Health Insurance Reform: Standards for Electronic Transactions. J. Qualitative Impacts of Administrative Simplification


Administration simplification produces more than hard-dollar savings. There are also qualitative benefits that are less tangible, but nevertheless important. These changes become possible when data can be more easily integrated across entities. WEDI suggests in its 1993 report that the implementation of an EDI infrastructure will cause a “ripple-effect” on the whole health care delivery system; this chain reaction will occur because there will be a reduction in duplicate medical procedures and processes as a patient is handled by a continuum of health care providers during an episode of care. WEDI also suggests that there will be a reduction in the exposure to health care fraud as security controls on electronic transactions will prevent unauthorized access to financial data.

Standards may also reduce administrative burden and improve job satisfaction. For example, fewer administrative staff will be required to translate procedural codes, since a common set of codes will be used. All codes used in these transactions will be standardized, eliminating different values for data elements (for example, place of service).

Administrative simplification will promote the accuracy, reliability and usefulness of the information shared. For example, today there are any number of transaction formats in use. There are over 400 variations of electronic formats for claims transactions alone. As noted earlier, these variations make it difficult for parties to exchange information electronically. At a minimum, it requires data to be translated from the sender’s own format to the different formats specified by each intended receiver. Translation usually requires additional equipment and labor.

Administrative simplification greatly enhances the sharing of data both within entities and across entities. It facilitates the coordination of benefits information by having in place a standardized set of data that is known to all parties, along with standardized name and address information that tells where to route transactions. Today, health care providers are reluctant to file claims with multiple health plans on behalf of the patient because information about a patient’s eligibility in a health plan is difficult to verify. Most claims filed by patients today are submitted in hard copy. We anticipate that more health care providers will file claims and coordinate benefits on the patient’s behalf once standard transactions are adopted and this information is made available electronically.