Update 12 November 2019
Here in the Netherlands the Christmas decorations have now come up. It appears that this happens earlier every year. In the Dutch healthcare sector, a number of interesting things have been happening in the last few weeks. In this update we cover:
- Another acquisition in the laboratory sector highlights the possibility of acquiring non-profit foundations
- National chain of psychological care providers in financial problems. What does this say about the sector?
- In our snapshot we give an overview of DigiContact, a provider of back-up care for organizations providing long-term care
Unilabs makes another acquisition in the Netherlands
In the spring of 2018 Unilabs acquired Medlon, a provider of diagnostical services in the eastern part of the country. Last week it was announced that Unilabs has acquired Saltro. Saltro is a national provider of a very broad range of diagnostics services and offers treatments related to thrombosis. Diagnostic services are offered at more than 200 locations in the Netherlands. These locations are not owned but are rented part-time from other organizations.
Saltro is organized as a non-profit foundation and has approximately 350 employees (FTEs), and a turnover of €41.2 million in 2018. The company is profitable (EBIT of €1.0 million) and has a strong balance sheet. According to Saltro the reasons for the acquisition by Unilabs is to be better positioned in a market with considerable pressure on prices and to have more room for investments in innovations. It is also expected that Unilabs will provide advantages in sourcing and international knowledge exchange.
A question I often get from foreign investors concerns the possibilities of acquiring non-profit foundations. This acquisition shows that this is possible. While not knowing the details of the deal my assumption is that Unilabs has acquired the two operating companies owned by the foundation leaving the foundation as an empty shell with a large amount of cash that it can use according to its by-laws.
Dokter Bosman in financial problems, but new investors are prepared to provide new liquidity
Dokter Bosman is a national chain providing secondary psychological care with a special focus on young clients. In 2017 it has contracts with 123 municipalities, 1743 clients and 278 employees. In 2017 Dokter Bosman had revenues of €17.6 million. The company made a loss of €5 million in 2016 and a loss of €0.7 million in 2017. The company has not published any numbers for 2018.
Due to large debts to the tax authorities and several municipalities the company is technically bankrupt. The main reasons for the dire financial situation is strong growth and limited financial controls. The main reasons for the losses is over-production (i.e. providing more care than the revenue ceilings agreed with insurance companies and municipalities). It also appears that large municipalities have paid the ongoing activities but are now demanding a return of the fees above the revenue ceilings hereby making them major creditors.
An investment company is prepared to acquire the company. It sees the Dutch psychological care market growing strongly in the coming years and believes that Dokter Bosman is well positioned through its ability to provide rapid diagnostics and cost-effective treatments. It believes that it can turn Dokter Bosman around into a profitable company but demands that the all municipalities owed money reduce their claims by 50%. An intense debate is ongoing concerning whether municipalities should use “healthcare money” to “subsidize” private investors in the healthcare sector. The alternative is that 400 (young) clients lose their current psychologist.
The development of Dokter Bosman (and other similar stories from other operators) highlights the need for operators to keep a very tight control on the services they provide and avoid providing services above and beyond the agreed revenue ceilings.
Snapshot of a Dutch healthcare operator: DigiContact
Typically, this space is reserved for Dutch commercial healthcare operators. DigiContact, in contrast, is a healthcare organization that has been set up by Philadelphia (one of the largest traditional providers of disabled care in the Netherlands). It was originally set up to provide 24/7 backup care to Philadelphia’s own clients but is now set up as an independent organization providing services to a broad range of other operators as well.
DigiContact provides a continuously manned call-center where all operators have a university-level healthcare education and relevant experience. The services offered include a videoscreen service that clients can call in emergencies when face-to-face help is not available, and a proactive outbound calling service to check up on clients regularly and/or provide reminders to take medicine. DigiContact is paid on a per-patient base, and there are three levels of service available:
- Light (€15 per week) for clients needing one outbound call per day and having (on average) one inbound call per week
- Regular (€25 per week) for clients requiring two outbound calls per day and having (on average) 1-3 inbound calls per week
- Specialized (€60 per week) for clients two outbound calls per week and up to six inbound calls per week
The key selling point to the operators is that DigiContact reduces manpower requirements by reducing the number of times that physical visits have to be carried out. Clients are providing with an IPad that provides direct contact. Most clients (even those with dementia and/or intellectual handicaps) can handle the technology and appreciate the extra level of service. All in all, a very smart way of providing an improved service for lower costs.