Feb15

Update 15 February 2022

Update 15 February 2022

One year ago, we had freezing weather and 50cm snow. Now it feels like spring. Not sure if this is bad, indifferent, or good news. Good news is certainly that further reductions of Corona-related restrictions will be officially announced in a press conference this evening. Expectations are that almost all restrictions will be lifted as of Friday next week.  In this update we cover the following news from the Dutch healthcare sector:

  • Court case related to innovative corona-test. What will be the consequences for the company?
  • Good and bad news for Bergman Clinics. Do the insurance companies and the competition board have a different view of the market?
  • Costs of treating dementia patients have increased. How can these costs be controlled?
  • Bankruptcy for provider of long-term mental care. What are the consequences for the rest of the group?

Court case related to innovative corona case

Breathomix is an innovative healthtech company that has developed a technology to directly diagnose illnesses based on volatile organic compounds in exhaled breath. In January 2021, the company was asked by the Ministry of Health to develop a test for corona. It was expected that this type of test would enable an increase in testing capacity.

Unfortunately, things went wrong, and the company and the Ministry of Health are now facing each other in court over what Breathomix claims are €24 million in unpaid invoices. After initial tests, the apparatus was piloted in three regional test organizations (GGDs). These claim that the apparatus was not workable in the testing environment and at the scale that was required. According to Breathomix the apparatus had worked well in early tests, and the reasons for the problems at the GGDs was improper use. An additional issue is that Breathomix in one case changed data from tests to their own advantage. The company claims that this was a “human error.”

Based on the results of the pilots the Department of Health cancelled the contract with Breathomix. Breathomix feels that that this was not correct and wants to be paid for the apparatus that it has built. I am curious to see how the court case ends. Breathomix is an interesting company and hopefully this will not lead to permanent damage.

Good and bad news for Bergman Clinics

Bergman Clinics is the largest chain of commercial specialized clinics in the Netherlands. Bergman was acquired by Triton last year. Last week there was (contradictory) good and bad news for Bergman, both related to its ophthalmology business. The good news is that Bergman has signed a three-year contract for ophthalmology with CZ (one of the largest Dutch healthcare insurance companies). The contract focuses on three core themes: 1) appropriate care, 2) quality and personalized care, and 3) control of overall costs.

The bad news is related to the denial by the ACM of the agreed acquisition of Mauritsklinieken. In the report by the ACM (Dutch Authority for Consumers and Markets) outlining why they have refused the acquisition it claims that Bergman Clinics has considerable market power. This is shown by tariff increases that are higher than those of their competitors and tariff levels that are minimally below those of regional hospitals. In the report healthcare insurance companies say that Bergman has a dominant position, especially in ophthalmology!

 Bergman disputes being a dominant party as their total revenues across all clinics are less than that of an average hospital. Bergman also claims that they do not play a system-role in any part of the country and that other parties can easily take over the care provided by Bergman.

The new, more proactive role being taken by the ACM will certainly make it more difficult for Bergman to grow by acquisitions in the Dutch market. Luckily, they still have the support of the insurance companies.

 

Growing healthcare costs related to dementia

A recent analysis by Vektis (data collection and analytics on most healthcare related activities in the Netherlands) highlights the increase in costs related to dementia. According to Vektis dementia-related costs in the Netherlands have grown by 25% since 2017 (from €8.6 billion to €10.6 billion). Vektis has unparalleled access to data and has made a broad analysis of relevant costs.

Costs of dementia-care in nursing homes has increased by 21%. This increase is almost only due to higher costs per client as the number of clients has not (yet) grown strongly. The costs of dementia care in the home situation have increased from €2.4 billion in 2017 to €4.2 billion in 2020. In this segment average costs per patient have remained stable and the overall growth in costs  is due to a substantial increase in the number of patients.

As the elderly population will grow the number of people with dementia is set to double. This will certainly result in continued growth in these costs. The data from Vektis certainly supports the Dutch government strategy of containing the costs for elderly care by keeping dementia patients “at home” for as long as possible.

Bankruptcy for provider of long-term mental care

Martinizorg is a subsidiary of De Zorgzaak (DZZ). DZZ provides a broad range of healthcare related services in the northern part of the Netherlands (domiciliary care, mental care, and nursing homes). Martinizorg was a subsidiary focusing on mental healthcare and was responsible for approximately 25% of the group revenues.

Martinizorg has now been declared bankrupt. The company has had quality issues during the last few years. Consequently, municipalities and other purchasers have cancelled contracts with the company. Furthermore, Martinizorg has had challenges in finding qualified staff (leading to further quality issues). Given these issues, the company has declared bankruptcy.

This case highlights that running a healthcare company is not risk-free (especially in an environment where revenues are dependent on a limited number of contracts with local government). It also highlights that quality is a key success factor. It will be interesting to see if there are any consequences for the rest of ZDD.

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