Update 28 March 2023
I am a realistic optimist. Spring will certainly come again, so I decided to make limoncello in the weekend. It will take four weeks to get ready, so luckily, spring still has some time to get itself organized. In this update we cover:
- A victory for fringe political party in senate elections. What will be the consequences for the Dutch healthcare sector?
- Youth care providers in financial problems. What is needed from the government?
- Elderly care provider refuses to build more capacity. Realism or exaggerated caution?
- Overview of promising Dutch healthcare start-up: Castor, a developer of more efficient data collection processes for clinical trials
Fringe political party winner of senate election
The Dutch parliament consists of a house of representatives and a senate. The members of the senate are chosen indirectly by provincial councilors every four years. Last week there were elections for the provincial councils. The winner in every province was the BBB (The Farmer Citizen Movement), indirectly resulting in 20% of the seats in the new senate. This now makes the BBB the largest party in the senate.
Two years ago the party did not exist and it currently has one seat in the house of representatives. The party focuses on the issues that are important to rural voters, and the party success in the recent elections will certainly lead to changes in key policies related to climate and agriculture, but no major changes are expected to the healthcare sector.
Key ideas related to the healthcare sector in the BBB party program include higher salaries for healthcare staff, more staff for nursing homes, more focus on smaller nursing homes, and increased rights for patients to take on more own-risk in their healthcare insurance packages. The most interesting statement is the wish to turn back the clock and go back to the previous structure of a government run healthcare financing system instead of the current system of independent healthcare insurance companies. This idea might get some support among left-leaning parties in parliament but does not have a realistic probability of being implemented due to resistance from other parties and the fact that the process of creating new laws can only be started in the house of representatives.
Youth care providers in financial problems
Since a couple of years the IGJ (The Dutch Healthcare Inspectorate) has the responsibility for monitoring youth care providers. Based on a recent analysis, the IGJ believes that eighteen youth care providers are in dire financial problems that can translate into problems for clients. The number of youth care providers with this status has been stable the last few years, but the reasons for the financial problems now appear to be structural.
The key challenge facing the sector is the ongoing reduction of “closed” youth care for the most severe cases. New solutions are being developed for these clients and as a consequence youth care operators working for this client group now have an average capacity utilization of 70%. Typical tariffs paid by municipalities are based on 90% capacity utilization. Given the type of intense care provided it is difficult to reduce costs, making the units and the operators focusing on this type of care loss-making.
According to the IGJ the government must help the sector by deciding a) what types of clients need this type of care, and b) where should this intense and complex care be provided. This will give a clear picture of the required capacity reduction, then the government should help the operators reduce the capacity that is not required. Given that it has taken the government ten years to make a decision on how to reduce the national overcapacity in specialized hospital care for children with heart problems, it will be interesting to see how long this process will take.
New required elderly care capacity is not being developed
According to the WOZO program capacity for 40.000 new complex elderly care clients will need to be developed in the coming years. This is confirmed by growing waiting lines for nursing homes – there are now 21.000 elderly clients waiting for a bed to become available, and this number is growing every quarter. Unfortunately, current plans by elderly care operators will “only” deliver a total new capacity for 19.000 extra clients. This number is a mixture of clustered living/care and new capacity for homecare. The total does not include new nursing home capacity as the government has said that it will not finance what it defines as nursing home care above the current capacity of 130.000.
The example of Frankelandgroep illustrates why insufficient capacity is being developed. Frankelandgroep is a mid-sized traditional (non-profit) provider of elderly care in a relatively poor area of the country. In 2018 it was able to buy a plot of land next to its current head office. In 2022 the plot was ready to be developed (after investments of €5 million) and the organization had an acceptable business case for developing 60 new nursing home beds. However, these plans have been stopped:
- Building costs have increased dramatically and all the builders who were asked to bid came back with a clause that all future risk for higher costs in the building period had to be covered by Frankelandgroep
- The planned reduction of government payments for real estate costs from 2024 onwards will have a large negative effect on the overall financial position of the company
- The new location would not be financed by ZIN (where the government pays real estate costs) but would need to be put on the market based on VPT-financing (where the client pays rental costs). Paying rental costs will be very difficult for the relatively poor clients of Frankelandgroep.
There are probably many operators with similar issues making the same type of decisions. Something will need to change to ensure sufficient elderly care in the coming years. Most likely, a number of difficult and unpleasant choices will need to be made.
Snapshot of promising Dutch healthcare start-ups: Castor
Castor is a company with the goal of increasing speed to market for new innovative drugs and technology. Castor was started in 2012 by Derk Arts, a Dutch doctor who was frustrated by how data collection for clinical studies in hospitals was conducted. Based on his experience he developed a system (Research Data Collection) to carry out these tasks in an easier and quicker manner. Castor currently has a broad range of services focusing on efficiently managing data from trials. It has more than one hundred employees, has clients in more than ninety countries, and has been used more than 8.500 studies. Castor is financed by four VC companies.