HCFA warns noncompliant contractors

In a move to make computer systems that support the Medicare program Year 2000-compliant, the Health Care Financing Administration has threatened to deny new information technology contracts to vendors if they fail to make the systems Year 2000-compliant.

In a letter sent last year to contractors, HCFA administrator Nancy-Ann Min DeParle wrote, "Failure by a contractor to bring its systems into Year 2000 compliance, as defined by HCFA, by Dec. 31, 1998, may be grounds for denial of any new contracts or additional work under the Medicare program or discontinuation of current contracts."

Gary Christophe, chief information officer at HCFA, said the letter is a "deadly serious" effort to push contractors to ensure that the systems they use to process Medicare bills can properly process dates containing 2000 and later years.

"We are saying to contractors that if there's an interruption in medical claims processing because your system is not Year 2000-compliant, we are going to consider that a performance error," Christophe said. "There's a range of potential actions if you fail on this, and we are going to seriously doubt your ability to provide services for us, whether it's a current claims processing contract or some future business."

For years HCFA has struggled to sort out its Medicare processing system, which in the past fiscal year processed $210 billion worth of medical bills for the elderly. The agency has suffered several setbacks, including the cancellation in August of the Medicare Transaction System (MTS), a project to consolidate Medicare's nine processing systems, which are scattered among 60 sites and operated by 70 contractors.

The cancellation of MTS, which was to have been Year 2000-compliant, combined with HCFA's ultimatum to contractors, caused the Office of Management and Budget to downgrade the Department of Health and Human Services' -- under which HCFA operates -- progress in fixing computers to accept 2000. HHS was listed as one of seven agencies that have shown insufficient progress toward solving its Year 2000 problems and must redirect all funding for new IT systems into making older computer systems Year 2000-compliant.

According to the OMB report, "Although [HHS] as a whole is making progress, [HCFA] has concerns about the 74 mission-critical systems of its external contractors, such as Medicare fiscal intermediaries and carriers. A little more than half of these contractors have completed their Year 2000 assessments."

According to the letter, HCFA recently conducted a survey to determine if the vendors' systems that process medical bills are Year-2000 compliant. "The survey discovered that some contractors thought they were compliant but in fact were not quite there, and many contractors did not have testing programs in place that we thought were appropriate," Christophe said.

Based on the survey's results, HCFA plans to require regional offices to monitor the progress of contractors and report that progress to the agency's central office.

"We are preparing guidelines for project plans to bring contractor systems into millennium compliance, as well as guidelines for the minimum requirements for testing systems for compliance," according to the letter. "These guidelines will be released to you in the near future."

Joel Willemssen, director for information resources management at the General Accounting Office, said he was "very encouraged by that language [in the letter]. It sounds like they mean business."

Electronic Data Systems Corp., which administers medical claims processing systems in Northern California and New England, said it is working on making its systems compliant.

"We have already begun working with HCFA on a [Year 2000] plan and schedule and a program that will meet the needs of the Medicare transaction program," an EDS spokesman said. "EDS and HCFA share the same goals, and Year 2000 is a very serious challenge."

Other Medicare contractors declined to comment on the letter.