Update 19 February 2018

Welcome to the newest update on private healthcare in the Netherlands. In this update we cover:

• Siza, a non-profit provider of long-term care in the disabled sector has acquired part of the know-how and staff of Top Care. Will this be the starting point for more innovation in the long-term care sector?
• Purchasers of long-term care see improvements in purchase process with insurance companies. Is this good news for new commercial entrants?
• The government has committed to provide the nursing home sector with €2.1 billion extra per year. What are the cost consequences of the additional money?
• In our snapshot we give an overview of Zorgroep De Laren, an organization focusing on high-end nursing homes that is rumored to be in financial problems.

Siza acquires Top Care

In our update of 18 December 2017, we explained how NPM Capital, one of the major Dutch investors in the healthcare sector, let Top Care (one of their investments) go bankrupt. Top Care was a company specialized in pain treatment through a holistic combination of physical and psychological treatments that got into financial problems after claims that it structurally overdeclared treatments.

Siza Groep is a large non-profit organization focusing on the disabled and mental-care sectors. It has 3.500 clients and 2.500 employees and is based in the middle part of the Netherlands. It has recently announced that it is acquiring know-how, methodologies and 50 employees from Top Care. Siza believes that the methodologies developed by Top Care can be used to improve the overall quality of life of its clients, enable them to live longer independently at home, and lower costs by bridging differences between the different financing systems in place in the Netherlands.

Siza sees this as an innovative and risky investment as it is unclear exactly what the benefits will be. The Dutch long-term care sector definitely needs more innovation, and anything that can help decrease the divisions between the different financing forms is welcome.

Purchasing process for long-term care is seen as improving by existing suppliers. Will this also make it easier for new providers?

ActiZ, the branch organization for 400 providers of long-term care, has carried out a survey among its members regarding the relationship with the purchasing offices for long-term care (organized by the healthcare insurance companies). The organizations providing long-term care are increasingly positive regarding the purchasing process. Key improvements are:

• Purchasing is more flexible as there is a growing tendency that it is client-following instead of structured around rigid annual budgets
• Contracts are increasingly for multiple years and do not have to be renegotiated every year.

Improvements that are still required include:

• Enabling “popular” providers/locations to provide more capacity to decrease waiting times
• Reducing uncertainty regarding payments of over-production (when an organization delivers more services than the platform agreed with the insurer)

The changes taking place in the contracting process for long-term care are certainly positive. The picture for new entrants is probably mixed. Multi-year contracts with existing providers will make it more difficult for the insurance companies to sign contracts with new providers. However, client-following financing means that the initial contracts can be small, and the provider with the most attractive proposition and best marketing skills will get financed.

Cost consequences of extra financing of nursing homes

As mentioned in earlier updates, the new coalition government has committed to providing an extra €2.1 billion per year in financing to nursing homes. I have been asked by several clients to explain whether this is good news or that requirements attached to the new financing will (more than) eat up any extra revenues.

The background for the new financing was a grass-root movement demanding higher quality in nursing homes through more employees (two employees per group of 6-8 clients). Publications from the Ministry (Kwaliteitskader Verpleeghuiszorg and Leiddraad Verantwoorde Personeelssamenstelling) do not explicitly mention any absolute numbers nor require any specific educational background for the staff present in a group. Rather the suggested framework is relatively broad and focuses on understanding the specific needs of the individual client, having a learning environment, etc. The only requirements that focus on staff are:

• Minimum of two employees present at peak times
• Always somebody present in the living room (can also be a volunteer)
• A staff member present who has knowledge and experience in required healthcare-related activities and social activities
• Nurse and doctor on call within 30 minutes
• 24/7 flexibility in staffing to meet unforeseen peaks in activity

Recent studies by external experts and statements from the elderly union (ANBO) have also recommended not moving towards explicit staffing requirements as individual locations have specific needs and hard requirements stand in the way of innovation.

The combination of extra money and flexibility in how quality is improved should be good news for international providers of nursing homes who are used to providing high quality care with lower budgets.

Snapshot of a Dutch private sector healthcare operator: Zorggroep De Laren

Zorggroep De Laren was established in 2007 and opened its first location in 2008. Zorggroep De Laren now has six locations with the seventh location opening in March. Zorggroep De Laren provides hi-end elderly care in comfortable locations with 24 apartments per location. Clients pay approximately €4.000 per month in rent and for services. In addition, healthcare-related costs are paid by the government.

Zorggroep De Laren is owned by Amvest, a Dutch real estate firm with a portfolio of €4.4 billion. One of their funds focuses on care residencies and has financed the real estate for Zorggroep De Laren.

Rumors on the street say that Zorggroep De Laren is in financial problems due to a combination of low occupancy rates and high rents paid to Amvest. A bit of a strange situation given that Amvest is on both sides of the table, but maybe an investment opportunity for either a local player looking for quick growth or an international organization looking for a bridgehead in the Dutch market.