Introduction to EDI (Electronic Data Interchange)

What is EDI?

EDI (Electronic Data Interchange) is a standardized electronic communication method used

for exchanging business documents between organizations without human intervention.

Instead of sending paper-based purchase orders, invoices, or healthcare claims, businesses use
EDI to automate and standardize their transactions.

For example, in healthcare, EDI enables claim submissions (837) and payment remittances
(835) between providers and insurance companies. In retail, EDI streamlines order processing
and inventory management.

Key Features of EDI:

• Machine-to-Machine Communication: No manual intervention needed.

• Structured Data Format: Uses predefined standards (X12, EDIFACT, HL7, etc.).
• Security & Compliance: Encrypts data to ensure privacy and regulatory compliance
(e.g., HIPAA for healthcare).
• Cost-Effective & Time-Saving: Eliminates paperwork, reduces errors, and speeds up
transaction processing.

Why is EDI Used?

EDI is widely used across industries due to its numerous business advantages, including:

1. Reduced Manual Effort & Errors – Minimizes human involvement, reducing typos
and data entry mistakes.
2. Faster Processing – Transactions occur in seconds instead of hours or days.
3. Cost Savings – Eliminates the costs of paper, printing, and mailing.
4. Improved Business Relationships – Enhances efficiency in order fulfillment and
invoicing.
5. Enhanced Security & Compliance – Ensures data privacy and regulatory compliance.
6. Seamless Integration – Connects with ERP, CRM, and other enterprise systems.

For instance, an EDI 850 Purchase Order allows a retailer to send an order to a supplier
instantly, who then responds with an EDI 810 Invoice and an EDI 856 Advanced Shipping
Notice. This automates the entire procurement process.

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 Key Industries That Use EDI

EDI is used in multiple industries where secure and efficient data exchange is essential:

1. Healthcare

• Claims Processing (837)

• Payment Remittance (835)
• Eligibility Verification (270/271)
• Prior Authorization (278)
o Ensures compliance with HIPAA regulations.

2. Retail & Supply Chain

• Purchase Orders (850)

• Invoices (810)
• Shipping Notices (856)
• Inventory Reports (846)
o Automates order processing and inventory tracking.

3. Logistics & Transportation

• Shipment Tracking (214)

• Freight Invoice (210)
• Bill of Lading (211)
o Optimizes shipment visibility and tracking.

4. Finance & Banking

• Payment Instructions
• Fund Transfers
• Financial Statements
o Enables secure financial transactions.

5. Automotive & Manufacturing

• Production Scheduling
• Inventory Reports
• Supplier Coordination
o Reduces production delays.

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 EDI Standards and Protocols
Common EDI Standards

EDI standards define how data should be formatted for uniform exchange.

Standard Industry & Region Usage

X12 (ASC U.S. (Healthcare, Retail, Healthcare claims, invoices, shipping
X12) Logistics) notices
EDIFACT Global (Europe, Asia) Retail, banking, transportation
HL7 Healthcare (Clinical) Patient records, lab results,
prescriptions
TRADACOMS U.K. Retail Orders, invoices, delivery schedules
VDA German Automotive Supplier communication

Transmission Protocols

EDI messages are exchanged using different communication protocols:

Protocol Usage
FTP (File Transfer Protocol) Basic file exchange over the internet
SFTP (Secure FTP) Encrypted file transfer
AS2 (Applicability Statement 2) Secure transactions for healthcare & retail
VAN (Value-Added Network) Third-party network for secure B2B EDI
API-based EDI Real-time data transfer using modern web APIs

EDI Structure and Key Elements

Components of an EDI Document

EDI messages consist of structured data elements, grouped into:

• Segments: A logical group of elements (e.g., Name, Address).

• Elements: Individual data fields (e.g., Date, Amount).
• Loops: Repeating groups of segments (e.g., Multiple Service Lines in a Claim).

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 Segments

Segments are what make up an EDI document. Segments consist of data elements that are
logically related.

Example of Claim segment: CLM*ABC7001*145.5***11:B:1*Y*A*Y*Y

Segment Terminators

These are the special characters appearing at the end of a segment to indicate the termination
of the segment.

Sometimes, you cannot see them, for example, the carriage-return-line-feed is not visible to the
human eye, but it does exist.

Sometimes they are visible. The tilde character (~) separates the HL and PRV segments in
this example: HL*1**20*1~PRV*BI*PXC*207Q00000X

Data Elements

The data element is the smallest item in the EDI data. It is similar to a field in a database. The
elements contain the actual data. They consist of qualifiers and values.

Example: HL*1**20*1~PRV*BI*PXC*207Q00000X

The segments in the above example are red bold and the data elements are in italics.

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 Element Delimiter

The data element delimiter is a special character that separates the data elements. In the
example above, the element delimiter is an asterisk character.

Qualifiers

Qualifiers are sometimes used to indicate the values in the data elements.

Example 1: DTP*472*D8*20081121~ DTP-01 = 472 means “Service Date”

DTP-02 element is the Date Time Period Format Qualifier, where ‘D8’ means "Date Expressed
in Format CCYYMMDD"

Example 2: DTP*472*RD8*20081121-20091122~

DTP-02 = RD8 means “Range of Dates Expressed in Format CCYYMMDD- CCYYMMDD”.

There are more than 100 qualifiers available in the EDI standards just for the date and time
segments. Using qualifiers eliminates the need to have dedicated fields. For example, CLM-
02 is the Claim Charge Amount. CLM-02 does not need a qualifier.

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 Composite Data Elements

They are a set of sub-elements that represent a single named item. Think of them as a set of
child elements of a regular data element.

For example the SVC segment has seven regular elements and two composite (sub- elements)
elements. SVC01 and SVC06 have sub-elements.

The regular element separator separates SVC01, SVC02, SVC03, SVC04, SVC05, SVC06,
SVC07 and the sub-element separator separates the sub-elements in SVC01 and SVC06.

In the example below the element separator is an asterisk * the sub-element separator is a colon:
(defined in ISA-16 element), and segment the Terminator is "~", the SVC segment can look
like this (only using SVC01-01 and SVC01-02 in the example):

SVC*HC:99214*600*340 ~

In the second example below, STC01 is F2, which has a sub-element of 107. F2 means that the
claim was finalized with a denial. The code for denial is 107.

STC*F2:107*20121203**499*0*20121203~

Example: EDI 837 Claim Submission

ISA*00* *00* *ZZ*ABC123 *ZZ*XYZ789 *230101*1255*U*00401*000000001*0*P*~

GS*HC*SENDER*RECEIVER*20230101*1255*1*X*004010X098~
ST*837*0001~

🡪 ISA, GS, ST Headers define sender, receiver, and transaction type.

EDI in Different Domains

How EDI is Used in Healthcare, Retail, Logistics

Healthcare – Automates claim submissions and payments.

Retail – Enhances order processing and invoicing.
Logistics – Improves shipment tracking and inventory management.

Challenges & Solutions

Challenge Solution
Data Errors Implement validation checks
Security Concerns Use encrypted protocols (AS2, SFTP)
Legacy System Integration Use middleware like Boomi, Mirth Connect

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 EDI Mapping and Translation
How Data is Mapped from Source to EDI Format

• Inbound Mapping – Converts EDI to business system format.

• Outbound Mapping – Converts business data into EDI format.

Common EDI Mapping Tools

• IBM Sterling Integrator

• Gentran (IBM)
• Boomi (Dell Boomi)
• Mirth Connect (HL7 mappings in healthcare)

EDI Testing and Troubleshooting

Common Errors & Resolutions

Error Fix
Invalid Data Format Validate data against EDI standards
Missing Fields Ensure required elements are present
Duplicate Transactions Use tracking mechanisms

Testing Strategies

• Unit Testing – Tests individual transactions.

• End-to-End Testing – Ensures data flows correctly.
• Compliance Testing – Verifies adherence to industry regulations.

Future of EDI
API-Based EDI vs Traditional EDI

• Traditional EDI – Batch processing, structured files.

• API-based EDI – Real-time transactions, FHIR adoption in healthcare.

Integration with FHIR & Modern Standards

• FHIR (Fast Healthcare Interoperability Resources) is being integrated with EDI

for real-time patient data exchange.
• Cloud-based EDI is growing for scalability & automation.

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 Conclusion
EDI remains a vital technology for secure, automated, and standardized data exchange
across industries. While traditional EDI is dominant, API-based EDI and FHIR are shaping
the future of digital transactions.

Companies should adapt to new standards and integrate with cloud-based solutions to
remain competitive.

***************************************************************************

Appendices – Sample EDI Transactions Across Industries

1. Healthcare – EDI 837 (Healthcare Claim)

Purpose: Submit a healthcare claim from a provider to an insurance company.

EDI 837 Claim Transaction

ISA*00* *00* *ZZ*SENDERID *ZZ*RECEIVERID
*240101*1200*U*00401*000000001*0*P*:~
GS*HC*SENDER*RECEIVER*20240101*1200*1*X*005010X222A1~
ST*837*0001~
BHT*0019*00*0123ABC456*20240101*1200*CH~
NM1*41*2*XYZ HOSPITAL*****46*1234567890~
PER*IC*John Doe*TE*8005551234~
NM1*40*2*INSURANCE COMPANY*****46*987654321~
HL*1**20*1~
NM1*85*2*XYZ CLINIC*****XX*1234567893~
N3*123 MAIN STREET~
N4*LOS ANGELES*CA*90001~
REF*EI*123456789~
HL*2*1*22*0~
NM1*IL*1*SMITH*JOHN****MI*ABCD123456~
N3*456 OAK STREET~
N4*LOS ANGELES*CA*90001~
DMG*D8*19800101*M~
CLM*987654321*150.00***11:B:1*Y*A*Y*Y~
REF*D9*ABC123~
DTP*431*D8*20240101~
SE*18*0001~
GE*1*1~
IEA*1*000000001~

Explanation:

• ISA/GS Segments – Identifies sender & receiver.

• CLM Segment – Claim details with amount.
• NM1, HL, REF – Provider, patient, insurance details.

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 2. Retail – EDI 850 (Purchase Order)

Purpose: A buyer sends an order to a supplier.

Sample EDI 850 Purchase Order Transaction

ISA*00* *00* *ZZ*BUYERID *ZZ*SUPPLIERID
*240101*1000*U*00401*000000002*0*P*:~
GS*PO*BUYER*SUPPLIER*20240101*1000*2*X*004010~
ST*850*0001~
BEG*00*SA*1234567890**20240101~
REF*DP*98765~
N1*ST*John Doe Store*92*STORE123~
N3*789 MARKET STREET~
N4*NEW YORK*NY*10001~
PO1*1*10*EA*15.00*USD*VC*12345*UP*000123456789~
PID*F****Red Cotton T-Shirt~
PO1*2*5*EA*30.00*USD*VC*67890*UP*000987654321~
PID*F****Blue Jeans~
SE*12*0001~
GE*1*2~
IEA*1*000000002~

Explanation:

• BEG Segment – Order type and purchase order number.

• PO1 Segment – Order line details (quantity, price, product ID).
• N1, N3, N4 – Shipping address details.

3. Logistics – EDI 214 (Shipment Status)

Purpose: Used by carriers to send shipment status updates.

Sample EDI 214 Shipment Status Transaction

ISA*00* *00* *ZZ*CARRIERID *ZZ*SHIPPERID
*240101*0900*U*00401*000000003*0*P*:~
GS*QM*CARRIER*SHIPPER*20240101*0900*3*X*004010~
ST*214*0001~
B10*123456789*ABC123*CARRIERNAME~
L11*4567890*PO~
N1*SH*WAREHOUSE NAME*92*WH123~
N3*500 INDUSTRIAL ROAD~
N4*DALLAS*TX*75001~
N1*CN*John Doe Store~
N3*789 MARKET STREET~
N4*NEW YORK*NY*10001~
LX*1~

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 AT7*AF*NS***20240101*0800*CT~
SE*10*0001~
GE*1*3~
IEA*1*000000003~

Explanation:

• B10 – Shipment reference and carrier info.

• AT7 – Status of shipment (e.g., "Arrived at Facility").
• N1, N3, N4 – Pickup and delivery location details.

4. Finance – EDI 820 (Payment Order / Remittance Advice)

Purpose: Used to transmit payment details from a company to a bank or supplier.

Sample EDI 820 Payment Order Transaction

ISA*00* *00* *ZZ*BUYERBANK *ZZ*SUPPLIERBANK
*240101*1100*U*00401*000000004*0*P*:~
GS*RA*BUYER*SUPPLIER*20240101*1100*4*X*004010~
ST*820*0001~
BPR*C*5000.00*C*ACH*CTX*01*123456789*DA*987654321*201~
REF*PO*4567890~
N1*PR*BUYER COMPANY~
N1*PE*SUPPLIER COMPANY~
IT1*1*5000.00*USD*PR*12345~
SE*8*0001~
GE*1*4~
IEA*1*000000004~

Explanation:

• BPR – Payment details (amount, method).

• REF – Purchase order reference.
• IT1 – Invoice payment details.

5. Automotive – EDI 830 (Planning Schedule with Release)

Purpose: Used by manufacturers to communicate production schedules to suppliers.

Sample EDI 830 Planning Schedule

ISA*00* *00* *ZZ*AUTOMANUFID *ZZ*SUPPLIERID
*240101*1300*U*00401*000000005*0*P*:~
GS*PS*AUTOMANUFACTURER*SUPPLIER*20240101*1300*5*X*004010~
ST*830*0001~
BFR*00*SI*9876543210**20240101~
N1*SU*SUPPLIER NAME~
LIN**BP*ABC123~

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 FST*100*20240115*W~
FST*150*20240201*W~
SE*8*0001~
GE*1*5~
IEA*1*000000005~

Explanation:

• BFR – Schedule type and reference.

• FST – Forecasted production needs.

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