##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION







FORM 10-K




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

For the fiscal year ended December 31, 1999 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)


|                                 |  |                                                  
|-------------------------------- |  | -------------------------------------------------
|                                
|                                
|                                
|                                
|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 [X] 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 14,
2000 based upon the closing price of the Common Stock on the
Nasdaq National Market for such date, was $773,100,765.

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 14, 2000   
|                             |  |                  
|Common Stock, $.01 par value |  |                   | 36,530,325 | 

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 2000 will be incorporated by reference into
Part III of this Form 10-K.



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TABLE OF CONTENTS



|                                                                                              |  |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|Item 1. Business                                                                             
|Item 2. Properties                                                                           
|Item 3. Legal Proceedings                                                                    
|Item 6. Selected Financial Data                                                              
|Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Three Years Ended December 31, 1999       
|Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|Item 10. Directors and Executive Officers of the Registrant                                  
|Item 11. Executive Compensation                                                              
|Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|Item 13. Certain Relationships and Related Transactions                                      
|Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|Signatures                                                                                   



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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

Eclipsys Corporation (the Company or
Eclipsys) is a healthcare information technology
company delivering solutions that enable healthcare delivery
organizations to achieve improved clinical, financial and
satisfaction outcomes. Eclipsys is positioned as an end-to-end
solutions provider offering integrated suites in seven critical
areas  clinical management, access management, patient
 financial management, health information management, strategic
decision support, resource planning management and enterprise
application integration. These solutions combine software
applications, technology and services that focus on solving the
business problems that healthcare organizations (HCO) face.
These solutions can be purchased in any combination to address
the particular needs of an HCO. Eclipsys solutions have
been designed specifically to deliver a measurable impact on
outcomes, enabling Eclipsys customers to quantify clinical
benefits and return on investment in a precise and timely manner.
 Eclipsys solutions can be integrated with a
customers existing information systems, which Eclipsys
believes reduces overall cost of ownership and increases the
attractiveness of its products. In fact, Eclipsys believes that a
 key differentiator in the marketplace is the ability for
Eclipsys enterprise application integration (EAI) solutions
to solve the integration problems faced by any HCO. Eclipsys also
 provides outsourcing, remote hosting and networking services to
assist customers in meeting their healthcare information
technology requirements. Eclipsys markets its products primarily
to large hospitals, academic medical centers and integrated
health networks. Eclipsys has one or more of its products
installed or being installed in over 1,400 facilities in the U.S.
 and 17 other countries. To provide direct and sustained customer
 contact, Eclipsys maintains decentralized sales, implementation
and customer support teams in each of its seven North American
regions.

The Company was formed in December 1995 and has grown
primarily through a series of strategic acquisitions as follows:

|                                                                                                                                    |  |      |          |            |  |  |          | 
|----------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | ---------- |  |  | -------- | 
|                                                                                                                                    |  |      |          | 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  | 

2



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The consolidated financial statements of the Company 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, the Companys consolidated
financial statements have been retroactively restated as if the
transactions had occurred as of the beginning of the earliest
period presented.

In May 1996, the Company entered into a license with
Partners HealthCare System, Inc. (Partners) for the
development, commercialization, distribution and support of
certain intellectual property relating to the BICS clinical
information systems software developed at the Brigham and
Womens Hospital, Inc. (BWH). In connection with this
license, the Company issued to Partners 988,290 shares of Common
Stock.

In July 1999, Eclipsys, in partnership with the Voluntary
Hospitals of America (VHA) and General Atlantic Partners
(GAP), formed HEALTHvision, Inc. (HV) an internet
company focused on enabling secure interactive patient care.
Eclipsys, VHA and HV all market HVs products which are
designed to integrate seamlessly with the Companys Sunrise
product line. The entity is a start up enterprise that bears no
relationship to the acquisition of HealthVISION by Transition in
December 1998.

COMPETITIVE STRENGTHS

Eclipsys believes that its solutions, focus on physicians
needs, leading technology, strategic relationships, management
team and well-positioned customer base are competitive strengths
that will enable it to capitalize on continued opportunities for
growth.



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Comprehensive Solutions Offering.Through acquisitions and
	 internal development, Eclipsys has assembled a comprehensive
	suite of applications, technology and services that perform core
	functions in the seven areas Eclipsys believes are most critical
	to its customers   clinical management, access
	management, patient financial management, health information
	management, strategic decision support, enterprise resource
	planning and integration. Eclipsys integrates individual
	products to provide a comprehensive healthcare information
	technology solution. Eclipsys product strategy has been to
	acquire or develop industry-leading products in each core
	category, functionally integrate them to provide increased value,
	 and add technology and consulting services to provide a
	comprehensive healthcare information technology solution. To
	facilitate rapid adoption of Eclipsys solutions by its customers,
	 solutions are web-enabled and are offered in both in-house and
	Application Services Provider (ASP) modes. The close
	integration of HEALTHvision and Eclipsys further extends
	the Eclipsys solution offering to encompass e-Health.
| 
| | Physician-Oriented Products.Eclipsys clinical
	products are designed to reflect and support the way physicians
	work and include features such as alerts, reminders, just-in-time
	 clinical decision support, sub-second response times, an
	intuitive graphical user interface, continuous event monitoring
	and a customizable rules and protocol engine. This focus on the
	physician as the pivotal agent of change is central to
	Eclipsys product strategy. Eclipsys believes that
	physicians are key decision-makers in the trend toward the use of
	 healthcare information technology solutions to improve work
	processes and outcomes across the continuum of healthcare
	delivery.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| 
| | Leading Technology.Eclipsys has been migrating its
	products to a structured object layered architecture
	(SOLA). SOLA is a browser-enabled, multi-tiered,
	database-neutral architecture that supports multiple platforms
	and can be used across a broad range of computing environments
	from the Internet to client-server systems to legacy mainframes.
	SOLA is designed to facilitate the integration of Eclipsys
	products with its customers existing systems, as well as
	with future products developed or acquired by Eclipsys. The
	flexibility of SOLA supports delivery of Eclipsys solutions in an
	 ASP mode.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| 
| | Strategic Relationships.One of Eclipsys important
	strategic relationships is with Partners, including two of its
	hospital subsidiaries, BWH and Massachusetts General Hospital
	(MGH). This relationship provides intensive physician-driven
	research and development for new and existing products, testing
	and development support. In addition, BWH and MGH, academic
	medical centers affiliated with Harvard Medical School, provide
	potential forums for training future users and customers.
	Eclipsys also has relationships with other academic medical
	centers, which also provide testing and development support.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Proven Management Team with Successful Track Record.
	Eclipsys senior management team averages over 20 years
	 in the healthcare and information technology industries and
	includes four former chief executive officers. Harvey J.
	Wilson, Chairman of the Board and Chief Executive Officer of
	Eclipsys, was a co-founder of Shared Medical Systems Corporation
	(SMS). Eclipsys believes that the range and depth of
	its senior management team position it to address the evolving
	requirements of its customers and to manage the growth required
	to meet its strategic goals.      
| 
| | Well-positioned Customer Base.Eclipsys customers
	include large hospitals, integrated health networks and academic
	medical centers. Eclipsys believes that these entities are
	generally the first to adopt new technology and are the drivers
	of industry consolidation. Management believes that
	Eclipsys commitment to quality, innovation, rapid product
	implementation and ongoing customer support has enabled it to
	build and maintain strong and stable customer relationships and
	positions it to capitalize on the opportunities for growth within
	 its existing customer base.

INDUSTRY

The healthcare industry continues to undergo radical and rapid
change. Through the 1990s, the increasing cost of providing
healthcare led the government sector, followed by the private
sector, to develop new payment mechanisms that encouraged
healthcare providers to contain costs. This has caused the
provider-reimbursement environment to move away from the
indemnity model, characterized by fee-for-service arrangements
and traditional indemnity insurance, toward the managed-care
model, in which providers are aligned within networks and
healthcare delivery must follow plan-established rules to qualify
 for reimbursement. As a result, the emphasis of healthcare
providers has shifted from providing care regardless of cost to
providing high-quality care in the most cost-effective manner
possible. Many providers are realizing that the traditional
method of cost containment  cutting
expenses  is not by itself enough to maintain their
competitiveness in the face of these pressures. Management
believes that providers must also improve the processes by which
healthcare is provided, including improving the quality of care,
the efficiency with which it is delivered and patient and
provider satisfaction. In particular, healthcare providers are
focusing on avoiding costly adverse clinical events.

Recent events in the healthcare industry have brought the need
for good quality yet cost effective care more sharply into focus.
 The Balanced Budget Act (BBA), passed by Congress in 1997,
reduced the level of Medicare funding to hospitals. Hardest hit
by this legislation are the academic medical centers. In late
1999, the Institute of Medicine(IOM) released a report on patient
 safety  To Err is Human: Building a Safer
Health System  which documented the high
incidence of avoidable medical errors that result in
disabilities and death. The report cites the issues of
illegibility of medical orders as well as the unreasonable
reliance on memory as key contributors to medical mistakes. The
regulations mandated by the Healthcare Information Portability
and Accountability Act (HIPAA) will likely be finalized in
2000. The combination of reduced reimbursement as a result of
BBA, demands  even requirements  for
improved patient safety instigated by the IOM report, and
requirements for improved access and security to patient
information will place significant pressures on healthcare
organizations. Eclipsys believes that the most effective means to
 cope with the pressures of this triple threat is through
information.

Traditional healthcare information systems are limited in their
ability to support restructuring of healthcare delivery processes
 or the evolving requirements of integrated health
networks  actions that are demanded by the current
pressures in healthcare. Such systems have generally been
financially oriented, focusing primarily on the ability to
capture charges and generate bills. Many information-technology
vendors have attempted to apply their existing financially
oriented systems to meet the demand for clinical solutions.
However, because these systems were not originally developed to
address clinical requirements, they often lack the basic
structure and functionality to support better overall management
of costs, care quality, outcome measurement and patient
satisfaction across the healthcare delivery continuum. Moreover,
because these vendors historically developed and marketed such
systems primarily to financial managers, physicians, who

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The growth of the managed care environment, the rise of
integrated health networks and the pervasive acceptance of the
Internet has created an opportunity for new healthcare
information technology products and services. Healthcare
providers are increasingly demanding integrated solutions that
offer all of the core functions required to manage the entire
healthcare delivery process. These core functions include
clinical management, access management, patient financial
management, health information management (HIM) and
enterprise resource planning (ERP) solutions. In addition,
large and widely spread health networks require decision support
tools that permit them to effectively analyze past performance,
model new plans for the future and measure and monitor the
effectiveness of those plans  to measure clinical
results and return on investment and to support process
improvement. These solutions must also allow providers to
preserve their investment in existing legacy applications and
technologies, which often are significant and vary from facility
to facility. Sophisticated, web-based integration tools are
required to achieve the level of information integration needed
together with ease of access. Finally, active physician use of
healthcare information technology is necessary for these
solutions to improve clinical outcomes. Eclipsys believes that
active physician use will increase as information-technology
solutions provide greater functionality, including Internet-based
 access, alerts, reminders, sub-second response times,
just-in-time clinical decision support and an intuitive browser
based user interfaces.

Historically, the healthcare industry has invested relatively
less in technology compared to certain other industries. Eclipsys
 believes that healthcare providers are realizing that a
relatively small investment in healthcare information technology
can significantly reduce variable costs. As a result of industry
trends, healthcare providers are making significant investments
in healthcare information technology solutions 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.

STRATEGY

Eclipsys objective is to become the leading provider of
healthcare information technology solutions to meet the needs of
the healthcare industry as it consolidates and evolves. Key
elements of Eclipsys strategy to achieve this objective
include:

Provide Comprehensive, Integrated Healthcare Information
Technology Solutions.Eclipsys is focused on providing a full
 suite of clinical management, access management, patient
financial management, strategic decision support, health
information management, enterprise resource planning and
enterprise application integration solutions. Eclipsys
solutions are positioned to:



| |   |                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | focus on the physician as the agent of change by providing
	actionable information at the point of decision, providing
	automated processes that improve clinical workflow and supporting
	 clinical decision making by appropriately communicating credible
	 clinical rules and reminders;                                               
|
| |  | promote balanced outcomes by integrating clinical, financial and
	satisfaction information to support balanced decision
	making  ensuring the healthcare organizations have the
	 information they need to understand the overall effect of their
	decisions as they re-define process to become more clinically
	effective and efficient;
|
| |  | provide end-to-end solutions  to focus on solving the
	business issues in healthcare organizations must solve;
	partnering with our customers to understand their particular
	needs and crafting a solution that both solves their problems
	while leveraging their existing systems; and                                                 
|
| |  | solve the efficiency equation in
	healthcare  improving quality while reducing
	cost  by connecting and leveraging information flow
	that supports supply chain management.                                                                                                                                                            

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Further Penetrate Existing Customer Base. Eclipsys
believes there is a significant opportunity to sell its
integrated healthcare technology solutions to its existing
customers. Eclipsys has at least one of its products installed or
 being installed in more than 1,400 facilities. Of these
customers, only a few have an enterprise-wide healthcare
information system. Eclipsys believes that it is well-positioned
to capitalize on the growth opportunity within its existing
customer base as a result of several factors:



| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |    Internet strategy;                                                                                                                              
|
| |    sophisticated proven integration
	technology that solves customers current integration problems
	while retaining investment in existing systems;



| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | the ability of its products to work with a customers
	existing information systems;        
|
| |  | the ability to document clinical benefits and return on
	investment;                        
|
| |  | managements industry experience and relationships;                                         
|
| |  | alignment of its pricing and payment schedule with the value
	received by its customers; and
|
| |  | its ongoing customer support and service programs.                                          

Employ a Targeted Marketing Approach. Eclipsys
target market primarily includes large hospitals, integrated
health networks and academic medical centers. Eclipsys believes
that these entities are the first to adopt new technology and are
 the drivers of industry consolidation. As the size and
complexity of these customers grow, their need for integrated
information-technology solutions increases. Eclipsys has
identified potential new customers, including those who are
currently relying on legacy systems that lack the functions and
features such customers require, and is targeting decision makers
 within these entities. In particular, Eclipsys believes that
physicians are becoming increasingly involved in the
information-technology selection process as recent technological
developments and the impact of managed care have increased the
utility of information systems to physicians. Eclipsys believes
that its clinically oriented, physician-designed products
provide it with an advantage as it competes for business.
Eclipsys also leverages the extensive industry experience of its
senior management and sales force, as well as its strategic
relationships with leading institutions such as BWH and MGH, to
pursue this opportunity.

Continue to Enhance and Develop New Solutions. Eclipsys
intends to continue upgrading existing products and developing
new solutions to meet the evolving healthcare information needs
of its customers. For example, Eclipsys has been currently
migrating its products to SOLA, which is designed to facilitate
the integration and web-enablement of new and existing
applications as they are developed or acquired by Eclipsys with
legacy systems of its customers. Eclipsys has a team of
approximately 400 internal research, development and technical
support professionals dedicated to developing, enhancing,
supporting and commercializing new and enhanced healthcare
information technology products. Eclipsys also has an exclusive
right of first offer to commercialize certain new information
technologies developed in connection with Partners. In addition,
Eclipsys relationship with Partners allows it to test new
and existing products in a potential forum that provides feedback
 from medical and administrative users, which Eclipsys believes
gives it a competitive advantage in developing new products.

Pursue Selected Acquisitions. Eclipsys intends to continue
 pursuing selected acquisitions that will enhance its product
line, customer base, technological capabilities and management
team. Historically, Eclipsys has experienced significant growth
through acquisitions, and intends to continue to target
acquisitions that will help it achieve its overall strategic
goals. Eclipsys also believes that such transactions will provide
 it with the opportunity to leverage its existing sales,
marketing and development teams and offer the potential to
achieve operating synergies across the organization.

PRODUCTS

Eclipsys products perform the core information-technology
functions required by integrated health networks and other
healthcare providers across the entire continuum of healthcare.
These functions include (i) clinical
management,(ii) access management, (iii) patient
financial management, (iv) strategic decision

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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Sunrise Clinical Manager products assist the physician and other
	clinicians in making clinical decisions throughout the care
	process. These systems give physicians and other clinicians
	immediate access to complete and up-to-date patient records at
	all stages, enable physicians to enter on-line orders for
	specialized services, such as radiology or laboratory testing and
	 prescriptions, provide clinical rules to facilitate clinical
	decisions and alert the physician to potential adverse reactions.                                                                                                                                          
| 
| | Sunrise Access Manager products provide access to patient
	information from any point in the healthcare delivery system and
	coordinate the gathering of additional patient data at each stage
	 of the patient encounter. Access Manager also coordinates the
	scheduling of patient appointments throughout the treatment
	process and includes an enterprise-wide master person index.                                                                                                                                                                                                                                                                           
| 
| | Sunrise Patient Financial Manager products coordinate compliance
	with managed-care contract reimbursement terms, patient billing
	and collection and third-party reimbursement. These products
	support the growing trend toward the centralized business office,
	 which manages compliance with governmental managed-care
	contracts across the entire healthcare enterprise and for all
	stages of the healthcare continuum.                                                                                                                                                                                                                                    
| 
| | Sunrise Decision Support Manager products create an integrated
	clinical and financial repository to support the management
	process of analyzing past clinical, operational and financial
	performance; modeling new approaches for the future; transforming
	 those models into actionable plans; and measuring and monitoring
	 actual practice against those plans.                                                                                                                                                                                                                                                                                             
| 
| | Sunrise Chart Manager provides a completely automated medical
	record management system. Able to meet the HIM needs of
	organizations of virtually any size, Chart Manager includes
	comprehensive applications for clinical data management and
	enterprise-wide document and image-management functions
	. . . functions designed to improve productivity,
	efficiency and accountability in all areas of HIM. Chart Manager
	does this by providing convenient, concurrent information access
	to multiple users, wherever they may be throughout the
	organization.                                                                                             
| 
| | Sunrise Enterprise Resource Planning Manager provides tools which
	 effectively manage the cost-intensive materials management
	(including surgery, and package tracking), accounts payable,
	general ledger, fixed assets, budgeting, human resources and
	payroll functions. Sunrise Enterprise Resource Planning Manager
	is unique in that it includes the only materials management,
	surgery and accounts payable applications designed specifically
	for the healthcare industry. UltriPro HRMS/ Payroll, a leading
	product provided by Eclipsys strategic partner Ultimate Software,
	 Inc, provides integrated human resources and payroll
	functionality.
| 
| | Sunrise Enterprise Application Integrator products provide tools
	to enable the integration of data from existing legacy systems
	while undergoing systematic replacement of those systems to
	newer, Web-based or enabled technologies.                                                                                                                                                                                                                                                                                                                                                                                                                            

These products enable Eclipsys to offer a comprehensive line of
core applications that can be purchased individually or combined
to form a fully integrated single-source information technology
solution. Most of Eclipsys products are functional in
several different healthcare settings, including ambulatory care,
 critical care and acute care.

The Sunrise Clinical Manager suite, the Sunrise Access Manager
suite, the Sunrise Patient Financial Manager suite, the Sunrise
Decision Support Manager suite, the Sunrise Chart Manager suite,
the Sunrise Enterprise Resource Planning suite and the Sunrise
Enterprise Application Integrator suite are generally available
to Eclipsys customers.

SUNRISE CLINICAL MANAGER

Sunrise Clinical Manager is a physician-oriented application that
 provides patient information to the physician and other
clinicians at the point-of-care anywhere in the healthcare
continuum, allows a physician to

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Sunrise Clinical Manager includes the following features:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Health Data Repository, which permanently stores clinical and
	financial information into patient care records that are easily
	and quickly accessible in ambulatory, acute care and other
	healthcare settings.                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Sunrise Universal Viewer, which provides physicians with
	web-based access to patient information, such as complete patient
	 records covering treatments at both ambulatory and acute-care
	facilities, whether they are accessing the records from within
	the healthcare facility or a remote location.                                                                                                                                                                                                                                                                                                   
|
| |  | Clinical documentation, which gathers and presents organized,
	accurate and timely patient information. The application creates
	an electronic patient chart, accepting and arranging input from
	caregivers, laboratories or monitoring equipment.                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Order entry, communication and management, which enables
	physicians to enter online prescriptions and orders for
	laboratory or diagnostic tests or procedures. The application
	also routes the order to the appropriate department or party
	within the organization for fulfillment.                                                                                                                                                                                                                                                                                                                     
|
| |  | Knowledge-Based Orders (KBO), which is a clinical decision
	support system that activates automatically during the order
	entry process. This sophisticated system 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 KBO. Customers can modify these existing rules or
	can develop their own clinical rules.                                                         
|
| |  | Clinical decision support, which is a continuous event-monitoring
	 system. Clinical decision support triggers alerts, which can
	include email or pager notification, 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. The application tracks new patient data,
	relates it to information already in the system for that patient,
	 identifies significant new relationships, alerts the physician
	to the changed relationship and prompts corrective actions on a
	real-time basis.
|
| |  | Clinical pathways and scheduled activities list, which provide
	access to standardized patient-care profiles and assist in the
	scheduling of clinical treatment procedures for individual
	patient care and generate scheduled activities lists in each
	department based on information from those lists. This allows the
	 resources of a department to be deployed in the most effective
	and efficient manner.                                                                                                                                                                                          

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 continuum of patient care on an enterprise-wide
basis. The single database structure of Sunrise Access Manager
permits simultaneous access to the entire patient record from any
 access point on the system. The Sunrise Access Manager suite is
based primarily on the SDK products, which Eclipsys has
integrated with its other product offerings and has continued to
enhance. It also includes the Enterprise Person Identifier from
Transition. The elements of Sunrise Access Manager include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Patient registration/ ADT, which is used to register a patient in
	 an ambulatory setting and to admit, discharge and transfer
	patients in an acute care setting. Patient
	information  such as demographics, personal contacts,
	primary-care provider, allergies or medications, health and
	employment history are immediately accessible on-line to all
	authorized personnel across the

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | enterprise. Subsequent visits require only confirmation and
	updates as necessary. Visit-specific information, such as the
	date and the reason for the visit, the care provided and the
	caregivers providing service, is collected at each visit.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Patient scheduling and resource management, which is used to
	schedule patient appointments across an organization from any
	location within the enterprise. The application has the
	flexibility to provide for patient preferences and resource
	availability.                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Enterprise Person Identifier (EPI), which is a single index of
	all patients and healthcare plan members within a healthcare
	providers system. Records can be accessed from the index by
	 searching a variety of characteristics, such as name, Social
	Security number or other demographic data, including a
	combination of several characteristics. EPI works with most
	existing legacy systems as well.                                                                                                                                                                                                                                                                              
|
| |  | Sunrise Access Manager also includes managed-care support
	features such as verifying insurance eligibility online and
	compliance with managed-care plan rules and procedures, as well
	as medical records abstracting, which compiles patient data into
	statistical information. The integrated nature of Sunrise Access
	Manager allows healthcare providers to complete pre-registration
	as part of the scheduling process and view patient records from
	multiple sites within an enterprise. This eliminates the
	generation of redundant records, thereby saving both patient and
	caregiver time, and permitting the efficient scheduling of
	resources throughout the organization.

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. Billing and receivables management
activities are automated through rules-based processing and can
be customized to reflect each organizations specific
procedures. This product suite supports the growing trend toward
the centralized business offices for multiple entities, which
improves compliance with managed care contracts across the entire
 enterprise and at all stages of the healthcare delivery
continuum. The Sunrise Patient Financial Manager suite is based
primarily on the products acquired in the SDK acquisition, which
Eclipsys has integrated with its other product offerings and has
continued to enhance. Sunrise Patient Financial Manager includes
the following functions:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Patient accounting, which automates the patient-billing and
	accounts receivable functions. For bill generation, the
	application incorporates rules-based calculations of expected
	reimbursement and provides users with the option for automatic
	generation of contractual allowances at the time of billing or
	the time of payment. Rules may be generated for each insurance
	plan accepted by an organization. Receivables management
	functions include account write-offs, online work lists of
	accounts requiring follow-up, extensive account comments and
	standard and ad hoc reporting. 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 monitoring
	receivables, performing collection activity, reconciling with
	third parties and analyzing contract compliance and performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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SUNRISE DECISION SUPPORT MANAGER

Sunrise Decision Support Manager creates a clinical and financial
 data repository by integrating data from across the enterprise.
Sunrise Decision Support Manager gathers information from the
many different departmental information systems through
interfaces 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 at the lowest cost. In addition, Sunrise Decision Support
 Manager includes capabilities for case mix, reimbursement and
utilization management, cost and profitability analysis,
strategic planning, modeling and forecasting. Sunrise Decision
Support Manager is an important component of the customers
ability to measure and document improved clinical outcomes and
return on investment.

The Sunrise Decision Support Manager suite is based primarily on
products acquired in the Transition merger.

SUNRISE CHART MANAGER

Sunrise Chart Manager is able to meet the HIM needs of
organizations of virtually any size. It includes comprehensive
applications for clinical data management and enterprise-wide
document and image-management functions;functions designed to
improve productivity, efficiency and accountability in all areas
of HIM. Chart Manager does this by providing convenient,
concurrent information access to multiple users, wherever they
may be throughout the organization. The Sunrise Chart Manager
suite of products includes Electronic Chart Manager, Chart
Tracking and Request, Chart Completion, Release of Information,
Transcription, Electronic Signature, Medical Record Abstracting,
Medical Image Viewer, and Concurrent Care Manager.

SUNRISE ENTERPRISE RESOURCE PLANNING MANAGER

Sunrise Enterprise Resource Planning Manager provides tools which
 effectively manage the cost-intensive materials management
(including surgery, and package tracking), accounts payable,
general ledger, fixed assets, budgeting, human resources and
payroll functions. Sunrise Enterprise Resource Planning Manager
is unique in that it includes the only materials management,
surgery and accounts payable applications designed specifically
for the healthcare industry. UltiPro HRMS/ Payroll, a leading
product provided by Eclipsys strategic partner Ultimate Software,
 Inc, provides integrated human resources and payroll
functionality.

SUNRISE ENTERPRISE APPLICATION INTEGRATOR

Sunrise Enterprise Application Integrator (Sunrise
EAI) provides tools to enable the integration of data from
existing legacy systems. As integrated health networks form, the
individual entities within the emerging network will have their
own information systems. It is important that the clinical and
financial data in these disparate systems be integrated to
provide an enterprise-wide view. The applications in Sunrise EAI
create this required integration, primarily through the use of
state-of-the-art Web-based integration technologies. Sunrise
EAIs eWebIT product suite includes tools to
cost-effectively link disparate systems, providing composite
views of data. Eclipsys EPI and Sunrise Dictionary Manager
(enterprise-wide data dictionary) are utilized in conjunction
with eWebITs eVIEW (a Web-based composite view of data from
 different information systems), eLINK (data sharing among
disparate information systems) and eSIGN (enterprise security and
 single system sign-on) to form a comprehensive integration
solution.

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SERVICES

Drawing on the functionality and flexibility of its software
products, Eclipsys offers a range of professional services as
part of its healthcare information technology solutions. These
services include outsourcing, remote hosting, network services
and business solutions.

Outsourcing Services typically involve Eclipsys assuming the
management of the customers entire information-technology
function onsite using Eclipsys employees. Outsourcing
Services include Facilities Management, Network Outsourcing and
Transition Management.

Facilities Management enables customers to improve their
information-technology operations by having Eclipsys assume
responsibility for all aspects of the customers onsite
information-technology operations, from equipment to human
resources.

Network Outsourcing provides customers with total healthcare
information network support, relieving the customer of the need
to secure and maintain expensive resources in a rapidly changing
technological environment.

Transition Management offers 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 involves the complete processing of an
enterprises applications from Eclipsys Technology
Solutions Center using Eclipsys equipment and personnel.
This service frees an organization from having 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 is a comprehensive package of services enabling
Eclipsys customers to receive critical data quickly and
accurately without incurring a substantial increase in cost.
Eclipsys assesses changes in network utilization and function,
forecasts any necessary upgrades to accommodate growth of the
customer and designs any changes necessary to provide the
customer with the required performance and functionality.
Eclipsys offers its services in various forms ranging from onsite
 assistance on a time and expense basis to complete turnkey
project deliveries with guaranteed fixed price rates and
outcomes.

Business Solutions focuses on aiding Eclipsys customers in
achieving improved return on investment through their use of
information obtained from Eclipsys products. The Business
Solutions Group staff have wide and varied experience in
healthcare delivery and healthcare information management,
enabling them to help customers implement effective change
management that will ensure maximum return on investment and
improved outcomes.

IMPLEMENTATION, PRODUCT SUPPORT AND TRAINING

Eclipsys believes that a high level of service and support is
critical to its success. Furthermore, Eclipsys believes that a
close and active service and support relationship is important to
 customer satisfaction and provides Eclipsys with important
information regarding evolving customer requirements and
additional sales opportunities. To facilitate successful product
implementation, Eclipsys consultants assist customers with
initial installation of a system, conversion of a customers
 historical data and ongoing training and support. In addition,
24-hour telephone support is available and Eclipsys offers
electronic distribution to provide customers with the latest
information regarding Eclipsys products. Eclipsys also
provides regular maintenance releases to its customers.
Eclipsys service and support activities are supplemented by
 comprehensive training programs, including introductory training
 courses for new customers and seminars for existing customers,
to allow them to more fully utilize the capabilities of
Eclipsys products.

OTHER PRODUCTS

Eclipsys further extends its comprehensive range of core
healthcare information solutions through strategic marketing
alliances with selected best-of-breed niche vendors. These
include, but are not limited to, Ultimate Software, Inc (UltiPro
HRMS/payroll), Motorola (for Doclink), Nine Rivers Technology for
 the

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vision


As part of its commitment to being an end-to-end
information-solutions provider, Eclipsys also sells a variety of
desktop, network and platform solutions including hardware,
middleware and related services.

PRODUCT ARCHITECTURE: STRUCTURED OBJECT LAYERED ARCHITECTURE
(SOLA)

Eclipsys continues to migrate its products to the SOLA
architecture, which Eclipsys believes will facilitate
integration, enhance automation, increase reliability and improve
 security and workflow processes. SOLA draws on a Web-based,
thin-client architecture to integrate business logic with an
intuitive graphical user interface, thereby enhancing automation
and reducing the cost of ownership. This thin-client architecture
 enables the user interface to be improved without disturbing the
 core application set and facilitates integration of
Eclipsys products with new operating systems, display
environments and devices.

SOLA also features a high-performance rules engine to implement a
 sizable portion of the business logic for Eclipsys
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
Eclipsys applications and facilitating their rapid
adoption. SOLA features a seamless and consistent architecture
which promotes reliability for mission-critical applications and
fault tolerance.

SOLA also uses advanced technology to maintain security across
both the Internet and organization intranets. This ability to
support secure communications and incorporate reliable protocols
for authenticating users and services permits the confidentiality
 of patient information to be maintained. SOLA is currently in
production at those customers utilizing Sunrise Clinical Manager
Release 3.0 and higher.

PRICING

Historically, Eclipsys has employed a software pricing and
payment model in which the software license fee is payable based
upon various milestones over the implementation period. Service
fees are paid as performed and maintenance fees, which typically
equal a fixed percentage of the license fee are paid over the
term of the related agreement. More recently, Eclipsys has begun
to offer a variety of pricing models that further its philosophy
that pricing and payment schedules should be closely aligned with
 the value received by the customer. Eclipsys encourages
customers to elect a payment schedule that spreads software
license payments, together with service fees and maintenance fees
 on a bundled basis, regularly over the life of the license. In
addition, Eclipsys has commenced offering software license and
maintenance fees that vary with the amount of patient traffic
serviced by the customer, enabling the customer to analyze the
cost on a per-case basis. Eclipsys also encourages customers to
consider pricing models in which Eclipsys primary
compensation takes the form of sharing in cost savings or other
performance benefits realized by the customer. The pricing of
Eclipsys contracts can vary significantly, depending upon
the pricing model, product configuration and features, and
implementation.

CUSTOMERS, MARKETING AND SALES

Eclipsys marketing and sales efforts focus on large
hospitals, integrated health networks and academic medical
centers. Eclipsys sells its products and services in North
America exclusively through its direct sales force. To provide
direct and sustained customer contact, management of the sales
force is decentralized, with eight 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 Eclipsys implementation and product line
 specialists. Supporting the field staff is a team of domain
experts who have

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In addition to the U.S., Eclipsys has customers in Australia,
Belgium, Brazil, Canada, England, France, Germany, Greece,
Ireland, Italy, Japan, Lebanon, New Zealand, Portugal, Singapore,
 The Netherlands and Yugoslavia. International sales
representatives generally report to the Regional President of the
 International Region and are responsible for all customers
within their sales regions. Eclipsys may also use sales agents to
 market its products internationally.

RESEARCH AND DEVELOPMENT

Eclipsys believes that its future success depends in large part
on its ability to maintain and enhance its current product line,
develop new products, maintain technological competitiveness and
meet an expanding range of customer requirements. A significant
portion of Eclipsys research and development and
product-testing effort is performed in conjunction with
physicians at the BWH, MGH, Sarasota (FL) Memorial Hospital
and other academic and/or large regional medical centers.
Eclipsys current development efforts are focused on the
migration of its products to the SOLA architecture and the
development of additional functionality and applications for its
existing software applications. Eclipsys believes that the open,
integrated nature of its SOLA architecture facilitates the
development of applications without the need for major rewriting
or reconfiguration of code. As of March 10, 2000,
Eclipsys research, development and technical support
organization consisted of over 400 employees. Eclipsys
research and development expenses were $43.8 million for
1999.

COMPETITION

The market for Eclipsys products and services is intensely
competitive and is characterized by rapidly changing technology,
evolving user needs and the frequent introduction of new
products. Eclipsys principal competitors include Cerner
Corp., McKesson HBOC Inc., IDX Systems Corp. and SMS. Eclipsys
also faces 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 Eclipsys competitors
are more established, benefit from greater name recognition and
have substantially greater financial, technical and marketing
resources than Eclipsys. Eclipsys also expects that competition
will continue to increase as a result of consolidation in both
the information technology and healthcare industries. Eclipsys
believes 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.

PROPRIETARY RIGHTS

Eclipsys is dependent upon its proprietary information and
technology. Eclipsys relies primarily on a combination of
copyright, trademark and trade secret laws and license agreements
 to establish and protect its rights in its software products and
 other proprietary technology. Eclipsys requires third-party
consultants and contractors to enter into nondisclosure
agreements to limit use of, access to and distribution of its
proprietary information. In addition, Eclipsys currently requires
 employees who receive stock option grants under any of its stock
 option plans to enter into nondisclosure agreements. There can
be no assurance that Eclipsys means of protecting its
proprietary rights will be adequate to prevent misappropriation.
The laws of some foreign countries may not protect Eclipsys
 proprietary rights as fully or in the same manner as do the laws
 of the United States. Also, despite the steps taken by Eclipsys
to protect its proprietary rights, it may be possible for
unauthorized third parties to copy aspects of Eclipsys
products, reverse engineer such products or otherwise obtain and
use information that Eclipsys regards as proprietary. In certain
limited instances, customers can access source-code versions of
Eclipsys software, subject to contractual limitations on
the permitted use of such source code. Although Eclipsys
license agreements with such customers attempt to prevent misuse
of the source code, the possession of Eclipsys source code
by third parties increases the ease and likelihood of potential
misappropriation of such software. Furthermore, there can be no
assurance that others will not

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EMPLOYEES

As of February 21, 2000, Eclipsys employed 1,564 people,
including approximately 1,040 in field operations (sales, account
 management, implementation and education); 410 in research,
development and product delivery; and 114 in marketing, finance,
human resources, legal and other administrative functions. The
success of Eclipsys depends on its 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. There can be no
assurance that Eclipsys will be able to attract and retain
qualified personnel in the future. Eclipsys employees are
not represented by any labor unions. Eclipsys considers its
relations with its employees to be good.

CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS/ RISK
FACTORS

You should carefully consider the risks described below before
you decide to buy our voting common stock. The risks and
uncertainties described below are not the only ones facing our
company. Additional risks and uncertainties may also impair our
business operations.

If any of the following risks actually occur, our business,
financial condition, or results of operations would likely
suffer. In such case, the trading price of our voting common
stock could decline and you could lose all or part of your
investment.

Limited Operating History of Eclipsys; History of Operating
Losses.We began operations in 1996 and have grown primarily
through a series of acquisitions completed since
January 1997. Accordingly, there is only a limited combined
operating history of Eclipsys and its acquired operations upon
which to base an evaluation of Eclipsys and its prospects. We
will continue to integrate the operations of the businesses we
acquired and to consolidate their product offerings. 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 and $9.4 million in 1999. These losses resulted
primarily from certain write-offs related to acquisitions we
completed during 1997 and 1998, and charges in the first quarter
of 1998 related to the buyout by us of certain obligations under
an agreement entered into in connection with one of the
acquisitions. We expect to continue to incur net losses for the
foreseeable future. We cannot predict when or if we will achieve
profitability.

Management of Growth. 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. To compete effectively and to manage future growth, if
 any, 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
operations.

Risks Associated with Future Acquisitions. An important
element of our business strategy has been expansion through
acquisitions. We expect to continue this strategy. This
acquisition strategy involves a number of risks, which include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | There is significant competition for acquisition opportunities in
	 the healthcare information technology industry. Competition may
	intensify due to consolidation in the industry, which could
	increase the costs of future acquisitions. We will compete for
	acquisition opportunities with other companies, some of which may
	 have significantly greater financial and management resources
	than we have.
|
| |  | The anticipated benefits from any acquisition may not be achieved
	 unless the operations of the acquired business are successfully
	combined with ours. 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 us.                                         

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| |   |                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Future acquisitions could result in the issuance of additional
	shares of capital stock or the incurrence of additional
	indebtedness, could entail the payment of consideration in excess
	 of book value and could have a dilutive effect on our net income
	 per share.                                    
|
| |  | Many business acquisitions must be accounted for under the
	purchase method of accounting. Consequently, such acquisitions
	may generate significant goodwill or other intangible assets and
	result in substantial amortization charges to us. Acquisitions
	could also involve significant one-time charges.

Potential Fluctuations in Quarterly Performance. 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 and size of future acquisitions;                                                   
|
| |  | the timing, size and nature of our product sales and
	implementations;                        
|
| |  | the length of the sales cycle;                                                                
|
| |  | the success of implementation efforts;                                                        
|
| |  | market acceptance of new services, products or product
	enhancements by us or our competitors;
|
| |  | product and price competition;                                                                
|
| |  | the relative proportions of revenues derived from systems and
	services and from hardware;    
|
| |  | changes in operating expenses;                                                                
|
| |  | personnel changes;                                                                            
|
| |  | the performance of our products; and                                                          
|
| |  | fluctuations in 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, because revenue is recognized at various points during
the term of a contract, the timing of revenue recognition varies
considerably. Factors affecting the timing of revenue recognition
 include the type of contract, the availability of personnel, the
 implementation schedule and the complexity of the implementation
 process. Because a significant percentage of our expenses will
be relatively fixed, a variation in the timing of sales and
implementations could cause significant variations in operating
results from quarter to quarter. We believe that period-to-period
 comparisons of our historical results of operations are not
necessarily meaningful. You should not rely on these comparisons
as indicators of future performance.

Long Sales and Implementation Cycles. 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 or lines of business, are major
 decisions for customers. Furthermore, the license of solutions
like those 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. Although we believe that the
migration of our products to our new SOLA platform will
significantly shorten the implementation cycle, we cannot provide
 any assurance in this regard. During the sales cycle and the
implementation cycle, we will expend substantial time, effort and
 funds preparing contract proposals, negotiating the contract and
 implementing the solution.

Risks Associated with Our Development of Our Integrated
Clinical Management Suite.We are currently in the process of
 integrating selected features and functionalities from a number
of clinical management products acquired in our mergers and
acquisitions and licensed from Partners, to create the Sunrise
Clinical Manager Suite. During 1999, the product was under field
trials in several customer sites. In

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Competition. We operate in a market that is intensely
competitive. Our principal competitors include Cerner Corp.,
McKesson HBOC, Inc., IDX Systems Corp. and Shared Medical Systems
 Corporation. We will 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 and have greater
name recognition and financial, technical and marketing resources
 than we do. We expect that competition will continue to increase
 as a result of consolidation in both the information technology
and healthcare industries.

Dependence on Relationship with Partners and Other Third
Parties. We have an exclusive license granted by Partners to
develop, commercialize, distribute and support certain
intellectual property relating to clinical information systems
software developed at BWH. If we breach certain terms of the
license, then Partners has the option to convert the license to a
 non-exclusive license. Such conversion by Partners could cause
the intellectual property and the ability to develop and
commercialize such intellectual property to become more widely
available to our competitors. We also work closely with
physicians and research and development personnel at BWH and its
affiliate, MGH, to develop and commercialize new
information-technology solutions for the healthcare industry and
to test and demonstrate new and existing products. If we fail to
maintain the cooperative working relationship with BWH and MGH,
including future access to products developed by personnel at BWH
 granted under the Partners license, could become strained or
cease altogether. The loss of good relations with BWH or MGH
could hurt our ability to develop new solutions and could cause
delays in bringing new products to the market. In addition, our
reputation and status in the industry could be hurt.

Additionally, we depend upon licenses for certain technology used
 in our products from a number of third-party vendors, including
Computer Corporation of America, Computer Associates, Oracle
Corporation and Sterling Software (United States of America),
Inc. We also have licenses from Premier, Inc. for certain
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 licensed under these
licenses on commercially reasonable terms or at all. As a result,
 we may have to discontinue, delay or reduce product shipments
until equivalent technology is obtained, which could hurt us.
Most of our third-party licenses, including our license from New
England Medical Center, Inc., for the original version of the
Transition I software, are non-exclusive. Our competitors may
obtain the right to use any of the technology covered by the
licenses and use the technology to directly compete with us. In
addition, if our vendors choose to discontinue support of the
licensed technology, we may not be able to modify or adapt our
own products going forward.

Uncertainty in the Healthcare Industry. We operate in an
industry subject to changing political, economic and regulatory
influences. The potential impact of these industry changes
include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the past several years, the U.S. healthcare industry
	has been subject to an increase in governmental regulation and
	reform proposals, such as the Federal Balanced Budget Act of 1997
	 and the Health Insurance Portability and Accountability Act of
	1996. These reforms may increase governmental involvement in
	healthcare, continue to reduce reimbursement rates and otherwise
	change the operating environment for our customers. Customers may
	 react to these proposals and the uncertainty surrounding the
	proposals by curtailing or deferring investments, including those
	 for our products and services. Some healthcare providers may
	fail, creating potential bad debt losses for Eclipsys.
|
| |  | Many healthcare providers are consolidating to create larger
	healthcare delivery enterprises with greater market power. This
	consolidation could erode our customer base and could reduce the
	size                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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| |  |                                                                                                                                     
| |  | ------------------------------------------------------------------------------------------------------------------------------------
| |  | of our target market. In addition, the resulting enterprises
	could have greater bargaining power, which may lead to price
	erosion.

Potential FDA Regulation. 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:



| |   |                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we would be required to seek either FDA clearance of a pre-market
	 notification submission demonstrating that the product is
	substantially equivalent to a device already legally marketed or
	obtain FDA approval of a pre-market approval application
	establishing the safety and effectiveness of the product;
|
| |  | we would be required to comply with rigorous regulations
	governing the pre-clinical and clinical testing, manufacture,
	distribution, labeling and promotion of medical devices; and                                                                                                                               
|
| |  | we would be required to comply with the FDC Acts general
	controls, including establishment registration, device listing,
	compliance with good manufacturing practices, reporting of
	certain device malfunctions and adverse device events.                                                                      

If we failed to comply with applicable requirements, then 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.

New Regulations Relating to Patient Confidentiality. State
 and federal laws regulate the confidentiality of patient records
 and the circumstances under which such records may be released.
These regulations govern both the disclosure and use of
confidential patient medical record information. 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 (i) adopt national standards for
certain types of electronic health information transactions and
the data elements used in such transactions, (ii) adopt
standards to ensure the integrity and confidentiality of health
information, and (iii) establish a schedule for implementing
 national health data privacy legislation or regulations.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A Notice of Proposed Rule Making (NPRM) for transaction
	 standards was published in May 1998. It addresses seven of
	the nine stipulated transactions. The data standards, which have
	been proposed, are expected to be issued as final rules in late
	2000, to become effective in 2003. We believe that the proposed
	data standards issued to date would not materially affect our
	business if adopted as proposed. We cannot predict the potential
	impact of the standards that have not yet been proposed or any
	other standards that might be finally adopted instead of the
	proposed standards.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | The HIPAA legislation challenged Congress to enact privacy
	legislation that includes healthcare information within three
	years and directed the Secretary of HHS to issue healthcare
	information privacy regulations if Congress did not act. Congress
	 had not acted on privacy legislation by the August 21, 1999
	 deadline, prompting the Secretary to issue proposed rules for
	the Privacy of individually identifiable Health Information on
	Nov. 3, 1999. In addition, federal and/or state privacy
	legislation may be enacted at any time. Such legislation, if
	enacted, could also require patient consent before even
	non-individually-identifiable (e.g., coded or anonymous) patient
	information may be shared with third parties and could require
	that holders or users of such information implement specified
	security measures. These laws or regulations, when adopted, could
	 restrict the ability of customers to obtain, use, or disseminate
	 patient information. This could adversely affect demand for our
	products.

17



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Potential for Product Liability; Security Issues. We
provide products with applications that 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. We attempt to contractually limit
our liability for damages arising from negligence, errors or
mistakes. Despite this precaution, the limitations of liability
set forth in these 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, such coverage may not continue to
be available on acceptable terms or may not be available in
sufficient amounts to cover one or more large claims. In
addition, the insurer might disclaim coverage as to any future
claim. One or more large claims could exceed available insurance
coverage. Litigation with respect to liability claims, regardless
 of its outcome, could result in substantial cost to us, could
divert managements attention from operations and could
decrease market acceptance of the our products. We have included
security features in our products that are intended to protect
the privacy and integrity of customer data. Despite the existence
 of these security features, these products may be vulnerable to
break-ins and similar disruptive problems. Break-ins and other
disruptions could jeopardize the security of information stored
in and transmitted through the computer systems of customers. We
may need to expend significant capital and other resources to
address evolving security issues.

Ability to Attract and Retain Key Personnel. 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 technical, marketing, sales
and management employees is intense and the process of recruiting
 personnel with the combination of skills and attributes required
 to execute our 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 or, in particular, the
loss of Harvey J. Wilson, our founder, Chairman of the Board and
member of the Office of the Chairman, could hurt our business.

Rapid Technological Change and Evolving Market. 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 offered by us is extremely complex and is expected
to become increasingly complex and expensive in the future as new
 technologies are introduced. We have commenced migrating our
products to the SOLA architecture. We cannot assure you that the
development of SOLA or the migration of products to SOLA will be
successful that such products will meet their scheduled release
dates, that we will successfully complete the development and
release of other new products or the migration of new or existing
 products to specific platforms or configurations in a timely
fashion or that our current or future products will satisfy the
needs of potential customers or gain general market acceptance.

Limited Protection of Proprietary Rights. We are dependent
 upon our proprietary information and technology. We cannot
assure you that our means of protecting our proprietary rights
will be adequate to prevent misappropriation. The laws of some
foreign countries may not protect our proprietary rights as fully
 nor in the same manner 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 such products or
otherwise obtain and use information that we regard as
proprietary. In certain limited instances, customers can access
source-code versions of our software, subject to contractual
limitations on the permitted use of such source code. Although
our license agreements with such 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, there can be no
assurance that others will not independently develop technologies
 similar or superior to our technology or design around the our
proprietary rights. In addition, although we do not believe that
our products infringe the proprietary rights of third parties, we
 cannot assure you that infringement or invalidity claims (or
claims for indemnification

18



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Product Errors. Highly complex software products such as
ours often contain undetected errors or failures when first
introduced or as new versions are released. Testing of our
products is particularly challenging because it is difficult to
simulate the wide variety of computing environments in which our
customers may deploy these products. Despite extensive testing,
we from time to time have discovered defects or errors in our
products. Accordingly, we cannot assure you that such defects,
errors or difficulties will not 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, we cannot assure you that, despite testing
 by us and by current and potential customers, errors will not be
 found after commencement of commercial shipments, resulting in
loss of or delay in market acceptance, which could have a
material adverse effect upon our business, financial condition
and results of operations.




Item 2. Properties

Eclipsys is headquartered in Delray Beach, Florida, where it
leases office space under four separate leases expiring in
March 2000 and July 2002. In addition, Eclipsys
maintains 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;
Carrolton, Texas; Lynnwood, Washington; Rockville, Maryland;
within the United States and North Perth WA, Australia; British
Columbia, Canada; Brussels, Belgium; Paris, France; and London,
United Kingdom. These leases expire at various times ranging from
 June 2000 to June 2009.




Item 3. Legal Proceedings

Eclipsys is involved from time to time in routine litigation that
 arises in the ordinary course of its business, but is not
currently involved in any litigation that Eclipsys believes could
 reasonably be expected to have a material adverse effect on
Eclipsys.

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

None.

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Part II



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

PRICE RANGE OF COMMON STOCK

Since August 6, 1998, the Companys Common Stock has
been publicly traded on the Nasdaq National Market under the
symbol ECLP. The following table sets forth for the
periods indicated the high and low sales prices of the Common
Stock since commencement of trading:

|                                    |  |      |       |     |  |   |       | 
|----------------------------------- |  | ---- | ----- | --- |  | - | ----- | 
|1998                                |  | High |       | Low
|                                    |  |      |       |    
|Third quarter (from August 6, 1998) |  | $    | 23.38 |     |  | $ | 11.88 | 
|                                   
|                                   
|                                   
|                                   
|Fourth quarter                      |  | $    | 29.50 |     |  | $ | 18.38 | 

|               |  |      |        |     |  |   |        | 
|-------------- |  | ---- | ------ | --- |  | - | ------ | 
|1999           |  | High |        | Low
|               |  |      |        |    
|First quarter  |  | $    | 40.25  |     |  | $ | 20.00  | 
|              
|              
|              
|              
|Second quarter |  | $    | 30.375 |     |  | $ | 20.188 | 
|              
|              
|              
|              
|Third quarter  |  | $    | 34.125 |     |  | $ | 12.625 | 
|              
|              
|              
|              
|Fourth quarter |  | $    | 30.875 |     |  | $ | 11.625 | 

HOLDERS OF RECORD

As of March 14, 2000, there were 195 holders of record of
the Common Stock. The number of holders of record of the Common
Stock is not representative of the number of beneficial holders
because depositories, brokers or other nominees hold many shares.

DIVIDENDS

The Company has never declared or paid any cash dividends on its
Common Stock. The Company currently intends to retain earnings,
if any, to support its growth strategy and does not anticipate
paying cash dividends in the foreseeable future. In addition,
there are certain restrictions on the Companys ability to
declare and pay dividends under the terms of the Companys
credit facility and under applicable state law.

RECENT SALES OF UNREGISTERED SECURITIES

In January 1998, the Company issued to Motorola, Inc., as
consideration in connection with the Emtek acquisition, 1,000,000
 shares of Common Stock.

In February 1998, the Company sold 900,000 shares of
Series G Convertible Preferred Stock to private investors
for an aggregate purchase price of $9.0 million.

At the closing of the Companys initial public offering in
August 1998, each share of Series D and Series F
Convertible Preferred Stock was automatically converted into one
share of Common Stock (an aggregate of 8,536,883 shares of Common
 Stock), each share of Series G Convertible Preferred Stock
was automatically converted into two-thirds of a share of Common
Stock (an aggregate of 599,999 shares of Common Stock) and
each share of Series E Convertible Preferred Stock was
automatically converted into one share of Non-Voting Common Stock
 (an aggregate of 896,431 shares of Non-Voting Common
Stock).

During 1998, the Company issued stock options to purchase an
aggregate of 1,217,463 shares of Common Stock and issued
465,008 shares of Common Stock upon the exercise of stock
options.

In January 1999, the Company issued 156,320 shares of
Common Stock upon exercise of stock warrants.

In February 1999, the Company issued to PCS shareholders, as
 consideration in connection with the PCS acquisition,
1,103,796 shares of Common Stock and assumed 56,560 stock
options and 40,829 warrants.

20



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##### Table of Contents



In February 1999, the Company issued 360,951 shares of
Common Stock upon exercise of stock warrants.

In June 1999, the Company issued to MSI stockholders, as
consideration in connection with the MSI acquisition,
2,257,864 shares of Common Stock and assumed 117,136 stock
options.

In December 1999, the Company issued 601,562 shares of
Common Stock upon exercise of stock warrants.

The securities issued in the foregoing transactions 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 sales of securities.




Item 6.  Selected Financial Data

The selected consolidated financial data of the Company set forth
 below should be read in conjunction with Managements
 Discussion and Analysis of Financial Condition and Results of
Operations and the financial statements and notes thereto
included elsewhere in this document. The statement of operations
data for the years ended December 31, 1997, 1998 and 1999
and the balance sheet data at December 31, 1998 and 1999,
under the heading Company set forth below, are
derived from, and are qualified by reference to, Eclipsys
audited consolidated financial statements, which appear elsewhere
 in this document and are retroactively restated to give effect
to the pooling of Transition, MSI and PCS. The statement of
operations data for the year ended December 31, 1996 and the
 balance sheet data at December 31, 1996, under the heading
Company set forth below, are derived from, and are
qualified by reference to, Eclipsys audited consolidated
financial statements, which are not included in this document and
 are retroactively restated to give effect to the pooling of
Transition, MSI and PCS. The statement of operations data for the
 years ended December 31, 1995 and 1996, under the heading
Predecessor, are derived from, and are qualified by
reference to, the audited financial statements of Alltel, which
are not included in this document and are retroactively restated
to give effect to the pooling of Transition.

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##### Table of Contents



|                                                                  |                                                  |                                                 |         |         |         |      |         |        |         |      |            |        |        |   |            |         |         |   |            |         |         |   |            |         |         | 
|----------------------------------------------------------------- | ------------------------------------------------ | ----------------------------------------------- | ------- | ------- | ------- | ---- | ------- | ------ | ------- | ---- | ---------- | ------ | ------ | - | ---------- | ------- | ------- | - | ---------- | ------- | ------- | - | ---------- | ------- | ------- | 
|                                                                  |                                                  |                                                
|                                                                  |                                                  | Year Ended December 31,                        
|                                                                  |                                                  |                                                
|                                                                  |                                                  |                                                 |         |        
|                                                                  |                                                  | Predecessor                                     |         | Company
|                                                                  |                                                  |                                                 |         |        
|                                                                  |                                                  | 1995                                            |         | 1996    |         | 1996 |         | 1997   |         | 1998 |            | 1999  
|                                                                  |                                                  |                                                 |         |         |         |      |         |        |         |      |            |       
|                                                                  |                                                  |                                                
|                                                                  |                                                  | (In thousands, except share and per share data)
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Statement of Operations Data:                                     |                                                  |                                                 |         |         |         |      |         |        |         |      |            |        |        |   |            |         |         |   |            |         |         |   |            |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Total revenues                                                    |                                                  | $                                               | 129,003 |         |         | $    | 144,997 |        |         | $    | 41,778     |        |        | $ | 147,328    |         |         | $ | 182,458    |         |         | $ | 249,327    |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Costs and expenses:                                               |                                                  |                                                 |         |         |         |      |         |        |         |      |            |        |        |   |            |         |         |   |            |         |         |   |            |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Cost of revenues                                 |                                                 |         | 69,686  |         |      |         | 81,141 |         |      |            | 12,240 |        |   |            | 95,626  |         |   |            | 106,909 |         |   |            | 144,764 |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Sales and marketing                              |                                                 |         | 15,071  |         |      |         | 15,989 |         |      |            | 7,067  |        |   |            | 22,902  |         |   |            | 29,651  |         |   |            | 35,987  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Research and development                         |                                                 |         | 11,186  |         |      |         | 13,529 |         |      |            | 6,067  |        |   |            | 21,369  |         |   |            | 37,139  |         |   |            | 43,751  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | General and administration                       |                                                 |         | 11,834  |         |      |         | 9,847  |         |      |            | 4,143  |        |   |            | 10,179  |         |   |            | 11,107  |         |   |            | 11,322  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Depreciation and amortization                    |                                                 |         | 6,735   |         |      |         | 9,643  |         |      |            | 1,646  |        |   |            | 11,514  |         |   |            | 11,981  |         |   |            | 15,415  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | 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   |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Restructuring charge                             |                                                 |         |        |         |      |         |       |         |      |            |       |        |   |            |        |         |   |            |        |         |   |            | 5,133   |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Stock compensation charge                        |                                                 |         |        |         |      |         | 3,024  |         |      |            | 3,024  |        |   |            |        |         |   |            |        |         |   |            | 1,987   |        
|                                                                  |                                                  |                                                 |         |         |         |      |         |        |         |      |            |        |        |   |            |         |         |   |            |         |         |   |            |        
|                                                                  |                                                  | Total costs and expenses                        |         |         | 114,512 |      |         |        | 133,173 |      |            |        | 34,187 |   |            |         | 267,071 |   |            |         | 216,183 |   |            |         | 260,007 | 
|                                                                  |                                                  |                                                 |         |         |         |      |         |        |         |      |            |        |        |   |            |         |         |   |            |         |         |   |            |        
|Income (loss) from operations                                     |                                                  |                                                 | 14,491  |         |         |      | 11,824  |        |         |      | 7,591      |        |        |   | (119,743   | )       |         |   | (33,725    | )       |         |   | (10,680    | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Interest expense (income), net                                    |                                                  |                                                 | 2,187   |         |         |      | 3,286   |        |         |      | (682       | )      |        |   | (1,511     | )       |         |   | (2,701     | )       |         |   | (1,235     | )      
|                                                                  |                                                  |                                                 |         |         |         |      |         |        |         |      |            |        |        |   |            |         |         |   |            |         |         |   |            |        
|Income (loss) before income taxes and extraordinary item          |                                                  |                                                 | 12,304  |         |         |      | 8,538   |        |         |      | 8,273      |        |        |   | (118,232   | )       |         |   | (31,024    | )       |         |   | (9,445     | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Income tax provision                                              |                                                  |                                                 | (6,185  | )       |         |      | (3,847  | )      |         |      | (4,690     | )      |        |   | (8,096     | )       |         |   | (4,252     | )       |         |   |           |        
|                                                                  |                                                  |                                                 |         |         |         |      |         |        |         |      |            |        |        |   |            |         |         |   |            |         |         |   |            |        
|Income (loss) before extraordinary item                           |                                                  |                                                 | 6,119   |         |         |      | 4,691   |        |         |      | 3,583      |        |        |   | (126,328   | )       |         |   | (35,276    | )       |         |   | (9,445     | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Loss on early extinguishment of debt (net of taxes $1,492)        |                                                  |                                                 |        |         |         |      | 2,149   |        |         |      | 2,149      |        |        |   |           |         |         |   |           |         |         |   |           |        
|                                                                  |                                                  |                                                 |         |         |         |      |         |        |         |      |            |        |        |   |            |         |         |   |            |         |         |   |            |        
|Net income (loss)                                                 |                                                  |                                                 | 6,119   |         |         |      | 2,542   |        |         |      | 1,434      |        |        |   | (126,328   | )       |         |   | (35,276    | )       |         |   | (9,445     | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|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                |                                                  | $                                               | 6,119   |         |         | $    | 2,542   |        |         | $    | 841        |        |        | $ | (135,283   | )       |         | $ | (46,204    | )       |         | $ | (9,445     | )      
|                                                                  |                                                  |                                                 |         |         |         |      |         |        |         |      |            |        |        |   |            |         |         |   |            |         |         |   |            |        
|Basic net income (loss) per common share                          |                                                  |                                                 |         |         |         |      |         |        |         | $    | 0.06       |        |        | $ | (8.60      | )       |         | $ | (1.95      | )       |         | $ | (.27       | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Diluted net income (loss)  per common share                       |                                                  |                                                 |         |         |         |      |         |        |         | $    | 0.05       |        |        | $ | (8.60      | )       |         | $ | (1.95      | )       |         | $ | (.27       | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Basic weighted average common shares outstanding                  |                                                  |                                                 |         |         |         |      |         |        |         |      | 13,780,156 |        |        |   | 15,734,208 |         |         |   | 23,668,072 |         |         |   | 34,803,934 |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Diluted weighted average common shares outstanding                |                                                  |                                                 |         |         |         |      |         |        |         |      | 15,404,421 |        |        |   | 15,734,208 |         |         |   | 23,668,072 |         |         |   | 34,803,934 |        

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|                                       |  |                    |         |         |  |      |         |      |  |      |        |      |  |   |         |  |  |   |         |  |  |   |         | 
|-------------------------------------- |  | ------------------ | ------- | ------- |  | ---- | ------- | ---- |  | ---- | ------ | ---- |  | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                       |  |                   
|                                       |  | As of December 31,
|                                       |  |                   
|                                       |  |                    |         |        
|                                       |  | Predecessor        |         | Company
|                                       |  |                    |         |        
|                                       |  | 1995               |         | 1996    |  | 1996 |         | 1997 |  | 1998 |        | 1999
|                                       |  |                    |         |         |  |      |         |      |  |      |        |     
|                                       |  |                   
|                                       |  | (In thousands)    
|                                      
|                                      
|                                      
|                                      
|Balance Sheet Data:                    |  |                    |         |         |  |      |         |      |  |      |        |      |  |   |         |  |  |   |         |  |  |   |         | 
|                                      
|                                      
|                                      
|                                      
|Cash and cash equivalents              |  | $                  | 14,541  |         |  | $    | 55,858  |      |  | $    | 59,940 |      |  | $ | 63,914  |  |  | $ | 37,983  |  |  | $ | 33,956  | 
|                                      
|                                      
|                                      
|                                      
|Working capital                        |  |                    | 11,487  |         |  |      | 49,357  |      |  |      | 65,306 |      |  |   | 34,870  |  |  |   | 25,724  |  |  |   | 33,103  | 
|                                      
|                                      
|                                      
|                                      
|Total assets                           |  |                    | 116,550 |         |  |      | 176,789 |      |  |      | 80,393 |      |  |   | 201,327 |  |  |   | 221,014 |  |  |   | 202,935 | 
|                                      
|                                      
|                                      
|                                      
|Debt, including current portion        |  |                    | 250     |         |  |      | 105     |      |  |      | 756    |      |  |   | 18,038  |  |  |   | 1,890   |  |  |   |        | 
|                                      
|                                      
|                                      
|                                      
|Mandatorily redeemable preferred stock |  |                    |        |         |  |      |        |      |  |      |       |      |  |   | 35,607  |  |  |   |        |  |  |   |        | 
|                                      
|                                      
|                                      
|                                      
|Stockholders equity (deficit)(1)      |  |                    | (5,640  | )       |  |      | 38,609  |      |  |      | 71,395 |      |  |   | 58,882  |  |  |   | 98,442  |  |  |   | 101,301 | 




|    |                                                                            
|--- | ---------------------------------------------------------------------------
|(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

Eclipsys Corporation is a healthcare information technology
company delivering solutions that enable healthcare providers to
achieve improved clinical, financial and satisfaction outcomes.
The Company offers an integrated suite of healthcare products and
 associated services in seven functional areas 
clinical management, access management, patient financial
management, health information management, strategic decision
support, resource planning management and enterprise application
integration. These products and services can be licensed either
in combination to provide an enterprise-wide solution or
individually to address specific needs. These solutions take many
 forms and can include a combination of software, hardware,
maintenance, consulting services, remote hosting services,
network services and information technology outsourcing.

Eclipsys products have been designed specifically to
deliver a measurable impact on outcomes, enabling Eclipsys
customers to quantify clinical benefits and return on investment
in a precise and timely manner. Eclipsys products can be
integrated with a customers existing information systems,
which Eclipsys believes reduce overall cost of ownership and
increases the attractiveness of its products. Eclipsys also
provides outsourcing, remote hosting and networking services to
assist customers in meeting their healthcare information
technology requirements.

Eclipsys markets its products primarily to large hospitals,
academic medical centers and integrated health networks. To
provide direct and sustained customer contact, Eclipsys maintains
 decentralized sales, implementation and customer support teams
in each of its seven North American regions.

The Company was formed in December 1995 and has grown
primarily through a series of strategic acquisitions. The
consolidated financial statements of the Company 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, the Companys consolidated
financial statements have been retroactively restated as if the
transactions had occurred as of the beginning of the earliest
period presented.

In May 1996, the Company entered into a license for the
development, commercialization, distribution and support of
certain intellectual property relating to the BICS clinical
information systems software developed at Partners HealthCare
System, Inc. In connection with this license, the Company issued
to Partners 988,290 shares of Common Stock.

In January 1997, the Company purchased Alltel from Alltel
Information Services, Inc. (AIS) for a total purchase
 price of $201.5 million, after giving effect to certain
purchase price adjustments. The Alltel acquisition was paid for
with cash, the issuance of Series C Redeemable Preferred
Stock and Series D convertible Preferred Stock and the
assumption of certain liabilities. The acquisition was accounted
for as a purchase, and the Company recorded total intangible
assets of $163.8 million, consisting of $92.2 million
of acquired in-process research and development,
$42.3 million of acquired technology, $10.8 million to
reflect the value of ongoing customer relationships,
$9.5 million related to a management services agreement
(MSA) with AIS and $9.0 million of goodwill. The
 Company wrote off the acquired in-process research

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In June 1997, the Company acquired SDK for a total purchase
price of $16.5 million. The SDK Acquisition was paid for
with cash as well as the issuance of promissory notes and Common
Stock. The acquisition was accounted for as a purchase, and the
Company recorded total intangible assets of $14.8 million,
consisting of $7.0 million of acquired in-process research
and development, $3.2 million of acquired technology and
$4.6 million of goodwill. The Company wrote off the acquired
 in-process research and development as of the date of the
acquisition, and is amortizing both the acquired technology and
the goodwill over five years.

In January 1998, the Company acquired Emtek from Motorola
for a total purchase price of $11.7 million, net of a
$9.6 million receivable from Motorola. The Emtek acquisition
 was paid for with the issuance of Common Stock and the
assumption of certain liabilities. The acquisition was accounted
for as a purchase, and the Company recorded total intangible
assets of $4.1 million, consisting of acquired technology
which is being amortized over five years.

On December 31, 1998, the Company acquired Transition. The
acquisition was paid for entirely with the issuance of Common
Stock. The acquisition was accounted for as a pooling of
interests. Accordingly, the financial statements have been
retroactively restated to give effect to the acquisition as if it
 had occurred as of the earliest period presented. On
December 3, 1998 Transition acquired HealthVISION for a
total purchase price of $31.6 million in cash, the
assumption of $9.5 million in liabilities and an earn out of
 up to $10.8 million if specified financial milestones were
met. The earn out expired in 1999 with no amounts earned under
the provisions of the agreement. The acquisition was accounted
for as a purchase, and Transition recorded intangible assets of
$40.6 million, consisting of $2.4 million of acquired
in-process research and development, $27.3 million of
acquired technology and $10.9 million of goodwill.
Transition wrote off the acquired in-process research and
development as of the date of the acquisition, and is amortizing
both the acquired technology and the goodwill over three years.
On July 22, 1996, Transition acquired substantially all of
the outstanding stock and a note held by a selling principal of
Enterprising HealthCare, Inc. (EHI), based in Tucson,
 Arizona, for a total purchase price of approximately
$1.8 million in cash. EHI provides system integration
products and services for the health care market. The acquisition
 was accounted for under the purchase method of accounting and
accordingly the results of operations of EHI are included from
the date of the acquisition. Acquired technology costs of
$1.6 million are being amortized on a straight-line basis
over seven years. 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.

In February 1999, the Company acquired PCS for a total
purchase price of approximately $35.0 million paid for
entirely with the issuance of Common Stock. The acquisition was
accounted for as a pooling of interests, and accordingly the
financial statements have been retroactively restated to give
effect to the acquisition as if it had occurred as of the
earliest period presented.

In March 1999, the Company acquired Intelus and Med Data for
 a total purchase price of $25.0 million in cash. The
acquisition was accounted for as a purchase, and the Company
recorded total intangible assets of $18.7 million,
consisting of acquired technology which is being amortized over
three years.

In June 1999, the Company acquired MSI for a total purchase
price of approximately $53.6 million paid for entirely with
the issuance of the Companys Common Stock. The acquisition
was accounted for as a

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In July 1999, the Company sold Med Data for a total sales
price of $5.0 million in cash. The Company reduced acquired
technology originally recorded ($18.7 million) in the
purchase by $4.4 million, which represented the difference
between the sales price and the net tangible assets sold.

Revenues

Revenues are derived from sales of systems and services, which
include the licensing of software, software and hardware
maintenance, remote hosting, outsourcing, implementation,
training and consulting, and from the sale of computer hardware.
The Companys products and services are generally sold to
customers pursuant to contracts that range in duration from three
 to seven years.

The Company generally licenses its software products pursuant to
multiple element arrangements that include maintenance for
periods that range from three to seven years. For software
license fees sold to hardware. The Companys products and
services are generally sold to customers pursuant to contracts
that range in duration from three to seven years.

The Company generally licenses its software products pursuant to
multiple element arrangements that include maintenance for
periods that range from three to seven 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. Revenue from other software
license fees, which are bundled with long-term maintenance
agreements, is recognized on a straight-line basis over the
contracted maintenance period. Remote hosting and outsourcing
services are marketed under long-term agreements and revenues are
 recognized monthly as the work is performed. Revenues related to
 other support services, such as training, consulting, and
implementation, are recognized when the services are performed.
Revenues from the sale of hardware are recognized upon shipment
of the equipment to the customer.

Costs of Revenues

The principal costs of systems and services revenues are
salaries, benefits and related overhead costs for implementation,
 remote hosting, outsourcing and field operations personnel. As
the Company implements its growth strategy, it is expected that
additional operating personnel will be required, which would lead
 to an increase in cost of revenues on an absolute basis. Other
significant costs of systems and services revenues are the
amortization of acquired technology and capitalized software
development costs. 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. Cost of revenues related to
hardware sales include only the Companys cost to acquire
the hardware from the manufacturer.

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. As the
Company continues to implement its growth strategy, marketing and
 sales expenses are expected to continue to increase on an
absolute basis.

Research and Development

Research and development expenses consist primarily of salaries,
benefits and related overhead associated with the design,
development and testing of new products by the Company. The
Company capitalizes internal software development costs
subsequent to attaining technological feasibility. Such costs are
 amortized as an

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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. As the Company implements its business plan,
general and administrative expenses are expected to continue to
increase on an absolute basis.

Depreciation and Amortization

The Company depreciates the costs of its 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 include acquired
technology, a network services asset, 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. The
Company recorded amortization expenses for acquisition-related
intangible assets of $25.6 million, $20.9 million and
$32.6 million in 1997, 1998 and 1999, respectively.

Taxes

As of December 31, 1999, the Company had operating loss
carryforwards for federal income tax purposes of
$92.0 million. The carryforwards expire in varying amounts
through 2019 and are subject to certain restrictions. Based on
evidence then available, the Company did not record any benefit
for income taxes at December 31, 1998 and 1999, because
management believes it is more likely then not that the Company
would not realize its net deferred tax assets. Accordingly, the
Company has recorded a valuation allowance against its total net
deferred tax assets.

Results of Operations

1999 Compared to 1998

In the period to period comparison below, both the 1999 and 1998
results reflect the operations of Eclipsys retroactively restated
 for the pooling of interests with Transition, PCS and MSI.

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 HealthVISION versus 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 $37.9 million, or 35.5%,
 from $106.9 million, or 58.6% of total revenues in 1998 to
$144.8 million, or 58.1% of total revenues, in 1999. The
increase in cost was due primarily to the associated growth in
revenues, offset in part by a reduction in certain expenses
related to integrating the acquisitions.

Marketing and sales expenses increased by $6.3 million, or
21.2%, from $29.7 million or 16.3% of total revenues, in
1998 to $36.0 million, or 14.4% of total revenues, in 1999.
The increase 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.

Total expenditures for research and development, including both
capitalized and non-capitalized portions, increased by
$9.1 million, or 22.0%, from $41.4 million, or 22.7% of
 total revenues, in 1998 to $50.5 million, or 20.3% of total
 revenues, in 1999. The increase was due primarily to the
inclusion in 1999 of nine months of operations of Intelus, the
continued development of an enterprise-wide, web enabled, client
server platform solution and $1.4 million increase in
capitalized development costs written off related to duplicate
products with no alternate use as a result of acquisition. The
portion of research and development expenditures that were
capitalized increased by $2.4 million, from
$4.3 million in 1998 to $6.7 million in 1999. The
increase in

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General and administrative expenses increased by $200,000 or
1.8%, from $11.1 million, or 6.1% of total revenues, in 1998
 to $11.3 million or 4.5% of total revenues, in 1999. The
increase was primarily due to the timing of the acquisitions and
offset by savings due to overall expense reductions.

Depreciation and amortization expense increased by
$3.4 million, or 28.3%, from $12.0 million or 6.6% of
total revenues, in 1998 to $15.4 million, or 6.2% of total
revenues, in 1999. The increase was due primarily to the
amortization of goodwill related to the HealthVISION acquisition.

During 1999, in connection with the MSI transaction, the Company
recorded a stock compensation charge of $1.0 million related
 to the required vesting of certain stock options that were
granted to former MSI employees. Additionally, Eclipsys incurred
pooling costs of $1.0 million related to the MSI
transaction. In connection with the MSI transaction, the Company
also wrote off $2.8 million of previously capitalized
software development costs as the products were determined to be
redundant based on a review of products obtained in the
transaction.

During the quarter ended June 30, 1999, the Company
initiated a restructure of its operations. The restructure 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.

In July 1999, in connection with the formation of HV, the
Company incurred a stock compensation charge of $982,000 related
to the accelerated vesting of certain former employees
stock options.

As a result of the foregoing factors, net loss decreased from
$35.3 million in 1998 to $9.4 million in 1999.

1998 Compared to 1997

In the period-to-period comparison below, both the 1998 and 1997
results reflect the operations of Eclipsys retroactively restated
 for the pooling of interests with Transition, PCS and MSI.

Total revenues increased by $35.2 million, or 23.8%, from
$147.3 million in 1997 to $182.5 million in 1998. This
increase was caused primarily by the inclusion in 1998 of twelve
full months of the operations of Alltel and SDK, as well as the
inclusion of eleven months of operations of Emtek. Also
contributing to the increase was new business contracted in 1998,
 which was the result of an increase in marketing efforts related
 to the regional realignment of Eclipsys operations
completed in 1997 and the integration of acquisitions completed
in 1997 and 1998.

Total cost of revenues increased by $11.3 million, or 11.8%,
 from $95.6 million, or 64.9% of total revenues, in 1997 to
$106.9 million, or 58.5% of total revenues, in 1998. The
increase in cost was due primarily to the increase in business
activity, offset in part by a reduction in certain expenses
related to integrating the acquisitions.

Marketing and sales expenses increased by $6.8 million, or
29.6%, from $22.9 million, or 15.5% of total revenues, in
1997 to $29.7 million, or 16.2% of total revenues, in 1998.
The increase was due primarily to the addition of marketing and
direct sales personnel following the acquisitions and the
regional realignment of Eclipsys sales operations.

Total expenditures for research and development, including both
capitalized and non-capitalized portions, increased by
$17.8 million, or 75.1%, from $23.7 million, or 16.0%
of total revenues, in 1997 to $41.5 million, or 22.7% of
total revenues, in 1998. These amounts exclude amortization of
previously capitalized expenditures, which are recorded as cost
of revenues. The increase was due primarily to the inclusion in
1998 of twelve full months of the operations of Alltel and SDK as
 well as eleven months of Emtek operations, as well as the
continued development of an enterprise-wide, client server
platform solution. The portion of research and development
expenditures that were capitalized increased by
$2.0 million, from $2.3 million in 1997 to
$4.3 million in 1998. The increase in capitalized software
development costs was due primarily to the

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General and administrative expenses increased by $900,000, or
8.8%, from $10.2 million, or 6.9% of total revenues, in 1997
 to $11.1 million, or 6.0% of total revenues, in 1998. The
increase was due primarily to the timing of the acquisitions,
partially offset by the savings generated by the rationalization
of Eclipsys administrative, financial and legal
organizations.

Depreciation and amortization expense increased by $500,000, or
4.3%, from $11.5 million, or 7.8% of total revenues, in 1997
 to $12.0 million, or 6.5% of total revenues, in 1998. The
increase was due primarily to the amortization of the value of
ongoing customer relationships and goodwill related to the
acquisitions. Partially offsetting this increase was a reduction
in goodwill amortization as a result of the re-negotiation of
certain matters relating to the Alltel acquisition.

Write-offs of acquired in-process research and development of
$105.5 million were recorded in 1997, of which
$92.2 million was attributable to the Alltel acquisition,
$7.0 million was attributable to the SDK acquisition and
$6.3 million was attributable to Transitions
acquisition of Vital. Additionally, a write-off of
$2.4 million was recorded in 1998 related to
Transitions acquisition of HealthVISION.

Eclipsys recorded a $7.2 million charge during 1998 related
to the buyout of the MSA. Additionally, the Company recorded a
charge of $4.8 million related to the write down of an
investment in Simione and recognized $5.0 million of costs
related to the merger with Transition.

As a result of the foregoing factors, net loss decreased from
$126.3 million in 1997 to $35.3 million in 1998.

Acquired In-Process Research and Development

In connection with the Alltel, SDK and HealthVISION acquisitions,
 the Company 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. The Company is using the acquired
in-process research and development to create new clinical
management, access management, patient financial management and
data warehousing products, which will become part of the Sunrise
product suite over the next several years. Certain products using
 the acquired in-process technology were generally released
during 1998, with additional product releases expected in
subsequent periods through 2001. The Company expects 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 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 product can be produced to meet
its 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 such
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 such projects were based on
managements estimates of revenues and operating profits
related to such projects. These estimates were based on several
assumptions, including those summarized below for each of the
respective acquisitions.

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

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Alltel

The primary purchased in-process technology acquired in the
Alltel acquisition was the client-server based core application
modules of the TDS 7000 product. This project represented 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 facilitating the gathering and
analysis of data throughout a healthcare organization, a data
integration engine and various other functionality.

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. Such
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
reflect accelerated revenue growth in the first five years (1997
to 2001) as the products derived from the in-process technology
are 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 is attributable to the increase in revenues discussed above,
 together with research and development costs expected to remain
constant at approximately $15 million annually. The
operating profit projections include a 5% annual growth rate for
the years after 2003 consistent with the revenue projections.

Through December 31, 1999, 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, the Company has continued the development
 of the in-process technology that was acquired in the Alltel
transaction. To date, the Company is installing modules derived
from the acquired in-process technology in various field trial
sites that were activated at the end of 1999. Additionally, the
Company has begun to successfully market certain aspects of the
technology to new and existing customers. The Company expects to
continue releasing products derived from the technology through
2001. Management continues to believe the projections used
reasonably estimate 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
WACC). The WACC 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 WACC used in the
projections was 21%. This rate was determined by applying the
capital asset pricing model. This method yielded an estimated
average WACC of approximately 16.5%. A risk premium was added to
reflect the business risks associated with the stage of
development of the Company, as well as the technology risk
associated with the in-process software, resulting in a WACC 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%).

The Company used a 21% discount rate for valuing existing
technology because it faces substantially the same risks as the
business as a whole. Accordingly, a rate equal to the WACC of 21%
 was used. The Company used a 28% discount rate for valuing
in-process technology. The spread over the existing technology
discount rate reflects the inherently greater risk of the
research and development efforts. The spread reflected the

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The Company estimates that the costs to develop the purchased
in-process technology acquired in the Alltel acquisition into
commercially viable products will be approximately
$75.0 million in the aggregate through 2001
($15.0 million per year from 1997 to 2001).

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% decreasing over
the remaining years at annual rates ranging from 73% to 14% as
other products are 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 over the projection period
 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, 1999, revenues and operating profit
attributable to in-process technology have been consistent with
the projections. However, no assurance can be given that
deviations from these projections will not occur in the future.

The WACC 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.

The Company 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 WACC of 20% was used.

The Company estimates that the costs to develop the in-process
technology acquired in the SDK acquisition will be approximately
$1.7 million in the aggregate through the year 2000
($500,000 in 1998, $600,000 in 1999 and $600,000 in 2000).

Transition

In connection with the purchase transaction of HealthVISION,
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. 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.

Backlog

Backlog consists of revenues the Company expects to recognize
over the following twelve months under existing contracts. The
revenues to be recognized may relate to a combination of one-time
 fees for software licensing and implementation, hardware sales
and installations and professional service, or annual or monthly
fees for licenses, maintenance, and outsourcing or remote hosting
 services. As of December 31, 1999, the Company had a
backlog of approximately $240 million.

30



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##### Table of Contents



Balance Sheet

1999 Compared to 1998

Investments

Investments decreased during the twelve months ended
December 31, 1999 due to the Companys reinvestment of
maturities in highly liquid investments with original maturities
of three months or less.

Accounts Receivable

Accounts receivable increased during the twelve months ended
December 31, 1999 primarily due to the acquisition of
Intelus and to the completion of certain implementation efforts
at the former Transition customers and certain significant
network projects.

Acquired Technology

Acquired technology decreased during the twelve months ended
December 31, 1999 due to amortization partially offset by an
 increase due to the acquisition of Intelus.

Intangibles

Intangibles decreased during the twelve months ended
December 31, 1999 due to amortization.

Deferred Revenue

Deferred revenue decreased during the twelve months ended
December 31, 1999 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 the twelve months
ended December 31, 1999 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 the twelve months ended December 31, 1999, the
Company generated $6.3 million in cashflow from operations.
The Company used $18.2 million in investing activities ,
which was primarily the result of the acquisition of Intelus and
MedData. Financing activities provided $8.2 million, due
primarily to the proceeds from the exercise of stock options and
the employee stock purchase plan.

During the twelve months ended December 31, 1998, the
Company generated $31.7 million in cash flow from
operations. The Company used $77.6 million in investing
activities, which was primarily the result of the acquisition of
HealthVISION, payment related to the settlement of the Alltel
purchase, purchase of investments and the investment in Simione.
Financing activities provided $20.4 million, primarily due
to the initial public offering partially offset by the redemption
 of the Mandatorily Redeemable Preferred Stock and the repayment
of long-term debt.

The Company has a revolving credit facility with available
borrowings up to $50.0 million which expires in
August 2001. As of December 31, 1999, there were no
amounts outstanding under the revolving credit facility.

As of December 31, 1999, the Company had $34.0 million
in cash and cash equivalents.

Management believes that its available cash and short-term
investments, anticipated cash generated from its future
operations and amounts available under the existing revolving
credit facility will be sufficient to meet the Companys
operating requirements for at least the next twelve months.

31



---



##### Table of Contents



Item 7A.  Quantitative and Qualitative Disclosures
About Market Risk

Not applicable.

Item 8.  Financial Statements and Supplementary Data

Index to Consolidated Financial Statements:

Financial Statements:

|                                                                                                                                  |  |      |    | 
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                  |  | Page
|                                                                                                                                  |  |     
|Report of Independent Accountants                                                                                                 |  |      | 33 | 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|Consolidated Balance Sheets as of December 31, 1998 and 1999                                                                      |  |      | 34 | 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|Consolidated Statements of Operations for the years ended
        December 31, 1997, 1998 and 1999                                |  |      | 35 | 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|Consolidated Statements of Cash Flows for the years ended
        December 31, 1997, 1998 and 1999                                |  |      | 36 | 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|Consolidated Statement of Stockholders Equity for the years
         ended December 31, 1997, 1998 and 1999                      |  |      | 37 | 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|Notes to the Consolidated Financial Statements for the years
        ended December 31, 1997, 1998 and 1999                       |  |      | 40 | 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|Financial Statement Schedules:                                                                                                    |  |      |    | 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|                                                                                                                                 
|Schedule II  Valuation of Qualifying Accounts for
         each of the three years in
        the period ended December 31, 1999 |  |      | 63 | 

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

32



---



##### Table of Contents



REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors



In our opinion, the consolidated financial statements listed in
the accompanying index on page 32 present fairly, in all
material respects, the financial position of Eclipsys Corporation
 and its subsidiaries at December 31, 1998 and
December 31, 1999 and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles
generally accepted in the United States. In addition, in our
opinion, the financial statement schedule listed in the
accompanying index on page 32 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, 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 the opinion expressed
above.

PricewaterhouseCoopers LLP

Atlanta, Georgia



33



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##### Table of Contents



Eclipsys Corporation

Consolidated Balance Sheets


(in thousands, except share data)


|                                            |                                                                                                                  |                                            |          |        |         |  |          |        |         | 
|------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------- | ------ | ------- |  | -------- | ------ | ------- | 
|                                            |                                                                                                                  |                                           
|                                            |                                                                                                                  | December 31,                              
|                                            |                                                                                                                  |                                           
|                                            |                                                                                                                  | 1998                                       |          | 1999  
|                                            |                                                                                                                  |                                            |          |       
|Assets                                      |                                                                                                                  |                                            |          |        |         |  |          |       
|                                           
|                                           
|                                           
|                                           
|Current Assets:                             |                                                                                                                  |                                            |          |        |         |  |          |       
|                                           
|                                           
|                                           
|                                           
|                                            | Cash and cash equivalents                                                                                        |                                            | $        | 37,983 |         |  | $        | 33,956 |        
|                                           
|                                           
|                                           
|                                           
|                                            | Investments                                                                                                      |                                            |          | 17,003 |         |  |          |       |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accounts receivable, net of allowance for doubtful accounts of
        $3,724 and $3,692                         |                                            |          | 62,324 |         |  |          | 77,254 |        
|                                           
|                                           
|                                           
|                                           
|                                            | Inventory                                                                                                        |                                            |          | 517    |         |  |          | 660    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other current assets                                                                                             |                                            |          | 10,013 |         |  |          | 11,800 |        
|                                            |                                                                                                                  |                                            |          |        |         |  |          |       
|                                            |                                                                                                                  | Total current assets                       |          | $      | 127,840 |  |          | $      | 123,670 | 
|                                           
|                                           
|                                           
|                                           
|Property and equipment, net                 |                                                                                                                  |                                            | 12,620   |        |         |  | 14,522   |       
|                                           
|                                           
|                                           
|                                           
|Capitalized software development costs, net |                                                                                                                  |                                            | 5,248    |        |         |  | 7,944    |       
|                                           
|                                           
|                                           
|                                           
|Acquired technology, net                    |                                                                                                                  |                                            | 43,318   |        |         |  | 33,161   |       
|                                           
|                                           
|                                           
|                                           
|Intangible assets, net                      |                                                                                                                  |                                            | 25,928   |        |         |  | 16,858   |       
|                                           
|                                           
|                                           
|                                           
|Other assets                                |                                                                                                                  |                                            | 6,060    |        |         |  | 6,780    |       
|                                            |                                                                                                                  |                                            |          |        |         |  |          |       
|                                            |                                                                                                                  | Total assets                               |          | $      | 221,014 |  |          | $      | 202,935 | 
|                                            |                                                                                                                  |                                            |          |        |         |  |          |       
|Liabilities and Stockholders Equity        |                                                                                                                  |                                            |          |        |         |  |          |       
|                                           
|                                           
|                                           
|                                           
|Current Liabilities:                        |                                                                                                                  |                                            |          |        |         |  |          |       
|                                           
|                                           
|                                           
|                                           
|                                            | Deferred revenue                                                                                                 |                                            | $        | 51,366 |         |  | $        | 49,279 |        
|                                           
|                                           
|                                           
|                                           
|                                            | Current portion of long-term debt                                                                                |                                            |          | 1,890  |         |  |          |       |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other current liabilities                                                                                        |                                            |          | 48,860 |         |  |          | 41,288 |        
|                                            |                                                                                                                  |                                            |          |        |         |  |          |       
|                                            |                                                                                                                  | Total Current Liabilities                  |          | $      | 102,116 |  |          | $      | 90,567  | 
|                                           
|                                           
|                                           
|                                           
|Deferred revenue                            |                                                                                                                  |                                            | 16,700   |        |         |  | 8,803    |       
|                                           
|                                           
|                                           
|                                           
|Other long-term liabilities                 |                                                                                                                  |                                            | 3,756    |        |         |  | 2,264    |       
|Commitments and contingencies               |                                                                                                                  |                                            |          |        |         |  |          |       
|Stockholders equity                        |                                                                                                                  |                                            |          |        |         |  |          |       
|                                           
|                                           
|                                           
|                                           
|Preferred stock:                            |                                                                                                                  |                                            |          |        |         |  |          |       
|                                           
|                                           
|                                           
|                                           
|                                            | Series A, convertible preferred stock of PCS                                                                     |                                            |          | 1      |         |  |          |       |        
|                                           
|                                           
|                                           
|                                           
|Common stock:                               |                                                                                                                  |                                            |          |        |         |  |          |       
|                                           
|                                           
|                                           
|                                           
|                                            | Voting, $.01 par value, 200,000,000 shares authorized; issued and
         outstanding 32,177,452 and 36,303,825 |                                            |          | 321    |         |  |          | 363    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Non-voting, $.01 par value, 5,000,000 shares authorized; issued
        and outstanding 896,431 and 0            |                                            |          | 9      |         |  |          |       |        
|                                           
|                                           
|                                           
|                                           
|Non-voting common stock warrant             |                                                                                                                  |                                            | 395      |        |         |  |         |       
|                                           
|                                           
|                                           
|                                           
|Unearned stock compensation                 |                                                                                                                  |                                            | (1,623   | )      |         |  | (320     | )     
|                                           
|                                           
|                                           
|                                           
|Additional paid-in capital                  |                                                                                                                  |                                            | 241,975  |        |         |  | 254,085  |       
|                                           
|                                           
|                                           
|                                           
|Accumulated deficit                         |                                                                                                                  |                                            | (142,680 | )      |         |  | (152,500 | )     
|                                           
|                                           
|                                           
|                                           
|Accumulated other comprehensive income      |                                                                                                                  |                                            | 44       |        |         |  | (327     | )     
|                                            |                                                                                                                  |                                            |          |        |         |  |          |       
|                                            |                                                                                                                  | Total stockholders equity                 |          | $      | 98,442  |  |          | $      | 101,301 | 
|                                            |                                                                                                                  |                                            |          |        |         |  |          |       
|                                            |                                                                                                                  | Total liabilities and stockholders equity |          | $      | 221,014 |  |          | $      | 202,935 | 
|                                            |                                                                                                                  |                                            |          |        |         |  |          |       

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

34



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##### Table of Contents



ECLIPSYS CORPORATION

Consolidated Statements of Operations


(in thousands, except share data)


|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |         |         | 
|----------------------------------------------------------------- | ------------------------------------------------ | ------------------------ | ---------- | ------- | ------- | ---- | ---------- | ------- | ------- | - | ---------- | ------- | ------- | 
|                                                                  |                                                  |                         
|                                                                  |                                                  | Year ended December 31, 
|                                                                  |                                                  |                         
|                                                                  |                                                  | 1997                     |            | 1998    |         | 1999
|                                                                  |                                                  |                          |            |         |         |     
|Revenues:                                                         |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Systems and services                             |                          | $          | 142,908 |         |      | $          | 168,025 |         |   | $          | 226,610 |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Hardware                                         |                          |            | 4,420   |         |      |            | 14,433  |         |   |            | 22,717  |        
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|                                                                  |                                                  | Total Revenues           |            |         | 147,328 |      |            |         | 182,458 |   |            |         | 249,327 | 
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|Costs and expenses:                                               |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Cost of systems and services                     |                          |            | 92,635  |         |      |            | 94,775  |         |   |            | 126,158 |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Cost of hardware sales                           |                          |            | 2,991   |         |      |            | 12,134  |         |   |            | 18,606  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Sales and marketing                              |                          |            | 22,902  |         |      |            | 29,651  |         |   |            | 35,987  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Research and development                         |                          |            | 21,369  |         |      |            | 37,139  |         |   |            | 43,751  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | General and administration                       |                          |            | 10,179  |         |      |            | 11,107  |         |   |            | 11,322  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Depreciation and amortization                    |                          |            | 11,514  |         |      |            | 11,981  |         |   |            | 15,415  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | 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   |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Restructuring charge                             |                          |            |        |         |      |            |        |         |   |            | 5,133   |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Stock compensation charge                        |                          |            |         |         |      |            |         |         |   |            | 1,987   |        
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|                                                                  |                                                  | Total costs and expenses |            |         | 267,071 |      |            |         | 216,183 |   |            |         | 260,007 | 
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|Loss from operations                                              |                                                  |                          | (119,743   | )       |         |      | (33,725    | )       |         |   | (10,680    | )      
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|Interest income, net                                              |                                                  |                          | 1,511      |         |         |      | 2,701      |         |         |   | 1,235      |        
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|Loss before income taxes                                          |                                                  |                          | (118,232   | )       |         |      | (31,024    | )       |         |   | (9,445     | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Provision for income taxes                                        |                                                  |                          | 8,096      |         |         |      | 4,252      |         |         |   |           |        
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|Net loss                                                          |                                                  |                          | (126,328   | )       |         |      | (35,276    | )       |         |   | (9,445     | )      
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|Dividends and accretion on mandatorily redeemable preferred stock |                                                  |                          | (5,850     | )       |         |      | (10,928    | )       |         |   |           |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Preferred stock conversion                                        |                                                  |                          | (3,105     | )       |         |      |           |         |         |   |           |        
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|Net loss available to common stockholders                         |                                                  | $                        | (135,283   | )       |         | $    | (46,204    | )       |         | $ | (9,445     | )      
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|Loss per share:                                                   |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Basic and diluted net loss per common share                       |                                                  | $                        | (8.60      | )       |         | $    | (1.95      | )       |         | $ | (.27       | )      
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        
|Basic and diluted weighted average common shares outstanding      |                                                  |                          | 15,734,208 |         |         |      | 23,668,072 |         |         |   | 34,803,934 |        
|                                                                  |                                                  |                          |            |         |         |      |            |         |         |   |            |        

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

35



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##### Table of Contents



Eclipsys Corporation

Consolidated Statements of Cash Flows


(in thousands)


|                      |                                                                                                  |                                                     |                   |          |          |         |   |         |         |        |   |         |         |        | 
|--------------------- | ------------------------------------------------------------------------------------------------ | --------------------------------------------------- | ----------------- | -------- | -------- | ------- | - | ------- | ------- | ------ | - | ------- | ------- | ------ | 
|                      |                                                                                                  |                                                    
|                      |                                                                                                  | Year Ended December 31,                            
|                      |                                                                                                  |                                                    
|                      |                                                                                                  | 1997                                                |                   | 1998     |          | 1999   
|                      |                                                                                                  |                                                     |                   |          |          |        
|Operating activities: |                                                                                                  |                                                     |                   |          |          |         |   |         |         |        |   |        
|                     
|                     
|                     
|                     
|                      | Net loss                                                                                         |                                                     | $                 | (126,328 | )        |         | $ | (35,276 | )       |        | $ | (9,445  | )      
|                     
|                     
|                     
|                     
|                      | Adjustments to reconcile net loss to net cash provided by
        operating activities:          |                                                     |                   |          |          |         |   |         |         |        |   |         |        
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Depreciation and amortization                       |                   |          | 33,426   |         |   |         | 29,932  |        |   |         | 42,134  |       
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Tax benefit of stock option exercises               |                   |          | 1,626    |         |   |         | 1,171   |        |   |         |        |       
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Provision for bad debts                             |                   |          | 750      |         |   |         | 1,100   |        |   |         | 2,304   |       
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Loss on disposal of property and equipment          |                   |          | 557      |         |   |         | 8       |        |   |         |        |       
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Write-off of in-process research and development    |                   |          | 105,481  |         |   |         | 2,392   |        |   |         |        |       
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Write-off of MSA intangible asset                   |                   |          |         |         |   |         | 7,193   |        |   |         |        |       
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Write-down of investment                            |                   |          |         |         |   |         | 4,778   |        |   |         |        |       
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Write-off of capitalized software development costs |                   |          |         |         |   |         | 1,306   |        |   |         | 2,790   |       
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Stock compensation expense                          |                   |          | 38       |         |   |         | 150     |        |   |         | 2,285   |       
|                     
|                     
|                     
|                     
|                      | Changes in operating assets and liabilities, net of acquisitions
            Accounts receivable |                                                     |                   | (8,263   | )        |         |   | (1,712  | )       |        |   | (9,967  | )      
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Inventory                                           |                   |          | 655      |         |   |         | 349     |        |   |         | (143    | )     
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Other current assets                                |                   |          | (84      | )       |   |         | 3,301   |        |   |         | (1,411  | )     
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Other assets                                        |                   |          | (71      | )       |   |         | (1,562  | )      |   |         | (1,521  | )     
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Deferred taxes                                      |                   |          | 3,301    |         |   |         |        |        |   |         |        |       
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Deferred revenue                                    |                   |          | (860     | )       |   |         | 17,300  |        |   |         | (11,863 | )     
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Other current liabilities                           |                   |          | 4,005    |         |   |         | 2,253   |        |   |         | (8,732  | )     
|                     
|                     
|                     
|                     
|                      |                                                                                                  | Other long-term liabilities                         |                   |          | (148     | )       |   |         | (971    | )      |   |         | (114    | )     
|                      |                                                                                                  |                                                     |                   |          |          |         |   |         |         |        |   |        
|                      |                                                                                                  |                                                     | Total adjustments |          |          | 140,413 |   |         |         | 66,988 |   |         |         | 15,762 | 
|                      |                                                                                                  |                                                     |                   |          |          |         |   |         |         |        |   |        
|                      | Net cash provided by operating activities                                                        |                                                     |                   | 14,085   |          |         |   | 31,712  |         |        |   | 6,317   |        
|                     
|                     
|                     
|                     
|Investing activities: |                                                                                                  |                                                     |                   |          |          |         |   |         |         |        |   |        
|                     
|                     
|                     
|                     
|                      | Purchase of investments                                                                          |                                                     |                   | (750     | )        |         |   | (33,591 | )       |        |   |        |        
|                     
|                     
|                     
|                     
|                      | Maturities of investments                                                                        |                                                     |                   | 250      |          |         |   | 16,838  |         |        |   | 17,003  |        
|                     
|                     
|                     
|                     
|                      | Sale of investments                                                                              |                                                     |                   |         |          |         |   | 250     |         |        |   |        |        
|                     
|                     
|                     
|                     
|                      | Purchase of property and equipment, net of acquisitions                                          |                                                     |                   | (4,314   | )        |         |   | (5,951  | )       |        |   | (8,477  | )      
|                     
|                     
|                     
|                     
|                      | Capitalized software development costs                                                           |                                                     |                   | (2,303   | )        |         |   | (4,329  | )       |        |   | (6,747  | )      
|                     
|                     
|                     
|                     
|                      | Acquisitions, net of cash acquired                                                               |                                                     |                   | (111,650 | )        |         |   | (29,259 | )       |        |   | (25,000 | )      
|                     
|                     
|                     
|                     
|                      | Proceeds from sale of business                                                                   |                                                     |                   |         |          |         |   |        |         |        |   | 5,000   |        
|                     
|                     
|                     
|                     
|                      | Payments under MSA                                                                               |                                                     |                   |         |          |         |   | (16,000 | )       |        |   |        |        
|                     
|                     
|                     
|                     
|                      | Changes in other assets                                                                          |                                                     |                   | (6,094   | )        |         |   | (5,565  | )       |        |   |        |        
|                      |                                                                                                  |                                                     |                   |          |          |         |   |         |         |        |   |        
|                      |                                                                                                  | Net cash used by investing activities               |                   |          | (124,861 | )       |   |         | (77,607 | )      |   |         | (18,221 | )     

36



---



##### Table of Contents









|                                                      |                                                      |                                           |        |        |         |      |         |         |        |   |        |         |       | 
|----------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------- | ------ | ------ | ------- | ---- | ------- | ------- | ------ | - | ------ | ------- | ----- | 
|                                                      |                                                      |                                          
|                                                      |                                                      | Year Ended December 31,                  
|                                                      |                                                      |                                          
|                                                      |                                                      | 1997                                      |        | 1998   |         | 1999
|                                                      |                                                      |                                           |        |        |         |     
|Financing activities                                  |                                                      |                                           |        |        |         |      |         |         |        |   |        |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Borrowings                                           |                                           |        | 10,713 |         |      |         | 18,940  |        |   |        | 20,000  |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Payments on borrowings                               |                                           |        | (1,018 | )       |      |         | (35,088 | )      |   |        | (20,000 | )    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Distributions  MSI                                  |                                           |        | (495   | )       |      |         | (585    | )      |   |        | (375    | )    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Sale of common stock                                 |                                           |        | 52     |         |      |         | 65,399  |        |   |        |        |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Sale of preferred stock                              |                                           |        | 73,764 |         |      |         | 9,000   |        |   |        |        |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Sale of mandatorily redeemable preferred stock       |                                           |        | 30,000 |         |      |         |        |        |   |        |        |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Redemption of mandatorily redeemable preferred stock |                                           |        |       |         |      |         | (38,771 | )      |   |        |        |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Exercises of stock options                           |                                           |        | 1,132  |         |      |         | 1,266   |        |   |        | 6,036   |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Employee stock purchase plan                         |                                           |        | 74     |         |      |         | 287     |        |   |        | 2,587   |      
|                                                      |                                                      |                                           |        |        |         |      |         |         |        |   |        |        
|                                                      |                                                      | Net cash provided by financing activities |        |        | 114,222 |      |         |         | 20,448 |   |        |         | 8,248 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Effect of exchange rates on cash and cash equivalents |                                                      |                                           | 28     |        |         |      | 16      |         |        |   | (371   | )      
|                                                     
|                                                     
|                                                     
|                                                     
|Net increase (decrease) in cash and cash equivalents  |                                                      |                                           | 3,474  |        |         |      | (25,431 | )       |        |   | (4,027 | )      
|                                                     
|                                                     
|                                                     
|                                                     
|Cash and cash equivalents  beginning of year         |                                                      |                                           | 59,940 |        |         |      | 63,414  |         |        |   | 37,983 |        
|                                                      |                                                      |                                           |        |        |         |      |         |         |        |   |        |        
|Cash and cash equivalents  end of year               |                                                      | $                                         | 63,414 |        |         | $    | 37,983  |         |        | $ | 33,956 |        
|                                                      |                                                      |                                           |        |        |         |      |         |         |        |   |        |        
|Cash paid for interest                                |                                                      | $                                         | 990    |        |         | $    | 612     |         |        | $ | 124    |        
|                                                      |                                                      |                                           |        |        |         |      |         |         |        |   |        |        
|Cash paid for income taxes                            |                                                      | $                                         | 2,944  |        |         | $    | 4,364   |         |        | $ | 758    |        
|                                                      |                                                      |                                           |        |        |         |      |         |         |        |   |        |        

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

37



---



##### Table of Contents









Eclipsys Corporation

Consolidated Statements of Changes in Stockholders
Equity


(in thousands, except share data)


|                                                                   |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|------------------------------------------------------------------ |  | ------------ | ---------- | ------ |  | --------------- | --- | -------- |  | -------- | ---- | ------ |  | ------ | ---------- | ------ |  | ------ | --- | - |  |  | ---------- | - |  | - | --- | - |  |  | -------- | - |  | - | -- | -
|                                                                   |  |              |            |        |  |                 |     |         
|                                                                   |  |              |            |        |  | Preferred Stock
|                                                                   |  | Voting and   |            |        |  |                
|                                                                   |  | Non-voting   |            |        |  |                 |     |          |  |         
|                                                                   |  | Common Stock |            | Common |  | Series A        |     | Series D |  | Series E
|                                                                   |  |              |            | Stock  |  |                 |     |          |  |         
|                                                                   |  | Shares       |            | Amount |  | Warrant         |     | Shares   |  | Amount   |      | Shares |  | Amount |            | Shares |  | Amount
|                                                                   |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |       
|Balance at December 31, 1996                                       |  | $            | 15,610,276 |        |  | $               | 156 |          |  |          | 395  |        |  |        | 1,020,000  |        |  | $      | 11  |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of Series  D Preferred stock                              |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  | 4,981,289  |   |  | $ | 50  |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Acquisition of Alltel                                              |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  | 2,077,497  |   |  |   | 21  |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of Series  E Preferred stock                              |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  | 896,431  |   |  | $ | 9  |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of common stock warrants                                  |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Exchange of Series  A for Series F                                 |  |              |            |        |  |                 |     |          |  |          |      |        |  |        | (1,000,000 | )      |  |        | (10 | ) |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock warrant exercise  PCS                                       |  |              | 46,926     |        |  |                 | 1   |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Acquisition of SDK                                                 |  |              | 499,997    |        |  |                 | 5   |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Acquisition of Vital                                               |  |              | 132,302    |        |  |                 | 1   |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Employee stock purchase  Transition                               |  |              | 3,921      |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock option exercises                                             |  |              | 356,102    |        |  |                 | 4   |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Income tax benefit from stock options exercised                    |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock grants                                                       |  |              | 15,000     |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Dividends and accretion on mandatorily redeemable preferred stock  |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Distribution  MSI                                                 |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of stock options                                          |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Compensation expense recognized                                    |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Comprehensive income:                                              |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net loss                                                           |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Foreign currency translation adjustment                            |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Other comprehensive income                                         |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Comprehensive income                                               |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                   |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|Balance at December 31, 1997                                       |  |              | 16,664,524 |        |  |                 | 167 |          |  |          | 395  |        |  |        | 20,000     |        |  |        | 1   |   |  |  | 7,058,786  |   |  |   | 71  |   |  |  | 896,431  |   |  |   | 9  |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|EMTEK Acquisition                                                  |  |              | 1,000,000  |        |  |                 | 10  |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Sale of common stock  Eclipsys initial public offering            |  |              | 4,830,000  |        |  |                 | 48  |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Conversion of preferred stock  Eclipsys initial public
	 offering |  |              | 10,033,313 |        |  |                 | 100 |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  | (7,058,786 | ) |  |   | (71 | ) |  |  | (896,431 | ) |  |   | (9 | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of Series  G Preferred Stock                              |  |              |            |        |  |                 |     |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|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   |          |  |          |      |        |  |        |            |        |  |        |     |   |  |  |            |   |  |   |     |   |  |  |          |   |  |   |    |  

[Additional columns below]

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

|                                                                   |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   |          |   |  |   |          |  
|------------------------------------------------------------------ |  | --------------- | ---------- | -------- |  | ---------- | --- | -------- |  | ----------- | -------- | ------------- |  | ------- | -- | ------------- |  | - | ------- | - |  | - | ------ | - |  | - | -------- | - |  | - | -------- | -
|                                                                   |  |                 |            |          |  |            |     |          |  |            
|                                                                   |  | Preferred Stock |            |          |  |            |     |          |  |            
|                                                                   |  |                 |            |          |  |            |     |          |  |            
|                                                                   |  |                 |            |          |  |            |     |          |  | Retained    |          |              
|                                                                   |  | Series F        |            | Series G |  | Additional |     |          |  | Earnings    |          |              
|                                                                   |  |                 |            |          |  | Paid-in    |     | Unearned |  | Accumulated |          | Comprehensive
|                                                                   |  | Shares          |            | Amount   |  | Shares     |     | Amount   |  | Capital     |          | Compensation  |  | Deficit |    | Income (loss)
|                                                                   |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |              
|Balance at December 31, 1996                                       |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  | $ | 50,965  |   |  | $ | (136   | ) |  | $ | 20,004   |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of Series  D Preferred stock                              |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 62,464  |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Acquisition of Alltel                                              |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 26,051  |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of Series  E Preferred stock                              |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 11,241  |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of common stock warrants                                  |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 10,501  |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Exchange of Series  A for Series F                                 |  |                 | 1,478,097  |          |  | $          | 15  |          |  |             |          |               |  |         |    |               |  |   | (5      | ) |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock warrant exercise  PCS                                       |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 51      |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Acquisition of SDK                                                 |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 3,243   |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Acquisition of Vital                                               |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 3,624   |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Employee stock purchase  Transition                               |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 74      |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock option exercises                                             |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 1,128   |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Income tax benefit from stock options exercised                    |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 1,626   |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock grants                                                       |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 97      |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Dividends and accretion on mandatorily redeemable preferred stock  |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | (5,850  | ) |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Distribution  MSI                                                 |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   | (495     | ) |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of stock options                                          |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 55      |   |  |   | (55    | ) |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Compensation expense recognized                                    |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   | (59    | ) |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Comprehensive income:                                              |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net loss                                                           |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   | (126,328 | ) |  | $ | (126,328 | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Foreign currency translation adjustment                            |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   |          |   |  |   | 28       |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Other comprehensive income                                         |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   |          |   |  |   | 28       |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Comprehensive income                                               |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   |          |   |  |   | (126,300 | )
|                                                                   |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   |          |   |  |   |          |  
|Balance at December 31, 1997                                       |  |                 | 1,478,097  |          |  |            | 15  |          |  |             |         |               |  |         |   |               |  |   | 165,265 |   |  |   | (250   | ) |  |   | (106,819 | ) |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|EMTEK Acquisition                                                  |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 9,050   |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Sale of common stock  Eclipsys initial public offering            |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 65,351  |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Conversion of preferred stock  Eclipsys initial public
	 offering |  |                 | (1,478,097 | )        |  |            | (15 | )        |  |             | (900,000 | )             |  | $       | (9 | )             |  |   | 4       |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of Series  G Preferred Stock                              |  |                 |            |          |  |            |     |          |  |             | 900,000  |               |  |         | 9  |               |  |   | 8,991   |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock warrant exercise  PCS                                       |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 61      |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock option exercise                                              |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 1,200   |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Employee stock purchase                                            |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 287     |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Income tax benefit from stock options exercised                    |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 1,171   |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Dividends and accretion on mandatorily redeemable preferred stock  |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | (10,928 | ) |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of stock options                                          |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 1,523   |   |  |   | (1,523 | ) |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Distribution  MSI                                                 |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   | (585     | ) |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Compensation expense recognized                                    |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   | 150    |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Comprehensive income:                                              |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net loss                                                           |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   | (35,276  | ) |  |   | (35,276  | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Foreign currency translation adjustment                            |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   |          |   |  |   | 16       |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Other comprehensive income                                         |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   |          |   |  |   | 16       |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Comprehensive income                                               |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   |          |   |  |   | (35,260  | )
|                                                                   |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   |         |   |  |   |        |   |  |   |          |   |  |   |          |  
|Balance at December 31, 1998                                       |  |                 |           |          |  |            |    |          |  |             |         |               |  |         |   |               |  |   | 241,975 |   |  |   | (1,623 | ) |  |   | (142,680 | ) |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock option exercises                                             |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 6,020   |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Employee stock purchase                                            |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 2,585   |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock warrant exercise  Transition                                |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 393     |   |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock warrant exercise                                             |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | (10     | ) |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Conversion of preferred stock  PCS                                |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | (1      | ) |  |   |        |   |  |   |          |   |  |   |          |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Conversion of convertible debt  PCS                               |  |                 |            |          |  |            |     |          |  |             |          |               |  |         |    |               |  |   | 2,141   |   |  |   |        |   |  |   |          |   |  |   |          |  

[Additional columns below]

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

|                                                                   |  |               |    |       |  |   |          |  
|------------------------------------------------------------------ |  | ------------- | -- | ----- |  | - | -------- | -
|                                                                   |  | Accumulated   |    |      
|                                                                   |  | Other         |    |      
|                                                                   |  | Comprehensive |    |      
|                                                                   |  | Income (loss) |    | Total
|                                                                   |  |               |    |      
|Balance at December 31, 1996                                       |  |               |    |       |  | $ | 71,395   |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of Series  D Preferred stock                              |  |               |    |       |  |   | 62,514   |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Acquisition of Alltel                                              |  |               |    |       |  |   | 26,072   |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of Series  E Preferred stock                              |  |               |    |       |  |   | 11,250   |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of common stock warrants                                  |  |               |    |       |  |   | 10,501   |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Exchange of Series  A for Series F                                 |  |               |    |       |  |   |         |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock warrant exercise  PCS                                       |  |               |    |       |  |   | 52       |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Acquisition of SDK                                                 |  |               |    |       |  |   | 3,248    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Acquisition of Vital                                               |  |               |    |       |  |   | 3,625    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Employee stock purchase  Transition                               |  |               |    |       |  |   | 74       |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock option exercises                                             |  |               |    |       |  |   | 1,132    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Income tax benefit from stock options exercised                    |  |               |    |       |  |   | 1,626    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock grants                                                       |  |               |    |       |  |   | 97       |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Dividends and accretion on mandatorily redeemable preferred stock  |  |               |    |       |  |   | (5,850   | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Distribution  MSI                                                 |  |               |    |       |  |   | (495     | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of stock options                                          |  |               |    |       |  |   |         |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Compensation expense recognized                                    |  |               |    |       |  |   | (59      | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Comprehensive income:                                              |  |               |    |       |  |   |         |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net loss                                                           |  |               |    |       |  |   | (126,328 | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Foreign currency translation adjustment                            |  |               |    |       |  | $ | 28       |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Other comprehensive income                                         |  |               |    |       |  |   |         |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Comprehensive income                                               |  |               |    |       |  |   |         |  
|                                                                   |  |               |    |       |  |   |          |  
|Balance at December 31, 1997                                       |  |               | 28 |       |  |   | 58,882   |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|EMTEK Acquisition                                                  |  |               |    |       |  |   | 9,060    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Sale of common stock  Eclipsys initial public offering            |  |               |    |       |  |   | 65,399   |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Conversion of preferred stock  Eclipsys initial public
	 offering |  |               |    |       |  |   |         |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of Series  G Preferred Stock                              |  |               |    |       |  |   | 9,000    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock warrant exercise  PCS                                       |  |               |    |       |  |   | 61       |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock option exercise                                              |  |               |    |       |  |   | 1,205    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Employee stock purchase                                            |  |               |    |       |  |   | 287      |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Income tax benefit from stock options exercised                    |  |               |    |       |  |   | 1,171    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Dividends and accretion on mandatorily redeemable preferred stock  |  |               |    |       |  |   | (10,928  | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Issuance of stock options                                          |  |               |    |       |  |   |         |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Distribution  MSI                                                 |  |               |    |       |  |   | (585     | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Compensation expense recognized                                    |  |               |    |       |  |   | 150      |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Comprehensive income:                                              |  |               |    |       |  |   |         |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net loss                                                           |  |               |    |       |  |   | (35,276  | )
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Foreign currency translation adjustment                            |  |               | 16 |       |  |   | 16       |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Other comprehensive income                                         |  |               |    |       |  |   |         |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Comprehensive income                                               |  |               |    |       |  |   |         |  
|                                                                   |  |               |    |       |  |   |          |  
|Balance at December 31, 1998                                       |  |               | 44 |       |  |   | 98,442   |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock option exercises                                             |  |               |    |       |  |   | 6,036    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Employee stock purchase                                            |  |               |    |       |  |   | 2,587    |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock warrant exercise  Transition                                |  |               |    |       |  |   |         |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Stock warrant exercise                                             |  |               |    |       |  |   |         |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Conversion of preferred stock  PCS                                |  |               |    |       |  |   |         |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Conversion of convertible debt  PCS                               |  |               |    |       |  |   | 2,142    |  

38



---



##### Table of Contents



|                                        |  |              |            |        |  |                 |     |          |  |          |   |        |  |        |   |        |  |        |   |  |  |  |   |  |  |   |   |  |  |  |   |  |  |   |   | 
|--------------------------------------- |  | ------------ | ---------- | ------ |  | --------------- | --- | -------- |  | -------- | - | ------ |  | ------ | - | ------ |  | ------ | - |  |  |  | - |  |  | - | - |  |  |  | - |  |  | - | - | 
|                                        |  |              |            |        |  |                 |     |         
|                                        |  |              |            |        |  | Preferred Stock
|                                        |  | Voting and   |            |        |  |                
|                                        |  | Non-voting   |            |        |  |                 |     |          |  |         
|                                        |  | Common Stock |            | Common |  | Series A        |     | Series D |  | Series E
|                                        |  |              |            | Stock  |  |                 |     |          |  |         
|                                        |  | Shares       |            | Amount |  | Warrant         |     | Shares   |  | Amount   |   | Shares |  | Amount |   | Shares |  | Amount
|                                        |  |              |            |        |  |                 |     |          |  |          |   |        |  |        |   |        |  |       
|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 |          |  |          |  |        |  |        |  |        |  | $      |  |  |  |  |  |  |  | $ |  |  |  |  |  |  |  | $ |  | 
|                                        |  |              |            |        |  |                 |     |          |  |          |   |        |  |        |   |        |  |        |   |  |  |  |   |  |  |   |   |  |  |  |   |  |  |   |   | 

[Additional columns below]

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

|                                        |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   |         |  |  |   |       |   |  |   |          |   |  |  |        |  
|--------------------------------------- |  | --------------- | - | -------- |  | ---------- | - | -------- |  | ----------- | - | ------------- |  | ------- | - | ------------- |  | - | ------- |  |  | - | ----- | - |  | - | -------- | - |  |  | ------ | -
|                                        |  |                 |   |          |  |            |   |          |  |            
|                                        |  | Preferred Stock |   |          |  |            |   |          |  |            
|                                        |  |                 |   |          |  |            |   |          |  |            
|                                        |  |                 |   |          |  |            |   |          |  | Retained    |   |              
|                                        |  | Series F        |   | Series G |  | Additional |   |          |  | Earnings    |   |              
|                                        |  |                 |   |          |  | Paid-in    |   | Unearned |  | Accumulated |   | Comprehensive
|                                        |  | Shares          |   | Amount   |  | Shares     |   | Amount   |  | Capital     |   | Compensation  |  | Deficit |   | Income (loss)
|                                        |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |              
|Compensation expense recognized         |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   | 982     |  |  |   | 1,303 |   |  |   |          |   |  |  |        |  
|                                       
|                                       
|                                       
|                                       
|Distributions MSI                       |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   |         |  |  |   |       |   |  |   | (375     | ) |  |  |        |  
|                                       
|                                       
|                                       
|                                       
|Comprehensive income:                   |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   |         |  |  |   |       |   |  |   |          |   |  |  |        |  
|                                       
|                                       
|                                       
|                                       
|Net loss                                |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   |         |  |  |   |       |   |  |   | (9,445   | ) |  |  | (9,445 | )
|                                       
|                                       
|                                       
|                                       
|Foreign currency translation adjustment |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   |         |  |  |   |       |   |  |   |          |   |  |  | (371   | )
|                                        |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   |         |  |  |   |       |   |  |   |          |   |  |  |        |  
|Other comprehensive income              |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   |         |  |  |   |       |   |  |   |          |   |  |  | (371   | )
|                                        |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   |         |  |  |   |       |   |  |   |          |   |  |  |        |  
|Comprehensive income                    |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   |         |  |  |   |       |   |  |   |          |   |  |  | (9,816 | )
|                                        |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   |         |  |  |   |       |   |  |   |          |   |  |  |        |  
|Balance at December 31, 1999            |  |                 |  |          |  | $          |  |          |  |             |  |               |  | $       |  |               |  | $ | 254,085 |  |  | $ | (320  | ) |  | $ | (152,500 | ) |  |  |        |  
|                                        |  |                 |   |          |  |            |   |          |  |             |   |               |  |         |   |               |  |   |         |  |  |   |       |   |  |   |          |   |  |  |        |  

[Additional columns below]

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

|                                        |  |               |      |       |  |   |         |  
|--------------------------------------- |  | ------------- | ---- | ----- |  | - | ------- | -
|                                        |  | Accumulated   |      |      
|                                        |  | Other         |      |      
|                                        |  | Comprehensive |      |      
|                                        |  | Income (loss) |      | Total
|                                        |  |               |      |      
|Compensation expense recognized         |  |               |      |       |  |   | 2,285   |  
|                                       
|                                       
|                                       
|                                       
|Distributions MSI                       |  |               |      |       |  |   | (375    | )
|                                       
|                                       
|                                       
|                                       
|Comprehensive income:                   |  |               |      |       |  |   |        |  
|                                       
|                                       
|                                       
|                                       
|Net loss                                |  |               |      |       |  |   | (9,445  | )
|                                       
|                                       
|                                       
|                                       
|Foreign currency translation adjustment |  |               | (371 | )     |  |   | (371    | )
|                                       
|                                       
|                                       
|                                       
|Other comprehensive income              |  |               |      |       |  |   |        |  
|                                       
|                                       
|                                       
|                                       
|Comprehensive income                    |  |               |      |       |  |   |        |  
|                                        |  |               |      |       |  |   |         |  
|Balance at December 31, 1999            |  | $             | (327 | )     |  | $ | 101,301 |  
|                                        |  |               |      |       |  |   |         |  

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

39



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##### Table of Contents



ECLIPSYS CORPORATION




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Three Years Ended December 31, 1999


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.

A reconciliation between revenue and net loss as previously
reported by the Company in the 1998 Annual report on
Form 10-K and as restated for the PCS and MSI pooling of
interests is as follows:

|          |                        |      |   |          |   |  |   |         |  
|--------- | ---------------------- | ---- | - | -------- | - |  | - | ------- | -
|          |                        | 1997 |   | 1998    
|          |                        |      |   |         
|Revenue:  |                        |      |   |          |   |  |   |        
|         
|         
|         
|         
|          | As previously reported |      | $ | 141,071  |   |  | $ | 170,689 |  
|         
|         
|         
|         
|          | PCS                    |      |   | 659      |   |  |   | 1,437   |  
|         
|         
|         
|         
|          | MSI                    |      |   | 5,598    |   |  |   | 10,332  |  
|          |                        |      |   |          |   |  |   |        
|          | As restated            |      | $ | 147,328  |   |  | $ | 182,458 |  
|          |                        |      |   |          |   |  |   |        
|Net loss: |                        |      |   |          |   |  |   |        
|         
|         
|         
|         
|          | As previously reported |      | $ | (125,040 | ) |  | $ | (34,678 | )
|         
|         
|         
|         
|          | PCS                    |      |   | (2,083   | ) |  |   | (2,472  | )
|         
|         
|         
|         
|          | MSI                    |      |   | 795      |   |  |   | 1,874   |  
|          |                        |      |   |          |   |  |   |        
|          | As restated            |      | $ | (126,328 | ) |  | $ | (35,276 | )
|          |                        |      |   |          |   |  |   |        

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.

40



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




2. Summary of Significant Accounting Policies 
(Continued)


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.

Investments

In accordance with FAS 115, Accounting for Certain
Investments in Debt and Equity Securities, the Company has
classified all investments as held to maturity. The securities
totaled $17.0 million as of December 31, 1998 and
consisted of federal agency obligations. The estimated fair value
 of each investment approximates the amortized cost plus accrued
interest. Unrealized gains at December 31, 1998 were
$18,000. As of December 31, 1999, the Company held no
investments.

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 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) 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 on input measures (based substantially on implementation
hours incurred).

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.

41



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999


2. Summary of Significant Accounting Policies 
(Continued)

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.

Services

Remote processing and outsourcing services are marketed under
long-term arrangements generally over periods from 5 to
7 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 shipment 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 $8.1 million and $15.3 million as of
December 31, 1998 and 1999, 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. Alltel Healthcare Information Services, Inc.
(Alltel) prior to the Companys January 1997
acquisition of that business (see Note 7) entered into such
contracts. 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
$1.5 million and $1.4 million as of December 31,
1998 and 1999, respectively, and is included in other assets in
the accompanying financial statements. The current portion of
amounts due related to these arrangements was $2.6 million
and $1.6 million as of December 31, 1998 and 1999,
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 generally non-cancelable.

42



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




2. Summary of Significant Accounting Policies 
(Continued)


Inventory

Inventory consists of computer 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 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 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 $2.3 million,
$4.3 million and $6.7 million for the years ended
December 31, 1997, 1998 and 1999, 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, were
approximately $700,000, $777,000 and $1.2 million for the
years ended December 31, 1997, 1998 and 1999, respectively.
Accumulated amortization of capitalized software development
costs were $5.8 million and $6.7 million as of
December 31, 1998 and 1999, 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.

43



---



##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




2. Summary of Significant Accounting Policies 
(Continued)


Acquired Technology and Intangible Assets

The intangible assets from the Companys acquisitions
(Notes 6 and 7) consisted of the following as of
December 31, 1998 and 1999 (in thousands):

|                                  |  |              |         |             |  |       |        |     |  |   |         |  |  |   |        |  |  |  |              | 
|--------------------------------- |  | ------------ | ------- | ----------- |  | ----- | ------ | --- |  | - | ------- |  |  | - | ------ |  |  |  | ------------ | 
|                                  |  |              |         |            
|                                  |  | December 31, |         | Useful Life
|                                  |  |              |         |            
|                                  |  |              |         |             |  |      
|                                  |  | 1998         |         | 1999        |  |      
|                                  |  |              |         |             |  |      
|                                  |  | Gross        |         | Net         |  | Gross |        | Net |  |  
|                                  |  |              |         |             |  |       |        |     |  |  
|Acquired technology               |  | $            | 79,118  |             |  | $     | 43,318 |     |  | $ | 92,536  |  |  | $ | 33,161 |  |  |  | 3 - 5 Years  | 
|                                 
|                                 
|                                 
|                                 
|Ongoing customer relationships    |  |              | 10,846  |             |  |       | 6,690  |     |  |   | 10,690  |  |  |   | 4,366  |  |  |  | 5 Years      | 
|                                 
|                                 
|                                 
|                                 
|Management and services agreement |  |              | 9,543   |             |  |       |       |     |  |   |        |  |  |   |       |  |  |  | 4 Years      | 
|                                 
|                                 
|                                 
|                                 
|Network services                  |  |              | 5,764   |             |  |       | 4,324  |     |  |   | 5,764   |  |  |   | 2,404  |  |  |  | 3 Years      | 
|                                 
|                                 
|                                 
|                                 
|Goodwill                          |  |              | 17,537  |             |  |       | 14,779 |     |  |   | 17,793  |  |  |   | 10,081 |  |  |  | 5 - 12 Years | 
|                                 
|                                 
|                                 
|                                 
|Other                             |  |              | 863     |             |  |       | 135    |     |  |   | 162     |  |  |   | 7      |  |  |  | 3 - 5 Years  | 
|                                  |  |              |         |             |  |       |        |     |  |   |         |  |  |   |        |  |  |  |              | 
|                                  |  | $            | 123,671 |             |  | $     | 69,246 |     |  | $ | 126,945 |  |  | $ | 50,019 |  |  |  |              | 
|                                  |  |              |         |             |  |       |        |     |  |   |         |  |  |   |        |  |  |  |              | 

The carrying values of intangible assets are reviewed if the
facts and circumstances suggest that it 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 is
as follows:

|         |                           |      |          |          |   |      |         |         |   |   |        |        |  
|-------- | ------------------------- | ---- | -------- | -------- | - | ---- | ------- | ------- | - | - | ------ | ------ | -
|         |                           | 1997 |          | 1998     |   | 1999
|         |                           |      |          |          |   |     
|Net loss |                           | $    | (126,328 | )        |   | $    | (35,276 | )       |   | $ | (9,445 | )     
|        
|        
|        
|        
|         | Pro forma tax adjustments |      |          | (270     | ) |      |         | (637    | ) |   |        |       |  
|         |                           |      |          |          |   |      |         |         |   |   |        |       
|         | Pro forma net loss        |      | $        | (126,598 | ) |      | $       | (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,

44



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




2. Summary of Significant Accounting Policies 
(Continued)


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 3,835,565, 4,344,958 and 5,494,673
shares of common stock at December 31, 1997, 1998 and 1999,
respectively, and warrants to acquire up to 1,179,483, 1,119,245
and 40,829 shares of common stock at December 31, 1997, 1998
 and 1999 respectively, were the only securities issued which
would be included in the diluted earnings per share calculation
if dilutive.

In 1997, 1998 and 1999, 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 computations for the years ended
December 31 1997 and 1998, respectively (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, 1999.

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 stockholders equity.

New Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board
issued FAS 131, Disclosure about Segments of an
Enterprise and Related Information. In October 1997,
the American Institute of Certified Public

45



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




2. Summary of Significant Accounting Policies 
(Continued)


Accountants issued Statement of Position 97-2
(SOP 97-2), Software Revenue
Recognition. Effective January 1, 1998, the Company
adopted FAS 131 and SOP 97-2. The adoption of
FAS 131 has not had a material impact on the Companys
financial statement disclosures. 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,
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 intends to
adopt this statement when required; however, it is not expected
to have a material impact on our financial position or results of
 operations.

3.   Property and Equipment

Property and equipment as of December 31, 1998 and 1999 is
summarized as follows (in thousands):

|                                                |  |              |         |      |  |   |         |  
|----------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | -
|                                                |  |             
|                                                |  | December 31,
|                                                |  |             
|                                                |  | 1998         |         | 1999
|                                                |  |              |         |     
|Computer equipment                              |  | $            | 15,039  |      |  | $ | 17,329  |  
|                                               
|                                               
|                                               
|                                               
|Office equipment and other                      |  |              | 4,310   |      |  |   | 4,631   |  
|                                               
|                                               
|                                               
|                                               
|Purchased software                              |  |              | 5,112   |      |  |   | 6,631   |  
|                                               
|                                               
|                                               
|                                               
|Leasehold improvements                          |  |              | 3,349   |      |  |   | 4,405   |  
|                                                |  |              |         |      |  |   |         |  
|                                                |  |              | 27,810  |      |  |   | 32,996  |  
|                                               
|                                               
|                                               
|                                               
|Less: Accumulated depreciation and amortization |  |              | (15,190 | )    |  |   | (18,474 | )
|                                                |  |              |         |      |  |   |         |  
|                                                |  | $            | 12,620  |      |  | $ | 14,522  |  
|                                                |  |              |         |      |  |   |         |  

Depreciation and amortization expense of property and equipment
totaled approximately $7.1 million, $7.6 million and
$7.2 million in 1997, 1998 and 1999, 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
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 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. If the Company fails to pay the
required royalties,

46



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ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




4.   Licensing Arrangement 
(Continued)


breaches any material term under the licensing arrangement or if
the current Chairman of the Board and Chief Executive Officer of
the Company voluntarily terminates his employment with the
Company prior to May 1999, the license may become
non-exclusive, at the option of Partners. If Partners elects to
convert the license to non-exclusive, it must return 370,609
shares of Common Stock to the Company. This provision expired
May 1999, whereby Partners did not convert the license to
non-exclusive.

At the time the license arrangement was consummated, the licensed
 technology had not reached technological feasibility and had no
alternative future use. The licensed technology being developed
consisted of enterprise-wide, clinical information software. The
Company released certain commercial products derived from the
licensed technology in late 1998. The Company accounted for the
license arrangement with Partners by recording a credit to
additional paid-in capital of $1.5 million (representing the
 estimated fair value of the licensed technology) and a
corresponding charge to its statement of operations for the year
ended December 31, 1996. The charge was taken because the
technology had not reached technological feasibility and had no
alternative future use.

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
$2.5 million, $1.2 million and $976,000 for the years
ended December 31, 1997, 1998 and 1999 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 May 1997, the Company declared a three-for-two split for
all Voting Common Stock and Non-Voting Common Stock issued and
outstanding. In addition, the shareholders approved an increase
in the number of authorized shares of Voting Common Stock from
30,000,000 to 50,000,000. 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
May 1997 and June 1998 stock splits as if they 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 are cumulative and accrue 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,

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ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




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


including voting rights, ability to redeem and liquidation
preferences as the Series B. The Series B has
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 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
$4.1 million and $10.7 million for the years ended
December 31, 1997 and 1998, respectively. During the years
ended December 31, 1997 and 1998, dividends and accretion on
 the Series C was $1.8 million and $200,000,
respectively. 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 analogously to 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 is recorded as an
increase to net loss available to common stockholders in the
accompanying statement of operations.

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 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.

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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




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


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.

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 is
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.

Voting and Non-Voting Common Stock

Holders of Common Stock are entitled to one vote per share.
Holders of Non-Voting Common Stock do not have voting rights
other than as provided by statute.

Undesignated Preferred Stock

The Company has available for issuance, 5.0 million 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.

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ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999


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

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.

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 .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.

Significant transactions of Transition during the three years
ended December 31, 1998, after giving effect to the 0.525
conversion ratio were as follows:

1996 Recapitalization



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In January 1996, prior to its contemplation of an initial
	public offering, Transition effected a leveraged recapitalization
	 transaction (the  Recapitalization), in which
	Transition repurchased 15,011,012 shares of Common Stock then
	issued and outstanding from New England Medical Center, Inc.
	(NEMC) and other stockholders of Transition for an
	aggregate amount of approximately $111.4 million.
	Additionally, Transition incurred approximately $4.8 million
	 in costs related to the Recapitalization (approximately
	$3.4 million is included in the statement of operations). Up
	 until the Recapitalization, Transition was a majority-owned
	subsidiary of NEMC. In addition, Warburg, Pincus Ventures, L.P.
	(WP Ventures) purchased from certain executive
	officers of Transition shares of Common Stock, including shares
	of Common Stock acquired by such executive officers pursuant to
	their exercise of stock options, for an aggregate of
	$9.0 million. WP Ventures then contributed such shares
	of Common Stock to Transition. The principal purpose of the
	Recapitaliztion was to provide liquidity to Transitions
	existing stockholders while permitting them to retain an
	ownership interest in Transition. Transition accounted for this
	transaction as a leveraged recapitalization. To finance the
	repurchase of these shares, Transition issued to certain
	institutional investors shares of Series A non-voting
	preferred stock for an aggregate of $20.0 million, shares of
	 Series B convertible preferred stock (convertible into
	4,529,338 shares of Common Stock) for an aggregate of
	$33.6 million and shares of Series C non-voting
	convertible preferred stock(convertible into 187,038 shares of
	Common Stock) for an aggregate of $1.4 million. In addition,
	 Transition entered into a secured term loan in the amount of
	$35.0 million and received an advance of $5.0 million
	under a secured revolving credit facility in the maximum
	principal amount of $15.0 million,

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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




6.   Transition Merger  (Continued)




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | and issued Senior Subordinated Notes, due 2003, in the aggregate
	principal amount of $10.0 million (the Senior
	Subordinated Notes).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | The holder of the Senior Subordinated Notes also received a
	warrant to acquire an aggregate of 156,412 shares of non-voting
	common stock at an initial exercise price of $7.43 per share,
	subject to adjustment in certain circumstances. Transition
	recorded a discount on the Senior Subordinated Notes for the
	estimated fair value of the warrants ($395,000). In addition, in
	the first quarter of 1996, Transition incurred a non-cash
	compensation charge of approximately $3.0 million. This
	compensation charge arose from the purchase by Transition (both
	directly and indirectly, through WP Ventures) from certain of its
	 executive officers shares of Common Stock that had been acquired
	 by such officers immediately prior to the Recapitalization
	through the exercise of employee stock options. The amount of the
	 compensation charge was equal to the difference between the
	approximately $766,000 exercise price paid by such officers upon
	such exercise and the proceeds received by the officers from the
	purchase by Transition of such shares.
|
| | During 1999, 156,320 shares of Common Stock were issued related
	to the warrants issued in conjunction with the Senior
	Subordinated Notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Transition Initial Public
Offering



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On April 18, 1996, Transition completed an initial public
	offering of 3,622,500 shares of its common stock that generated
	net proceeds of $114.4 million. A substantial part of the
	proceeds were used to redeem $20.6 million of Series A
	preferred stock and accrued dividends (included as part of the
	recapitalization on the statement of changes in
	stockholders equity), to repay the $34.7 million
	outstanding principal amount and accrued interest under a secured
	 term loan facility, to repay the $10.3 million outstanding
	principal amount and accrued interest related to the senior
	subordinated notes and to repay the $5.1 million outstanding
	 principal amount and accrued interest under a revolving credit
	facility.

Acquisitions



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On July 22, 1996, Transition acquired substantially all of
	the outstanding stock and a note held by a selling principal of
	Enterprising HealthCare, Inc. (EHI), based in Tucson,
	 Arizona, for a total purchase price of approximately
	$1.8 million in cash. EHI provides system integration
	products and services for the health care market. The acquisition
	 was accounted for under the purchase method of accounting and
	accordingly the results of operations of EHI are included from
	the date of the acquisition. Acquired technology costs of
	$1.6 million are being amortized on a straight-line basis
	over 7 years.                                                                                                                                                                                                                                                                                                                                             
|
| | 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. The amount allocated to acquired in-process research
	 and development ($2.4 million) was based on the results of
	an independent appraisal. 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 written off
	at the date of the acquisition.
|
| | 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




| |                                     
| | ------------------------------------
| | 6.   Transition Merger  (Continued)





| |                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Unaudited pro forma results of operations have not been presented
	 for EHI and Vital, as the effects of these acquisitions on the
	financial statements are not material. For unaudited pro forma
	results of operations for the years ended December 31, 1997
	and 1998, as if the HV acquisition had occurred on
	January 1, 1997 (Note 7).

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, for
$30.0 million, 30,000 shares of Series B and warrants
to purchase up to 1,799,715 shares of Non-Voting Common Stock to
private investors. 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.

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   | 

52



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




7.   Acquisitions  (Continued)


|                                |                                     |   |         |        | 
|------------------------------- | ----------------------------------- | - | ------- | ------ | 
|                               
|                               
|                               
|                               
|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.

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  | 

53



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




7.   Acquisitions  (Continued)


|                                |                                     |   |        |       | 
|------------------------------- | ----------------------------------- | - | ------ | ----- | 
|                               
|                               
|                               
|                               
|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.

Effective January 30, 1998, the Company acquired the net
assets of the Emtek Healthcare Division of Motorola, Inc.
(Motorola), (Emtek) 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.

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  |  
|                                                     |  |   |        |  

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

54



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




7.   Acquisitions  (Continued)


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

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

|                                                     |  |        
|---------------------------------------------------- |  | -------
|                                                    
|                                                    
|                                                    
|                                                    
|Cash                                                 |  | $25,000
|                                                    
|                                                    
|                                                    
|                                                    
|Liabilities assumed                                  |  | 4,306  
|                                                     |  |        
|                                                     |  | 29,306 
|                                                    
|                                                    
|                                                    
|                                                    
|Current assets                                       |  | 9,830  
|                                                    
|                                                    
|                                                    
|                                                    
|Fixed assets                                         |  | 778    
|                                                     |  |        
|                                                     |  | 10,608 
|                                                    
|                                                    
|                                                    
|                                                    
|Identifiable intangible assets (acquired technology) |  | $18,698
|                                                     |  |        

Unaudited pro forma results of operations as if the
aforementioned acquisitions had occurred on January 1, 1998
is as follows including the acquisition of HV discussed in
Note 6 (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   | )    |  | $ | (.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 1997, 1998 and 1999 MSI paid distributions to
stockholders of $495,000,$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 ending 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 General Atlantic Partners,
LLC. The Company purchased 3,400,000 shares of common stock for
$34,000, which represents 34% of the outstanding common stock on
an as if converted basis of HEALTHvision, Inc. The Company
accounts for the investment using the equity method of
accounting. This entity is a start-up enterprise that bears no
relationship to the acquisition of HealthVISION by Transition in
December 1998 (Note 6). 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. As of
December 31, 1999, Healthvision, Inc has total revenues of
approximately $3.7 million

55



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




7.   Acquisitions  (Continued)


(unaudited), a net loss of approximately $6.0 million
(unaudited) and total assets of approximately $22.4 million
(unaudited).

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.

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 banks 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, 1998 and
1999, the Companys borrowing rate under the Facility was
6.85% and 5.92%, 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, 1999.

As of December 31, 1999, the Company has $50.0 million
available for future borrowings under the Revolver. The Revolver
expires in August 2001. Under the terms of the Revolver, the
 Company pays an annual commitment fee of .375% for any unused
balance, as defined. Additionally, the Company pays a fee of
 .125% for any Letters of Credit issued under the agreement. As of
 December 31, 1999, unused Letters of Credit totaling
approximately $300,000 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 merger, the convertible debt was converted into
102,515 shares of Common Stock of the Company.

9.   Other Current Liabilities

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

|                                    |  |              |        |      |  |   |        | 
|----------------------------------- |  | ------------ | ------ | ---- |  | - | ------ | 
|                                    |  |             
|                                    |  | December 31,
|                                    |  |             
|                                    |  | 1998         |        | 1999
|                                    |  |              |        |     
|Accounts payable                    |  | $            | 7,782  |      |  | $ | 6,864  | 
|                                   
|                                   
|                                   
|                                   
|Accrued compensation and incentives |  |              | 15,206 |      |  |   | 16,982 | 
|                                   
|                                   
|                                   
|                                   
|Customer deposits                   |  |              | 9,576  |      |  |   | 4,154  | 
|                                   
|                                   
|                                   
|                                   
|Accrued royalties                   |  |              | 6,586  |      |  |   | 4,640  | 
|                                   
|                                   
|                                   
|                                   
|Accrued interest                    |  |              | 295    |      |  |   |       | 
|                                   
|                                   
|                                   
|                                   
|Other                               |  |              | 9,415  |      |  |   | 8,648  | 
|                                    |  |              |        |      |  |   |        | 
|                                    |  | $            | 48,860 |      |  | $ | 41,288 | 
|                                    |  |              |        |      |  |   |        | 

During the quarter ended June 30, 1999, the company
initiated a restructure of its operations. This restructure was
completed during the quarter ended September 30, 1999 and
resulted in a charge totaling $5.1

56



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




9.   Other Current Liabilities 
(Continued)


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 are included in other current liabilities.

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):

|                                                     |  |                          |         |      |  |      |         |   |  |   |        |  
|---------------------------------------------------- |  | ------------------------ | ------- | ---- |  | ---- | ------- | - |  | - | ------ | -
|                                                     |  |                         
|                                                     |  | Years Ended December 31,
|                                                     |  |                         
|                                                     |  | 1997                     |         | 1998 |  | 1999
|                                                     |  |                          |         |      |  |     
|Statutory federal income tax rate                    |  | $                        | (39,761 | )    |  | $    | (10,683 | ) |  | $ | (3,212 | )
|                                                    
|                                                    
|                                                    
|                                                    
|In-process research and development                  |  |                          | 4,418   |      |  |      | 813     |   |  |   |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|State income taxes                                   |  |                          | (4,516  | )    |  |      | (872    | ) |  |   | (374   | )
|                                                    
|                                                    
|                                                    
|                                                    
|Non-deductible deal costs                            |  |                          |        |      |  |      | 1,546   |   |  |   | 650    |  
|                                                    
|                                                    
|                                                    
|                                                    
|Non-deductible amortization                          |  |                          | 747     |      |  |      | 927     |   |  |   | 2,610  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Other                                                |  |                          | 232     |      |  |      | 237     |   |  |   | 326    |  
|                                                    
|                                                    
|                                                    
|                                                    
|Valuation allowance, includes effect of acquisitions |  |                          | 46,976  |      |  |      | 12,284  |   |  |   |       |  
|                                                     |  |                          |         |      |  |      |         |   |  |   |        |  
|Income tax provision                                 |  | $                        | 8,096   |      |  | $    | 4,252   |   |  | $ |       |  
|                                                     |  |                          |         |      |  |      |         |   |  |   |        |  

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

|                                             |  |              |         |      |  |   |         |  
|-------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | -
|                                             |  |             
|                                             |  | December 31,
|                                             |  |             
|                                             |  | 1998         |         | 1999
|                                             |  |              |         |     
|Deferred tax assets:                         |  |              |         |      |  |   |         |  
|                                            
|                                            
|                                            
|                                            
|Intangible assets                            |  | $            | 35,546  |      |  | $ | 34,747  |  
|                                            
|                                            
|                                            
|                                            
|Deferred revenue                             |  |              | 7,752   |      |  |   | 434     |  
|                                            
|                                            
|                                            
|                                            
|Allowance for doubtful accounts              |  |              | 1,097   |      |  |   | 2,760   |  
|                                            
|                                            
|                                            
|                                            
|Accrued expenses                             |  |              | 2,448   |      |  |   | 3,644   |  
|                                            
|                                            
|                                            
|                                            
|Depreciation and amortization                |  |              | 1,111   |      |  |   | 1,148   |  
|                                            
|                                            
|                                            
|                                            
|Other                                        |  |              | 2,481   |      |  |   | 1,843   |  
|                                            
|                                            
|                                            
|                                            
|Net operating loss carryforwards             |  |              | 23,084  |      |  |   | 36,984  |  
|                                             |  |              |         |      |  |   |         |  
|                                             |  | $            | 73,519  |      |  | $ | 81,560  |  
|                                             |  |              |         |      |  |   |         |  
|                                            
|Deferred tax liabilities:                    |  |              |         |      |  |   |         |  
|                                            
|                                            
|                                            
|                                            
|Unbilled receivables                         |  | $            | (2,445  | )    |  | $ | (7,718  | )
|                                            
|                                            
|                                            
|                                            
|Capitalization of software development costs |  |              | (1,992  | )    |  |   | (3,016  | )
|                                             |  |              |         |      |  |   |         |  
|Net deferred tax asset                       |  |              | 69,082  |      |  |   | 70,826  |  
|                                             |  |              |         |      |  |   |         |  
|Valuation allowance                          |  |              | (69,082 | )    |  |   | (70,826 | )
|                                             |  |              |         |      |  |   |         |  
|                                             |  | $            |        |      |  | $ |        |  
|                                             |  |              |         |      |  |   |         |  

At December 31, 1999, the Company had net operating loss
carryforwards for federal income tax purposes of approximately
$92.0 million. The carryforwards expire in varying amounts
through 2019. Of this amount, $21.0 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.

57



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




10. Income Taxes  (Continued)


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
carryforwards 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 limitation on their future use. As of December 31,
1999, 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 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. There are currently
4,333,333 shares of common stock reserved under the Incentive
Plan, together with the 1996 Stock Plan and the 1998 Employee
Stock Purchase Plan. Options granted under the Incentive Plan
will be granted at the fair market value of the stock as of the
date of grant.

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. The
 1999 Plan increases the

58



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




11. Employee Benefit Plans  (Continued)


number of shares of common stock reserved under the 1999 Plan,
together with the Incentive Plan, the 1996 Plan and the 1998
Employee stock purchase Plan to 7,000,000.

|                                 |                                |         |           |           |   |         |      |          |  |         |           |           |   |   |       |       |  |  |           |            |   |   |       |       | 
|-------------------------------- | ------------------------------ | ------- | --------- | --------- | - | ------- | ---- | -------- |  | ------- | --------- | --------- | - | - | ----- | ----- |  |  | --------- | ---------- | - | - | ----- | ----- | 
|                                 |                                |         |           |           |   |        
|                                 |                                | 1997    |           | 1998      |   | 1999   
|                                 |                                |         |           |           |   |        
|                                 |                                |         |           | Weighted  |   |         |      | Weighted |  |         |           | Weighted 
|                                 |                                |         |           | Average   |   |         |      | Average  |  |         |           | Average  
|                                 |                                |         |           | Exercise  |   |         |      | Exercise |  |         |           | Exercise 
|                                 |                                | Options |           | Price     |   | Options |      | Price    |  | Options |           | Price    
|                                 |                                |         |           |           |   |         |      |          |  |         |           |          
|Outstanding at beginning of year |                                |         | 2,679,224 |           |   | $       | 3.75 |          |  |         | 3,835,565 |           |   | $ | 7.78  |       |  |  | 4,344,958 |            |   | $ | 10.69 |      
|                                
|                                
|                                
|                                
|                                 | Granted                        |         |           | 1,823,559 |   |         |      | 14.27    |  |         |           | 1,217,463 |   |   |       | 18.85 |  |  |           | 3,141,212  |   |   |       | 19.62 | 
|                                
|                                
|                                
|                                
|                                 | Exercised                      |         |           | (356,102  | ) |         |      | 3.05     |  |         |           | (465,008  | ) |   |       | 2.61  |  |  |           | (1,610,556 | ) |   |       | 3.75  | 
|                                
|                                
|                                
|                                
|                                 | Forfeited                      |         |           | (311,116  | ) |         |      | 17.04    |  |         |           | (243,062  | ) |   |       | 21.06 |  |  |           | (380,941   | ) |   |       | 22.53 | 
|                                 |                                |         |           |           |   |         |      |          |  |         |           |           |   |   |       |       |  |  |           |            |   |   |       |      
|Outstanding at end of year       |                                |         | 3,835,565 |           |   |         | 7.78 |          |  |         | 4,344,958 |           |   |   | 10.69 |       |  |  | 5,494,673 |            |   |   | 16.98 |      
|                                 |                                |         |           |           |   |         |      |          |  |         |           |           |   |   |       |       |  |  |           |            |   |   |       |      
|                                 | Exercisable at end of the year |         |           | 1,280,480 |   |         |      |          |  |         |           | 1,654,029 |   |   |       |       |  |  |           | 1,115,891  |   |   |       |       | 
|                                 |                                |         |           |           |   |         |      |          |  |         |           |           |   |   |       |       |  |  |           |            |   |   |       |      

|                                      |  |          |       |          |  |          |       |          |  |          |       |          |  |   |       |  |  |   |       |  |  |   |       | 
|------------------------------------- |  | -------- | ----- | -------- |  | -------- | ----- | -------- |  | -------- | ----- | -------- |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                      |  |          |       |          |  |         
|                                      |  | 1997     |       | 1998     |  | 1999    
|                                      |  |          |       |          |  |         
|                                      |  | 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      |  | $        | 34.56 |          |  |          |       |          |  | $        | 24.49 |          |  |   |       |  |  |   |      |  |  |   |       | 
|                                     
|                                     
|                                     
|                                     
|Option price = fair market            |  |          | 6.54  |          |  |          |       |          |  |          | 21.31 |          |  |   |       |  |  | $ | 19.62 |  |  |   |       | 
|                                     
|                                     
|                                     
|                                     
|Option price < fair market value      |  |          |      |          |  |          |       |          |  |          |      |          |  |   |       |  |  |   |       |  |  |   |       | 
|                                     
|                                     
|                                     
|                                     
|Weighted Fair Market Value of Options |  |          |       |          |  | $        | 12.49 |          |  |          |       |          |  | $ | 18.43 |  |  |   |      |  |  | $ | 18.51 | 

During 1997, pursuant to the 1996 Stock Plan, the Board issued
15,000 shares of Common Stock to employees and non-employees for
services. Compensation expense of approximately $97,000 was
recorded in 1997 related to these transactions.

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 awards in 1997, 1998 and 1999 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, |   |     
|                            |             | 1997 |   | 1998         |   | 1999
|                            |             |      |   |              |   |     
|Net loss:                   |             |      |   |              |   |      |   |         |   |  |   |        
|                           
|                           
|                           
|                           
|                            | As reported |      | $ | (126,328     | ) |      | $ | (35,276 | ) |  | $ | (9,445  | )
|                           
|                           
|                           
|                           
|                            | Pro forma   |      |   | (131,806     | ) |      |   | (47,780 | ) |  |   | (23,788 | )
|                           
|                           
|                           
|                           
|Basic net loss per share:   |             |      |   |              |   |      |   |         |   |  |   |        
|                           
|                           
|                           
|                           
|                            | As reported |      | $ | (8.60        | ) |      | $ | (1.95   | ) |  | $ | (.27    | )
|                           
|                           
|                           
|                           
|                            | Pro forma   |      | $ | (8.95        | ) |      | $ | (2.48   | ) |  | $ | (.68    | )
|                           
|                           
|                           
|                           
|Diluted net loss per share: |             |      |   |              |   |      |   |         |   |  |   |        
|                           
|                           
|                           
|                           
|                            | As reported |      | $ | (8.60        | ) |      | $ | (1.95   | ) |  | $ | (.27    | )
|                           
|                           
|                           
|                           
|                            | Pro forma   |      | $ | (8.95        | ) |      | $ | (2.48   | ) |  | $ | (.68    | )

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 1997,
1998 and 1999: dividend yield of 0% for all years, risk-free
interest rate of 5.55% for 1997 and 1998, and 6.34% for 1999,

59



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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




11. Employee Benefit Plans  (Continued)


expected life of 9.98, 8.35 and 7.44 based on the plan and
volatility of 103% for 1997 and 1998, and 133% for 1999.

The following table summarizes information about stock options
outstanding at December 31, 1999:

|                        |  |                     |           |                     |  |          |     |             |  |          |       |  |  |  |         |  |  |   |       | 
|----------------------- |  | ------------------- | --------- | ------------------- |  | -------- | --- | ----------- |  | -------- | ----- |  |  |  | ------- |  |  | - | ----- | 
|                        |  |                     |           |                     |  |         
|                        |  | Options Outstanding |           |                    
|                        |  |                     |           | Options Exercisable
|                        |  |                     |           | Weighted            |  |          |     |            
|                        |  |                     |           | Average             |  | Weighted |     |             |  | Weighted
|                        |  | Number              |           | Remaining           |  | Average  |     | Number      |  | Average 
|                        |  | Outstanding         |           | Contractual         |  | Exercise |     | Exercisable |  | Exercise
|Range of Exercise Price |  | at 12/31/99         |           | Life                |  | Price    |     | at 12/31/99 |  | Price   
|                        |  |                     |           |                     |  |          |     |             |  |         
|$0.01-$6.00             |  |                     | 380,268   |                     |  |          | 6.3 |             |  | $        | .42   |  |  |  | 241,797 |  |  | $ | .60   | 
|                       
|                       
|                       
|                       
|$6.01-$12.00            |  |                     | 1,318,603 |                     |  |          | 7.4 |             |  |          | 7.56  |  |  |  | 548,294 |  |  |   | 7.53  | 
|                       
|                       
|                       
|                       
|$12.01-$18.00           |  |                     | 1,408,541 |                     |  |          | 9.5 |             |  |          | 14.85 |  |  |  | 136,028 |  |  |   | 14.22 | 
|                       
|                       
|                       
|                       
|$18.01-$24.00           |  |                     | 1,934,227 |                     |  |          | 9.2 |             |  |          | 22.16 |  |  |  | 5,780   |  |  |   | 21.79 | 
|                       
|                       
|                       
|                       
|$24.01-$30.00           |  |                     | 90,815    |                     |  |          | 8.0 |             |  |          | 28.86 |  |  |  | 39,854  |  |  |   | 28.70 | 
|                       
|                       
|                       
|                       
|$30.01-$36.00           |  |                     | 102,371   |                     |  |          | 6.0 |             |  |          | 35.47 |  |  |  | 53,544  |  |  |   | 35.41 | 
|                       
|                       
|                       
|                       
|$36.01-$42.00           |  |                     |          |                     |  |          |    |             |  |          |      |  |  |  |        |  |  |   |      | 
|                       
|                       
|                       
|                       
|$42.01-$48.00           |  |                     | 159,848   |                     |  |          | 8.1 |             |  |          | 44.46 |  |  |  | 57,266  |  |  |   | 44.40 | 
|                       
|                       
|                       
|                       
|$48.01-$54.00           |  |                     |          |                     |  |          |    |             |  |          |      |  |  |  |        |  |  |   |      | 
|                       
|                       
|                       
|                       
|$54.01-$60.00           |  |                     | 100,000   |                     |  |          | 8.3 |             |  |          | 60.00 |  |  |  | 33,328  |  |  |   | 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 Voting 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, 1997, 1998 and
1999, respectively, there were 1,999,867, 1,792,854 and 327,626
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, 1997, 1998 and 1999, respectively, there
 were 9,048, 56,551 and 11,764 options outstanding related to
PCSs stock option plan. As of December 31, 1997, 1998
and 1999, respectively, there were 0, 117,090 and 72,435 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 year-end December 31, 1998 the
Board authorized matching contributions totaling $ 1,400,000. No
contributions were authorized for 1999.

Transition maintained a savings plan pursuant to Section 401
 (k) of the Code. In connection with this plan, employer
contributions totaling $306,000 and $376,000 were made in 1997
and 1998, respectively. 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

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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999




11. Employee Benefit Plans  (Continued)


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 $7.0 million, $8.7 million and
 $11.6 million for the years ended December 31, 1997,
1998 and 1999 respectively. Future minimum rental payments for
noncancelable operating lease as of December 31, 1999 are as
 follows (in thousands):

|                         |  |        
|------------------------ |  | -------
|Year ending December 31, |  |        
|                         |  |        
|2000                     |  | $7,310 
|                        
|                        
|                        
|                        
|2001                     |  | 6,603  
|                        
|                        
|                        
|                        
|2002                     |  | 6,333  
|                        
|                        
|                        
|                        
|2003                     |  | 5,888  
|                        
|                        
|                        
|                        
|2004                     |  | 3,500  
|                        
|                        
|                        
|                        
|Thereafter               |  | 6,790  
|                         |  |        
|                         |  | $36,424
|                         |  |        

Litigation

The Company is involved in litigation incidental to its business.
 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.

13. Related Party Transactions

During 1997, the Company paid AIS $1.7 million for certain
transition services provided by AIS related to accounting
services, computer processing and other various activities.

During 1997, Eclipsys paid a total of $348,000 to certain
subsidiaries of AIS and Alltel Corporation related to the
purchase of various goods and services.

The Company leases office space from a former stockholder of SDK.
 During the year ended December 31, 1997, 1998 and 1999, the
 Company paid $178,000, $330,000 and $330,000, respectively,
under this lease. The lease is noncancelable and expires in 2009.

In 1997, 1998 and 1999, the Company paid $336,000, $446,000 and
$530,000, 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 $219,000, $310,000 and $339,000,
 during 1997, 1998 and 1999, 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
General Atlantic Partners, LLC. The Company purchased 3,400,000
shares of common stock for $34,000, which represents 34% of the

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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999


13. Related Party Transactions  (Continued)



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 accounts
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 $ 787,000 and the Company recorded a charge of
$4.8 million in the accompanying statement of operations.

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##### Table of Contents



ECLIPSYS CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


For the Three Years Ended December 31, 1999


ECLIPSYS CORPORATION

SCHEDULE II-VALUATION OF QUALIFYING ACCOUNTS


For Each of the Three Years in the Period Ended December 31,
1999





|                                                 |  |              |       |           |  |          |       |           |  |            |       |  |  |   |        |   |  |   |       | 
|------------------------------------------------ |  | ------------ | ----- | --------- |  | -------- | ----- | --------- |  | ---------- | ----- |  |  | - | ------ | - |  | - | ----- | 
|                                                 |  | Balance at   |       |           |  |          |       |           |  | Balance at
|                                                 |  | Beginning of |       |           |  | Acquired |       |           |  | End of    
|                                                 |  | Period       |       | Additions |  | Reserves |       | Writeoffs |  | Period    
|                                                
|                                                
|December 31, 1997Allowance for Doubtful Accounts |  | $            | 325   |           |  | $        | 941   |           |  | $          | 1,473 |  |  | $ | (436   | ) |  | $ | 2,303 | 
|                                                
|                                                
|                                                
|                                                
|                                                
|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 | 
|                                                

63



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##### Table of Contents



Quarterly Results (Unaudited)

The following table presents quarterly statement of operations
data for each of the eight quarters in the period ended
December 31, 1999. 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, 1998


(In thousands)


|             |  |         |         |         |  |         |        |         |  |      |        |   |  |   |         |   |  |   |         |  
|------------ |  | ------- | ------- | ------- |  | ------- | ------ | ------- |  | ---- | ------ | - |  | - | ------- | - |  | - | ------- | -
|             |  | First   |         | Second  |  | Third   |        | Fourth  |  |     
|             |  | Quarter |         | Quarter |  | Quarter |        | Quarter |  | Year
|             |  |         |         |         |  |         |        |         |  |     
|Revenues     |  | $       | 39,199  |         |  | $       | 42,621 |         |  | $    | 46,931 |   |  | $ | 53,707  |   |  | $ | 182,458 |  
|            
|            
|            
|            
|Gross profit |  |         | 15,153  |         |  |         | 16,695 |         |  |      | 19,276 |   |  |   | 24,425  |   |  |   | 75,549  |  
|            
|            
|            
|            
|Net loss     |  | $       | (14,005 | )       |  | $       | (4,394 | )       |  | $    | (2,766 | ) |  | $ | (14,111 | ) |  | $ | (35,276 | )

ECLIPSYS CORPORATION

For the Year Ended December 31, 1999


(In thousands)


|                  |  |         |        |         |  |         |        |         |  |      |        |   |  |   |        |  |  |   |         |  
|----------------- |  | ------- | ------ | ------- |  | ------- | ------ | ------- |  | ---- | ------ | - |  | - | ------ |  |  | - | ------- | -
|                  |  | First   |        | Second  |  | Third   |        | Fourth  |  |     
|                  |  | Quarter |        | Quarter |  | Quarter |        | Quarter |  | Year
|                  |  |         |        |         |  |         |        |         |  |     
|Revenues          |  | $       | 57,378 |         |  | $       | 61,826 |         |  | $    | 64,830 |   |  | $ | 65,293 |  |  | $ | 249,327 |  
|                 
|                 
|                 
|                 
|Gross profit      |  |         | 23,881 |         |  |         | 26,103 |         |  |      | 27,254 |   |  |   | 27,325 |  |  |   | 104,563 |  
|                 
|                 
|                 
|                 
|Net income (loss) |  | $       | (792   | )       |  | $       | (9,060 | )       |  | $    | (1,799 | ) |  | $ | 2,206  |  |  | $ | (9,445  | )






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

Not applicable.

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 2000, and will be 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
2000 and will be incorporated herein by reference. Set forth
below is certain information regarding the Companys
executive officers:

|                        |  |     |    |       |  |                                                               
|----------------------- |  | --- | -- | ----- |  | --------------------------------------------------------------
|Name                    |  | Age |    | Title
|                        |  |     |    |      
|Harvey J. Wilson        |  |     | 61 |       |  | Chief Executive Officer and Chairman of the Board of Directors
|                       
|                       
|                       
|                       
|James E. Hall           |  |     | 66 |       |  | President and Chief Operating Officer                         
|                       
|                       
|                       
|                       
|Gregory L. Wilson       |  |     | 31 |       |  | Senior Vice President, Chief Financial Officer, and Treasurer 
|                       
|                       
|                       
|                       
|T. Jack Risenhoover, II |  |     | 34 |       |  | Senior Vice President, General Counsel Secretary              

Harvey J. Wilson, Eclipsys founder,
served as President, Chief Executive Officer and Chairman of the
Eclipsys Board since Eclipsys was formed in December 1995
until February 1999, and continues to serve as Chief Executive
Officer and Chairman of the Board of Directors. From
January 1984 to December 1995,

64



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##### Table of Contents





James E. Hall, has served as 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 (MMS). From January 1989 to
August 1995, Mr. Hall was President of Asia Pacific
Partners Ltd., a consulting firm. During 1987 and 1988,
Mr. Hall held several positions at Rabbit Software
Corporation, including Chief Operating Officer (1987) and
Chief Executive Officer (1988). In 1985 and 1986, Mr. Hall
was self-employed as a business consultant focussing primarily in
 the technology area. From 1974 to 1984, Mr. Hall held
various positions at SMS, including Senior Vice President of
Marketing and Sales.

Gregory L. Wilson, has served as Senior Vice
President, Chief Financial Officer, and Treasurer since
December 1999. Most recently, he was the President of the
Southeast Region and previously Vice President of Mergers and
Acquisitions for the Company. Before joining the Company,
Mr. Wilson was a Vice President and Healthcare Services
Equity Analyst for Lehman Brothers.

T. Jack Risenhoover, II, 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. Mr. Risenhoover was
 awarded his J.D. from Vanderbilt University School of Law in
April 1994.




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 2000 and will be 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 2000 and will
 be 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 2000 and will be
incorporated herein by reference.

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##### Table of Contents



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
	Ventrues, 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                                                                                                                                                                                                         
| | 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                                                                                                                                                                                                          
| | 10.3* | *      |  | Warrant to Purchase Non-Voting Common Stock, dated January 24,
	1997, granted to First Union Corporation                                                                                                                                                    
| | 10.4* | *      |  | Warrant to Purchase Non-Voting Common Stock, dated January 24,
	1997, granted to BT Investment Partners, Inc.                                                                                                                                               
| | 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 1996
	Stock Plan                                                                      
| | 10.7* | *      |  | 1998 Stock Incentive Plan, as amended                                                                                                                                                                                                                       
| | 10.8* | ****   |  | Amended and Restated 1998 Employee Stock Purchase Plan, as
	amended                                                                                                                                                                                         
| | 10.9* | ****   |  | Inc., Brigham and Womens Hospital,                                                                                                                                                                                                                         
| | 10.10 | **     |  | Employment Letter, dated as of May 1, 1996, to Harvey J.
	Wilson from Integrated Healthcare Solutions, Inc.                                                                                                                                                 

66



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##### Table of Contents



| |       |       |  |                                                                                                                                                                                                                                                 
| | ----- | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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                                                                                                                
| | 21    |       |  | Subsidiaries of the Registrant                                                                                                                                                                                                                  
| | 23    |       |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                           
| | 27    |       |  | Financial Data Schedule (for SEC use only)                                                                                                                                                                                                      
| | 10.14 | ***** |  | 1999 Stock Incentive Plan                                                                                                                                                                                                                       






|        |                                                                                                                                                          
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 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)            

67



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##### Table of Contents






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 29, 2000
|/s/ GREGORY L. WILSONGregory L. Wilson   |  | Senior Vice President, Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer) |  | March 29, 2000
|/s/ STEVEN A. DENNINGSteven A. Denning   |  | Director                                                                                                   |  | March 29, 2000
|/s/ G. FRED DIBONAG. Fred DiBona         |  | Director                                                                                                   |  | March 29, 2000
|/s/ EUGENE V. FIFEEugene V. Fife         |  | Director                                                                                                   |  | March 29, 2000
|/s/ WILLIAM E. FORDWilliam E. Ford       |  | Director                                                                                                   |  | March 29, 2000
|/s/ PATRICK T. HACKETTPatrick T. Hackett |  | Director                                                                                                   |  | March 29, 2000
|/s/ ROBERT KELLRobert Kell               |  | Director                                                                                                   |  | March 29, 2000
|/s/ JAY B. PIEPERJay B. Pieper           |  | Director                                                                                                   |  | March 29, 2000

68