HCFA may not be ready, but half its users are not

Medicare claims required to have 8-digit dates

Medicare could fall prey to the year 2000 (Y2K) computer bug, according to the latest news from congressional auditors. To help spur clinicians and other health care providers to get their systems ready, the Health Care Financing Administration (HCFA) on April 5 stopped accepting electronic Medicare claims that do not include full 8-digit dates.

As recently as March, Joel Willemssen of the General Accounting Office (GAO) told lawmakers HCFA was nowhere near ready for the millennium problem. "There is a high probability that there will be some system failures," Willemssen said. He said Medicaid also was at risk because some state agencies were falling behind in computer systems upgrades. For you, that means billions of dollars in Medicare and Medicaid benefits could be delayed, miscalculated, or unpaid.

HCFA administrator Nancy-Ann DeParle says GAO is overstating the risks and that fixing HCFA’s computer systems is her top priority. She says progress is being made and that many critical systems are already prepared for Y2K.

More than 150 different computer systems are used in administering the Medicare program, and the agency expects to process more than one billion claims and pay $288 billion in benefits annually by 2000.

In late March, HCFA reported that as of Feb. 28, 1999, all of its internal systems were certified as compliant. The agency also says all Medicare contractors will be Y2K-compliant before this summer.

According to a survey released in late March by Health and Human Services Inspector General June Gibbs Brown, only about half of Medicare providers are Y2K-compliant. The survey of 5,000 doctors, hospitals, nursing homes, home health agencies, and durable medical equipment provi ders did reveal, however, that more than 90% of hospitals and 70% to 84% of other provider groups responding to the survey believe their billing systems will be Y2K-compliant by year-end. Survey responses were received from 49% of hospitals, 41% of nursing facilities, 27% of home health agencies, 26% of medical equipment providers, and 22% of physicians.

Additional survey findings revealed that less than 20% of respondents had tested data flow between their systems and those of their vendors, and less than half the respondents have developed a contingency plan in the event of a Y2K-related system failure.

Concerned that HCFA’s vulnerabilities could spawn a rash of Medicare fraud, Sen. Chuck Grassley (R-IA), chairman of the Senate Special Committee on Aging, wrote in a letter to Finance Committee chairman Bill Roth (R-DE) that the Y2K problem will increase opportunities for foul play. "What better timing for a provider intent on gaming the system than when Medicare computers are in disarray?" If computers fail, fraudulent claims could go undetected. On the flip side, proper claims could be misidentified as fraudulent.

Experts at the Healthcare Information and Management Systems Society’s annual conference in Atlanta in late February warned that physicians and health care institutions in general are way behind other industries and have no idea what may hit them on Jan. 1. Sharon R. Klein, a health care attorney with Dechert Price & Rhoades in Philadelphia, said 30% of the industry has no formal Y2K plans and 90% of physicians are still wondering what to do. About 64% of hospitals have no plans to test their Y2K fixes before the crunch date, reported Robert A. Rankin, Washington correspondent for the Philadelphia Inquirer.

While most industries are spending 5% to 8% of operating revenue on fixing Y2K problems, the health care industry overall is spending only 2%, noted Klein. However, the American Hospital Association in Chicago reported recently that spending to become Y2K-compliant represents about 6.9% of the average hospital’s operating budget and 32% of its capital budget.

Klein said the health care industry is unique in that, unlike other industries, it cannot fully shut down to test entire systems. "We not only have to worry about the hospital functioning, but we will also get the casualties that follow from the year 2000, such as transportation accidents because of signaling problems."

Fred Brown, chairman of the AHA, says hospitals will spend up to $8.2 billion on Y2K issues. His data come from a recent survey of 2,000 community hospitals. The survey compiled these average figures for Y2K compliance spending by size of hospital:

    • 100 beds or less (more than half of all hospitals), $436,000 each;
    • 100 - 300 beds, $1.2 million each;
    • 300 - 500 beds, $3.4 million each;
    • 500 or more beds, $8.6 million each.

In general, smaller hospitals will spend a significantly larger proportion of their operating and capital budgets on Y2K compliance. Most of the expenses of all facilities come from capital expenditures — modifying or replacing hardware. The rest represents operational and consulting expenditures.

Urban hospitals, according to the survey, expect to spend more in absolute terms than their rural counterparts. About 70% of rural facilities anticipate spending up to $500,000, while three-fourths of urban facilities will spend more than that figure. According to 1998 AHA statistics, 56.6% of U.S. hospitals are urban and 43.4% are rural.

The Y2K problem exists in lines of software code that use two digits to represent years. To conserve memory in the early years of computer technology — when data storage space was at a premium — programmers used two digits rather than four to express years, such as "99" for the year 1999. Computers that are not Y2K-compliant will assume that dates occurring after Dec. 31 still use the prefix 19, leading software programs to read 00 as 1900 instead of 2000. That defect could cause computers to crash or spew out incorrect data.

Keith Mallonnee, head of the Y2K compliance project for McKessonHBOC, a medical software company in Atlanta, estimates that the hourly rate charged by programmers who know the computer language needed to correct Y2K problems "has risen to $85 an hour, from just $65 less than 18 months ago."