a number of
factors, including:



| |   |                                                                                                 
| | - | ------------------------------------------------------------------------------------------------
| |  | the timing, size and complexity of our product sales and
	implementations;                      
|
| |  | overall demand for healthcare information technology;                                           
|
| |  | market acceptance of new services, products and product
	enhancements by us and our competitors;
|
| |  | product and price competition;                                                                  
|
| |  | the relative proportions of revenues we derive from systems and
	services and from hardware;    
|
| |  | changes in our operating expenses;                                                              
|
| |  | the timing and size of future acquisitions;                                                     
|
| |  | personnel changes;                                                                              
|
| |  | the performance of our products; and                                                            
|
| |  | fluctuations in general economic and financial market conditions.                               

It is difficult to predict the timing of revenues from product
sales because the sales cycle can vary depending upon several
factors. These factors include the size of the transaction, the
changing business plans of the customer, the effectiveness of
the customers management and general economic conditions.
In addition, depending upon the extent to which our customers
elect to license our products under comprehensive

11



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We have grown through acquisitions, and if we fail to
successfully integrate the operations and products of the
businesses we have acquired, our business could suffer

We began operations in 1996 and have grown through a series of
acquisitions completed since January 1997. The rapid growth
in the size and complexity of our business as a result of our
acquisitions has placed a significant strain on our management
and other resources. Our success will depend in part on our
ability to continue to integrate the operations of the
businesses we acquired and to consolidate their product
offerings with our own. We may not be able to manage the
combined entity and implement our operating or growth strategies
effectively. To compete effectively and to manage any future
growth, we will need to implement and improve operational and
financial systems on a timely basis and to expand, train,
motivate and manage our work force. Our personnel, systems,
procedures and controls may not be adequate to support our
rapidly growing operations.

We operate in an intensely competitive market that includes
companies that have greater financial, technical and marketing
resources than we do

We operate in a market that is intensely competitive. Our
principal competitors include Cerner Corp., McKessonHBOC, Inc.,
IDX Systems Corp. and Shared Medical Systems Corporation, which
was acquired by Siemens AG in 2000. We also face competition
from providers of practice management systems, general decision
support and database systems and other segment-specific
applications, as well as from healthcare technology consultants.
A number of existing and potential competitors are more
established than we are and have greater name recognition and
financial, technical and marketing resources than we do. We
expect that competition will continue to increase. Increased
competition could harm our business.

If the healthcare industry continues to undergo
consolidation, this could impose pressure on our products
prices, reduce our potential customer base and reduce demand for
our products

Many healthcare providers have consolidated to create larger
healthcare delivery enterprises with greater market power. If
this consolidation continues, it could erode our customer base
and could reduce the size of our target market. In addition, the
resulting enterprises could have greater bargaining power, which
may lead to erosion of the prices for our products.

Potential regulation by the U.S. Food and Drug Administration
of our products as medical devices could impose increased costs,
delay the introduction of new products and hurt our business

The U.S. Food and Drug Administration is likely to become
increasingly active in regulating computer software intended for
use in the healthcare setting. The FDA has increasingly focused
on the regulation of computer products and computer-assisted
products as medical devices under the federal Food, Drug, and
Cosmetic Act. If the FDA chooses to regulate any of our products
as medical devices, it can impose extensive requirements upon
us, including the following:



| |   |                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | requiring us to seek FDA clearance of a pre-market notification
	submission demonstrating that the product is substantially
	equivalent to a device already legally marketed, or to obtain
	FDA approval of a pre-market approval application establishing
	the safety and effectiveness of the product;
|
| |  | requiring us to comply with rigorous regulations governing the
	pre-clinical and clinical testing, manufacture, distribution,
	labeling and promotion of medical devices; and                                                                                                                           

12



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| |   |                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | requiring us to comply with the FDC Acts general controls,
	including establishment registration, device listing, compliance
	with good manufacturing practices, reporting of specified device
	malfunctions and adverse device events.

If we fail to comply with applicable requirements, the FDA could
respond by imposing fines, injunctions or civil penalties,
requiring recalls or product corrections, suspending production,
refusing to grant pre-market clearance or approval of products,
withdrawing clearances and approvals, and initiating criminal
prosecution. Any final FDA policy governing computer products,
once issued, may increase the cost and time to market of new or
existing products or may prevent us from marketing our products.

New and potential federal regulations relating to patient
confidentiality could depress the demand for our products and
impose significant product redesign costs on us

State and federal laws regulate the confidentiality of patient
records and the circumstances under which those records may be
released. These regulations govern both the disclosure and use
of confidential patient medical record information and may
require the users of such information to implement specified
security measures. Regulations governing electronic health data
transmissions are evolving rapidly and are often unclear and
difficult to apply.

On August 22, 1996, President Clinton signed the Health
Insurance Portability and Accountability Act of 1996, or HIPAA.
This legislation requires the Secretary of Health and Human
Services, or HHS, to adopt national standards for some types of
electronic health information transactions and the data elements
used in those transactions, adopt standards to ensure the
integrity and confidentiality of health information, and
establish a schedule for implementing national health data
privacy legislation or regulations. In December 2000, HHS
published its final health data privacy regulations, which will
require healthcare organizations to be in compliance by
April 2003. These regulations restrict the use and
disclosure of personally identifiable health information without
the prior informed consent of the patient. HHS has not yet
issued final rules on most of the other topics under HIPAA and
has yet to issue proposed rules on some topics. The final rules,
if and when issued, may differ from the proposed rules. We
cannot predict the potential impact of the rules that have not
yet been proposed or any other rules that might be finally
adopted instead of the proposed rules. In addition, other
federal and/or state privacy legislation may be enacted at any
time.

These laws or regulations, when adopted, could restrict the
ability of our customers to obtain, use or disseminate patient
information. This could adversely affect demand for our products
and force us to re-design our products in order to meet the
requirements of any new regulations. We have included security
features in our products that are intended to protect the
privacy and integrity of patient data. Despite the existence of
these security features, these products may be vulnerable to
break-ins and similar disruptive problems that could jeopardize
the security of information stored in and transmitted through
the computer systems of our customers. We may need to expend
significant capital, research and development and other
resources to modify our products to address evolving data
security and privacy issues.

Our products are used to assist clinical decision-making and
provide information about patient medical histories and
treatment plans, and if these products fail to provide accurate
and timely information, our customers could assert claims
against us that could result in substantial cost to us, harm our
reputation in the industry and cause demand for our products to
decline

We provide products that assist clinical decision-making and
relate to patient medical histories and treatment plans. If
these products fail to provide accurate and timely information,
customers could assert liability claims against us. Litigation
with respect to liability claims, regardless of its outcome,
could result in substantial cost to us, divert managements
attention from operations and decrease market acceptance of our
products. We attempt to limit by contract our liability for
damages arising from negligence, errors or mistakes. Despite
this precaution, the limitations of liability set forth in our
contracts may not be enforceable or may not otherwise protect us
from liability for damages. We maintain general liability
insurance coverage, including coverage for errors or omissions.
However, this coverage may not continue to be available on
acceptable terms

13



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Highly complex software products such as ours often contain
undetected errors or failures when first introduced or as
updates and new versions are released. It is particularly
challenging for us to test our products because it is difficult
to simulate the wide variety of computing environments in which
our customers may deploy them. Despite extensive testing, from
time to time we have discovered defects or errors in our
products. Defects, errors or difficulties could cause delays in
product introductions and shipments, result in increased costs
and diversion of development resources, require design
modifications or decrease market acceptance or customer
satisfaction with our products. In addition, despite testing by
us and by current and potential customers, errors may be found
after commencement of commercial shipments, resulting in loss of
or delay in market acceptance.

If we undertake additional acquisitions, they may be
disruptive to our business and could have an adverse effect on
our future operations and the market price of our common
stock

An important element of our business strategy has been expansion
through acquisitions. Since 1997, we have completed eight
acquisitions. Any future acquisitions would involve a number of
risks, including the following:



| |   |                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The anticipated benefits from any acquisition may not be
	achieved. The integration of acquired businesses requires
	substantial attention from management. The diversion of the
	attention of management and any difficulties encountered in the
	transition process could hurt our business.           
|
| |  | In future acquisitions we could issue additional shares of our
	capital stock, incur additional indebtedness or pay
	consideration in excess of book value, which could have a
	dilutive effect on future net income, if any, per share.                                                                 
|
| |  | Many business acquisitions must be accounted for under the
	purchase method of accounting. These acquisitions may generate
	significant goodwill or other intangible assets and result in
	substantial related amortization charges to us. Acquisitions
	could also involve significant one-time charges.

If we fail to attract, motivate and retain highly qualified
technical, marketing, sales and management personnel, our
ability to execute our business strategy could be impaired

Our success depends, in significant part, upon the continued
services of our key technical, marketing, sales and management
personnel and on our ability to continue to attract, motivate
and retain highly qualified employees. Competition for these
employees is intense. In addition, the process of recruiting
personnel with the combination of skills and attributes required
to execute our business strategy can be difficult,
time-consuming and expensive. We believe that our ability to
implement our strategic goals depends to a considerable degree
on our senior management team. The loss of any member of that
team, particularly Harvey J. Wilson, our founder, chairman
of the board and chief executive officer, could hurt our
business.

Changing customer requirements could decrease the demand for
our products, which could harm our business and decrease our
revenues

The market for our products and services is characterized by
rapidly changing technologies, evolving industry standards and
new product introductions and enhancements that may render
existing products obsolete or less competitive. As a result, our
position in the healthcare information technology market could
erode rapidly due to unforeseen changes in the features and
functions of competing products, as well as the pricing models
for such products. Our future success will depend in part upon
our ability to enhance our existing products and services and to
develop and introduce new products and services to meet changing
customer requirements. The process of developing products and
services such as those we offer is extremely complex and is
expected to become increasingly complex and expensive in the
future as new technologies are

14



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We depend on licenses from third parties for rights to the
technology used in several of our products, and if we are unable
to continue these relationships and maintain our rights to this
technology, our business could suffer

We depend upon licenses for some of the technology used in our
products from a number of third-party vendors, including
Computer Corporation of America, Computer Associates, Oracle
Corporation and Microsoft. We also have licenses from Premier,
Inc. for comparative database systems and other software
components and clinical benchmarking data. Most of these
licenses expire within one to four years, can be renewed only by
mutual consent and may be terminated if we breach the terms of
the license and fail to cure the breach within a specified
period of time. We may not be able to continue using the
technology made available to us under these licenses on
commercially reasonable terms or at all. As a result, we may
have to discontinue, delay or reduce product shipments until we
obtain equivalent technology, which could hurt our business.
Most of our third-party licenses are non-exclusive. Our
competitors may obtain the right to use any of the technology
covered by these licenses and use the technology to compete
directly with us. In addition, if our vendors choose to
discontinue support of the licensed technology in the future, we
may not be able to modify or adapt our own products.

Our products rely on our intellectual property, and any
failure by us to protect our intellectual property, or any
misappropriation of it, could enable our competitors to market
products with similar features, which could reduce demand for
our products

We are dependent upon our proprietary information and
technology. Our means of protecting our proprietary rights may
not be adequate to prevent misappropriation. The laws of some
foreign countries may not protect our proprietary rights as
fully as do the laws of the United States. Also, despite the
steps we have taken to protect our proprietary rights, it may be
possible for unauthorized third parties to copy aspects of our
products, reverse engineer our products or otherwise obtain and
use information that we regard as proprietary. In some limited
instances, customers can access source-code versions of our
software, subject to contractual limitations on the permitted
use of the source code. Although our license agreements with
these customers attempt to prevent misuse of the source code,
the possession of our source code by third parties increases the
ease and likelihood of potential misappropriation of such
software. Furthermore, others could independently develop
technologies similar or superior to our technology or design
around our proprietary rights. In addition, infringement or
invalidity claims, or claims for indemnification resulting from
infringement claims, could be asserted or prosecuted against us.
Regardless of the validity of any claims, defending against
these claims could result in significant costs and diversion of
our resources. The assertion of infringement claims could also
result in injunctions preventing us from distributing products.
If any claims or actions are asserted against us, we might be
required to obtain a license to the disputed intellectual
property rights, which might not be available on reasonable
terms or at all.

15



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Provisions of our charter documents and Delaware law may
inhibit potential acquisition bids that a stockholder may
believe is desirable, and the market price of our common stock
may be lower as a result

Our board of directors has the authority to issue up to
4,900,000 shares of preferred stock. The board of directors can
fix the price, rights, preferences, privileges and restrictions
of the preferred stock without any further vote or action by our
stockholders. The issuance of shares of preferred stock may
discourage, delay or prevent a merger or acquisition of our
company. The issuance of preferred stock may result in the loss
of voting control to other stockholders. We have no current
plans to issue any shares of preferred stock. In
August 2000, our board of directors adopted a shareholder
rights plan under which we issued preferred stock purchase
rights that would adversely affect the economic and voting
interests of a person or group that seeks to acquire us or a 15%
or more interest in our common stock without negotiations with
our board of directors.

Our charter documents contain additional anti-takeover devices
including:



| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | only one of the three classes of directors is elected each year;                                                  
|
| |  | the ability of our stockholders to remove directors without
	cause is limited;                                    
|
| |  | the right of stockholders to act by written consent has been
	eliminated;                                         
|
| |  | the right of stockholders to call a special meeting of
	stockholders has been eliminated;                         
|
| |  | advance notice must be given to nominate directors or submit
	proposals for consideration at stockholder meetings;

Section 203 of the Delaware corporate statute may inhibit
potential acquisition bids for our company. We are subject to
the anti-takeover provisions of the Delaware corporate statute,
which regulate corporate acquisitions. Delaware law will prevent
us from engaging, under specified circumstances, in a business
combination with any interested stockholder for three years
following the date that the interested stockholder became an
interested stockholder unless our board of directors or a
supermajority of our uninterested stockholders agree. For
purposes of Delaware law, a business combination includes a
merger or consolidation involving us and the interested
stockholder and the sale of more than 10% of our assets. In
general, Delaware law defines an interested stockholder as any
holder beneficially owning 15% or more of the outstanding voting
stock of a corporation and any entity or person affiliated with
or controlling or controlled by the holder.

These provisions could discourage potential acquisition
proposals and could delay or prevent a change in control
transaction. They could also have the effect of discouraging
others from making tender offers for our common stock. As a
result, these provisions may prevent the market price of our
common stock from increasing substantially in response to actual
or rumored takeover attempts. These provisions may also prevent
changes in our management.

Set forth below is certain information regarding the
Companys executive officers:

Executive Officers of the Registrant

|                        |  |     |    |       |  |                                                               
|----------------------- |  | --- | -- | ----- |  | --------------------------------------------------------------
|Name                    |  | Age |    | Title
|                        |  |     |    |      
|Harvey J. Wilson        |  |     | 62 |       |  | Chief Executive Officer and Chairman of the Board of Directors
|                       
|                       
|                       
|                       
|James E. Hall           |  |     | 67 |       |  | President and Chief Operating Officer                         
|                       
|                       
|                       
|                       
|Gregory L. Wilson       |  |     | 32 |       |  | Senior Vice President, Chief Financial Officer and Treasurer  
|                       
|                       
|                       
|                       
|T. Jack Risenhoover, II |  |     | 35 |       |  | Senior Vice President, General Counsel and Secretary          

Harvey J. Wilson, our founder, served as our
president, chief executive officer and chairman of the board of
directors since we were formed in December 1995 until February
1999, and continues to serve as chief executive officer and
chairman of the board of directors. Mr. Wilson was a
co-founder of Shared Medical Systems Corporation, or SMS, a
healthcare information systems provider. Mr. Wilson is a
director of Philadelphia Suburban Corporation, a water utility
company. Harvey Wilson is the father of Gregory Wilson, our
chief financial officer.

16



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James E. Hall has served as our chief operating
officer since January 1997 and became president in February
1999. From August 1995 to January 1997, Mr. Hall was senior
vice president of sales and marketing for Multimedia Medical
Systems, Inc., a clinical information systems company.

Gregory L. Wilson has served as our senior vice
president, chief financial officer and treasurer since December
1999. From January to December 1999, he served as our president
of the Southeast region and, from April 1997 to January 1999, as
our vice president of mergers and acquisitions. Before joining
us, Mr. Wilson was a vice president and healthcare services
equity analyst for Lehman Brothers, from March 1996 to April
1997. From May 1995 to March 1996, Mr. Wilson was a vice
president of Needham & Co., an investment bank. Gregory
Wilson is the son of Harvey Wilson.

T. Jack Risenhoover, II has served as vice
president and general counsel from February 1997 through
February 2000, and as senior vice president and general counsel
since March 2000. From May 1994 to January 1997,
Mr. Risenhoover was general counsel for The Right Angle,
Inc., a marketing firm.

Item 2.  Properties

We are headquartered in Delray Beach, Florida, where we lease
approximately 20,000 square feet of office space under several
leases expiring at various times through June 2003. In addition,
we maintain leased office space in Phoenix, Arizona; Tucson,
Arizona; Little Rock, Arkansas; Newport Beach, California; San
Jose, California; Santa Clara, California; Santa Rosa,
California; Roswell, Georgia; Atlanta, Georgia; Oak Brook,
Illinois; Boston, Massachusetts; Mountain Lakes, New Jersey;
Albany, New York; Uniondale, New York; Malvern, Pennsylvania;
Lynnwood, Washington; and Rockville, Maryland. We also maintain
leased office space in Australia, Canada, Belgium and the United
Kingdom. These leases expire at various times through June 2009.

Item 3.  Legal Proceedings

We are not party to any material legal proceedings.

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

No matters were submitted to a vote of our stockholders during
the fourth quarter of 2000.

17



---



Part II



|        |                                                                              
|------- | -----------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and Related
        Stockholder Matters

Price Range of Common Stock

Our Common Stock has been publicly traded on the Nasdaq National
Market under the symbol ECLP since our initial
public offering on August 6, 1998. The following table
shows the high and low sales prices of our common stock as
reported by the Nasdaq National Market for the periods indicated.

|                                    |  |      |       |     |  |   |       | 
|----------------------------------- |  | ---- | ----- | --- |  | - | ----- | 
|                                    |  | High |       | Low
|                                    |  |      |       |    
|1998                                |  |      |       |     |  |   |       | 
|                                    |  |      |       |     |  |   |       | 
|Third quarter (from August 6, 1998) |  | $    | 23.38 |     |  | $ | 11.88 | 
|                                   
|                                   
|                                   
|                                   
|Fourth quarter                      |  | $    | 29.50 |     |  | $ | 18.38 | 
|1999                                |  |      |       |     |  |   |       | 
|                                    |  |      |       |     |  |   |       | 
|First quarter                       |  | $    | 40.25 |     |  | $ | 20.00 | 
|                                   
|                                   
|                                   
|                                   
|Second quarter                      |  | $    | 30.38 |     |  | $ | 20.00 | 
|                                   
|                                   
|                                   
|                                   
|Third quarter                       |  | $    | 34.13 |     |  | $ | 12.63 | 
|                                   
|                                   
|                                   
|                                   
|Fourth quarter                      |  | $    | 30.88 |     |  | $ | 11.63 | 
|2000                                |  |      |       |     |  |   |       | 
|                                    |  |      |       |     |  |   |       | 
|First quarter                       |  | $    | 31.06 |     |  | $ | 16.50 | 
|                                   
|                                   
|                                   
|                                   
|Second quarter                      |  | $    | 20.50 |     |  | $ | 6.44  | 
|                                   
|                                   
|                                   
|                                   
|Third quarter                       |  | $    | 17.00 |     |  | $ | 7.08  | 
|                                   
|                                   
|                                   
|                                   
|Fourth quarter                      |  | $    | 28.00 |     |  | $ | 14.13 | 

Holders of Record

On March 01, 2001, the last reported sale price of our
common stock on the Nasdaq National Market was $21.48 per share.
As of March 01, 2001, we had approximately 161 stockholders
of record, and we believe our common stock is owned beneficially
by approximately 7,000 stockholders.

Dividends

We have never paid or declared any cash dividends on our common
stock or other securities and do not anticipate paying cash
dividends in the foreseeable future. We currently intend to
retain all future earnings, if any, for use in the operation of
our business. Our revolving credit facility currently prohibits
the payment of dividends.

Recent Sales of Unregistered Securities

In January 2000, the Company issued 40,765 shares of Common
Stock upon exercise of stock warrants.

The securities issued in the foregoing transaction were either
(i) offered and sold in reliance upon exemptions from
Securities Act registration set forth in Sections 3(b) and
4(2) of the Securities Act, or any regulations promulgated
thereunder, relating to sales by an issuer not involving any
public offering, or (ii) in the case of certain options to
purchase shares of Common Stock and shares of Common Stock
issued upon the exercise of such options, such offers and sales
were made in reliance upon an exemption from registration under
Rule 701 of the Securities Act. No underwriters were
involved in the foregoing sale of securities.

Item 6.  Selected Financial Data

You should read the following selected financial data in
conjunction with our consolidated financial statements and the
related notes thereto, and with Managements
Discussion and Analysis of Financial Condition and Results of
Operations, included elsewhere in this document. The
statement of operations data for the years ended
December 31, 1998, 1999 and 2000 and the balance sheet data
at December 31, 1999 and

18



---





|                                                                  |                                                  |                                                 |         |         |   |      |            |        |  |      |            |         |  |   |            |         |  |   |            |         |  |   |            |         | 
|----------------------------------------------------------------- | ------------------------------------------------ | ----------------------------------------------- | ------- | ------- | - | ---- | ---------- | ------ |  | ---- | ---------- | ------- |  | - | ---------- | ------- |  | - | ---------- | ------- |  | - | ---------- | ------- | 
|                                                                  |                                                  |                                                
|                                                                  |                                                  | Year Ended December 31,                        
|                                                                  |                                                  |                                                
|                                                                  |                                                  | (In thousands, except share and per share data)
|                                                                  |                                                  |                                                
|                                                                  |                                                  |                                                 |         |        
|                                                                  |                                                  | Predecessor                                     |         | Company
|                                                                  |                                                  |                                                 |         |        
|                                                                  |                                                  | 1996                                            |         | 1996    |   | 1997 |            | 1998   |  | 1999 |            | 2000   
|                                                                  |                                                  |                                                 |         |         |   |      |            |        |  |      |            |        
|Statement of Operations Data:                                     |                                                  |                                                 |         |         |   |      |            |        |  |      |            |         |  |   |            |         |  |   |            |         |  |   |            |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Total revenues                                                    |                                                  | $                                               | 144,997 |         |   | $    | 41,778     |        |  | $    | 147,328    |         |  | $ | 182,458    |         |  | $ | 249,327    |         |  | $ | 216,538    |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Costs and expenses:                                               |                                                  |                                                 |         |         |   |      |            |        |  |      |            |         |  |   |            |         |  |   |            |         |  |   |            |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Cost of revenues                                 |                                                 |         | 81,141  |   |      |            | 12,240 |  |      |            | 95,626  |  |   |            | 106,909 |  |   |            | 145,918 |  |   |            | 149,259 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Sales and marketing                              |                                                 |         | 15,989  |   |      |            | 7,067  |  |      |            | 22,902  |  |   |            | 29,651  |  |   |            | 36,316  |  |   |            | 40,143  | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Research and development                         |                                                 |         | 13,529  |   |      |            | 6,067  |  |      |            | 21,369  |  |   |            | 37,139  |  |   |            | 44,151  |  |   |            | 37,382  | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | General and administration                       |                                                 |         | 12,871  |   |      |            | 7,167  |  |      |            | 10,179  |  |   |            | 11,107  |  |   |            | 11,426  |  |   |            | 10,380  | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Depreciation and amortization                    |                                                 |         | 9,643   |   |      |            | 1,646  |  |      |            | 11,514  |  |   |            | 11,981  |  |   |            | 15,415  |  |   |            | 14,906  | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Write-down of investment                         |                                                 |         |        |   |      |            |       |  |      |            |        |  |   |            | 4,778   |  |   |            |        |  |   |            |        | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Write-off of in-process research and development |                                                 |         |        |   |      |            |       |  |      |            | 105,481 |  |   |            | 2,392   |  |   |            |        |  |   |            |        | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Write-off of MSA                                 |                                                 |         |        |   |      |            |       |  |      |            |        |  |   |            | 7,193   |  |   |            |        |  |   |            |        | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Pooling costs                                    |                                                 |         |        |   |      |            |       |  |      |            |        |  |   |            | 5,033   |  |   |            | 1,648   |  |   |            | 1,900   | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Restructuring charge                             |                                                 |         |        |   |      |            |       |  |      |            |        |  |   |            |        |  |   |            | 5,133   |  |   |            | 1,198   | 
|                                                                  |                                                  |                                                 |         |         |   |      |            |        |  |      |            |         |  |   |            |         |  |   |            |         |  |   |            |        
|                                                                  | Total costs and expenses                         |                                                 |         | 133,173 |   |      |            | 34,187 |  |      |            | 267,071 |  |   |            | 216,183 |  |   |            | 260,007 |  |   |            | 255,168 | 
|                                                                  |                                                  |                                                 |         |         |   |      |            |        |  |      |            |         |  |   |            |         |  |   |            |         |  |   |            |        
|Income (loss) from operations                                     |                                                  |                                                 | 11,824  |         |   |      | 7,591      |        |  |      | (119,743   | )       |  |   | (33,725    | )       |  |   | (10,680    | )       |  |   | (38,630    | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Interest (expense) income, net                   |                                                 |         | (3,286  | ) |      |            | 682    |  |      |            | 1,511   |  |   |            | 2,701   |  |   |            | 1,235   |  |   |            | 1,075   | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Other income, net                                |                                                 |         |        |   |      |            |       |  |      |            |        |  |   |            |        |  |   |            |        |  |   |            | 3,596   | 
|                                                                  |                                                  |                                                 |         |         |   |      |            |        |  |      |            |         |  |   |            |         |  |   |            |         |  |   |            |        
|Income (loss) before income taxes and extraordinary item          |                                                  |                                                 | 8,538   |         |   |      | 8,273      |        |  |      | (118,232   | )       |  |   | (31,024    | )       |  |   | (9,445     | )       |  |   | (33,959    | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Income tax provision                                              |                                                  |                                                 | 3,847   |         |   |      | 4,690      |        |  |      | 8,096      |         |  |   | 4,252      |         |  |   |           |         |  |   |           |        
|                                                                  |                                                  |                                                 |         |         |   |      |            |        |  |      |            |         |  |   |            |         |  |   |            |         |  |   |            |        
|Income (loss) before Extraordinary item                           |                                                  |                                                 | 4,691   |         |   |      | 3,583      |        |  |      | (126,328   | )       |  |   | (35,276    | )       |  |   | (9,445     | )       |  |   | (33,959    | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Loss on early extinguishment of debt (net of taxes $1,492)        |                                                  |                                                 | 2,149   |         |   |      | 2,149      |        |  |      |           |         |  |   |           |         |  |   |           |         |  |   |           |        
|                                                                  |                                                  |                                                 |         |         |   |      |            |        |  |      |            |         |  |   |            |         |  |   |            |         |  |   |            |        
|Net income (loss)                                                 |                                                  |                                                 | 2,542   |         |   |      | 1,434      |        |  |      | (126,328   | )       |  |   | (35,276    | )       |  |   | (9,445     | )       |  |   | (33,959    | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Dividends and accretion on mandatorily redeemable preferred stock |                                                  |                                                 |        |         |   |      | (593       | )      |  |      | (5,850     | )       |  |   | (10,928    | )       |  |   |           |         |  |   |           |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Preferred stock conversion                                        |                                                  |                                                 |        |         |   |      |           |        |  |      | (3,105     | )       |  |   |           |         |  |   |           |         |  |   |           |        
|                                                                  |                                                  |                                                 |         |         |   |      |            |        |  |      |            |         |  |   |            |         |  |   |            |         |  |   |            |        
|Net income (loss) available to common stockholders                |                                                  | $                                               | 2,542   |         |   | $    | 841        |        |  | $    | (135,283   | )       |  | $ | (46,204    | )       |  | $ | (9,445     | )       |  | $ | (33,959    | )      
|                                                                  |                                                  |                                                 |         |         |   |      |            |        |  |      |            |         |  |   |            |         |  |   |            |         |  |   |            |        
|Basic net income (loss) per common share                          |                                                  |                                                 |         |         |   | $    | 0.06       |        |  | $    | (8.60      | )       |  | $ | (1.95      | )       |  | $ | (0.27      | )       |  | $ | (0.92      | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Diluted net income (loss) per common share                        |                                                  |                                                 |         |         |   | $    | 0.05       |        |  | $    | (8.60      | )       |  | $ | (1.95      | )       |  | $ | (0.27      | )       |  | $ | (0.92      | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Basic weighted average common shares outstanding                  |                                                  |                                                 |         |         |   |      | 13,780,156 |        |  |      | 15,734,208 |         |  |   | 23,668,072 |         |  |   | 34,803,934 |         |  |   | 36,765,975 |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Diluted weighted average common shares outstanding                |                                                  |                                                 |         |         |   |      | 15,404,421 |        |  |      | 15,734,208 |         |  |   | 23,668,072 |         |  |   | 34,803,934 |         |  |   | 36,765,975 |        

19



---



|                                       |  |                    |         |         |  |      |        |      |  |      |         |      |  |   |         |  |  |   |         |  |  |   |         | 
|-------------------------------------- |  | ------------------ | ------- | ------- |  | ---- | ------ | ---- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                       |  |                   
|                                       |  | As of December 31,
|                                       |  |                   
|                                       |  |                    |         |        
|                                       |  | Predecessor        |         | Company
|                                       |  |                    |         |        
|                                       |  | 1996               |         | 1996    |  | 1997 |        | 1998 |  | 1999 |         | 2000
|                                       |  |                    |         |         |  |      |        |      |  |      |         |     
|Balance Sheet Data:                    |  |                    |         |         |  |      |        |      |  |      |         |      |  |   |         |  |  |   |         |  |  |   |         | 
|                                      
|                                      
|                                      
|                                      
|Cash and Cash equivalents              |  | $                  | 55,858  |         |  | $    | 59,940 |      |  | $    | 63,914  |      |  | $ | 37,983  |  |  | $ | 33,956  |  |  | $ | 20,799  | 
|                                      
|                                      
|                                      
|                                      
|Working Capital                        |  |                    | 49,357  |         |  |      | 65,306 |      |  |      | 34,870  |      |  |   | 25,724  |  |  |   | 33,103  |  |  |   | 17,985  | 
|                                      
|                                      
|                                      
|                                      
|Total Assets                           |  |                    | 176,789 |         |  |      | 80,393 |      |  |      | 201,327 |      |  |   | 221,014 |  |  |   | 202,935 |  |  |   | 156,112 | 
|                                      
|                                      
|                                      
|                                      
|Debt, including current portion        |  |                    | 105     |         |  |      | 756    |      |  |      | 18,038  |      |  |   | 1,890   |  |  |   |        |  |  |   | 1,491   | 
|                                      
|                                      
|                                      
|                                      
|Mandatorily redeemable preferred stock |  |                    |        |         |  |      |       |      |  |      | 35,607  |      |  |   |        |  |  |   |        |  |  |   |        | 
|                                      
|                                      
|                                      
|                                      
|Stockholders equity (1)               |  |                    | 38,609  |         |  |      | 71,395 |      |  |      | 58,882  |      |  |   | 98,442  |  |  |   | 101,301 |  |  |   | 73,404  | 




|    |                                                                            
|--- | ---------------------------------------------------------------------------
|(1) | The Company has never declared or paid cash dividends on the
	Common Stock.



|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
	Condition and Results of Operations

Overview

We were founded in December 1995 and have grown primarily
through a series of strategic acquisitions. For acquisitions
accounted for as a purchase, our consolidated financial
statements reflect the financial results of the purchased
entities from the respective dates of the purchase. For all
transactions accounted for using the pooling of interests
method, our consolidated financial statements have been
retroactively restated as if the transactions had occurred at
the beginning of the earliest period presented. Our acquisitions
are summarized in the following table:

|                                                                                                                                    |  |      |          |            |  |  |          | 
|----------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | ---------- |  |  | -------- | 
|                                                                                                                                    |  |      |          | Method of 
|Transaction                                                                                                                         |  | Date |          | Accounting
|                                                                                                                                    |  |      |          |           
|ALLTEL Healthcare Information Services, Inc. (Alltel)                                                                             |  |      | 1/24/97  |            |  |  | Purchase | 
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|SDK Medical Computer Services Corporation (SDK)                                                                                   |  |      | 6/26/97  |            |  |  | Purchase | 
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|Emtek Healthcare Systems (Emtek) a division of
	Motorola, Inc. (Motorola)                                                       |  |      | 1/30/98  |            |  |  | Purchase | 
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|HealthVISION, Inc. (acquired by Transition)
	(HealthVISION)                                                                       |  |      | 12/3/98  |            |  |  | Purchase | 
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|Transition Systems, Inc. (Transition)                                                                                             |  |      | 12/31/98 |            |  |  | Pooling  | 
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|PowerCenter Systems, Inc. (PCS)                                                                                                   |  |      | 2/17/99  |            |  |  | Pooling  | 
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|Intelus Corporation and MedData Systems, Inc.
	(Intelus and Med Data) wholly owned
	subsidiaries of Sun Gard Data Systems, Inc. |  |      | 3/31/99  |            |  |  | Purchase | 
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|MSI Solutions, Inc. and MSI Integrated Services, Inc.
	(collectively, MSI)                                                        |  |      | 6/17/99  |            |  |  | Pooling  | 

In July 1999, we sold Med Data for a total sales price of
$5.0 million in cash.

During July 1999, we invested in HEALTHvision, Inc., or
HEALTHvision, a Dallas-based, privately held internet healthcare
company, in conjunction with VHA, Inc. and investment entities
affiliated with General Atlantic Partners, LLC. We purchased
3,400,000 shares of common stock for $34,000, which at the time
represented 34% of the outstanding common stock on an if
converted basis. HEALTHvision provides Internet solutions to
hospital organizations to assist them in improving patient care
in the local communities they serve. In connection with our
relationship with HEALTHvision, we have entered into a joint
marketing arrangement under which both organizations agreed to
jointly market products and services to their customers. Under
this agreement, we paid HEALTHvision $304,000 during 2000. We
account for our investment in HEALTHvision using the equity
method of accounting. As of December 31, 2000 our shares
represented 28% of the common stock of HEALTHvision on an if
converted basis. During 2000, the Company earned revenues of
$5.4 million and had accounts receivable due from HEALTHvision
of $1.2 million at December 31, 2000.

Revenues

Revenues are derived from sales of systems and services, which
include the licensing of software, software and hardware
maintenance, implementation and training, remote hosting,
outsourcing, networking services

20



---





We have generally licensed our software products pursuant to
arrangements that include maintenance for periods that range
from three to seven years. For software licenses that are
bundled with services and maintenance that require significant
implementation efforts and provide for payments upon the
achievement of implementation milestones, we have generally
recognized revenues using the percentage-of-completion method.
Under these arrangements, software license fees and
implementation fees are recognized over the implementation
period, which has typically ranged from 12 to 24 months.

Revenues from other software licenses, which are bundled with
long-term maintenance agreements, are recognized on a
straight-line basis over the contracted maintenance period.
Remote hosting and outsourcing services are marketed under
long-term agreements that are generally of five to ten years in
duration. Revenues under these arrangements are recognized
monthly as the work is performed. Revenues related to other
support services, such as training, consulting, and other
implementation services, are recognized when the services are
performed. We recognize revenues from the sale of hardware upon
delivery of the equipment to the customer.

In 2000, in response to our customers desire for flexible
pricing and more comprehensive bundled information technology
solutions, we began to offer our customers the option of
purchasing our solutions under arrangements that bundled the
software license fees (including the right to future products
within the suite sold), implementation, maintenance,
outsourcing, remote hosting, networking services and other
related services in one comprehensive contract that provides for
monthly or annual payments over the term of the contract. We
generally recognize revenues under these arrangements on a
monthly basis over the term of the contract, which typically
ranges from seven to ten years.

The shift toward providing comprehensive bundled solutions,
together with the completion in early 2000 of the implementation
of some of our contracts accounted for using the
percentage-of-completion method, contributed to the decline in
our revenues in 2000, particularly in the second, third and
fourth quarters of 2000. Under these comprehensive bundled
arrangements, revenues are recognized over the term of the
contract consistent with the timing of the performance of all
services offered under the arrangement. Generally, less revenue
is recognized under these arrangements during the first 12 to
24 months compared to traditional licensing arrangements
that we sell. If the level of new contracted business under
these comprehensive bundled arrangements increases, we believe
that it will mitigate some of the volatility in our revenues.
However, if we continue to increase contract signings under
these type of arrangements as opposed to our traditional
licensing arrangements, our revenues may continue to be
adversely affected for the next two to three years as compared
to historic results.

Costs of Revenues

The principal costs of systems and services revenues are
salaries, benefits and related overhead costs for
implementation, remote hosting and outsourcing personnel. Other
significant costs of systems and services revenues are the
amortization of acquired technology, capitalized software
development costs and a network services intangible asset.
Acquired technology is amortized over three to five years based
upon the estimated economic life of the underlying asset, and
capitalized software development costs are amortized generally
over three years on a straight-line basis commencing upon
general release of the related product or based on the ratio
that current revenues bear to total anticipated revenues for the
applicable product. The network services intangible asset is
being amortized on a straight-line basis over three years. Cost
of revenues related to hardware sales include only our cost to
acquire the hardware from the manufacturer.

Gross Profit Margin

The cost of revenues associated with both our traditional
licensing arrangements and the more comprehensive arrangements
discussed above are primarily related to services, which are
expensed as incurred over the service period. The shift to these
bundled comprehensive arrangements adversely affected margins in
the second, third and fourth quarters of 2000 as our costs are
higher and revenues are lower in the first 12 to 24 months
under these arrangements than under the traditional license
arrangements. This is due to the costs

21



---





In addition, in connection with certain acquisitions, we
inherited contracts that did not provide a reasonable margin for
the cost and scope of the services involved. In order to build
customer loyalty, we continued to honor our commitments under
these contracts during 2000 and in some cases performed work
outside the scope of these contracts for which we received
nominal or no fees. This activity adversely impacted our margins
in the second, third and fourth quarters of 2000 as we continued
to incur costs with lower incremental revenues. To address this
problem, we are negotiating payments for future work under some
of these contracts, and we have decided not to continue our work
under some other contracts, which has resulted in a write-down
in the related accounts receivable. Additionally, we have
consolidated our research and development and implementation
functions to improve operating efficiencies. While we believe
these actions will help to mitigate the future effect of these
contracts on our operating results, we believe that margins may
continue to be adversely affected as we continue to provide
services under these contracts.

Marketing and Sales

Marketing and sales expenses consist primarily of salaries,
benefits, commissions and related overhead costs. Other costs
include expenditures for marketing programs, public relations,
trade shows, advertising and related communications.

Research and Development

Research and development expenses consist primarily of salaries,
benefits and related overhead associated with our design,
development and testing of new products. We capitalize internal
software development costs subsequent to attaining technological
feasibility. These costs are amortized as an element of cost of
revenues.

General and Administrative

General and administrative expenses consist primarily of
salaries, benefits and related overhead costs for
administration, executive, finance, legal, human resources,
purchasing and internal systems personnel, as well as accounting
and legal fees and expenses.

Depreciation and Amortization

We depreciate the costs of our tangible capital assets on a
straight-line basis over the estimated economic life of the
asset, which is generally not longer than five years.
Acquisition-related intangible assets, which primarily consist
of the value of ongoing customer relationships and goodwill, are
amortized based upon the estimated economic life of the asset at
the time of the acquisition, and will therefore vary among
acquisitions.

Taxes

As of December 31, 2000, we had operating loss
carryforwards for federal income tax purposes of
$118.0 million. The carryforwards expire in varying amounts
through 2020 and are subject to certain restrictions. Based on
evidence then available, we did not record any benefit for
income taxes at December 31, 1998, 1999 and 2000, because
we believe it is more likely then not that we would not realize
our net deferred tax assets. Accordingly, we have recorded a
valuation allowance against our total net deferred tax assets.

22



---



Results of Operations

2000 Compared to 1999

Total revenues for the year ended December 31, 2000
decreased $32.8 million, or 13.2%, to $216.5 million, from
$249.3 million for 1999. Systems and services revenues decreased
$23.2 million, or 10.2%, to $203.4 million for the year
ended December 31, 2000 from $226.6 million for 1999.

This decrease in total revenues was primarily attributable to
the shift toward providing comprehensive bundled solutions, the
completion of the implementations under arrangements which were
recognized under the percentage-of-completion method and the
less favorable contracts we inherited as a result of recent
acquisitions, which are all discussed above. In addition, our
proposed transactions with Shared Medical Systems Corp., or SMS,
and Neoforma.com, Inc., or Neoforma, which we have since
abandoned, resulted in a significant diversion of
managements time and attention, which also adversely
affected revenues during early 2000.

Hardware revenues decreased $9.6 million, or 42.4%, to
$13.1 million for the year ended December 31, 2000
from $22.7 million for 1999. The decrease was primarily due
to decreased volume of hardware sales as a result of less
hardware-intensive transactions.

Total cost of revenues increased $3.3 million, or 2.3%, to
$149.3 million, or 68.9% of total revenues, for the year ended
December 31, 2000 from $145.9 million, or 58.5% of total
revenues, for 1999. Increased costs of system and services
revenues were partially offset by a decrease in costs of
hardware revenues. Costs of systems and services revenues
increased as a result of higher royalty related expenses
associated with revenue recognized during the period, an
increased level of outsourcing revenue and associated expenses,
and a charge of $8.7 million to write-down some receivables
related to contracts assumed in acquisitions. Furthermore, we
recorded a charge of $0.7 million for other costs related
to finalizing our acquisition integrations. These amounts were
partially offset by decreased amortization of acquired
technology in connection with acquisitions completed in prior
years and by cost savings associated with the consolidation of
our research and development and implementation functions. We
also recorded acquisition related amortization of acquired
technology and a network services asset of $25.3 million and
$18.4 million for 1999 and 2000, respectively.

Sales and marketing expenses increased $3.8 million, or 10.5%,
to $40.1 million, or 18.5% of total revenues, for the year
ended December 31, 2000 from $36.3 million, or 14.6% of
total revenues, for 1999. The increase was primarily due to an
increase in commissions as the result of an increase in new
contracts 2000.

Research and development expenses decreased $6.8 million,
or 15.3%, to $37.4 million, or 17.3% of total revenues, for
the year ended December 31, 2000 from $44.2 million, or
17.7% of total revenues, for 1999. The decrease was due
primarily to a write-off of $2.8 million of capitalized
software development costs related to duplicate products with no
alternative future use due to the acquisition of MSI in 1999 and
the realization of integration synergies. Research and
development expenses that were capitalized were
$6.7 million and $6.4 million for 1999 and 2000,
respectively.

General and administrative expenses decreased $1.0 million,
or 9.2%, to $10.4 million, or 4.8% of total revenues, for the
year ended December 31, 2000 from $11.4 million, or 4.6% of
total revenues, for 1999. The decrease was primarily due to our
restructuring plans that were completed in late 1999 and 2000.
This was partially offset by a $0.7 million write-down of
receivables during 2000.

Depreciation and amortization decreased $0.5 million, or
3.3%, to $14.9 million, or 6.9% of total revenues, for the year
ended December 31, 2000 from $15.4 million, or 6.2% of
total revenues, for 1999. The decrease was primarily the result
of certain fixed assets becoming fully depreciated, partially
offset by depreciation related to purchases of fixed assets
during the 2000. For 1999 and 2000, respectively, we recorded
acquisition related amortization of $7.5 million and
$7.2 million.

During 1999, we initiated and completed a restructuring of our
operations, which resulted in a charge totaling
$5.1 million related to the closing of duplicate facilities
and the termination of employees. During 2000, we initiated and
completed another restructuring of our operations. This
restructuring rationalized employee headcount after we completed
the integration of our acquisitions. Additionally, we
consolidated our

23



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Pooling and transaction costs increased $0.3 million to
$1.9 million for the year ended December 31, 2000 from
$1.6 million for 1999. Pooling and transaction costs
incurred during 1999 were related to the poolings of PowerCenter
and MSI. The transaction costs during 2000 were primarily the
result of costs associated with the abandoned transactions with
SMS and Neoforma.

Other income recorded during the year ended December 31,
2000 related to a realized gain on the sale of our investment in
SMS of $4.5 million, which was offset in part by a loss on
sale of our investment in equity securities.

As a result of these factors, net loss increased 259.5% to $34.0
million for the year ended December 31, 2000 from
$9.4 million for 1999.

1999 Compared to 1998

Total revenues increased by $66.8 million, or 36.6%, from $182.5
million in 1998 to $249.3 million in 1999. This increase was
caused primarily by the inclusion in 1999 of twelve months of
operations of HV compared to only one month in 1998, and nine
months of operations of Intelus. Also contributing to the
increase was new business contracted in 1999 and incremental
sales of hardware.

Total cost of revenues increased by $39.0 million, or 36.5%,
from $106.9 million in 1998 to $145.9 million in 1999. The
increase in cost was due primarily to the associated growth in
revenues, offset in part by a reduction in expenses related to
integrating the acquisitions. As a percentage of total revenues,
the total cost of revenues decreased from 58.6% in 1998 to 58.5%
in 1999. Included in total cost of revenues is acquisition
related amortization expense of $17.2 million and $25.3 million
in 1998 and 1999, respectively, related to the amortization of
acquired technology and a network services asset.

Sales and marketing expenses increased by $6.7 million, or
22.5%, from $29.7 million in 1998 to $36.3 million in 1999. The
increase in marketing and sales expense was due primarily to the
addition of marketing and direct sales personnel following the
acquisitions and the continued hiring of additional marketing
and direct sales personnel. As a percentage of total revenues,
marketing and sales expenses decreased from 16.3% in 1998 to
14.6% in 1999.

Research and development expenses increased by $7.0 million, or
18.9%, from $37.1 million, or 20.4% of total revenues, in 1998
to $44.2 million, or 17.7% of total revenues, in 1999. These
amounts exclude amortization of previously capitalized
expenditures, which are recorded as cost of revenues. The
increase was due primarily to the inclusion in 1999 of nine
months of operations of Intelus, the continued development of
our Sunrise Clinical Management product suite and a $2.8 million
write-off of previously capitalized research and development
expenditures related to duplicate products with no alternate use
as a result of the MSI acquisition. In 1999, we wrote off $1.3
million of previously capitalized expenditures related to
duplicate products as a result of 1998 acquisitions. Capitalized
research and development expenditures increased by $2.4 million,
or 55.8%, from $4.3 million in 1998 to $6.7 million in 1999. The
increase in capitalized software development costs was primarily
due to the acquisitions and the continued development of our
Sunrise Clinical Management product suite.

General and administrative expenses increased by $319,000, or
2.9%, from $11.1 million in 1998 to $11.4 million in 1999. The
increase was primarily due to the timing of the purchase
acquisitions and was partially offset by savings due to overall
expense reductions. As a percentage of total revenues, general
and administrative expenses decreased from 6.1% in 1998 to 4.6%
in 1999.

Depreciation and amortization expense increased by $3.4 million,
or 28.3%, from $12.0 million in 1998 to $15.4 million in 1999.
The increase was due primarily to the amortization of goodwill
related to the acquisition of HV. As a percentage of total
revenues, depreciation and amortization expense decreased from
6.6% in 1998 to 6.2% in 1999. Included in depreciation and
amortization expense is acquisition related amortization of $3.9
million and $7.5 million in 1998 and 1999, respectively.

24



---



During 1999, in connection with the MSI transaction, we recorded
a stock compensation charge of $1.0 million related to the
required vesting of stock options that were granted to former
MSI employees. We also incurred pooling costs of $1.0 million
related to the MSI transaction. Additionally, in July 1999, in
connection with the formation of HEALTHvision, we incurred a
stock compensation charge of $982,000 related to the accelerated
vesting of former employees stock options.

During the quarter ended June 30, 1999, we initiated a
restructuring of our operations. The restructuring was completed
during the quarter ended September 30, 1999 and resulted in
a charge totaling $5.1 million related to the closing of
duplicate facilities and the termination of certain employees.

As a result of these factors, net loss decreased 73.4% from
$35.3 million in 1998 to $9.4 million in 1999.

Acquired In-Process Research and Development

In connection with the Alltel, SDK and HV acquisitions, we wrote
off in-process research and development totaling $92.2 million
and $7.0 million in 1997 and $2.4 million in 1998, respectively.
These amounts were expensed as non-recurring charges on the
respective acquisition dates. These write-offs were necessary
because the acquired technology had not yet reached
technological feasibility and had no future alternative uses. We
are using the acquired in-process research and development to
create new products, which will become part of the Sunrise
product suite over the next several years. We generally released
some products using the acquired in-process technology and
expect to release additional products through 2001. We expect
that the acquired in-process research and development will be
successfully developed, but there can be no assurance that
commercial viability of these products will be achieved.

The nature of the efforts required for us to develop the
purchased in-process technology into commercially viable
products principally relate to the completion of all planning,
designing, prototyping, verification and testing activities that
are necessary to establish that the products can be produced to
meet their design specifications, including functions, features
and technical performance requirements.

The value of the purchased in-process technology was determined
by estimating the projected net cash flows related to the
products, including costs to complete the development of the
technology and the future revenues to be earned upon
commercialization of the products. These cash flows were
discounted back to their net present value. The resulting
projected net cash flows from these projects were based on
managements estimates of revenues and operating profits
related to these projects. These estimates were based on several
assumptions, including those summarized below for each of the
respective acquisitions.

Through December 31, 2000, revenues and operating profit
attributable to the acquired in-process technology have not
materially differed from the projections used in determining its
value. Throughout 1999 and 2000, we have continued the
development of the in-process technology that was acquired in
the transactions. We are installing modules derived from the
acquired in-process technology in various field trial sites and
have activated some sites. Additionally, we have begun to
successfully market certain aspects of the technology to new and
existing customers. We expect to continue releasing products
derived from the technology through 2001. We continue to believe
the projections used reasonably estimate the future benefits
attributable to the in-process technology. However, we cannot
assure you that deviations from these projections will not occur.

If these projects to develop commercial products based on the
acquired in-process technology are not successfully completed,
our sales and profitability may be adversely affected in future
periods. Additionally, the value of other intangible assets may
become impaired.

Alltel

The primary purchased in-process technology acquired in the
Alltel acquisition was the client-server based core application
modules of an integrated clinical software product whose
functionality included order management, health information
management, physician applications, nursing applications,
pharmacy, laboratory and radiology applications and ancillary
support. Additionally, the product included functionality

25



---





Revenue attributable to the in-process technology was assumed to
increase over the twelve-year projection period at annual rates
ranging from 234% to 5%, resulting in annual revenues of
approximately $27.0 million to $640.0 million. These projections
were based on assumed penetration of the existing customer base,
new customer transactions, historical retention rates and
experiences of prior product releases. The projections reflected
accelerated revenue growth in the first five years, 1997 to
2001, as the products derived from the in-process technology
were generally released. In addition, the projections were based
on annual revenue to be derived from long-term contractual
arrangements ranging from seven to ten years. New customer
contracts for products developed from the in-process technology
were assumed to peak in 2001, with rapidly declining sales
volume in the years 2002 to 2003 as other new products were
expected to enter the market. The projections assumed no new
customer contracts after 2003. Projected revenue in years after
2003 was determined using a 5% annual growth rate, which
reflected contractual increases.

Operating profit was projected to grow over the projection
period at rates ranging from 1238% to 5%, resulting in
incremental annual operating profit (loss) of approximately
$(5.0) million to $111.0 million. The operating profit
projections during the years 1997 to 2001 assumed a growth rate
slightly higher than the revenue projections. The higher growth
rate was attributable to the increase in revenues discussed
above, together with research and development costs then
expected to remain constant at approximately $15 million
annually. The operating profit projections included a
5% annual growth rate for the years after 2003 consistent
with the revenue projections.

Through December 31, 2000, revenues and operating profit
attributable to the acquired in-process technology have not
materially differed from the projections used in determining its
value. Through December 31, 2000, we continued the
development of the in-process technology that was acquired in
the Alltel transaction. We have installed modules derived from
the acquired in-process technology and are continuing to develop
additional functionality from this technology. Additionally, we
have begun to successfully market certain aspects of the
technology to new and existing customers. We expect to continue
releasing products derived from the technology through 2001. We
continue to believe the projections used reasonably estimated
the future benefits attributable to the in-process technology.
However, no assurance can be given that deviations from these
projections will not occur.

The projected net cash flows were discounted to their present
value using the weighted average cost of capital. The weighted
average cost of capital calculation produces the average
required rate of return of an investment in an operating
enterprise, based on required rates of return from investments
in various areas of the enterprise. The weighted average cost of
capital used in the projections was 21%. This rate was
determined by applying the capital asset pricing model. This
method yielded an estimated average weighted average cost of
capital of approximately 16.5%. A risk premium was added to
reflect the business risks associated with our stage of
development, as well as the technology risk associated with the
in-process software, resulting in a weighted average cost of
capital of 21%. In addition, the value of customer relationships
was calculated using a discount rate of 21% and a return to net
tangible assets was estimated using a rate of return of 11.25%.
The value of the goodwill was calculated as the remaining
intangible value not otherwise allocated to identifiable
intangible assets, resulting in an implied discount rate on the
goodwill of approximately 28%.

We used a 21% discount rate for valuing existing technology
because this technology faced substantially the same risks as
the business as a whole. Accordingly, a rate equal to the
weighted average cost of capital of 21% was used. We used a
28% discount rate for valuing in-process technology. The
spread over the existing technology discount rate reflected the
inherently greater risk of the research and development efforts.
The spread reflected the nature of the development efforts
relative to the existing base of technology and the potential
market for the in-process technology once the products were
released.

We estimated that the costs to develop the purchased in-process
technology acquired in the Alltel acquisition into commercially
viable products would be approximately $75.0 million in the
aggregate through 2001, or $15.0 million per year from 1997 to
2001.

26



---



SDK

The purchased in-process technology acquired in the SDK
acquisition comprised three major enterprise-wide modules in the
areas of physician billing, home health care billing and
long-term care billing; a graphical user interface; a corporate
master patient index; and a standard query language module.

Revenue attributable to the in-process technology was assumed to
increase in the first three years of the ten-year projection
period at annual rates ranging from 497% to 83%, then to
decrease over the remaining years at annual rates ranging from
73% to 14% as other products were released in the market place.
Projected annual revenue ranged from approximately $5.0 million
to $56.0 million over the term of the projections. These
projections were based on assumed penetration of the existing
customer base, synergies as a result of the SDK acquisition, new
customer transactions and historical retention rates. Projected
revenues from the in-process technology were assumed to peak in
2000 and decline from 2000 to 2007 as other new products were
expected to enter the market.

Operating profit was projected to grow at annual rates ranging
from 1497% to 94% during the first three years, decreasing
during the remaining years of the projection period similar to
the revenue growth projections described above. Projected annual
operating profit ranged from approximately $250,000 to $8
million over the term of the projections.

Through December 31, 2000, revenues and operating profit
attributable to in-process technology have been consistent with
the projections. However, we cannot assure you that deviations
from these projections will not occur in the future.

The weighted average cost of capital used in the analysis was
20%. This rate was determined by applying the capital asset
pricing model and a review of venture capital rates of return
for companies in a similar life cycle stage.

We used a 20% discount rate for valuing existing and in-process
technology because both technologies face substantially the same
risks as the business as a whole. Accordingly, a rate equal to
the weighted average cost of capital of 20% was used.

We estimated that the costs to develop the in-process technology
acquired in the SDK acquisition would be approximately $1.7
million in the aggregate through the year 2000, comprised of
$500,000 in 1998, $600,000 in 1999 and $600,000 in 2000.

Transition

In connection with the purchase by Transition of HV, based on an
independent appraisal, we recorded $40.6 million of intangible
assets, which included $2.4 million of acquired in-process
research and development. The amount allocated to acquired
in-process research and development represented development
projects in areas that had not reached technological feasibility
and which had no alternative future use. Accordingly, the amount
was charged to operations at the date of the acquisition.

Balance Sheet as of December 31, 2000 Compared to
December 31, 1999

Accounts Receivable

Accounts receivable decreased during 2000 primarily due to the
charge totaling $9.4 million to write down certain receivables
related to contracts assumed in acquisitions and a decrease in
revenue in 2000. Additionally, our hardware shipments were lower
in the fourth quarter of 2000 compared to 1999.

Acquired Technology

Acquired technology decreased during 2000 due to amortization.
This decrease was partially offset by a $3.3 million increase
recorded to finalize the purchase price allocation related to
the Intelus acquisition.

27



---



Intangibles

Intangibles decreased during 2000 due to amortization.

Deferred Revenue

Deferred revenue decreased during 2000 primarily due to the
completion of certain implementation efforts at the former
Transition customers and certain significant network projects.

Other Current Liabilities

Other current liabilities decreased during 2000 primarily due to
the timing of payments related to accounts payable and accrued
expenses acquired from the acquisitions including deal costs of
Transition and the payment of employee related liabilities due
to the acquisitions.

Liquidity and Capital Resources

During 2000, we used $10.7 million in operations, including
approximately $10.5 million of annual employee compensation
related liabilities paid during the first quarter. Investing
activities used $9.9 million for the purchase of fixed assets
and the funding of development costs partially offset by the
sale of investments. Financing activities provided $7.3 million,
due to borrowings under an equipment financing arrangement,
exercise of stock options and the purchase of common stock under
our employee stock purchase plan.

We have a revolving credit facility with a commercial bank, that
expires May 2002, and provides for maximum borrowings of up
to $30.0 million. Available borrowings under this facility are
based on accounts receivable and other criteria. As of
December 31, 2000, our available borrowings under the
facility were approximately $17.4 million and there were no
outstanding borrowings under the facility.

As of December 31, 2000, our principal sources of liquidity
consisted of $20.8 million in cash and cash equivalents and our
available borrowings under our revolving credit facility of
$17.4 million.

Subsequent to December 31, 2000, we completed a follow-on
public offering for 5,750,000 shares of our common stock. Net
proceeds from the offering were approximately $123.3 million.

Our future capital requirements will depend upon a number of
factors, including the rate of growth of our sales and the
timing and level of research and development activities. As of
December 31, 2000, we did not have any material commitments
for capital expenditures. We believe that our available cash and
cash equivalents, anticipated cash generated from our future
operations and amounts available under the existing revolving
credit facility will be sufficient to meet our operating
requirements for at least the next twelve months.

Item 7A.  Quantitative and Qualitative
Disclosures About Market Risk

We do not currently use derivative financial instruments. We
generally buy investments with maturities of 90 days or
less. Based upon the nature of our investments, we do not expect
any material loss from our investments.

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

The Company accounts for cash equivalents and marketable
securities in accordance with Statement of Financial Accounting
Standards (SFAS) No. 115. Accounting for Certain
Investments in Debt and Equity

28



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We do not currently enter into foreign currency hedge
transactions. Through December 31, 2000, foreign currency
fluctuations have not had a material impact on our financial
position or results of operations.

Item 8.  Financial Statements and
Supplementary Data

Index to Consolidated Financial Statements:

Financial Statements:

|                                                                                                     |  |      |    | 
|---------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                     |  | Page
|                                                                                                     |  |     
|Report of Independent Accountants                                                                    |  |      | 30 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Consolidated Balance Sheets as of December 31, 1999 and 2000                                         |  |      | 31 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Consolidated Statements of Operations for the years ended
	December 31, 1998, 1999 and 2000          |  |      | 32 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Consolidated Statements of Cash Flows for the years ended
	December 31, 1998, 1999 and 2000          |  |      | 33 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Consolidated Statement of Stockholders Equity for the
	years ended December 31, 1998, 1999 and 2000 |  |      | 34 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Notes to the Consolidated Financial Statements for the three
	years ended December 31, 2000          |  |      | 35 | 

Financial Statement
Schedules:

|                                                                                                                   |  |  |    | 
|------------------------------------------------------------------------------------------------------------------ |  |  | -- | 
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Schedule II  Valuation of Qualifying Accounts
	for each of the three years in the period ended
	December 31, 2000 |  |  | 58 | 

All other schedules are omitted as they are not applicable or
the required information is shown in the financial statements or
notes thereto.

29



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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors



In our opinion, the consolidated financial statements listed in
the accompanying index on page 29 present fairly, in all
material respects, the financial position of Eclipsys
Corporation and its subsidiaries at December 31, 1999 and
December 31, 2000, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. In addition,
in our opinion, the financial statement schedule listed in the
accompanying index on page 29 presents fairly, in all
material respects, the information set forth therein when read
in conjunction with the related consolidated financial
statements. These financial statements and financial statement
schedule are the responsibility of the Companys
management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

PricewaterhouseCoopers LLP

Atlanta, Georgia



30



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ECLIPSYS CORPORATION

Consolidated Balance Sheets

(in thousands, except share data)


|                                            |                                                                                                               |                                            |        |          |         |  |        |          |         | 
|------------------------------------------- | ------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | -------- | ------- |  | ------ | -------- | ------- | 
|                                            |                                                                                                               |                                           
|                                            |                                                                                                               | December 31,                              
|                                            |                                                                                                               |                                           
|                                            |                                                                                                               | 1999                                       |        | 2000    
|                                            |                                                                                                               |                                            |        |         
|Assets                                      |                                                                                                               |                                            |        |          |         |  |        |         
|                                           
|                                           
|                                           
|                                           
|Current Assets:                             |                                                                                                               |                                            |        |          |         |  |        |         
|                                           
|                                           
|                                           
|                                           
|                                            | Cash and cash equivalents                                                                                     |                                            | $      | 33,956   |         |  | $      | 20,799   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accounts receivable, net of allowance for doubtful accounts of
	$3,692 and $5,656                             |                                            |        | 77,254   |         |  |        | 63,912   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Inventory                                                                                                     |                                            |        | 660      |         |  |        | 1,065    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other current assets                                                                                          |                                            |        | 11,800   |         |  |        | 6,854    |        
|                                            |                                                                                                               |                                            |        |          |         |  |        |         
|                                            |                                                                                                               | Total current assets                       |        |          | 123,670 |  |        |          | 92,630  | 
|                                           
|                                           
|                                           
|                                           
|                                           
|Property and equipment, net                 |                                                                                                               |                                            | 14,522 |          |         |  | 16,801 |         
|                                           
|                                           
|                                           
|                                           
|Capitalized software development costs, net |                                                                                                               |                                            | 7,944  |          |         |  | 11,469 |         
|                                           
|                                           
|                                           
|                                           
|Acquired technology, net                    |                                                                                                               |                                            | 33,161 |          |         |  | 19,714 |         
|                                           
|                                           
|                                           
|                                           
|Intangible assets, net                      |                                                                                                               |                                            | 16,858 |          |         |  | 7,831  |         
|                                           
|                                           
|                                           
|                                           
|Other assets                                |                                                                                                               |                                            | 6,780  |          |         |  | 7,667  |         
|                                            |                                                                                                               |                                            |        |          |         |  |        |         
|                                            |                                                                                                               | Total assets                               |        | $        | 202,935 |  |        | $        | 156,112 | 
|                                            |                                                                                                               |                                            |        |          |         |  |        |         
|                                           
|Liabilities and Stockholders Equity        |                                                                                                               |                                            |        |          |         |  |        |         
|                                           
|                                           
|                                           
|                                           
|Current Liabilities:                        |                                                                                                               |                                            |        |          |         |  |        |         
|                                           
|                                           
|                                           
|                                           
|                                            | Deferred revenue                                                                                              |                                            | $      | 49,279   |         |  | $      | 45,970   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Current portion of long-term debt                                                                             |                                            |        |         |         |  |        | 314      |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other current liabilities                                                                                     |                                            |        | 41,288   |         |  |        | 28,361   |        
|                                            |                                                                                                               |                                            |        |          |         |  |        |         
|                                            |                                                                                                               | Total current liabilities                  |        |          | 90,567  |  |        |          | 74,645  | 
|                                           
|                                           
|                                           
|                                           
|                                           
|Deferred revenue                            |                                                                                                               |                                            | 8,803  |          |         |  | 5,258  |         
|                                           
|                                           
|                                           
|                                           
|Long-term debt                              |                                                                                                               |                                            |       |          |         |  | 1,177  |         
|                                           
|                                           
|                                           
|                                           
|Other long-term liabilities                 |                                                                                                               |                                            | 2,264  |          |         |  | 1,628  |         
|Commitments and contingencies               |                                                                                                               |                                            |        |          |         |  |        |         
|                                           
|                                           
|                                           
|                                           
|                                           
|Stockholders equity:                       |                                                                                                               |                                            |        |          |         |  |        |         
|                                           
|                                           
|                                           
|                                           
|                                            | Common stock $.01 par value, 200,000,000 shares authorized;
	issued and outstanding 36,303,825 and 37,136,121 |                                            |        | 363      |         |  |        | 371      |        
|                                           
|                                           
|                                           
|                                           
|                                            | Unearned stock compensation                                                                                   |                                            |        | (320     | )       |  |        | (176     | )      
|                                           
|                                           
|                                           
|                                           
|                                            | Additional paid-in capital                                                                                    |                                            |        | 254,085  |         |  |        | 259,903  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accumulated deficit                                                                                           |                                            |        | (152,500 | )       |  |        | (186,459 | )      
|                                           
|                                           
|                                           
|                                           
|                                            | Accumulated other comprehensive income                                                                        |                                            |        | (327     | )       |  |        | (235     | )      
|                                            |                                                                                                               |                                            |        |          |         |  |        |         
|                                            |                                                                                                               | Total stockholders equity                 |        |          | 101,301 |  |        |          | 73,404  | 
|                                            |                                                                                                               |                                            |        |          |         |  |        |         
|                                            |                                                                                                               | Total liabilities and stockholders equity |        | $        | 202,935 |  |        | $        | 156,112 | 
|                                            |                                                                                                               |                                            |        |          |         |  |        |         

The accompanying notes are an integral part of these
consolidated financial statements.

31



---



ECLIPSYS CORPORATION

Consolidated Statements of Operations


(in thousands, except share and per share data)


|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |            |         | 
|------------------- | ----------------------------------------------------------------- | ------------------------ | - | ---------- | ------- | ---- | - | ---------- | ------- |  | - | ---------- | ------- | 
|                    |                                                                   |                         
|                    |                                                                   | Year Ended December 31, 
|                    |                                                                   |                         
|                    |                                                                   | 1998                     |   | 1999       |         | 2000
|                    |                                                                   |                          |   |            |         |     
|Revenues:           |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                   
|                   
|                   
|                   
|                    | Systems and services                                              |                          | $ | 168,025    |         |      | $ | 226,610    |         |  | $ | 203,444    |        
|                   
|                   
|                   
|                   
|                    | Hardware                                                          |                          |   | 14,433     |         |      |   | 22,717     |         |  |   | 13,094     |        
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                    |                                                                   | Total Revenues           |   |            | 182,458 |      |   |            | 249,327 |  |   |            | 216,538 | 
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|Costs and expenses: |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                   
|                   
|                   
|                   
|                    | Cost of systems and services revenues                             |                          |   | 94,775     |         |      |   | 127,312    |         |  |   | 138,909    |        
|                   
|                   
|                   
|                   
|                    | Cost of hardware revenues                                         |                          |   | 12,134     |         |      |   | 18,606     |         |  |   | 10,350     |        
|                   
|                   
|                   
|                   
|                    | Sales and marketing                                               |                          |   | 29,651     |         |      |   | 36,316     |         |  |   | 40,143     |        
|                   
|                   
|                   
|                   
|                    | Research and development                                          |                          |   | 37,139     |         |      |   | 44,151     |         |  |   | 37,382     |        
|                   
|                   
|                   
|                   
|                    | General and administrative                                        |                          |   | 11,107     |         |      |   | 11,426     |         |  |   | 10,380     |        
|                   
|                   
|                   
|                   
|                    | Depreciation and amortization                                     |                          |   | 11,981     |         |      |   | 15,415     |         |  |   | 14,906     |        
|                   
|                   
|                   
|                   
|                    | Write-down of investment                                          |                          |   | 4,778      |         |      |   |           |         |  |   |           |        
|                   
|                   
|                   
|                   
|                    | Write-off of in-process research and development                  |                          |   | 2,392      |         |      |   |           |         |  |   |           |        
|                   
|                   
|                   
|                   
|                    | Write-off of MSA                                                  |                          |   | 7,193      |         |      |   |           |         |  |   |           |        
|                   
|                   
|                   
|                   
|                    | Pooling and transaction costs                                     |                          |   | 5,033      |         |      |   | 1,648      |         |  |   | 1,900      |        
|                   
|                   
|                   
|                   
|                    | Restructuring charge                                              |                          |   |           |         |      |   | 5,133      |         |  |   | 1,198      |        
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                    |                                                                   | Total costs and expenses |   |            | 216,183 |      |   |            | 260,007 |  |   |            | 255,168 | 
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                    | Loss from operations                                              |                          |   | (33,725    | )       |      |   | (10,680    | )       |  |   | (38,630    | )      
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                    | Interest income, net                                              |                          |   | 2,701      |         |      |   | 1,235      |         |  |   | 1,075      |        
|                   
|                   
|                   
|                   
|                    | Other income, net                                                 |                          |   |           |         |      |   |           |         |  |   | 3,596      |        
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                    | Loss before income taxes                                          |                          |   | (31,024    | )       |      |   | (9,445     | )       |  |   | (33,959    | )      
|                   
|                   
|                   
|                   
|                    | Provision for income taxes                                        |                          |   | 4,252      |         |      |   |           |         |  |   |           |        
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                    | Net loss                                                          |                          |   | (35,276    | )       |      |   | (9,445     | )       |  |   | (33,959    | )      
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                    | Dividends and accretion on mandatorily redeemable preferred stock |                          |   | (10,928    | )       |      |   |           |         |  |   |           |        
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                    | Net loss available to common stockholders                         |                          | $ | (46,204    | )       |      | $ | (9,445     | )       |  | $ | (33,959    | )      
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|Loss per share:     |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                   
|                   
|                   
|                   
|                    | Basic and diluted net loss per common share                       |                          | $ | (1.95      | )       |      | $ | (0.27      | )       |  | $ | (0.92      | )      
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           
|                    | Basic and diluted weighted average common shares outstanding      |                          |   | 23,668,072 |         |      |   | 34,803,934 |         |  |   | 36,765,975 |        
|                    |                                                                   |                          |   |            |         |      |   |            |         |  |   |           

The accompanying notes are an integral part of these
consolidated financial statements.

32



---



ECLIPSYS CORPORATION

Consolidated Statements of Cash Flows


(in thousands)


|                      |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |         |         |         |  
|--------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------------- | --------------------------------------------------- | ------- | ------- | ------- | - | ------ | ------- | ------- | - | ------- | ------- | ------- | -
|                      |                                                                                  |                                                        
|                      |                                                                                  | Year Ended December 31,                                
|                      |                                                                                  |                                                        
|                      |                                                                                  | 1998                                                    |                                                     | 1999    |         | 2000   
|                      |                                                                                  |                                                         |                                                     |         |         |        
|Operating activities: |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |        
|                     
|                     
|                     
|                     
|                      | Net loss                                                                         |                                                         | $                                                   | (35,276 | )       |         | $ | (9,445 | )       |         | $ | (33,959 | )      
|                     
|                     
|                     
|                     
|                      | Adjustments to reconcile net loss to net cash provided by
	operating activities: |                                                         |                                                     |         |         |         |   |        |         |         |   |         |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Depreciation and amortization                           |                                                     |         | 29,932  |         |   |        | 42,134  |         |   |         | 36,418  |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Tax benefit of stock option exercises                   |                                                     |         | 1,171   |         |   |        |        |         |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Provision for bad debts                                 |                                                     |         | 1,100   |         |   |        | 2,304   |         |   |         | 3,855   |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Write-down of accounts receivable                       |                                                     |         |        |         |   |        |        |         |   |         | 9,400   |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Loss on disposal of property and equipment              |                                                     |         | 8       |         |   |        |        |         |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Write-off of in-process research and development        |                                                     |         | 2,392   |         |   |        |        |         |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Write-off of MSA intangible asset                       |                                                     |         | 7,193   |         |   |        |        |         |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Write-down of investment                                |                                                     |         | 4,778   |         |   |        |        |         |   |         | 836     |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Gain on sale of investment                              |                                                     |         |        |         |   |        |        |         |   |         | (4,462  | )      
|                     
|                     
|                     
|                     
|                      |                                                                                  | Write-off of capitalized software development costs     |                                                     |         | 1,306   |         |   |        | 2,790   |         |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Stock compensation expense                              |                                                     |         | 150     |         |   |        | 2,285   |         |   |         | 144     |        
|                     
|                     
|                     
|                     
|                      | Changes in operating assets and liabilities, net of acquisitions:                |                                                         |                                                     |         |         |         |   |        |         |         |   |         |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Accounts receivable                                     |                                                     |         | (1,712  | )       |   |        | (9,967  | )       |   |         | (1,061  | )      
|                     
|                     
|                     
|                     
|                      |                                                                                  | Inventory                                               |                                                     |         | 349     |         |   |        | (143    | )       |   |         | (880    | )      
|                     
|                     
|                     
|                     
|                      |                                                                                  | Other current assets                                    |                                                     |         | 3,301   |         |   |        | (1,411  | )       |   |         | 6,349   |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Other assets                                            |                                                     |         | (1,562  | )       |   |        | (1,521  | )       |   |         | (1,825  | )      
|                     
|                     
|                     
|                     
|                      |                                                                                  | Deferred revenue                                        |                                                     |         | 17,300  |         |   |        | (11,863 | )       |   |         | (7,911  | )      
|                     
|                     
|                     
|                     
|                      |                                                                                  | Other current liabilities                               |                                                     |         | 2,253   |         |   |        | (8,732  | )       |   |         | (16,184 | )      
|                     
|                     
|                     
|                     
|                      |                                                                                  | Other long-term liabilities                             |                                                     |         | (971    | )       |   |        | (114    | )       |   |         | (1,387  | )      
|                      |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |        
|                      |                                                                                  |                                                         | Total adjustments                                   |         |         | 66,988  |   |        |         | 15,762  |   |         |         | 23,292  |  
|                      |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |        
|                      |                                                                                  |                                                         | Net cash provided by (used in) operating activities |         |         | 31,712  |   |        |         | 6,317   |   |         |         | (10,667 | )
|                      | Investing activities                                                             |                                                         |                                                     |         |         |         |   |        |         |         |   |         |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Purchase of investments                                 |                                                     |         | (33,591 | )       |   |        |        |         |   |         | (7,905  | )      
|                     
|                     
|                     
|                     
|                      |                                                                                  | Maturities of investments                               |                                                     |         | 16,838  |         |   |        | 17,003  |         |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Sale of investments                                     |                                                     |         | 250     |         |   |        |        |         |   |         | 12,432  |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Purchase of property and equipment, net of acquisitions |                                                     |         | (5,951  | )       |   |        | (8,477  | )       |   |         | (8,019  | )      
|                     
|                     
|                     
|                     
|                      |                                                                                  | Capitalized software development costs                  |                                                     |         | (4,329  | )       |   |        | (6,747  | )       |   |         | (6,407  | )      
|                     
|                     
|                     
|                     
|                      |                                                                                  | Acquisitions, net of cash acquired                      |                                                     |         | (29,259 | )       |   |        | (25,000 | )       |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Proceeds from sale of business                          |                                                     |         |        |         |   |        | 5,000   |         |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Payments under MSA                                      |                                                     |         | (16,000 | )       |   |        |        |         |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Changes in other assets                                 |                                                     |         | (5,565  | )       |   |        |        |         |   |         |        |        
|                      |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |        
|                      |                                                                                  |                                                         | Net cash used by investing activities               |         |         | (77,607 | ) |        |         | (18,221 | ) |         |         | (9,899  | )
|                      |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |        
|                      | Financing activities                                                             |                                                         |                                                     |         |         |         |   |        |         |         |   |         |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Borrowings                                              |                                                     |         | 18,940  |         |   |        | 20,000  |         |   |         | 2,012   |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Payments on borrowings                                  |                                                     |         | (35,088 | )       |   |        | (20,000 | )       |   |         | (521    | )      
|                     
|                     
|                     
|                     
|                      |                                                                                  | Distributions  MSI                                     |                                                     |         | (585    | )       |   |        | (375    | )       |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Sale of common stock                                    |                                                     |         | 65,399  |         |   |        |        |         |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Sale of preferred stock                                 |                                                     |         | 9,000   |         |   |        |        |         |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Redemption of mandatorily redeemable preferred stock    |                                                     |         | (38,771 | )       |   |        |        |         |   |         |        |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Exercise of warrants                                    |                                                     |         |        |         |   |        |        |         |   |         | 4       |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Exercises of stock options                              |                                                     |         | 1,266   |         |   |        | 6,036   |         |   |         | 4,330   |        
|                     
|                     
|                     
|                     
|                      |                                                                                  | Employee stock purchase plan                            |                                                     |         | 287     |         |   |        | 2,587   |         |   |         | 1,492   |        
|                      |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |        
|                      |                                                                                  |                                                         | Net cash provided by financing activities           |         |         | 20,448  |   |        |         | 8,248   |   |         |         | 7,317   |  
|                      |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |        
|                      | Effect of exchange rates on cash and cash equivalents                            |                                                         |                                                     | 16      |         |         |   | (371   | )       |         |   | 92      |        
|                     
|                     
|                     
|                     
|                      | Net decrease in cash and cash equivalents                                        |                                                         |                                                     | (25,431 | )       |         |   | (4,027 | )       |         |   | (13,157 | )      
|                     
|                     
|                     
|                     
|                      | Cash and cash equivalents  beginning of year                                    |                                                         |                                                     | 63,414  |         |         |   | 37,983 |         |         |   | 33,956  |        
|                      |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |        
|                      | Cash and cash equivalents  end of year                                          |                                                         | $                                                   | 37,983  |         |         | $ | 33,956 |         |         | $ | 20,799  |        
|                      |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |        
|                      | Cash paid for interest                                                           |                                                         | $                                                   | 612     |         |         | $ | 124    |         |         | $ | 388     |        
|                      |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |        
|                      | Cash paid for income taxes                                                       |                                                         | $                                                   | 4,364   |         |         | $ | 758    |         |         | $ | 62      |        
|                      |                                                                                  |                                                         |                                                     |         |         |         |   |        |         |         |   |        

The accompanying notes are an integral part of these
consolidated financial statements.

33



---



ECLIPSYS CORPORATION

Consolidated Statement of Changes in Stockholders
Equity


(in thousands)


|                                                                  |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|----------------------------------------------------------------- |  | ------------ | ---------- | ------ |  | --------------- | --- | -------- |  | ------ | ---- | ------ |  | ------ | ------- | - |  | - | -- | - |  |  | ---------- | - |  | - | --- | -
|                                                                  |  |              |            |        |  |                 |     |         
|                                                                  |  |              |            |        |  | Preferred Stock
|                                                                  |  | Voting and   |            |        |  |                
|                                                                  |  | Non-Voting   |            |        |  |                 |     |         
|                                                                  |  | Common Stock |            | Common |  | Series A        |     | Series D
|                                                                  |  |              |            | Stock  |  |                 |     |         
|                                                                  |  | Shares       |            | Amount |  | Warrant         |     | Shares   |  | Amount |      | Shares |  | Amount
|                                                                  |  |              |            |        |  |                 |     |          |  |        |      |        |  |       
|Balance at December 31, 1997                                      |  |              | 16,664,524 |        |  | $               | 167 |          |  |        | 395  |        |  |        | 20,000  |   |  | $ | 1  |   |  |  | 7,058,786  |   |  | $ | 71  |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|EMTEK Acquisition                                                 |  |              | 1,000,000  |        |  |                 | 10  |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Sale of common stock  Eclipsys initial public offering           |  |              | 4,830,000  |        |  |                 | 48  |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Issuance of Series G Preferred Stock                              |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Conversion of preferred stock  Eclipsys initial
	public offering |  |              | 10,033,313 |        |  |                 | 100 |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  | (7,058,786 | ) |  |   | (71 | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock warrant exercise  PCS                                      |  |              | 60,238     |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock option exercise                                             |  |              | 465,008    |        |  |                 | 5   |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Employee stock purchase                                           |  |              | 20,800     |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Income tax benefit from stock options exercised                   |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Dividends and accretion on mandatorily redeemable preferred stock |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Issuance of stock options                                         |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Distribution  MSI                                                |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Compensation expense recognized                                   |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Comprehensive income                                              |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Net loss                                                          |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Foreign currency translation adjustment                           |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Other comprehensive income                                        |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Comprehensive income                                              |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                  |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|Balance at December 31, 1998                                      |  |              | 33,073,883 |        |  |                 | 330 |          |  |        | 395  |        |  |        | 20,000  |   |  |   | 1  |   |  |  |           |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock option exercises                                            |  |              | 1,610,556  |        |  |                 | 16  |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Employee stock purchase                                           |  |              | 156,755    |        |  |                 | 2   |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock warrant exercise  Transition                               |  |              | 156,320    |        |  |                 | 2   |          |  |        | (395 | )      |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock warrant exercise                                            |  |              | 962,513    |        |  |                 | 10  |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Conversion of preferred stock  PCS                               |  |              | 241,283    |        |  |                 | 2   |          |  |        |      |        |  |        | (20,000 | ) |  |   | (1 | ) |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Conversion of convertible debt  PCS                              |  |              | 102,515    |        |  |                 | 1   |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Compensation expense recognized                                   |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Distributions MSI                                                 |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Comprehensive income                                              |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Net loss                                                          |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Foreign currency translation adjustment                           |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Other comprehensive income                                        |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Comprehensive income                                              |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                  |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|Balance at December 31, 1999                                      |  |              | 36,303,825 |        |  |                 | 363 |          |  |        |     |        |  |        |        |   |  |   |   |   |  |  |           |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock option exercises                                            |  |              | 495,328    |        |  |                 | 5   |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Employee stock purchase                                           |  |              | 296,203    |        |  |                 | 3   |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Exercise of warrants                                              |  |              | 40,765     |        |  |                 |    |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Compensation expense recognized                                   |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Net loss                                                          |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Foreign currency translation adjustment                           |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|Other comprehensive income                                        |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Comprehensive income                                              |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|                                                                  |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  
|Balance at December 31, 2000                                      |  |              | 37,136,121 |        |  | $               | 371 |          |  |        |     |        |  |        |        |   |  | $ |   |   |  |  |           |   |  | $ |    |  
|                                                                  |  |              |            |        |  |                 |     |          |  |        |      |        |  |        |         |   |  |   |    |   |  |  |            |   |  |   |     |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                  |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|----------------------------------------------------------------- |  | --------------- | -------- | -------- |  | -------- | -- | ------ |  | ------ | ---------- | ------ |  | - | --- | - |  |  | -------- | - |  | - | -- | -
|                                                                  |  |                
|                                                                  |  | Preferred Stock
|                                                                  |  |                
|                                                                  |  |                 |          |          |  |         
|                                                                  |  | Series E        |          | Series F |  | Series G
|                                                                  |  |                 |          |          |  |         
|                                                                  |  | Shares          |          | Amount   |  | Shares   |    | Amount |  | Shares |            | Amount
|                                                                  |  |                 |          |          |  |          |    |        |  |        |            |       
|Balance at December 31, 1997                                      |  |                 | 896,431  |          |  | $        | 9  |        |  |        | 1,478,097  |        |  | $ | 15  |   |  |  |         |   |  |   |   |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|EMTEK Acquisition                                                 |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Sale of common stock  Eclipsys initial public offering           |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Issuance of Series G Preferred Stock                              |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  | 900,000  |   |  |   | 9  |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Conversion of preferred stock  Eclipsys initial
	public offering |  |                 | (896,431 | )        |  |          | (9 | )      |  |        | (1,478,097 | )      |  |   | (15 | ) |  |  | (900,000 | ) |  |   | (9 | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock warrant exercise  PCS                                      |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock option exercise                                             |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Employee stock purchase                                           |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Income tax benefit from stock options exercised                   |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Dividends and accretion on mandatorily redeemable preferred stock |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Issuance of stock options                                         |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Distribution  MSI                                                |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Compensation expense recognized                                   |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Comprehensive income                                              |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Net loss                                                          |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Foreign currency translation adjustment                           |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Other comprehensive income                                        |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Comprehensive income                                              |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|Balance at December 31, 1998                                      |  |                 |         |          |  |          |   |        |  |        |           |        |  |   |    |   |  |  |         |   |  |   |   |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock option exercises                                            |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Employee stock purchase                                           |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock warrant exercise  Transition                               |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock warrant exercise                                            |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Conversion of preferred stock  PCS                               |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Conversion of convertible debt  PCS                              |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Compensation expense recognized                                   |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Distributions MSI                                                 |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Comprehensive income                                              |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Net loss                                                          |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Foreign currency translation adjustment                           |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Other comprehensive income                                        |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Comprehensive income                                              |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|Balance at December 31, 1999                                      |  |                 |         |          |  |          |   |        |  |        |           |        |  |   |    |   |  |  |         |   |  |   |   |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Stock option exercises                                            |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Employee stock purchase                                           |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Exercise of warrants                                              |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Compensation expense recognized                                   |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Net loss                                                          |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Foreign currency translation adjustment                           |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|Other comprehensive income                                        |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Comprehensive income                                              |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  
|Balance at December 31, 2000                                      |  |                 |         |          |  | $        |   |        |  |        |           |        |  | $ |    |   |  |  |         |   |  | $ |   |  
|                                                                  |  |                 |          |          |  |          |    |        |  |        |            |        |  |   |     |   |  |  |          |   |  |   |    |  



---



ECLIPSYS CORPORATION

Consolidated Statement of Changes in Stockholders
Equity


(in thousands)


|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|------------------------------------------------------------------------ |  | ---------- | ------- | ------------ |  | ----------- | ------ | ------------- |  | ------------- | -------- | ----- |  |  | ------- | - |  | - | ---- | - |  | - | ------- | -
|                                                                         |  |            |         |              |  |             |        |               |  | Accumulated   |          |      
|                                                                         |  |            |         |              |  |             |        |               |  | Other         |          |      
|                                                                         |  | Additional |         |              |  |             |        | Comprehensive |  | Comprehensive |          |      
|                                                                         |  | Paid-in    |         | Unearned     |  | Accumulated |        | Income        |  | Income        |          |      
|                                                                         |  | Capital    |         | Compensation |  | Deficit     |        | (Loss)        |  | (Loss)        |          | Total
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |      
|Balance at December 31, 1997                                             |  | $          | 165,265 |              |  | $           | (250   | )             |  | $             | (106,819 | )     |  |  |         |   |  | $ | 28   |   |  | $ | 58,882  |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|EMTEK Acquisition                                                        |  |            | 9,050   |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 9,060   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Sale of common stock  Eclipsys initial public offering                  |  |            | 65,351  |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 65,399  |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Issuance of Series G Preferred Stock                                     |  |            | 8,991   |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 9,000   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Conversion of preferred stock  Eclipsys initial
        public offering |  |            | 4       |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |        |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Stock warrant exercise  PCS                                             |  |            | 61      |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 61      |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Stock option exercise                                                    |  |            | 1,200   |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 1,205   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Employee stock purchase                                                  |  |            | 287     |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 287     |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Income tax benefit from stock options exercised                          |  |            | 1,171   |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 1,171   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Dividends and accretion on mandatorily redeemable preferred stock        |  |            | (10,928 | )            |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | (10,928 | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Issuance of stock options                                                |  |            | 1,523   |              |  |             | (1,523 | )             |  |               |          |       |  |  |         |   |  |   |      |   |  |   |        |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Distribution  MSI                                                       |  |            |         |              |  |             |        |               |  |               | (585     | )     |  |  |         |   |  |   |      |   |  |   | (585    | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Compensation expense recognized                                          |  |            |         |              |  |             | 150    |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 150     |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Comprehensive income                                                     |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net loss                                                                 |  |            |         |              |  |             |        |               |  |               | (35,276  | )     |  |  | (35,276 | ) |  |   |      |   |  |   | (35,276 | )
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|Foreign currency translation adjustment                                  |  |            |         |              |  |             |        |               |  |               |          |       |  |  | 16      |   |  |   | 16   |   |  |   | 16      |  
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|Other comprehensive income                                               |  |            |         |              |  |             |        |               |  |               |          |       |  |  | 16      |   |  |   |      |   |  |   |         |  
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|Comprehensive income                                                     |  |            |         |              |  |             |        |               |  |               |          |       |  |  | (35,260 | ) |  |   |      |   |  |   |         |  
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|Balance at December 31, 1998                                             |  |            | 241,975 |              |  |             | (1,623 | )             |  |               | (142,680 | )     |  |  |         |   |  |   | 44   |   |  |   | 98,442  |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Stock option exercises                                                   |  |            | 6,020   |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 6,036   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Employee stock purchase                                                  |  |            | 2,585   |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 2,587   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Stock warrant exercise  Transition                                      |  |            | 393     |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |        |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Stock warrant exercise                                                   |  |            | (10     | )            |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |        |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Conversion of preferred stock  PCS                                      |  |            | (1      | )            |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |        |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Conversion of convertible debt  PCS                                     |  |            | 2,141   |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 2,142   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Compensation expense recognized                                          |  |            | 982     |              |  |             | 1,303  |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 2,285   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Distributions MSI                                                        |  |            |         |              |  |             |        |               |  |               | (375     | )     |  |  |         |   |  |   |      |   |  |   | (375    | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Comprehensive income                                                     |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |        |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net loss                                                                 |  |            |         |              |  |             |        |               |  |               | (9,445   | )     |  |  | (9,445  | ) |  |   |      |   |  |   | (9,445  | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Foreign currency translation adjustment                                  |  |            |         |              |  |             |        |               |  |               |          |       |  |  | (371    | ) |  |   | (371 | ) |  |   | (371    | )
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|Other comprehensive income                                               |  |            |         |              |  |             |        |               |  |               |          |       |  |  | (371    | ) |  |   |      |   |  |   |         |  
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|Comprehensive income                                                     |  |            |         |              |  |             |        |               |  |               |          |       |  |  | (9,816  | ) |  |   |      |   |  |   |         |  
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|Balance at December 31, 1999                                             |  |            | 254,085 |              |  |             | (320   | )             |  |               | (152,500 | )     |  |  |         |   |  |   | (327 | ) |  |   | 101,301 |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Stock option exercises                                                   |  |            | 2,988   |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 2,993   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Employee stock purchase                                                  |  |            | 2,704   |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 2,707   |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Exercise of warrants                                                     |  |            | 4       |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 4       |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Compensation expense recognized                                          |  |            | 122     |              |  |             | 144    |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   | 266     |  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net loss                                                                 |  |            |         |              |  |             |        |               |  |               | (33,959  | )     |  |  | (33,959 | ) |  |   |      |   |  |   | (33,959 | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Foreign currency translation adjustment                                  |  |            |         |              |  |             |        |               |  |               |          |       |  |  | 92      |   |  |   | 92   |   |  |   | 92      |  
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|Other comprehensive income                                               |  |            |         |              |  |             |        |               |  |               |          |       |  |  | 92      |   |  |   |      |   |  |   |         |  
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|Comprehensive income                                                     |  |            |         |              |  |             |        |               |  |               |          |       |  |  | (33,867 | ) |  |   |      |   |  |   |         |  
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  
|Balance at December 31, 2000                                             |  | $          | 259,903 |              |  | $           | (176   | )             |  | $             | (186,459 | )     |  |  |         |   |  | $ | (235 | ) |  | $ | 73,404  |  
|                                                                         |  |            |         |              |  |             |        |               |  |               |          |       |  |  |         |   |  |   |      |   |  |   |         |  

The accompanying notes are an integral part of these
consolidated financial statements.

34



---



ECLIPSYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Three Years Ended December 31, 2000


1.  Organization and Description of Business

Eclipsys Corporation (Eclipsys) and its subsidiaries
(collectively, the Company) is a healthcare
information technology solutions provider which was formed in
December 1995 and commenced operations in
January 1996. The Company provides, on an integrated basis,
enterprise-wide, clinical management, access management, patient
financial management, health information management, strategic
decision support, resource planning management and enterprise
application integration solutions to healthcare organizations.
Additionally, Eclipsys provides other information technology
solutions including outsourcing, remote hosting, networking
technologies and other related services.

2.  Summary of Significant Accounting Policies

Principles of Consolidation

The financial statements include the accounts of Eclipsys and
its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.

Financial Statement Presentation

The Company has completed mergers with Transition Systems, Inc.
(Transition) effective December 31, 1998,
PowerCenter Systems, Inc. (PCS) effective
February 17, 1999 and MSI Solutions, Inc. and MSI
Integrated Services, Inc. (collectively MSI)
effective June 17, 1999. Each of these mergers were
accounted for as a pooling of interests and, accordingly, the
consolidated financial statements have been retroactively
restated as if the mergers had occurred as of the beginning of
the earliest period presented. Transition had a
September 30 fiscal year end. In connection with the
retroactive restatement, the financial statements of Transition
were recast to a calendar year end to conform to Eclipsys
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, liabilities, revenues and
expenses and disclosures of contingent assets and liabilities.
The estimates and assumptions used in the accompanying
consolidated financial statements are based upon
managements evaluation of the relevant facts and
circumstances as of the date of the financial statements. Actual
results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the consolidated statement of cash flows, the
Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash
equivalents are stated at cost plus accrued interest, which
approximates market value.

Revenue Recognition

The Companys products are sold to customers based
primarily on contractual arrangements that include
implementation services that often extend for periods in excess
of one year. Revenues are derived from licensing of computer
software, software and hardware maintenance, remote hosting and
outsourcing, training, implementation assistance, consulting,
and the sale of computer hardware. For arrangements in which the
Company does not use percentage of completion accounting the
Company recognizes revenue in accordance with the American
Institute of Certified Public Accountants Statement of
Position 97-2 Software Revenue Recognition
(SOP 97-2) which requires, among other matters,
that there be a signed contract evidencing

35



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




2.  Summary of Significant Accounting
Policies  (Continued)




2.  Summary of Significant Accounting
Policies  (Continued)


an arrangement exists, delivery of the software has occurred,
the fee is fixed and determinable and collectibility of the fee
is probable.

Systems and Services Revenue

Multiple Element Arrangements

The Company generally licenses its software products pursuant to
multiple element arrangements that include maintenance for
periods that range from 3 to 7 years. For software license
fees sold to customers that are bundled with services and
maintenance and require significant implementation efforts, the
Company recognizes revenue using the percentage of completion
method, as the services are considered essential to the
functionality of the software.

For the Eclipsys product line (EPL), for
transactions entered into with customers that require
significant implementation efforts, the Company recognizes the
bundled license and services fee from the arrangement using the
percentage of completion method over the implementation period,
based primarily on implementation hours incurred. Payments for
software license and implementation fees under these
arrangements are typically due over the implementation period
(12 to 24 months). In 2000, the Company entered into
long-term multiple element arrangements in which it is
partnering with its customers to provide comprehensive
technology solutions. These arrangements typically include
multiple software products (including the right to future
products within the suites purchased), implementation and
consulting services, maintenance, and, where desired by the
customer, outsourcing and remote hosting services. Additionally,
these contracts may contain provisions in which the Company may
earn additional fees based on customer savings or other
objectives, as defined in the arrangements. These elements will
be provided throughout the term of the arrangements which range
from seven to ten years. Payments are due monthly over these
extended contractual terms. The Company bundles all fees due
under these comprehensive multiple element arrangements and
recognizes the revenue ratably over the contract term. In
addition, the Company capitalizes related direct costs
consisting of third party software costs and direct software
implementation costs. These costs are amortized over the term of
the arrangement.

For the Transition Systems, Inc. product line (TPL),
the Company recognizes revenue for transactions entered into
prior to January 1, 1998 under the percentage of completion
method based principally upon progress and performance as
measured by achievement of contract milestones. Effective
January 1, 1998, the Company adopted SOP 97-2 with respect
to TPL transactions. In connection with the adoption, the
Company accounted for TPL transactions entered into on or after
January 1, 1998 under the same percentage of completion
method used for the EPL as the Companys management
intended to manage implementation efforts of the TPL on the
basis of inputs rather than the output method used by pre-merger
Transition management. The Company recognizes the TPL bundled
license and service fee revenue ratably over the implementation
period, which corresponds with the timing of the related
implementation efforts.

Revenue from other software license fees, which are bundled with
long-term maintenance agreements (3 to 7 years), is
recognized on a straight-line basis over the contracted
maintenance period. Other software license fee arrangements
relate to certain add-on module EPL products sold to
customers in the EPL installed base. Because the Company does
not sell the add-on modules or the associated
extended term maintenance elements separately, the entire
arrangement fee is recognized as revenue over the contracted
maintenance period in accordance with paragraph 12 of
SOP 97-2.

36



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




2.  Summary of Significant Accounting
Policies  (Continued)


Services

Remote processing and outsourcing services are marketed under
long-term arrangements generally over periods from 5 to
10 years. Revenues from these arrangements are recognized
as the services are performed.

Software maintenance fees are marketed under annual and
multi-year agreements and are recognized as revenue ratably over
the contracted maintenance term. The Companys software
maintenance arrangements include when and if available upgrades
and do not contain specific upgrade rights.

Implementation revenues and other services, including training
and consulting are recognized as services are performed for time
and material arrangements and using the percentage of completion
method based on labor input measures for fixed fee arrangements.
The Company sells these services separately and accordingly has
sufficient vendor specific objective evidence of the element to
recognize revenue.

Hardware Sales and Maintenance Revenue

Hardware sales are generally recognized upon delivery of the
equipment to the customer. Hardware maintenance revenues are
billed and recognized monthly over the contracted maintenance
term.

Unbilled Accounts Receivable

The timing of revenue recognition and contractual billing terms
under certain multiple element arrangements may not precisely
coincide, resulting in the recording of unbilled accounts
receivable or deferred revenue. Customer payments are due under
these arrangements in varying amounts upon the achievement of
certain contractual milestones throughout the implementation
period. Implementation periods generally range from 12 to
24 months. The current portion of unbilled accounts
receivable of $15.3 million and $12.5 million as of
December 31, 1999 and 2000, respectively, is included in
accounts receivable in the accompanying financial statements.

In addition, the Company maintains certain long-term contracts
used to finance a portion of certain customer hardware and
software fees owed. These arrangements generally provide for
payment terms that range from three to five years and carry
interest rates that range from 7% to 10%. Such amounts are
recorded as non-current unbilled account receivables until the
customers are billed which is generally on a monthly basis. The
non-current portion of amounts due related to these arrangements
was $1.4 million and $3.3 million as of December 31, 1999
and 2000, respectively, and is included in other assets in the
accompanying financial statements. The current portion of
amounts due related to these arrangements was $1.6 million and
$3.8 million as of December 31, 1999 and 2000,
respectively, and is included in accounts receivable in the
accompanying financial statements. The Company does not have any
obligation to refund any portion of the software or hardware
fees and its contracts are non-cancelable.

Inventory

Inventory consists of computer equipment, parts and peripherals
and is stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.

Property and Equipment

Property and equipment are stated at cost. Depreciation and
amortization are provided for using the straight-line method
over the estimated useful lives, which range from two to ten
years. Computer equipment is depreciated over two to five years.
Office equipment is depreciated over two to ten years. Purchased
software for internal use is amortized over three to five years.
Leasehold improvements are amortized over the shorter

37



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




2.  Summary of Significant Accounting
Policies  (Continued)


of the useful lives of the assets or the remaining term of the
lease. When assets are retired or otherwise disposed of, the
related costs and accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in income.
Expenditures for repairs and maintenance not considered to
substantially lengthen the property and equipment lives are
charged to expense as incurred.

Capitalized Software Development Costs

The Company capitalizes a portion of its internal computer
software development costs incurred subsequent to establishing
technological feasibility, including salaries, benefits, and
other directly related costs incurred in connection with
programming and testing software products. Capitalization ceases
when the products are generally released for sale to customers.
Management monitors the net realizable value of all capitalized
software development costs to ensure that the investment will be
recovered through margins from future sales. Capitalized
software development costs were approximately $4.3 million, $6.7
million and $6.4 million for the years ended December 31,
1998, 1999 and 2000, respectively. These costs are amortized
over the greater of the ratio that current revenues bear to
total and anticipated future revenues for the applicable product
or the straight-line method over three to five years.
Amortization of capitalized software development costs, which is
included in cost of systems and services revenues, was
approximately $777,000, $1.2 million and $2.9 million for the
years ended December 31, 1998, 1999 and 2000, respectively.
Accumulated amortization of capitalized software development
costs were $6.7 million and $9.6 million as of December 31,
1999 and 2000, respectively.

In December 1998, based on a review of products acquired in
conjunction with the Transition merger and other related
activities, the Company recorded a write-off of approximately
$1.3 million of capitalized software development costs related
to duplicate products that did not have any alternative future
use.

In June 1999, based on a review of products acquired in
conjunction with the MSI merger and other related activities,
the Company recorded a write-off of approximately $2.8 million
of capitalized software development costs related to duplicate
products that did not have any alternative future use.

Acquired Technology and Intangible Assets

The intangible assets from the Companys acquisitions
(Notes 6 and 7), which are amortized to cost of systems and
services on a straight-line basis over their estimated useful
lives, consisted of the following as of December 31, 1999 and
2000 (in thousands):

|                               |  |              |         |      |  |       |        |     |  |             |         |  |  |   |        |  |  |  |              | 
|------------------------------ |  | ------------ | ------- | ---- |  | ----- | ------ | --- |  | ----------- | ------- |  |  | - | ------ |  |  |  | ------------ | 
|                               |  |              |         |     
|                               |  | December 31, |         |     
|                               |  |              |         |     
|                               |  |              |         |      |  |      
|                               |  | 1999         |         | 2000 |  |      
|                               |  |              |         |      |  |      
|                               |  | Gross        |         | Net  |  | Gross |        | Net |  | Useful Life
|                               |  |              |         |      |  |       |        |     |  |            
|Acquired technology            |  | $            | 92,536  |      |  | $     | 33,161 |     |  | $           | 95,795  |  |  | $ | 19,714 |  |  |  | 3  5 Years  | 
|                              
|                              
|                              
|                              
|Ongoing customer relationships |  |              | 10,690  |      |  |       | 4,366  |     |  |             | 10,690  |  |  |   | 2,740  |  |  |  | 5 Years      | 
|                              
|                              
|                              
|                              
|Network services               |  |              | 5,764   |      |  |       | 2,404  |     |  |             | 5,764   |  |  |   | 481    |  |  |  | 3 Years      | 
|                              
|                              
|                              
|                              
|Goodwill                       |  |              | 17,793  |      |  |       | 10,081 |     |  |             | 17,834  |  |  |   | 4,610  |  |  |  | 5  12 Years | 
|                              
|                              
|                              
|                              
|Other                          |  |              | 162     |      |  |       | 7      |     |  |             | 162     |  |  |   |       |  |  |  | 3  5 Years  | 
|                               |  |              |         |      |  |       |        |     |  |             |         |  |  |   |        |  |  |  |              | 
|                               |  | $            | 126,945 |      |  | $     | 50,019 |     |  | $           | 130,245 |  |  | $ | 27,545 |  |  |  |              | 
|                               |  |              |         |      |  |       |        |     |  |             |         |  |  |   |        |  |  |  |              | 

Amortization of the acquired technology and network services
assets is included in the cost of systems and services revenues.

38



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




2.  Summary of Significant Accounting
Policies  (Continued)


The carrying values of intangible assets are reviewed if the
facts and circumstances suggest that they may be impaired. This
review indicates whether assets will be recoverable based on
future expected cash flows. Based on its review, the Company
does not believe that an impairment of its excess of cost over
fair value of net assets acquired has occurred.

Fair Value of Financial Instruments

The carrying amounts of the Companys financial
instruments, including cash and cash equivalents, accounts
receivable, and other current liabilities, approximate fair
value.

Income Taxes

The Company accounts for income taxes utilizing the liability
method, and deferred income taxes are determined based on the
estimated future tax effects of differences between the
financial reporting and income tax basis of assets and
liabilities and tax carryforwards given the provisions of the
enacted tax laws.

Prior to the pooling of interests merger with the Company, MSI
had elected S corporation status for income tax
purposes. As a result of the merger, MSI terminated its
S corporation election. The pro forma provision for
income taxes, taken together with reported income tax expense
presents the combined pro forma tax expense of MSI as if it had
been a C corporation during the periods presented.
The pro forma net loss of the Company considering this impact
for the years ended December 31, 1998 and 1999 were as
follows:

|                          |  |      |         |      |  |   |        |  
|------------------------- |  | ---- | ------- | ---- |  | - | ------ | -
|                          |  | 1998 |         | 1999
|                          |  |      |         |     
|Net loss                  |  | $    | (35,276 | )    |  | $ | (9,445 | )
|                         
|                         
|                         
|                         
|Pro forma tax adjustments |  |      | (637    | )    |  |   |       |  
|                         
|                         
|                         
|                         
|Pro forma net loss        |  | $    | (35,913 | )    |  | $ | (9,445 | )

Stock-Based Compensation

The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion (APB)
No. 25, Accounting for Stock Issued to
Employees, and related Interpretations and to elect the
disclosure option of Statement of Financial Accounting Standards
(FAS) No. 123, Accounting for Stock-Based
Compensation. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the estimated
market price of the Companys stock at the date of the
grant over the amount an employee must pay to acquire the stock.

Basic and Diluted Net Loss Per Share

For all periods presented, basic and diluted net loss per common
share is presented in accordance with FAS 128,
Earnings per Share, which provides for the
accounting principles used in the calculation of earnings per
share and was effective for financial statements for both
interim and annual periods ending after December 15, 1997.
Basic net loss per common share is based on the weighted average
number of shares of common stock outstanding during the period.
Diluted net loss per share reflects the potential dilution from
assumed conversion of all dilutive securities such as stock
options and warrants. Stock options to acquire 4,344,958,
5,494,673 and 9,148,878 shares of common stock at
December 31, 1998, 1999 and 2000, respectively, and
warrants to acquire up to 1,119,245, 40,829 and 5,160 shares of
common stock at December 31, 1998, 1999 and 2000
respectively, were the only securities issued which would be
included in the diluted earnings per share calculation if
dilutive.

39



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




2.  Summary of Significant Accounting
Policies  (Continued)


In 1998, 1999 and 2000, the inclusion of stock options and
warrants would have been antidilutive due to the net loss
reported by the Company. The Company has excluded 370,609
contingently returnable shares of common stock from basic and
diluted earnings per share computation for the year ended
December 31, 1998 (Note 4).

Concentration of Credit Risk

The Companys customers operate primarily in the healthcare
industry. The Company sells its products and services under
contracts with varying terms. The accounts receivable amounts
are unsecured. Management believes the allowance for doubtful
accounts is sufficient to cover credit losses. The Company does
not believe that the loss of any one customer would have a
material effect on the financial position of the Company.

Foreign Currency Translation

The financial position and results of operations of foreign
subsidiaries are measured using the currency of the respective
countries as the functional currency. Assets and liabilities are
translated at the foreign exchange rate in effect at the balance
sheet date, while revenue and expenses for the year are
translated at the average exchange rate in effect during the
year. Translation gains and losses are not included in
determining net income or loss but are accumulated and reported
as a separate component of stockholders equity. The
Company has not entered into any hedging contracts during the
three-year period ended December 31, 2000.

Comprehensive Income

Effective January 1, 1998, the Company implemented
Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income. This standard
requires that the total changes in equity resulting from
revenue, expenses, and gains and losses, including those that do
not affect the accumulated deficit, be reported. Accordingly,
those amounts that are comprised solely of foreign currency
translation adjustments are included in other comprehensive
income in the consolidated statement of changes in
stockholders equity.

New Accounting Pronouncements

In October 1997, the American Institute of Certified Public
Accountants issued Statement of Position 97-2
(SOP 97-2), Software Revenue
Recognition. Effective January 1, 1998, the Company
adopted SOP 97-2. In connection with the adoption of
SOP 97-2, the Company deferred approximately $9.1 million
of revenue under certain Transition contracts that were entered
into after December 31, 1997.

In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133
(SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. This statement
establishes accounting and reporting standards for derivative
instruments embedded in other contracts and for hedging
activities. This statement is effective for financial statements
for all fiscal quarters of all fiscal years beginning after
June 15, 2000. The Company believes the adoption of
SFAS 133 will not have a material impact on our financial
position or results of operations.

In March 2000, the Financial Accounting Standards Board
issued Interpretation No. 44 Accounting for Certain
Transactions Involving Stock Compensation, an interpretation of
APB Opinion No. 25 (FIN 44). The
interpretation provides guidance for certain issues relating to
stock compensation involving employees that arose in applying
APB Opinion No. 25. The provisions of FIN 44 were
effective July 1, 2000. The adoption of FIN 44 has had
no effect on the Companys financial statements.

40



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




2.  Summary of Significant Accounting
Policies  (Continued)


In December 1999, the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin No. 101
Revenue Recognition in Financial Statements
(SAB No. 101). SAB No. 101 summarizes
certain of the SEC staffs view in applying generally
accepted accounting principles to revenue recognition in
financial statements. On June 26, 2000, the SEC staff
issued SAB No. 101-B to provide registrants with additional
time to implement guidance contained in SAB No. 101. SAB
101-B delays the implementation date of SAB No. 101 until
no later than the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. The adoption of SAB
No. 101 has had no material impact on our financial
position or results of operations.

In September 2000, the FASB issued SFAS 140
(SFAS 140), Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities. SFAS 140, which replaces SFAS 125
(SFAS 125), Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities, addresses certain issues not previously
addressed in SFAS 125. SFAS 140 is effective for
transfers and servicing occurring after March 31, 2001 and,
for certain provisions, fiscal years ending after
December 15, 2000. The Company believes the adoption of
SFAS 140 will not have a material impact on the
Companys financial position or results of operations.

3.  Property and Equipment

Property and equipment as of December 31, 1999 and 2000 is
summarized as follows (in thousands):

|                                                |  |              |         |      |  |   |         |  
|----------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | -
|                                                |  |             
|                                                |  | December 31,
|                                                |  |             
|                                                |  | 1999         |         | 2000
|                                                |  |              |         |     
|Computer equipment                              |  | $            | 17,329  |      |  | $ | 22,292  |  
|                                               
|                                               
|                                               
|                                               
|Office equipment and other                      |  |              | 4,631   |      |  |   | 6,240   |  
|                                               
|                                               
|                                               
|                                               
|Purchased software                              |  |              | 6,631   |      |  |   | 6,667   |  
|                                               
|                                               
|                                               
|                                               
|Leasehold improvements                          |  |              | 4,405   |      |  |   | 4,723   |  
|                                                |  |              |         |      |  |   |         |  
|                                                |  |              | 32,996  |      |  |   | 39,922  |  
|                                               
|                                               
|                                               
|                                               
|Less: Accumulated depreciation and amortization |  |              | (18,474 | )    |  |   | (23,121 | )
|                                                |  |              |         |      |  |   |         |  
|                                                |  | $            | 14,522  |      |  | $ | 16,801  |  
|                                                |  |              |         |      |  |   |         |  

Depreciation and amortization expense of property and equipment
totaled approximately $7.6 million, $7.2 million and $5.7
million in 1998, 1999 and 2000, respectively.

4.  Licensing Arrangement

In May 1996, the Company entered into an exclusive
licensing arrangement with Partners HealthCare System, Inc.
(Partners) to further develop, commercialize,
distribute and support certain intellectual property which was
being developed at Partners. As consideration for the license,
the Company issued 988,290 shares of Common Stock of the
Company, including 370,609 shares that were subject to a
contingency which expired in 1999, and agreed to pay royalties
to Partners on sales of the developed product until the Company
completed an initial public offering of common stock with a per
share offering price of $10.00 or higher. There was no revenue
recognized by the Company or royalties paid to Partners under
the arrangement in 1997 or 1998. In August of 1998, the Company
completed an initial public offering (Note 5) whereby the
royalty provision of the agreement terminated. Under the terms
of the license, the Company may further develop, market,
distribute and support the original technology and license it,
as well as market related services, to other healthcare
providers and hospitals throughout the world (other than in the
Boston, Massachusetts metropolitan area). The Company is
obligated to offer to Partners and certain of their affiliates
an internal use

41



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




4.  Licensing Arrangement 
(Continued)


license, granted on most favored customer terms, to any new
software applications developed by the Company, whether or not
derived from the licensed technology, and major architectural
changes to the licensed software. After May 3, 1998,
Partners and certain of their affiliates are entitled to receive
internal use licenses for any changes to any modules or
applications included in the licensed technology, as defined.
The Company has an exclusive right of first offer to
commercialize new information technologies developed in
connection with Partners.

As part of the agreement, the Company has provided development
services to Partners related to commercializing the intellectual
property; fees for these development services totaled $1.2
million, $976,000 and $274,000 for the years ended
December 31, 1998, 1999 and 2000 respectively, and are
included as a reduction in research and development expenses in
the accompanying consolidated statements of operations.

5.  Stockholders Equity and Mandatorily
Redeemable Preferred Stock

Stock Split

In June 1998, the Company effected a two-for-three reverse
stock split of all Voting Common Stock and Non-Voting Common
Stock outstanding. The accompanying consolidated financial
statements give retroactive effect to the June 1998 stock
split as if it had occurred at the beginning of the earliest
period presented. Effective upon the closing of the IPO, the
authorized common stock and non-voting common stock was
increased to 200,000,000.

Mandatorily Redeemable Preferred Stock

In connection with its acquisition of Alltel (Note 7), the
Company sold 30,000 shares of Series B 8.5% Cumulative
Redeemable Preferred Stock (Series B) and
warrants to purchase up to 1,799,715 shares of Non-Voting Common
Stock at $.01 per share for total consideration of $30.0
million. The number of warrants to be issued was subject to
adjustment in the event the Company redeemed all or a portion of
the Series B prior to its mandatory redemption date. The
Series B was non-voting and was entitled to a liquidation
preference of $1,000 per share plus any unpaid dividends.
Dividends were cumulative and accrued at an annual rate of 8.5%.

The Series B was redeemable by the Company at its
redemption price at any time on or before the mandatory
redemption date of December 31, 2001. The redemption price,
as defined, equaled the liquidation preference amount plus all
accrued and unpaid dividends. With respect to liquidation
preferences, the Series B ranked equal to the Series C
8.5% Cumulative Redeemable Preferred Stock
(Series C) and senior to all other equity
instruments.

In January 1997, 20,000 shares of the Series C were
issued to Alltel Information Services, Inc. (AIS) as
part of the consideration paid for Alltel (Note 7). The
Series C contained substantially the same terms, including
voting rights, ability to redeem and liquidation preferences the
same as the Series B. The Series B had preferential
rights in the event of a change of ownership percentages of
certain of the Companys stockholders; the Series C
did not have these preferential rights. The Series C
redemption price was determined the same as Series B and
had to be redeemed on or before December 31, 2001.

The Company has accounted for the Series B and C as
mandatorily redeemable preferred stock. Accordingly, the Company
accrued dividends and amortized any discount over the redemption
period with a charge to additional paid-in capital
(APIC). The Company recorded a discount on the
Series B at the time of its issuance for the estimated fair
value of the warrants ($10.5 million). The Company valued the
maximum amount of warrants that would be issued up to the
mandatory redemption date of the Series B as of the
acquisition date, January 23, 1997 and the mandatory
redemption date, December 31, 2001. The Company

42



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




5.  Stockholders Equity and Mandatorily
Redeemable Preferred Stock  (Continued)


recorded the Series C on the date of acquisition of Alltel
at $10.3 million (after adjustment for the 4,500 shares returned
by AIS (Note 7)), which included a discount from its face
amount of $5.2 million.

Dividends and accretion on the Series B was $10.7 million
for the year ended December 31, 1998. During the year ended
December 31, 1998, dividends and accretion on the
Series C was and $200,000. The Series B and C were
redeemed in August 1998 for $38.8 million with proceeds
from the Companys initial public offering. In connection
with this early redemption, the Company recorded a one-time
charge to APIC of $10.9 million, which represented the
difference between the carrying value of the Series B and C
and the redemption value. This amount is included in dividends
and accretion in the accompanying financial statements.

During 1999, 962,513 shares of Common Stock were issued related
to the warrants issued in conjunction with Series B and
Series C.

Series A Convertible Preferred Stock

In May 1996, concurrent with entering into the
Partners licensing arrangement, the Company sold 1,000,000
shares of Series A Convertible Preferred Stock
(Series A) for $6.0 million to outside
investors. The Series A was convertible on a one-to-one
basis to shares of Common Stock of the Company at the discretion
of the outside investors. The Series A had voting rights
equivalent to Common Stock on an as converted basis and a
liquidation preference of $6 per share. The Company did not
declare or pay dividends on Series A. In January 1997,
the Company issued 1,478,097 shares of Series F Convertible
Preferred Stock (Series F) in exchange for the
cancellation of Series A. The Company accounted for the
transaction as an extinguishment of debt with a related party
and, accordingly, recorded a charge of $3.1 million to
additional paid-in capital at the date of this transaction. In
addition, the charge was recorded as an increase to net loss
available to common stockholders.

In March 1996, PCS sold 20,000 shares of its Series A
Convertible Preferred Stock (PCS Series A) for
$2.0 million to outside investors. At the time of the PCS
merger, the PCS Series A were converted into 241,183 shares
of Common Stock of the Company.

Series D Convertible Preferred Stock

In January 1997, the Company sold 4,981,289 shares of the
Series D Convertible Preferred Stock
(Series D) for $62.5 million to private
investors and issued 2,077,497 shares to AIS in connection with
the acquisition of Alltel. Each share of Series D was
convertible into one share of Common Stock. The Series D
contained voting rights as if it were converted into Common
Stock and had a liquidation preference of $12.55 per share plus
any declared but unpaid dividends. The Series D was
equivalent to Series E Convertible Preferred Stock
(Series E) with respect to liquidation
preference and rank.

Both the Series D and E ranked junior to the Series B
and C and senior to Series F. The Company did not declare
or pay any dividends on the Series D.

Concurrent with the Companys initial public offering, the
Series D were converted into 7,058,786 shares of Common
Stock.

Series E Convertible Preferred Stock

In January 1997, the Company sold 896,431 shares of
Series E for $11.3 million. The Series E was
non-voting and was identical to the Series D with respect
to liquidation preference and rank. Each share of Series E
was convertible into one share of Non-Voting Common Stock. The
Company did not declare or pay any dividends on the
Series E.

43



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




5.  Stockholders Equity and Mandatorily
Redeemable Preferred Stock  (Continued)


Concurrent with the Companys initial public offering, the
Series E were converted into 896,431 shares of Non-Voting
Common Stock. Each share of Non-Voting Common Stock was
convertible into one share of voting Common Stock. During 1999,
all shares of Non-Voting Common Stock were converted into voting
Common Stock.

Series F Convertible Preferred Stock

As described above, in January 1997, 1,478,097 shares of
Series F were issued in exchange for the cancellation of
the outstanding shares of Series A. The Series F
contained a liquidation preference of $6 per share. The
Series F ranked junior to the Companys other classes
of preferred stock with respect to liquidation preferences. Each
share of Series F was convertible into one share of Common
Stock. The Company did not declare or pay any dividends on the
Series F.

Concurrent with the Companys initial public offering, the
Series F were converted into 1,478,097 shares of Common
Stock.

Series G Convertible Preferred Stock

In February 1998, the Company sold 900,000 shares of
Series G Convertible Preferred Stock
(Series G) to outside investors for total
consideration of $9.0 million. The proceeds were utilized to
repay the outstanding Term Loan balance. Each share of the
Series G was convertible on a two-for-three basis to shares
of Common Stock. The conversion rate was subject to adjustment
in certain circumstances. The Series G had a liquidation
preference of $10 per share. In the event of an involuntary
liquidation of the Company, the Series G would have
participated on a pro rata basis with the Series D and E.

Concurrent with the Companys initial public offering, the
Series G was converted into 599,999 shares of Common Stock.

Undesignated Preferred Stock

The Company has available for issuance, 5,000,000 shares of
preferred stock. As discussed below under Shareholder
Rights Plan the Board has designated 100,000 of the
5,000,000 authorized shares of preferred stock as Series A
Junior Participating Preferred Stock. The Company has a balance
of 4,900,000 authorized shares of undesignated preferred stock
(the Undesignated Preferred). The liquidation,
voting, conversion and other related provisions of the
Undesignated Preferred will be determined by the Board of
Directors at the time of issuance. Currently, there are no
outstanding shares.

Initial Public Offering

Effective August 6, 1998, the Company completed an initial
public offering (IPO). Net proceeds from the
offering were $65.4 million, including proceeds from the
exercise of the underwriters over allotment option. The
Company used the net proceeds from the offering to redeem the
outstanding shares of the Companys Mandatorily Redeemable
Preferred Stock, repay the principal balance and accrued
interest on acquisition related debt and to repay amounts
outstanding under the Companys revolving credit facility.
In connection with the redemption of the Mandatorily Redeemable
Preferred Stock, the Company recorded an increase to net loss
available to common shareholders of $10.9 million reflecting the
difference between the carrying value and redemption value of
the stock.

Concurrent with the initial public offering, all Series of
Convertible Preferred Stock were automatically converted into
Common Stock or Non-Voting Common Stock and all Mandatorily
Redeemable Preferred Stock was redeemed.

44



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




5.  Stockholders Equity and Mandatorily
Redeemable Preferred Stock  (Continued)


Shareholder Rights Plan

On July 26, 2000, the Board of Directors of the Company
declared a dividend of one Right for each outstanding share of
the Companys Common Stock to stockholders of record at the
close of business on August 9, 2000. Each Right entitles
the registered holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating
Preferred Stock, $.01 par value per share, at a Purchase Price
of $65.00 in cash, subject to adjustment. The Rights will
initially trade together with the Eclipsys Common Stock and will
not be exercisable. If a person or group (other than an exempt
person) acquires 15% or more of the outstanding shares of
Eclipsys Common Stock, the Rights generally will become
exercisable and allow the holder (other than the 15% purchaser)
to purchase shares of Eclipsys Common Stock at a 50% discount to
the market price. The effect will be to discourage acquisitions
of 15% or more of Eclipsys Common Stock without negotiations
with the Board. The terms of the Rights are set forth in a
Rights Agreement dated as of July 26, 2000 (the
Rights Agreement) between the Company and Fleet
National Bank, as Rights Agent. The Board has designated 100,000
of the 5,000,000 authorized shares of preferred stock as
Series A Junior Participating Preferred Stock.

6.  Transition Merger

As discussed in Note 2, on December 31, 1998, the
Company completed a merger with Transition, a publicly traded
provider of integrated clinical and financial decision support
systems for hospitals, integrated health networks, physician
groups and other healthcare organizations. Transition
stockholders received 0.525 shares of common stock of Eclipsys
for each share of Transition common stock, or an aggregate of
11.1 million shares. The transaction was accounted for as a
pooling of interests, and accordingly, all prior periods have
been restated to give effect to this transaction. The Company
incurred transaction costs of approximately $5.0 million
directly related to the merger.

7.  Acquisitions

Effective January 24, 1997, Eclipsys completed the
acquisition of Alltel. As consideration for this transaction,
Eclipsys paid AIS $104.8 million cash, issued 15,500 (after
consideration of the return of 4,500 shares by AIS in
October 1997) shares of Series C valued at
approximately $10.3 million and 2,077,497 shares of
Series D valued at approximately $26.1 million. Concurrent
with the acquisition, the Company and Alltel entered into the
Management and Services Agreement (MSA) whereby
Alltel agreed to provide certain services to the Company and its
customers together with certain non-compete provisions. In
exchange, the Company agreed to pay Alltel $11.0 million in
varying installments through December 2000. The obligation
and equivalent corresponding asset were recorded at its net
present value of $9.5 million at the date of signing. To finance
the transaction, the Company sold 30,000 shares of Series B
and warrants to purchase up to 1,799,715 shares of Non-Voting
Common Stock to private investors for total proceeds of $30.0
million. Additionally, the Company sold 4,981,289 shares of
Series D and 896,431 shares of Series E for total
proceeds of $73.8 million.

The transaction was accounted for as a purchase and accordingly,
the purchase price was allocated based on the fair value of the
net assets acquired.

45



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




7.  Acquisitions  (Continued)


The purchase price is composed of and allocated as follows (in
thousands):

|                           |                                     |   |         |        | 
|-------------------------- | ----------------------------------- | - | ------- | ------ | 
|                          
|                          
|                          
|                          
|Cash, net of cash acquired |                                     | $ | 104,814 |       
|                          
|                          
|                          
|                          
|Issuance of Series D       |                                     |   | 26,072  |       
|                          
|                          
|                          
|                          
|Issuance of Series C       |                                     |   | 10,258  |       
|                          
|                          
|                          
|                          
|Transaction costs          |                                     |   | 2,008   |       
|                          
|                          
|                          
|                          
|Liabilities assumed        |                                     |   | 58,397  |       
|                           |                                     |   |         |       
|                           |                                     |   | 201,549 |       
|                           |                                     |   |         |       
|Current assets             |                                     |   | 31,803  |       
|                          
|                          
|                          
|                          
|Property and equipment     |                                     |   | 12,242  |       
|                          
|                          
|                          
|                          
|Other assets               |                                     |   | 3,148   |       
|                          
|                          
|                          
|                          
|                           | Identifiable intangible assets:     |   |         |        | 
|                          
|                          
|                          
|                          
|                           | In-process research and development |   |         | 92,201 | 
|                          
|                          
|                          
|                          
|                           | Acquired technology                 |   |         | 42,312 | 
|                          
|                          
|                          
|                          
|                           | Ongoing customer relationships      |   |         | 10,846 | 
|                           |                                     |   |         |       
|                           |                                     |   | 192,552 |       
|                           |                                     |   |         |       
|Goodwill                   |                                     | $ | 8,997   |       
|                           |                                     |   |         |       

The acquisition agreement contains certain provisions whereby
the purchase price could be adjusted within twelve months from
the acquisition date based on certain criteria defined in the
agreement. Based on these provisions, in October 1997, AIS
returned 4,500 shares of Series C to Eclipsys. In December
1997, the Company presented its final analysis to AIS of items
for which, under the agreement, the Company believed it was
entitled to consideration. In the first quarter of 1998, the
Company and AIS renegotiated, in two separate transactions,
certain matters relating to the acquisition of Alltel. In one
transaction, AIS returned to the Company, for cancellation,
11,000 shares of Series C in exchange for resolving certain
open issues in connection with the Alltel acquisition, and the
Company agreed, at AIS option, to redeem the remaining
4,500 shares of Series C held by AIS for an aggregate price
of $4.5 million at the time of the IPO and for a period of
30 days thereafter. These shares were redeemed with the
proceeds from the Companys IPO (Note 5). In the
second transaction, the Company paid AIS an aggregate of $14.0
million in exchange for terminating all of the rights and
obligations of both parties under the MSA. The Company recorded
a charge of approximately $7.2 million related to the write-off
of the MSA intangible asset. In addition, the Company recorded a
reduction to goodwill of approximately $7.8 million related to
the final settlement of certain issues related to the Alltel
acquisition resulting in the return of the 11,000 shares of
Series C. Additionally, the Company recorded a Network
Service intangible asset related to the Companys ability
to provide services in this area as a result of the settlement.
This asset is being amortized over three years. After accounting
for these adjustments, the Companys total consideration
paid for this acquisition was $201.5 million, including
liabilities assumed, net of cash acquired.

In connection with the recording of the acquisition of Alltel,
the Company reduced the predecessors reported deferred
revenue by $7.3 million to the amount that reflects the
estimated fair value of the contractual obligations assumed.
This adjustment results from the Companys requirement, in
accordance with generally accepted accounting principles; to
record the fair value of the obligation assumed with respect to
arrangements for which the predecessor company previously
collected the related revenue. The Companys liability at
acquisition includes its estimated costs in fulfilling those
contract obligations.

46



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




7.  Acquisitions  (Continued)


Effective June 26, 1997, the Company acquired all of the
common stock of SDK Computer Services Corporation
(SDK) in exchange for 499,997 shares of Common Stock
valued at approximately $3.2 million, $2.2 million in cash and
acquisition debt due to SDK shareholders totaling $7.6 million.
The transaction was accounted for as a purchase and,
accordingly, the purchase price was allocated based on the
estimated fair value of the net assets acquired.

The purchase price is composed of and allocated as follows (in
thousands):

|                           |                                     |   |        |       | 
|-------------------------- | ----------------------------------- | - | ------ | ----- | 
|                           |                                     |  
|                          
|                          
|                          
|                          
|Cash, net of cash acquired |                                     | $ | 2,161  |      
|                          
|                          
|                          
|                          
|Issuance of Common Stock   |                                     |   | 3,248  |      
|                          
|                          
|                          
|                          
|SDK acquisition debt       |                                     |   | 7,588  |      
|                          
|                          
|                          
|                          
|Liabilities assumed        |                                     |   | 3,514  |      
|                           |                                     |   |        |      
|                           |                                     |   | 16,511 |      
|                           |                                     |   |        |      
|Current assets             |                                     |   | 1,061  |      
|                          
|                          
|                          
|                          
|Property and equipment     |                                     |   | 671    |      
|                          
|                          
|                          
|                          
|Other assets               |                                     |   | 33     |      
|                          
|                          
|                          
|                          
|                           | Identifiable intangible assets:     |   |        |       | 
|                          
|                          
|                          
|                          
|                           | In-process research and development |   |        | 6,988 | 
|                          
|                          
|                          
|                          
|                           | Acquired technology                 |   |        | 3,205 | 
|                           |                                     |   |        |      
|                           |                                     |   | 11,958 |      
|                           |                                     |   |        |      
|                           | Goodwill                            |   | $      | 4,553 | 
|                           |                                     |   |        |      

The Company is using the acquired in-process research and
development to create new clinical, patient financial, access
management and data warehousing products, which will become part
of its product suite over the next several years. The Company
anticipates that certain products will be generally released
through 2001. It is managements expectation that the
acquired in-process research and development will be
successfully developed however there can be no assurance that
commercial viability of these products will be achieved. In the
event that these products are not generally released in a timely
manner, the Company may experience fluctuations in future
earnings as a result of such delays.

In connection with the Alltel and SDK acquisitions, the Company
wrote off in-process research and development of $92.2 million
and $7.0 million, respectively, related to the appraised values
of certain in-process research and development acquired in these
acquisitions.

On September 19, 1997, Transition acquired all outstanding
shares of Vital Software Inc. (Vital), a privately
held developer of products that automate the clinical processes
unique to medical oncology. The purchase price was approximately
$6.3 million, which was comprised of $2.7 million in cash and
132,302 shares of the Companys common stock with a value
of $3.6 million. The acquisition was accounted for under the
purchase method of accounting and accordingly the results of
operations of Vital are included from the date of the
acquisition.

Effective January 30, 1998, the Company acquired the net
assets of the Emtek Healthcare Division (Emtek) of
Motorola, Inc. (Motorola), for an aggregate purchase
price of approximately $11.7 million, including 1,000,000 shares
of Common Stock valued at $9.1 million and liabilities assumed
of approximately $12.3 million. In addition, Motorola agreed to
pay the Company $9.6 million in cash due within one year for
working capital purposes.

47



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




7.  Acquisitions  (Continued)


The purchase price is composed of and allocated as follows (in
thousands):

|                                                     |  |   |        |  
|---------------------------------------------------- |  | - | ------ | -
|                                                     |  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Issuance of Common Stock                             |  | $ | 9,060  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Receivable from Motorola                             |  |   | (9,600 | )
|                                                    
|                                                    
|                                                    
|                                                    
|Liabilities assumed                                  |  |   | 12,275 |  
|                                                     |  |   |        |  
|                                                     |  |   | 11,735 |  
|                                                     |  |   |        |  
|Current assets                                       |  |   | 5,033  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Property and equipment                               |  |   | 2,629  |  
|                                                     |  |   |        |  
|                                                     |  |   | 7,662  |  
|                                                     |  |   |        |  
|Identifiable intangible assets (acquired technology) |  | $ | 4,073  |  
|                                                     |  |   |        |  

On December 3, 1998, Transition acquired substantially all
of the outstanding stock of HealthVISION, a provider of
electronic medical record software. The purchase price was
approximately $41.1 million, which was comprised of
approximately $31.6 million in cash (of which $6.0 million was
paid in 1997) and the assumption of approximately $9.5 million
in liabilities, plus an earn-out of up to $10.8 million if
specified financial milestones were met. The earnout period
expired in 1999 with no amounts earned under the provisions of
the agreement. The acquisition was accounted for under the
purchase method of accounting and accordingly the results of
operations of HealthVISION are included from the date of the
acquisition. In connection with the transaction, based on an
independent appraisal, the Company recorded $40.6 million of
intangible assets which consisted of $2.4 million of acquired
in-process research and development, $27.3 million of acquired
technology and $10.9 million of goodwill. The amount allocated
to acquired in-process research and development ($2.4 million)
represented development projects in areas that had not reached
technological feasibility and which had no alternative future
use. Accordingly, the amount was charged to operations at the
date of the acquisition. The amount allocated to acquired
technology and goodwill are being amortized on a straight-line
basis over three years.

As discussed in Note 2, on February 17, 1999, the
Company completed a merger with PCS for total consideration of
approximately $35.0 million. The Company issued 1,104,000 of its
Common Stock for all of the common stock outstanding of PCS. No
adjustments were made to the net assets of PCS as a result of
the acquisition. The merger was accounted for as a pooling of
interests and accordingly, the accompanying consolidated
financial statements have been retroactively restated as if the
merger occurred as of the earliest period presented. PCS
provides enterprise resource planning software throughout the
healthcare industry.

Effective March 31, 1999, the Company acquired the common
stock of Intelus Corporation (Intelus) and Med Data
Systems, Inc. (Med Data), both wholly owned
subsidiaries of Sungard Data Systems, Inc. for total
consideration of $25.0 million in cash. The acquired entities
both provide document imaging technology and workflow solutions
to entities throughout the healthcare industry. The acquisition
was accounted for as a purchase and, accordingly, the purchase
price was allocated based on the fair value of the net assets
acquired.

48



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




7.  Acquisitions  (Continued)


The final purchase price is composed of and allocated as follows
after adjustments for the sale of Med Data (in thousands):

|                                                     |  |   |        | 
|---------------------------------------------------- |  | - | ------ | 
|                                                     |  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Cash                                                 |  | $ | 25,000 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Liabilities assumed                                  |  |   | 6,406  | 
|                                                     |  |   |        | 
|                                                     |  |   | 31,406 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Current assets                                       |  |   | 8,630  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Fixed assets                                         |  |   | 778    | 
|                                                     |  |   |        | 
|                                                     |  |   | 9,408  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Identifiable intangible assets (acquired technology) |  | $ | 21,998 | 
|                                                     |  |   |        | 

Unaudited pro forma results of operations as if the
aforementioned acquisitions had occurred on January 1, 1998
is as follows (in thousands except per share data):

|                                     |  |                          |         |      |  |   |         |  
|------------------------------------ |  | ------------------------ | ------- | ---- |  | - | ------- | -
|                                     |  |                         
|                                     |  | Years Ended December 31,
|                                     |  |                         
|                                     |  | 1998                     |         | 1999
|                                     |  |                          |         |     
|Revenues                             |  | $                        | 213,444 |      |  | $ | 252,818 |  
|                                    
|                                    
|                                    
|                                    
|Net loss                             |  |                          | (57,623 | )    |  |   | (9,884  | )
|                                    
|                                    
|                                    
|                                    
|Basic and diluted net loss per share |  | $                        | (2.88   | )    |  | $ | (0.28   | )

As discussed in Note 2, on June 17, 1999, the Company
completed a merger with MSI for total consideration of
approximately $53.6 million. The Company issued 2,375,000 of its
common stock for all of the common stock outstanding of MSI. No
adjustments were made to the net assets of MSI as a result of
the acquisition. The merger was accounted for as a pooling of
interests and accordingly, the accompanying consolidated
financial statements have been retroactively restated as if the
merger occurred as of the earliest period presented. MSI
provides web enabling and integration software. In connection
with the pooling of MSI, the Company recorded a stock
compensation charge of $1.0 million related to certain MSI
options that were required to be fully vested at the merger
date. Prior to the merger with Eclipsys, MSI was a Subchapter S
Corporation. During 1998 and 1999, MSI paid distributions to
stockholders of $585,000 and $375,000, respectively. In
connection with the Eclipsys merger, the Subchapter S election
was terminated.

Effective July 1, 1999, the Company sold Med Data for total
consideration of $5.0 million in cash. The Company reduced
acquired technology originally recorded in the purchase during
the quarter ended September 30, 1999 by $4.4 million, which
represents the difference between the sales price and the net
tangible assets sold.

During July 1999, the Company invested in HEALTHvision,
Inc., a Dallas based, privately held internet healthcare
company, in conjunction with VHA, Inc. and investment entities
affiliated with General Atlantic Partners, LLC. The Company
purchased 3,400,000 shares of common stock for $34,000, which
represented 34% of the outstanding common stock on an as if
converted basis of HEALTHvision, Inc. As of December 31,
2000 these shares represented 28% of the common stock of
HEALTHvision, Inc. on an if converted basis. The Company
accounts for the investment using the equity method of
accounting. This entity bears no relationship to the acquisition
of HEALTHvision by Transition in December 1998. In
connection with the formation of HEALTHvision, Inc., certain
employees of Eclipsys became employees of HEALTHvision, Inc. and
as a result the Company recorded a stock compensation charge of
$982,000 due to accelerated vesting of those employees stock
options.

On March 30, 2000, the Company entered into a definitive
merger agreement to be acquired by Neoforma.com, Inc.
(Neoforma) of Santa Clara, California. Neoforma is a
provider of business-to-business

49



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




7.  Acquisitions  (Continued)


e-commerce services in the medical products, supplies and
equipment industry. During the quarter ended June 30, 2000,
the Company and Neoforma agreed to terminate the Merger
Agreement between them without the payment of a termination fee.
Transaction costs incurred in connection with the proposed
merger were approximately $1.9 million.

8.  Long-Term Debt

In connection with the Alltel acquisition, the Company entered
into a $30.0 million credit facility (the Facility).
The Facility included a $10.0 million term loan (the Term
Loan) and a $20.0 million revolving credit facility (the
Revolver). Borrowings under the Facility are secured
by substantially all of the assets of the Company. The Term Loan
was payable in varying quarterly installments through
January 2000. As more fully discussed in Note 5, the Term
Loan was repaid in full with the proceeds of the sale of
Series G Convertible Preferred Stock in February 1998.
On May 29, 1998, the Company entered into an agreement to
increase the available borrowings under the Facility from $20.0
million to $50.0 million. In August 1998, the long-term
debt balance and accrued interest were repaid in full with
proceeds from the Companys IPO. During October 2000,
the Company amended the Facility. The amendment extended the
agreement through May 31, 2002, changed the maximum
borrowings to $30.0 million and revised certain other provisions
of the Facility. Under the amended Facility, available
borrowings are based on accounts receivable, as defined and
certain other criteria. As of December 31, 2000, the
Companys available borrowings under the facility were
approximately $17.4 million. There were no outstanding
borrowings under the Facility as of December 31, 2000.

Borrowings under the Facility bear interest, at the
Companys option, at (i) LIBOR plus 1% to 3% or
(ii) the higher of a) the banks prime lending
rate or b) the Federal Funds Rate plus 0.5%; plus 0% to
1.75%. The interest rates vary based on the Companys ratio
of earnings to consolidated debt, as defined. At
December 31, 1999 and 2000, the Companys borrowing
rate under the Facility was 5.92% and 8.65%, respectively. Under
the terms of the Facility, the Company is required to maintain
certain financial covenants related to consolidated debt to
earnings, consolidated earnings to interest expense and
consolidated

debt to capital. In addition, the Company has limitations on the
amounts of certain types of expenditures and is required to
obtain certain approvals related to mergers and acquisitions, as
defined. The Company was in compliance with all provisions of
the Facility as of December 31, 2000.

Under the terms of the Revolver, the Company pays an annual
commitment fee of .375% to .500% for any unused balance.
Additionally, the Company pays a fee of .125% for any Letters of
Credit issued under the agreement. As of December 31, 2000,
unused Letters of Credit totaling approximately $75,000 were
outstanding against the Revolver.

PCS issued convertible notes and warrants to purchase common
stock to certain investors. As of December 31, 1998, the
balance of convertible notes payable was $1.9 million. At the
time of the PCS merger, the convertible debt was converted into
102,515 shares of Common Stock of the Company.

50



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000


9.  Other Current Liabilities

Other current liabilities consist of the following (in
thousands):

|                                    |  |              |        |      |  |   |        | 
|----------------------------------- |  | ------------ | ------ | ---- |  | - | ------ | 
|                                    |  |             
|                                    |  | December 31,
|                                    |  |             
|                                    |  | 1999         |        | 2000
|                                    |  |              |        |     
|Accounts payable                    |  | $            | 6,864  |      |  | $ | 2,660  | 
|                                   
|                                   
|                                   
|                                   
|Accrued compensation and incentives |  |              | 16,982 |      |  |   | 11,952 | 
|                                   
|                                   
|                                   
|                                   
|Customer deposits                   |  |              | 4,154  |      |  |   | 990    | 
|                                   
|                                   
|                                   
|                                   
|Accrued royalties                   |  |              | 4,640  |      |  |   | 2,695  | 
|                                   
|                                   
|                                   
|                                   
|Other                               |  |              | 8,648  |      |  |   | 10,064 | 
|                                    |  |              |        |      |  |   |        | 
|                                    |  | $            | 41,288 |      |  | $ | 28,361 | 
|                                    |  |              |        |      |  |   |        | 

During the quarter ended June 30, 1999, the Company
initiated a restructuring of its operations. This restructuring
was completed during the quarter ended September 30, 1999
and resulted in a charge totaling $5.1 million. The charge
principally related to the closing of duplicate facilities and
the termination of certain employees. As of December 31,
1999 accrued restructuring costs of $2.3 million were included
in other current liabilities. As of December 31, 2000, the
liability related to the restructuring in 1999 totaled $764,000.
During 2000, the Company initiated and completed another
restructuring of its operations. This restructuring rationalized
employee headcount following the Companys completion of
the integration of its acquisitions. Additionally, we
consolidated our research and development and implementation
functions. Charges in connection with this restructuring in 2000
totaled $1.2 million. As of December 31, 2000 there were no
significant liabilities related to the restructuring in 2000.

10.  Income Taxes

A reconciliation of the effect of applying the federal statutory
rate and the effective income tax rate on the Companys
income tax provision is as follows (in thousands):

|                                                     |  |                         |         |      |  |      |        |   |  |   |         |  
|---------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------ | - |  | - | ------- | -
|                                                     |  |                        
|                                                     |  | Year Ended December 31,
|                                                     |  |                        
|                                                     |  | 1998                    |         | 1999 |  | 2000
|                                                     |  |                         |         |      |  |     
|Statutory federal income tax rate                    |  | $                       | (10,683 | )    |  | $    | (3,212 | ) |  | $ | (11,546 | )
|                                                    
|                                                    
|                                                    
|                                                    
|In-process research and development                  |  |                         | 813     |      |  |      |       |   |  |   |        |  
|                                                    
|                                                    
|                                                    
|                                                    
|State income taxes                                   |  |                         | (872    | )    |  |      | (374   | ) |  |   | (1,345  | )
|                                                    
|                                                    
|                                                    
|                                                    
|Non-deductible deal costs                            |  |                         | 1,546   |      |  |      | 650    |   |  |   |        |  
|                                                    
|                                                    
|                                                    
|                                                    
|Non-deductible amortization                          |  |                         | 927     |      |  |      | 2,610  |   |  |   | 2,640   |  
|                                                    
|                                                    
|                                                    
|                                                    
|Other                                                |  |                         | 237     |      |  |      | 326    |   |  |   | 301     |  
|                                                    
|                                                    
|                                                    
|                                                    
|Valuation allowance, includes effect of acquisitions |  |                         | 12,284  |      |  |      |       |   |  |   | 9,950   |  
|                                                     |  |                         |         |      |  |      |        |   |  |   |         |  
|Income tax provision                                 |  | $                       | 4,252   |      |  | $    |       |   |  | $ |        |  
|                                                     |  |                         |         |      |  |      |        |   |  |   |         |  

51



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




10.  Income Taxes  (Continued)


The significant components of the Companys net deferred
tax assets/(liabilities) were as follows (in thousands):

|                                             |  |                    |         |      |  |   |         |  
|-------------------------------------------- |  | ------------------ | ------- | ---- |  | - | ------- | -
|                                             |  |                   
|                                             |  | As of December 31,
|                                             |  |                   
|                                             |  | 1999               |         | 2000
|                                             |  |                    |         |     
|Deferred tax assets:                         |  |                    |         |      |  |   |         |  
|                                            
|                                            
|                                            
|                                            
|Intangible assets                            |  | $                  | 34,747  |      |  | $ | 38,071  |  
|                                            
|                                            
|                                            
|                                            
|Deferred revenue                             |  |                    | 434     |      |  |   | 328     |  
|                                            
|                                            
|                                            
|                                            
|Allowance for doubtful accounts              |  |                    | 2,760   |      |  |   | 6,579   |  
|                                            
|                                            
|                                            
|                                            
|Accrued expenses                             |  |                    | 3,644   |      |  |   | 1,534   |  
|                                            
|                                            
|                                            
|                                            
|Depreciation                                 |  |                    | 1,148   |      |  |   | 794     |  
|                                            
|                                            
|                                            
|                                            
|Other                                        |  |                    | 1,843   |      |  |   | 600     |  
|                                            
|                                            
|                                            
|                                            
|Net operating loss carryforwards             |  |                    | 36,984  |      |  |   | 46,895  |  
|                                             |  |                    |         |      |  |   |         |  
|                                             |  | $                  | 81,560  |      |  | $ | 94,801  |  
|                                             |  |                    |         |      |  |   |         |  
|Deferred tax liabilities:                    |  |                    |         |      |  |   |         |  
|                                            
|                                            
|                                            
|                                            
|Unbilled Receivables                         |  | $                  | (7,718  | )    |  | $ | (7,630  | )
|                                            
|                                            
|                                            
|                                            
|Capitalization of software development costs |  |                    | (3,016  | )    |  |   | (4,354  | )
|                                             |  |                    |         |      |  |   |         |  
|Net deferred tax asset                       |  |                    | 70,826  |      |  |   | 82,817  |  
|                                             |  |                    |         |      |  |   |         |  
|Valuation allowance                          |  |                    | (70,826 | )    |  |   | (82,817 | )
|                                             |  |                    |         |      |  |   |         |  
|                                             |  | $                  |        |      |  | $ |        |  
|                                             |  |                    |         |      |  |   |         |  

At December 31, 2000, the Company had net operating loss
carryforwards for federal income tax purposes of approximately
$118.0 million. The carryforwards expire in varying amounts
through 2020. Of this amount, $24.6 million related to stock
option tax deductions which will be tax-effected and reflected
as additional paid-in-capital when realized. Additionally, the
Company has Canadian net operating loss carryovers of
approximately $5.5 million that expire in varying amounts
through 2004.

Under the Tax Reform Act of 1986, the amounts of, and the
benefits from, net operating loss carryforwards may be impaired
or limited in certain circumstances. The Company experienced
ownership changes as defined under Section 382 of the
Internal Revenue Code in January, 1997 and December, 1998. As a
result of the ownership changes, net operating loss
carry-forwards of approximately $1.5 million at January, 1997
and $55.0 million at December 1998, which were incurred
prior to the date of change, are subject to annual limitations
on their future use. As of December 31, 2000, a valuation
allowance has been established against the deferred tax assets
that management does not believe are more likely than not to be
realized. The future reduction of the valuation allowance, up to
$7.2 million, will be reflected as a reduction of goodwill.

11.  Employee Benefit Plans

1996 Stock Option Plan

In April 1996, the Board of Directors of the Company (the
Board) adopted the 1996 Stock Plan (the 1996
Stock Plan). The 1996 Stock Plan, as amended, provides for
grants of stock options, awards of Company stock free of any
restrictions and opportunities to make direct purchases of
restricted stock of the Company. The 1996 Stock Plan allows for
the issuance of options or other awards to purchase up to
2,500,000 shares of Common Stock. Pursuant to the terms of the
1996 Stock Plan, a committee of the Board is

52



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




11.  Employee Benefit Plans 
(Continued)


authorized to grant awards to employees and non-employees and
establish vesting terms. The options expire ten years from the
date of grant.

1998 Stock Incentive Plan

In January 1998, the Board adopted the 1998 Stock Incentive
Plan (the Incentive Plan). The Incentive Plan
provides for the granting of stock options, stock appreciation
rights, restricted stock awards or unrestricted stock awards.
Under the provisions of the Incentive Plan, no options or other
awards may be granted after April 2008.

1999 Stock Incentive Plan

In February 1999, the Board adopted the 1999 Stock
Incentive Plan (the 1999 Plan). The 1999 Plan
provides for the granting of stock options, restricted stock, or
other stock-based awards. Under the provisions of the 1999 Plan,
no options or other awards may be granted after April 2009.

2000 Stock Incentive Plan

On May 22, 2000, the Board adopted the 2000 Stock Incentive
Plan (the 2000 Plan). The 2000 Plan provides for the
granting of stock options, restricted stock, or other
stock-based awards. Under the provisions of the 2000 Plan, no
options or other awards may be granted after May 2010. The
Board also adopted amendments to the plans, increasing the
number of shares of common stock reserved under all the
Companys plans, including the 2000 Plan, the 1999 Plan,
the Incentive Plan, the 1996 Plan and the 1998 Employee Stock
Purchase Plan, to 12,000,000.

|                                     |           |         |           |           |   |         |       |          |  |         |           |            |   |   |       |       |  |  |           |           |   |   |       |       | 
|------------------------------------ | --------- | ------- | --------- | --------- | - | ------- | ----- | -------- |  | ------- | --------- | ---------- | - | - | ----- | ----- |  |  | --------- | --------- | - | - | ----- | ----- | 
|                                     |           |         |           |           |   |        
|                                     |           | 1998    |           | 1999      |   | 2000   
|                                     |           |         |           |           |   |        
|                                     |           |         |           | Weighted  |   |         |       | Weighted |  |         |           | Weighted  
|                                     |           |         |           | Average   |   |         |       | Average  |  |         |           | Average   
|                                     |           |         |           | Exercise  |   |         |       | Exercise |  |         |           | Exercise  
|                                     |           | Options |           | Price     |   | Options |       | Price    |  | Options |           | Price     
|                                     |           |         |           |           |   |         |       |          |  |         |           |           
|Outstanding at beginning of the year |           |         | 3,835,565 |           |   | $       | 7.78  |          |  |         | 4,344,958 |            |   | $ | 10.69 |       |  |  | 5,494,673 |           |   | $ | 16.98 |      
|                                    
|                                    
|                                    
|                                    
|                                     | Granted   |         |           | 1,217,463 |   |         |       | 18.85    |  |         |           | 3,141,212  |   |   |       | 19.62 |  |  |           | 4,977,159 |   |   |       | 8.46  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Exercised |         |           | (465,008  | ) |         |       | 2.61     |  |         |           | (1,610,556 | ) |   |       | 3.75  |  |  |           | (510,253  | ) |   |       | 6.62  | 
|                                    
|                                    
|                                    
|                                    
|                                     | Forfeited |         |           | (243,062  | ) |         |       | 21.06    |  |         |           | (380,941   | ) |   |       | 22.53 |  |  |           | (812,701  | ) |   |       | 17.71 | 
|                                     |           |         |           |           |   |         |       |          |  |         |           |            |   |   |       |       |  |  |           |           |   |   |       |      
|Outstanding at end of year           |           |         | 4,344,958 |           |   | $       | 10.69 |          |  |         | 5,494,673 |            |   | $ | 16.98 |       |  |  | 9,148,878 |           |   | $ | 12.87 |      
|                                     |           |         |           |           |   |         |       |          |  |         |           |            |   |   |       |       |  |  |           |           |   |   |       |      
|Exercisable at end of the year       |           |         | 1,654,029 |           |   |         |       |          |  |         | 1,115,891 |            |   |   |       |       |  |  | 2,319,237 |           |   |   |       |      
|                                     |           |         |           |           |   |         |       |          |  |         |           |            |   |   |       |       |  |  |           |           |   |   |       |      

|                                   |  |          |       |          |  |          |       |          |  |          |       |          |  |   |       |  |  |   |      |  |  |   |      | 
|---------------------------------- |  | -------- | ----- | -------- |  | -------- | ----- | -------- |  | -------- | ----- | -------- |  | - | ----- |  |  | - | ---- |  |  | - | ---- | 
|                                   |  |          |       |          |  |         
|                                   |  | 1998     |       | 1999     |  | 2000    
|                                   |  |          |       |          |  |         
|                                   |  | Weighted |       | Weighted |  | Weighted |       | Weighted |  | Weighted |       | Weighted
|                                   |  | Average  |       | Fair     |  | Average  |       | Fair     |  | Average  |       | Fair    
|                                   |  | Exercise |       | Market   |  | Exercise |       | Market   |  | Exercise |       | Market  
|Option Granted During the Year     |  | Price    |       | Value    |  | Price    |       | Value    |  | Price    |       | Value   
|                                   |  |          |       |          |  |          |       |          |  |          |       |         
|Option price > Fair market value   |  | $        | 24.49 |          |  |          |       |          |  |          |      |          |  |   |       |  |  |   |     |  |  |   |      | 
|                                  
|                                  
|                                  
|                                  
|Option price = Fair market value   |  |          | 21.31 |          |  |          |       |          |  | $        | 19.62 |          |  |   |       |  |  | $ | 8.46 |  |  |   |      | 
|                                  
|                                  
|                                  
|                                  
|Option price < Fair market value   |  |          |      |          |  |          |       |          |  |          |      |          |  |   |       |  |  |   |     |  |  |   |      | 
|                                  
|                                  
|                                  
|                                  
|Weighted Fair Market Value Options |  |          |       |          |  | $        | 18.43 |          |  |          |       |          |  | $ | 18.51 |  |  |   |      |  |  | $ | 7.98 | 

The Company has adopted the disclosure only provision of
FAS 123. Had compensation cost for the Companys stock
option grants described above been determined based on the fair
value at the grant date for

53



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




11.  Employee Benefit Plans 
(Continued)


awards in 1998, 1999 and 2000 consistent with the provisions of
FAS 123, the Companys net loss and loss per share
would have been increased to the pro forma amounts indicated
below (in thousands, except share data):

|                            |             |                         |   |         |   |      |   |         |   |  |   |         |  
|--------------------------- | ----------- | ----------------------- | - | ------- | - | ---- | - | ------- | - |  | - | ------- | -
|                            |             |                        
|                            |             | Year Ended December 31,
|                            |             |                        
|                            |             | 1998                    |   | 1999    |   | 2000
|                            |             |                         |   |         |   |     
|Net loss:                   |             |                         |   |         |   |      |   |         |   |  |   |        
|                           
|                           
|                           
|                           
|                            | As reported |                         | $ | (35,276 | ) |      | $ | (9,445  | ) |  | $ | (33,959 | )
|                           
|                           
|                           
|                           
|                            | Pro forma   |                         | $ | (47,780 | ) |      | $ | (23,788 | ) |  | $ | (45,032 | )
|                           
|                           
|                           
|                           
|Basic net loss per share:   |             |                         |   |         |   |      |   |         |   |  |   |        
|                           
|                           
|                           
|                           
|                            | As reported |                         | $ | (1.95   | ) |      | $ | (0.27   | ) |  | $ | (0.92   | )
|                           
|                           
|                           
|                           
|                            | Pro forma   |                         | $ | (2.48   | ) |      | $ | (0.68   | ) |  | $ | (1.22   | )
|                           
|                           
|                           
|                           
|Diluted net loss per share: |             |                         |   |         |   |      |   |         |   |  |   |        
|                           
|                           
|                           
|                           
|                            | As reported |                         | $ | (1.95   | ) |      | $ | (0.27   | ) |  | $ | (0.92   | )
|                           
|                           
|                           
|                           
|                            | Pro forma   |                         | $ | (2.48   | ) |      | $ | (0.68   | ) |  | $ | (1.22   | )

The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants in 1998,
1999 and 2000: dividend yield of 0% for all years, risk-free
interest rate of 5.55% for 1998, 6.34% for 1999, and 5.75% for
2000, expected life of 8.35, 7.44 and 9.88 years based on
the plan and volatility of 103% for 1998, 133% for 1999, and
113% for 2000.

The following table summarizes information about stock options
outstanding at December 31, 2000:

|                        |               |                     |  |                     |           |          |  |             |      |          |  |   |       |  |  |  |         |  |  |   |       | 
|----------------------- | ------------- | ------------------- |  | ------------------- | --------- | -------- |  | ----------- | ---- | -------- |  | - | ----- |  |  |  | ------- |  |  | - | ----- | 
|                        |               |                     |  |                     |           |         
|                        |               | Options Outstanding |  |                    
|                        |               |                     |  | Options Exercisable
|                        |               |                     |  | Weighted            |           |          |  |            
|                        |               |                     |  | Average             |           | Weighted |  |             |      | Weighted
|                        |               | Number              |  | Remaining           |           | Average  |  | Number      |      | Average 
|                        |               | Outstanding         |  | Contractual         |           | Exercise |  | Exercisable |      | Exercise
|Range of Exercise Price |               | at 12/31/00         |  | Life                |           | Price    |  | at 12/31/00 |      | Price   
|                        |               |                     |  |                     |           |          |  |             |      |         
|                        | $ 0.01-$ 6.00 |                     |  |                     | 179,131   |          |  |             | 5.92 |          |  | $ | 0.48  |  |  |  | 162,768 |  |  | $ | 0.51  | 
|                        | $ 6.01-$12.00 |                     |  |                     | 5,599,344 |          |  |             | 8.97 |          |  |   | 7.90  |  |  |  | 712,165 |  |  |   | 7.40  | 
|                        | $12.01-$18.00 |                     |  |                     | 1,311,212 |          |  |             | 8.49 |          |  |   | 14.92 |  |  |  | 514,755 |  |  |   | 14.73 | 
|                        | $18.01-$24.00 |                     |  |                     | 1,678,604 |          |  |             | 8.36 |          |  |   | 22.14 |  |  |  | 707,776 |  |  |   | 22.57 | 
|                        | $24.01-$30.00 |                     |  |                     | 89,765    |          |  |             | 6.97 |          |  |   | 28.90 |  |  |  | 60,617  |  |  |   | 28.86 | 
|                        | $30.01-$36.00 |                     |  |                     | 39,374    |          |  |             | 6.58 |          |  |   | 35.83 |  |  |  | 23,622  |  |  |   | 35.83 | 
|                        | $36.01-$42.00 |                     |  |                     |          |          |  |             |     |          |  |   |      |  |  |  |        |  |  |   |      | 
|                        | $42.01-$48.00 |                     |  |                     | 151,448   |          |  |             | 7.14 |          |  |   | 44.51 |  |  |  | 84,201  |  |  |   | 44.48 | 
|                        | $48.01-$54.00 |                     |  |                     |          |          |  |             |     |          |  |   |      |  |  |  |        |  |  |   |      | 
|                        | $54.01-$60.00 |                     |  |                     | 100,000   |          |  |             | 7.27 |          |  |   | 60.00 |  |  |  | 53,333  |  |  |   | 60.00 | 

In connection with the Transition merger, options held by
employees of Transition were converted into options to purchase
1,792,854 shares of Common Stock based on the .525 conversion
ratio. All option disclosures reflect the impact of Transition
options after retroactive restatement for the impact of the
Transition merger. As of December 31, 1998, 1999 and 2000,
respectively, there were 1,792,854, 327,626 and 181,986 options
outstanding related to Transitions stock options plans.

In connection with the PCS and MSI mergers, options held by
employees were converted into outstanding options of the
Company. As of December 31, 1998, 1999 and 2000,
respectively, there were 56,551, 11,764 and 10,859 options
outstanding related to PCSs stock option plan. As of
December 31, 1998,

54



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000




11.  Employee Benefit Plans 
(Continued)


1999 and 2000, respectively, there were 117,090, 72,435 and
47,676 options outstanding related to MSIs stock option
plan. Additionally, in connection with the MSI merger, the
Company recorded unearned stock compensation of $1,523,000
related to options granted to MSI employees during 1998.

Employee Savings Plan

During 1997, the Company established a Savings Plan (the
Plan) pursuant to Section 401(k) of the
Internal Revenue Code (the Code), whereby employees
may contribute a percentage of their compensation, not to exceed
the maximum amount allowable under the Code. At the discretion
of the Board, the Company may elect to make matching
contributions, as defined in the Plan. For the years ended
December 31, 1998, 1999 and 2000, the Board authorized
matching contributions totaling $1,400,000, $0, and $801,000
respectively.

Transition maintained a savings plan pursuant to
Section 401(k) of the Code. In connection with this plan,
employer contributions totaling $376,000 were made in 1998. In
connection with the Transition merger, employees of Transition
became eligible to enroll in the Plan.

1998 Employee Stock Purchase Plan

Under the Companys 1998 Employee Stock Purchase Plan (the
Purchase Plan) (implemented in April 1998),
employees of the Company, including directors of the Company who
are employees are eligible to participate in quarterly plan
offerings in which payroll deductions may be used to purchase
shares of Common Stock. The purchase price of such shares is the
lower of 85% of the fair market value of the Common Stock on the
day the offering commences and 85% of the fair market value of
the Common Stock on the day the offering terminates.

12.  Commitments and Contingencies

Noncancelable Operating Leases

The Company leases its office space and certain equipment under
noncancelable operating leases. Rental expense under operating
leases was approximately $8.7 million, $11.6 million and $10.6
million for the years ended December 31, 1998, 1999 and
2000 respectively. Future minimum rental payments for
noncancelable operating leases as of December 31, 2000 are
as follows (in thousands):

|                         |  |   |        | 
|------------------------ |  | - | ------ | 
|Year Ending December 31, |  |  
|                         |  |  
|2001                     |  | $ | 7,101  | 
|                        
|                        
|                        
|                        
|2002                     |  |   | 6,980  | 
|                        
|                        
|                        
|                        
|2003                     |  |   | 6,292  | 
|                        
|                        
|                        
|                        
|2004                     |  |   | 3,867  | 
|                        
|                        
|                        
|                        
|2005                     |  |   | 2,274  | 
|                        
|                        
|                        
|                        
|Thereafter               |  |   | 4,928  | 
|                         |  |   |        | 
|                         |  | $ | 31,442 | 
|                         |  |   |        | 

Litigation

The Company is involved in litigation incidental to its business
from time to time. In the opinion of management, after
consultation with legal counsel, the ultimate outcome of such
litigation will not have a material adverse effect on the
Companys financial position or results of operations or
cash flows.

55



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000


13.  Related Party Transactions

The Company leases office space from a former stockholder of
SDK. During the years ended December 31, 1998, 1999 and
2000, the Company paid $330,000, $330,000 and $849,000,
respectively, under this lease. The lease, which was amended to
increase the space at the end of 1999, is noncancelable and
expires in 2009.

In 1998, 1999 and 2000, the Company paid $446,000, $530,000 and
$412,000, respectively, to a charter company for the use of an
aircraft for corporate purposes. The aircraft provided for the
Companys use was leased by the charter company from a
company owned by the Chairman of the Board and Chief Executive
Officer of the Company (the Chairman). The
Chairmans company received $310,000, $339,000 and
$298,000, during 1998, 1999 and 2000, respectively, for these
transactions. The Chairman has no interest in the charter
company.

As discussed in Note 7, during July 1999, the Company
invested in HEALTHvision, Inc., a Dallas based, privately held
internet healthcare company, in conjunction with VHA, Inc. and
investment entities affiliated with General Atlantic Partners,
LLC. The Company purchased 3,400,000 shares of common stock for
$34,000, which represented 28% of the outstanding common stock
on an if converted basis of HEALTHvision, Inc. as of
December 31, 2000. We account for our investment in
HEALTHvision using the equity method of accounting. During 2000,
the Company earned systems and services revenues of $5,411,000
and had accounts receivable due from HEALTHvision, Inc. of
$1,240,000 at December 31, 2000. We paid HEALTHvision, Inc.
$304,000 during 2000 related to a joint marketing arrangement
under which both organizations agreed to jointly market products
and services to their customers. For the year ended
December 31, 2000, HEALTHvision, Inc. had total revenues of
approximately $12.7 million (unaudited) and a net loss of
approximately $24.6 million (unaudited). Additionally,
HEALTHvision had total assets of approximately $25.2 million
(unaudited) as of December 31, 2000.

14.  Investment Write-Down

In April 1998, the Company made a strategic investment in
Simione Central Holdings, Inc. (Simione), a publicly
traded company, purchasing 420,000 shares of restricted common
stock from certain stockholders of Simione for $5.6 million. At
the time of the transaction, the common stock represented 4.9%
of Simiones outstanding common stock. The Company
accounted for its investment in these shares using the cost
method.

Concurrent with the investment, the Company and Simione entered
into a remarketing agreement pursuant to which the Company has
certain rights to distribute Simione software products.

At December 31, 1998, the Company determined that an other
than temporary impairment of its investment occurred.
Accordingly, the investment was written down to its estimated
fair value of approximately $800,000 and the Company recorded a
charge of $4.8 million in the accompanying statement of
operations. During the first quarter of 2000, the Company
recorded a charge of approximately $800,000 to write down the
remaining balance of its investment. In late 2000, the Company
sold its investment for approximately $226,000. The subsequent
recovery was recorded to partially offset the previously
recorded write downs.

During the quarter ended March 31, 2000, the Company
recorded a gain on its investment in Shared Medical Systems
Corp. (SMS) of approximately $4.5 million. The
investment was made in connection with a proposed merger with
SMS that was not consummated. In connection with the proposed
merger, the Company recorded transaction costs of approximately
$50,000.

56



---



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 2000


15.  Subsequent Event (unaudited)

Subsequent to December 31, 2000, the Company completed a
follow-on public offering for 5,750,000 shares of its common
stock. Net proceeds from the offering were approximately $123.3
million.

57



---



ECLIPSYS CORPORATION

SCHEDULE II-VALUATION OF QUALIFYING ACCOUNTS


For Each of the Three Years in the Period Ended
December 31, 2000





|                                                 |  |              |       |           |  |          |        |            |  |            |     |  |  |   |         |   |  |   |       | 
|------------------------------------------------ |  | ------------ | ----- | --------- |  | -------- | ------ | ---------- |  | ---------- | --- |  |  | - | ------- | - |  | - | ----- | 
|                                                 |  | Balance at   |       |           |  |          |        |            |  | Balance at
|                                                 |  | Beginning of |       |           |  | Acquired |        |            |  | End of    
|                                                 |  | Period       |       | Additions |  | Reserves |        | Write-offs |  | Period    
|                                                
|                                                
|December 31, 1998Allowance for Doubtful Accounts |  | $            | 2,303 |           |  | $        | 1,460  |            |  | $          | 763 |  |  | $ | (802    | ) |  | $ | 3,724 | 
|                                                
|                                                
|                                                
|                                                
|                                                
|December 31, 1999Allowance for Doubtful Accounts |  |              | 3,724 |           |  |          | 2,304  |            |  |            | 81  |  |  |   | (2,417  | ) |  |   | 3,692 | 
|                                                
|                                                
|                                                
|                                                
|                                                
|December 31, 2000Allowance for Doubtful Accounts |  |              | 3,692 |           |  |          | 13,255 |            |  |            |    |  |  |   | (11,291 | ) |  |   | 5,656 | 
|                                                

58



---



Quarterly Results (Unaudited)

The following table presents quarterly statement of operations
data for each of the eight quarters in the period ended
December 31, 2000. The statement of operations data for the
quarters are unaudited, and in the opinion of management,
include all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the financial data for
such periods. Additionally, the statement of operations data is
derived from, and are qualified by reference to, Eclipsys
audited financial statements, which appear elsewhere in this
document and are retroactively restated to give effect to the
pooling of Transition, MSI and PowerCenter.

ECLIPSYS CORPORATION

For the Year Ended December 31, 1999


(in thousands, except per share data)


|                                              |  |         |        |         |  |         |        |         |  |      |        |   |  |   |        |  |  |   |         |  
|--------------------------------------------- |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | ---- | ------ | - |  | - | ------ |  |  | - | ------- | -
|                                              |  | First   |        | Second  |  | Third   |        | Fourth  |  |     
|                                              |  | Quarter |        | Quarter |  | Quarter |        | Quarter |  | Year
|                                              |  |         |        |         |  |         |        |         |  |     
|Revenues                                      |  | $       | 57,378 |         |  | $       | 61,826 |         |  | $    | 64,830 |   |  | $ | 65,293 |  |  | $ | 249,327 |  
|                                             
|                                             
|                                             
|                                             
|Gross profit margin                           |  |         | 23,881 |         |  |         | 25,519 |         |  |      | 26,684 |   |  |   | 27,325 |  |  |   | 103,409 |  
|                                             
|                                             
|                                             
|                                             
|Net income (loss)                             |  |         | (792   | )       |  |         | (9,060 | )       |  |      | (1,799 | ) |  |   | 2,206  |  |  |   | (9,445  | )
|                                             
|                                             
|                                             
|                                             
|Basic and diluted net income (loss) per share |  | $       | (0.02  | )       |  | $       | (0.26  | )       |  | $    | (0.05  | ) |  | $ | 0.06   |  |  | $ | (0.27   | )

ECLIPSYS CORPORATION

For the Year Ended December 31, 2000


(in thousands, except per share data)


|                                              |  |         |        |         |  |         |         |         |  |      |         |   |  |   |        |   |  |   |         |  
|--------------------------------------------- |  | ------- | ------ | ------- |  | ------- | ------- | ------- |  | ---- | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                              |  | First   |        | Second  |  | Third   |         | Fourth  |  |     
|                                              |  | Quarter |        | Quarter |  | Quarter |         | Quarter |  | Year
|                                              |  |         |        |         |  |         |         |         |  |     
|Revenues                                      |  | $       | 64,690 |         |  | $       | 47,129  |         |  | $    | 50,613  |   |  | $ | 54,105 |   |  | $ | 216,538 |  
|                                             
|                                             
|                                             
|                                             
|Gross profit margin                           |  |         | 29,137 |         |  |         | 9,786   |         |  |      | 7,739   |   |  |   | 20,617 |   |  |   | 67,279  |  
|                                             
|                                             
|                                             
|                                             
|Net income (loss)                             |  |         | 4,989  |         |  |         | (15,231 | )       |  |      | (18,288 | ) |  |   | (5,430 | ) |  |   | (33,959 | )
|                                             
|                                             
|                                             
|                                             
|Basic and diluted net income (loss) per share |  | $       | 0.13   |         |  | $       | (0.42   | )       |  | $    | (0.50   | ) |  | $ | (0.15  | ) |  | $ | (0.92   | )



|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure

Not applicable.

59



---



Part III

Certain information required by Part III of Form 10-K will
be contained in the Companys definitive Proxy Statement to
be used in connection with the annual meeting of stockholders
for the year 2001, and is incorporated herein by reference to
this Form 10-K Annual Report:

Item 10.  Directors and Executive Officers
of the Registrant

Information regarding directors will be set forth in the proxy
statement for the annual meeting of stockholders for the year
2001 and is incorporated herein by reference. Information
regarding our executive officers is set forth under the caption
Executive Officers of the Registrant appearing at
the end of Part I, above.

Item 11.  Executive Compensation

Information regarding executive compensation will be set forth
in the proxy statement for the annual meeting of stockholders
for the year 2001 and is incorporated herein by reference.

Item 12.  Security Ownership of Certain
Beneficial Owners and Management

Information regarding security ownership of certain beneficial
owners and management will be set forth in the proxy statement
for the annual meeting of stockholders for the year 2001 and is
incorporated herein by reference.

Item 13.  Certain Relationships and Related
Transactions

Information regarding certain relationships and related
transactions will be set forth in the proxy statement for the
annual meeting of stockholders for the year 2001 and is
incorporated herein by reference.

60



---



Part IV



|         |                                                                  
|-------- | -----------------------------------------------------------------
|Item 14. | Exhibits, Financial Statement Schedules, and Reports on
	Form 8-K

(a) The following documents are filed as part of this
report:



| |    |                                                                                   
| | -- | ----------------------------------------------------------------------------------
| | 1. | Consolidated Financial Statements included in Item 8 of
	this report on Form  10-K
|
| | 2. | Financial Statement Schedules included in Item 8 of this
	report on Form  10-K    
|
| | 3. | The following exhibits are included in this report:                               

| |             |  |  |                                                                                                                                                                                                                                                             
| | ----------- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.1*        |  |  | Agreement and Plan of Merger dated as of October 29, 1998
	by and among the Registrant, Exercise Acquisition Corp. and
	Transition Systems, Inc.                                                                                                            
| | 2.2**       |  |  | Agreement of Merger among Alltel Healthcare Information
	Services, Inc., Alltel Information Services, Inc., Eclipsys
	Corporation and Eclipsys Solutions Corp. dated as of January 24,
	1997                                                                
| | 2.3**       |  |  | Amended and Restated Stock Purchase Agreement among Eclipsys
	Corporation, SDK Medical Computer Services Corporation and the
	Selling Stockholders listed therein dated June 26, 1997                                                                       
| | 2.4**       |  |  | Asset Purchase Agreement by and among Motorola, Inc. Eclipsys
	Corporation and Emtek Healthcare Corporation dated
	January 30, 1998                                                                                                                         
| | 2.5****     |  |  | Agreement and Plan of Merger dated as of February 5, 1999,
	by and among Eclipsys PCS and Sub                                                                                                                                                               
| | 2.6****     |  |  | Escrow Agreement dated as of February 17, 1999, by and
	among Eclipsys, Sub, PCS and the PCS Stockholders and Noteholders                                                                                                                                   
| | 2.7*****    |  |  | Stock Purchase and Sale Agreement dated as of March 6, 1999
	by and among Sungard Data Systems Inc., Sungard Investment
	Ventures, Inc., Med Data Systems, Inc., Intelus Corporation, and
	Eclipsys Corporation and Eclipsys Solutions Corp                 
| | 2.8******   |  |  | Agreement and Plan of Merger dated as of June 17, 1999, by
	and among Eclipsys Corporation, Eclipsys Merger Corp., MSI
	Solutions, Inc., MSI Integrated Services, Inc., Anna L.
	Bean, Michael R. Cote, Robert J. Feldman and the 1997
	Feldman Family Trust
| | 2.9*******  |  |  | Asset Purchase Agreement by and among Quadramed Corporation,
	Eclipsys Corporation and Med Data Systems, Inc. dated July 
	1, 1999                                                                                                                          
| | 3.1***      |  |  | Third Amended and Restated Certificate of Incorporation of the
	Registrant                                                                                                                                                                                  
| | 3.2**       |  |  | Third Amended and Restated Bylaws of the Registrant                                                                                                                                                                                                         
| | 3.3******** |  |  | Certificate of Designation of Series A Junior Participating
	Preferred                                                                                                                                                                                      
| | 4.1**       |  |  | Specimen certificate for shares of Common Stock                                                                                                                                                                                                             
| | 10.1**      |  |  | Second Amended and Restated Registration Rights Agreement                                                                                                                                                                                                   
| | 10.2**      |  |  | Second Amended and Restated Stockholders Agreement                                                                                                                                                                                                          
| | 10.5**     |  |  | Information Systems Technology License Agreement, dated as of
	May 3, 1996, by and among Partners Healthcare System, Inc.
	and Integrated Healthcare Solutions, Inc.                                                                                        
| | 10.6**      |  |  | Preferred Stock Purchase Agreement by and among Eclipsys
	Corporation, General Atlantic Partners 47, L.P. and GAP
	Coinvestment Partners, L.P. dated February 4, 1998                                                                                       
| | 10.7**      |  |  | 1996 Stock Plan                                                                                                                                                                                                                                             
| | 10.8**      |  |  | 1998 Stock Incentive Plan, as amended                                                                                                                                                                                                                       
| | 10.9*****   |  |  | Amended and Restated 1998 Employee Stock Purchase Plan, as
	amended                                                                                                                                                                                         

61



---



| |                |  |  |                                                                                                                                                                                                                                                 
| | -------------- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.11**        |  |  | First Amended and Restated Credit Agreement dated May 29,
	1998, by and among Eclipsys Corporation, First Union National
	Bank, f/k/a First Union National Bank of North Carolina as Agent
	and BankBoston, N.A. as Co-agent                    
| | 10.12**        |  |  | Letter agreement amending First Amended and Restated Credit
	Agreement dated May 29, 1998, by and among Eclipsys
	Corporation, First Union National Bank f/k/a First Union
	National Bank of North Carolina as Agent and BankBoston as
	Co-agent
| | 10.13**        |  |  | Settlement of Claims Agreement, dated as of March 13, 1998,
	between ALLTEL Information Services, Inc. and Eclipsys
	Corporation                                                                                                                
| | 10.14*****     |  |  | 1999 Stock Incentive Plan                                                                                                                                                                                                                       
| | 10.15********* |  |  | 2000 Stock Incentive Plan                                                                                                                                                                                                                       
| | 21             |  |  | Subsidiaries of the Registrant                                                                                                                                                                                                                  
| | 23.1           |  |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                           






|          |                                                                                                                                                          
|--------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|         | confidential treatment granted on August 6, 1998 in
	connection with the Registrants IPO                                                                 
|         
|*         | Incorporated by reference to the Joint Proxy Statement/
	Prospectus included in the Registrants Registration
	Statement on Form S-4 (File No. 333-68353)
|         
|**        | Incorporated by reference to the Registrants Registration
	Statement on Form  S-1, as amended (File No. 333-50781)                                      
|         
|***       | Incorporated by reference to the Registrants Quarterly
	Report on Form 10-Q for the quarter ended June 30,
	1998 (File No.  000-24539)                  
|         
|****      | Incorporated by reference to the Registrants Current
	Report on Form 8-K dated March 3, 1999 (File
	No. 000-24539)                                      
|         
|*****     | Incorporated by reference to the Registrants Quarterly
	Report on Form 10-Q for the quarter ended March 31,
	1999 (File No.  000-24539)                 
|         
|******    | Incorporated by reference to the Registrants Quarterly
	Report on Form 10-Q for the quarter ended June 30,
	1999 (File No.  000-24539)                  
|         
|*******   | Incorporated by reference to the Registrants Quarterly
	Report on Form 10-Q for the quarter ended
	September 30, 1999 (File No. 000-24539)              
|         
|********  | Incorporated by reference to the Registrants Current
	Report on Form 8-K dated August 8, 2000 (File
	No. 000-24539)                                     
|         
|********* | Incorporated by reference to the Registrants Quarterly
	Report on Form 10-Q for the quarter ended June 30,
	2000 (File No.  000-24539)                  

(b)  Reports on Form 8-K.

None.

62



---



Signatures

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                                       |  |                                                                                                            |  |               
|-------------------------------------- |  | ---------------------------------------------------------------------------------------------------------- |  | --------------
|Signature                              |  | Title                                                                                                      |  | Date          
|                                       |  |                                                                                                            |  |               
|/s/ HARVEY J. WILSONHarvey J. Wilson   |  | Chief Executive Officer, (Principal Executive Officer), Director                                           |  | March 14, 2001
|/s/ GREGORY L. WILSONGregory L. Wilson |  | Senior Vice President, Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer) |  | March 14, 2001
|/s/ STEVEN A. DENNINGSteven A. Denning |  | Director                                                                                                   |  | March 14, 2001
|/s/ G. FRED DIBONAG. Fred Dibona       |  | Director                                                                                                   |  | March 14, 2001
|/s/ EUGENE V. FIFEEugene V. Fife       |  | Director                                                                                                   |  | March 14, 2001
|/s/ BRADEN KELLYBraden Kelly           |  | Director                                                                                                   |  | March 14, 2001
|/s/ JAY B. PIEPERJay B. Pieper         |  | Director                                                                                                   |  | March 14, 2001

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