Did you know that Part 162 of the HIPAA Administrative Simplification Regulations governs the standards used in electronic data interchange (EDI) healthcare transactions?
But what are these transactions? They facilitate the automated transfer of data in a standardized format. How does it help? It enables seamless communication between various entities. These include providers, payers, hospitals, clearinghouses, and government agencies.
This guide will discuss everything you need to know about these electronic transactions and their reporting. So, continue reading!
What is EDI Reporting?
It is the process of translating raw, computer-coded electronic transactions into easy-to-read dashboards and visual reports.
Why does it matter? Without EDI reporting, billing departments would have to manually inspect raw file logs or log into multiple insurance portals to check payment statuses.
As a result, clinicians use reporting software as a translator. It centralizes everything into clean graphics. This enables billing teams to catch errors fast and get claims paid on time.
List of Common EDI Transactions in Healthcare
The table below offers an at-a-glance view of common electronic interchange transactions:
| EDI Transaction Code | Primary Purpose |
|---|---|
| 270 and 271 | These are used to verify a patient’s insurance coverage, benefits, and copays before rendering service. |
| 276 and 277 | These codes help providers check the processing status of a submitted medical claim. |
| 278 | You can use it to request and receive approval from an insurer before performing a service. E.g., prior authorization. |
| 834 | It is a standard format for exchanging healthcare member plan data by employers, unions, and government bodies. |
| 835 | Insurers use this transaction to make payments to clinicians or provide electronic remittance advice (ERA), or both. |
| 837 | It is used to submit standardized electronic medical claims to clearinghouses and payers. |
Difference Between EDI 834, 835, and 837
This section explains the key differences between transactions 834, 835, and 837:
What is EDI 834?
Plan sponsors use the EDI 834 transaction set. These include government agencies, employers, union organizations, and state health exchanges.
What’s the purpose of this transaction? It is used to transmit subscriber enrollment and coverage data directly to insurance carriers. That is, it communicates new member enrollment, updates existing subscriber details, or terminates coverage.
Simply put, payers rely on 834 to maintain up-to-date eligibility information. The outcome? Successful coverage verification of patients upon arrival at a clinic.
What is EDI 835?
EDI 835 is the electronic response made by the payer to the clinician. It details the financial outcome of submitted medical claims. Besides, it is transmitted along with or following an electronic funds transfer (EFT).
What does this transaction contain? It breaks down the reimbursement amounts, line-by-line adjustments, and patient copay or deductible obligations in the form of an electronic remittance advice (ERA).
That’s not all! In case of claim denial, the 835 file includes standardized codes, i.e., remittance advice remark codes (RARCs) and claim adjustment reason codes (CARCs).
For context, RARC and CARC explain the legal or administrative reasons triggering the denial.
What is EDI 837?
What electronic transaction do practices, clinicians, hospitals, and clearinghouses use to submit claims to payers? The answer is: 837. This EDI transaction in healthcare is the digital equivalent of paper billing forms, such as CMS-1500 and UB-04.
Its key components include patient diagnosis (ICD-10 codes), procedures performed (CPT/HCPCS codes), billed amounts, and provider taxonomy numbers.
Additionally, this EDI transaction set is divided into three subtypes. These include:
- 837P: Used for billing professional physician services.
- 837I: Used to submit claims for institutional/hospital care services.
- 837D: Dental clinics or dentists use this transaction for billing purposes.
| Transaction Name | Lifecycle Phase | Key Function | Paper Equivalent | |
|---|---|---|---|---|
| 834 | Benefit enrollment and maintenance. | Coverage onboarding. | It establishes patient coverage. | Paper enrollment forms. |
| 835 | Electronic remittance advice (ERA). | Payment resolution. | It explains claim payment or denial. | Explanation of Benefits (EOB). |
| 837 | Healthcare claim. | Billing or claim submission. | It requests payment against rendered care services. | CMS-1500 and UB-04 forms. |
How Do These EDI Transactions Work Together?
Let’s review how different electronic transactions work together throughout the billing cycle:
Phase 1: Coverage Onboarding
Here’s an example of how this phase works:
EDI 834 (Benefit Enrollment)
An employer or exchange sends employee eligibility data to the insurance payer to enroll a beneficiary.
EDI 820 (Premium Payment)
Using this transaction, the employer sends monthly premium payments to the payer. This ensures the beneficiary’s coverage stays active.
Phase 2: Patient Intake & Pre-Care
During this phase, the focus remains on eligibility verification and pre-authorization:
EDI 270/271 (Eligibility Inquiry & Response)
First, the healthcare provider sends a 270 transaction to verify the patient’s active coverage before rendering the services.
The payer responds to this inquiry using the 271 transaction code. It details copays, deductibles, and coverage limits.
EDI 278 (Prior Authorization)
What happens when a procedure requires pre-approval from the insurance carrier. The clinician sends a 278 electronic transaction request. The payer responds by either sending the approval or denial code via the same transaction set.
Phase 3: Billing & Claim Submission
The third phase involves the following transactions:
EDI 837 (Healthcare Claim)
Once the treatment is done, the healthcare practitioner compiles diagnoses and procedures into an 837 electronic transaction claim file. The provider then transmits this transaction to the clearinghouse or the payer.
EDI 999 & 277CA (Acknowledgements)
Clearinghouses primarily use transaction 999 to confirm the file layout is valid.
Contrarily, payers return transaction 277CA to confirm whether the individual claim passed initial checks or not.
Phase 4: Claim Tracking & Status
This is the phase in the billing cycle in which you want to know what became of your submitted medical claim:
EDI 276/277 (Claim Status Request & Response)
There may be scenarios when a medical claim remains unpaid. When this happens, you should send a 276 transaction to check the claim’s processing status.
The insurance carrier replies to this query with a 277 transaction. It outlines where the claim stands in the adjudication process.
Phase 5: Payment Reconciliation
Here’s what typically happens following claim adjudication:
EDI 835 (Electronic Remittance Advice)
The insurance carrier sends a transaction 835 ERA in conjunction with an EFT.
What does this transaction entail? It includes details about line-item payments, contractual adjustments, and denial reason codes.
How does this information help? It enables the practice management system to automatically post payments and close out the patient’s account balance.
Benefits of EDI in Healthcare
Discussed below are some of the benefits of implementing EDI in healthcare:
- The transactions automate claim submission and remittance processing. Besides, they reduce claim processing times and revenue cycle turnaround from weeks to days.
- Automated batch processing and system acknowledgments enable billing staff to focus on exception handling rather than manual tracking.
- EDI transactions in healthcare offer standardization for electronic formats. The outcome? Fewer claim rejections and denials since it eliminates manual data entry errors, illegible handwriting, and missing fields.
- They replace paper forms, manual mailing, printing, and phone follow-ups, significantly reducing administrative overhead per transaction.
- These transactions enable front-desk teams to confirm patient coverage and collect correct copays before rendering services via real-time checks.
Conclusion
To summarize, electronic data interchange in healthcare is a system that enables secure information transfer between providers, clearinghouses, and payers. This information includes the patient’s condition, rendered procedures, and payment for the treatment.
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Thus, if you want to save your practice from costly denials and stay audit-ready, feel free to opt for our expert medical billing services.
