As providers and suppliers get serious about staving off computer failures related to year-2000 bugs, a group of top healthcare companies last week launched an exhaustive contingency-planning effort on the premise that not everyone will succeed.
The group anticipates a new millennium in which malfunctions or shutdowns of key systems could stop the flow of revenues, refuse to accept postings of accounts receivable and disrupt deliveries of materials critical to production.
A five-month study, coordinated by Nashville-based Odin Group, aims to identify interdependencies among industry sectors, uncover where failures are likely to occur and formulate "action plans" to mitigate risk and work around problems that crop up.
Representing hospitals, health insurers, pharmaceutical firms and medical supply giants, the group's members already are ahead of the pack and spending many millions of dollars assessing and "remediating" their internal systems and computer-assisted equipment, said Daniel Nutkis, chairman of Odin.
But the closer they get to putting their own houses in order, the more they realize that complicated interrelationships with suppliers and customers create so many possible points of failure that no company can be in complete control of its operations, said John Parker Jr., senior vice president and director of information resources with SmithKline Beecham.
Besides troubleshooting business and clinical operations in more than 100 information systems departments in 89 countries, the pharmaceutical giant has to be concerned about electronic linkages with 150,000 suppliers as well as transmissions to and from distributors and customers. "Seemingly simple systems may be performing a very vital function," Parker said.
He's not just speaking hypothetically. Countering naysayers who contend the millennium-related computer problem is being blown out of proportion, Parker said SmithKline's efforts since 1995 have eliminated many points of failure in an internal search and testing blitz that will have logged "500 to 1,000 man-years" (a man-year represents the work of one person for one year) and $160 million in expenses by year-end.
And that doesn't include the expense of replacing obsolete information systems that had to be purged because they treated dates as two digits. Much of the problems with computers stem from reading 00 as 1900 instead of 2000.
Columbia/HCA Healthcare Corp. began a broad effort in January 1997 to assess its store of computerization serving 340 hospitals, determine how to fix faulty code or microchips, conduct testing and put systems and equipment back in production, said Noel Williams, senior vice president for information systems.
Columbia expects that phase of the project to cost at least $60 million. Still uncompleted is an assessment of medical equipment, mainly because vendors don't know yet the extent of their own problems with date and time functions, Williams said.
The industry is only beginning to organize to solicit and update information on the status of devices controlled by microchips programmed to compute dates (See story, p. 42).
By August, Columbia's focus will shift to contingency planning, Williams said. Part of the effort includes training people in all facilities on "what if" scenarios-what if a type of equipment shuts down, for example, or what if an emergency room automatic door doesn't open.
Meanwhile, a team of executives is meeting biweekly to anticipate the impact of computer problems on payers, vendors, banks and other key influences on the Nashville-based hospital chain.
If just one major insurer cannot receive and transmit claims, Columbia will have a cash-flow disruption on its hands. That raises the question: Does the company need to set aside cash reserves in the event of a payer crisis?
Columbia already has witnessed internal computer-generated problems with contracts that cross over the millennium line. Williams said systems have been caught trying to write off accounts as bad debt because they were tagged as woefully old and uncollectible rather than due in 2000.
Parker said such problems at payer organizations could cause havoc unless provisions are made ahead of time to implement alternative plans. A system failure at a Medicare fiscal intermediary, for example, could have a widespread impact on the industry.
But the third-party failure doesn't have to be big to be bad, he added. A small supplier of a key compound could shut down the line at Smith-Kline if its quality-control system went on the blink and could not deliver the raw material for a vital drug.
Even if the supplier's systems were sound, each supplier deals with its own suppliers. And so it goes in the healthcare industry, putting the ability to control problems increasingly beyond the reach of even the most diligent companies, Parker said.
Odin plans to survey about 30 companies participating in the collaborative research organization's efforts. Those companies will identify about 80 other organizations representing a cross section of interrelated partners upon which the Odin membership depends.
From that base of information-gathering, a working group will identify weak links in the industry's value chain, consider best practices in dealing with potential risk, and develop contingency plans to blunt or bypass system failures that are likely to occur, Nutkis said.
The report is targeted for presentation at an Oct. 27 gathering of chief executive officers of companies in the group. As conclusions are drawn and the industry predicament is defined, the group will invite representatives of the Food and Drug Administration, HCFA and Congress to examine the findings and suggest legislative or regulatory assistance, Nutkis said.
Parker said pending demands, such as a proposed national identifier for all citizens, might have to be reconsidered. "If regulators drop that on us in the next few years, that would be a disaster," he said.
With demands of mitigating year-2000 computer problems so high, any new demand "consumes resources and puts added change requirements on an industry that's operating on maximum RPMs now," Parker said.