The role of edits - quality-control tests for electronic files

Healthcare Financial Management, Oct, 1995 by James J. Moynihan

Edits are quality-control tests applied to electronic files. In a paper-based environment, clerical workers review information during the keyboard entry process and often correct errors "on the fly." But when those same documents are sent electronically, there are no key entry operators "proofing" the documents once data are in the computer. Because electronic data interchange (EDI) documents are processed without human intervention, X12 EDI standards are designed to facilitate reasonable editing with quality-control tests. Most EDI software products that support the X12 standards incorporate edits.

While all EDI practitioners use edits, use of edits in healthcare EDI is more complex. More edits are applied to a healthcare electronic claim than to any other EDI document. Many payers have established extensive edits as "filters" to ensure the integrity of the data captured by their claims adjudication systems. Most edits are quite reasonable and merely ensure that providers transmit all the information that would have been required on a paper form. But some edits are seen by providers as less reasonable and are a constant source of frustration to them. The provider view of the payer community would be improved if edits were regarded as standard quality controls that improve business for everyone, rather than as "payer requirements." Soon, however, providers will have to begin applying edits to their own incoming EDI documents, such as invoices and remittances.

How should providers deal with edits?

Extensive edits are a good business practice. Their absence can create system chaos.

A healthcare organization's patient accounting department is probably most aware of the importance of edits because quality edits of outgoing claims substantially can reduce days in accounts receivable. The responsibility for maintaining good claims edits often is shared by an organization's business office, the systems vendor for the patient accounting application, and the claims submission vendor. Financial managers should select claims submission vendors on the quality of edits vendors provide and not base their decisions solely on cost.

Provider appreciation of the importance of edits will increase as EDI is more broadly implemented. Historically, providers have transmitted claims electronically, but seldom have providers received any information electronically, except on tape. Even tape transfers illustrate the importance of editing data received. One large hospital system gave up electronic remittance information receipt several years ago because the local intermediary repeatedly provided the wrong tapes to the system.

As providers begin to receive more invoices, remittances, and other documents electronically, edits will become more important. Providers should determine how their accounts receivable systems will respond when an automated remittance processing program receives an electronic remittance containing errors. Providers also must decide who is responsible for the remittance file edits--the bank, the claims submission vendor, or the patient accounting system vendor.

Healthcare financial managers must take responsibility for edits and not assign the task to an information systems department. Accounts payable staff members must review and approve the file format for electronic invoices received and vendor payments made by the provider. Cash managers should be familiar enough with banking transactions to review the bank reporting process. Patient accounting managers must approve the remittance format. All of these professionals know that data errors can degrade the EDI process and, if they work with information systems staff members, that appropriate edits can be put in place.

As the use of EDI expands, providers should be developing policies that support the exchange of X12 standard documents rather than proprietary formats. With the use of X12 documents and EDI software, editing can be implemented at low cost. Policies are needed to ensure the quality of financial and administrative transactions taking place today.

James J. Moynihan is a principal of McLure-Moynihan, Inc., Sherman Oaks, California. He can be reached at (818) 501-3967 or via the Internet at JJMOYNEDI@AOL.COM.