Update 17 September 2019
Here in the Netherlands it looks like we will be getting an Indian summer. I hope that you are enjoying some nice weather as well. In this update we cover:
- Analysis of elderly-care annual reports highlight decrease in capacity and investments in new locations. How will the coming surge in demand for nursing homes be met?
- Report highlights Dutch co-payment system that makes commercial nursing home care very attractive. Is it government policy to encourage the elderly to pay for accommodations and services themselves?
- In our snapshot we give an overview of MKA Groep, a provider of dental surgery services with national ambitions
Annual reports highlight reduction in capacity and investments in nursing home sector
As explained in the previous update Verstegen Accountants develop a yearly overview of the financial situation of different parts of the Dutch healthcare sector. In this update we will cover their analysis of the elderly care sector. The analysis is based on the annual reports of 447 organizations operating nursing homes and/or providing home-care services to the elderly. The organizations included in the analysis cover 97% of the total revenues of the sector.
Total revenues in the sector increased by 4.3% to €17.2 billion. The main driver for the growth in revenues is higher tariffs (4% higher than 2017) and the additional revenues from the €2.1 billion fund for increasing quality in nursing homes. The number of clients in nursing homes increased by 1.2% to 126.084 while number of home-care clients increased by 5% to 236.285. These numbers appear to be in line with the government’s wish to keep the elderly at home for as long as possible.
A closer look at capacity and investments, however, give reasons to be worried. The ongoing growth in the elderly population and the growth that we are seeing in waiting lists means that there is pent-up demand for nursing home care. However, in 2018 capacity in the sector decreased by 1.3% to 131.808 beds and investments in new and existing locations actually decreased by almost 10% from 2017. This means that the sector is moving in the wrong direction and that the Netherlands will face a large gap between demand and available capacity for nursing home beds in the next few years.
Profits in the sector increased from €269 million in 2017 to €381 million in 2018.Costs increased less than revenues giving an increase in Return on Sales (ROS) from 1.6% in 2017 to 2.2% in 2018. An issue on the cost side of the sector is the strong increase in the use of external staff as hiring and retention remain a key challenge for the sector.
Report highlights attractiveness of indirect government financing for commercial nursing homes
As highlighted to many of you in market analyses and market entry strategies we have developed an interesting aspect of providing commercial nursing home services in the Dutch market is that a large portion of the costs that a client pays out-of-pocket is in essence subsidized by the Dutch government.
This aspect of the market has been indirectly addressed in a recent report commissioned by a number of interest organizations for the elderly and carried out by Regioplan. The main conclusion of the report is that all-inclusive nursing home care provided by traditional organizations is becoming very expensive for certain types of clients due to the high (indirect) co-payments that clients pay via their taxes.
The report also confirms the advantages for clients who are moderately well-off in using a commercial provider rather than a traditional provider. If a moderately well-off client (combination of a good pension and capital) uses a traditional operator providing all-in care, he/she will have a co-payment of up to €2.364,80 per month. When using a commercial nursing home provider a client officially live “at home” and has a much lower co-payment (essentially because the client is paying his/her own accommodations). The difference between the two co-payments can be up to almost €2.000 per month. This means that the government essentially pays the first €2.000 of any payments that the client makes for accommodations and services in a commercial nursing home.
Snapshot of a Dutch private-sector healthcare operator: MKA Groep
MKA Groep was started as Zeeland Care in 2012 by Henk van Koeveringe, an entrepreneur specializing in vacation parks and the local general hospital as an outpatient clinic specializing in a wide range of services such as dialysis, pain treatment, orthopedics, and dental surgery. In 2017 the local hospital sold its minority stake and took back most of the services provided. Since then Zeeland Care focused on dental surgery and has grown to five clinics in the southern part of the Netherlands. In 2018 the company had revenues of €7.2 million and made a loss of €0.4 million.
The company wants to become a major national player in its field and has therefore changed its name to MKA Groep. It is in the process of opening several clinics in Rotterdam and claims to have concrete plans for another five locations in the rest of the country. The long-term goal is to operate one third of all dental surgeries in the Netherlands.