Update 3 September 2019
After a fairly long break and a quiet summer in the Dutch healthcare sector this is an update on key news:
- Government think thank publishes positive report on commercial nursing home sector but with questions regarding specialized geriatric care. Will there be tighter rules on the level of care to be provided in commercial nursing homes?
- Annual reports highlight structural changes to Dutch hospital sector. How will the sector cope with ongoing reduction in demand?
- Actief Zorg acquires another bankrupt commercial healthcare provider
Government think-thank publishes positive report on commercial nursing home sector
The Social & Cultural Planning Office is a think-thank for the Dutch government. They have recently carried out an analysis of the growing market for commercial elderly care in the Netherlands. Their key conclusions are:
- The focus of the sector is still high-income groups, but diversity is growing, and a number of organizations are in the market providing cheaper nursing homes and/or nursing homes focusing on specific segments
- The growth in commercial nursing homes does not put any pressure on solidarity for the Dutch welfare state as all commercial nursing home locations finance their healthcare-related services through the same government financing as the traditional (non-profit) providers
- The key differences between commercial and traditional nursing homes are:
- How the accommodations are paid - In commercial locations this is always the client, while traditional non-profit organizations tend to use the all-in financing provided by the government
- Size - Commercial locations tend to be smaller
- There does not appear to be any clear differences in quality, however, commercial locations typically do not have a geriatric specialist and cannot help clients with very complex issues
The last point in the report highlights what I believe will be the key challenge facing many organizations with one or a few commercial nursing homes – the need to be able to provide more specialized care. As highlighted in the update of 22 January 2019 General Practitioners are complaining about the extra work that they have to do for the residents of small-scale commercial nursing homes, and it can be expected that both the rules and the demands from clients will force commercial providers to develop in-house geriatric capabilities.
Annual reports highlight structural changes to Dutch hospital sector
Every year Verstegen Accountants makes a number of sector overviews based on the published annual reports of the organizations in each sector. The first of these to be published was their overview of the Dutch hospital sector.
Total revenues increased by 4.2% compared to 2017 to €26 billion. Overall profitability in the sector was stable with a return on sales (ROS) of 1.7%. A key finding of the analysis is that the increase in revenues and costs is not volume driven:
- Total capacity in the Dutch hospital sector was reduced by 2.8% between 2017 and 2018 giving a total of 34.047 beds at the end of 2018
- Clinical admissions in 2018 totaled 1.4 million, a reduction of 2.8% from the previous year
- The average length of stay was also reduced. The combination of less admissions and shorter stays gave a reduction of 3.4% in patient days
- The number of outpatient treatments went down by 2.5% to approximately 7.5 million visits
The reasons for both increased revenues and costs are higher patient-related costs that are covered by the Dutch mandatory health insurance scheme. The main reason for the increase in these costs are higher medicine costs. It will be interesting to see how the government reacts to these numbers, as strict revenue targets have been given to the insurance companies and hospitals.
2018 was a dramatic year for the Dutch hospital sector with two bankruptcies (see update 20 November 2018). It will be interesting to see how the sector copes with the ongoing structural changes related to lower volumes and whether the required changes (less capacity, more specialization, etc.) can be carried out in a less dramatic manner.
In my next update I will follow up on the Verstegen analysis of the elderly care sector.
Actief Zorg acquires another bankrupt commercial healthcare operator
Actief Zorg is a large home-care provider in the southern part of the Netherlands that is very active in acquiring troubled healthcare companies (see update 26 February 2019 for a snapshot and overview of a previous acquisition).
It has now acquired the activities of Boeijend Huys, an operator active in elderly care (nursing homes and homecare) and youth care (a number of locations provided assisted living). Boeijend Huys was started in 2013 and has grown strongly since then and had plans for at least two more nursing homes.
Unfortunately, the strong growth does not seem to have led to positive financial results, and the company declared bankruptcy at the end of July. Recently it was announced that Actief Zorg has taken over the activities of the company. Boeijend Huys is the second operator in financial difficulties that Actief Zorg has acquired. It is also a major step away from its current core activities (medical) homecare. It will be interesting to see whether Actief Zorg can handle the growth. Will this move make them a more attractive partner for a foreign investor?