Update 27 July 2017
Welcome to the newest update on private healthcare in The Netherlands .In this newsletter we cover the following news and issues :
- Bergman Clinics gets its debts refinanced by Intermediate Capital Group (ICG). Will the more traditional Dutch healthcare organizations also start look at innovative financing possibilities?
- Elderly care sector was loss-making in 2016 and investments are 30% lower than four years ago. Can international operators help turn the sector around?
- In our snapshot, we give an overview of WoonZorgNet, a private provider of long-term psychiatric care.
Bergman Clinics refinances with Intermediate Capital Group
Bergman Clinics, the largest operator of private clinics in The Netherlands (profiled in the update of 1 June 2017) has finalized a €140 million loan facility with Intermediate Capital Group. €40 million will be used to refinance existing debt and repayment of the preference shares owned by RaboBank. The remaining €100 million will be used for financing growth. Will Bergman Clinics use its strengthened balance sheet to consolidate the market by buying existing private clinics or will it continue its strategy of establishing new green-field locations?
This is also the third deal in a year in the European healthcare sector for ICG (after equity deals with Esperi in Finland and Domus Vi in France). Up until now the more traditional Dutch healthcare operators (hospitals and care organizations) have tended to finance themselves from local banks. The local banks have become more careful in their financing due to ongoing regulatory changes. Will this deal increase the curiosity among other operators about international financing opportunities?
More bad news from the care sector
An analysis carried out on the annual reports of almost 400 Dutch elderly care organizations show that the sector made a loss of €39 million (compared to profits of €123 million in 2015). The overall negative results were the result of 40% of the organizations making losses in 2016. A major reason for the losses in 2016 is a once-off correction in salary costs going back five years related to payments made during vacations. This once-off cost totaled approximately €200 million for the 400 operators.
2016 was also the third year in a row that the elderly care organizations reduced investments. Investments in 2016 are 30% lower than what they were in 2013. One of the causes for the reduced investments are problems related to getting financing from the local banks. Does the elderly-care sector also need to look to international financing options?
Snapshot of Dutch private sector healthcare operator: WoonZorgNet
WoonZorgNet consists of seven locations with a total of 165 rooms offering long-term care (but no treatment) to people with a broad range of psychiatric issues. WoonZorgNet offer living accommodations and helps it clients deal with issues related to autism, psychiatric problems, and addictions. WoonZorgNet is geographically focused in the central and eastern part of The Netherlands, but is in the process of opening a new location in Dordrecht (near Rotterdam). The aim is to grow by 1-2 locations per year.
The care provided by WoonZorgNet is typically financed by the municipalities either directly or indirectly via personal budgets granted to the clients (usually required if WoonZorgNet does not have a contract with the relevant municipality). The residents of WoonZorgNet can be divided into three roughly equal groups: one third of the clients stay for a year or less; one third stay for 2-3 years, and the final one third are permanent residents.
The owners of WoonZorgNet bought the organization a number of years back and have carried out a turnaround and growth process. The owners are now also involved in rolling out Home Instead in The Netherlands. Home Instead is a franchise organization offering care and comfort-related services to the elderly living at home.