Update 11 July 2023

Update 11 July 2023

Some of you are probably already on vacation, but some of us have to continue working in the nice summer weather. I hope you are enjoying your holidays and that those of us who have to wait can look forward to the coming vacations. Even though it is summer, there is still news to report from the Dutch healthcare sector. In this update we cover:

  • Mixed news concerning the development of new senior living / nursing home capacity. Will the ambitious targets be met?
  • Dutch Competition Authority (ACM) will not hinder increased cooperation in the healthcare sector. Good news for the roll-out of IZA and WOZO?
  • Government report recommend that self-pay by elderly care clients is increased. Is this good news for commercial operators?
  • In a new snapshot we give an overview of Cooperative Boer en Zorg, an interesting concept for healthcare provision by farmers

Mixed news concerning the development of new elderly care capacity

As we have reported before, the Dutch government has very ambitious plans for developing new elderly care capacity to meet the growing demand. The overall goal is to build 290.000 homes that are “suitable for the elderly.” This should include 170.000 homes that are accessible by wheelchair, 80.000 homes in clustered locations (senior living) and 40.000 “homes” where care at the level of nursing homes can be provided. As described in earlier updates, the government will not finance new nursing home capacity where the government pays the real estate costs. All new “nursing home” real estate capacity will need to be financed by direct payments from the clients themselves.

Key bottlenecks for achieving these goals are the financing of new capacity for low-income clients and the key role of municipalities in allocated land for the building of new capacity. To address the first point, the government has recently announced that in will invest more than €300 million in the next few years to help elderly care providers and housing associations develop 20.000 “homes” for intensive elderly care (nursing homes) where the rental component falls within the limits of social rent (currently maxed at €808 per month). Building elderly care “homes” is more expensive than building standard homes (meeting rooms, broader corridors, larger bathrooms, etc.) and the government will subsidize these extra costs. This will definitely make it more likely that this type (low cost) nursing home capacity will be developed.

The Netherlands is a very densely populated countries and one of the big challenges in developing new elderly care locations is finding somewhat attractive spaces where a physical location can be built. Municipalities play a key role in this process, and have been instructed to develop a detailed overview of the exact demand for diverse types of elderly care and to make plans to ensure that the expected demand can be met through the development of new locations. Unfortunately, one third of the 342 municipalities have not even started this process. This will make a timely roll-out of new capacity in more than one hundred municipalities difficult.

Dutch Competition Authority (ACM) will not hinder increased cooperation in the healthcare sector

As reported earlier, the ACM has become more active in the healthcare sector but has also recently been slapped on wrist two times when judges have reversed decisions made by the ACM related to acquisitions in the healthcare sector. The ACM has also been seen as a risk for the roll-out of the key plans for restructuring the Dutch healthcare sector (IZA and WOZO). A key part of these programs is to increase the level of cooperation between healthcare providers in a given region. This is expected to lead to higher quality, improved efficiency, better use of scarce staff, and lower costs. However, there has been a perceived risk that the ACM would block this type of increased cooperation as it would reduce patient choice and increase the market power of the cooperating organizations.

In a recent interview the Director of the ACM states that the ACM will not block situations where healthcare organizations decide to work together. The ACM will accept that there is less competition and less choice for patients in the region if this is balanced by improved access to care. In the view of the ACM, the cooperation will need to be acceptable to a “triangle” consisting of the healthcare organizations, the purchasers (i.e. the healthcare insurance companies) and the relevant patient groups. The ACM will however step in if the cooperation results in mergers or acquisitions and the ACM will not accept agreements related to restrict the freedom of staff. Organizations will be allowed to develop “flex pools” (where individual staff work at different organizations) but organizations will not be allowed to agree maximum salary levels or jointly restrict the use of temporary staff.

Payments by elderly care clients to increase

As reported earlier the Dutch government is actively searching for manners to reduce the (public) cost of healthcare in general and elderly care specifically. A recent report from a government taskforce highlights the need for reducing the (public) costs of elderly care that will double to €37 billion without fundamental changes. This will displace spending on other critical areas of government spending such as education and police.

The government taskforce has developed a menu of potential savings that will reduce the growth in spending for elderly care to the expected growth in GDP. Cost savings can be found in three areas including the efficiency of the healthcare provision. However, the major savings will come from reducing access to publicly financed elderly care and increasing the own payments from elderly care clients. According to the report, The Netherlands currently has the highest share of publicly financed elderly care in the OECD and the lowest level of own payments.

The suggested changes mostly fit within the current regulatory structure, but the taskforce understands that a political and social discussion will be required to get acceptance for the suggested changes. The timing of these changes is unclear (and will be slowed down as the current cabinet stepped down last Friday, leading to new elections in November), but these changes should be good news for commercial providers of elderly care.

Snapshot of Dutch commercial healthcare company: Boer en Zorg, a cooperative providing healthcare services

The Cooperative Boer en Zorg (Farmer and Care) is an organization with members providing several types of healthcare services. The Cooperative started out with a focus on farmers but has expanded membership to non-farmers as well. The Cooperative, with approximately 250 members, is the owner of a company running the central office. The central office has 37 employees and has the responsibility for getting and following up on contracts. The members provide a broad range of services, and contracting therefore covers long-term care (with health care insurance companies, youth care and social care (with municipalities). In addition, the central office takes care of payment streams, IT, training, quality, etc.

The members of the Cooperative are all small-scale independent organizations providing a wide range of healthcare related services. The services provided include homecare, day care and 24/7 in-house care (40-50 locations). Clients’ needs include geriatric care, disabled care, and mental care (autism, etc.). The total organization (all members) claim revenues of approximately €25 million per year.