Update 1 July 2019
Excuses for the long delay since the last update. I have been extremely busy on a very interesting project and have unfortunately not been able to squeeze in the time to write an update until now. In this update I cover the following news and issues:
- Recent analysis highlights growing need for more nursing homes in the Netherlands, but focus is on short term measures. What will be done to ensure more overall capacity?
- Improved profitability for Dutch hospitals, but overall profitability is still very low. Can profitability be sufficiently improved to meet the expected challenges for the hospital sector or will we be seeing more bankruptcies?
- Extra money to be freed up to meet growing demand for elderly care and the higher costs for specific patient groups. Will this make the Dutch nursing home sector even more attractive?
Growing need for more nursing home beds in the Netherlands
Omroep Max is a Dutch TV sender focused on the elderly population. In a recent program they highlighted the growing need for nursing home beds and the expanding waiting lists for a place in nursing homes. I had the honor of helping them with the research for this program and sanity checking their analytics and final numbers.
Based on the expected growth in the Dutch population older than 75 years, Omroep Max concludes that there will be a need for more than 70.000 extra nursing home beds. They also show data that highlight that this is not a future challenge but already happening, as the number of people with a valid indication for nursing home care who are on a waiting list for a place has grown from 9.000 to almost 15.000 in the last twelve months.
These numbers are even higher than those that were developed by us together with Verstegen Accountants (see update 8 February 2019). NZa (The Dutch Healthcare Authoritiy) and ActiZ (the trade association of the incumbent healthcare organizations) both see a growing need for new financing to meet the growing demand. However, their focus is still on short-term actions to ensure enough budgets in the coming years and much less on longer-term actions to ensure enough nursing home capacity.
Improved profitability for Dutch hospitals, but overall profitability is still very low
A recent report from Prismant (in Dutch) gives an overview of the revenues and results of hospitals in the Netherlands. The revenues in the sector have grown by 3.5% to €26.75 billion. As costs and salary levels have grown by 2.5% in 2018, this gives a volume growth of 1.0%. This is below the goals agreed with the government (1.4% volume growth). The low volume growth is the result of a number of reduced activities. Examples include hospital admissions (down 3.0%), outpatient treatments (down 2.6%), and patient days (down 3.6%).
Total costs in the sector grew by €900 million. It is interesting to see that for the first time in many years depreciation has increased (due to higher investments), and financing costs have decreased (lower debts and lower interest rates). Overall profit margins increased from 1.2% in 2017 to 1.5% in 2019 for general hospitals and went down from 2.7% in 2017 to 1.7% in 2018 for the academic hospitals.
The Dutch hospital sector has a number of challenges in the next few years and it is questionable whether they will be able to meet these challenges with the current low profitability levels. Will we be seeing more bankruptcies in the coming years?
Extra money earmarked for quality improvements in nursing homes to be used for extra capacity and improved tariffs
As mentioned in the update of 26 February 2019 many nursing home operators have found it difficult to meet the requirements for being allocated extra money from the ministry to improve quality. Due to this, the pressure on Minister Hugo de Jonge has been increasing to change the allocation rules.
He now appears to be willing to meet these demands. In 2018 €435 million was allocated to the sector, and in 2019 an additional €600 was to be allocated. In 2020 the target is to increase the total extra amount by €700 million. It was recently announced that part of this amount (€200 million) will be used to help the sector meet growing demand for nursing home beds. In addition, another €125 million will be used to increase the tariffs paid to operators for dealing with complex patients.
Finally, the minister will give nursing home operators more flexibility in the type of new activities that will be financed. The original rules only financed projects where at least 85% of the allocated funds went to more staff. Operators will now be allowed to suggest projects that deviate from this rule if the overall result is higher quality for the patient.
The higher financing levels and the increased flexibility in how to allocate the extra funds should the sector more attractive for both incumbent and new operators.