Improving the claims process with EDI.

Summary Electronic data interchange (EDI) is redefining the healthcare claims process. The traditional managerial approach to claims processing emphasizes information flow within the patient accounting department and between patient accounting and other departments. EDI enlarges the scope of the

claims process to include information exchange between providers and payers. Using EDI to improve both external and internal information exchange makes the claims process more efficient and less expensive. This article is exerpted from "The Healthcare Financial Manager's Guide to Healthcare EDI," by James J. Moynihan, published by the Healthcare Financial Management Association.

Billings and collections are major components of total hospital administrative costs. In a 500-bed hospital, for example, the patient accounts staff may number more than 100. In parts of the United States where managed care companies have a significant presence, the additional reporting required before and during the provision of services has forced hospitals to add staff to handle the workload. The relative cost of the patient accounting function as a percentage of total hospital administrative and fiscal expenses is illustrated in Exhibit 1. EDI can help reduce this cost significantly.

Electronic claims

Data about healthcare claims are the principle information exchanged between payers and providers. But of the four billion claims filed each year in the United States, less than 5 percent are filed electronically; the rest are submitted as paper forms and supporting documents. Despite this low use of electronic exchange, however, hospitals frequently use electronic claims submission for Medicare claims. The overwhelming majority of hospitals in the United States submit Medicare Part A (inpatient) claims electronically.

Electronic claims submission is changing rapidly as new technologies evolve. Electronic claims submission has been used for 20 years, and in the 1990s, many providers have selected electronic claims submission software run on PCs to replace the "old" direct data entry (DDE) terminals. Although such software can be installed on a hospital mainframe or a minicomputer, in a typical installation, PCs are configured as claims editor workstations to receive claims that are electronically downloaded from a patient accounting system. Claims received are first processed to meet payer-specific formats and editing criteria. Claims are then telecommunicated either directly to a payer or to a payer through a claims clearinghouse.