EDI is an acronym for electronic data interchange. It is a data communication technology that acts as a secure means of transmitting information between the major stakeholders in healthcare – providers, payers, and patients using established message formats and standards.

When transferring medical information between physicians, payers, and patients, the integrity and privacy of the data are of utmost importance. It might also be among multiple doctors discussing a single complicated case. Consider this: a team of three doctors is working on a patient’s case, and they would like to administer integrated care to manage a chronic illness. These doctors would need to exchange data among them and with the patient from time to time. To ensure their data remains safeguarded, they need a secure way of transmitting the information. This can be achieved by incorporating an electronic data interchange (EDI) system, which results in enhanced patient engagement.  

Ultimate 2022 Guide to Healthcare EDI

An EDI system software establishes message formats and standards and creates a secure platform for exchanging patient medical records. With an EDI software system, new information flows smoothly compared to paper works. Healthcare EDI solutions include HIPAA-compliant standards that promote interoperability between different networks. Every transaction in healthcare EDI is HIPAA-compliant and follows ANSI standards. Each electronic data interchange requires a standardized format for ensuring a quick transfer and interpretation of data. EDI systems help healthcare providers to deliver collaborative care and better population health management.  

The Health Insurance Portability and Accountability Act (HIPAA) was instrumental in establishing national standards for electronic transactions of medical information. It was intended to bolster the efficiency of the healthcare system through a comprehensive implementation of secure EDI. This helped solve many concerns regarding patient data privacy and access to electronic medical records.  

2.Benefits of Healthcare EDI

Healthcare EDI has had a transformative effect on how operations at medical organizations are conducted, and it was a massive improvement in the way things were done before its implementation. This section will talk about how the EDI has been advantageous to healthcare.

This system inherently provides several benefits that help all stakeholders, regardless of which vendor offers a healthcare EDI. Let’s explore a few of them -  

1. Standardization


As mentioned earlier, medical EDI ensures a secure exchange of patient data through standardized formats. Healthcare electronic data interchange improves the data quality and efficiency of data transfer. Before it was implemented, providers would use various formats to send inquiries for insurance verification, submit claims, request status updates, etc. A common standard made communication significantly more complex and left medical staff no option but to deal with vast amounts of documentation.  

2. Reduced administrative expenses

Reduced administrative expenses

Electronic data interchange systems eliminate the handling costs for paper processing because most of the data is electronic. According to the Workgroup for Electronic Data Interchange (WEDI), EDI healthcare can help healthcare organizations save $1 per claim for health plans, $1.49 for physicians, $0.86 for hospitals, and $0.83 for other parties. Being digital also helps speed up the process, as the medical staff can complete tasks such as filling out claims through a digital interface with some clicks. This process reduces the chances of mistakes and accelerates the whole procedure. Consequently, healthcare organizations can do more with fewer staff, reducing administrative overhead.  

3. Elevated security

Elevated security

Electronic data interchange healthcare payment guarantees secure transmissions between authorized parties, healthcare providers, insurers, and patients.  

The information transmitted through electronic means would also be encrypted, securing it further from cybercriminals who might succeed in intercepting them. Since everything is electronic, there is minimal chance of unauthorized individuals accessing it or for the data to be tampered with. All of the benefits of healthcare EDI about security also ensure better data integrity.  

4. Improved accuracy

Improved accuracy

Electronic data interchange in medical billing streamlines transactions by reducing manual errors and implementing testing and validation.  

5. Enhanced productivity

Enhanced productivity 

An EDI system improves productivity by allowing data transactions to multiple parties. Electronic data interchange in medical practice also reduces denials and rework requests and removes the need for confirmation from the receiving party.  

6. Lowering Account Receivables

Lowering Account Receivables

An EDI system for the medical industry helps providers verify patients’ insurance plans. Clinicians can obtain each patient’s health data and insurance coverage plans when they come in for an appointment. This allows the medical staff to fill out claim submissions with greater efficiency and speed, avoiding errors. Mistakes in submitting claims often result in delays in getting reimbursed. Knowing a patient’s deductible and coinsurance information is as easy as a few clicks; it enables healthcare providers to collect co-payments immediately after delivering care. Doctors need not wait too long to get paid, improving their revenue cycles. In this way, a healthcare EDI helps to improve a provider’s revenues and reduces account receivables.  

7. Reducing Errors in Claims Submissions

Reducing Errors in Claims Submissions

The conventional way of pen and paper-based claims submission, by its very nature, is prone to errors. The larger the organization, the greater the volume of submissions handled, and subsequently, the more the chances of making mistakes. A mistake in filling out claims and submitting them could result in lengthy delays in paying providers. But it’s fast and easy to verify claims submitted through electronic means, and a healthcare EDI makes it possible to do so effortlessly. The entire lifecycle of verifying insurance, HIPAA compliance, and other payer requirements and those at clearinghouses is significantly accelerated by an EDI. These features ultimately result in a considerable reduction in errors when submitting claims.  

8. Communication with Multiple Payers

Communication with Multiple Payers

A healthcare EDI lets providers and clinical staff pre-determine multiple transactions with payers to happen automatically. These could be in the form of inquiries or verifications. For example – the staff at a hospital could use an EDI to inquire about the status of a claim submission while at the same time also verifying a patient’s insurance coverage.  

As healthcare organizations grow bigger, a medical EDI integrated with a management platform empowers fewer staff to complete multiple tasks. In other words, it boosts productivity and speeds up workflows. The result is reduced waiting times for patients, timely treatments, better revenues for providers, and improved efficiency for payers. To sum it up, a healthcare EDIs feature of multiple simultaneous communications goes a long in helping all the stakeholders involved.  

3. How Does an EDI Help in Medical Billing?

Healthcare in the United States is a maze of regulations that makes the entire lifecycle of billing extremely complicated. These rules demand a major workflow. A healthcare EDI goes a long way in simplifying this process significantly, and this part explores how.

Medical billing is complicated by nature, and it’s got multiple layers of procedures, protocols, and formalities that need to be carried out precisely. Any errors in any of the processes mentioned above often result in delays that might affect patient health or cost the provider precious revenue. Before electronic data interchange came along, professionals in the healthcare industry had to deal with a staggering number of documents, loads of paperwork, and countless claims returned or rejected. But a healthcare EDI streamlines data exchange as it is electronic and sharply reduces the turnaround time of the information exchanged.  

Most of all, it offers total security of the data and could promise a high degree of its integrity. The best part – an EDI reduces delays in processing claims, which is enormously beneficial to the patients and the providers. Standardization is extremely important to prevent being tied up with numerous services, tests, and procedures for billing. The medical billing process starts with an inquiry from the healthcare provider and concludes with a response from the insurance payer analytics. For example –  

A. Provider inquiry:

When a patient comes in for a consultation, doctors make an inquiry that consists of the relevant details. These include the member ID, payer ID, and other information. Inquiries sometimes reach the payers directly. But in most cases, it first goes through a clearinghouse, an intermediary between providers and insurance payers. A clearinghouse processes all the documentation and passes them onto the payer. A single clearinghouse would work with numerous providers and payers. They carry out the smooth exchange of information between doctors and insurers.  

B. Payer response:

When the insurer receives the inquiry, they carry out the required assessment and respond to the clearinghouse. The staff at the clearinghouse, in turn, sends it to the provider. If the submitted information contains errors, the staff at the provider’s side must make the necessary corrections and re-submit the claim.  

The entire lifecycle of billing and reimbursement – from verifying patients’ insurance plans to the relevant medical coding, submission of claims, and reimbursement is a multi-layered process. In the absence of a standardized electronic medium, every one of these steps would be vastly slower, not to mention the staff having to deal with all the documentation. If there’s a mistake in any step, it could delay the reimbursement for many days. Moreover, the providers and insurers would utilize varying data formats to exchange. But an EDI eliminates the delays and reduces the chances of mistakes significantly. Patients don’t have to wait long for their plans to be verified, the procedure for coding is streamlined, and the reimbursement for providers is made much sooner. In this way, an EDI provides a highly consolidated means of carrying out the entire lifecycle of medical billing.  

4.How Does an EDI Work?

While EDI has positively impacted healthcare, it is important to know it’s working. This section will outline how healthcare EDI works to understand its benefits better.

The advent of healthcare EDI has helped change the way medical information is exchanged between various stakeholders. The working of a medical EDI is best explained in a series of steps –  

How does an EDI work?

Any transfers of medical information done on the electronic data interchange first begin with an inquiry by the provider. This is usually done to verify a patient’s health plan.

  • The inquiry submission to the payer or a clearinghouse is made with a few patient details such as member ID, date of birth, and insurer ID. This is a standard procedure for all patients.  
  • A clearinghouse would routinely receive inquiries from numerous providers. Most of the inquiries from healthcare providers often go through a clearinghouse, with a few going directly to payers.  
  • After receiving the inquiry, the payer completes all the formalities and procedures from their side and sends it back to the clearinghouse.  
  • If everything is cleared, the provider will have verified the patient’s health plans and submitted claims for reimbursement. However, if there is an error in the submissions or a problem with patient information, the provider must re-submit the claims. But this would cause delays in reimbursement.  

The above data transfers between the providers, clearinghouses, and payers through an EDI. Before using a standard electronic data interchange, these stakeholders would probably use different inquiries, queries, and responses. Doing so would result in a large pile of documentation to churn through. Unsurprisingly, it would also increase the likelihood of mistakes by any staff member at any one of the locations. An electronic data interchange brings in digitization, which automates many repetitive tasks, reducing the chances of errors and accelerating the entire process’s lifecycle.  

5. A Scenario of the Working of an EDI

To know the advantages of a healthcare EDI, it’s best to study it through an example. In this section, we will look at a realistic scenario to better understand the working of an EDI.

The best way to understand the difference that electronic data interchange has made is to look at an everyday scenario of how it works. It would more or less be an average day at the office for the staff at a large hospital that offers numerous services. Imagine that a hospital will see 120 patients on a particular day. The hospital’s platform for managing operations would confirm the appointments of the 120 patients visiting various specialists and get their information beforehand. The hospital verifies all the patients’ insurance plans and determines how much they can collect before the appointments.  

The staff compile the information using the hospital management system for 120 people and send the inquiries to a clearinghouse. The clearinghouse, in turn, sends each of those inquiries in the form of transactions to the payers who cover each of the patients. The payers respond with confirmations of eligibility, details of the plans and benefits, out-of-pocket costs, etc.  

This response is formatted according to requirements and sent to the hospital’s platform for managing operations. This lifecycle of inquiry from the healthcare provider and response from the payers through the clearinghouse happens before the first of the 120 patients sees their doctor.  

The response received is viewed by the staff at the hospital on the day of the appointments, even before the first one begins. The patients won’t have to wait to have their plans verified, and the provider would be able to receive the out-of-pocket amount. In this way, this process of using EDI for verification between providers and payer’s benefits everyone involved since the patients won’t have to wait long, and the providers can have faster revenues.  

Out of the 120 patients, if there are any errors in the information submitted, the appropriate information can be corrected using the hospital management platform and re-submitted. It again goes through the stages as before, but without the mistakes, which comes back confirmed by the payer(s). This entire sequence of events would’ve been enormously difficult and time-consuming in the absence of a standardized model of electronic communication between the providers and payers. Each provider’s health system and many payers’ systems would probably use different data formats to send or process the information. Such disjointed, non-uniform communication modes make the entire process of sending inquiries and getting responses much more difficult. They pile up the tasks and the documentation and increase the staffing requirements at the providers. An unsurprising consequence of the increased processes and formalities is the increase in time taken to assess all the requests, and an error would’ve cost the providers precious revenue.  

6.Common Myths about EDI

While EDIs are an integral part of the healthcare industry in the United States, there are some myths about this tech. These range from concerns about the security of the transmitted data to the costs involved in implementing one and its impact on the hospital operations. In this section, we try and address some of these myths.

There are facts about EDI systems, and then there are myths. Let’s take a look at the five myths of EDI software –  

A. EDI tracking system is expensive

EDI tracking system is expensive

The EDI system is often expensive because it depends on the value-added network (VAN) to deliver messages. It is a myth that electronic data interchange in medical practice offers less return on investment (ROI). The fact is that an EDI system can be delivered by many secure methods which are economical and flexible. Automated data handling in HIPAA electronic data interchange helps reduce cost per transaction.  

B. EDI solutions do not safeguard data
EDI solutions do not safeguard data 

While many providers may think that data is not safe in EDI, the reality contradicts this myth. The data of your healthcare business is of utmost importance, and every vendor of EDI for healthcare understands this. Healthcare EDI transactions help you exchange electronic data with other organizations and vendors with high security. Electronic healthcare transactions are HIPAA-compliant, ensuring the safe exchange of health data. The heightened security in an EDI process prevents data thefts and mishandling.  

C. EDI platform is complicated

EDI platform is complicated

From healthcare automation to EDI systems in healthcare, you may term them as ‘too technical’ and entirely avoid their integration. This is the most common myth regarding EDI systems, which prevents healthcare providers from using them in their operations. In this digital age where telehealth and mHealth are booming, it is essential to use modern tools such as EDI software. Unlike assumptions of it being not easy to use, EDI software solutions are easy to implement and can rapidly enhance the efficiency of your healthcare practice management. An EDI software system can handle large volumes of data and reflect the sensitivity of advanced software solutions, including improved healthcare interoperability, easy application, and cost-efficiency.  

D. APIs will replace EDI in small healthcare businesses

APIs will replace EDI in small healthcare businesses

You may believe that healthcare EDI software is only for large healthcare businesses with many partners and cannot be used in small practices. Many providers assume that APIs are better suited for small healthcare practices than cloud EDI software. But in reality, electronic data interchange (EDI) software can be easily integrated into smaller practices. An electronic data interchange software offers modern and secure transmission of health informatics with established standards even in small practices. APIs are not well-suited for exchanging bulk data and are not considered a good fit, especially for small and medium-scale practices.  

E. It takes time to adjust to a new EDI system software

It takes time to adjust to a new EDI system software

The main goal of EDI integration in healthcare is to simplify processes, support secure data exchange, and increase productivity. Irrespective of the EDI system you use, it is often assumed that it takes healthcare staff time to adjust to the intricacies of EDI integration. Contradictory to what is believed, an EDI system offers an easy learning curve, and it will hardly take any time for you and your team to get used to its functioning. The application of EDI systems is fairly straightforward, uses electronic health records, and performs quick healthcare analytics. With EDI in place, you will not lose much time learning how it works.  

It is common for myths and misconceptions regarding technology that impact businesses. The same thing happened for everything from wireless mobile communication to computers and even the internet. The best to address those notions is to outline the working of any piece of technology and articulate the pro and cons of it.

7.How to make your Health system EDI compliant?

Healthcare in the United States is vastly complex, with multiple layers of regulations that stakeholders have to comply with. A failure to do so results in serious legal consequences that often end in steep fines and even jail time. In light of this, it is important to ensure compliance for your health systems.


Healthcare providers need to ensure that their digital systems comply with prevailing regulations. Considering this, if a medical professional wants to implement an EDI into an existing system or have customized software built, there are vital parameters to know for complying with the rules. Here are a few –  

I. Appropriate System Design

Appropriate System Design

It is important to have a reliable framework of the system. It can either be custom developed, or an existing one can be upgraded to ensure safe handling of data. It means that the users should store, access, modify, and update the information without compromising its integrity. The larger the healthcare organization, the more patient data it will handle. So, it becomes important for the system to allow designated staff to access health informatics easily for keeping the records up-to-date after the latest consultations, scans, tests, diagnosis, and medication.  

The system’s design should also include adequate backups and redundancy of the information. This is highly important in case of a malfunction, disaster, or cyber-attack compromises the information. Moreover, if a healthcare EDI can’t protect the integrity of information, it would impact patients’ long-term health. The most important aspect of an EDI is the speed of the transactions, and it must make sure that the requests and responses are rapid.  

II. Restricted Access

Restricted Access

This is one of the most rudimentary forms of securing digital assets for organizations in any industry. It’s a simple rule of thumb – restrict access to sensitive information to a small group of employees. Doing so ensures accountability and audit trails that highlight who accesses which data for what purpose.  

The employees can be grouped appropriately into user, super-user, administrator, provider, etc. It prevents unauthorized access to information, whether deliberate or accidental. In this way, every user will only access information that they are allowed to. Moreover, the authorizations to work with the data differ for every user type. A regular user won’t change the data, while a super-user or an administrator might.  

III. Privacy of Communications

Privacy of Communications

The best to ensure that communicated transactions through an EDI are secure is to use encryption. As per the latest standards, all healthcare providers solutions must use it, and digital encrypted solutions ensure the integrity and confidentiality of patients’ information.  

If encrypted communications happen to be intercepted by unscrupulous individuals, they won’t be able to make anything out of it. The encryption ensures that only the user at the recipient’s end of the system can decipher the information being communicated. This is also called end-to-end encryption, and it ensures a very high degree of confidentiality of the data being transferred.  

IV. Securing Protected Health Information

Securing Protected Health Information

Under the laws of the United States, any information about health, delivery of care, or payments for the same that is created or stored by an organization that handles it is called Protected Health Information (PHI). PHI can be associated with particular patients. This data is crucial as it contains all the information about a patient’s condition, diagnosis, scans, tests, treatments, allergies, history of substance abuse (if any), accidents, family history of diseases, etc. Ensuring the integrity of this data is vital as it paints a picture of a person’s health, enabling doctors to make informed decisions about any treatments or medication.  

Securing this information can be done in many ways – secure credentials, adequate cybersecurity measures, and protocols, remote backups, staff training, etc.  

It is an elaborate process to achieve EDI compliance. It requires a technology partner to possess knowledge of the domain, not to mention digital security, and most of all, technology competence. If you’re a senior professional in the healthcare industry, you need to get the right company to partner with for attaining EDI compliance. Ensure that the company has an established track record and previous industry experience. Moreover, cross-domain expertise in systems development, cybersecurity, health tech, and policy is promising. You must be thorough in this endeavour since it would impact your organization significantly.  

8.EDI and HIPAA Regulation

It’s no secret that healthcare in the United States is vastly complex, with a meandering labyrinth of regulations and a complicated set of rules involving insurance payers, providers, and pharmacies. This section will talk about the connection between EDI and the HIPAA regulation.

The Health Insurance Portability and Accountability Act was passed in 1996 to regulate health information activities. It applies to organizations that handle medical data and shares it amongst the healthcare industry’s various stakeholders. This law also stipulates that medical organizations adhere to a standardized mechanism in electronic data interchange (EDI) while sending and receiving claims submissions, processing them, and acting upon them.  

Before HIPAA was signed into law by President Bill Clinton, healthcare providers across the United States followed numerous codes and formats for sharing medical information. The data submitted for verifying patients’ insurance coverage, submitting healthcare claims, and their relevant responses would differ in their formats.  

This fragmented landscape resulted in poor efficiency and higher operating costs for clearinghouses, payers, and providers. It made operations needlessly more complicated, not to mention slowing down things significantly. Additionally, handling numerous different formats increased overhead in many ways and resulted in large amounts of documentation to be handled by the staff. Tons of repetitive, manual tasks, redundant workflows, higher waiting times for providers and patients, and poor patient experience were characteristic of the operations at healthcare organizations before HIPAA brought about standardization.  

The HIPAA regulation established a single, consolidated standard for communicating medical data between providers and payers. As a result, the same messaging format is now used for eligibility verification, inquiry about claim status, enrolment, claims submission, and others.  

Healthcare professionals might need to hire a consultant since the EDI standards of HIPAA require a certain degree of understanding of protocols governing the transmission of data.  

9.The Cost of EDI

Implementing an electronic data interchange will undoubtedly incur expenditure, but it is well worth it. Having a reliable estimate of the cost is crucial, and to do that, a provider must decide which approach they will take. In this section, we discuss the cost of EDI implementation in detail.

When you’ve decided to have an EDI implemented at your medical organization, you’ve got two factors to consider – An in-house EDI or an external EDI provider. The cost of the implementation will be majorly impacted by which approach you decide to take. Let’s have a look at both of them –  

1. In-House


As the name suggests, an in-house EDI will work exclusively for the developed organizations. The responsibility of the EDI network’s control, operation, healthcare management, and security will rest with the organization itself. The components for developing a fully functioning in-house EDI include –  

  • A dedicated software solution  
  • EDI communication methods  
  • Software for Communications  
  • Application for mapping the network and translating requests  
  • Dedicating staff to operate and map the EDI  
  • Timely upgrades and support  

Developing and operating an in-house EDI is only within the scope of large healthcare organizations. Such entities would have to ensure that their partners would also have the system at their end, which would mean additional cost. As the network of partners grows, they would have to have this system implemented at their end. So, the expenditure is likely to be ongoing. Small practices, medium-sized ambulatory care centres, and even moderate-sized hospitals would not be able to make such a large investment.  

2. Third-Party EDI Provider

This approach to having an EDI implemented is better suited for smaller organizations and single-physician practices. Different providers are likely to price their services differently. In addition to the cost, there are other factors to be considered when partnering with an EDI provider –  

  • If the provider covers the locations, you need  
  • If any of the partners you’ve tied up with are already on this provider’s network  
  • The training, support, and updates that the provider can offer.  

A major factor in the price is the amount of data you transmit over the EDI network. In light of this, it becomes necessary to have a reliable approximation of the amount of information your practice might send out before choosing a provider. You would most likely be charged on a monthly, annual, or ad-hoc basis.  

10.EDI or API?

EDI’s have established their reputation as reliable modes of communicating medical information. But some may argue that new technologies like applications programming interface (API) might be better. So, which is it? In this section, we weigh both options.

The electronic data interchange and application programming interface provide a means of communicating healthcare information between organizations. Both of them have their advocates and critics. 

APIs emerged in the first decade of the 21st century and are commonly used in cloud-based applications. Web-based APIs provide easy integration to healthcare systems and enable the real-time exchange of medical data. But they lack a common, established industry standard and aren’t suitable for transferring big chunks of information. Whenever a new platform needs to be integrated using APIs, the data layer for the implementation needs to be developed separately.  

On the other hand, EDI was developed about 50 years ago to help streamline organizational workflows and share information among platforms seamlessly. The data sharing was accomplished using sweeping industry standards. With EDIs in healthcare, communication between providers and payers became faster and more efficient. As a result, non-clinical workflows involving payer verification and billing were vastly optimized.  

EDI’s can handle large chunks of data transfers and operate with industry standards and codes that vary according to geographic region. Unlike APIs, EDIs adhere to regulations. Newer healthcare partners already in the provider’s EDI network can be connected without hassle.  

As we have seen, both EDIs and APIs have pros and cons and are useful in different ways. While an electronic data interchange costs more to implement, APIs make it more complicated to onboard new healthcare organizations and work together for common standards.  

11.Important Factors to Consider Before Launching an EDI

EDI has been proving its worth in the healthcare industry for the better part of 50 years. We are witnessing an unprecedented rush for tech adoption in the medical industry, partly stimulated by the pandemic. If you consider an EDI initiative at your organization, this section deals with some factors, you must think about.

If you consider a program to launch an EDI at your organization, many factors come into play. A long-term commitment requires a complete, all-around understanding of all the parameters that would go into an EDI initiative. Let’s discuss some of them –  

  • Are you thinking about an EDI just because other healthcare organizations you’re tied with are doing so? In other words, are you under any kind of pressure to undertake an EDI implementation?  
  • Do you feel that your practice is not doing enough to improve the overall experience for your patients? Additionally, do you feel like you’d have better working relationships with the payers or clearinghouse you’re tied up with? Think carefully about these points when you’re thinking about an EDI.  
  • Since it requires an investment, do you think an EDI would make it worth it? This is important for single-physician practices in small towns and rural communities since they might not face as big a problem with accounts receivables as the physician practices in large cities. Moreover, if the volume of patients is manageable without the help of an EDI, it might not be worth all the money spent.  
  • Using an EDI is good for the environment as it reduces the amount of physical documentation needed for non-medical activities. This would be a concern for relatively larger healthcare organizations. But smaller ones might be able to indulge this. Nevertheless, it’s still something to think about.  
  • Do you know which third-party EDI provider would be best suited for your practice or clinic? If you’re tied up with other healthcare organizations using the same provider’s EDI, you’d have to partner with that provider.  
  • As discussed earlier, one of the primary considerations for healthcare EDIs is having it in-house or partnering up with a third-party provider. Partnering up works out cheaper when it comes to the initial investment required and in the long run as timely updates and support is required. But having a healthcare EDI in-house gives complete control over it. However, you’ll have to make sure all the business partners have the same EDI on their end. This is possible for large healthcare IT organizations, taking significant initial investment and a competent IT staff.  

12.Document Standard of HIPAA EDI

An important aspect of the Health Insurance Accountability and Portability Act was the establishment of the national standards for electronic transactions in healthcare. They were meant to improve the efficiency of the entire healthcare system and incentivize all associated organizations to adopt it. In this section, we discuss a few message types of HIPAA EDI.

The Health Insurance Accountability and Portability Act (HIPAA) was signed into law by President Bill Clinton in 1996. It protects people’s health information and establishes practices for inhibiting fraud or waste in the healthcare industry. The standards consist of codes that enable the identification of the data that is being transmitted. Let’s explore some of those codes and the corresponding type for which they’re used -  

a. EDI 837 Transaction Set

EDI 837 Transaction Set

The clinic staff uses this code for submitting medical claims information, and it is sent from a provider to a payer directly or through a clearinghouse. Additionally, the EDI 837 transaction set is used for communicating medical billing and medical claims information among payers, where a collaboration of benefits comes into the picture. It might also send the data to government organizations to verify compliance.  

b. NCPDP Telecommunications Standard version 5.1

NCPDP Telecommunications Standard version 5.1 

This is the EDI healthcare transaction set used to submit claims for a retail pharmacy to payers by pharmacists. EDI code 837 is also submitted directly to a payer or through a clearinghouse.  

c. EDI Advice Transaction Set 835

EDI Advice Transaction Set 835 

The EDI 835 transaction set is also known as healthcare payment and remittance advice. It has been stipulated by HIPAA 5010 requirements for the e-transmission of healthcare payment and benefit information. Insurance payers use this mostly to make payments to healthcare providers and explain benefits (EOB). Whenever a provider submits an 837 claim, the payer uses this transaction set to elaborate the payment information for that claim. Some of those details would include –  

  • Any reduction or denial of the charges, in addition to which ones were paid.  
  • If there was any bundling or splitting of claims.  
  • Information such as coinsurance or co-pay and so forth.  
  • If the payment was made through a clearinghouse.  

d. EDI Benefit Enrolment and Maintenance Set (834)

EDI Benefit Enrolment and Maintenance Set (834) 

Companies use this transaction set, government agencies, associations, unions, and so forth to enrol members in a healthcare insurance plan. The EDI 834 has been stipulated by HIPAA 5010 standards to exchange information regarding member enrolment, including benefits, employee demographic information, and the plan subscribed to. Moreover, it can also be used for any modifications in a person’s enrolment, restoration of enrolment benefits, and even termination of membership to health plans.  

Companies submit the relevant information to insurance payers or government organizations such as Medicare and Medicaid. The information submitted would normally include: 

  • The person’s name and identification. 
  • Their eligibility. 
  • Identification of the network of the plan.  


Healthcare EDI has had a transformative effect on the entire lifecycle of healthcare delivery. Before introducing EDI, the healthcare landscape was fragmented, with stakeholders using various formats to communicate patient information. We have seen how EDI could weave together a disjointed system and bring uniformity, productivity, speed, and efficiency.  

A standardized, consolidated system always brings uniformity, maximizing efficiency for the system’s stakeholders. For now, and the near future, EDI is here to stay.  

OSP is a trusted healthcare software development company that delivers bespoke solutions as per your business needs. Connect with us to hire the best talents in the industry to build enterprise-grade software.


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