Update 27 June 2023

It was great meeting many of you last week at the HBI conference in London. Lots of very interesting talks and discussions, and good opportunities to talk informally. A “welcome” to my new contacts who have agreed to be put on my mailing list. I hope that you find my bi-weekly updates on the Dutch healthcare sector interesting and useful. In this update we cover:

• Bad news / good news concerning hospital consolidation. What will be the next steps?
• Extra salary for elderly care staff. When will other sectors follow?
• More loss-making organizations in the disabled care sector. Will tariffs be increased?
• In a new snapshot we give an overview of Mauritskliniek, a group of specialized clinics

Bad news and good news concerning hospital consolidation

The Netherlands today has too many regional hospitals, and it can be expected that ongoing trends will further reduce the need for traditional hospitals. The trends having the most impact on regional hospitals are complex activities being moved to larger hospitals due to increased demands from the healthcare insurance companies on minimal number of complex operations per year and plannable activities being moved to specialist clinics that are cheaper and provide higher quality services.

Closing hospitals, or even reducing the activities that a hospital carried out, always results in local opposition. A regional hospital has recently decided to close the emergency care and maternal care departments at one of its locations. This has resulted in a heated debate in Parliament and the Minister has now promised that the relevant law will be changed to force hospitals to communicate with local government and inhabitants in the relevant region before closing departments in an existing facility. This is bad news as this will make it more difficult for hospitals to implement more logical structures for their operations.

From the northern part of the Netherlands there is good news. The province of Friesland currently has four hospital locations owned by three organizations. After intensive discussions with the healthcare insurance companies they have now agreed to jointly move from four to three locations. The key drivers for this decision have been the growth in complexity of care to be provided, higher quality demands (from insurance companies), and issues related to staffing. The decision for the chosen solution is based on a complex set of criteria including travel-time for patients, avoiding loss of patients, travel time for ambulances, mostly positive consequences for employees, and financial consequences.

The process of getting to three hospitals will be complex as it involves a series of mergers and the acceptance of these by the Dutch Healthcare Authorities (NZA) and Dutch Competition Authorities (ACM). Realization is planned to happen in 2030. As we have reported earlier, these hospitals have tried to merge before, but called it off after many years of discussions. Hopefully, they will be more successful this time.

Extra salary for staff in elderly care sector

One of the key themes discussed at HBI last week was issues related to finding and keeping staff. This is definitely a major challenge for healthcare operators in the Netherlands as well. As described in the update of 25 April, temporary staffing agencies have been able to attract staff through higher base salaries and attractive fringe benefits. One of the problems that Dutch healthcare operators have is that they are tied to national collective employment agreements (CAO).

Based on pressure from the labor unions, the elderly care sector has now agreed to increase salaries by an extra 5% in 2023 (October) and an extra 5% in 2024. The current collective agreements run until the end of 2024, so new agreements will need to be made next year. Hopefully, this will make the elderly care sector somewhat more attractive for existing and new staff and reduce the costs that the providers must pay to temporary staffing agencies. Naturally, the providers will need to be able to pay the higher salaries, and this challenge will grow as the government plans to reduce the tariffs for elderly care by 3%.

More loss-making organizations in the disabled care sector

The VGN is the Dutch association of (large) providers of disabled care. The thirty-eight members all have annual revenues higher than €100 million and collectively have two thirds of the total revenues in the sector. In a recent press release, the VGN highlighted that eleven of its members reported losses in 2022, and that this is twice as high as the usual number of members reporting losses in a given year. Key reasons for the losses are inflation, higher energy costs, the growing complexity of care provided to clients, higher incidence of sick leave and more use of temporary staffing companies.

Even the companies that reported positive results for 2022 saw their profitability halved from earlier years. The VGN claims that from 2025 a large share of the disabled care providers will not be financially viable if there is no action from the government and healthcare insurance companies. Key aspects that need to be changed include increases in tariffs and more freedom from rules and regulations. The pressure on the government to structurally increase tariffs in this and other sectors is growing, but the government has also promised to control the growth in spending through programs such as IZA and WOZO. It will be interesting to see how long-term goals are aligned with the short-term needs of the operators.

Snapshot of Dutch commercial healthcare company: Mauritskliniek, a group of specialized clinics

Mauritskliniek is a group of specialized clinics focusing on dermatological conditions, varicose veins, and medical-cosmetic care. The group currently has five clinics and approximately 75 healthcare professionals. In 2021 the group had revenues of €12.2 million. With its five locations Mauritskliniek is a medium-sized Dutch commercial operator of specialized clinics. In 2021 Bergman Clinics attempted to acquire the group but permission was refused by The Dutch Authority for Consumers and Markets as it felt that the acquisition would give Bergman too much market power. In 2022 the company was acquired by CORIUS. CORIUS is a large network of dermatology clinics in Germany and Switzerland.