Good morning. I am Kevin Thurm, Deputy Secretary of the Department of Health and
Human Services. I am accompanied by Dr. John Callahan, the HHS Assistant Secretary for
Management and Budget and our Chief Information Officer (CIO). I am
pleased to appear before this Committee to provide you with a report on the
accomplishments and the challenges faced by the Department of Health and Human Services
(HHS) in ensuring that our systems are Millennium compliant.
The Secretary and I have declared the Year 2000 (Y2K) date issue to be our job #1. We
have taken and will continue to take actions to ensure that HHS information systems are
Year 2000 compliant.
We have involved all parts of our organization, including staff with expertise in
information systems, budget, human resources, and acquisition management in solving the
Year 2000 problem. No matter what else we do and what other initiatives we undertake, we
must ensure that our ability to accomplish the Department's mission is not impaired by the Y2K problem.
For this reason, we established December 31, 1998, as our internal deadline for Year
2000 compliance of mission critical systems, intentionally setting it three months ahead
of the official government-wide deadline of March 31, 1999. This was done in order to
provide a full year of operations in which to detect and remedy any adverse interactions
among HHS systems and those of our many service partners, including other Federal
agencies, States and local governments, Tribes, and contractors. As of March 31, 1999,
most of our mission critical systems were Y2K compliant. We have two internal systems,
Resource and Patient Management System (RPMS) and Payment Management System (PMS). The
RPMS is an integrated solution for management of both clinical and administrative
information in healthcare facilities. The PMS is a centralized electronic payment and cash
HHS's YEAR 2000 EFFORTS
To meet our Year 2000 responsibilities, we have taken a series of strong administrative
actions. We have encouraged aggressive reallocation of funds, where necessary, to meet
Year 2000 deadlines; we have established direct reporting lines between staff working on
Year 2000 activities and the Operating Divisions (OPDIV) Chief Information Officers
(CIOS). Each OPDIV CIO is responsible for regular reporting directly to the OPDIV head and
the Department's Chief Information Officer on
Year 2000 efforts until the Year 2000 date compliance is achieved.
HHS has also taken action to retain, re-employ, and attract qualified information
technology professionals, using both employment and contrActing
March 31, 1998, HHS received Department-wide personnel authorities from the Office of
Personnel Management (OPM) to waive the pay and retirement reduction for re-employed
military and civilian retirees who return to work on Y2K remediation. To date, the Health
Care Financing Administration has used the waiver authority to reemploy forty-one
annuitants, and the Program Support Center has hired one annuitant.
HHS agencies collect a tremendous amount of information that requires data exchanges.
The Department has inventoried our data exchanges and contacted our service partners to
emphasize the importance of ensuring Year 2000 compliance. HHS is working with the
National Association of State Information Resource Executives (NASIRE) and others to
assure a coordinated response. On April 22, 1998, HHS provided a listing of State
interfaces to NASIRE for its review of completeness and accuracy. We have been and will
continue to update this listing monthly until all of our State interfaces are compliant.
HHS continues to update the listing on the GSA web site for NASIRE review. In addition to
data exchanges with States, HHS systems also exchange data with other federal agencies,
local governments, Medicare contractors and fiscal intermediaries, private insurance
companies, universities, banks, and drug manufacturers.
In addition, HHS is requiring all of its Operating Divisions to conduct thorough
testing and independent verification and validation (IV&V) of its renovated systems.
We also know there is a possibility that, try as we might, some systems may not be fully
compliant in time. Consequently, all of our Operating Divisions have submitted initial
business continuity and contingency plans to the Department. These plans will be finalized
and tested throughout 1999 to permit business continuity in the event of system failure.
ENSURING MEDICARE COMPLIANCE
The foremost concern of the Health Care Financing Administration (HCFA) has been, and
continues to be, ensuring that the more than 70 million Medicare, Medicaid, and State
Children's Health Insurance Program (SCHIP)
beneficiaries continue to receive the health care services they need. HCFA has been
aggressively addressing the Y2K issues in those systems over which it has responsibility.
It has also gone well beyond its responsibility as a payer by engaging in an unprecedented
outreach effort to raise awareness and provide information to governmental and private
entities in the health care sector to ensure continuity of needed services and to protect
Fixing Medicare systems has proven to be HHS's
greatest Year 2000 challenge, and we expect it to be our greatest success story. Medicare
is the most automated health care payer in the country. Payment of fee-for-service bills
is accomplished by 60 external contractors that operate and maintain 78 mission-critical
systems that process nearly one billion claims each year from over one million Health
HCFA has aggressively attacked those areas over which it has direct responsibility.
While the entire effort will necessarily continue throughout the year, HCFA has already
accomplished its major milestones. HCFA is confident that its claims processing and
payment systems will work and that hospitals, doctors, and other health care providers
will be timely and accurately paid -- assuming they can appropriately submit bills.
- All of HCFA's 81 internal systems were
renovated, tested, and certified compliant by the government-wide deadline of March 31,
1999. In fact, HCFA's 25 mission-critical
internal systems were compliant three months ahead of the government-wide deadline. Among
other things, these internal systems:
- manage the eligibility, enrollment and premium status of 39 million beneficiaries;
- make payments to approximately 450 managed care plans on behalf of over six million
- operate HCFA's accounts receivable and
- All of the 78 mission-critical external systems that process claims and pay bills have
been renovated, and HCFA will announce the compliance status of these systems in the near
HCFA required that all of the mission-critical external systems be renovated and tested
by March 31, 1999. As the Committee is aware, 54 of the systems were self-certified as
compliant at the end of 1998, some with minor qualifications. A thorough review of all
systems is now underway. HCFA mandated that all contractors, including those that had
previously self-certified with qualifications, submit written certifications and
accompanying qualifications, if any. HCFA is in the process of carefully reviewing all of
the documentation recently received from the contractors and supplementing it, where
necessary, with other evidence gathered by its onsite review teams. HCFA will determine
compliance in collaboration with its IV&V expert, AverStar. HCFA's analysis and
conclusions will also be supported through consultation with the Department's Office of
the Inspector General (OIG) and the General Accounting Office (GAO).
With remediated contractor systems in place, providers have been able to test whether
their claims, with simulated future dates, can be accepted by the contractors. The results
of these tests have been promising so far.
HCFA's progress on remediation and testing
has been so successful that the Agency is now confident it will be able to effectuate the
FY 2000 and CY 2000 provider payment updates in a timely manner. HCFA had previously
announced to the Congress and provider community that it might have to substantially delay
these statutorily-mandated updates. HCFA recently determined that the updates to
hospitals, skilled nursing facilities, home health agencies, and other Part A providers
can be implemented on October 1, 1999. Updates to physicians, clinical laboratories, and
other Part B providers and suppliers, while they cannot take place on January 1, 2000,
will be implemented starting January 17 and apply to all claims received after January 1.
For the remainder of 1999, HCFA will continue to renovate, test, and retest its
systems. In July, HCFA will require recertifications from all of its 78 mission-critical
external systems. By July, HCFA will have made all of the changes required to its payment
systems before it must freeze its systems to perform final tests in a fully
production-ready, integrated environment.
Although HCFA fully intends to have all its systems ready long before January 1, 2000,
it is developing contingency plans for all mission-critical business processes in case any
unanticipated problems arise. The top priorities, as reflected in these plans, are to:
- Process claims so as to be able to pay providers promptly;
- Prevent payment errors and potential fraud and abuse;
- Ensure quality of care; and
- Enroll beneficiaries.
HCFA is closely following the GAO's guidance
on contingency planning. HCFA will soon complete the Agency-wide task of drafting the
contingency plans, defining events that will trigger use of the plans, and establishing
and training implementation teams should the need arise to execute the plans.
Providers must ready their own billing systems for the Year 2000 if the health care
system is to meet the millennium challenge completely and successfully. One of the first
steps is changing the format of Medicare claims to allow for 8-digit date fields. As the
Committee is aware, HCFA required that all providers or their billing agents submit
Y2K-compliant claims by no later than April 5, 1999. HCFA's contractors made compliant billing software
available to all claims submitters for free or minimal cost. We are pleased to announce
that providers have made substantial progress in submitting compliant claims. As of last
week, 99.99 percent of Part B claims submitters were submitting claims with 8-digit date
fields. About 79 percent of the Part A claims submitters were doing the same. HCFA has
been working with industry trade groups to identify the few remaining problems to bring
the compliance rate to 100 percent.
While this is an important first step toward Y2K readiness, it is not the only step.
Providing quality care to beneficiaries goes well beyond processing payments successfully.
It depends upon doctors, hospitals, and other service providers ensuring that their
equipment will work and their offices will remain open. It depends upon pharmaceutical and
medical supply chains, which rely heavily on information technology, continuing to operate
normally. Health care providers must take all steps necessary to fully prepare for the
While HCFA does not have the authority, ability, or resources to step in and fix
systems for others, it has devoted much of its energies toward educating the health care
- Last month, in an unprecedented step, HCFA Administrator Nancy-Ann Min DeParle mailed a
letter to the more than 1.3 million providers serving Medicare beneficiaries explaining
the gravity of the Year 2000 problem and providing a checklist for what must be done to
- HCFA launched a special Y2K Internet site (cms.hhs.gov/y2k) that counsels
providers on how to: identify hardware and software that is mission-critical to their
business operations and assess the readiness of this inventory; test systems and their
interfaces; and develop business continuity plans for unexpected problems. The website
also included links to other essential sites for providers, such as the FDA's site on medical device compliance. HCFA also
recently installed a toll-free provider assistance line (1-800-958-HCFA ) that
updates providers on HCFA's Y2K policies and
provides general assistance to help providers prepare their systems.
- HCFA is also reaching out especially to the more than 300 managed care organizations
(MCOs) with which it contracts. As I mentioned earlier, HCFA's systems for maintaining managed care enrollment and
paying MCOs is already compliant. HCFA is requiring its MCO partners to report on their
Y2K readiness and to submit contingency plans, which HCFA will assess.
- HCFA staff throughout the country have been actively involved in sponsoring and
participating in conferences, symposiums, and other outreach programs. Members of HCFA's Speakers'
Bureau have made hundreds of presentations and answered questions on Y2K issues around the
country. HCFA recently co-sponsored Y2K Action Week conferences in 12 cities across the
country. Soon, HCFA will present listening sessions at ______.
- HCFA is leading the health care sector of the President's Council on Year 2000 Conversion, which includes
working closely with provider trade associations and public sector health partners to
raise awareness of the millennium issue and encourage all providers to become compliant.
Providers must meet the Y2K challenge head on or risk not being able to receive prompt
payment from Medicare, Medicaid, or virtually any other insurer. We welcome Congress' help in making providers aware of the Year 2000 and
energizing them to address their part of the problem. I invite you to help us identify
opportunities to get the Year 2000 message across and encourage you to stress the
importance of this issue when you meet with providers.
Our concern for States is as great as our concern for providers. It is each State's responsibility to take the steps it believes are
appropriate to meet the needs of its Medicaid and SCHIP beneficiaries. HCFA's primary role is to assess, as best its can, each
State's progress and to provide guidance on
remediation, testing, and contingency planning. While HCFA does not have the authority,
ability, or resources to fix State systems, it is doing all it can to assist States.
HCFA's ten regional offices are monitoring
the status of each State's remediation effort.
HCFA also engaged an expert IV&V contractor, TRW, to assist in conducting on-site
visits in every State to provide advice (including examples of best practices) and
validate assessments. To date, HCFA and its IV&V experts have visited 35 States and
the District of Columbia and will visit the remaining States by the end of this month. The
preliminary reports confirm earlier work by the GAO which strongly suggests that some
States will not be ready on time. HCFA and the IV&V team will revisit all Sates where
there appeared to be medium to high risk of some Y2K failure.
HCFA has asked all Medicaid and CHIP Directors to:
- Report the status of their Year 2000 compliance efforts;
- Document contingency plans for systems that may not be compliant; and
- Provide updates to HCFA's regional offices on
In addition to furnishing the services of TRW, HCFA has developed technical assistance
documents, and held regional meetings and workshops for States on how to develop
contingency plans. We know that States and Congress share our goal of protecting all our
beneficiaries throughout the millennium transition.
HCFA's progress in meeting the Year 2000
challenge is due in large part to the outstanding effort and commitment of staff
throughout HCFA and at its Medicare contractors. HCFA has also been greatly aided by wise
counsel from the the IV&V experts, the Office of the Inspector General, and GAO. And,
importantly, HCFA could not have come so far so quickly without the timely support and
funding that this and other Congressional Committees have provided.
THE PAYMENT MANAGEMENT SYSTEM BACKGROUND
The Program Support Center (PSC), operates the Payment Management System (PMS) that
provides centralized electronic funding and cash management service to all organizations
receiving HHS grants. Besides making automated payments, DPM monitors funds in the hands
of recipients, provides debt management services such as debt collection, and serves as a
customer service intermediary between grant recipients and grant awarding agencies.
The PMS is a historically sound and successful system that provides grant payment
services, which include the expeditious flow of cash and corresponding disbursement data
between awarding agencies and grant recipients. HHS has over 30 years experience in paying
grants on a centralized/consolidated basis and in developing and maintaining systems to
support this function. In the 1960s, NIH centralized payments for all of its grants. In
1975, the operation was transferred to the Office of the Secretary and began paying grants
for all the components of HHS, and in the 1989 HHS began paying grants for other Federal
agencies. This operation has proven extremely reliable, efficient, and cost effective --
realizing significant savings due to economies of scale. Indeed, this system was down only
one half day in recent history due to a blizzard during 1996.
HHS is now a recognized leader in the providing funds to recipients of federal grants
on a just-in-time basis. The PMS supports organizations funded by
ten other federal agencies and 42 different subagencies. In FY 1998 the system made
260,000 payments totaling $165 billion to 20,000 grantees. The PMS
can receive automated or manual payment requests, edit them for accuracy and content,
batch them for forwarding to the Federal Reserve Bank for payment, and record the
transaction to the appropriate general ledger accounts.
The current PMS was implemented in 1984. Major enhancements have been implemented, such
as providing the capability for grantees to request funds and obtain information about
their account balances electronically via their personal computers, and allowing the
grantees to report expenditures electronically, thereby reducing the administrative burden
on the grantees. Being committed to good business practices and to improving and
reengineering our systems to provide better customer service, in 1994 a business review of
the PMS Legacy system was initiated, resulting in a recommendation for a major
reengineering effort to modernize the PMS. This system development effort, the fourth
major PMS redesign in 30 years, was identified as mission critical for Y2K compliance
The actual programming of the re-engineered PMS began in January 1998 with a planned
operational date of December 1998. As work progressed, management became concerned about
potential slippage in the schedule. In order to ensure Y2K compliance, the code of the
existing Legacy PMS was renovated. We, therefore, proceeded on a parallel track,
remediating the legacy code while continuing to develop the new PMS.
Y2K ASSESSMENT OF THE PAYMENT MANAGEMENT SYSTEM
The Assistant Secretary for Management and Budget, in conjunction with PSC, initiated
expedited Y2K compliance assessment activity to review PMS alternatives against the
government-wide March 31, 1999, Y2K compliance deadlines imposed by OMB. To accomplish
this, we sought expert outside advice to assess the risk and schedule for completing
development of the new PMS versus testing and implementing the legacy remediated code.
The PMS is undergoing major re-engineering; major development deliveries have been
completed; and testing and Y2K certification activities are still pending. The
Re-engineered PMS introduces additional functionality not available with the Legacy PMS,
in particular a Web-based interface and improved tracking and reporting features. The
Legacy PMS has been Y2K renovated, but has not yet been validated or IV&V certified.
Currently, based on the findings of an independent study neither the Legacy nor the
Re-engineered PMS can be certified as Y2K compliant by March 31, 1999. Our lowest risk
alternative is priority testing and implementation of the remediated Legacy system. Our
secondary initiative will be to continue development of the new generation PMS with the
goal of its implementation prior to January 1, 2000. This strategy is now being
implemented by the PSC. This decision has the full backing of the PSC leadership, me, and
We will report back to the Committee monthly on the status of our PMS Y2K testing and
IV&V certification efforts. It is our expectation that we will have the Legacy system
validated and implemented by June 1999. We would further hope to have a compliant version
of the newly developed PMS prior to year's end.
This Department believes we have thoroughly analyzed and evaluated the options for Y2K
compliance of PMS, and we have chosen the lowest risk alternative, a remediated Legacy
system that will yield rapid PMS Y2K compliance.
BUSINESS CONTINUITY AND CONTINGENCY AND DAY ONE PLANNING
The PSC has also developed a business continuity and contingency plan for the critical
processes of PMS. This plan documents action items required should there be a Y2K problem
and provides for testing of the contingency actions. This document will be shared with our
federal customers. We have been using the PSC quarterly technical bulletin, "Quickdraw,"
to keep our 20,000 recipients informed on Y2K issues and are fully prepared to make
payments to our recipients on time when the year 2000 arrives.
Although we are confident that our efforts to ensure that PMS is Y2K compliant and that
transactions in the end-to-end business process will be successfully executed at the
century roll-over, we have also developed plans to ensure business continuity in the event
of an unforeseen system failure. The end-to-end process includes a number of critical
components in addition to the Payment Management System. The other key components include:
the systems at the grant-awarding agencies that transmit data on new awards or
modifications to awards that are the input to PMS, the NIH/CIT Data Center on which the
PMS software runs, and the Federal Reserve systems that provide for payments into the
commercial banking systems.
The Business Continuity Plan developed by the PSC's
Financial Management Service (PSC/FMS) provides for a back-up process in the event of a
failure in any of these critical resources. Should the granting
systems be affected, or if the agencies are unable to transmit electronically, PSC/FMS can
receive data on paper forms via fax (if operational), mail, or courier service. Normal
in-transit authorization procedures would then be followed. Grant recipients may also
request payments using phone, fax, or courier. Data will be maintained by PSC/FMS on a
backup system using stand-alone compliant PC's. Should a problem occur at the Data Center, an alternative back-up
processing site would be available through the NIH/CIT contingency plan. If a problem
occurs in the transmission of transactions to the Federal Reserve, PSC/FMS will take
advantage of redundancy in the processing path for PMS transactions. Alternative Federal
Reserve processing locations have been established, and the contingency procedures as
established by those organizations will be followed to ensure that transactions can be
completed. Finally, in the event that a Y2K problem prevents PSC/FMS staff from gaining
access to their workplace to conduct business, plans and procedures have been developed
for staff to be able to continue to work from home or from an alternate site.
In preparation for operation at the century roll-over, PSC/FMS, as part of an overall
HHS-wide effort, is also developing a Day One strategy. We will have key program and
systems staff on site during the week preceding and following January 1 to ensure systems
and processes are functioning properly, and to expedite the implementation of any needed
business continuity measures or system contingency plans.
Resource and Patient Management System (RPMS)
The mission of the Indian Health Service (IHS) is to raise the physical, mental,
social, and spiritual health of American Indians and Alaska Natives to the highest level.
This is accomplished through a system of hospitals and clinics that are operated by the
IHS directly or by Tribal or Urban Indian health programs. The range of services includes
inpatient and ambulatory care, with extensive preventive care focused toward health
promotion and disease prevention activities.
The IHS, Tribal, and Urban health programs provide health services to an active
American Indians and Alaska Natives user population of 1.3 million. There are 49 inpatient
facilities, including 37 operated directly by the IHS and 12 operated by Tribal and Urban
Indian health programs. For outpatient services, there are 214 health centers and 287 "other"
types of ambulatory care facilities, which include health stations, satellite clinics, and
Alaska village clinics. Of the total ambulatory facilities, the IHS operates 107
facilities and 394 facilities are Tribally operated. In addition, various health care and
referral services are provided to Indian people away from reservation settings through 34
Urban Indian health programs.
The Resource and Patient Management System (RPMS) is the heart of the medical
facilities' information resource management
activities for the IHS, Tribal, or Urban health programs. RPMS consists of modules that
are developed, maintained, distributed nationally and locally installed at the heath care
facility. Assessment of the 91 RPMS modules determined that 38 were Y2K compliant, 27
needed to be renovated, and 26 could be retired. All of the 27 modules requiring
renovation have been renovated, validated and distributed for implementation to the health
care facilities. A technical expert contractor will conduct and Independent Verification
and Validation (IV&V) through April.
IHS has three unique and extremely important challenges which dramatically affect Y2K
compliancy. First, many of the people served by the IHS live in some of the most remote
areas in 35 different states across the nation. Secondly, unlike many organizations where
implementation of Y2K compliant software is installed at only a single or few facilities,
RPMS implementation is required at 101 IHS operated facilities and 175 Tribal and Urban
facilities. Finally, IHS is not only addressing the Year 2000 issues in the IHS direct
facilities for which we are responsible, but IHS is also actively involving all of the
Tribes and Urban programs who have elected to assume responsibility under Indian Self
Determination for the delivery of services in their own communities. It is projected that
IHS direct facilities will complete implementation by April 30, 1999, and it is
anticipated that Tribal and Urban programs will complete implementation by June 30, 1999.
In addition to addressing the Y2K issues in the IHS direct facilities over which IHS
has direct oversight responsibility, IHS is also engaged in an aggressive outreach effort
to raise Y2K awareness and provide information to the Tribal and Urban health care
facilities where IHS has minimal authority and control. To support outreach activities to
Tribal and Urban programs, a Y2K resource kit composed of videos, brochures, and reference
literatures was produced and distributed to nearly 1100 addressees. A Y2K Internet site
was also established (www.ihs.gov/y2k) and is
continuously being updated to provide a common source of pertinent information for IHS,
Tribal, and Urban Indian programs. The majority of the Tribal and Urban health programs
are on schedule for ensuring Y2K readiness of their health care facilities by June 30,
1999, well in advance of the advent of the millennium.
HHS still faces substantial challenges in its Year 2000 efforts. However, let me assure
you, on behalf of Secretary Shalala, that we will continue to vigorously pursue Year 2000
remediation as our most important initiative. The Department of Health and Human Services
intends to meet its responsibility to ensure that our few remaining systems will be Year
2000 compliant. There will be no cash flow problems for our customers due to Y2K problems.
Our customers will be paid in full and on time. Our Medicare claim will also be paid in
full and on time. Our direct patient care facilities will still provide patient health
We recognize our obligation to the American people to assure that HHS's programs
function properly now and in the next millennium.
I thank the Committee for its interest and oversight on this issue, and I would be
happy to answer any questions you may have.