Update 20 April 2021
I hope that you have had a nice weekend and have enjoyed the nice weather. In this update we cover:
- Mediq reports new financing. Has the sales process been stopped?
- Dutch healthcare organizations expect positive results for 2020. What will be the situation in 2021?
- New model for financing of mental healthcare defined. What will be effect on commercial providers?
Update on Mediq
In recent updates we have talked about the ongoing transaction for Mediq and the process appeared to be in the end phase. However, since then there has been radio-silence and last week Mediq announced that it has received new financing for further acquisitions and that Advent continues to support Mediq in its further development.
Apparently, Advent also tried to sell Mediq in 2016 but changed its mind. Were the offers from Bain Capital and Clayton, Dubilier & Rice not rich enough and has Advent decided to keep Mediq? The last few weeks it has also been quiet regarding the potential sale of Ceban and Equipe.
Dutch healthcare organizations expect positive results for 2020
As explained in the update of 12 May last year the Dutch government, banks and healthcare insurance companies quickly took pro-active steps to help healthcare organizations that lost revenues due to COVID-19 related lock-downs. Not many financial statements for 2020 have been published and the government has expanded the time available to do so until 1 June. The first signs, however, are positive. In a report published by Finance Ideas 85% of interviewed CFOs of Dutch healthcare organizations expect to publish break-even or better results for 2020.
When the CFOs are asked about 2021, they are less positive. Many see challenges related to reduced COVID-19 compensation, cost of extra staff and very high health-related absenteeism.
New model for financing of mental healthcare
Approximately one year ago it was announced that the government wanted a new payment model for the curative mental healthcare sector. It was felt that the existing system had a wide range of issues ranging from complexity (including different payment models for different parts of the process), insufficient logical links between activities carried out and payments, the provision of sub-optimal information, and built-in motivation to carry out activities that are suboptimal for the system as a whole.
Several working groups consisting of people from the sector and staff from the ministry have been working on developing a new system. Regular interim reports have been published starting with design criteria and descriptions of the individual aspects of the new system. Last week the definitive model (including suggested tariffs) was presented. Key aspects of the system are:
- All types of curative mental healthcare activities are paid from one comprehensive and logical system
- Payment system is based on activities carried out. There are three types of activities (consultations, inpatient-related activities, and other activities)
- The tariff for a consultation depends on whether it is a diagnostic activity or a treatment, the type of professional carrying out the activity, the length of the consultation and the location in which it is carried out
- Eleven inpatient activities have been defined depending on the complexity of the situation. These activities are paid per 24-hours.
The new payment system will be implemented as of 1 January 2022. The overall system is meant to be budget-neutral for the sector as a whole. However, it is expected that the new payment system will result in a rebalancing of tariffs where low-complexity activities will be paid less than in the existing system and high-complexity activities will get an improved financing. Given that tariffs now have been published it is possible to use calculation-tools to analyze what the effects will be for a specific organization.
It can be expected that the new system will result in lower revenues on a like-for-like basis for commercial mental healthcare providers (Mentaal Beter, Dr. Bosman, etc.) typically focusing on the ambulant treatment of low-complexity issues. To a certain extent the lower revenue will be compensated by lower admin costs and reduced working capital (as payments from insurance companies will be significantly speeded up).