Update 10 January 2023

I hope that you have had a nice break for Christmas and New Year, and a good start to 2023. As expected, here in the Netherlands New Years Eve was wet and windy. As always, there is news from the Dutch healthcare sector. In this update we cover:

• Commercial provider of primary care in trouble. What will happen to the sector?
• Move towards multi-year contracts for long-term care providers. Which problems will this solve?
• Rehab sector in financial problems (still). Will the government and healthcare insurance companies step in?
• Disabled care sector has come through the corona years with limited damage. What are the new challenges facing the sector?

Commercial provider of primary care in trouble

In an earlier update we provided a snapshot of Arts en Zorg as an example of a successful commercial company running GP-practices. This was meant to provide a positive balance to our writing on the problems that Quin (a provider of software for digitizing the patient journey) had faced in owning twelve GP-practices.

Unfortunately, there has recently been more complaints about the quality of service provided by commercial GP-practices. The focus of the complaints is Co-med. Co-med is the owner of thirteen GP-practices located in various parts of the Netherlands. The practices have typically been bought from GPs who are retiring. As there is a shortage of primary-practice healthcare staff (GPs and other staff) in the Netherlands, Co-med has had challenges in filling the vacant staff positions in the acquired practices and has been forced to use temporary staff (when available). As a result,  patients have had problems getting timely appointments.

The quality issues at several Co-med practices has resulted in warnings and a study by IGJ (The Health and Youth care Inspectorate) and discussions in parliament. Innovation is clearly needed in the primary care sector but it appears that the commercial parties trying to establish a position in the market are facing large challenges in successfully dealing with the basic processes for providing quality services to their patients.

Moving towards multi-year contracts for long-term care

The Dutch government and the healthcare insurance companies are busy developing plans to implement WOZO (overall masterplan for improving  support, housing and care for the elderly). In a recent update provided by the Minster of Health one of the key decisions communicated was that from 2024 onwards long-term care providers will get multi-year contracts (as opposed to the one-year contracts that are typical today). The thinking is that multi-year contracts will give providers more financial security. It is hoped that this will enable the providers to invest in new capacity, (technical) innovations, quality and people (by giving staff fixed instead of short-term contracts).

The Minister also wants to develop financial incentives to stimulate elderly-care providers to use more technology in their service provision. Word on the street is that consultants are developing new cost-based tariffs based on the use of technology. The new tariffs based on these calculations will be lower than the current tariffs, forcing providers to invest in and use new cost-saving technology. The consultants have also suggested that new technologies should be purchased centrally in a coordinated manner to reduce costs.

Dutch rehab sector in financial problems (still)

In 2019 we gave an overview of the Dutch rehab sector. Back then the sector was loss-making for the second year in a row. The situation has not improved since then. A recent study highlights that all seventeen (down one since 2019 due to a merger) Dutch medical rehabilitation clinics will be loss-making in 2022. The losses are due to inflation, increased staff costs, higher energy costs, etc. According to the sector, the healthcare insurance companies will need to structurally increase tariffs. However, the initial response from the insurance companies is not positive.

The sector appears to be in structural problems due to the structure and level of tariffs paid and competition from other types of providers (physiotherapists, small specialized clinics, etc.) The sector plays an important role in decreasing congestion in hospitals and helping patients get back to normal lives. However, the financial problems are structural and it does not appear that the sector and the insurance companies are any closer to agreeing on how to move forward than three years ago.

Disabled care sector has passed through the corona-years successfully

A recent analysis by Verstegen Accountants and Intrakoop analyses the financial results of the disabled care sector in 2021 (the core corona-year). The analysis covers 232 companies providing disabled care with annual revenues higher than €1 million. Total revenues in the sector grew by 3.4% to €10.7 billion. The growth in revenues is partly due to growth in number of clients (0.9%) and days of care provided (1.9%). Remaining increases in revenues is due to higher tariffs and corona-related payments from the government and healthcare insurance companies.

Profitability in the sector declined slightly to 2.3% (return on sales). The smaller operators (revenues less than €25 million) and the six largest providers (revenues higher than €300 million) improved their profitability from 2021 to 2022. The improved profitability for the smaller companies was due to higher margins, while the increased returns  for the larger companies was mainly the result of (non-recurring) profits on sale of real estate.

These results highlight how successful the efforts of the Dutch government and the insurance companies to limit the financial effects of corona on providers has been. However, the disabled care sector is now facing the same challenges as the other sub-sectors (high energy costs, inflation and higher staff costs). Initial reports say that the financial results for 2022 will be negatively impacted by these trends and that negotiations with the insurance companies for higher tariffs have been challenging.