Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
SECONDARY ANALYSIS OF MEDICARE 
PROVIDER READINESS FOR Y2K 
JUNE GIBBS BROWN 
Inspector General 
JUNE 1999 
OEI-03-98-00252  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them.  This statutory mission is carried out through a 
nationwide program of audits, investigations, inspections, sanctions, and fraud alerts.  The 
Inspector General informs the Secretary of program and management problems and recommends 
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's Philadelphia Regional Office prepared this report under the direction of Robert A. Vito, 
Regional Inspector General, and Linda M. Ragone, Deputy Regional Inspector General.  Principal 
OEI staff included: 
REGION  HEADQUARTERS 
David Tawes, Lead Analyst
 Bambi Straw, Program Specialist

Tara Schmerling
 Stuart Wright, Program Specialist

David Graf
 Scott Horning, Technical Support Staff

Nancy Gross
 Linda Moscoe, Technical Support Staff

Cynthia Hansford
 Brian Ritchie, Technical Support Staff

Robert Katz
 Barbara Tedesco, Technical Support Staff

Erika Q. Lang

Lauren McNulty

Nancy Molyneaux

To obtain copies of this report, please call the Philadelphia Regional Office at (800) 531-9562. 
Reports are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  June Gibbs Brown

Inspector General 

Secondary Analysis of Medicare Provider Readiness for Y2K, OEI-03-98-00252 

Nancy-Ann Min DeParle

Administrator

Health Care Financing Administration

In your comments on our report, Y2K Readiness of Medicare Providers, you indicated that

the Health Care Financing Administration (HCFA) would appreciate receiving additional

information about our provider survey results.  Specifically, you requested that we (1) address

differences in the Year 2000 (Y2K) readiness from an urban versus rural perspective, and (2)

determine if there was a relationship between providers who contract with vendors for claims

submission and those providers awareness of Medicare contractor outreach. 

Overall, we found little difference between urban and rural providers on most Y2K issues. 

There was also little difference in responses between providers who used a billing service for

claims submission and those who did not.  However, there were some instances where both

these and other variables had an impact.

In addition to addressing these issues, we have also analyzed the Y2K survey responses to

determine if other variables, including provider size and managed care participation, had an

impact on Y2K readiness. 

Our report on Y2K readiness was based on a stratified random sample in which we over-

sampled rural providers.  Therefore, for a more in-depth analysis, we needed to calculate

weighted frequencies from our survey responses in order to allow for the over-representation of

rural providers in our sample.  Additionally, we decided to remove N/A responses (not

applicable or no response given) from our analysis.  Table 1, on page 2, shows the weighted

percentage of providers who responded in each category.  We then used chi-square tests to

determine if differences between two groups were statistically significant.  For the purposes of

this analysis, we determined statistical significance based on a 95 percent confidence level,

meaning that we can be 95 percent confident that the differences between two groups are not

due to random chance.
 Page 2 - Nancy-Ann Min DeParle 
Table 1:  Percentage of Providers 
Nursing  Home Health  DME 
Hospital  Facility  Agency  Supplier  Physician 
Rural  48%  38%  32%  26%  17% 
Urban  52%  62%  68%  74%  83% 
Small Provider  35%  19%  20%  29%  36% 
Medium Provider  29%  60%  51%  44%  41% 
Large Provider  35%  21%  30%  27%  23% 
Billing Service  64%  32%  40%  33%  40% 
No Billing Service  36%  68%  60%  67%  60% 
Managed Care  69%  42%  41%  54%  69% 
Non-Managed Care  31%  58%  59%  46%  31% 
Chain  32%  32%  10% 
Non-Chain  68%  68%  90% 
Freestanding  75%  45% 
Non-freestanding  25%  55% 
Group Practice  53% 
Sole Practitioner  47% 
For hospitals and nursing facilities, we defined small as having 50 beds or less, medium as between 51 and 150 beds, and large as more than 150 
beds. For home health agencies, we defined small as seeing 100 patients or less per year, medium as 101 to 500 patients per year, and large as more 
than 500 patients per year. For durable medical equipment (DME) suppliers, we defined small as submitting 150 claims or less per year, medium as 
between 151 and 2000 claims per year, and large as more than 2000 claims per year. For physicians, we defined small as seeing 1500 patients or 
less per year, medium as 1501 to 7500 patients per year, and large as more than 7500 patients per year. All percentages may not total 100 percent 
due to rounding. 
URBAN AND RURAL PROVIDERS 
Overall, there was little significant difference between urban and rural providers regarding most 
Y2K issues.  However, there were a few specific areas where the responses of urban and rural 
providers differed. 
'	 Rural hospitals were more likely to report having financial and personnel 
problems, while urban hospitals reported more problems with external vendors. 
Additionally, urban hospitals were more likely to have renovated their billing 
systems and to have identified all of their external vendors and contractors than 
rural hospitals. 
'	 Urban nursing facilities were more aware of changes to HCFA forms and of the 
availability of free contractor software than rural nursing facilities.  Furthermore, 
urban nursing facilities were more likely to have identified all of their external 
vendors and contractors. 
'	 Of home health agencies that could not enter 8-digit dates on the HCFA-1450 
form, 71 percent of urban agencies said they would be able to within 6 months; 
only 38 percent of rural agencies reported they would be able to do so.  In  Page 3 - Nancy-Ann Min DeParle 
addition, urban home health agencies were more likely to have renovated their 
medical records systems. 
'	 Rural DME suppliers were more likely to have renovated their medical records 
systems. 
'	 Rural physicians were more aware than urban physicians of contractor Y2K 
efforts and the availability of free software.  Urban physicians were more likely to 
have identified all of their external vendors and contractors. 
USING EXTERNAL BILLING SERVICES FOR CLAIMS SUBMISSION 
We found that providers contracting with a billing service for claims submission and payment 
activities had a significant impact on just a few variables. 
'	 Hospitals using a billing service were much more confident in their ability to 
enter 8-digit dates on HCFA forms, were more aware of Medicare contractor 
outreach, and were more likely to have requested free contractor software. 
'	 Nursing facilities using a billing service were less aware of the availability of the 
free contractor software. 
'	 Home health agencies using a billing service were more likely to have identified 
all of their external vendors and contractors. 
'	 Physicians not using a billing service reported more dissatisfaction with 
contractor outreach.  Additionally, they were more likely to have discussed Y2K 
issues with their external vendors. 
ADDITIONAL ANALYSIS 
In completing our analysis, we examined several other variables to determine if additional 
factors affected providers Y2K awareness and readiness.  There were very few statistically 
significant relationships between these variables and our survey questions.  We have provided a 
summary of those that were statistically significant, by provider type. 
Hospitals 
1.	 Hospitals that were part of a managed-care organization were more likely to have 
inventoried and renovated their biomedical equipment. 
2.	 Chain hospitals were much less aware of issues regarding HCFA claim forms and 
Medicare contractor outreach.  For example, while 32 percent of chain hospitals did not  Page 4 - Nancy-Ann Min DeParle 
know if they could enter 8-digit dates on the HCFA-1500 form, only 15 percent of non-
chain hospitals did not know this. 
3.	 Large hospitals (more than 150 beds) were significantly ahead of small hospitals (50 beds 
or less) in most areas, including assessment, renovation, and communication with 
vendors.  Additionally, 45 percent of small hospitals reported having financial problems, 
compared to only 20 percent of large hospitals. 
Nursing Facilities 
1.	 Nursing facilities that provided care for managed-care organizations were more likely to 
have developed strategies for dealing with their computer systems and biomedical 
equipment.  Nursing facilities with managed-care contracts also were more likely to have 
assessed and renovated their clinical systems and biomedical equipment.  These nursing 
facilities also reported having better interaction with their vendors. 
2.	 Chain nursing facilities seem to be trailing non-chains in the billing area.  For example, 
only 38 percent of chains reported that their billing systems were ready, while 56 percent 
of non-chains said their billing systems were ready. 
3.	 Only 29 percent of freestanding nursing facilities had developed Y2K contingency plans. 
Meanwhile, 49 percent of non-freestanding facilities had made contingency plans. 
Home Health Agencies 
1.	 Non-freestanding home health agencies had taken more steps to prepare their biomedical 
equipment for Y2K than freestanding agencies.  In addition, non-freestanding agencies 
reported better communication with external vendors. 
2.	 Large home health agencies reported significantly more progress than did small and 
medium-sized agencies in both their billing and clinical systems.  Furthermore, while 60 
percent of large home health agencies had developed Y2K contingency plans, only one-
third of small and medium-sized agencies had done so. 
Durable Medical Equipment Suppliers 
1.	 No chain DME suppliers reported having financial or personnel problems due to Y2K. 
However, 16 percent of non-chains reported financial problems and 21 percent reported 
personnel problems.  Additionally, chain suppliers were more confident in their ability to 
enter 8-digit dates on HCFA-1500 forms. 
2.	 Large DME suppliers were more likely to have developed Y2K strategies than small or 
medium-sized suppliers.  Large suppliers also reported better cooperation with their  Page 5 - Nancy-Ann Min DeParle 
external vendors.  In addition, more than three-quarters of large suppliers indicated they 
could enter 8-digit dates on HCFA-1500 forms; approximately half of small and 
medium-sized suppliers reported they could do the same. 
Physicians 
1.	 Over 80 percent of physicians providing service for a managed-care organization were 
aware of changes to the HCFA-1500 form, while less than 60 percent of physicians who 
were not part of a managed-care plan knew about the changes. 
2.	 Physicians who are part of a group practice reported higher levels of Y2K strategizing 
and system renovation than sole practitioners.  Additionally, group physicians reported 
better communication with their external vendors. 
3.	 Larger physician practices were more likely to have discussed Y2K issues and tested 
data exchange with external vendors.  Furthermore, 82 percent of large practices were 
receiving Y2K assistance from external sources, while only 56 percent of medium-sized 
practices and 29 percent of small practices were receiving outside assistance. 
We are making no recommendations, as our goal is to respond to your request for additional 
analysis of our Y2K survey data.  We hope that this analysis is helpful in shaping your continued 
efforts to assist Medicare providers in their Y2K readiness activities.  There is no requirement 
for you to comment on this report.  However, if you have any comments or questions, please 
call me or George Grob, Deputy Inspector General for Evaluation and Inspections, or have your 
staff contact Mary Beth Clarke at (202) 619-2481. 
cc: 

Kevin L. Thurm

Deputy Secretary

John J. Callahan 
Assistant Secretary for 
Management and Budget 
Melissa Skolfield 
Assistant Secretary for 
Public Affairs