What is Electronic Data Interchange in Healthcare?

The healthcare industry is one of the many industries that processes an enormous number of documents—patient medical records, health insurance reimbursements, and healthcare claims, among…

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February 14, 20176 minute read

The healthcare industry is one of the many industries that processes an enormous number of documents—patient medical records, health insurance reimbursements, and healthcare claims, among others. Using paper forms can be cumbersome, inefficient and expensive when you need to distribute, retrieve, organize, and search for data. So in 1991, in answer to the Bush administration’s concern for rising healthcare costs, the Workgroup for Electronic Data Interchange (WEDI) was formed. It was instrumental for the enactment of the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

Before HIPAA, the healthcare industry was using over 400 medical forms in various formats, most of which were paper based. Because healthcare data management was highly manual and ad hoc, protecting and securing healthcare information was a major concern. For example, in the US, “privacy regulation consisted of a series of differing, industry-specific laws.” The Center for Democracy and Technology described the pre-HIPAA period as total absence of national health privacy law, federal limits on healthcare information processing, and federal right allowing patients to access their health care information.

The enactment of HIPAA was intended to address these gaps.

Healthcare data began to be transmitted in standard formats — primarily via the electronic data interchange (EDI) protocol X12 or EDI. Enabling HIPAA EDI transactions helped address security and compliance issues and fill other gaps such as information inaccuracy and patients’ lack of access to their healthcare information.
Understanding electronic data interchange in healthcare – how it works, what are its benefits, and what are the key considerations for implementation – can help healthcare professionals and organizations fully capitalize on it.

How EDI in healthcare works

Electronic data interchange in healthcare allows the exchange of computer-processable healthcare data in a standardized format and secure manner among healthcare professionals, healthcare institutions, and patients. For example, it enables healthcare providers to send claim status requests and obtain information using a standard transaction set for organized, compliant information exchange.

Electronic data interchange healthcare transactions, however, are not email exchanges; they involve all electronic transmission of healthcare data between computer systems and applications. Different modes of healthcare EDI transactions delivery include “web-based EDI, point-to-point EDI, mobile EDI, EDI VAN, and EDI via AS2.”
Healthcare EDI uses standard transaction sets such as EDI Health Care Claim Transaction Set (837), EDI Health Care Claim Payment/Advice Transaction Set (835), EDI Benefit Enrollment and Maintenance Set (834), EDI Health Care Eligibility/Benefit Inquiry (270), and EDI Health Care Claim Status Request (276). Using these EDI HIPAA transaction sets, healthcare professionals and institutions can reap various benefits such as standardization, minimized transaction and other costs, security, and improved productivity.

Benefits of EDI in Healthcare

According to MarketsandMarkets (as cited by PR Newswire), the healthcare EDI market is forecast to “reach $1,681.1 million by 2018.” This substantial growth is accounted for by the various advantages it provides:


  • The intention of HIPAA in using EDI is to establish national and global standards for electronic healthcare transactions. HIPAA EDI transactions enable organized, compliant, accurate, and efficient exchange of healthcare data. HIPAA EDI standards, however, are not limited to patient transactions or health information exchange (learn more about health care information here). It also covers other standards such as for healthcare workers’ compensation.

Cost savings

  • Enabling EDI healthcare transactions can result in lower handling costs of processing healthcare documents because it helps eliminate all paper trails and digitize all transactions. With EDI, healthcare players can generate significant savings: $1 per claim for health plans, $1.49 for physicians, $0.86 for hospitals, and $0.83 for others (based on WEDI estimates).


  • Healthcare EDI systems enable secure transfer of information between healthcare providers and payers or insurers. These healthcare transactions are now more secure because EDI enables secure data transmission, as mandated by HIPAA standards. EDI transactions in healthcare can be made accessible only to authorized users, supporting secure healthcare data management and access.

Improved productivity

  • Using EDI for healthcare transactions improves productivity in that it enables a high level accuracy, efficiency, and speed. Because there is limited human intervention, errors are reduced. EDI minimizes the instances of manual data errors, shipping errors, billing address errors, and the like. EDI has proven to be an efficient tool for insurance claims documentation due to the use of electronic attachments, which streamlines the process.
  • Healthcare providers and payers have seen fewer denials and rework requests with the use of EDI. Further, transactions to multiple buyers can be done at one time. As a result, healthcare stakeholders can now focus their attention on more important tasks.

Faster processing

  • EDI does not only benefit healthcare professionals and institutions but also the patients. One of the significant results of HIPAA was the right given to patients to access their healthcare information, which was “a critical component to reinventing healthcare delivery.” EDI transactions are particularly beneficial for patients because it speeds up the claims and benefits process .

These benefits, however, can only be fully tapped if healthcare institutions weave a data-centric healthcare EDI solution into their organizational fabric.

Data-centric healthcare EDI

When implementing EDI systems or solutions, many factors should be considered such as the level of security and compliance the system or solution can provide, ease of integration, and time to value. However, most overlook another key consideration – the raw data behind healthcare information.

Healthcare EDI systems offer a structured organization of healthcare information through EDI HIPAA transaction sets. However, EDI systems require a platform that can pull a tremendous amount of data in an automated, efficient, and secure manner from different departments and system silos, without capturing bad data. Today, with industries moving from a system of record to system of insights, it is necessary to ensure that all healthcare data that goes into the system is secure and of high quality. This can be ensured by leveraging a robust healthcare data management solution based on a data-centric platform for integrating EDI healthcare data.

By enabling a data-centric healthcare EDI, all the benefits of EDI such as security and improved productivity can be maximized. (Learn more about the ALLOY™ Platform, OpenText’s data-centric platform for healthcare, here.)

Looking Ahead 

Technological advancements in and outside of the healthcare industry impact healthcare data management in many ways. For example, mobile technologies have changed the way patient and providers process healthcare information. To keep pace with trends like these, EDI systems should be supercharged with a data-centric platform to ensure a high level of data quality and security.

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OpenText, The Information Company, enables organizations to gain insight through market-leading information management solutions, powered by OpenText Cloud Editions.

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