Electronic data interchange (EDI)

HIPAA required the health care industry to use standard formats for electronic claims and claim-related transactions, and HHS adopted those standards. Most come from ASC X12: the 837 claim, the 835 remittance advice, the 270/271 eligibility inquiry and response, and the 276/277 claim status request and response. Pharmacy claims use NCPDP standards instead. Medicare also runs three X12 acknowledgments that HIPAA does not require, the TA1, the 999 and the 277CA, to answer each file it receives². CMS describes the payoff as faster processing at lower cost for both sides, sometimes with a clearinghouse or billing service handling the transfer¹.

For Medicare, electronic billing is the rule. The Administrative Simplification Compliance Act prohibits Medicare payment for services not billed electronically unless an exception applies, such as a small provider: under 25 full-time equivalent employees for a provider of services, or under 10 for a physician, practitioner, facility or supplier. Before the first file goes out, Medicare needs a trading partner agreement made of two forms, EDI registration and EDI enrollment².

Once files flow, they are checked in layers. A file that breaks the basic standard is rejected as a whole batch, claims that fail implementation guide edits are rejected one by one, and claims that pass both are edited for coverage and payment policy, where they can still be rejected or denied³. The common mistake is assuming the clearinghouse owns all of this. It moves and translates the files, but the enrollments and the daily reading of acknowledgments still belong to the practice and its biller.