In Chicago and across the U.S., medical billing is overwhelmingly digital, but not without its challenges. In 2023, over 97% of medical claims were submitted electronically. Yet without proper handling of EDI 835 (remittance) and EDI 837 (claims) files, even the best systems leave room for delays, denials, and missed revenue.
The stakes are high. Nearly $120 billion in claims were denied in 2023 alone, and 60% of those denials were never resubmitted, resulting in massive financial losses. Meanwhile, providers spent an estimated $25.7 billion appealing denials, averaging $57 per claim, not to mention the lost time and administrative burden.
That’s why understanding and optimizing your EDI file workflows isn’t just a back-office chore—it’s a frontline strategy for protecting revenue and improving operational efficiency.
What is an EDI file?
Electronic Data Interchange (EDI) is a standardized, digital system that facilitates the secure exchange of healthcare information between providers, payers, and clearinghouses. Replacing outdated, paper-based processes, EDI streamlines claim submissions, remittance advice, eligibility checks, and more, dramatically reducing manual errors and administrative overhead.
Each EDI transaction is formatted using HIPAA-compliant ANSI X12 standards, ensuring consistency and regulatory compliance. For instance, EDI 837 files transmit claim data, while EDI 835 files communicate remittance details from payers. These transaction sets enable faster payments, improved claim accuracy, and enhanced revenue cycle efficiency for healthcare providers.
EDI File Types in Healthcare
In healthcare, essential EDI file types enable the electronic transfer of critical information. Below are the types of EDI files that are used in healthcare.
- EDI 837: Providers use this file to submit Health Care Claims to providers. This includes the patient information, ICD-10 Codes and HCPCS Codes.
- EDI 835: This file is being used by payers to send explanations of benefits (EOBs) to the patient.
- EDI 270/271: These help healthcare providers to check the Eligibility and Benefit information with the payer.
- EDI 276/277: Claim Status Inquiry and Response from the payer is being checked with these files.
- EDI 834: Benefit file used for Enrollment and Maintenance of the enrollment information of the individuals.
- EDI 820: This file is used for Payment Order and Remittance Advice.
What are 835 Files?
835 Files also known as electronic remittance advice, a digital file that has the information about the payment made by insurance companies and payers. This file is used in the healthcare industry for electronic data interchange (EDI).
- The 835 file is your digital remittance or payment advice. Think of it as the receipt or EOB for your electronic claim.
- It details what the payer paid, adjusted, denied, and why via standardized CARC/RARC codes.
- It includes a trace number (TRN) that matches the original claim, allowing for fast and automated reconciliation, even when payments cover multiple claims.
What is the format for the 835 files?
The 835 file, also known as Electronic Remittance Advice (ERA), follows the ANSI ASC X12N 835 standard and is HIPAA-compliant. It transmits healthcare claim payment details, including payment amounts, adjustments, reason codes, and information about denied claims.
What Are 837 Files?
This file contains the patient’s claim information. Instead of printing the claim paper or sending it through the mail, this file is submitted to the insurance company or clearing house.
- The 837 transaction is your digital claim, carrying billing data and often dozens or hundreds of them directly to payers, such as Medicare, Medicaid, and commercial insurers.
- There are several types of it, including 837P (professional), 837I (institutional), and 837D (dental).
- Via standardized EDI formats (ANSI X12), it includes comprehensive data on patient demographics (NM1), diagnosis codes (ICD-10), procedure codes (CPT), provider info, dates, and pricing.
What are the formats for the 837 files?
The 837 format, effective after March 31, 2012, is divided into three groups for healthcare billing:
- 837D – For dental practices
- 837P – For professionals
- 837I – For institutions
These forms are sent from healthcare providers to payers like HMOs, PPOs, or government agencies (Medicare/Medicaid) directly or via clearinghouses. They transmit billing and encounter data, while the 835 file is used for payment and benefit coordination between providers and payers.
What is the difference between 835 and 837 files in healthcare?
These two files are both Electronic Data Interchange (EDI), but they have different purposes. File 837 is used to submit healthcare claims from providers to the insurance companies. The payer uses the 835 file to send remittance advice and payment information back to providers.
| Aspect | 837 File | 835 File |
| Purpose | Used to submit healthcare claims electronically to payers (insurance). | Used to receive payment details and explanations from payers. |
| File Type | Claim submission (electronic claims format). | Remittance advice (electronic remittance advice or ERA). |
| Sender | Healthcare provider or billing company. | Payer (insurance company or government program). |
| Receiver | Payer (insurer or clearinghouse). | Provider or billing company. |
| Content | Patient details, services provided, codes, and charges. | Claim status, payment amount, denial codes, and adjustments. |
| File Standard | ANSI X12 837 format. | ANSI X12 835 format. |
| Used For | Initiating the payment process (sending claims). | Closing the loop—reporting payment and denial outcomes. |
| Importance | Starts the revenue cycle. | Crucial for payment reconciliation and denial management. |
| Regulated By | HIPAA standards for electronic health transactions. | HIPAA standards for remittance advice and EFT. |
| Other Names | Electronic Claim File (837P for professionals, 837I for institutional). | Electronic Remittance Advice (ERA). |
What is the Healthcare Claims and Remittance Process?
In healthcare, claims and remittance processes play a vital role. Providers get paid for the services they provide to the patient. From submitting claims to receiving payment, this process ensures that the services that have been provided by the providers are reimbursed accurately and timely manner.
Claim Generation (837 File)
This process begins when the provider renders services to the patient. That visit of the patient is then translated into medical codes (ICD-10, CPT, HCPCS) that are then formatted into an 837 file.
This file includes:
- Patient demographics
- Procedure and diagnosis codes
- Service dates and provider information
Claim Adjudication by the Payer
Once the payer receives the 837 claim file, they begin the process known as adjudication. This step involves reviewing the claim against:
- Patient’s eligibility
- Policy coverage
- Medical necessity
- Provider agreements
- Coding accuracy
Remittance Advice (835 File)
After adjudication, the payer sends back an 835 file, also known as an Electronic Remittance Advice (ERA). This remittance file includes:
- Approved payment amount
- Any adjustments or reductions
- Denial reasons (if applicable)
- Patient responsibility (copay, coinsurance, deductible)
Payment Posting & Reconciliation
At this stage, the payment from the payer (via EFT or check) is posted in the provider’s billing software or EHR system. The 835 file helps automate this. The billing team or software compares:
- Expected vs. actual payment
- Unpaid or underpaid claims
- Denial reasons
Denial Management & Appeals (If Needed)
Not all claims go smoothly. According to a 2023 report, about 9% of all U.S. healthcare claims are denied, totalling more than $262 billion annually. Providers must:
- Review denial reasons in the 835 file
- Correct and resubmit the claim (if possible)
- File an appeal when denials are unjustified
What are the benefits of 835 and 837 Files in Healthcare
There are several benefits of the EDI files 835 and 837, including modernizing healthcare billing processes by improving the exchange of claims and payments between providers and payers.
- Faster Claims & Payments: EDI 837 enables quicker claims submission, while EDI 835 ensures faster remittance and payment reconciliation.
- Reduced Costs: Automating the process reduces administrative tasks, saving time and money.
- Improved Accuracy: Standardised data reduces errors, increasing first-pass claim approvals and minimising denials.
- Better Cash Flow: Faster payments and efficient reconciliation help improve overall cash flow for healthcare practices.
- Enhanced Compliance: EDI ensures adherence to HIPAA and other regulations, minimizing audit risks.
- Increased Transparency: Clear data exchange improves visibility into claims and payments, facilitating quicker issue resolution.
Final Thought:
The healthcare claims and remittance process is more than paperwork; The truth is you can’t afford to overlook your 835 and 837 files. In a healthcare landscape where denials cost providers billions each year, improving your claims and remittance workflow is no longer optional; it’s essential. These digital files are not just forms; they’re your financial lifeline.
Are you ready to improve your billing process?
At Health Quest, we specialise in simplifying complex billing tasks, making them easy, accurate, and efficient. Whether you’re tired of chasing denied claims or looking to improve your revenue cycle, our team can help. Let’s take the stress out of billing one claim at a time.