Update 6 March 2024

I hope that you are doing well. Here in the Netherlands it has been the wettest February since 1995, so there is enough water in the canals. The good news is that spring is in the air, and even the die-hards have given up the hope of an elfstedentocht. Except for the weather, there is also news to report from the Dutch healthcare sector. This update covers the following news items:

• A report from ABN Amro on the dental care sector. What are the key trends?
• Providers of closed juvenile healthcare in financial problems. Will shutting down the current system solve key problems?
• Dutch hospital will receive €200 million lump-sum payments each of the following five years from insurance companies. How will the money be used?

ABN Amro report on the Dutch dental care sector

ABN Amro has recently released their 2024 report on the Dutch dental care sector. The report gives an excellent picture of a sector where many things are changing. Key trends that the report covers include:

• The market is currently at approximately €3.9 billion and will continue to grow. Key growth drivers include a growing population, an elderly population requiring more complex care, and a trend toward more use of cosmetic treatments
• As in other parts of the overall Dutch healthcare market, dental care providers are facing increasing challenges in staffing. There is a growing shortage of dentists. More than a third of dentists are older than 55 years and one in five will retire in the next seven years. This translates into 394 dentists on average stopping per year, while on average 274 new dentists finish the university level education
• The Dutch Healthcare Authorities (NZA) maximize tariffs, but tariffs have shown a healthy growth of 7.7% in 2023 and 5.9% in 2024
• Private equity financed chains have an increasing market share, but acquisitions are slowing down. In 2021 10% of all dental care locations were part of a chain. This has grown to 13% in 2023. As the locations owned by chains tend to be larger, the market share in revenue terms is much higher. Many of the larger chains have only conducted a limited number of acquisitions in 2023, and the focus appears to be more on integration
• Digital innovation is becoming increasingly important in the sector. This includes IT solutions for improving communication with the patients, improved prevention through the use of smart toothbrushes, digital x-rays, oral scanners, etc.

In 2023 new international investors entered the Dutch market, and it will be interesting to see what will happen in 2024.

Providers of closed juvenile healthcare in financial problems

JeugszorgPlus (Youth Care Plus) is the most extreme and complex form of youth care in the Netherlands. It consists of 24/7 youth care provided in a closed location where the clients are not free to leave. Due to the restrictive measures imposed on the young clients, JeugdzorgPlus can only be applied based on a court order. There have been scandals associated with this type of care provision and doubts about its efficacy. There is therefore an ongoing process to reduce its use to a minimum. As a consequence, the number of clients has been reduced from 1.000 a few years back to 500 currently.

A consequence of this is that providers are facing financial difficulties. The tariffs are cost-based but calculated on a utilization-rate of 90%. Given the reduced number of clients, eleven of the sixteen locations where this care is provided had a utilization rate lower than the required 90% in the last quarter of 2023. In addition, the providers are facing extra costs as they develop alternatives to the existing services. The new services themselves, typically providing more freedom to clients and more individual care, are also more expensive to provide than the existing services.

Youth care falls under the responsibility of municipalities and there are ongoing discussions between the municipalities and the youth care providers. The Youth Authority (responsibility for oversight of youth care) is also looking into the situation and a national coordinator has been appointed to overlook the total transformation of the JeugdzorgPlus care.

Dutch hospital to receive €200 million per year lump-sum payments for next five years

A key goal of the IZA-program is to decrease overtreatment and move towards “appropriate care” where care-related activities are moved from hospitals to primary care and social issues are dealt by with the appropriate authorities. The IZA-program is not making as much progress as was planned, but in some cases good progress is being made. An example is the Elisabeth-Twee Steden Ziekenhuis (ETZ) in the southern part of the Netherlands.

ETZ is a medium-sized regional hospital with three locations. It has recently made a very innovative agreement with two healthcare insurance companies (VGZ and CZ) to reduce the volume of care, move care to other (primary care) providers, restructure the remaining care and drastically reducing the real estate footprint. ETZ claims that a key driver for the agreed changes is staff shortages, that they see increasing in the coming years. A key part of the plan is the reduction of real estate and focusing activities in locations. One location will in essence stop being a hospital. The current building will be razed, and the new building will become a combined Medical Office Building with activities carried out by ETZ and partners and an elderly care location.

The care provided by ETZ will be digitized and streamlined (for example through reduced follow-ups). All of these changes will require different financing and an agreement with the insurance companies. The new contract foresees lumpsum payments of approximately €200 million per year instead of contracts based on volumes and a fixed tariff per activity. This will reduce risk for ETZ and will enable digitization as there are currently no tariffs for many of these innovative service variations.

There have been earlier experiments with innovative financing between healthcare insurance companies and hospitals, and these have always been successful. Hopefully, this will be an example of a successful transformation process.