Update 3 September 2024

I am back from three weeks in Cambodia and Thailand, and have had a wonderful time. We started out by visiting Angkor Wat, and then took a boat to Battangbam (highly recommended). In Thailand we split our time between Koh Chang, Bangkok, and Hua Hin. I am already missing the scenery, the fantastic food, nice people, and wonderful massages. Here in the Netherlands there is a fair amount of news to report from the healthcare sector. This update covers the following news items:

• Private equity owned companies have €1.5 billion in healthcare-related revenues. Where does this come from?
• The new Minister of Health will not forbid PE-investments in healthcare companies. What does this mean for further investments?
• The Netherlands is facing a shortage of dentists. Where will new dentists come from?
• Receiver expects to sell Co-Med “within weeks”. Who are the likely buyers?

Private equity companies have €1.5 billion in healthcare-related revenues

In a recent article one of the leading Dutch newspapers have analyzed private equity owned companies in the healthcare sector. The article has found fifty-two private equity companies with investments in the healthcare sector, and the companies owned by these investors have annual revenues of €1.5 billion. The vast majority of the revenues (€0.9 billion) comes from specialized clinics, while PE-owned dental clinics have annual revenues of €0.2 billion. PE-owned companies in elderly care and mental healthcare both have approximately €0.1 in revenue. PE-owned companies providing maternity care have revenues of €70 million, and PE-owned companies providing paramedical care have revenues of €65 million. Private equity revenues from primary care and disabled care are minimal.

The analysis also looks at the relative share of revenues coming from PE-owned companies compared to the total revenues in the sub-sectors. In dental care and maternity care the PE-owned companies have a share of approximately 22%, while the PE-owned specialized clinics realize approximately 4% of the relevant revenues financed by the insurance companies. The share of total revenues in other sectors is lower.

This analysis is interesting but only gives a partial picture of the importance of commercial healthcare in the different sectors. The background for the article is probably the ongoing discussions around the role of private equity in the healthcare sector (see next note), and is positive because it highlights the relatively small role that private equity plays in most healthcare sub-sectors. The article also has a link to the study by EY that showed that privately owned Dutch healthcare providers do not have lower quality and do not have negative effects on availability and affordability of healthcare.

New Minister of Health will not forbid PE-investments in healthcare sector

As reported in earlier updates elections in November of last year resulted in a far-right populistic party (PVV) becoming a largest party in Parliament. The new Government is a coalition of four parties who have divided the Minister posts. The Minister for Healthcare is Fleur Agema who has for many years been a leading figure in the PVV and has also been the party’s spokesperson for healthcare. In that role, she has been negative about the role of commercial companies in the provision of healthcare and has wanted to further limit the opportunities for healthcare providers to pay dividends to owners.

The Minster has recently looked into the possibilities for forbidding PE-investors to be active in the healthcare sector. However, as her predecessor, she has concluded that this is impossible. One reason is that it is difficult to precisely define when an investor is “private equity”. A second reason is that forbidding one specific class of investors would be against EU-laws. The Minister is looking into ways of tightening the rules regarding dividend payments in new laws under development . As we have said before, the main goal of these new laws is to make it less easy for “healthcare cowboys” and should have limited effects on serious investors / healthcare providers.

The Netherlands is facing a shortage of dentists

As highlighted in the previous note, dental care is a sector with a large share of care being provided by (PE-owned) chains. Based on data from Eurostat the sector will face new challenges as the number of active dentists will decline. The Eurostat study shows that the Netherlands has the lowest number of dentists finishing the university study of all countries in Europe. In 2022 1,47 dentists graduated from Dutch universities per 100.000 inhabitants, compared to an average of 3,2 new dentists per 100.000 inhabitants across Europe. In 2020 and 2021 the Netherlands also had the lowest number of graduating dentists in Europe relative to population.

As highlighted in a recent report from ABN Amro there is already a shortage of dentists in the Dutch market, and this will increase as the number of dentists retiring is considerably higher than new dentists finishing school. The Eurostat report highlights the high number of dentists being trained in countries such as Romania and Portugal (almost 10 per 100.000 inhabitants). Using foreign dentists has been tried in the Netherlands, but language and communication with the patient is a challenge.

Receivers expect to sell Co-Med

As reported in the update of 2 July Co-Med entered into voluntary bankruptcy. Based on this, official receivers have been appointed with the goal of maximizing payments to creditors. This has resulted in some tension as the receivers have held back on providing patient files to the primary care organizations taking over ex Co-Med patients on the assumption that these have monetary value. This dispute now seems to be settled, and patient files have been handed over.

Two weeks ago the receivers announced that they have several parties that are interested in all or some of the Co-Med locations. The receivers hope to finalize an agreement where all the locations go to one buyer, but underline that this can be a lengthy and complex process as acquiring organizations will need to be able to put GPs in place, have all required IT systems and be acceptable top the NZA (Dutch Healthcare Authorities).

I am very curious about who the potential buyers could be and how much they would be willing to pay for one or more of the ex Co-Med primary care locations. It is difficult to imagine that any of the other existing providers of primary care services (Arts en Zorg, Centric, Buurtdoctors, etc.) will stick out their necks to buy these locations. If they were to do so, I would be interested to know what they would be willing to pay. The locations are currently not active and do not have any patients. In areas where there is a shortage of GPs patients would be happy for a new GP, but will probably be less keen on becoming a patient at the location that has a link with Co-Med.