Chronimed Inc. Year 2000 Readiness Disclosure
The Company's Year 2000 readiness program has been developed with the objective that neither the Company's business performance nor the functionality of its products and services will be materially affected by the computation or storage of dates prior to, during, or after the year 2000.
Members of the Year 2000 team are currently involved in the process of evaluating all information systems, equipment, facilities, products, services, business functions and relationships with Company vendors and payors susceptible to possible Year 2000 disruption. The Company is also developing contingency plans to address systems failures, whether internal or external.
All of the Company's manufacturing equipment and “owned” medical devices have been inventoried and evaluated. Chronimed's Supreme, Select, and Assure blood glucose meters are all fully Y2K compliant (none of them contain internal chips or dating functions subject to Y2K disruption). The Company is in the process of obtaining compliance information on medical devices it distributes through its Diagnostic Products division and Home Service Medical subsidiary. The Company will pass along information on specific distributed products, manufactured by third parties, on a request basis. The Company is testing and verifying the Y2K functionality of all its manufacturing equipment and is confident its manufacturing processes will not be disrupted. Materials suppliers are being contacted, and contingency plans developed, to assure an adequate inventory of production materials.
Chronimed, Home Service Medical and Statscript pharmacy suppliers are being contacted, and appropriate contingency planning undertaken, to assure that adequate supplies of medications will be maintained. All three companies are confident that they will be able to supply medications. Delivery services, such as UPS and Federal Express, have been contacted to verify their abilities and, while the information they have provided is positive, contingency plans are being developed to address possible disruptions in delivery systems.
The Company has inventoried and performed risk assessment on all office equipment and building facilities for Chronimed's (and Home Service Medical's)Minnesota headquarters, warehouse, and manufacturing facilities, for Clinical Partners' San Francisco, Los Angeles, and Houston offices, and for Statscript's Kansas City headquarters and 27 retail pharmacy stores. Testing and contingency planning are under way for each piece of equipment or system deemed to have a significant impact on operations and for which compliance certification has not been received (vendor communications are ongoing).
The Company has determined that its various financial control systems are either compliant or require minor modifications.
The Company has evaluated all telecommunications equipment and systems and, while most components have been verified as compliant, the Company is continuing to compile compliance information for its many local service providers. Contingency planning will address possible short term disruptions to telecommunications services.
The Company has completed an extensive inventory and assessment of all Company information systems technology and applications. Satisfactory compliance information has been compiled with respect to all hardware. All applications have been categorized with respect to disruption impact and compliance status. Most applications have either been verified as compliant or are in the process of remediation. A small number of applications remain to be replaced or remedied. These remaining applications will be replaced, retired, or remedied well within the Company's readiness program deadlines.
The Company's electronic commerce systems and payor networks have been fully evaluated. Most commerce systems and EDI links have been established as compliant, with continuing information gathering and contingency planning applied to the rest.
The Company is focusing on its major payors (including Medicare/Medicaid systems) and will, within its readiness program deadlines, complete all data gathering, testing, and contingency planning. Contingency planning in this area will in particular address possible delays in cash flow.
Year 2000 expenses have been funded primarily through operating cash flows. While certain core information systems were recently replaced with Y2K compliant systems, these upgrades were strategic and the associated capital costs have not been considered Y2K expenses. The Company does anticipate spending approximately $250,000 on its Y2K readiness program during calendar 1999.
The Company anticipates that its fundamental assessment, testing, and implementation strategies will be completed during July, 1999, and that it will continue to monitor the readiness and functioning of both its own systems and those of its constituents through the year 2000.
Inquiries regarding Chronimed, Statscript, Clinical Partners, or Home Service Medical Year 2000 readiness may be directed to Kenneth S. Guenthner at kguenthn@chronimed.com.