Update 3 June 2025
After a period of cold and wet weather we finally had a nice weekend that was perfect for sailing and a picnic. Unfortunately, the news from the healthcare sector is less positive. In this update we cover:
- Unwelcome news for Evidensia. Will veterinary care in the Netherlands turn out to be a good investment?
- Programs to limits growth in the costs of the Dutch healthcare sector in problems. What is happening?
- Increasing populistic demands in Parliament for making commercial healthcare more difficult. What are the risks for commercial healthcare providers?
Unwelcome news for Evidensia
In an update in 2022 we wrote about the ongoing consolidation in the Dutch veterinary market, and how attractive the market was due to growing demand and high willingness to pay from clients who see their pets as members of the family. In an update in 2023 we described further consolidation and the benefits of not having price-controls on veterinary services.
It now appears that the tide has turned. Based on numerous complaints the ACM (the Dutch Authority for Consumers and Markets) has announced that they are looking at the sector to understand whether customers are being treated fairly. In addition, a recent article in one of the leading Dutch newspapers (NRC) highlights the problems that the biggest player in the market is currently facing. IVC Evidensia is owned by EQT, Silver Lake and Nestle, has acquired more than 300 veterinary practices in the Netherlands, and has more than 3.000 employees.
The main problem that Evidensia is facing is unhappy employees. It has had to close twenty-four clinics after hundreds of staff have left due to unhappiness regarding the company’s very commercial approach to the market. Staff complain about the extremely high prices they have to charge pet-owners, pressure to up-sell services that the veterinary staff often feel are not required (x-rays, complex anesthesia, etc.), pressure to use Evidensia-owned veterinary hospitals, and pressure to reach revenue-based targets. In addition, staff complain about high work pressure that is due to a combination of targets and high staff turnover.
The Dutch dental care market can be seen as an example of a sector where services can be commercialized, and valuable chains be developed through acquisition. However, as shown by the case of Curaeos (also part owned by EQT) in 2020, it is possible to overpay and have a too rapid growth. Evidensia highlights the need to listen to key staff and to understand the limits of commercializing sectors where staff are (to a certain extent) driven by idealistic factors. I am quite sure that consolidation in the veterinary sector will continue, but prices paid for acquisitions might go down due to more careful assumptions on opportunities for price increase and upselling.
Programs to limits growth in the costs of the Dutch healthcare sector in problems
A few years back, the government and forty-eight organizations from the healthcare sector agreed to carry out two broad programs to control costs in the healthcare sector and improve the quality of care provided. One program (IZA) was focused on the cure-sector while WOZO was focused on the elderly care sector. A core part of both programs were individual projects related to key goals. These projects were financed by grants from the government (via the healthcare insurance companies). The programs made some progress but were quickly plagued by delays.
IZA made progress, but there was a growing feeling that the resulting changes were not leading to sufficient improvement in the mismatch between demand and supply for key healthcare services (primarily driven by staffing shortages). It was therefore decided to expand the program with more focus on social care (as this was seen as a method for reducing demand for healthcare). As part of this, the overall program was renamed to ASWA, where the A is for “Additional” and the W is for “Well-being”. This expanded focus, however, was very dependent on the participation of the more than 300 municipalities that currently have the responsibility for social services. Late last year, the municipalities and five other organizations announced that they were leaving the IZA program. The key reason for this was budget cuts announced by the national government in the area of prevention.
Agreements were made regarding financing and an expanded role from the municipalities in defining targets and projects and further steps were agreed for the period 2025-2028. However, last week the parties, with the municipalities in the lead, again stopped their participation in the ASWA program. The main reason is that they still feel that the government is providing insufficient financing to make the program a success. As this is being written, the Minister for Healthcare is in discussions with the Minister of Finance to see if it is possible to free up more money, but the initial signs are not positive.
In an earlier analysis we looked at what the consequences could be of the ongoing programs for different types of commercial investors in the Dutch healthcare market. The overall conclusion was that there would be a mixture of positive and negative effects but that these would be fairly minor. While that it is clear that there is a need for structural changes to the Dutch healthcare system and delays and uncertainties related to these changes are unfavorable, the specific effects on commercial parties will probably be quite limited.
Ongoing discussions in Parliament related to commercial healthcare
In our update in March we described how the Minister of Health had explained to Parliament why a) it did not make sense to refuse PE-investments in the healthcare sector, and b) even if she wanted to, it would be impossible within the framework of European and Dutch law. However, two weeks ago a majority in Parliament (including the Minister of Health’s own party) again voted for a resolution to ban PE-investments in the healthcare sector.
Last week, a majority in Parliament instructed the Minister of Health to analyze how to mandate lower payments to focused commercial clinics than to hospitals for the same operations. The majority in Parliament feels that this is needed because hospitals have higher indirect costs and also have to support intensive care and emergency care departments. In addition, hospitals have the responsibility of training fresh staff and face increased competition from the focused clinics on staff.
Probably this will result in a new project for a consulting company. It will be interesting to see what comes out of this analysis. To my knowledge, insurance companies like the focused clinics because they provide excellent quality and are cheaper. In other words, the insurance companies are already paying the hospitals more for the same services. In addition, a growing number of hospitals are setting up their own focused clinics. Will the lower tariffs also be paid for activities conducted in the hospital-owned clinics?
As we concluded in March, there will always be political parties in Parliament who will be against commercial healthcare. These parties can easily “score points” and get newspaper headlines by continuously raising these types of issues. However, reality is that in many parts of the healthcare system (dental, clinics, elderly care, etc.) commercial providers are an integral part of the overall system and their importance can only grow given the demands for innovation and financing in the near to medium term.