Health Care Costs Highlight MLC Risk

The Japan P&I Club recently issued a notice to shipowners giving an analysis of why U.S. health care is so expensive. The high cost of U.S. healthcare is not new, but with the Maritime Labour Convention (MLC) now coming into its third year there could now be an elephant in the room making it more pertinent than ever before.

The MLC came into force internationally in August 2013. One of its aims is to extend the duty of care that shipowners are required to provide sick or injured seafarers. In the past, seafarers working for less vigilant owners might find themselves treated on board but then replaced at the next port and subsequently left to manage their problems without support.

The high cost of health care in the U.S. has become an issue of greater relevance to shipowners and their P&I Clubs as they are required to now manage crew members back to “maximum medical improvement.”

The Japan P&I Club cites an information paper by U.S. medical services coordinator Sphere MD. The key message is this:

Medical care in the U.S. is more expensive than in any other country in the world. This is because U.S. health care pricing is not set by the government. In fact, in most cases, hospitals and doctors in the U.S. are allowed to charge ANY amount they wish for their services. As most U.S. hospitals and doctors are private enterprises, they charge higher pricing to maximize profits.

Because hospitals and doctors set their own pricing, situations exist where hospital charges for identical medical services, may differ substantially from port to port. In fact, port-to-port cost variation can be 10 x or more. An appendectomy may cost $300,000 in New York, while the same surgery may cost $30,000 in Washington State.

Medical services coordinators around the world offer services to help shipowners minimize costs, particularly in the U.S.

Christina DeSimone, CEO of Future Care, Inc., has this to say: “The U.S. has the most expensive healthcare system in the developed world. Medical bill review along with pre-certifying care and cost at the time your crew member is admitted to a hospital is the only way to ensure that your crew members are receiving quality care in the right timeframe for the right cost.”

Future Care’s bill review services have found that 90 percent of all hospital bills contain overcharges. “It is critical to have a precertification of care process and a bill review system in place when your crew members are scheduled to receive medical care in the U.S. Savings from bill review can be enormously effective, saving the shipowner 50-70 percent of medical charges when a nurse case manager and a medical bill review specialist work together prospectively during the actual course of the crew member’s care.”

DeSimone’s views are echoed by Andy Tibbets, Vice President at International Medical Group, Inc. (IMG). Through its subsidiary, AkesoCare Global, IMG offers services globally for insurance, claims administration, case management and cost containment.

“Shipowners are realizing that health care in the U.S. is extraordinarily expensive, and what we’ve seen happen in the U.S. for the last 40-plus years is that most land-based industries have built up many different strategies for mitigating these costs,” he says.

“Now shipowners are assuming additional responsibilities similar to those land-based industries. A lack of experience in fiscal management and medical care management could see shipowners and P&I Clubs writing checks without any real idea about how to manage costs.”

It’s Tibbets that sees the elephant in the room when it comes to the MLC. He says that historically it takes attorneys two or three years to realize the litigation opportunities that new regulations make available. “Litigation is a challenge everywhere, and especially in workers’ compensation. We have seen it in other industries. A law comes in and the attorneys follow. Shipowners, as employers, need a sound strategy.”

IMG claims to have something currently missing in the MLC and also the maritime insurance industry. That is the protocols to help shipowners ensure they have sound processes and documentation in their dealings with sick or injured crew members. Tibbets claims IMG’s protocols are based on sophisticated processes, suitable worldwide, that are already tested in court.

“Documentation is not a panacea, but in in its absence litigation risks increase. That’s the elephant in the room with the MLC: There is no clear guidance set forth to really demonstrate what steps have to be taken by vessel owners to fulfill its requirements,” says Tibbets.

As Sphere MD warns: “U.S. law is unique for both domestic and foreign crew members when it comes to medical care. In many cases, liability for medical care is unlimited, and medical bills are not subject to any insurance adjustments. In fact, U.S. courts have ordered vessel owners to pay 100 percent of medical invoices. Therefore, even in the event of overtreatment shipowners may be required to pay the full invoice amount.”

The Japan P&I Club notice is available here.