May21

Update 21 May 2024

Update 21 May 2024

In my previous update I wrote about the first days of summers here in the Netherlands. Last weekend I also had the unique pleasure of enjoying four days of beautiful weather in England. I hope that this was not the full extent of summer in that exceptionally beautiful country. Here in the Netherlands there is news to report from the Dutch healthcare sector. This update covers the following news items:

  • After six months we have a new government. What are the likely consequences for the healthcare sector?
  • The number of people taking voluntary healthcare insurance is declining. What does this mean for different sub-sectors of the healthcare market?
  • More acquisitions in the healthcare sector. What are possible reasons for the continuing popularity of Dutch healthcare companies?
  • In a new snapshot we give an overview of Sandstep Healthcare, a developer of specialized clinics

Big step towards new government

In the January update we gave an overview of the process for agreeing a new government and the most likely changes to the Dutch healthcare regulatory environment. The election in November last year made the PVV (radical right) the largest party and gave a large number of seats to two new parties (BBB and NSC). These three parties and the VVD (who has provided the prime minister for the previous thirteen years) have since then been negotiating the framework for a new coalition government. A major milestone was reached last week Wednesday when they published a joint outline agreement describing the main focus and goals of the new government.

As mentioned in earlier updates, healthcare was not the main theme in the election. The outline agreement spends a large part of its twenty-six pages on key issues for the PVV (limiting migration), the BBB (improving the situation for Dutch farmers) and the NSC (improved government and better rule-of-law). The key change for the healthcare sector is halving the own risk in the mandatory healthcare insurance (from €385 per year to €165 per year and maximizing the own risk per intervention to €50). Other key points include a pledge to keep regional hospitals, improve financing of elderly care and to remove emergency care from the current financing system. Other key statements are essentially to continue with ongoing (relatively minor) changes to the overall system.

For the traditional (non-profit) part of the sector the overall plans made by the new government essentially mean a continuation of the current way of working. For the commercial part of the sector, the good news is that it does not appear that the new government will have issues related to who the owners are of Dutch healthcare operators nor with profits and dividend payments.

 

Declining number of people taking voluntary healthcare insurance

In the Netherlands we have a system of compulsory healthcare insurance as the main financing method for cure-related healthcare activities (primary care, hospitals, medicine, psychiatric care, etc.). Everybody living in the Netherlands must have an insurance policy costing approximately €140/month. In combination with financing from employers, this covers almost all cure-related medical expenses. The system is administrated by five large and a limited number of smaller insurance companies who collect premiums and purchase healthcare services from providers. At the end of every year, we must decide which company to buy the insurance from, how much own risk we wish to take on ( currently a minimum of €385 per year to a maximum of €885 per year but as described in the previous note this will probably change) and whether we wish to buy supplemental insurance covering dentistry, physiotherapy, and other additional services.

Traditionally, the Dutch have been big believers in the extra insurance. In 2006 93% of the population opted for extra insurance. Since then, the percentage taking extra insurance has been declining (with a upswing in 2021 related to corona). In 2024 81.5% of the population chose extra insurance. This is still a fairly high share of the population, but the declining number of people opting for extra insurance is unwelcome news for certain sectors of the healthcare market:

  • Dental care is not included in the compulsory healthcare insurance and most supplementary packages include coverage of costs of visiting the dentist. While the supplementary insurance typically only covers check-ups and partial refunds of other costs, having the insurance coverage encourages regular visits to the dentist
  • Most supplementary insurance packages also cover physiotherapy. Physiotherapy is one of the few healthcare activities that can be done without an OK from the patient’s General Practitioner. This, in combination with insurance coverage, makes it a healthcare activity with low barriers for use. Decreasing number of people with supplementary insurance is likely to lead to less demand for physiotherapy services

 

More acquisitions in the healthcare sector

In the previous update we wrote about recent M&A activities in the Dutch healthcare sector. In this update we can also report three new acquisitions:

  • Agilio Software is an English supplier of a broad range of software for the healthcare and veterinary sector with 240 employees. In the Netherlands, their subsidiary (the result of an earlier acquisition) focuses on planning software for primary care locations. In the Netherlands Agilio has recently acquired PRaQties. PRaQties was established in 2012, and offers primary care locations a complete quality management system combining software and expert knowledge.
  • Equipe is the second largest Dutch chain of specialist clinics. It is owned by Nordic Capital. Equipe has recently acquired two clinics from Sandstep Healthcare (see snapshot). Orthoparc had three clinics focusing on orthopedic care but one of these has been closed after the acquisition by Equipe. HandsOnCare has three clinics that all specialize in wrist and arm surgery.

The Dutch healthcare market continues to be popular with international investors. The healthcare sector is probably relatively popular as an investment target in most countries as revenues and profits are stable even in uncertain times such as those we are currently experiencing. In addition, acquisitions in the Dutch healthcare sector are popular due to our high spend on healthcare, political stability (both in general and specifically as pertains to the healthcare regulatory framework), tariffing systems that generally lead to tariffs increasing in line with costs giving stable margins, and a general acceptance of private ownership of healthcare providers. Based on this, more acquisitions can be expected.

Snapshot of a Dutch commercial healthcare company: Sandstep Healthcare

Sandstep Healthcare is the owner of a number of specialized clinics, but is not a typical chain of clinics. Sandstep was started in 2014 by Peter de Koning, who already had experience in setting up two specialized clinics (Oogziekenhuis Zonnestraal and Huidziekenhuis Dermecis – both sold to Bergman Clinics). Peter and his team at Sandstep focus on helping medical specialists develop successful specialist clinics and providing back-office services to existing clinics (finance, accounting, quality management, marketing, IT, etc.). Sandstep is currently involved with four clinics and a company providing operating theater and treatment rooms to other healthcare providers.