Health Insurance Reform: Standards for Electronic Transactions. G. The Role of Standards in Increasing the Efficiency of EDI

10/16/2000

There was a steady increase in the use of EDI in the health care market through the late 1990's, and there is likely to be some continued growth, even without national standards. However, the upward trend in EDI health care transactions will be enhanced by having national standards in place. Because national standards are not in place today, there continues to be a proliferation of proprietary formats in the health care industry. Proprietary formats are those that are unique to an individual business. Due to proprietary formats, business partners that wish to exchange information via EDI must agree on which formats to use. Since most health care providers do business with a number of health plans, they must produce EDI transactions in many different formats. For small health care providers facing the requirement of maintaining multiple formats, this is a significant disincentive to converting to EDI.

National standards will allow for common formats and translations of electronic information that will be understandable to both the sender and receiver. Multiple electronic formats increase associated labor costs because more personnel time and more skills are required to link or translate different systems. These costs are reflected in increased office overhead, a reliance on paper and third party vendors, and communication delays. National standards eliminate the need to determine what format a trading partner is using. Standards also reduce software development and maintenance costs that are required for operating or converting multiple proprietary formats. Health care transaction standards will improve the efficiency of the EDI market and will help further persuade reluctant industry partners to choose EDI over traditional mail services.

The statute directs the Secretary to establish standards and sets out the timetable for doing so. The Secretary must designate a standard for each of the specified transactions and medical code sets. Health plans and health care providers generally conduct EDI with multiple partners and the choice of a transaction format is a bilateral decision between the sender and receiver. Many health care providers and health plans need to support many different transaction formats in order to meet the needs of all of their trading partners. Single standards will maximize net benefits and minimize ongoing confusion.

Health care providers and health plans have a great deal of flexibility in how and when they will implement standards. The statute specifies dates by which health plans will have to use adopted standards, however, health plans can determine if, when, and in which order they will implement standards before the date of mandatory compliance. Health care providers have the flexibility to determine when it is cost-effective for them to convert to EDI. Health plans and health care providers have a wide range of vendors and technologies from which to choose in implementing standards and can choose to utilize a health care clearinghouse to transmit (produce and receive) standard transactions.