Update 23 April 2024

Rain, rain, rain, and a bit of cold is essentially the story of spring so far. While spring is forcing us to wait, there is still news to report from the Dutch healthcare sector. This update covers the following news items:

• More problems for commercial primary care chains. Is Co-Med heading towards bankruptcy?
• IT providers to the healthcare sector enjoying “excessive” profits. Can the government do anything to limit profits?
• EY report on the role of private equity in the Dutch healthcare sector. Good news or bad news?

More problems for Co-Med

Commercial primary care chains are a hot topic in the Netherlands. As highlighted in our previous update they are currently a very small part of the overall primary care landscape but are often in the news due to low quality of service provided. There are currently several commercial chains active. Arts en Zorg has been developing its commercial chain and alternative primary care provision for many years, and seems to be doing a very good job. Other chains include Centric (originally from Ireland) and Meditel. The chain that has been most in the news the last few months is Co-Med.

The IGJ (the Health and Youth Care Inspectorate) has regularly received complaints about the reachability of Co-Med primary practices and the ability of these practices to respond in a timely manner to patients facing a medical emergency. The IGJ is therefore forcing Co-Med to deliver a monthly report outlining how each location will respond to urgent medical issues. In addition, Co-Med must, on a monthly basis, deliver a report outlining how it has actually responded to patient requests (urgent and normal).

In addition to its challenges with regulatory bodies Co-Med also appears to have financial challenges. A part of the Co-Med group serving as its national call center was last week declared bankrupt. Bankruptcy has been declared due to outstanding debts to staff who have not received salaries and a company providing temporary staff. The company running the primary care practices claims to be financially healthy (in 2022 this limited company had revenues of €9.4 million and made a profit of €1.2 million) and says that the bankruptcy will not have any effects on the company’s ability to provide primary care services. Another worrying issue regarding Co-Med is that the two founders have left the company, and the current director does not have any healthcare-related experience.

A bankruptcy for Co-Med would be bad news for the 50.000 patients they currently serve as it will be difficult for them to find an alternative primary-care provider (GP). In the Dutch healthcare system it is difficult to get any care without first seeing a GP. In addition, a Co-Med bankruptcy will be unwelcome news for the (commercial) primary care sector. Given the decreasing numbers of GPs willing to acquire a practice (especially in rural areas) combined with a growing elderly population with increasing healthcare needs an overhaul of the sector and use of innovative technologies is urgently required. However, bankruptcy and associated challenges for patients are likely to lead to a clamp-down and reduced room for innovation in the sector.

Healthcare IT providers’ profits are safe

As described in our earlier update there is considerable unhappiness about the high profits made by key suppliers of IT-systems and services to the Dutch healthcare sector. In order to address this, the previous healthcare minister announced a study on the possibilities to curb excessive profits made by IT suppliers to the healthcare sector. The current healthcare minister recently announced that curbing the profitability of these suppliers is not possible. This is due to a combination of limited data availability on the profitability of the IT suppliers and difficulties in balancing profits made with the social value created by the products and services developed and delivered by the relevant companies.

The Minister does feel that facilitating the exchange of data should not be a business model based on healthcare service providers paying for these services. She also claims that these issues must be followed up by the healthcare providers themselves and the ACM (The Dutch Authority for Consumers and Markets), who is responsible for following up on misuse of market power by companies.

Technology and software will become increasingly important in the healthcare sector. While established companies such as Chipsoft (with an 80% market share for hospital EPD-systems) might be seen as having excessive profits (50%), it is good news that the Dutch healthcare ministry understands the need for profits to drive innovation.

EY report on the role of private equity in the Dutch healthcare sector

Last week EY Consulting published a report, commissioned by the Ministry of Health, providing an overview of the importance of private equity in different sub-sectors and the effects of private equity ownership on quality, accessibility, and costs of care. The report explains that it was complicated to find and get access to relevant data and warn about an “inherent level of uncertainty” around potential conclusions. In addition, their main conclusion is that the data does not show any “demonstrable differences” in quality, accessibility, and costs of care. However, a careful reading of the report does provide some interesting data points:

• There are approximately thirty-five active private equity investors active in the Dutch healthcare sector. The largest group of PE-investors are local (40%), another 40% are from continental Europe
• The three largest sectors where they are active are dental care, specialized clinics, and elderly care
• With the exception of maternity care and dental care, private equity plays a minimal role in most sectors (typically between 1-4% of total revenues)
• According to EY the differences are not statistically significant due to the relatively small number of private equity owned companies compared to companies with other types of ownership (foundations, etc.) but private equity-owned companies have better quality-related scores across all the examples where EY was able to develop comparisons
• Accessibility was measured on two issues (waiting times for being treated in clinics and patient’s level of rapport with practitioner in the mental healthcare sector). Non PE-owned companies appear to score slightly better on this dimension, but again, the results are not statistically significant
• The only data that EY could find related to cost of care was profitability and there were no significant differences between PE-owned and other healthcare providers

An interesting report that will hopefully help regulators, politicians, and other opinion-makers that private equity is not the threat that it is sometimes made out to be.