Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

JUNE 1999 

OEI-03-98-00252 

SECONDARY ANALYSIS OF MEDICARE 

PROVIDER READINESS FOR Y2K 
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 

David Tawes, Lead Analyst

Tara Schmerling

David Graf

Nancy Gross

Cynthia Hansford

Robert Katz

Erika Q. Lang

Lauren McNulty

Nancy Molyneaux

HEADQUARTERS 

Bambi Straw, Program Specialist

Stuart Wright, Program Specialist

Scott Horning, Technical Support Staff

Linda Moscoe, Technical Support Staff

Brian Ritchie, Technical Support Staff

Barbara Tedesco, Technical Support Staff

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 oversampled 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 

Hospital Facility 

Nursing 

Agency 

Home Health 

Supplier 

DME 

Physician 

Rural 

Urban 

48% 

52% 

38% 

62% 

32% 

68% 

26% 

74% 

17% 

83% 

Small Provider 

Medium Provider 

Large Provider 

35% 

29% 

35% 

19% 

60% 

21% 

20% 

51% 

30% 

29% 

44% 

27% 

36% 

41% 

23% 

Billing Service 

No Billing Service 

64% 

36% 

32% 

68% 

40% 

60% 

33% 

67% 

40% 

60% 

Managed Care 

Non-Managed Care 

69% 

31% 

42% 

58% 

41% 

59% 

54% 

46% 

69% 

31% 

Chain 

Non-Chain 

32% 

68% 

32% 

68% 

10% 

90% 

Freestanding 

Non-freestanding 

75% 

25% 

45% 

55% 

Group Practice 

Sole Practitioner 

53% 

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 nonchain 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 onethird 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