HIPAA EDI Healthcare EDI Standards

Driven by consumer demands for more efficient Healthcare services at reduced costs, President Clinton signed into law the Health Insurance Portability and Accountability Act of 1996, better known as HIPAA. This law gave the Department of Health the job of mandating standards Healthcare EDI. While attempts to standardize the transfer of Healthcare information have been attempted since the advent of EDI, the first concerted effort to establish standards occurred with the establishment of the Workgroup for Electronic Data Interchange (WEDI) in 1993. While initially suggesting many changes, the U.S. government has now mandated that the proposed standards be applied throughout the industry.

As with any major shift in an industry, the establishment of standards has gone slowly. The first approaches to implementation were published in mid-August 2001 that stated that all doctors, hospitals, health plans, and clearinghouses will begin to start implementing the new federal Electronic Data Interchange (EDI) standards. All Healthcare data transmissions must adhere to these standards, but the required security standards have, by far, the most wide-ranging impact on the industry. These mandated HIPAA standards are having a significant impact on the entire Healthcare industry. The key thing to remember is that insurance companies will shoulder the majority of the burden of compliance to HIPAA as they must convert their systems to accept and implement these changes. The focus in the next few years will be on the implementation of EDI for basic Healthcare business processes which include claims transactions, remittance advices, enrolment and eligibility transactions.

The implementation of “standards” to electronically transfer information in the Healthcare industry has been a long time in coming. Industries such as the Financial Services, Retail and Logistics have had market pressures to force them to reduce processing costs. These industries have log been proponents of standardized electronic transfer of information (EDI) within their industry. By contrast, the Healthcare industry, focused on providing service as providers, has not, as a whole, taken advantage of technology to a similar extent.

The root cause of this lack of action is that the Health Care industry frequently considered technology a “necessary evil” and has been implemented only as required. In addition, implementation of technology was frequently based on a single company’s perspective without concern for all players in the Healthcare industry. Since each system was custom designed and built to a somewhat unique specification, the problem of implementing systems became more and more difficult. What was required was a unifying force to establish standard ways of communicating Healthcare information between players in the industry.

The driving force behind HIPAA is simplification. Traditionally, there were over 400 different medical form "standards". Each of these was supported by a complex, manpower and resource intensive system. People familiar with every “standard” format are required in various roles in every Healthcare company. The costs of training, turnover and the inherent introduction of errors in processing were staggering. The value in implementing HIPAA is cost savings through electronic transfer of information and simplification of the process.

At present, the Health Care industry has worked through the process to define and implement sensible Health Care EDI standards for all flows of information in the industry for all participants. As you can imagine, the process was slow as there are so many interested parties and business processes in the industry to consider when defining the implementation of EDI. Most Health Care EDI Hubs have taken the HIPAA guidelines and implemented their own “flavour” of them to meet their business needs which are documented as “Companion Guides”. The guides explain the essential interpretation of the standards based on the company’s business practices. For a flavour of what information is being sent and received and how EDI has been implemented, the following is a brief description of HIPAA EDI transaction sets and how they are implemented.

EDI Health Care Claim Transaction set (HIPAA EDI 837) is used to submit health care claim billing information, encounter information, or both. It can be sent from providers of health care services to payers, either directly or via intermediary billers and claims clearinghouses. It can also be used to transmit health care claims and billing payment information between payers with different payment responsibilities where coordination of benefits is required or between payers and regulatory agencies to monitor the rendering, billing, and/or payment of health care services within a specific health care/insurance industry segment.

For example, a state mental heath agency, may mandate all healthcare claims, Providers and health plans who trade professional (medical) health care claims electronically must use the HIPAA EDI 837 Health Care Claim: Professional standard to send in claims. As there are many different business applications for the Health Care claim, there can be slight derivations to cover off claims involving unique claims such as for Institutions, Professionals, Chiropractors, and Dentists etc. As the 837 provides the biggest benefit to all parties in the Health Care industry, it has been the focus of most implementations. It is expected to continue to be the document of choice for initial implementations. Some of the benefits of the use of the EDI 837 Health Care Claim are:

EDI Health Care Claim Payment/Advice Transaction Set - ERA (HIPAA EDI 835) can be used to make a payment, send an Explanation of Benefits (EOB) remittance advice, or make a payment and send an EOB remittance advice only from a health insurer to a health care provider either directly or via a financial institution. At present, the use of EDI in the Payment/ Payment Advice cycle in Health Care is still a uncommon document to send as the organizations in the payment cycle (Financial Institutions, Payers and Payees) place less value on this information than documents such as the Health Care Claim (HIPAA EDI 837), EDI Benefit and Enrolment (HIPAA EDI 834) and Health Care Benefit Inquiry/Response (HIPAA EDI 270, 271). That said, some of the advantages of receiving ERA instead of the paper Remittance Advice (RA) include:

EDI Benefit Enrolment and Maintenance Set (HIPAA EDI 834) can be used by employers, unions, government agencies, associations or insurance agencies to enrol members to a payer. The payer is a healthcare organization that pays claims, administers insurance or benefit or product. Examples of payers include an insurance company, health care professional (HMO), preferred provider organization (PPO), government agency (Medicaid, Medicare etc.) on any organization that may be contracted by one of these former groups. This document initially was implemented by large EDI complaint organizations (Ford, Kroger, Wal-Mart etc.) to enrol employees electronically. It is forecasted that this document will increase in popularity for sophisticated DI Hubs who wish to use it to automate the enrolment process.

EDI Application Advice (HIPAA EDI 824) this transaction set can be used to report the results of an application system's data content edits of transaction sets. The results of editing transaction sets can be reported at the functional group and transaction set level in either coded or free-form format. It is designed to accommodate the business need of reporting the acceptance/rejection or acceptance with change of any transaction set. The Application Advice should not be used in place of a transaction set designed as a specific response to another transaction set (e.g., purchase order acknowledgment sent in response to a purchase order.)

EDI Payroll Deducted and other group Premium Payment for Insurance Products (HIPAA EDI 820) this transaction set can be used to make a premium payment for insurance products. It can be used to order a financial institution to make a payment to a payee.

EDI Health Care Eligibility/Benefit Inquiry (HIPAA EDI 270) is used to inquire about the health care benefits and eligibility associated with a subscriber or dependant under the subscriber's policy. A subscriber is a person who elects the benefits and is affiliated with the employer or the insurer. A dependent is a person who is affiliated with the subscriber such as spouse, child, etc., and therefore may be entitled to benefits. This transaction is generally initiated by medical facilities, hospitals or third party benefits management organizations to Health Care information sources (i.e., insurers, sponsors, payers, government agencies (Medicare, Medicaid)). In addition, the following trends have been noted for the send for eligibility information:

EDI Health Care Eligibility/Benefit Response (HIPAA EDI 271) is used to respond to a request inquire about the health care benefits and eligibility associated with a subscriber or dependant. This transaction set can be used to communicate from health care information sources (i.e. - insurers, sponsors, payers, government agencies (Medicare, Medicaid) to health care information receivers (i.e. - physicians, hospitals, medical facilities) information about or changes to health care eligibility or benefits. This information includes but is not limited to: benefit status, explanation of benefit status, dependent coverage level, dates of coverage, covered days and/or non-covered days, amounts for co-insurance, co-pays, deductibles, exclusions and limitations.

EDI Health Care Claim Status Request (HIPAA EDI 276) this transaction set can be used by a provider, recipient of health care products or services or their authorized agent to request the status of a health care claim. This document and the Health Care Claim Status Notification (HIPAA EDI 277) are envisioned to be the next documents to be implemented by larger Health Care organizations. The request for claim status is beneficial for the requester (i.e. hospital) as they can initiate an automatic request for information on claims past a certain date and receive back information automatically. The automation of this business process reduces phone calls and decreases administration costs for the requester. For the responder (i.e. Insurance Company, Government agency (Medicare, Medicaid), the cost of implementing this process is much lower than the total cost of implementing manual systems to receive constant requests for information and sending information on claims back to the requester.

EDI Health Care Claim Status Notification (HIPAA EDI 277) This transaction set can be used by a health care payer or authorized agent to notify a provider, recipient or authorized agent regarding the status of a health care claim or encounter, or to request additional information from the provider regarding a health care claim or encounter. This transaction set is not intended to replace the Health Care Claim Payment/Advice Transaction Set (HIPAA EDI 835) and therefore, is not used for account payment posting. The notification is at a summary or service line detail level. The notification may be solicited or unsolicited. One of the biggest user of the HIPAA EDI 276 / 277 is Medicare. Providers have a number of non-EDI options to obtain claim status information from Medicare. These options include:

All three manual approaches are designed for the “single” use requests and responses. They are not designed for organizations who wish to reduce costs and increase overall efficiency. That is why the electronic HIPAA EDI 276/277 process is recommended since many providers are able to automatically generate and submit 276 queries as needed, eliminating the need for manual entry of individual queries or calls to a contractor to obtain this information. Submission of 276 queries and issuance of 276 responses should be less expensive for both providers and for Medicare. In addition, the 277 response is designed to enable automatic posting of the status information to patient accounts, again eliminating the need for manual data entry by provider staff members. If unsure whether your software is able to automatically generate 276 queries or to automatically post 277 responses, you should contact your software vendor or billing service.

EDI Health Care Service Review Information (HIPAA EDI 278) This transaction set can be used to transmit health care service information, such as subscriber, patient, demographic, diagnosis or treatment data for the purpose of request for review, certification, notification or reporting the outcome of a health care services review.

EDI Functional Acknowledgement Transaction Set (HIPAA EDI 997) this transaction set can be used to define the control structures for a set of acknowledgments to indicate the results of the syntactical analysis of the electronically encoded documents. The encoded documents are the transaction sets, which are grouped in functional groups, used in defining transactions for business data interchange. This standard does not cover the semantic meaning of the information encoded in the transaction sets.

SoftCare recognizes that for many organizations involved in the implementation of HIPAA, there are simply too many things to do to effectively integrate their back-end systems with the information needed to create EDI documents to comply to HIPAA’s requirements With that in mind, SoftCare has created its HIPAA Quick Start Program, which is a comprehensive program for Healthcare organizations to link and utilize their information to create the necessary EDI documents. The final solution provides a centralized EDI management system to audit, manage and control the movement of information from an organizations back-end systems right through to its trading partners.

SoftCare's HIPAA Quick Start Program provides the software and services, required to implement HIPAA EDI for the Healthcare industry. The SoftCare Solution’s Group provides necessary consulting services to determine:

Once the implementation “roadmap” is completed, the next step is to implement the solution to export data from a company’s back-end systems, transform it and communicate it to your trading partners using the OpenEC® TradeLink EDI Management System. This step involves working with a company’s staff to configure TradeLink to meet their business processes. Once completed, the Solutions Group will test with a company’s trading partners and train internal staff on how to implement future partners within TradeLink. The key to SoftCare’s Quick Start program is to provide the software and services required to implement HIPAA EDI quickly and efficiently.

Customer Case Study

Employers Direct Health, Inc. (EDH), based in Dallas TX, has been in the business of providing group medical insurance to employers since 1960.

EDH was faced with the issue of having to determine what to do with an EDI solution that did not meet their needs EDH had previously purchased an EDI solution to handle the receipt and integration of HIPAA EDI Health Care Claims (EDI 837 – Institutional, and Professional formats) from the major Health Care Claims Clearinghouses. The problem was that the solution could not handle all of the derivations of the standard sent by the clearing houses. In addition, it was felt that the proprietary interface to EDH’s back-end claims processing software was not robust enough to handle the volume or types of documents required to be processed. This led them to look for alternative solutions that could provide the necessary changes while maintaining proper documentation and was maintainable in-house. This led them to SoftCare.

EDH chose SoftCare and its TradeLink EDI Management System because they liked their approach to combining software, consulting and services to provide an all-encompassing solution to implementing EDI for them.

“The implementation has been going great. We have completed Professional and Institutional claims for the main Health Care Clearing houses. The SoftCare Solutions group has been of immense help in the implementation. This year we intend to move all our EDI processes into TradeLink. We would like to recommend your application to any potential client of yours." says M. Jambukesan of EDH’s integrator Vlogic.