Update 11 July 2018
Here in Holland we have had great weather the last few weeks, and there have been several interesting announcements in the press. In this latest update on private healthcare in the Netherlands we cover:
- Consolidation of Dutch dentistry sector continues, but sector is still very fragmented. Who will take the next steps in the expected consolidation?
- Financing for long term psychiatric care in process of being moved back to central government. What does this mean for international companies interested in the Dutch disables sector?
- Profitability up in Dutch elderly care sector. Is the improvement structural?
- In our snapshot we give an overview of Kies Mondzorg, the largest privately-owned dentistry chain in the Dutch market.
Consolidation of Dutch dentistry sector continues
Tandarts.nl is an information site for the dentistry sector. In a recent report they highlight key results of an analysis of their more than 5.000 affiliated clinics. A key result is that the share of clinics that are part of a chain is growing but is still low. In 2014 4.7% of the locations were part of a chain. Currently this is 6.5% representing approximately 325 locations. 265 of these locations are part of the five biggest chains:
- Curaeos / Dentconnect with 150 locations
- DentalClinics with 81 locations
- Kies Mondzorg with 14 clinics
- Fresh Tandartsen with 12 locations
- RDW Tandartsen with 8 locations
According to Tandarts.nl there are currently 18 organizations with more than four locations. This means that the remaining 13 chains have an average of 4.6 locations each.
There appears to be a large potential for further consolidation in this market. This consolidation will also be driven by many older dentists with solo practices retiring in the next few years. Who will lead the further consolidation of the Dutch dentistry sector?
Financing of psychiatric long-term care to be moved back to central government
One of the major changes in the extensive 2015 reform of the Dutch healthcare system was to move the responsibility and financing of long-term psychiatric care from the central government to the municipalities. For the sector this has lead to a number of extra challenges related to the level of fees paid and increased complexity in dealing with the individual demands and financing terms of the municipalities.
A process is now underway to include long-term psychiatric care in the Wet Langdurig Zorg (WLZ) (The Law for long-term care) which is financed by the central government. Currently the process is focused on determining the scope and scale of psychiatric issues to be covered by the amended law, and the level of financing for each indication.
The new financing structure will be in place in 2021 and will be good news for international companies interested in the Dutch disabled care sector:
- Simpler rules, regulations, and financing structures / tariffs as these will be determined nationally instead of individually per municipality
- Easier access to client following financing either through the current system of personal budgets or through the ongoing move of all WLZ-financing to system where the money follows the client (see update of 26 June 2018 for more details)
Profitability up in Dutch elderly care sector
In their yearly analysis of the annual reports of companies in the Dutch elderly care sector Verstegen Accountants report that the sector made a profit of €285 million in 2017. This is compared to a loss of €71 million in 2016. In 2016 36% of the organizations in the sector made a loss. In 2017 only 17% of the organizations made a loss.
The improvement in profitability in the sector is caused by a few key factors:
- No more extra one-off costs related to previous years as in 2016
- Extra payments from the government totaling €435 million to increase quality in the sector
This improvement in profitability should be structural. The losses in 2015 were for a large part due to reorganizations related to the new financing structures resulting from the 2015 reforms. Losses in 2016 were for a large part due to one-off costs related to corrections for salary-related costs for previous years. Improved profits in 2017 were due to most organizations in the sector enjoying increased revenues (average of 2.2%) while keeping costs stable. Direct patient related costs showed a strong growth (5.2%) but this was balanced by decreased costs on other areas. Revenues for the sector will be structurally be increased by €2.2 billion in the coming years. While the increase in revenues is earmarked for enabling higher staffing-levels, it should also create opportunities for a further improvement of profitability.
Snapshot of a Dutch private sector healthcare operator: Kies Mondzorg
The two largest dental chains in the Dutch market are owned by private equity (Curaeos by EQT and Dentalclinics by Nordic Capital). The third company on the list, Kies Zorg, is owned by the entrepreneur who started it in 2001. Harrie op de Laak is a dentist who after starting his own practice started acquiring other locations.
Kies Mondzorg now consists of 14 locations in the southern part of the Netherlands (Limburg). The locations all offer a broad range of dental health related services. A few the locations are directly owned, while some are part of a franchising formula where the central organization offers services around IT, management, financing, etc. Kies Mondzorg also offers several services independently to other dentists. Kies Mondzorg is actively looking for new franchisees in towns with more than 30.000 inhabitants.