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EDI in Healthcare: A Brief History

Posted by Shandra Locken on Fri, May 10, 2013 @ 10:27 AM

EDI in healthcareWelcome to the first in a series of blogs where we will briefly describe the history of EDI in several different industries.  In this first one, we will discuss the history and evolution of EDI in healthcare.  Everyone knows about the Health Insurance Portability and Accountability Act (HIPAA) but what many don't know is that in 1991, the Workgroup for Electronic Data Interchange (WEDI) was formed as an answer to the Bush Administration's concern for rising healthcare costs.  Essentially, WEDI paved the way for HIPAA to become a reality and many of HIPAA's provisions are based on the recommendations of WEDI.  So in 1996, everything changed in the healthcare industry when President Clinton signed HIPAA into law.  Before HIPAA, there were over 400 different medical forms used in the healthcare industry.  While EDI implementation had been attempted in various manifestations (i.e. WEDI), HIPAA actually mandated it.

EDI was quite simply something that needed to happen in the healthcare industry.  Using paper was inefficient and the cost due to human error was significant.  One study estimated that EDI could save the healthcare industry $20-$43 billion.  Like any major changes in big industry, EDI implementation has been a very slow process.  The area that has seen the most changes with the HIPAA mandate is within health insurance.  The most common EDI healthcare forms being used are the 837 (Health Care Claim), 835 (Health Care Claim Payment), 834 (Benefit Enrollment), 270 (Health Care Eligibility/Benefit Inquiry), 271 (Health Care Eligibility/Benefit Response), 276 (Health Care Claim Status Request) and 277 (Health Care Claim Status Notification).  In spite of all this, many providers have not yet adopted EDI because they are only required to IF they send ANY information electronically.  With HIPAA, it's all or nothing.  Unfortunately, they don't realize the potential cost savings EDI can offer!  See this link for more information about who falls under HIPAA.

One of the big issues that HIPAA and by extension EDI, seemed to have solved was in the areas of privacy and security.  According to Wikipedia, one of the base recommendations from WEDI was to "...preserve confidentiality and privacy rights of individually identifiable health care information."  In fact, today HIPAA is better known to the average person as privacy and security laws than anything else, certainly not EDI.  Yet, EDI is the mechanism that allows patient information to be exchanged privately and securely.  As of April 21, 2005, HIPAA's security provisions went into effect for all covered entities except for small health plans, as they were given one additional year to comply.  The Department of Health and Human Services' website presents guidelines for technical security in the four following areas: access control, audit controls, integrity controls and transmission security.  Any good EDI software package should have the bells and whistles needed to comply with HIPAA.  But it should be stated that HIPAA violations can incur penalties and fines of up to $250k and prison sentences of up of 10 years.  Therefore, if you're looking for a HIPAA compliant EDI solution, go with a proven solution.  Because not everyone looks good in orange.

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Tags: EDI Technology, benefits of EDI, EDI Implementation, EDI compliant