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What Is EDI in Healthcare and Why Is It important?

Electronic data interchange (EDI) in healthcare is a hot topic. According to the 2021 CAQH Index Report, the healthcare industry can save $20 billion by transitioning to fully electronic transactions.

March 15, 2022


Healthcare EDI software not only saves money and streamlines transactions, but it also ensures the security and safety of sensitive data. To answer the question “what is EDI in healthcare,” you need to understand the role of EDI in healthcare organizations, as well as its advantages and benefits.

Defining Healthcare EDI

EDI, abbreviated for electronic data interchange, is the automated transfer of data in a defined format following prescribed data content rules. A wide range of industries use it to share an even broader array of information. Healthcare EDI software transmits details like the coordination of benefits, claims status and information, insurance data, payment data and eligibility forms among healthcare providers, professionals and institutions, clearinghouses, insurance companies and government entities like Medicare. While people often think of medical billing payment information as the sole purview of healthcare electronic data interchange, in reality, healthcare EDI software handles far more than that.

How Healthcare EDI Works

Healthcare EDI transactions usually occur in five steps. Let’s use an inquiry from a medical provider to a payer as an example:

  1. The medical provider initiates the inquiry by supplying specific data, like member ID number and date of birth.
  2. The inquiry goes to a clearinghouse contracted by the provider.
  3. The clearinghouse sends the inquiry to the payer.
  4. The payer responds to the clearinghouse.
  5. The clearinghouse transmits the response to the medical provider.

All involved parties transmit the information using codes laid out in ANSI ASC X12, the general standard that governs all EDI transaction codes, including electronic healthcare transactions.

What Is the Importance of EDI in Healthcare?

EDI standards for healthcare are related to the Health Insurance Portability and Accountability Act (HIPAA), the national health privacy law enacted in 1996. HIPAA 5010 standards and ICD-10 coding requirements impact the use of EDI in healthcare. A standardized EDI process is a vast improvement over the landscape of the 1960s when hundreds of standards were in use. The importance of EDI in healthcare can’t be overstated — without it, data errors, security breaches and payment delays would be much more common.

Setting the Standard for Healthcare EDI Software

At 1 EDI Source, we have years of experience helping medical professionals with their healthcare EDI needs. We’re an industry leader, delivering software that simplifies the process and ensures accurate, timely data transmission. Our EDI experts understand the requirements and concerns of the healthcare industry. Contact us today to take advantage of our expertise.

The Benefits of EDI in Healthcare

As mentioned earlier, healthcare EDI streamlines the transmission of patient medical records and related data. Healthcare professionals can share details more efficiently and quickly with EDI. Other benefits include:

  • Lower administrative costs
  • Enhanced security
  • Better accuracy
  • Improved productivity

Healthcare EDI Transaction Sets

The benefits of healthcare EDI are related to the wide variety of transaction sets available for use by healthcare professionals. These sets cover all the different types of information transmitted among medical providers, clearinghouses and payers. The sets cover EDI healthcare transactions like:

  • Healthcare claim
  • Healthcare claim payment/advice
  • Benefits enrollment and maintenance
  • Healthcare eligibility/benefit inquiry
  • Healthcare eligibility/benefit response
  • Healthcare service review information