Update 20 December 2018
Welcome to the last update for 2018 on what is happening in the Dutch commercial healthcare market. In this update we cover:
- The Authority for Consumers and Markets agrees to merger between Bergman Clinics and NL Healthcare Clinics. Will the new market leader focus on internal efficiency or will it grow further?
- Only 50% of nursing home operators have submitting plans to ask for extra financing. Are the requirements unrealistic?
- Traditional mental healthcare provider carries out first bond-financing. Will the new financing form be used by other operators?
- In our snapshot we give an overview of Radiotherapiegroep, a provider of cancer-related radiation services.
Merger between Bergman Clinics and NL Healthcare can proceed
In the update of 28 September 2017, we presented the merger plans of the two leading operators of specialized clinics in the Netherlands. The merger between the two companies has now been approved by the Dutch Authority for Consumers and Markets (who has investigated anti-competition issues).
The merged company will have 52 clinics and approximately 1.500 employees. Annual turnover will be €230 million. The combined group will keep its present shareholders (the Malenstein family and NPM Capital) and has hired a new CEO (Hans van der Heyden, who has a background including time at Procter & Gamble and running an international chain of opticians). In an interim period, the group will operate under the name Bergman Clinics, but have announced that a rebranding will take place. The group expects to grow both at current locations, and through the development of new locations. The group also claims that there will be large cost advantages from the larger scale of the new company. There does not appear to be any short-term plans for acquisitions or international growth.
Few requests for extra financing of nursing home care
In earlier updates (see 24 April 2018) we presented the government’s plan for distributing the extra €2.1 billion in financing for nursing homes. Key elements of the plan were that the financing would not be provided through a general increase in tariffs, but rather based on specific plans presented by individual nursing homes. In addition, 85% of the extra financing must be used for hiring and providing more frontline staff. Negative comments from the sector focused on how this would stifle innovation and be difficult to implement due to staff shortages.
At the first deadline only 50% of the eligible nursing homes have requested extra financing. A key reason for this is that the operators expect that it will be extremely difficult to find qualified personnel. Other reasons include complexity related to coordination with other involved parties and the need to provide detailed financial models to allow follow-up (if the extra money is not used correctly, it will have to be paid back). Will the rules need to be relaxed to enable more use of the financing?
First financing via bond emission by traditional Dutch mental healthcare provider
All traditional healthcare providers in the Netherlands are non-profit foundations. This means that they are limited in their ability to attract financing. Most traditional operators have an equity base developed from charitable contributions in the past and positive results. Traditionally, these operators have relied on debt financing from banks. However, in recent years, banks have become more risk averse to the sector and have gradually pulled back their financing. This has resulted in a debate on whether all health care providers should be allowed to pay dividends, which would allow equity financing (see update 27 July 2018).
GGZ Noord-Holland-Noord, a provider of a broad range of mental healthcare services, has taken a new approach and recently launched a €20 million bond issue. This involved getting a rating from Finch (A) and finding financiers. The issue has been taken up entirely by four German institutional investors. The financing will cost GGZ NHN 2.5% for 30 years, compared to an average of 4% for its current bank financing. Will more providers make use of this innovative financing form and create a new market for health-care bonds?
Snapshot of a Dutch private healthcare operator: The Radiotherapiegroep
The Radiotherapiegroep is an independent chain of clinics specializing is treating different types of cancer with radiation. The group currently has three locations in the central-eastern part of the Netherlands. The Radiotherapiegroep is a result of a merger in 2015 between ARTI (locations in Arnhem and Ede) and RISO, with a location in Deventer. The group works closely with the local hospitals in Arnhem and Deventer. All of the activities carried out by the group are covered by the Dutch compulsory healthcare insurance.