EDI Overview

February 12, 2015    Article

EDI is a term that goes back a long ways in the world of consulting and it is valuable to ensure that everyone works from the same understanding of what EDI is all about.

EDI is shorthand for Electronic Data Interchange. EDI is defined as the structured electronic transmission of data using the Internet. Information can be transferred electronically from one computer system to another seamlessly and without direct human management.

EDI has the dual advantage of speeding up the transfer of data and doing so with much less chance of error. New security standards, such as AS2 provide for a high level of security using digital certificates and advanced encryption, while permitting the HTTP transfer at a lower cost than using a Value Added Network (VAN).

EDI has been widely adopted by various government agencies, including the IRS, which as long accepted electronic filings of tax returns.

The use of EDI requires that all documents have a standard format in order to be processed electronically. There are EDI standards for various industries and regions.

Electronic medical claim filing has benefited greatly from EDI. By one study, EDI has reduced the 11 steps required for a paper claim filing down to one document, produced within moments of the event. The electronic claim filing process, with its built in software checks for accuracy and completion has significantly reduced filing errors resulting much faster payment cycle. The vast majority of hospital and major medical centers in the U.S. have switched to electronic filings.

EDI is about doing business with trading partners electronically in a timely and seamless environment. EDI provides many advantages to a company such as the development of closer relationships with trading partners, faster processing of orders and payments and lower overall costs due to personnel reductions or reassignments.