Health Net 1998 Annual Report Download - page 26

2 4 F O U N D ATIO N H EALTH SYST EMS, I N C.
Year 200 0
The Company recognizes that the arrival of the
Year 2000 requires computer systems to be able to
recognize the date change from 1999 to 2000 and,
like other companies,is assessing and modifying its
computer applications and business processes to
provide for their continued functionality.
The Year 2000 issue is the result of computer
programs being written using two digits rather than
four to define the applicable year.Any of the Com-
pany’s computer programs that have time sensitive
software may recognize a date using “00”as the year
1900 rather than the year 2000.This could result in
a system failure or miscalculations causing disrup-
tions of operations,including,among other things, a
temporary inability to process transactions,prepare
invoices or engage in normal business activities.In
addition, the Year 2000 problems of the Company’s
providers and customers,including governmental
entities,can affect the Company’s operations,which
are highly dependent upon information technology
for processing claims,determining eligibility and
exchanging information.
Project Status– The Year 2000 effort for the
C o m p a ny has the highest pri o rity of technolog y
p rojects and has the full support of the Company ’s
m a n a g e m e n t .The project has dedicated re s o u rc e s
with multiple teams to address its unique systems
e nv i ro n m e n t . U n i f o rm project management tech-
niques have been adopted with overall ove rs i g h t
responsibility residing with the Company ’s Chief
Te c h n o l ogy Officer, assisted by a special project man-
ager hired by the Company. An exe c u t i ve manage-
ment committee is also actively and directly invo l ve d
in an ove rsight capacity in the Company ’s Year 2000
p roject and re c e i ves monthly re p o rts from the pro-
ject manager. In addition, the project manager re g u-
larly meets with the Company ’s audit committee to
f u rther discuss the Company ’s Year 2000 issues.
The Company is addressing its Year 2000
issues in several ways.Selected systems are being
retired with the business functions being converted
to Year 2000 compliant systems.A number of the
Company’s systems include packaged software from
large vendors that the Company is closely monitor-
ing to ensure that these systems areYear 2000 com-
p l i a n t .The Company believes that ve n d o rs will make
timely updates available to ensure that all remaining
purchased software is Year 2000 compliant.The
remaining systems’compliance with Year 2000 will
be addressed by internal technical staff.The Company
has engaged IBM Global Services to assist in the
p r ogr a m management of the project.In addition,
the Company is in the process of assessing its third
party relationships with respect to non-information
technology assets and services.The Company has
also retained legal consultants to assist in the review
of insurance and the Company’s obligations and
rights,and IBM’sThe Wilkerson Group, technical
consultants specializing in health care, to help
develop contingency plans.
The Company has divided its Year 2000
effort into five phases:(1) Assessment and Strategy,
(2) Detailed Analysis and Planning,(3) Remediation,
(4) Testing and Implementation, and (5) Cert i f i c a t i o n .
The Company’s geographical and specialty service
divisions are conducting a detailed self-assessment
as to their compliance, needs, risks,and contingency
planning, which will then be reviewed and priori-
tized at the corporate leve l .D u ring the fourth quart e r
of 1998,the Company continued moving forward
in its efforts to address Year 2000 issues,though its
overall progress was less significant due to organiza-
tional changes and re s t ru c t u ri n g .The Year 2000 pro j-
ect is experiencing increased progress at the start of
1 9 9 9 .The Company has established the third quart e r
of 1999 to complete all phases and is endeavoring
to accelerate completion ahead of that time.The
following table sets forth the estimated percentage
completion of each of the Company’sYear 2000
phases as of February 1999 with respect to its core
applications and information technology infrastruc-
ture, and its Year 2000 project overall.
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
Core applications
and IT
infrastructure 100% 94% 56% 15% 0%
Overall 100% 83% 54% 11% 0%