Electronic data interchange (EDI) is the standard way computers at providers, health plans and clearinghouses send each other business messages. Claims, eligibility checks, payment details and prior authorization requests all travel as EDI files. Patients rarely see it, but when EDI fails, care and payment slow down.
The standard transactions
In the United States, the HIPAA law required national standards for electronic health care transactions. They apply to health plans, clearinghouses and any provider who conducts these transactions electronically [1]. Most use the X12 format:
- 837: the claim sent from provider to payer.
- 835: the remittance advice explaining payment.
- 270/271: eligibility and benefits question and answer.
- 276/277: claim status question and answer.
- 278: prior authorization (referral) request and response.
- 834 and 820: plan enrolment and premium payment.
Pharmacy claims use separate NCPDP standards. HHS has also adopted operating rules that set response times and data content for several transactions [1].
How far adoption has come
The CAQH Index tracks how often these transactions are done electronically. The 2024 Index found claim status checks were 81% electronic and claim payments 78%, but prior authorization lagged at about 40% [2][3]. The rest still involves phone calls, faxes, mail or web portals.
CAQH estimates about $20 billion a year in remaining savings if manual transactions move to electronic ones [2][3]. Much of that saving is staff time at both providers and plans.
Why prior authorization is hard
Prior authorization needs clinical details, not just billing codes. The 278 standard is often not supported end to end, so staff fill in payer portals or send faxes with notes attached. In January 2024, CMS finalised a rule that requires many payers to build electronic prior authorization interfaces and to answer urgent requests within 72 hours and standard ones within 7 days, starting in 2026 [4]. These interfaces use the newer FHIR standard alongside X12.
The role of clearinghouses
Most providers do not connect to every payer directly. They send files to a clearinghouse, which checks format, routes each claim to the right payer and returns responses. This saves effort but concentrates risk in a few large companies.
The Change Healthcare attack
That risk became clear in February 2024, when a ransomware attack hit Change Healthcare, one of the largest US clearinghouses. Claims and payments stalled for weeks for many providers. HHS opened an investigation and published guidance for affected organisations [5]. Change Healthcare later reported that about 192.7 million people were affected, the largest health data breach reported to US regulators [6].
Lessons for resilience
- Have a back-up clearinghouse or direct payer connection ready.
- Know which payers and services depend on each vendor.
- Require multi-factor authentication and strong security from partners.
- Test plans for working without electronic claims for several weeks.
- Keep enough cash reserves to cover delayed payments.
Beyond the US
Other countries use different standards, and some have single national systems. Many middle-income countries are now building electronic claims as public and private insurance grows. The goals are the same: fewer manual steps, faster payment and better data on what care is delivered.
Data quality matters
EDI is only as good as the data in it. Wrong member IDs, outdated provider details and mismatched codes cause rejections. Clean master data and automated checks before sending catch many of these errors.
Key numbers at a glance
- Claim status: 81% electronic; claim payment: 78%.
- Prior authorization: only about 40% electronic.
- About $20 billion a year in remaining savings.
- Change Healthcare breach: about 192.7 million people affected.
Questions for revenue cycle and IT leaders
- Which transactions do we still handle by phone, fax or portal?
- What is our back-up if our clearinghouse goes down?
- Are we ready for electronic prior authorization in 2026?
- How often are our claims rejected for data errors?
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Glossary
- Clearinghouse: a company that checks and routes claims between providers and payers.
- Remittance advice: the payer's explanation of what was paid and why.
- Operating rules: extra rules on timing and content that sit on top of the standards.
- FHIR: a newer web-based standard for sharing health data through APIs.
- Rejection vs denial: a rejected claim fails format checks and never reaches review; a denied claim was reviewed and not paid.
In short
Standard electronic messages move most health care money. Finishing the move to electronic prior authorization and planning for outages are the next priorities.
What this means
EDI is the plumbing of health care payment. Most routine transactions are already electronic, but prior authorization and resilience are the weak points. New rules, FHIR interfaces and better back-up plans will shape the next stage.
Where to read more
All figures in this article come from public sources listed below. For more detail, start with the CMS page on HIPAA adopted standards and the CAQH Index. Each is free to read online. If anything here raises a question about your own health, take this article to your doctor or pharmacist and talk it through together. Buyers, investors and policy makers can also use these sources to check claims in sales materials and compare options on the same public evidence. Where public sources disagree or update their figures, we note the year of each number so readers can see how the picture changes over time.
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Topics: Health IT and data · Digital health · Hospital
Sources
- CMS: HIPAA adopted standards and operating rules
- AJMC: CAQH Index finds $20 billion in cost savings opportunities
- CAQH news release: New CAQH Index reveals $20B savings opportunity
- CMS fact sheet: Interoperability and Prior Authorization Final Rule (CMS-0057-F)
- HHS OCR: Change Healthcare cybersecurity incident FAQs
- American Hospital Association: 2025 cybersecurity year in review, part one
Banner image: Raspberry Pi 4 on a network switch by RAIL P (RAIL.PHOTOGRAPHY), CC0, via Wikimedia Commons.
The data behind this story
Topics: Health IT and data · Digital health · Hospital
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