Dec17

Update 17 December 2024

Update 17 December 2024

This will be the last update for 2024 as I will be off for a couple of weeks celebrating Christmas and New Year with family and friends. Best wishes to you and your family. The whole country seems to be slowing down in preparation for the holidays to come, but there is still news to report from the Dutch healthcare sector:

  • Costs for many healthcare providers will increase in January. What are the reasons?
  • Major program to reform the Dutch healthcare sector is not going well. What are the problems?
  • Overview of promising Dutch healthcare start-up: Kepler Vision Technologies, a developer of fall detection products for the elderly care sector

Costs for healthcare providers to increase in January

In earlier updates we have written about the problems that Dutch healthcare organizations have in finding and keeping staff and the very high levels of sick leave plaguing the sector. In response to this many organizations rely extensively on temporary workers either from staffing agencies or from independent staff. This last group (called ZZP in Dutch) are under Dutch tax rules able to work as independent contractors with considerable tax benefits.

Late last year the government announced that it wanted to clamp down on the use of ZZPs in the healthcare sector by tightening the rules concerning the types of activities they can carry out and how “imbedded” they can be in the organization. The new law comes into effect 1 January 2025. The hope of the government is that the suggested changes will lead to ZZPs becoming standard employees of the relevant healthcare organizations thereby saving the operators money. Unfortunately, a recent report from KPMG paints another picture.

It does not appear that many of the people currently working as independent staff will want to become “normal” employees of the healthcare organizations where they are currently working. A likely alternative for many will be to work via staffing agencies. This will increase the costs for the healthcare providers, as staffing via an agency will typically be 40-70% more expensive than directly hiring independent staff. The higher costs are a combination of staffing agencies being willing to pay staff higher salaries, the mark-ups added by staffing agencies and the requirement of staffing agencies to add 21% VAT to their invoices. According to KPMG the most likely outcome is that total staffing costs will, on average, increase by 7% for healthcare providers. Given the large share of staff costs in the total costs and the thin margins of most healthcare providers this can be a major problem for the sector.

Hopefully, this will be a wake-up call for healthcare providers to improve how they treat their staff. Various healthcare providers have announced that they are stopping using external staff and some providers are trying to develop creative staffing solutions across different organizations so the picture might not be quite as negative as the KPMG report suggests.

IZA program facing difficulties

In earlier updates we have described the two major programs (IZA and WOZO) that have been put in place to improve the overall efficiency and quality of the Dutch healthcare system. IZA (the Integral Healthcare Program) had a focus on improving the overall health of the Dutch population and reduce costs by focusing on prevention, improving primary care, and making the overall healthcare system more efficient. In principle, IZA covers the whole healthcare sector, but the primary focus is cure (financed by healthcare insurance). Last year we wrote about how the IZA program was not meeting key milestones.

Recently there has been more bad news concerning the progress of the IZA program. A recent progress report outlines how 20% of the three hundred agreed action points are behind schedule, with some not even having been started. There are clear differences in the type of action points. More than a third of the action points related to improving regional cooperation have already finished, while a third of the action points related to concentration of care activities have not even been started. An ongoing activity is to renew and update the overall program with a higher focus on the social domain. The new agreement will have a new name (ISWA) where the ‘W” is meant to highlight the importance of social welfare.

The extension of the new program will be very dependent on the more than 300 municipalities in the Netherlands. Unfortunately, the VNG (the Association of Dutch Municipalities) recently announced that it was leaving the IZA program. The main reasons for this were budget cuts announced by the national government in the area of prevention, and that the VNG felt that its role in defining and running the new ISWA program was too limited. Parliament and the relevant ministries have been in intense discussions the last week in efforts to get the VNG back into the program and it is reasonable to assume that a new deal will be closed, which makes all parties happy.

Breaking news: Yesterday (16 December 2024) five other healthcare-related organizations also announced that they are stopping further participation in the IZA / IZWA program. The main reason for leaving is a response to the government’s announcement that they will cut more than €300 million from the program financing healthcare staff’s professional ongoing training.

Snapshot of promising Dutch healthcare start-ups:  Kepler Vision Technologies

Kepler Vision Technologies was established by Harro Stokman in 2018 as a spin-off from the University of Amsterdam. The key product is Night Nurse that uses live picture technology combined with AI to detect clients falls and can help prevent decubitus by analyzing how long a client stays in a given position. The main value of the Kepler Night Nurse system is preventing false alarms and unnecessary visits to the client location, hereby saving valuable (and expensive) time of nursing home staff.

The company currently has approximately twenty employees and is active in twenty-six countries. The company is financed by Mr. Stokman (who earned a considerable amount of money through the sale of a photo-recognition technology to Qualcomm), the University of Amsterdam and the Dutch Ministry of Economic Affairs and a recent investment by ROM Invest (a regional investment company).