Update 30 October 2018

Welcome to the latest update on what is happening in the Dutch commercial healthcare market. In this update we cover news about the Dutch hospital sector:

  • I must admit that I have been very wrong in my appraisal of the future of the hospitals belonging to the MC Groep;
  • BDO publishes analysis of the financial situation of Dutch hospitals;
  • I give my initial thoughts on what the consequences are for the sector?

If you have any specific questions related to this week’s update do not hesitate to get in touch with me directly.

MC Groep Hospitals are bankrupt

In my updates of 27 July and 16 October I explained the situation around the weak results of the two hospitals (MC Ijsselmeerziekenhuizen and MC Slotervaart) that are part of the healthcare activities of Loek Winter. My appraisal was that the weak results were explainable and that while both hospitals required restructuring they played important roles in their regions and were unlikely to disappear.

Unfortunately, the Dutch healthcare insurance companies thought differently and stopped their financing, leading to an abrupt bankruptcy for both hospitals in the middle of last week. All patients in MC Slotervaart were moved to other hospitals in Amsterdam by the end of Friday, and the only remaining activities there are now outpatient activities related to appointments that were already made. These activities are also expected to stop shortly.

At the Ijsselmeerziekenhuizen the situation is slightly different as there as there are no other hospitals nearby. Certain departments are already closed, and the others will be closed as the number of patients is reduced and/or other solutions are found for these patients. A neighboring hospital, St. Jansdal from Harderwijk, has proposed to take over the main hospital in Lelystad and the clinic in Dronten. They are suggesting moving all activities requiring an overnight stay to Harderwijk and offer polyclinical services in Lelystad and Dronten. There are also other parties interested.

The situation in Amsterdam is unclear. There is enough hospital capacity in the remaining hospitals to serve the needs of the current city population and the city is geographically compact ensuring that maximum travels times for ambulances will not be an issue. Several parties have expressed interest in the real estate, and one party has suggested developing a health center at the Slotervaart location.

The bankruptcies and closings have resulted in a broad political debate about hospitals and the role of the healthcare insurance companies. The government has clearly stated that it does not see a role for itself in this situation, and the main insurance company (Zilveren Kruis) says that its main responsibility is to keep health care payable and that it has no responsibilities for financing hospitals with economic problems.

BDO publishes report on overall financial health of Dutch hospitals

BDO Accountants publishes an annual overview of the financial health of general hospitals in the Netherlands. The survey is based on an analysis of the annual accounts of 64 hospitals and is based on standard financial benchmarks such as profitability, liquidity, current ratio, etc. The analysis was published just before the announcement of the financial problems of the MC Groep hospitals (MC Ijsselmeerziekenhuizen was included in the benchmark).

The overall picture that is presented is positive. The vast majority of the hospitals (78%) are financially healthy and healthier than last year in their overall scores. The improvement in the overall financial health of the sector is to a large extent driven by the healthy financials of the smaller hospitals.

However, the study also highlights several structural problems:

  • Fourteen of the hospitals are financially weak, and a number of these are structurally weak with low scores many years in a row
  • Profitability in the sector has declines from 2.7% of revenues in 2013 to 1.2% of revenues in 2017
  • The overall agreement between and the healthcare sector is to keep hospital spend stable but costs are and will continue increasing without structural changes to how hospitals are financed and operate
  • There is a growing shortage of qualified personnel
  • The taboo on allowing dividend payments reduces the ability of hospitals to finance innovation

What are the consequences for the sector?

In a recent meeting with somebody with an excellent overview of the hospital sector we discussed how the number of general hospitals in the Netherlands probably will be reduced from more than 100 to approximately 70 in the next 10-15 years as the overall demand for inpatient services is reduced and many outpatient activities are moved to primary care. At the same time, very many hospitals were built in the 1970’s and need to be modernized, rebuilt, and even moved.

The recent bankruptcies can be seen as the first steps in reducing the number of general hospitals. Even if parties agree to take over the physical locations it will almost certainly be as a less “general” hospital than what it was. What will be the next hospitals to be closed? Are they on the list of hospitals with weak financials in the BDO benchmarking?

How will the required investments in upgraded and new facilities be financed? Will the government speed up its activities related to relaxing the rules related to dividend payments for the Dutch healthcare sector (see update of 27 July 2018)? Will the bankruptcy of the two hospitals be seen as a failure of the market model, or can this lead to more openness for private financing of hospitals? We will keep you updated.