Update 19 October 2022
I am just back from a great vacation in Greece with a fantastic combination of walking in the mountains, meeting old friends and being lazy on a beach. In the meantime, the Dutch healthcare sector has not stood still. In this update we cover:
- Buurtzorg expands into nursing homes. Will this be as successful as their homecare activities?
- Government announces sixty opportunities for reducing healthcare costs. Can they be implemented?
- A recent report highlights the Dutch healthcare real estate market as very attractive. What does this mean for potential new entrants?
Buurtzorg expands into nursing homes
Buurtzorg is a highly successful provider of medical homecare. It is well known for its use of decentralized and independent working teams which results in high quality and low overhead. The CEO, Jos de Blok, also has an excellent reputation. He is also known as someone with strong opinions and who is not afraid of having public arguments with healthcare insurance companies and the government about how healthcare should be organized and financed.
A few years back Buurtzorg expanded its service offering into mental healthcare with Buurtzorg T. Jos de Blok recently announced that Buurtzorg has started developing small-scale (15 apartments) physical elderly care locations. The building will be based on wood and will be built as prefab in a factory. Due to the low building costs rental costs will be below the limit for rent subsidies.
The main idea behind the small locations is that these can be built in local neighborhoods enabling the elderly clients to keep their social networks. Jos be Blok believes in “demedicalizing” nursing home care, and expects that the social network of the clients can conduct many of the tasks now done by staff in a nursing home. Limited information is given about how any required medical care is to be given. It will be financed by VPT (long-term care at home), and will probably be provided by local Buurtzorg homecare teams.
The approach suggested by Jos de Blok fits very well with the current government vision of moving elderly care away from nursing homes to a home setting (see update on WOZO). The first BuurtWonen location is under development and the plan is to develop one thousand apartments in one hundred municipalities. This will definitely be a good step in addressing the growing need for senior living in the Netherlands, and Jos de Blok is typically successful in what he decides to do. To be followed.
Government suggests sixty ideas for reducing healthcare costs
The government has recently announced two major programs for reducing healthcare costs in the Netherlands. IZA focuses on the cure (primary care to hospitals) and WOZO focuses on the elderly care sector. In addition, a memorandum to the recently published government budgets for 2023 gives a list of sixty potential cost saving measures for the Dutch healthcare sector. Some of the ideas have a clear overlap with the broader ideas suggested in WOZO and IZA, but others are stand-alone changes to current policies concerning care provision in the Netherlands.
The list is meant to only be “technical support for political choices”, but clearly puts several options on the table for discussion. Some of the ideas have also already been incorporated in the 2023 budgets. The sixty ideas can be allocated to the following main categories:
- Reducing care provision: examples include making it more difficult to get an indication for long-term care (annual savings €675 million) and removing components currently covered by the compulsory healthcare insurance package (total savings €2.7 billion)
- Transferring costs to patients / clients: examples include increasing annual own risk from the current €385/year to €485/year (savings €1 billion) or changing the own risk system from the current system where patients pay everything until the maximum is reached to a system where a fixed percentage of costs are paid up an annual maximum or having patients pay a fixed fee for individual treatments (savings up to €4.5 billion)
- Moving healthcare activities to different types of operators: examples include stopping payments for care provided by operators without contracts with healthcare insurance companies (€300 million) and moving activities from secondary to primary care (€100 million)
- Reducing quality and supply of healthcare services: examples include concentrating emergency care (totally or only at night) (savings of €45 million) and reducing the quality-norm for staffing at nursing homes (€500 million)
- Moving the responsibility for purchasing care: examples include moving elderly care from the central government to municipalities (€1.4 billion) and moving the responsibility for certain mental healthcare activities to the municipalities (€138 million)
Many of the suggested have considerable overlap and many will also lead to intense political debate. As an example, the idea of giving healthcare insurance companies more leeway in refusing to pay for treatments conducted by operators with which they do not have a contract has already been going on for may years and has not (yet) passed parliament. It will be interesting to see how the list is used to shape discussions about themes which up until now have been taboo and which ones will be implemented.
Dutch healthcare real estate market is attractive
A recent report by Savills looks at the European healthcare real estate market and concludes that the Netherlands is one of the most attractive markets for potential investors. The report gives two main reasons:
- Rapid growth in elderly population
- Highly fragmented investor market
The elderly population in the Netherlands is growing (as in all other European countries). In addition, the Netherlands has a strong and stable economy with a high and consistent financing of elderly care. Dutch senior citizens are also well-off and increasingly willing to pay for quality senior living real estate and related services. The main challenges facing senior living in the Netherlands is supply. The Netherlands is a densely populated country and finding space for building new locations is a challenge.
Healthcare real estate is a young sector in the Netherlands and the investment volume is growing strongly. Initial investors were a mixture of individuals and local parties. Currently, the largest investors are the Belgian REITs, but other international parties are slowly entering the market. As the Savill report highlights, a consequence of this is that the five largest investors control only 5% of the total invested volume in healthcare real estate in the Netherlands while the comparable number of the Belgian market is 25%. According to Savill this means that there are still good opportunities for international investors to enter the Dutch market for healthcare real estate.