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Testimony on the Provider Year 2000 Readiness by Nancy-Ann DeParle
Administrator, Health Care Financing Administration
U.S. Department of Health and Human Services

Before the House Commerce Subcommittees on Oversight & Investigations and Health & Environment
April 27, 1999

Chairman Upton, Chairman Bilirakis, Congressman Klink, Congressman Brown, distinguished Committee members, thank you for inviting me here today to discuss my number one priority -- the Year 2000 computer challenge. It is a challenge that we at the Health Care Financing Administration (HCFA) and the health care providers who serve our programs' beneficiaries must meet. I am happy to report today that we continue to make remarkable progress. All of HCFA's Year 2000 systems issues will be resolved and thoroughly tested and retested before January 1, 2000.

It is equally essential that providers ready their systems for the new millennium. Our systems will be able to accurately and timely process and pay claims, but providers must be able to generate and submit legitimate claims to our contractors. We are, therefore, engaged in an unprecedented outreach effort to raise awareness of the need to be Year 2000-ready and provide information to health care providers and other parts of the health care system where we have little authority and control. As a part of our broad provider outreach effort, we have:

  • mailed a letter on the importance of the Year 2000 and how to achieve compliance to each of our 1.3 million providers;
  • established a website (cms.hhs.gov/y2k) with information and checklists on what providers must do to meet their Year 2000 responsibility;
  • held Year 2000 Action Week conferences in 12 cities across the nation to raise provider awareness of Year 2000 issues;
  • created a speakers bureau with agency staff around the country who are speaking to provider groups about Year 2000 readiness; and
  • initiated other efforts to work with provider groups and institutions to help them meet their Year 2000 responsibilities.


Our foremost concern has been, and continues to be, ensuring that our more than 70 million Medicare, Medicaid, and Children's Health Insurance Program beneficiaries continue to receive the health care services they need in the new millennium. We are aggressively addressing Year 2000 issues in the systems over which we have responsibility. We continue to test and retest our renovated systems. I am pleased to announce that we have made extraordinary progress on our renovation, testing, and implementation of Year 2000-ready systems.

  • All of our internal systems were renovated, tested, certified, and implemented by the government-wide Year 2000 deadline of March 31, 1999. In fact, our 25 mission-critical internal systems were compliant, including end-to-end and future-date testing, three months ahead of that deadline. Among other things, these internal systems:
    • manage the eligibility, enrollment, and premium status of our 39 million Medicare beneficiaries;
    • make payments to approximately 386 managed care plans on behalf of over six million beneficiaries; and
    • operate HCFA's accounts receivable and payable operations.
  • As of last week, 73 of 75 mission-critical claim processing systems, operated by private insurance contractors that process Medicare claims and pay bills, were certified as compliant, including end-to-end and future-date testing. Since last week the remaining two contractors have furnished documentation of certification, and we are evaluating that information now.

The process by which we analyzed and certified these claims processing systems has received much attention, appropriately, from the Congress, the GAO, and the provider community. I would like to take a moment to explain the process we used for declaring a system to be compliant. As you are aware, we required that all mission-critical systems be renovated, tested, and implemented by the federal government's March 31, 1999 deadline. Seventy of the systems were actually self-certified as compliant by the contractors at the end of 1998, but we accepted only 54 of those certifications -- those with qualifications that we deemed to be minor -- at that time. And we asked the contractors to address and resolve those qualifications. We then required that all contractors, including those that we had previously certified as compliant with qualifications, to complete their Year 2000 readiness work by March 31, 1999, and submit written reports on the status of their systems by April 5, 1999.

We thoroughly reviewed all of the certifications and accompanying qualifications, if any, that we received by April 5, 1999. We supplemented our analysis of the paperwork with evidence gathered by our own on-site review teams. We provided all the certifications and accompanying qualifications to our independent verification and validation (IV&V) expert, AverStar, and, in conjunction with them, then made an assessment of each system. Also, as a part of our ongoing collaboration with the Department of Health and Human Services Office of the Inspector General (OIG) and the General Accounting Office (GAO), we provided these oversight bodies all of the certification and qualification information and reviewed our analysis and conclusions with them. Because of the rigor and thoroughness of our testing and reviews, I am quite confident that our systems will be able to process and pay claims timely and appropriately at the turn of the millennium.

Our progress on remediation and testing has been so successful that we would like to attempt to carry out the Fiscal Year 2000 and Calendar Year 2000 provider payment updates as close to their statutory schedule as possible. We had previously announced to the Congress and provider community that we might have to delay these updates. In consultation with our IV&V contractor, we recently determined that the updates to hospitals, skilled nursing facilities, home health agencies, and other Part A providers can be implemented on schedule on October 1, 1999 without jeopardizing our Year 2000 readiness. Our IV&V contractor describes these changes at that time as "low impact." However, because of the potential for system disruptions, we cannot make changes to the International Classification of Disease, 9th Revision, Clinical Modifications (ICD-9-CM) coding for fiscal 2000.

We also hope to implement the updates to physicians and other Part B providers and suppliers starting January 17, applying them retroactively to all claims for services on or after January 1. Our IV&V contractor describes this as the "optimal solution" because it avoids a payment freeze while providing a reasonable amount of time for cleaning up any Year 2000-related problems identified in early January before the systems changes would be made. Of course, our top priority will remain the readiness of our systems, but as long as our Year 2000 efforts continue on track, we will try our best to meet our statutory obligations and implement these updates on schedule.

All of our remediated claims processing systems are implemented and paying claims today. And we have given providers the opportunity to test with those systems to determine whether their claims, including future-dated claims, can be successfully accepted and processed. Our test results have been encouraging, thus far. For example, a major national hospital network has future-date tested successfully with nine claims processing contractors. We do not know of any other payers that are giving providers the opportunity to test the submission of future-dated claims.

Such provider testing gives us a better indication of how many providers have actually done the necessary renovations to make their billing systems compliant. As such, we will continue to closely monitor these provider tests, as well as track the number of providers and other claims submitters who test simulated future-date claims with the claims processors. This will help us refine and target our future outreach efforts to providers who may not be making adequate progress in meeting their Year 2000 responsibility. Of course, providers receive payment from sources other than Medicare. We hope that our outreach efforts will prompt providers to ensure that other payers also are meeting their Year 2000 obligations.

Being able to submit claims and get paid is, however, only one reason why health care providers must meet their Year 2000 responsibility. Computer system problems could impact quality of care and patient safety. Patient management systems, clinical information systems, medical devices, such as defibrillators and infusion pumps, and even elevators and security systems all must be checked, renovated, and tested to make sure they are ready so that providers can give quality care.

We are concerned that some providers will not meet the Year 2000 challenge on time. Health care sector monitoring by us, the OIG and others, indicates that some providers are substantially behind in their remediation efforts and could well fail. Providers have the primary responsibility to ready their own systems for the Year 2000 in a timely manner to meet the millennium challenge successfully. We do not have the authority, ability, or resources to step in and fix systems for others. We are providing assistance to the extent that we are able, but in some cases that likely will not be enough. This matter is of urgent concern, and literally grows in importance with each passing day.

Provider Outreach Activities.

From our own efforts, we know first hand the difficulties inherent in achieving Year 2000 compliance, and we are eager to share with providers and their billing agents the lessons we have learned along the way. Therefore, as I have mentioned above, last year we initiated a vigorous outreach campaign to raise awareness of this critical issue and to encourage providers to take the steps necessary for ensuring their own millennium compliance.

  • We are leading the health care sector of the President's Council on Year 2000 Conversion. We chair twice-monthly meetings in coordination with a number of provider trade associations and our public sector health partners, like the Food and Drug Administration, the Defense Department, the Department of Veterans Affairs, and the Labor Department, among others, to share insights, raise millennium awareness, and encourage all providers to become Year 2000 compliant.
  • This past January, in an unprecedented step, we sent a letter to each of our more than 1.3 million Medicare and Medicaid providers stressing the importance of Year 2000 readiness, including the need to assess readiness, test systems, as well as develop contingency plans for unanticipated failures. We also provided an inventory checklist of office equipment and supplies they need to assess for Year 2000 compliance. A copy of this letter was printed in the Federal Register and distributed to every Member of Congress.
  • We established a website dedicated to the Year 2000 (cms.hhs.gov/y2k) advising providers how to identify mission-critical hardware and software and assess its readiness; test systems and their interfaces; and develop contingency plans should unexpected problems arise. The website also includes links to other pertinent sites, such as the Food and Drug Administration's website on medical device readiness. The site registered nearly 25,000 visits last month.
  • Last month, we set up a Year 2000 toll-free phone line, 1-800-958-HCFA (1-800-958-4232) where callers can receive up-to-date answers to Year 2000 questions that relate to medical supplies, their facilities and business operations, as well as referrals for more specific billing-related information. The hotline also will update callers on HCFA's Year 2000 policies and provide general "how to" assistance to help callers prepare their own computer systems for the millennium.
  • In March, we hosted Year 2000 Action Week seminars in Washington, D.C. and eleven other cities, including Baltimore; Boston; New York; Philadelphia; Atlanta; Chicago; Dallas; Kansas City; Denver; San Francisco; and Seattle. These conferences provided attendees with detailed information about what doctors' offices, hospitals, equipment suppliers, pharmacies, and other health care providers and their billing agents need to do to be Year 2000-ready.
  • Two weeks ago, we began a series of provider educational conferences which will take place over the next three months in twelve cities across the country. We have already held conferences in Kansas City and Atlanta. Tomorrow, we will hold a conference in Cleveland. In May, we will visit Hartford, Salt Lake City, Los Angeles, Fargo, and Minneapolis. And in June, we will be in Tampa, Phoenix, and Portland, Oregon. These one-day conferences are offered free-of-charge and feature readiness strategies, as well as information about biomedical equipment and pharmaceutical risks. The seminars have been well-received by providers. Over 175 providers attended our conference in Kansas City and Atlanta drew over 200 participants. I invite any of the members of these Subcommittees to participate in these events and my staff would be pleased to work with your staff to make arrangements.
  • We are developing smaller, more individualized Year 2000 educational sessions targeted towards rural providers, in consultation with rural provider associations.
  • And agency staff across the country have been actively involved in sponsoring and participating in conferences, symposiums, and other outreach programs through our speakers bureau. They have made literally hundreds of presentations on Year 2000 issues to providers and others around the nation.

We have been working to address the Year 2000 readiness of managed care plans. Our primary objective -- to ensure that our own internal mission critical systems for paying managed care plans are compliant -- is done. At the same time, we have been proactive in our efforts to raise managed care plans' awareness of the importance of being Year 2000-ready. We have established a Year 2000 managed care workgroup that is focusing its efforts in three critical areas: readiness education and information; certification; and contingency planning. Similar to our efforts to reach the provider community at large, we have sent managed care plans letters providing guidance on Year 2000 readiness; posted updated information on our Year 2000 website; and conducted several national conferences geared specifically towards managed care. In addition, we meet regularly with managed care industry groups and trade associations to discuss and resolve Year 2000 issues. We know that our partners, including the American Association of Health Plans (AAHP) and the Health Insurance Association of America (HIAA) have been actively involved in outreach to their members.

Importantly, we required all Medicare managed care organizations to submit certifications to us about their Year 2000 readiness by April 15, 1999. We are quickly working to obtain an initial sense of the certifications submitted under the managed care data request. We also are requiring them to provide contingency plans by July 15, 1999. Also, earlier this year, we contracted with an IV&V expert, SRA, Inc., to help us assess health plan readiness. We currently are establishing criteria for identifying managed care organizations that will receive on-site reviews and are planning reviews at all national Medicare plans and those with more than 50,000 Medicare enrollees. We share the OIG's concern over the readiness of small plans and will include a number of these smaller plans in our review efforts. By September 1999, we should have a more accurate assessment of overall plan readiness. We will work closely with and monitor those plans at greatest risk and are developing contingency plans should problems arise in this area.

I was pleased to learn that some provider associations, including the American Medical Association and the American Hospital Association, have begun to assess the Year 2000 readiness of their membership and to step-up their educational efforts on the critical nature of this problem. This is an essential undertaking. Quite simply, Year 2000 compliance cannot be a one-way street. All providers must meet the Year 2000 challenge head on, or risk not being able to receive prompt payment from Medicare, Medicaid, or virtually any other insurer, as well as risk serious compromise to patient care and safety.

We also welcome Congress' help in making all providers aware of the need to become Year 2000-ready and appreciate your ongoing attention to this critical issue. You can help in identifying additional opportunities to publicize the Year 2000 message and we encourage you to stress the importance of this issue whenever you meet with providers.

Achieving Year 2000 Readiness.

One of the first steps providers should take to achieve millennium readiness, and perhaps the easiest, is changing Medicare claims to the Year 2000-compliant format allowing for 8-digit date fields. We required that all providers and their billing agents submit Year 2000-compliant claims by no later than April 5, 1999. To ease the transition to the new format, our claims processing contractors made compliant billing software available to all providers and submitters for free or at minimal cost.

Our electronic claims monitoring indicates that, as of last week, more than 99.98 percent of Part B claims submitters (either physicians, suppliers, or their billing agents) and over 93 percent of Part A submitters (hospitals, other institutions, or their billing agents) that submit claims electronically are using the 8-digit fields. Most of those not yet using the new format are in the process of testing their format changes. We will continue to work closely with providers and health industry trade groups to reach our goal of 100 percent compliance.

While the ability to submit 8-digit date claims is an important step toward Year 2000 readiness, it is only a first step. The ability of a provider to submit a claim with 4-digit years does not mean its office computer or practice management software will function into the millennium. If the systems do not function, a provider may not even be able to obtain the information needed to generate a paper claim. Providing quality care to beneficiaries goes well beyond billing and claims processing. It depends upon doctors, hospitals, and other service providers ensuring that their medical equipment will work and their offices remain open. It also depends upon pharmaceutical and medical supply chains continuing to operate uninterrupted.

Providers also need to make sure they are able to submit claims to their State Medicaid systems, and in turn, the State systems must also be ready. We are conducting on-site visits, with the assistance of an expert IV&V contractor, in every State to review Year 2000 readiness and provide advice where necessary. To date, we have visited all 50 States and the District of Columbia. GAO staff have accompanied us on some of these visits. Our preliminary surveys are consistent with earlier work by the GAO that suggests some States may not be ready on time. We and our IV&V team will revisit approximately 35 states between May and the end of August to follow-up on earlier visits and to continue to monitor progress. Again, we do not have the ability, authority, or resources to step in and fix State systems, and can provide only limited assistance. We are sharing whatever survey information we gather directly with the States, to provide them, at a minimum, with an independent appraisal of their Year 2000 issues and progress. It is the responsibility of each State to determine the appropriate steps it must take to meet its Year 2000 responsibility and the needs of its beneficiaries.

Contingency Planning.

Regardless of success in renovating and testing systems for Year 2000 readiness, both we and providers must have business continuity and contingency plans prepared in case unanticipated problems arise. We have undertaken an extensive effort to develop these plans for all our mission-critical business processes, as should providers. Our priorities are to ensure that we can:

  • continue prompt and accurate payments to providers, suppliers, and others;
  • safeguard the Medicare Trust Funds by preventing and recovering inappropriate payments;
  • protect quality of care; and
  • sustain beneficiary entitlement and enrollment.

For HCFA, contingency planning is an agency-wide effort with active participation of all of our senior Executive s. We are closely following the GAO's advice on contingency planning outlined in their August 1998 guidance, Year 2000 Business Continuity and Contingency Planning and in their September 1998 report, Medicare Computer Systems --Year 2000 Challenges Put Benefits and Services in Jeopardy. We have developed and are now validating our contingency plans. This validation phase of our effort will run through the end of June. We intend, however, to provide the Office of Management and Budget with a status of our business continuity and contingency planning on June 15, 1999, as all Federal agencies are doing. Each contingency plan has a designated Emergency Response Team responsible for executing the various contingency plans, if necessary. During the validation phase, these teams will run practice exercises and rehearse plans in a simulated environment.

It is important to note that contingency planning is not a static process. We will continue to rehearse and refine our plans throughout the coming year and up until December 31, 1999. We will make changes, if necessary, as we learn more about the readiness status of those with whom we interact, such as providers, pharmaceutical and medical equipment suppliers, and States, among others.

Our contingency plans will, of course, factor in the possibility of provider failure. I hope the Subcommittees will appreciate the delicate balance that exists between our top two contingency planning goals of paying providers promptly and preventing payment errors. Let me stress that I firmly believe that no contingency plan should cause providers who fail to prepare for the Year 2000 to be rewarded for their lack of attention, effort, or due diligence. It is quite clear that it would not fulfill our fiduciary responsibilities to pay monies from the Medicare Trust Funds in the absence of appropriate evidence that a covered service was delivered to a beneficiary.


We have made remarkable progress in meeting the Year 2000 challenge, as have many providers. However, we remain seriously concerned with the progress of some providers in meeting their own Year 2000 challenges. We are committed to raising awareness and providing as much assistance as we can, but in some cases that may not be enough. We all share a common goal of having our systems and programs function and care for our programs' beneficiaries continue throughout the millennium transition. I thank you for your attention to this essential issue, and I am happy to answer any questions you may have.

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