Update 23 June 2017
Welcome to the newest update on private healthcare in The Netherlands. In this newsletter, the focus is very much on weak financial results 2016 for Dutch healthcare organizations:
- Deloitte has published an overview of the financial results of the Dutch healthcare sector. Do the weak results give a reason for entering the Dutch market or are they a warning signal?
- Hospital Group Twente expects losses for 2017 and see the need to reduce costs with €10-15 million. Why is this hospital not able to make returns in line with the industry average?
- Careyn (€500 million revenues mostly from elderly care) faces a combination of financial losses and a position on the public “black list” for low quality. Can it manage a turn-around on its own?
- Welzorg, supplier of wheelchairs and other material for the elderly has made cumulative losses of €50 million since 2013. Can it be saved?
- In our Snapshot we give an overview of Buurtzorg, the best-known Dutch care organizations.
Deloitte report highlights weak financial performance in Dutch healthcare sector
In a recently published report Deloitte has analyzed the financial situation of the different segments of the Dutch healthcare market.
Hospitals have seen a growth in revenues of 3% in 2016, while costs grew by 3.5%. The average margin for the sector was 1.8% compared to 2.2% in 2015. As almost all the hospitals are non-profits equity has grown by €350 million to €4.5 billion, giving a solvability of 25.2%.
The long-term care sector also saw a reduction in results. With revenues of €16.1 billion, the sector made a profit of only €14 million (0.1%). A key driver for the weak results was a one-off payment related to a correction on vacation pay for previous years. The number of elderly-care organizations making a loss has doubled from 44 in 2015 to 91 in 2016, and the ten worst performing organizations made an average loss of €2.2 million on average revenues of €24 million.
Hospital Group Twente in trouble
Ziekenhuis Groep Twente (ZGT) consists of two hospitals and several clinics in the eastern part of The Netherlands on the border with Germany. ZGT serves 250.000 patients per year with a staff of 220 medical specialists and 3.200 employees. ZGT has a turnover of approximately €340 million.
For 2017 ZGT is expecting a loss of between €10-15 million thru a combination of increasing costs and pressure on the revenue side. ZGT expects to reduce the number of employees, reduce investments, and carefully consider which services should be offered where.
Careyn in a difficult position
Careyn is one of the biggest providers of elderly care in The Netherlands with revenues of €500 million. After making a loss of €3.2 million in 2015, the organization made a further loss of €4.5 million in 2016. The Board also reports that the financial numbers for the first quarter of 2017 are “worrying”.
In addition to financial problems, Careyn also has quality problems. In June 2016 Careyn was on a published list of elderly-care locations with low quality. Despite improvements, Careyn locations remained on the follow-up list, and the Ministry has sent an “intervention-team” to Careyn to help them improve quality.
If Careyn remains on the “black-list” this could have serious financial implications as well and lead to trouble with the banks. It is also possible that the Ministry will force Careyn to stop offering certain types of services.
Welzorg making massive losses
Welzorg is a Dutch supplier of wheelchairs and other equipment to improve the mobility of the elderly and handicapped. Welzorg also helps in the adaptation of homes to the requirements of the elderly and handicapped. Welzorg has annual revenues of slightly more than €100 million, and is owned by the Louwman Groep. The main business of the Louwman Group is importing cars.
Welzorg has serious operational and financial issues. Since 2010 revenues have gone down by 33%, mostly due to municipalities stopping their contracts with Welzorg due to bad quality. Welzorg has since 2013 made losses totaling almost €50 million. The owner has pumped €18 million into the company last year and claims that it will continue to support Welzorg
Snapshot of Dutch private sector healthcare operator: Buurtzorg
Buurtzorg is one of the success stories of Dutch healthcare. Buurtzorg specializes in providing home care to the elderly, mostly based on contracts with Dutch municipalities. Buurtzorg employees work in local teams that work very independently and has a minimal organization above the local teams. Buurtzorg Nederland was founded in 2006 by Jos de Blok. In the last ten years Buurtzorg Nederland has grown to more than 10.000 nurses working in 850 independent teams. Buurtzorg is seen internationally as an interesting model, and is now active in 24 countries.
The revenues of Buurtzorg Nederland in 2016 were €362 million, an increase of €54 million from the previous year. Buurtzorg made a loss of €4.7 million in 2016. This is partly due to the strong growth as the insurance companies have not paid Buurtzorg for €9-10 million of services that has been delivered but was not covered by the annual contracts. Buurtzorg also has an issue with the tax authorities who are disputing Buurtzorg’s positioning as a non-profit organization and want €6.5 million in back taxes for the period 2009-2014.