An apparent Y2K computer glitch at a Chicago bank temporarily interrupted electronic Medicare payments to hospitals and other health care providers in at least eight states this week, forcing insurance contractors to send diskettes containing processed claims to the bank by courier so that the payments could be made, federal and state officials said today.
The computer system at the Highland Community Bank had been examined at least twice last year by state and federal banking regulators and had been found to be "satisfactory" in terms of Y2K compliance, officials said. However, on Monday it was discovered the computers would not accept electronic files of processed claims submitted by insurance companies.
Gary Christoph, chief information officer of the federal Health Care Finance Administration (HCFA), which administers the Medicare program, said a technician from the bank's software vendor installed an updated version of the program on Tuesday and that by today the bank had resumed making electronic money transfers to the health care providers' accounts through the Federal Reserve Bank of Chicago.
"As of today, it is fixed," Christoph said. "It has worked off and on, so we've told them [insurance contractors] to keep sending diskettes for the time being until everything is checked out."
Christoph said the breakdown added "an extra day or so" to the time of Medicare reimbursements being deposited to health care providers' accounts, but that the payments are being made well within the two weeks allotted to Medicare by law.
"So we aren't late, in that sense. We're still within the legal bounds," Christoph said. Officials said the states affected are California, Oregon, Washington, Arizona, North Carolina, New York, Idaho and Alaska.
Christoph said that only electronic transfers of processed claims, which account for about 90 percent of all Medicare claims, were affected. He said he did not know how much money had been delayed, but that "significant amounts" were involved. In California alone, over $40 million in Medicare claims are processed each day, he said.
Christoph said he was assured in December by federal banking regulators that the Highland bank, along with all of the 20 banks that have Medicare payment contracts with the HCFA, had been checked for Y2K computer problems and found to be satisfactory.
"We also were assured by the bank that they had done the required testing, which suggests they had the right software in there," Christoph said.
George Brokemond, president of the bank, did not return repeated telephone calls today. James Hadley, vice president of marketing and business development, declined to comment, saying, "I'm not associated with computer systems."
On Monday, the Department of Health and Human Services, of which the HCFA is a part, issued a press release saying that its payment systems, including those operated by contractors, were "operating normally." The release said all states had made initial reports on their Medicaid computer systems "with no problems reported."
Scott Clarke, assistant commissioner of the Illinois Office of Banks and Real Estate, said his agency's examiners and inspectors from the Federal Deposit Insurance Corp. inspected the Highland bank's system in December and had rated it "satisfactory."
Clarke said the state and federal examiners were back at the bank today to investigate the cause of the problem and whether it involved the Y2K computer glitch, in which computers recognize "00" as 1900, not 2000, and malfunction. He said another possible explanation could be that the bank's electronic data transfer software license could have expired at midnight on Dec. 31, thereby making the computers incapable of receiving the processed claims.
"I know it might not be an explanation that would make much different to the hospitals that are waiting for their money, but software expiration could be the problem. We're continuing our investigation into why it occurred," Clarke said.