Payer-Provider Direct Connections Will Transform EDI, Clearinghouse Role

When electronic data interchange (EDI) made its debut in health care, clearinghouses emerged to serve the vital function of connecting providers and payers by translating and routing paper claims in electronic form. Over time, with the advent of transactions standards and the Health Insurance Portability and Accountability Act, clearinghouses processed additional transactions, such as real-time eligibility and remittance advice. They added value by processing electronic transactions efficiently and by creating a network of trading partners that enables virtually all providers and payers to be connected.

Today, as a result of the high costs and service issues often associated with the complex clearinghouse system, providers and payers are calling for a new, decentralized paradigm that would enable them to electronically connect and communicate with each other in a more direct, adaptable and flexible way. Although establishing direct connectivity between hundreds of thousands of providers and thousands of payers likely will lead to a timelier, more secure and better managed claims and payment process, the paradigm shift will take time. The evolution also will impact the role of clearinghouse services.

"The EDI distribution issue – getting provider and payer networks in sync – was solved by the clearinghouses, but there are high costs associated with that solution,” said Roy Sailor, senior vice president of EDI Solutions at Ingenix. “Across health care, everyone is dealing with rising costs and lower profit margins, so they want to eliminate the 'middle man' and exchange data directly. In this environment, the traditional clearinghouse service model isn't sustainable,” he said.

Sailor believes that the future of health care transaction processing lies in both the broad adoption of direct connectivity and in clearinghouses transforming themselves to support this new model and serve as the future infrastructure for a more comprehensive health information exchange (HIE). “Clearinghouses must find new ways to add value to the transaction process and to help facilitate the exchange of both administrative and clinical information,” he said.

Direct, self-service connections on the horizon

The shift toward a self-service transactional model is due in part to payers and providers wanting more control, Sailor suggested. “They want to ensure that claims are processed accurately and in a timely manner. The financial health of the trading partners is at stake,” he said.

Providers and payers have high expectations of a direct-connection EDI scenario, including safe and secure transmission of data, good data quality, prompt claims payment, and lower administrative costs associated with these tasks. Today’s Internet technologies, which enable providers and payers to connect without human interaction, can be leveraged to bring these ambitious goals within reach.

Moving from clearinghouse-driven transactions to direct-connect transactions addresses both cost and service issues. Direct transmission is expected to reduce instances of lost and delayed claims. In addition, with a direct connection model, costs per transaction are projected to drop from $.15 - $.25 per claim to approximately $.06 - $.10 per claim. “When you process millions of claims every day, the savings quickly add up,” Sailor pointed out.

The current challenge is getting this new technology deployed and establishing comprehensive payer and provider networks. Only a small number of providers and payers currently connect directly using Internet-based technologies, including payers Aetna and UnitedHealthcare. Sailor predicted that it will take years to fully establish the new ecosystem, which means that clearinghouse connection points will continue to be integral to the direct-connect model for some time.

New roles for clearinghouses emerging

Clearinghouses can add value to providers and payers tackling direct connections in several ways, Sailor explained. First, they can serve as a facilitator of the payment process, by providing technology products around the management of coding and claims. In this role, clearinghouses will enable easier, faster payments and strengthen the relationships among trading partners.

“For example, using correct coding and editing technology, problems can be identified earlier in the processing stream so that they can be addressed before reaching the payer’s adjudication system,” he noted. “Identifying payment issues early and correcting them before adjudication helps reduce costs and streamline the payment process.” In addition, clearinghouses also may offer technologies to transform data from one format to another to accommodate either a standard or a payer-specific need.

Before the full system of direct connections is established, clearinghouses also can help payers and providers by serving as transport hubs between direct-connect customers and those endpoints that do not have direct connection capabilities. Sailor noted that in the next stage of development, the technology will enable any provider to automatically connect with any payer, “but until then, clearinghouses can lend their network capacity to support better connectivity among the parties.”

Finally, according to Sailor, clearinghouses are well positioned to serve an important role in the establishment of a comprehensive health information exchange (HIE). HIE is a technology vision characterized by optimized networks, applications, interfaces, and data formats that together form an interoperable electronic infrastructure for the exchange of clinical, administrative and financial health information between all health care stakeholders. “The clearinghouse network for routing administrative data can serve as a starting point for the transmission of clinical data as well,” he said.

Ingenix helping to facilitate direct connections

Ingenix offers a broad range of technologies and services to assist providers and payers navigating this changing environment. Software can help providers manage EDI with traditional clearinghouse partnerships or direct connection, and a call center option offers support during the transition to and implementation of a direct-connect environment.

For example, Ingenix Connectivity Director, a trading partner direct-connect technology, interfaces with most health care communication protocols, offers provider portal integration and automates self-registration and testing. Ingenix Transaction Manager adds an additional layer of value by combining tools that automatically scrub and adjust transaction content and formats. Sailor noted that Connectivity Director is facilitating a significant increase in direct submissions among payers and providers, which alone could be expected to lead to faster and cheaper EDI exchanges.

Ingenix also can provide access to complementary clinical intelligence using Claims Manager and Encoder Pro, so providers can ensure that their claims are properly coded and ready for prompt payment. The Claims Manager clinical editing tool offers a powerful, customizable rules engine, while Encoder Pro enables fast and simple code reference across the CPT^®, ICD-9-CM and HCPCS code sets.

Incorporating more clinical data into the EDI stream will lay important groundwork for the HIE, which should result in a smooth integration of both clinical and administrative information related to a patient encounter. Ingenix’s HIE strategy leverages both its EDI infrastructure and clearinghouse functions to help customers achieve greater connectivity and interoperability.

The EDI space has been disrupted in a healthy way by the industry’s shift toward direct connection, in Sailor’s view. “Trading partners are demanding better service and lower costs. We all want to see an easier process in place that moves data fast and consumes minimal administrative time," he said. “If we provide payers and providers with flexibility in how they connect, the cost of transactions can be managed more effectively.”

Read more about flexible approaches to EDI that can deliver immediate benefits and lay the framework for Health Information Exchange.

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