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Importance of EDI in the Healthcare Industry

U.S Healthcare system is considered to be fragmented with uneven health insurance coverages, lack of transparency, regulatory challenges and rising costs of care.Amidst these complexities, there are many layers of organizations involved in the overall system including healthcare providers, insurance companies, hospitals, clinics, independent providers, intermediaries such as medical and financial clearing houses, billing companies. Making sure everyone involved in the process is paid is very important to ensure smooth running of the system.

EDI in the Healthcare Industry

EDI plays a significant role in managing healthcare payments between the concerned organizations through electronic data transmission with standard formatsmostly ANSI. HIPAA (The Health Insurance Portability and Accountability Act) came into existence in 1996, it mandated healthcare organizations to follow a standardized set of rules to submit and process insurance claims. HIPAA transactions are based on ANSI X12 transactions and are meant to improve efficiency and securely transmit healthcare information within the U.S. healthcare.

Benefits of EDI in Healthcare

  1. under HIPAA guidelines/standards, secure transmission of data is mandatory between healthcare providers, patients and payers or insurers and EDI fits this criterion perfectly
    • eliminates errors, reduces administrative burden that occurs due to making multiple phone calls, excessive paper work, keying and re-keying of information, manual data entry, lost emails/faxes
      • saves time, cost and resources by drastically reducing document handling, processing fees and time needed for keying and re-keying information. Personnel can now focus on interacting more with patients and ensuring better customer service and attention to patients’ needs
        • complete visibility throughout the system by making sure every part involved knows where a particular document is and what is required of the individual parties in every transaction.

        The way EDI works in the healthcare claims space is that providers use a clearing house to exchange information between their practice and payers.

        Example of EDI in Healthcare

        Here is what happens behind the scenes when you go visit your physician is:
        1. An EDI 270 inquiry is raised and submitted from the physician’s office with data fields like member ID number, date of birth and Payer ID
          • The EDI 270 inquiry goes through a clearinghouse contracted by the physician’s office/hospital
            • The clearinghouse further sends the EDI 270 inquiry to the payers.
              • Once the payer receives the inquiry, they send the response back to the clearinghouse as EDI 271 with the coverage details/ coinsurance/copayment details
                • The clearinghouse then sends the data to the physician’s office management system.
                  • If there’s an error, the physician’s office will correct it and resubmit it to the clearinghouse for a response

                  Some other healthcare EDI transaction types include:

                  1. EDI 835– Benefits enrollment and maintenance set
                    This transaction is used by employers, unions, government agencies, insurance agencies, associations, or healthcare organizations paying claims. Its aim is to enroll members in a healthcare benefit plan.
                    • EDI 837– Healthcare claim transaction set
                      This transaction is used by healthcare providers and patients to submit healthcare claim information and encounter information.
                      • EDI 276- Healthcare claim status request
                        This transaction is used by healthcare providers to request or verify the status of healthcare previously submitted to a payer, such as an insurance company.
                        • EDI 277-Healthcare claim status notification
                          This transaction is used by healthcare payers and insurance companies to report on the status of claims (EDI 837 transactions) previously submitted by providers.
                          • EDI 278– Healthcare service review Information
                            This transaction is used by hospitals to request an authorization from a payer, such as an insurance company.
                            • EDI 820- Payroll deducted and other group premium payment for insurance products
                              This transaction serves to make premium payments for insurance products and is used by healthcare institutions to send information to financial organizations.
                              • EDI 834- Benefits enrollment and maintenance set
                                This transaction is used by employers, unions, government agencies, insurance agencies, associations, or healthcare organizations paying claims. Its aim is to enroll members in a healthcare benefit plan.

                              Maintaining compliance and data security is critical in this space. Prior to exchanging documents via EDI, all parties involved have systems in place that adhere to HIPAA standards and requirements, are encrypted and are handled by authorized personnel only. You’ll need to hire the right expertise and partner to ensure your business needs are met with integrity.

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