Understanding Electronic Data Interchange (EDI): What is it and how does it help?

Electronic Data Interchange, or EDI, as it is more commonly known, is a communication protocol used to exchange documents from one computer system to another in a secure and standardized format. For those in business, EDI X12 is a familiar term, as it is the most commonly used system for this exchange of documents.

What is EDI X12?

The EDI X12 standard was developed by the Accredited Standards Committee (ASC), chartered by the American National Standards Institute (ANSI), in 1979. It has since become one of the most popular standards for electronic data interchange. It consists of a set of rules and guidelines that must be followed when sending and receiving data electronically. This ensures that all transactions are conducted securely and efficiently.

EDI X12 is an ANSI-certified standard most commonly used in industries such as retail, finance, logistics, and healthcare. The standard came into effect for the healthcare industry after the USA’s HIPAA (Health Insurance Portability and Accountability Act) regulation of 1996, which called for a national standard for electronic healthcare transactions.

How Does EDI X12 Work?

The purpose of EDI X12 is to enable organizations to securely exchange large amounts of data quickly and accurately without manual intervention. It works by using predefined codes that represent each piece of data transmitted between two parties. For example, one code may represent an invoice number, while another may represent a product type or quantity. By using these predefined codes, both parties can accurately interpret the exchanged information quickly without having to enter or process any of the data manually.

How To Read EDI X12?

Reading EDI X12 requires familiarity with its structure and syntax, as well as some knowledge about how the various codes work together. One needs to know which codes are used for different types of information to interpret the data received correctly.

In healthcare, the most commonly used EDI X12 files are 837 and 835. While 837 is used to submit claims from healthcare providers to payers, 835 is an important document that carries details of the claims processed. These Transaction Sets in these files are designed to work for different audiences. For example, 837 defines different criteria for claims submitted by professionals (like doctors) vs. institutions (like hospitals) vs. dental claims.

In a digital-first world, going paperless is no longer a luxury; it’s a priority. EDI X12 streamlines this electronic exchange of data, creating more efficient operations for businesses. Here are some key benefits:

• EDI X12 makes it easier for businesses to send and receive data electronically. This helps reduce manual paperwork and labor costs associated with traditional paper-based transactions.

• By using an established standard like EDI X12, businesses can streamline their operations and improve communication between partners and customers alike.

• Additionally, because all transactions are conducted electronically, one saves time by eliminating manual processes related to document handling, such as sorting through large stacks of paper documents and manually entering information into databases or other systems.

• Since all documents exchanged via EDI comply with the same set of rules, they are much easier to read than traditional paper documents, which could be difficult to decipher due to handwriting or formatting issues. This makes it simpler to store data as well as retrieve information quickly when needed.

The next article in this series throws light on the use of EDI and its various formats in the Healthcare industry. Click here to learn more about standards used in healthcare industry, their benefits and challenges.

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(Note: This article is part of a series of three articles that aim to demystify EDI, its use in the healthcare industry, and its benefits.)