Liberty Mutual Saves Customers $14 Million
Managing Costly Physician-Dispensed Drugs Saved Customers $14 Million
CHALLENGE
Employers, health plans, and government programs face a growing trend of providers dispensing pharmaceuticals in physician offices. Though offering repackaged drugs creates a profitable revenue stream for physicians, it was a cost issue for Liberty Mutual customers in California. Worker’s Compensation reform in that state left a fee-schedule loophole that allowed provider reimbursements for drugs at five to six times the retail pharmacy rate.
SOLUTION
In 2005, when it implemented Medstat Advantage Suite®, Liberty Mutual foresaw the need to manage pharmaceuticals dispensed in physician offices. Working with the Thomson Healthcare design team, Liberty Mutual captured prescription records in the bill payment process using Red Book by Thomson, the most reliable source for accurate product information and prices on prescription drugs, to translate professional bills into equivalent pharmaceutical codes. This enabled the full power of the Thomson Healthcare pharmaceutical metrics in the management of all drugs. When the California reform fee schedule omitted rates for repackaged drugs, Liberty Mutual was positioned to tackle the problem head on.
RESULT
- As the share of physician-dispensed in California rose to 10 times the national average — more than one-third of all workers’ compensation costs in the state — Liberty collaborated with employers to curtail the practice by high-volume providers and actively supported state regulators lobbying for legislation that would benefit all workers’ compensation payers and employers in California.
- Due to the company’s customization of Advantage Suite, Liberty Mutual customers immediately saved $1 million when high-volume providers agreed to discontinue dispensing repackaged drugs. After further reducing the volume by 50 percent, Liberty Mutual policy holders realized $10 million in annual savings as new regulations enacted on March 1, 2007, closed the loophole that allowed the excessive provider reimbursements.