Update 23 FEbruary 2021

After a week of winter, we have now arrived in spring with temperatures almost reaching 20C in the weekend. The previous weekend everybody was ice-skating this last weekend everybody was in t-shirts on their bikes enjoying the sun. Despite the strange weather conditions there is still interesting news from the Dutch healthcare sector:

• Dutch healthcare sector facing range of staffing-related issues. What can the elderly care sector learn from hospitals?
• Yet another Dutch healthcare organized moves to innovative financing solutions. What will be the role of banks in the future?
• Another court case related to low tariffs. Will this case be successful?

Staffing-related issues in the healthcare sector

Intrakoop is an organization providing purchasing services to its members in the Dutch healthcare sector. Intrakoop has recently carried out an analysis of the annual reports of operators in the Dutch healthcare sector in the period 2011 to 2019. The analysis highlights several trends in revenues, costs, and profits across the four main sectors of the market (elderly care, disabled care, mental care, and hospitals). The report also highlights a few worrying differences and trends related to staffing in the Dutch healthcare sector.

As can be expected, personnel-related costs have increased in all four sectors. The increase has been the lowest in the hospital sector (3.1% per year) and the highest in the disabled care sector (4.2% per year). The report also looks at the relationship between revenues and personnel related costs. This has increased in the hospital sector from €219 revenues per €100 personnel-related costs in 2011 to €243 revenues per €100 personnel-related costs in 2019. In other words, hospitals have created more value from every euro spent on personnel. In the other sectors the value created from staff was lower than hospitals in 2011 and has declined in the period up to 2019.

In the hospital sector a large part of the cost structure consists of (expensive) medicines, costs of equipment and disposables, etc. This explains why personnel-related costs are a smaller share of revenues in the hospital sector. The decline of the ratio in the other sectors is driven by personnel-related costs becoming a larger part of the total costs. This is due to a combination of staff becoming more expensive and the need to use more staff to provide the required services (in the elderly care sector this has been due to legal requirements for more front-line staff).

One of the reasons why staff has become more expensive is the development of sick leave in the period 2011 to 2019. Across all sectors there was a decline in the early years and then a steep increase. In the elderly care sector sick-leave has increased from 5.5% in 2013 to 6.9% in 2019. In the same year, sick leave in the hospital sector was 5.2%.

When speaking to senior managers in the elderly care sector they are typically more worried about finding sufficient staff than how they are going to finance the building of new nursing home locations. My experience says that HR management can be significantly improved in many elderly care organizations, and one of the key methods for alleviating staffing shortages is to reduce sick leave. Why is this higher in the elderly-care sector than in hospitals? What can the elderly care organizations learn from hospitals in areas such as attracting staff, reducing sick-leave and turnover, etc.?

Yet another healthcare providers with innovative financing

In the update of 12 January  we described how the largest Dutch provider of disabled care has received financing from the European Investment Bank. Recently, another Dutch operator (Meander Groep Zuid-Limburg) has received a Fitch AA-rating. This rating will enable Meander to finance new investments by directly placing bonds in the market.

Dutch banks are increasingly reducing their exposure to the Dutch healthcare sector. It is interesting to see the variety of strategies being followed by individual healthcare organizations to find new ways of financing investments (sale and lease back of real estate, European Investment Bank, ratings, etc.). In addition to being good news for the individual organization, such developments are also good news for the total Dutch healthcare sector as it shows that the sector is viewed as being sufficiently safe and stable for the new financing methods to be viable. However, this might not be good news for the major Dutch banks if their role in the sector becomes too low.

Another court case to fight low tariffs sector

In the update of 1 December 2020 we described how Meander Groep Zuid Limburg (see above) tried to force municipalities to increase the tariffs for domiciliary care by going to court. Meander lost the court case and the municipalities announced that they would be keeping their published tariffs.

Metabletica is a small commercial operator (2019 revenues of €2.5 million) providing ambulant mental healthcare services in and around Eindhoven. Approximately 20% of the revenues are from youth care (financed by municipalities) The company was loss-making in 2019 and claims that a main reason for the loss was tariffs from the municipalities that were not high enough to cover costs. Metabletica has now started a court case to force the municipalities to pay higher tariffs. It will be interesting to see if they are more successful that Meander.