Update 19 March 2024
Welcome back to another update on the Dutch healthcare sector. Spring is in the air, and there is news to report from the Dutch healthcare sector. This update covers the following news items:
- General practitioners worried about the growth of commercial nursing homes. What are they worried about and what are the potential consequences?
- Healthcare regulators want more control over commercial primary care chains. What are the key reasons?
- More than 20% of Dutch healthcare providers expect to report losses for 2023. What does the future look like?
General Practitioners worried about the growth of commercial nursing homes
According to a recent study the number of commercial nursing homes has grown from 96 ten years ago to more than 500 now. In the previous two years there has been a growth of more than 100 new commercial nursing homes. The Dutch General Practitioner Association (LHV) is worried about the ongoing growth in commercial nursing homes as they believe many of these locations are not able to provide the required quality to the resident clients.
The worries of the LHV are due to the different financing systems currently used in the Netherlands for financing elderly care. Most traditional non-profit elderly care providers finance nursing home care through ZIN-financing. This entails that the government pays for all costs associated with the client, including real estate costs. Commercial providers tend to use VPT-financing, where the government only pays the healthcare-related costs, and the client pays rental cost directly to the provider. Clients receiving VPT-financed care are seen as living “at home” and the care provided is, technically speaking, home care, even when provided on a 24/7 basis. As a consequence, the operator is not obliged to provide specialized geriatric care and the clients are expected to make use of local primary care (General Practitioners). In addition, as described in an earlier update, this also raises issues regarding the financing of equipment such as patient lifts.
The Dutch government has announced that no new nursing homes (financed by ZIN) will be developed and that the growing numbers of elderly clients requiring complex care will need to be cared for “at home”. This means that the number of clients receiving VPT-financed elderly care (either at nursing home locations where the client pays rent, or at the existing home of the client) will grow strongly. The workload of GPs in the Netherlands is increasing due to other factors as well, and adding large numbers of elderly patients requiring complex care to their workload is probably untenable.
A likely outcome is that regulations will be sharpened, and providers of VPT-care will be required to have structured access to geriatric doctors and psychiatrists. Commercial nursing home care in the Netherlands is currently provided by a limited number of large chains (Korian, Orpea, etc.), some smaller chains, and a fairly substantial number of small (1-3 locations) operators. The sector has been consolidating, and sharpened regulations are likely to speed up consolidation as it will be much easier for larger organizations to provide the required specialized care.
Healthcare regulators want more control over commercial primary care chains
In earlier updates we have written about the challenges that some commercial primary care chains are facing. We have also written about how the Dutch Authority for Consumers and Markets (ACM) wants more power to block small mergers and acquisitions in the healthcare sector. The two key regulatory bodies for the Dutch healthcare sector are The Dutch Healthcare Authority (NZa) and the Health and Youth Care Inspectorate (IGJ). They have now published advice for the Ministry suggesting more proactive monitoring of the commercial primary care chains.
The NZa and IGJ believe that the primary care chains can improve the tenability of primary care in the Netherlands by making supporting processes more efficient and through scale effects related to their size. However, they also see that some of the chains are not delivering the required quality of care and accessibility. The NZa and IGJ are also worried about the financial position of the chains and see the potential danger of chains becoming “too big to fail”. Finally, the chains tend to invoice differently from independent GPs by either invoicing a fixed fee for the total population served by a given location, or invoicing all activities on one code instead of specifying the activity conducted. This means that the NZa has less control over the specific activities conducted.
The recommendations to the Minister are to either develop laws or give the NZa the power to force the commercial chains to provide information on their financial position and report on the level of detail required by the NZA. In addition, the IGJ and NZa suggest that it should be made possible to evaluate acquisitions on the potential consequences on the overall market. The report will be discussed in Parliament at the end of May, and we will come back to this issue then.
More than 20% of Dutch healthcare providers expect to report a loss for 2023
The Healthcare Sector Guarantee Fund (WfZ) is an organization that guarantees loans made to Dutch healthcare providers. Due to the provided guarantee the healthcare organizations are able to borrow money at AAA-rates. A key part of the WfZ’s activities is to monitor risks by reviewing the financial situation of participating organizations twice a year.
The latest review has been conducted on 284 healthcare providers across all sub-sectors. Overall 22.5% of the organizations expect to close 2023 with a loss. However, there are significant differences between the sectors. In the disabled care sector, one third of the providers expect to end 2023 with a loss while only 17% of hospitals expect 2023 to be loss-making. The main reason for the weak financial results is higher staff-related costs. These are mainly driven by large salary increases due to updated collective bargaining agreements to help staff meet the effects of the high inflation in 2021 and 2022. Other staff-related reasons include high levels of absenteeism and the need to hire large numbers of temporary staff.
Most providers expect 2024 to be a better year (less inflation, increased tariffs, etc.) with only 10% of the organizations budgeting a loss for the year. However, most operators expect profit margins to be low. WfZ feels that the low profitability is an issue, but does not anticipate large-scale problems as most of the operators have a healthy balance sheet.