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Negotiating a Year 2000 software upgrade

By Harris Pogust, Esq.

Recently, the first Year 2000 litigation involving the practice of medicine was filed and soon thereafter, settled. The case was captioned Courtney v. Medical Manager.

The settlement of the Courtney case was a victory for all physicians. Not only did it help the physicians in that particular suit, but it benefited over 22,000 medical practices across the country. Not only did the case save these physicians tens of millions of dollars in computer upgrade costs, it hopefully served as a wake up call to other medical practices that the Year 2000 issue is one that must be addressed and must be addressed immediately.

In November of 1996, Robert Courtney, D.O., a sole practitioner from Somers Point, New Jersey, purchased version 8.1 of The Medical Manager software manufactured and marketed by Medical Manager. The Medical Manager is a leading practice management software system for independent physician associations, management service organizations, physicians practice management organizations, managed care organizations and other providers of health care services. The software encompasses patient care, clinical, financial and management applications. Dr. Courtney paid approximately $13,000 for this system.

Dr. Courtney is a rare breed these days. He gives his patients his home phone number, makes house calls and sees a significant number of indigent patients at no charge. An expenditure of $13,000 for a practice such as Dr. Courtney’s was a significant capital investment.

In October of 1997, Lonny Matlick, D.O., purchased version 8.1 of the Medical Manager software. Dr. Matlick paid approximately $20,000 for his Medical Manager system. In November of 1997, approximately one month after having the system installed in his office, Dr. Matlick received a letter from Medical Manager informing him that the software he had just purchased one month earlier would not operate properly, if at all, after 12/31/99. Medical Manager did provide a solution: to pay in excess of $20,000 and receive the “new and improved” Version 9, which was Year 2000 compliant. Dr. Courtney, as well as 22,000 other medical practices, received this same letter.

After receiving the November letter, the doctors requested that the company fix the problem for free. It was the doctors’ position that Medical Manager created this problem and therefore should fix the problem at their expense. The doctors argued that the so-called “Millennium Bug” was not in fact a bug but an intentional programming decision on the part of Medical Manager and other individuals in the information technology industry. That being the case, Drs. Courtney and Matlick believed that Medical Manager should not profit from its own intentional conduct. Unfortunately, the company felt differently. Accordingly, the doctors retained our office to pursue their legal remedies against Medical Manager.

In June of 1997, a lawsuit was filed against the company. Within weeks of the filing, word began spreading throughout the medical community regarding the action. Hundreds of physicians began contacting us outraged at being in the same position as Drs. Courtney and Matlick. Numerous medical publications and other news publications began following the lawsuit. By the end of July the stock price of the company fell from $24 to $17 per share. During this time period, five additional class actions were filed against the company. Within six weeks of filing the lawsuit the attorneys representing Medical Manager requesting a meeting to discuss the possible amicable resolution of the lawsuit.

From August through December of 1998, settlement negotiations took place. The main concern of the physicians was that a “patch” be made available as soon as possible so that those practices who had not yet upgraded to Version 9 would not have to spend the thousands of dollars to become Year 2000 compliant. Additionally, many practices were being told by HCFA that they needed to become Year 2000 compliant by September 1, 1999.

As to those practices who had already upgraded to Version 9, it was important that those practices receive something of value back from Medical Manager. Medical Manager would never refund the full value of the software since it was their position that the practices who had upgraded to Version 9 did so because of the additional “bells and whistles” that Version 9 contained and because of any Year 2000 concerns.

As a result of these negotiations a settlement was reached whereby Medical Manager would provide a free upgrade to Version 8.12 of the software for those practices that had purchased the software since 1990 and had not already upgraded. As to those practices which had already upgraded to Version 9, they had the option of one of four add-on modules which had a retail value of $1000, or they could take part in a cash pool of $615,000.

Since the filing of the Medical Manager lawsuit we have heard from numerous physicians throughout the country who are just being informed that their computer systems are not Year 2000 compliant. As was the case in the Medical Manager, these physicians are being asked to spend thousands of dollars to become compliant. Some of these practices have been successful in negotiating a reduced price for their Year 2000 upgrade. For others, the software manufacturer has refused to provide such a remedy. What is a medical practice to do if it is in such a position? Due to the significant time constraints that you are under if you have not begun your Year 2000 remediation, the following steps must be taken immediately:

  • Take an inventory of all of your hardware, software, medical devices and other office equipment.
  • Contact the vendor and/or manufacturer and request information regarding the Year 2000 compliance status of the products.
  • Check the manufacturer’s web site for information concerning the Year 2000 compliance status of the products.
  • Replace or remediate any product which is not Year 2000 compliant.
  • After you remediate or replace, test the product to make sure that it is, in fact, Year 2000 compliant.
  • Contact your vendors who supply your office with necessary supplies and request their Year 2000 compliance status. If their systems go down and they are unable to deliver necessary and essential medical supplies, it will be just as devastating as if your own system went down.

Finally, if you believe that you are being unfairly charged to remediate or replace any product you should contact your attorney who may be able to negotiate a reduced price. Due to the time constraints that you are currently under, if the manufacturer is not willing to negotiate a reduced price, you will have no choice but to pay in order to remediate the product or to purchase a new product altogether. After you have become Year 2000 compliant you may then seek legal redress if you believe you were treated unfairly.

Harris Pogust, Esq., is with the law firm of Sherman, Silverstein, Kohl, Rose & Podolsky in Pennsauken, NJ.

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