Vardetun, consultancy innovation healthcare


Update 1 June 2022

Update 1 June 2022

Dear <First name>,

I hope that you are all enjoying wonderful spring weather. In this update on the Dutch healthcare sector, we cover:

  • Government is planning structural savings on healthcare expenditure. What will be the consequences?
  • Minister wants to tighten rules regarding the use of personal budgets (PGBs). What will this mean for innovation?
  • Increasing number of healthcare professionals choosing to leave jobs for an independent career. What are the reasons and what can be done?

Government plans for reducing healthcare costs

The Dutch coalition government has decided to dramatically increase its spend on defense. This, in combination with other cost increases, means that savings must be found in other areas, including healthcare. The government has announced that it is considering eight specific possibilities for structurally reducing future healthcare budgets:

  1. Not refunding certain medicines through the mandatory healthcare insurance system (savings €250 million)
  2. Rolling back plans to move long-term mental healthcare away from municipalities (WMO) to central government financing (WLZ) for an annual saving of €900 million
  3. Reducing tariffs for long-term mental care (savings €200 million)
  4. Increasing the own risk in the mandatory healthcare insurance system by €100 per year (savings of €1.4 billion, but only after laws have been changed)
  5. Increasing co-payments for use of social services and making these dependent on financial means (savings €200 million)
  6. Decreasing the tariffs paid to informal care providers from personal budgets
  7. Reducing tariffs for nursing home care (savings €300 million)
  8. Standardizing the financing of disabled care (savings €40 million)

From an operator perspective the most worrying of these initiatives are the lower tariffs for nursing homes (nr. 7) and long-term mental care (nr. 3) as these will have a direct impact on revenues. The roll-back of the move of long-term mental care from municipalities (WMO) to the central government (nr. 2) will have an impact on operational costs as this move would simplify contracting and administration. The increase in co-payments in social homecare (nr. 5) can slow the growth in the homecare sector as usage will be reduced. However, it is also possible that it will lead to an increase in the use of out-of-pocket services as these will become relatively more attractive.

Tightened rules for use of personal budgets

In this update we give an overview of how personal budgets (PGBs) work in the Dutch healthcare system. There are currently 135.000 clients using a personal budget, and approximately 160.000 healthcare staff (including informal care providers) financed through personal budgets. Total spend via personal budgets (across all financing forms) is €3.2 billion (3.6% of total healthcare spend).

In addition to the move to reduce the tariffs that clients using personal budgets can pay their informal care providers (typically family or friends) mentioned above, the Minister of Health also wants to clamp down on who can use a personal budget and what services can be purchased used a personal budget. Although the rules governing who can get a personal budget are already tight, the Minister wants to tighten this even further. According to the Minister personal budgets will only be given to people who can prove that they can manage the (fairly complicated) process and administration or who have a (legal) representative who can do this for them. This change will probably have a limited impact as the rules are already very tight.

The other change proposed by the Minister is potentially more damaging. Currently, many small-scale innovative operators providing care to groups of clients living together are financed with the personal budgets of the clients. The Minster’s proposal is that this no longer will be allowed. Her reasoning is that the combination of care provided in an intramural setting being financed by combining personal budgets of the clients reduces the freedom of the clients to choose alternative care.

The Minister is aware that many new and innovative healthcare providers choose financing through personal budgets because it is impossible for them to get contracts with healthcare insurance companies and claims that contracting will become easier. Based on personal experience I have my doubts about this. It is now many years ago, but when we started what is known as Jados we had our clients choose for personal budgets as it was impossible to get contracts with the insurance companies.  Now that Jados is a well-established operator this has changed but this initiative and many other innovative initiatives would not have seen the light of day if personal budgets had not existed. Hopefully, this is communicated to the Minister.

Staff leaving jobs to work independently growing challenge for operators

Staffing is a key challenge facing all sub-sectors of the Dutch healthcare market. As discussed in the update of 23 February 2021 staffing-related costs are increasing both in absolute terms and as a percentage of revenues. One of the (many) reasons for this increase is the need to use more temporary staff / contractors (who are more expensive).

Recent numbers show that the number of independent healthcare contractors (ZZP in Dutch) has had a robust growth in the last few years with a new 11% jump in 2021 to a total of 168.500 staff. Employees choosing to leave standard jobs and continue as independent contractors typically give the following reasons:

  • Bad management
  • Insufficient appreciation in previous job
  • High workload in previous job
  • Insufficient opportunities to plan and take vacations in previous job
  • Limited flexibility in scheduling in previous job

This issue is a vicious circle for operators, as the more staff that leave and then return as temporary staff / contractors  the more uncomfortable the situation becomes for the remaining staff. Operators will need to make difficult choices involving a mixture of higher salaries, better working conditions, and focused approaches for nudging staff to work nights and weekends.