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By NINA SMITH-GARMON, senior vice president and general manager at Mitchell International Workers' Compensation Solutions

Those familiar with workers' compensation electronic data exchange, or EDI, know that the current state of EDI reporting for many claims administrators is inefficient, inaccurate and costly.

The most severe example of these inefficient processes comes in the form of claims administrators who are forced to do complete duplication of claims data solely for the purpose of EDI compliance reporting. Many of the manual processes for event reporting and error correction are also assigned to claims adjusters who should be focused on return to work rather than keeping track of individual state reporting requirements.

The result is a very negative impact on claims outcomes.

In the end, while state jurisdictions may have eliminated costs by implementing EDI, claims administrators may actually experience higher costs while being exposed to greater scrutiny of data by the states, resulting in higher frequency of fines and penalties. This is exacerbated by the fact that many states still require paper forms even after EDI implementation, creating a dual reporting requirement.

In general, EDI can be defined as the computer-to-computer exchange of business information. In its truest form, EDI eliminates or greatly reduces manual human intervention, but as we have seen, in many cases the workers' compensation industry has missed the mark in creating these efficiencies.

Depending on the state, there are specific requirements for reporting first report of injury (FROI), which contains basic claims data, and the subsequent report of injury (SROI), which contains such payment information as medical bill reports, along with back-and-forth acknowledgements for ensuring successful transmission, identifying errors and maintaining audit trails. Each state defines what reporting standard it uses for data and claims history.

In addition, the Centers for Medicare & Medicaid Services (CMS) has requirements for quarterly payment information, as well as guidelines that allow senders to make their own electronic queries to the CMS for Medicare eligibility.

SEVEN STEPS TO ACHIEVING EDI COMPLIANCE

Automating the EDI process solves most of the complications, inefficiencies and costs described above.

The steps below will serve as a measured approach for such automation. It's no easy task, but given the alternative, it's a necessary exercise.

1. Become familiar with the International Association of Industrial Accident Boards and Commissions (IAIABC), which is a great place to start for general education, specific system requirements and general networking with industry experts who have faced these same problems.

2. Perform a gap analysis of the claims system using IAIABC documentation. Identify the gaps and modify the claims system to include these data elements. The level of automation needed is directly related to data gaps.

3. Identify data requirements, mandatory and conditional edits, sequencing edits, and trigger or event reporting rules using, again, the IAIABC documentation, along with state jurisdiction-specific implementation guides.

4. Do a high-level review of this information, making possible the most important decision in this automation project: Do you have the internal resources to understand, document and develop all the various technology required, or should you contract with a vendor? The other obvious question is: Even if you do all of this internally, do you want to keep up with all the future new states implementations and new requirements for existing states?

In general, the decision to outsource core business functions is more of an internal strategic direction than a dollars-and-cents proposal, and in the end this decision has probably already been made at upper levels of the company.

5. Hire appropriate experts in workers' compensation EDI if in-house development is the decision. They will help develop requirements for system changes. Full EDI integration costs can range from $500,000 to $1.2 million, with ongoing costs ranging from $250,000 to $500,000 per year.

6. Select a vendor if you decide that's the appropriate path. The criteria for your search should be similar to in-house hiring requirements. Workers' compensation EDI is its own field of expertise. The vendor must have many years of experience in the field, and its staff must possess intimate knowledge and involvement in the IAIABC development process, along with a proven history of implementation with a large number of clients.

7. Once all claims system data gaps have been filled and the right EDI vendor (or in-house staff) is selected, the next step could be as simple as dumping a claims file to the vendor each day. The vendor will examine the raw claims data, compare the claims data against previously reported data and determine if an EDI transaction is required, populate that data in the required state format, edit the data to insure accuracy and finally send the data to the appropriate state jurisdiction.

Automating EDI reporting--an achievable process if taken step by step--can help lower claims reporting costs, increase claims accuracy, reduce manual processing and data entry, and maintain compliance with ever-varying state EDI reporting mandates. A standardized EDI solution for bill, injury reporting and CMS reporting can satisfy compliance directives while improving productivity, extending flexibility and increasing profitability.

June 1, 2011

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