Update 15 December 2020

The daily number of reported COVID infections here in the Netherlands has been increasing during the last few weeks and as of today the Netherlands is in lockdown for the next five weeks. Christmas this year will be celebrated in small gatherings.

For this update we cover:

  • Second corona wave leads to lower capacity utilization in Dutch nursing homes. What will be the financial consequences?
  • Mediq up for sale. What is the current situation?
  • Profits up in the mental healthcare sector in 2019. What will happen in 2020?

Lower capacity utilization for nursing homes

A recent report from the NZA (The Dutch healthcare Authorities) gives key data regarding the status of nursing homes (and other sectors) in the Netherlands. The report is based on data up to an including 25 October 2020. Key points in the report are:

  • The number of indications given for long-term care have declined to a level similar to  that seen in the first corona-wave in the spring. This means that potential nursing home clients are choosing to stay at home receiving needed care from district nursing (financed by healthcare insurance companies) and/or help from municipalities
  • Higher mortality rates at nursing homes. As in the first wave many nursing homes are suffering from corona outbreaks
  • As a result, the number of people on waiting lists for a room in a nursing home and capacity utilization have decreased. It is striking that there are large regional differences in the effects on utilization, with the largest effects seen in those parts of the country with high rates of corona-infections

These trends, in addition to the operational and financial effects of high health-related absenteeism and higher specific corona-related costs (extra material, etc.), must be hurting the sector financially. As reported in earlier updates the support mechanisms put in place by the government and healthcare insurance companies are favorable, so the net effects will probably  be limited.

Mediq up for sale

Mediq has a history going back to 1899 when it was established as a cooperative owned by pharmacies to wholesale and manufacture pharmaceuticals. The company grew through the years, both in activities (including becoming the owner of pharmacies) and geographically by expanding operations to 12 countries. In 1992 the company was listed on the Amsterdam Stock Exchange.

In 2013 the company was acquired by Advent. In 2015 Advent sold the 219 pharmacies owned by Mediq to Brocasef. In the following years, several further disposals and acquisitions were used to generate cash (mostly paid as dividends to Advent) and further focus the company’s strategy.

Today (certainly in the Netherlands) Mediq has moved far away from its roots as a distributor / wholesaler of medical products to a company focused on helping patients deal with chronic disease. While a large part of revenues still come from distribution to hospitals the focus of the company has been changing to patient-focused solutions. Mediq already had activities focused on delivering care to patients at home (Mediq Tefa). The recent acquisition of Eurocept Homecare has dramatically increased Mediq’s footprint in the specialized medical homecare sector. This covers delivering medicines and devices to patients at home and helping the patients by carrying out healthcare activities such a chemotherapy, dialysis, etc.). Payors can be hospitals, pharmaceutical companies, or patients / healthcare insurance companies.

It was announced in August that Advent has put Mediq up for sale in a potential €1.4 billion deal, but since then it has been very quiet. There were rumors that Advent already tried to sell Mediq in 2016. Mediq is an interesting company and is well positioned to take part in the move of healthcare activities away from hospitals to providing (advanced) care to patients in a home setting, but maybe the difference between the Dutch and international activities is too large and the asking price  too high.


Profits up in the mental healthcare sector

As reported in the last update, Verstegen Accountants carry out an annual analysis of the accounts of all operators in each of the main segments of the Dutch healthcare market.  Last week they published their report on the mental healthcare sector. Their analysis is based on the annual reports of 224 operators whose revenues are approximately 98% of the total revenues of the sector.

Total revenues in the sector grew by 7.2% from 2018 to €7.5 billion in 2019. The number of treated patients grew by 3.1% to slightly more than one million. The number of beds for treatment declined by 3.6% to 17.652. This is a continuation of a longer-term trend to reduce intramural capacity in the sector. In addition, the operators have approximately 18.000 beds for long-term protected living (currently financed by municipalities but to be financed by the central government from 2021). The ten largest operators in the sector all had revenue growth from 2018 to 2019 and control 40% of the total revenues in the sector.

Profitability in the sector has improved dramatically from 2018 to 2019. In 2018 the aggregate net results of the sector was €28 million (ROS of 0.4%). In 2019 this improved to €142 million (ROS of 1.9%). However, a large part of the 2019 profits are one-off benefits from selling real estate. As highlighted in the update of 4 June 2019 this is not a sustainable model and also weakens the operator’s balance sheets.

After the major changes to the financing of the sector in 2014 investments have been low. This trend appears to have changed in 2019 as overall Capex increased by 37% from the previous year. The operators increased all types of investments but especially investments in real estate showed a strong growth. It will be interesting to see how the sector has coped with corona when 2020 annual reports are published.