Update 31 October 2019
Happy Halloween for any of you who happen to celebrate it. Another example of American traditions conquering the world. In the Dutch healthcare sector a number of interesting things have been happening in the last few weeks. In this update we cover:
- German chain of eye clinics moves into the Dutch market. Will more acquisitions follow?
- Rehabilitation sector negatively in the news. Is the sector attractive for foreign investors?
- Tradition provider of elderly care starts commercial franchise organization. Is this the start of a new wave of cooperation between non-profit and for-profit players in the sector?
- In our snapshot we give an overview of Eyescan, the chain being acquired by Ober Scharrer Gruppe
Another international healthcare company enters the Dutch market
Ober Scharrer Gruppe (OSG) is a leading chain of eye care clinics in Germany. OSG was acquired by Nordic Capital in April 2018. This now appears to be the first step in the development of a pan-European strategy, as OSG has now acquired the Eyescan Groep, a chain of six eye-clinics in the Netherlands (see snapshot for more details).
Are other international groups also looking at the Dutch market? Bergman Clinics is a leading player in this sector but is probably too big and too varied in its portfolio to be attractive to an international niche player. However, there are a number of other smaller and focused companies such as Worldeye and Visus.
One of the sectors in the Dutch healthcare market that I often get questions about is the rehabilitation sector. The sector is differently organized than in most other countries with eighteen regional centers offering a very broad range of rehabilitation services accounting for 70% of the revenue in the sector. The remaining 30% of the market is divided among a large number of smaller players, ranging from independent clinics offering pain treatment to physiotherapists offering rehabilitation-related services.
A recent report by EY highlights the issues faced by the eighteen regional centers. The sector as a whole is loss-making for the second year in a row with an average return on sales of negative 1%. The main reasons for the negative results among the big players are:
- Increasing complexity of the service offering and insufficient payments from insurance companies
- Growth in patient numbers and tight revenue ceilings from the insurance companies leading to production that is not paid for
- Increasing competition from independent clinics that focus on simpler rehabilitation services (pain treatment, etc.) that are profitable within the current payment structure
Based on this, the overall picture of the sector is not positive. However, it does appear that there are good opportunities for focused players providing “simpler” services where the current DBCs (Diagnostic Treatment Combinations) are (more than) sufficient. A key question is how long this situation will last? Given the overall malaise for the regional centers changes will have to be made. Changes that are currently being discussed include:
- New DBCs and tariffs that are better aligned to the actual services carried out (probably leading to higher tariffs for complex services and lower tariffs for simpler services)
- Consolidation of the regional centers
- Improved contracts with the insurance companies reducing the risk of unpaid over-production
Given that the changes in tariffs will probably have negative consequences for the rehabilitation clinics, my advice would be to wait with investments until there is more information about the new payment structures.
Aafje to provide elderly care through franchise organization
Aafje is one of the larger traditional providers of elderly care with a geographic focus on the region around Rotterdam. Aafje had a turnover of almost €250 million in 2018, 17.000 clients and 5.500 employees. The largest share of revenues is from nursing homes, but Aafje also provides homecare.
Aafje has recently announced that it will be starting two franchise organizations. One will focus one developing small-scale (16 clients) nursing homes, and the other is a form of home care. It is interesting that Hans van Putten who has established both Thomashuizen and De Herbergier will be a part owner of the new franchise organization.
This is an thought-provoking move, as it is the first time that a traditional non-profit healthcare provider is moving into the commercial part of the market. A key driver may be that this will enable Aafje to provide an interesting option for certain employees who want to work independently instead of in a large organization.
Snapshot of a Dutch private healthcare operator: Eyescan Groep
Eyescan was started in 1999 by Reyer Lafeber and Hendrik Punt (ophthalmologist). Since then it has grown into a chain with six locations, €30 million revenues and 250 employees. Eyescan carries out 12.000 cataract operation annually and also carries out laser eye surgeries and lens implantations.
The company claims to have made a “reasonable” profit in the last few years but sees increasing difficulties in in staying profitable due to large investments in new locations (Utrecht and Emmen) and limited opportunities to grow revenues due to revenue ceilings imposed by the insurance companies.
The acquisition by Ober Scharrer Groep is expected to provide lower back-office costs, cost savings in investments and supplies, and improved utilization of the operation rooms.