Healthcare is one of the most data intensive industries in the United States. Even a not-so-big health plan may support millions of members and may process several thousand claims on a daily basis. These claims come from hundreds to thousands of providers and clearinghouses. EDI has been key in keeping the operations costs down by allowing “Straight Through Processing” of a large percentage of these claims.

Several auxiliary transactions are also used in the healthcare industry. These transactions range from premium payment and member enrollment to eligibility verification, authorization and claims status enquiry. Auxiliary transactions have not been as successful in terms of adoption by the industry as claims transactions.

Standardizing electronic transactions between covered healthcare entities has been a key focus area for HIPAA. The currently used 4010A1 standards for EDI have been successful to a great extent in meeting this objective, but there’s still scope for improvement. While a marginal improvement in claims EDI can result in savings of millions of dollars, other transactions like claims status enquiry and eligibility inquiry can also help in reducing the overall cost of healthcare – it is with this intention and based on the feedback received from the industry that the 5010 standards were developed. All HIPAA covered entities using EDI will need to comply with the new standards by January of 2012. Analysts have projected up to a 20% increase in HIPAA adoption rates in the decade following 5010 implementation, which could result in operational cost savings to the tune of USD 45 billion for the industry.

The HIPAA 5010 file format has 1,000+ unique changes as compared to HIPAA 4010A1. These changes range from as simple a change as expanding the name fields by 25 bytes to more significant changes as sending and accepting new data. Analyzing and remediating the impact of each one of these 1,000+ elements on organizations’ business processes and IT systems is a significant challenge. Inadequate remediation or small glitches in remediation can result in hundreds of thousands of claims dropping to paper – if a 2% increase in auto adjudication saves USD 1-2 million for a health plan, a drop of 2% will increase the manual adjudication cost by the same amount. In addition, payments will be delayed, attracting penalties and resulting in provider/customer dissatisfaction. To circumvent such a problem occurring on a large scale, adequate planning and a clear strategy for integration testing, pilot and rollout are necessary. Automation components are also going to play an important role in reducing the risk and keeping the cost of transition down.

Currently, several organizations are performing gap analyses and assessment of 5010 impact to their processes and systems. Other organizations are waiting either with the hope that the compliance date will be pushed further, or because they’ve underestimated the impact of the change – which in our view is the biggest risk with the transition.