"What is EDI?"
Electronic Data Interchange, or EDI is the electronic exchange of business documents from one company’s computer to another’s computer in nationally standard structured data formats. Using EDI to exchange business documents eliminates the rekeying of the data, resulting in more accurate data. In EDI, data necessary for conducting business is transmitted directly into your system without human intervention. Business documents such as health care claims, eligibility request, and benefit enrollment may be transmitted via EDI. You can transmit and receive EDI documents with companies such as providers, insurance companies, TPA's, and Clearinghouses. The companies you send and receive EDI with are referred to as trading partners.
"How Does EDI Work?"
Moving through the EDI process involves three functions within each computer system. Each trading partner (companies trading EDI documents) maintains their own application system, EDI interface, and communications.
Application Interface System
- Processes the data to be sent to, or received from, the trading partner.
- Moves electronic transactions to or from the application systems.
- Programs separate and deliver inbound transactions to the application systems.
- Delivers inbound transactions to the applications systems and gathers transactions from the application systems for outbound transmission.
EDI Software
- Manipulates and routes data between the application system and the communications handler.
- Translates Business documents into and out of the X12 formats.
- Creates Functional Acknowledgments (EDI transaction that notifies the trading partner that an electronic document was received).
- Verifies the identity of trading partners.
- Validates the transactions by checking a master file against the information transmitted.
Communications Handler
- Transmits data to and from the trading partner through a value-added network.
- Protects against transmission errors or interruptions.
