Update 10 May 2023

I hope that you are doing well and are enjoying the many free days (especially in the UK) and beautiful weather in May. This time, no update on news from the overall Dutch healthcare sector (although there is a fair amount of news to be highlighted), but rather a focused update on the Dutch commercial nursing home sector.

As some of you may remember I had an accident in 2018 and was limited in my movements. I used my downtime at home to develop a bottom-up overview of the Dutch commercial nursing home sector. After my 2018 overview a lot changed in the sector, and in 2021 I revisited my analysis, but with a focus on the large national chains. Given some downtime last week between projects I decided to develop a new overview of the current situation of the sector and give an overview of the developments we have seen since 2018.

Dutch commercial nursing home sector 2018 - 2023

2018 was early days in the Dutch commercial nursing home sector. The overall nursing home sector was dominated by the traditional non-profit operators but there were a number of commercial operators active as well. The sector included a large number of single-location operators, some with a long history of catering to the well-to-do and sometimes based on private pay. Changes to the regulatory structure earlier in the decade had made operating commercial nursing homes more attractive and there were an increasing number of operators with multiple locations. In total there were more than seventy organizations active in the commercial nursing home sector with 260 locations and approximately 6.000 beds. In 2018 there were eleven larger Dutch-owned chains with national ambitions. These eleven chains jointly had 160 locations and approximately 3.600 beds.

Shortly after publication of the 2018 report the market changed dramatically through the entrance of Orpea and Korian to the market through acquisitions of existing national chains. In 2021 only four of the original eleven local chains were still independent and one had managed to go bankrupt. The overall sector had grown dramatically, with the number of beds owned by the large organizations (Orpea, Korian and the four large independent chains) growing from 3.600 in 2018 to 5.400 in 2021. It is interesting to note that all the growth in volume from 2018 to 2021 among the large operators came from chains controlled by Orpea or Korian

Large Dutch commercial nursing home chains 2018 - 2023

Current best estimates are that there are 2.350 nursing homes in the Netherlands with a total of 121.000 beds. The current situation of the commercial nursing home sector is:

• Approximately 20% of the nursing homes are owned by commercial operators (ranging from operators with one location to the large, national chains)
• As commercial nursing homes tend to be smaller than nursing homes run by traditional non-profit operators, the commercial organizations have approximately 8% of the total beds
• The big, national organizations currently have 300 locations. The remaining 170 commercial locations are divided among single-location operators and small chains
• The Dutch commercial nursing home sector is consolidating. In 2018, the eleven large chains controlled 56% of the total number of commercial nursing home beds. Today, seven national organizations control 65% of the commercial nursing home beds
• The large national operators are still growing strongly through a combination of acquisitions and new, greenfield locations, but overall growth in slower in the last few years than in the period 2018 – 2021
• Orpea is, by far, the largest commercial nursing home operator in the Netherlands with 130 locations and 2.800 beds. Korian is the second largest with half the beds that Orpea has but is catching up. The third largest operator has half the beds that Korian has.

It will be interesting to see how the Dutch commercial nursing home sector develops in the next few years. Some predictions:

• Overall demand for complex elderly care will grow in the Netherlands as in all other European countries. The decision by the government to reduce direct financing of real estate (move from ZIN-financing to VPT financing) will benefit commercial operators as they typically already use VPT financing. Overall market share of the commercial nursing home operators will increase
• The overall nursing home market and the commercial sub-sector will continue to consolidate. The ongoing process to restructure the overall Dutch healthcare market (IZA and WOZO) will make it more difficult for smaller operators and mergers / acquisitions into larger organizations are likely both in the non-profit and for-profit segments
• The two sub-sectors will become less differentiated as the non-profit organizations are required to meet growing demand through VPT financing. Cooperation and joint ventures between profit and non-profit companies are likely
• Korian and Orpea will mature as organizations in the Dutch market. Both have recently hired new CEOs for their Dutch operations with backgrounds from traditional non-profit healthcare operators. The new CEOs will be more open to cooperating with the non-profit operators and will spend considerable time on consolidating branding and back-office operations between what are currently a collection of separate brands and organizations
• The window of opportunity for new international entrants is closing. The only large group that is currently open to acquisition is Zorggroep De Laren. It is the smallest of the seven national chains and has not grown since 2018. While there are acquisition opportunities among the smaller regional chains, this will be a more challenging path to developing a national brand in the Dutch market.