Adding electronic trading partners - electronic commerce for healthcare organizations

Healthcare Financial Management, April, 1999 by James J. Moynihan

To be financially viable, electronic commerce must be done in volume. Telecommunications costs and hardware and support expenses decrease as they are amortized over greater numbers of transactions. The net effect is that per-transaction costs decline. The overall cost of doing business also declines as the amount of clerical help needed to process paperwork decreases.

To increase the volume of electronic commerce/EDI processing, healthcare organizations need to transact business with increased numbers of trading partners that are able to exchange documents electronically. Today, many healthcare organizations conduct business electronically with a few key distributors, Medicare, Medicaid, anti local Blue Cross-Blue Shield companies. By partnering with additional electronically enabled payers anti suppliers, providers can benefit further from electronic commerce.

Healthcare financial managers often find that 80 percent of their business is transacted with 20 percent of their trading partners. Establishing electronic commerce relations with trading partners that generate the bulk of all transactions is an excellent first goal for an electronic commerce/EDI program. There is no reason to stop when the first goal is achieved. There are strategies for dealing with second-tier trading partners as well.

Claims clearinghouses have provided an excellent way for providers to reach payers whose transaction volume may not be significant compared with Medicare and Medicaid. As the Health Insurance Portability and Accountability Act of 1996 compels more and more payers to receive claims electronically, clearinghouses will be able to deliver more volume. Providers that do not use a clearinghouse today might consider hiring one. Providers might consider using two clearinghouses if doing so makes more payers accessible.

For materials management transactions, healthcare organizations can use the services of their value-added networks (VANs) to add smaller-volume trading partners. VANs often supply limited-capability EDI/electronic commerce software and an electronic mailbox to small companies for a small fee, which the supplier usually pays.

In a recent development, healthcare organizations can use software designed to work over the Internet to conduct electronic commerce. Internet-based electronic commerce may be an effective way not only to eliminate paper but also to transact at least some purchasing electronically.

The technology solutions for adding trading partners may be a combination of clearinghouses, classic EDI, and Internet-based solutions. The goal of all three solutions remains simple - to increase electronic commerce/EDI volume partners and related transaction volume.

James J. Moynihan, MBA, is a principal, McLure-Moynihan, Inc., Agoura Hills, California, and a member of HFMA's Southern California Chapter. His phone number is (818) 706-3882, and his e-mail address is jjmoynedi@aol.com.