Update 25 April 2019

In this latest update on what is happening in the Dutch commercial healthcare sector we cover:

  • Korian enters the Dutch elderly care market. How will further consolidation take place?
  • Limited risks for bank-financing of Dutch healthcare operators. Why are banks still reducing their exposure to the sector?
  • Ongoing discussions about the financing of long-term care increases uncertainty going forward
  • In our snapshot we give an overview of WFZ, the organization guaranteeing loans to Dutch healthcare providers

The giants are in place: Korian enters the Dutch elderly care market

As mentioned in earlier updates (see updates of 22 January 2019 and 14 June 2018 and 24 April 2018) Orpea already has a strong position in the Dutch market thru its acquisition of two elderly care chains and a chain providing psychiatric care. As Korian also had a Dutch “white spot” on its map it was only a matter of time before they also would enter the market. They have now taken this step through the acquisition of Stepping Stones.

Stepping Stones is a chain that was started in 2007 by Arthur Scherpenzeel and Christiaan Sap (the current CEO). Gilde Healthcare, a private-equity company specializing in the healthcare sector, made a €5 million investment in the company in 2010. Stepping Stones currently has twelve locations with a total of 260 apartments. They have a focus on clients with Alzheimer’s and charge up to €3.600 per month for rent and services. Each location has a “budget” apartment which costs approximately €1.600 per month. As is standard in the Dutch healthcare system, healthcare related costs are paid for by the government. The current CEO is staying in the company and has announced that they want to double in size in the next few years.

It will be interesting to see how Orpea and Korian will grow their business further in the Netherlands. The number of chains with national coverage or ambitions for national coverage and that is available for acquisition is very limited. Further growth for both Korian and Orpea will therefore have to come from greenfield locations or the acquisition of smaller local chains or even single operators (the number of which is still growing strongly).

No problems are anticipated for guaranteed loans to Dutch healthcare organizations that go bankrupt

The WFZ (See Snapshot) is an organization that guarantees commercial loans to Dutch healthcare providers. In their annual report for 2018they highlight an expected loss of €6 million related to the bankruptcy of the Ijsselmeer Hospital (see update of 30 October 2018). However, with equity and reserves of €285 million this is not an issue and does not limit WFZ in providing further guarantees. The WFZ sees a limited risk for bankruptcies in the sector in 2019. Only four of its 286 members have serious liquidity issues, and these organizations only have total guaranteed debts of €60 million.

Ongoing discussions related to the financing of long-term care

In the Dutch political arena, there are a number of ongoing discussions regarding the financing of long-term care:

  • A member of parliament for the VVD (liberal party with the largest number of seats in the parliament) has pushed the issue of allowing dividend payments from organizations providing intramural care. A law to allow this has passed parliament but has been stuck in the senate for a couple of years. The key arguments used are that it is strange that banks are allowed to make money financing care institutions, but that pension funds and other long-term investors are not given this opportunity.
  • The Dutch Healthcare Authority (NZA) has advised the Ministry to simplify the financing of nursing homes. A key step is to integrate the special quality funds (see update of 20 December 2018) into the normal tariffs
  • The Healthcare Minister decides not to follow up on advice giving all providers of long-term intramural care the overall responsibility for all healthcare issues. Currently only a limited number of organizations and locations (those “with treatment”) have this responsibility and extra financing. For locations without this right, cure related activities has to be provided by outside organizations and is financed via the Dutch healthcare system


Snapshot of a Dutch healthcare organization: Waarborgfonds Zorginstellingen

The Waarborgfonds Zorginstellingen (WFZ) (The Guarantee Fund for Healthcare Organizations) is a government organization that exists since 1999. The fund has the goal of allowing Dutch healthcare organizations easier access to cheaper financing by guaranteeing loans for member organizations. Organizations wishing a guarantee have to go through a well-defined process that evaluates the overall financial health of the entity. Those who pass the initial analysis are then able to get (semi)commercial loans at very favorable rates (Triple A).

When a company with a guaranteed loan goes bankrupt, the WFZ first covers the loan payments from its own reserves. Member organizations can also be forced to contribute up to 3% of its outstanding guaranteed loans to help the WFZ cover defaulted loans. Final coverage is provided by the Dutch government. The WFZ currently guarantees loans of approximately €7 billion.