Update 25 July 2023

Some of you are probably already on vacation, but some of us have to continue working in the nice summer weather. I hope you are enjoying your holidays and that those of us who have to wait can look forward to the coming vacations. Even though it is summer, there is still news to report from the Dutch healthcare sector. In this update we cover:

• 2022 a better financial year for hospitals than expected. What were the reasons?
• The right of elderly care clients for intramural care to be reduced. How does this fit in overall process of redefining Dutch elderly care?
• M&A in the healthcare IT sector. Will there be further consolidation in the sector?
• In a new snapshot we give an overview of Calculus, a healthcare IT company currently in the news

2022 better financial year for hospitals than expected

In a poll carried out at the beginning of this year 17% of hospitals expected to end 2022 with a loss. Verstegen Accountants and Intrakoop have recently released a report outlining the key results of their analysis of the published annual reports of 71 Dutch hospitals. The report highlights that only three hospitals (down from four in 2021) ended the year with a loss. This is 4% of the total number of hospitals.

The main reason for the acceptable 2022 results is increased volumes. The number of patients increased by 2.3% resulting in revenues of €33.6 billion for the 71 hospitals in the survey (3.4% higher than the previous year). Return on sales, however, decreased from 1.6% in 2021 to 1.4% in 2022. Key areas with cost increases include staffing costs (partly driven by record-high levels of sick-leave), capital costs (depreciation, interest and rental costs) and energy costs. While energy costs are not a very large part of the total cost structure of a hospital, some hospitals saw these costs increase by more than 50% from 2021 to 2022.

Even the best of years, the margins of Dutch hospitals are thin. Luckily, most Dutch hospitals have strong balance sheets (average across the 71 hospitals is an equity to asset ratio of 28.1%). The hospital sector in the Netherlands is set to go through dramatic changes in the coming years and the hospitals will need financial room to weather these changes.

The right of elderly care clients for intramural care will be reduced

As we have written about before. The Dutch government is carrying out two major programs to restructure the Dutch healthcare system (IZA and WOZO). IZA is focused on curative care and WOZO is focused on elderly care. A key change envisaged for the WOZO program is to move care away from nursing homes to a home setting. As discussed earlier, to a large extent this means that patients requiring intensive care will need to pay directly for housing costs instead of this being financed by the government.

It is clear that the ongoing programs will lead to less services being financed by the government (see update on sixty cost saving opportunities presented by the government). A key starting point for the programs has been that they should take place within the current regulatory structure. However, a recent report from the NZA (The Dutch Healthcare Authority) suggests that the law governing intramural care (WLZ) should be changed. This law currently gives elderly clients requiring 24/7 care the right to care in a intramural setting. The NZa believes that this is not realistic anymore due to staff and bed shortages. The law should therefore be changed to reflect the goals of WOZO (do it yourself if possible, do it at home if possible, do it digitally if possible) and ensure that scarce resources are available to those with the highest needs. The NZA also believes that such a change will reduce the overall complexity of the elderly care system .

While the report is a free-standing presentation of the viewpoints of the NZA, its voice is powerful and very often such a publication is a first step in a process leading to real change. Unfortunately, not much can be expected to happen in the short term as the current Dutch government has fallen and new elections will only take place in mid-November. After the elections more time will pass before a new government is formed and legislative action can be taken.

M&A in the healthcare sector

RAM Infotechnology is a company specialized in provided cloud-based services to Dutch healthcare providers. Key services include digital workspaces, software management, cybersecurity, etc. The company has recently announced the acquisition of CuraTec. Curatec is a company focusing on alarm and communication systems, domotica solutions, sensor-based solutions, etc. RAM sees the acquisition as a key step in positioning itself as a key partner for healthcare providers digitizing key processes. Ram is part-owned by private equity (Keensight Capital) who have financed the acquisition.

Snapshot of Dutch commercial healthcare company: Calculus a healthcare IT company in the news

Calculus is a Dutch software company specialized in helping General Practitioners (GPs) deal with their administration and billing to the healthcare insurance companies. The main product is VIPLive which has a direct connection to the doctor’s Patient Information System (HIS in Dutch). VIPLive is also used to coordinate care within regional care groups focusing on the needs of patients with chronic diseases requiring help from different types of healthcare providers. As GPs play a key role in these networks VIPLive has an estimated 80% market share.

As the different types of providers tend to use different systems, VIPLive functions as a shell that extracts information from the individual systems and makes the data available to other organizations. One of the major Dutch newspapers has recently printed a negative article outlining how Calculus uploads medical information for all patients every week to its central server. The Dutch regulator for the protection of personal data (Authoriteit Persoonsgegevens) has looked into the company and how it uses the data but has not seen it as problematic.

Calculus has approximately one hundred employees and is owned by Topicus. Topicus is a holding company for approximately one hundred software companies in the Netherlands and is again owned by the Canadian company Constellation Software.