How EDI works in health logistics

29 April 2024 by
Peter Hunt
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Each day healthcare providers and the manufacturers, suppliers and distributors of medical consumables, equipment and devices generate vast amounts of data within their supply chains. However, this data often lacks uniformity due to mis-aligned product data, ineffective business processes or supply chain inefficiencies. The lack of uniformity and understanding of “best practice” principles in the healthcare industry results in errors, delays and high processing costs right across the supply chain.  

Fortunately, there is a ready-made solution – healthcare EDI – which, when implemented appropriately, improves industry interoperability, increases operational efficiency and enhances existing business relationships.  

In this article, we examine how Electronic Data Interchange (EDI) exists within the healthcare sector, highlighting its benefits, challenges and considerations that will ensure your business can make most from adopting this technology.  

How does it work?   

EDI in healthcare uses global standards (e.g. GS1 XML, EDIFACT, ANSI X12, etc) to validate data and convert documents into a consistent format that can be easily processed and exchanged between healthcare providers and their trading partners through their existing business management systems. This data is transmitted across secure networks, for example through Value-Added Networks (VANs) provided by companies such as Pacific Commerce or via direct connections using technology including APIs, AS2/AS4, HTTPS, or SFTP.   

Once received, data files (including purchase order data, responses, invoices, shipping notifications, remittance advices, etc.) can be automatically integrated into an organisation’s internal systems, such as Enterprise Resource Planning (ERP) or Supply Chain Management (SCM) systems. 

What are the benefits of EDI in healthcare?  
  • Efficiency and speed: EDI drastically shortens the time required for transaction processing, enabling instant supply chain management and accelerating delivery of healthcare goods and services. 
  • Accuracy and reduced errors: the automation of data exchanges minimises the risk of errors associated with manual data entry, leading to more accurate transactions.  
  • Cost reduction: by reducing paper-based processes and manual labour, substantial cost savings can be achieved. 
  • Improved security: EDI employs encryption and authentication protocols to ensure the secure transmission of sensitive healthcare data. 
  • Improved business relationships: Adopting technology, in conjunction with your trading partners, provides the impetus for closer relationships and competitive advantages for both companies. 
  • Regulatory compliance: EDI helps healthcare organisations comply with regulatory requirements, including privacy laws and standards for electronic transactions. 
Challenges and considerations

Despite its numerous benefits, the adoption and ongoing management of EDI systems can present challenges for organisations. It is important that these challenges are recognised, and consideration given on ways to mitigate them.  

  • Overcoming resistance to change: It is human nature to resist change particularly where there is a perception that it will impact negatively on them. The key point here is to be upfront and explain the changes and their positive impact for workers and the organisation. Appropriate education and training are vital to help breakdown a resistance to change. 
  • Understanding costs to implement and maintain: The introduction of any new technology will involve upfront and ongoing costs. Costs include the technology itself and the costs to employ resources required to manage these systems. If using a VAN service, there will be costs associated with these services. It is important that all costs are fully understood, and a business conducts appropriate due diligence including a return on investment (ROI) and Risk Analysis prior to any commitment. 
  • Security and privacy considerations: It is critical to understand the security and privacy aspects when introducing automation technology such as EDI. EDI involves transmitting data, often including Personally Identifiable Information (PII), across the internet, making robust security measures more crucial. If a company is considering engaging an external EDI VAN service, considerations should be given to: 
    1. What are the company's security and privacy credentials (e.g. do they have valid security certifications such as the ISO 27001)? 
    2. What are the security controls implemented to protect your data (e.g. data encryption)? 
    3. Does the company store and process all data locally within Australia? This ensures your data remains onshore, away from potential security risks associated with storing data in other jurisdictions. 
    4. What is their experience implementing effective EDI in healthcare? It is crucial to select a provider with a solid track record to ensure you give yourself the best chance of success. 
  • Volume of transactions: Volume is key when implementing EDI. To achieve a successful outcome and gain maximum returns, it is always best to target high volume transactions and technically capable trading partners initially to reap the benefits of economies of scale. 

EDI, when implemented correctly, can greatly improve your competitiveness in the marketplace. When utilised in conjunction with other complementary technologies and an experienced healthcare EDI service provider, it will play a pivotal role in streamlining your healthcare supply chain. Cost savings will be achieved through removing wastage and inefficiencies and implementing a secure, standards-based approach to electronic information exchange. This will, in turn, ripple through your supply chain and eventually lead to enhanced patient care.

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