HIPAA: Electronic Data Interchange (EDI) Rule

What exactly does the electronic data interchange (EDI) rule require?

The EDI rule is very technical and based on the X12N EDI data transmission protocol standard. Although rare allowances are made, the rule requires that any covered entity who electronically transmits data must use this, and only this format in doing so. The EDI rule is a set of data transmission specifications that strictly govern the way data is electronically transferred from one computer to another. The rule specifically defines the different types of transactions that are covered under HIPAA and stipulates the exact format for each transaction record. Electronic transactions such as health care claims, claims status and remittance advices (RA), eligibility verifications and responses, referrals and authorizations, and coordination of benefits (COB) among others are included in the rule. Its intent is to reduce the hundreds of health care data formats to just one that is universally implemented throughout the health care industry. The objective is to greatly increase the portability and accessibility of this information and to decrease the administrative overhead associated with the management of the process.

Will I need to hire a consultant to comply with the EDI Rule?

Although it does not necessarily require the use of a consultant, the electronic data interchange (EDI) standards of HIPAA do necessitate a relatively sophisticated understanding of data transmission protocols. Key determinants of whether a consultant is needed to achieve compliance with the EDI standards are:

1. whether the provider will submit claims directly to the third party payer or electronically through an intermediary, and
2. the technical sophistication of the organization's information technology (IT) resources.

The HIPAA rules clearly expect that the response to the EDI rule will be based on the needs and resources of the provider. As long as all electronic transmissions are EDI compliant, the method of response is left up to their discretion.

Providers can submit claims directly to third party insurers if their software systems have been upgraded to comply with the EDI standards. This approach helps the provider to maintain the maximum amount of control over the claims submission and payment review process, but also necessitates the maintenance of a more sophisticated information system. The management of this direct data exchange is just one element of the claims process within the practice. Additional operations such as scheduling, eligibility verification, coding, payment review, accounts receivables, re-submissions and others should all be well integrated with the mechanics of data exchange and managed through one of the many HIPAA compliant office management software packages. While there are many advantages to automating the exchange of claim information directly with the payer, it also requires an additional degree of integration into the overall office management process to assure the highest possible level of accuracy. Establishment of these operational processes and the training needed to integrate the automated system with office management procedures can sometimes be facilitated with the help of a consultant.

If an intermediary such as a clearinghouse is used to help reformat claims to conform to the HIPAA standard, much of the compliance with HIPAA's EDI rules will be met by that entity. Although the process of initially submitting the claim to the intermediary and the analysis of payments remain under the control of the provider, the mechanical process of reformatting the claim information is performed elsewhere. It is, therefore, possible to maintain a slightly less technical level of automation while benefiting from the electronic submission to the insurer, which has been facilitated by the intermediary. This option will not necessarily require the help of a consultant, but will likely require assistance from the intermediary to establish the connection and implement the initial exchange. However, as in the office management functions identified above, the greater the degree of office function integration, the better the level of overall control of the claims processes and revenue collection.