EDI companies to watch - potential market leaders in healthcare industry EDI in the last half of the 1990s - Industry Overview

Health Management Technology, May, 1995 by Richard Kadas

The product life cycle for healthcare electronic data interchange (EDI) has shifted phases from introduction to growth. In addition, recent consolidations suggest a phase shift. Financial cases for these acquisitions could not have been made earlier.

What is EDI?

EDI is: "The exchange of routine business transactions in a computer-processible format, covering such traditional applications as inquiries, planning, purchasing, acknowledgments, pricing, order status and financial reporting." (DISA 1991)

Healthcare EDI is different from that in other industries because the business of healthcare is healthcare. EDI transaction sets should not be limited to standard business transactions. Financial transactions between insurance-trading partners were first automated, mirroring revenue dependence on insurance. EDI transaction sets were developed for paper-claims transactions. Other financial transactions automated were the EOMB, eligibility/benefit inquiry, benefit enrollment and claim-status inquiry.

No EDI standard transaction set exists for the managed-care encounter. This lags behind the growth of managed care as a health benefit. Subsets of the UB-92 and HCFA-1500NSF are used. It has been, however, at the expense of uniformity and data consistency. Through HCFA, a standard managed-care encounter EDI transaction set may emerge in the next two years.

EDI supporting the clinical practice of medicine will increase. It will support remote physician/physician and physician/facility transactions. Standards will include requests and responses for patient information, order entry and results reporting, scheduling for beds, appointments and treatment facilities. An approved ASC X12 transaction set already exists for laboratory reporting and a patient information transaction set is already proposed and in the ballot stage.

Managed-care and clinical EDI transactions should more than offset volume declines of financial transaction sets tied to insurance. More than 30 percent of employees with healthcare benefits coverage are enrolled in HMOs, and penetration is still growing. This growth is fundamental to the industry.

Managed care created a more transaction-rich environment than existed under the insurance model. Transactions were added for utilization review, case management and referral management. Provider operational difficulties stimulated interest in the benefits of EDI.

EDI company leaders

Which EDI firms will be big winners in second half of the 1990s? It is suggested that the winners will be: * Equifax, * QuadraMed, * CIS, * ENVOY, * NDC (National Data Corporation), and * MCI. * other firms to watch could be CyCare and RIMS.

With the exception of MCI, the companies predicted to be the top companies in the late 1990s are transaction switches with network capabilities (NDC and Envoy) or software developers with either extensive networks or value-added EDI applications for user access. MCI seems to have progressed further than any other telecommunications company in providing a suite of healthcare EDI software adding value to users of their network.

As the industry moves through its product life cycle, opportunity is passing from the smaller entrepreneurial firms to the larger corporate entities. These entities are in the EDI business because of strategic planning. The corporate planners reasoned that the healthcare EDI business would enhance their core businesses. They did not see it as the primary focus of their operations. This movement from small entrepreneurial firms to the larger, stronger corporate entities is expected as the industry shifts cycle phases from introduction toward growth and maturity.

Selection criteria for companies included as leaders in the late 1990s: * EDI experience, * strategy, * size and financial strength, * market share, and, * personnel.

Experience and personnel quality will make the greatest difference between the winners and the losers in the EDI marketplace.

Equifax

Equifax has a well thought out and executed healthcare EDI corporate-development strategy. This strategy has positioned it for continuing growth in the physician segment of the market, which is the least EDI-saturated segment. Equifax's EDI strengths are the company's: 1. size and financial strength, 2. insulation from dependence upon healthcare EDI revenue for survival, 3. experience in nonhealthcare transaction processing businesses, and 4. physician-segment industry strategy.

Equifax acquired ETS (Electronic Tabulating Services) and CHN (Cooperative Healthcare Networks) - both in the physician market segment. On top of the acquisitions, Equifax strengthened its already strong position by making a $10 million investment in PCN (Physician Computer Network), a business directed at physician practice automation.

With the ETS acquisition, Equifax bought one of the largest national libraries of individual-payer formats. With the CHN acquisition, Equifax bought expertise in networking and point-of-service terminals. And, in the PCN transaction, Equifax bought a large direct-market entry into physician-practice automation. Equifax's core-credit reporting and transaction-processing businesses that are financially oriented allow it to meet almost any physician's office need for credit or transaction-processing services.