Electronic Data Interchange (EDI) in the Healthcare Industry: An Overview

Electronic Data Interchange (EDI) is a process that allows businesses to exchange documents and data with trading partners electronically. By replacing paper transactions, EDI offers a secure, reliable, and efficient way to transmit information. This is especially crucial in the healthcare sector, which stores and transmits enormous amounts of sensitive patient data.

Among the EDI standards for healthcare, X12 837 and 835 are vital for their role in processing claims. These documents are used for activities such as submitting claims and facilitating payments between healthcare providers and insurance companies. They enable a standardized way to transmit data electronically between all parties. Here’s a closer look at how the two standards work and the benefits they offer healthcare organizations.

X12 837

X12-837 is an EDI file that is used for submitting claims from healthcare providers to payers such as insurance companies. The 837 document contains detailed patient information, including the course of treatment, costs and charges, dates of service, etc., which are necessary for processing claims accurately.

X12 835

An X12-835 file is electronic remittance advice sent by payers like insurance companies to healthcare providers after a claim has been submitted via an X12-837 file. It details the payment of the claim with information regarding what charges were accepted or rejected. The document may also include information regarding any denials, co-insurance, co-pay amounts, deductibles, etc.

Benefits of Using EDI in Healthcare

According to one estimate, EDI can speed up business cycles by 61% (study by Dixon Carphone). For healthcare organizations, the benefits of EDI are evident in streamlining claims processing and reducing administrative costs.

1. Saving Costs: By automating manual processes such as printing paper, mailing documents, etc., EDI data exchange reduces not only time delays but also the costs associated with such activities.
2. Saving Time: Using EDI further helps eliminate errors associated with manual entry, which could lead to costly delays in reimbursement cycles.
3. Data Security: Since all parties are required to use standardized formats when exchanging data via EDI, there is less chance of miscommunication and higher data security.

Ultimately, this means a smoother process overall with greater efficiency and transparency throughout all steps of a claim’s journey, from submission to reimbursement.

There is already a high adoption rate for EDI in the healthcare industry. In our experience, approximately 90% of EDI submissions take place electronically today.

The key challenges of using EDI and how to combat them

Compatibility: Ensuring that EDI files are compatible across various systems for seamless sharing of information requires the use of industry-standard formats and in-depth knowledge of the software.

Data Security: Patient data is sensitive and needs high levels of security to prevent unauthorized access or breaches. This requires strong security measures like encryptions and compliance with industry regulations.

Lack of Standardization: Since there are multiple standards for implementing EDI in healthcare, there might be compatibility issues across different computer systems, making it difficult to read and decipher the data.

Since EDI systems can be costly to maintain, many healthcare providers work with specialized third-party experts to streamline the processes. These providers can help you rebuild the software for ease of use and quicker handling, empowering you to create a patient-centric digital-first approach.

To learn more about the application and impact that Electronic Data Interchange can offer, read about the EDI solution we built to improve claim processes for our client with advanced technology leveraging our best-in-class Digital Transformation expertise.