June 1999

Y2K Cash Contingency Plan Set

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Catholic Health Initiatives will develop a Year 2000 Cash Contingency Plan to limit the impact of short-term cash deficiencies that may arise due to key payors’ Y2K compliance issues. Catholic Health Initiatives anticipates that delays in payments may occur during the first quarter of calendar year 2000, especially from managed care and commercial payors. Initial projections indicate the organization-wide cash shortfall could approach $250 million.

To minimize the impact of potential shortfalls throughout the organization, Catholic Health Initiatives will secure an external bank line-of-credit facility or alternative financing arrangement to be available by December 31, 1999. The line-of-credit facility will be coordinated by enterprise treasury staff for the benefit of all market-based organizations.

"Market-based organizations will be permitted to overdraft their Cash Management Program accounts during the Y2K cash shortfall period," said Jerry Judd, vice president of treasury services for Catholic Health Initiatives. "The line-of-credit facility will allow cash deficits to be covered throughout the system." Each market-based organization will be charged an interest rate for overdrawn balances, anticipated to be the same rate now charged for overdraft balances in the Cash Management Program. In addition, market-based organizations will not be required to comply with Catholic Health Initiatives’ Working Capital Policy during this period if Y2K payor delays occur. "While market-based organizations will have the flexibility to overdraft cash management accounts during this period, they will be encouraged to aggressively work with payors to resolve and accelerate payment delays and otherwise maintain prudent levels of cash," said Judd.

Because the Y2K Cash Contingency Plan will meet system-wide cash flow needs, market-based organizations should avoid strategies such as accumulating local cash reserves or securing local lines of credit. Additional information on the Y2K cash contingency project will be provided to market-based organizations throughout calendar year 1999.