EDI holds potential for cutting receivables processing costs - electronic data interchange - column

Healthcare Financial Management, March, 1990 by Dan Rode

EDI holds potential for cutting receivables processing costs

Electronic data interchange (EDI) technology is moving to the forefront of healthcare receivables and cash management (see this month's Updata) - and it could offer ways to reduce the costs of these operations and solve problems that have plagued UB-82 and 1500 claim submissions.

These expenses contribute to the estimated 1 percent of the gross national product designated as healthcare services.

Transportation, banking, and finance firms have used EDI for some time. The key to EDI involves setting standards by consensus of "all" parties involved with the transactions.

In this case, "all" refers to those participating in deliberations. Opinions of those not attending will not necessarily be considered. Standards now are set through the auspices of the American National Standards Institute (ANSI).

Under ANSI, a committee known as the Accredited Standards Committee (ASC) X12 was formed in 1979 to "develop uniform standards for electronic interchange of business transactions." The committee's top priority is to develop standards to ease electronic interchange in order placement and processing, shipping and receiving, invoicing, payment and cash application data, and other business transactions.

Faster data reporting

According to ANSI, "EDI is the transmission, in a standard syntax, of unambiguous information of business or strategic significance between computers of independent organizations. The users of EDI do not have to change their internal databases. EDI is the common language used to get information from one computer system to another. The user must translate this information from or to his own computer system, but this translation software has to be prepared only once."

The beauty of EDI is that once a standard is set, users can enter the data interchange system with any type of hardware and software as long as they possess a modem. Whether using a personal computer or a mainframe system, users can send and receive data from payers and third-party administrators (TPAs). Clearly, electronic transmission could eliminate some problems found in existing billing data sets, such as UB-82 and 1500.

EDI could expand, in an orderly fashion, the amount of data that can be sent, thus meeting the requirements of most third-party payers. Presumably, if those involved agree on what data to send and how it fits into the X12 format, any data contained in a provider's system that is needed for processing could be transferred and translated.

While data transmission requires careful contracting to define data being transferred, this should be a prime consideration in contracting anyway.

Providers in many areas already complete UB-82 claims in an electronic format. EDI could help transmit additional data required by payers and remain electronic. For this reason, it could expand current electronic methods of claim submission and eliminate slower transmissions, such as tape to tape.

While the original goal of summary data billing was appropriate for UB-82 - and its standards remain appropriate - many payers want additional data. This can be provided without resorting to a paper format or attachment.

EDI also could accommodate, again within standards, managed care billing and some claims processing requirements of payment contracts not based on charges and under other settlement requirements.

Other uses

EDI offers applications beyond claims processing. It could be used for preadmission and registration activities, including certification, authorization, appointments, and reviews (see Exhibit 1). Many of these activities could continue throughout the stay or treatment, as needed. EDI could facilitate medical record transmissions, post claims processing payment, and remittance activities.

Two EDI uses affecting accounts receivable are under study. One concerns transmitting data between employers who purchase large amounts of insurance, insurance companies, and TPAs. This model also could be used by entitlement sections of government agencies and their claims processing sections.

Data sets being considered include beneficiary and dependent information that could be disclosed through EDI on a daily or even hourly basis. Parties involved then would have up-to-date information that could be shared with providers (and possibly by EDI). This information would give providers accurate data on persons covered and when.

Unfortunately, the data set would not necessarily identify specific coverage limitations for all beneficiaries because contract variations are not always identified within an insurer's database.

Other data sets would allow insurers or TPAs to identify claims processed to certain employers for payment. The Health Insurance Association of America reports that about 40 percent of current health insurance policies are the traditional, premium-driven variety.

The majority require employer or union approval before payment can be sent to providers. Transactions between insurers or TPAs and employers or unions, then, could reduce the number of days devoted to processing insurance claims.