Y2K compliance could cost hospitals billions

Hospitals will spend up to $8.2 billion to ensure uninterrupted delivery of patient care during the year 2000 (Y2K) transition, according to a survey conducted by the American Hospital Association (AHA) in Chicago.

"The billions that hospitals expect to spend this year come on top of already significantly declining Medicare reimbursement brought by the Balanced Budget Act of 1997," said Fred Brown, AHA chairman, during testimony before the House Ways and Means Committee. Brown also is vice chairman of BJC Health System in St. Louis.

AHA surveyed 2,000 hospital and health system CEOs in January 1999. Five hundred and six surveys were returned, which was a 25.3% response rate. According to the results, on average:

1. Hospitals with 100 beds or fewer will spend $436,000 each.

2. Hospitals with 100 to 300 beds will spend $1.2 million each.

3. Hospitals with 300 to 500 beds will spend $3.4 million each.

4. Hospitals with 500 beds or more will spend $8.6 million each.

Most of the expense (68%) from becoming Y2K-compliant comes from capital expenditures, such as modifying operational expenses or replacing information systems hardware.

The other 32% represents operational expenses, such as assigning personnel to work on Y2K changes and hiring consultants. Respondents report that most of the expenditures for Y2K fixes will likely be incurred in 1999.

Urban hospitals also expect to spend more than rural hospitals. More than 69% of rural hospitals anticipate spending up to $500,000; 75% of urban hospitals will spend more than $500,000.