If only EDI had been around when they were trying to build theTower of Babel; translating data from one party to the next wouldhave been that much easier. Conveniently, EDI is around today. Somesay that its goals are loftier than, say, building that stairway toheaven.

With the federal government breathing down their necks, healthinsurers and providers are trying to communicate with one anotherduring the claims process. EDI (electronic data interchange) is thetool of choice for both sides.

With fewer than 15 months to go before the two sides must reachwhat the federal government calls "administrative simplification,"many payers (health insurers) and providers (hospitals, physicians,etc.) are approaching the deadline with a sense of dread-much likethe rest of the world when Jan. 1, 2000 rolled around. Obviously,the Health Insurance Portability and Accountability Act (HIPAA)passed in 1997 won't get the wide-ranging exposure that Y2Kreceived, but it will probably have more of an impact on Americanlives than Y2K ever did.

HIPAA doesn't mandate that each side in the claims process useEDI, but it seems clear that this is the direction they are headed.HIPAA does mandate that if EDI is used, certain standards must bemet. The General Accounting Office estimates that 20 cents of everyhealthcare dollar is spent on administrative overhead; to reducethat expense-much of which is associated with paperclaims-companies are turning to EDI to transfer the claims datafrom the health provider to the correct forms used by the varioushealth insurers.

Megan Crosson, national director of the claims audit practicesfor PricewaterhouseCoopers, said the trend on the medical side hasbeen to focus on reducing the administrative component. That's beendifficult to achieve because each insurer requires its own versionof what are usually similar forms. Insurers sometimes ask fordifferent information, and that generally leads down the path ofconfusion. HIPAA came up with standardized transaction sets, afterwhich providers breathed a sigh of relief, even if it meant morework for the carriers they did business with.

Standardizing health claims had been tried before, but neverwith much success. HIPAA, though, had something other attempts didnot: the stamp of the federal government. The fear that Congress orthe Department of Health and Human Services would be the ones todefine standards and mandate forms was enough to make everyone inthe healthcare field a little nervous.

All Roads Lead to EDI

Estimates of EDI's current impact on the claims process vary.Crosson said somewhere between 25 and 50 percent of today's claimsare being filed electronically, even higher when prescriptions arefactored in.
Making it work using the current software hasn't been easy. Crossonbelieves that in health insurance the words "software" and"customization" go together like "prescription" and "drugs."

"Most software-if it's not homegrown-is home customized,"Crosson said. "The vendors might not even recognize it as theirown."

Greg Walton, chairman of the Healthcare Information andManagement Systems Society, said the claims process isextraordinarily complex; implementation of the HIPAA regulationshas "stirred the pot," for both payers and providers. "A lot ofcompanies are scrambling to get their boats built so they can floatwhen the deadline arrives," Walton said.

He likens the HIPAA deadlines to those of Y2K, in which somecompanies made the grade with no sweat while others struggled.Walton estimates that only half the health insurers in the countryare prepared for the HIPAA deadline. Most will use EDI to meetcompliance. But what's the cheaper alternative?

According to Walton, nothing in the insurance industry is ascomplex as health coverage. "There are tremendous variances inpractices," he said. "Medicine is the sum of science and art."Making it understandable for payers, providers, and users isdifficult. There have been attempts in the past, but they havefailed. "HIPAA is the fourth or fifth wave of changes in my 30years in the industry," he said. "A lot of people are looking overtheir shoulders."

There have been several failed attempts to bring somestandardization to the claims process in health insurance, but mostobservers believe that HIPAA will be successful. The Bushadministration made it clear that HIPAA issues such as patientprivacy will be strictly supervised. The clock is ticking towardOctober 2002, but unlike the late, great Y2K deadline, the worldwon't come to an end if your system is not completely HIPAAcompliant.

What We Have Here Is a Failure to Communicate

There are two sides to doing EDI effectively. Carriers andproviders need to work together.

While the health insurance world may be running to EDI to solveits claims problems, there's at least one voice in the wildernessthat wonders if the payers and providers of the healthcare worldare pulling the EDI wagon or being dragged along.

Ray Kobs, CEO of Data Method, (www.datamethod.com) developers ofclaims processing software, compares the health insurance field toautomobile manufacturing: "EDI is like the trucks that delivers themufflers to the car builder," he said. "They stack up all themufflers for you, but there is more to the car than a muffler. EDIis a better truck to deliver the mufflers, but I've never seen itas a panacea."

Communication is the biggest problem between the payers and theproviders. "This is a marriage, but the two sides don't talk," Kobssaid. "Some people are figuring out how to manage the relationship.When they do, everybody will win." He said there are importantquestions both sides let go unanswered: "Why are there so many[duplicate forms]? Why are my claims being turned down?" Kobs saidhe's baffled by the absence of better communication.

One of the reasons that the communication issues have not beensettled, according to Kobs, is because insurance is not anadventuresome industry. "Carriers are not going to go out andpurchase a new claims system. They have to move slowly."

Carriers are doing their best to solve their claims problems. "Ithink there is good underwriting being done on the health side,"Kobs said. But health insurance is different than property andcasualty coverage. "The insurable risks are not growing on theP&C side like they are on the health side. New treatments arebeing discovered all the time. Does the P&C side face all ofthis? I'm going to take a stab and say no."

Establishing standards for health insurance is as important asit is for other lines, given the number of claims they have to dealwith. "A small plan will still get 5,000 a week going through theclaims process," Kobs said. Prioritizing those relationships is animportant step. "Whom do I have a relationship with?" he asked. Theanswer to that question can make the entire process run likes it'son some new wonder drug.

Take Three

We talked to three companies that are doing EDI for thehealthcare industry. Not surprisingly, they have different views onwhat's driving the changes, what obstacles are in the way, andwho-carriers or providers-will lead the charge.

NDC Health: The Race Is On
www.ndchealth.com

According to Tom Johnson, senior director of product managementfor NDC Health, the standardization issue has been going strong fora decade. HIPAA didn't change things as much as speeded them up. "Ithink the government is going to be tough with this," he said. "Itisn't going to let the momentum stop. There are proposals out thereto delay or stop it, but [Health and Human Services Secretary]Tommy Thompson is a real force behind this."

As Johnson put it, it's a tossup as to who is in the lead in therace to compliance; he meets with both sides regularly. "Theproviders are buying upgrades to get the job done," he said. "Thepayers have more internal work with their systems that needs to bedone."

Many providers have turned to compliance officers to get theirsystems in shape. "This is a much larger ordeal for them (than Y2Kcompliance)," according to Johnson. "But that was good practice forthem."

HIPAA will be able to bring both sides together to establishstandards for their data fields, he believes. "That's been our job(as an EDI provider), to understand their data elements. That's thejob we play in this," Johnson said.

An agreement on standards between payers and providers isimportant and Johnson believes it is forthcoming. As he put it,"It's to both sides' advantage."

SSI Group: It's About Security andStandards
www.ssigroup.com

SSI Group is one of the major EDI firms in health insurance.Debbie Short, the company's the company's vice president of clientservices, said that many of the companies SSI works with are"poised and ready" for the first HIPAA deadline. She said there aresome small HMOs still using paper, but most payers are using sometype of electronic form.

While working with legacy systems, Short said, payers have toget new data fields in place to collect the claims data. "Contentis the thing everyone needs to get over," she said. While securityand privacy issues will be addressed by HIPAA after theadministrative function deadline is passed, security is an integralpart of claims.

She said that content on the claims forms is what makes healthinsurance unique. "The interpretation of what goes in the datafields is important. Not everything in the electronic standard isin the paper standard."
Short doesn't believe either side in the payer-providerrelationship is ahead of the other in terms of compliance, but,like others, she is amazed that the government didn't include allaspects of the transaction process at one time. "How can you talkabout transactions when you don't have the security issues inplace," she said. The popular view, though, is that the standardsmust come first. "Most people believe things will fall in placethen," Short said. "Binding them all together (administration,security, and privacy) would slow the whole process."

WebMD: HIPAA Means Handling More RobustData
www.webmd.com

WebMD also provides EDI connections between payers andproviders. Steve Simpson, vice president of sales and productmanagement, describes his company's service as a clearinghouse.(WebMD purchased EDI firm Envoy a year ago.) Simpson said that theHIPAA regulations will make the data being exchanged "more robust,"and both sides have to give and receive more data in order to fillthe data fields.

Older legacy systems have been one of the problems thatinsurance carriers have had to deal with in accepting claims files.Many of those systems weren't designed with today's more-extensivedata in mind. "They are going to have to take much larger datafields, so they will need some type of translator in front of thelegacy system," Simpson said.

The key for companies to become HIPAA compliant, according toSimpson, will be finding an EDI that will receive non-compliantdata, translate it, and then submit it. He believes the insuranceside is ahead of the provider side in terms of reaching thecompliance level. "There are some different issues for the providerthat have to be solved, such as security and privacy," Simpsonsaid. "The providers are going to have to formulate an audit trailto see who has been in and out of the data."

Insurers, on the other hand, should already be ready to handlesuch issues. "Most have practice management systems that canaccommodate the privacy and security issues," Simpson said.-RRH

Wave After Wave

The Federal Department of Health and Human Services (HHS) isimplementing HIPAA in several stages or, as the department callsthem, "waves."

The first wave, which covers transaction and code sets, giveshealth care providers-and thus the insurance companies that workwith them-until Wednesday, October 16, 2002 to comply. (That alsohappens to be National Boss Day.) The second set of standardscovers privacy; it gives providers and carriers until Wednesday,February 26, 2003 to meet them.

After that, HHS plans on seven more waves of HIPAA regulations,each with a two-year compliance deadline attached. Oh, joy.