Update 5 December 2023
Today is 5 December. This is the Dutch version of Christmas with an exchange of gifts. Typically, each person gets one gift, and the gift has to be accompanied by a poem explaining why the person is getting the gift. Even though everybody has been busy buying gifts and writing poems, there is still news to report from the Dutch healthcare sector. In this update we cover:
- Surprising election results. Good news for the healthcare sector?
- Healthcare insurance companies are a key component of the Dutch healthcare system. Will there be consolidation in the sector?
- Hospital profitability improved. Will the trend continue?
- Two acquisitions by Co-Med blocked. What is happening in the primary sector?
Surprising election results
Two weeks ago there were elections for the Dutch parliament. The result was surprising as the far-right PVV (Party for Freedom) came out of the elections as the largest party with 37 (out of 150) seats. This means that the party leader, Geert Wilders, will become prime minister if he is able to put together a coalition. A coalition of four parties, including two other big winners (BBB and NSC) and the previous governing party (VVD) is likely, but will probably take a long time to agree on key issues.
As mentioned in the update of 7 November, promises made by political parties would theoretically increase costs in the healthcare sector by more than €11 billion. The PVV was the party that had included the most extra spend for the healthcare sector in its program. The suggested changes include abolishing the current own risk for patients (€375 per year), building more nursing homes, and the inclusion of dental care in the compulsory healthcare insurance package. The party has also promised to pay healthcare staff higher salaries and reduce bureaucracy. The most likely coalition parties do not agree with all of PVV’s plans, but it can also find support in the biggest opposition party (the leftist coalition party PvdA/GL) that also supports many of PVV’s plans.
There is much uncertainty ahead as a coalition is formed and plans are agreed and financed, but it appears that more money will be flowing to the Dutch healthcare sector in the coming years.
Will the healthcare insurance sector consolidate?
The healthcare insurance companies play a critical role in the Dutch healthcare system as they administer the compulsory healthcare insurance system and the contracting and payment system to healthcare providers. There are currently ten providers of healthcare insurance in the Netherlands. The ten providers typically have various brands. The market is dominated by four large companies (Achmea, CZ, Menzis and VGZ) with a combined market share of 84%.
In recent years, the smaller companies have increased their market share from 10% in 2013 to 16% in 2023 so it appears that they are doing well. In a recent report KPMG, however, suggests that there will be further consolidation in the market. They believe that the healthcare insurance market is a commodity market (as the content of the compulsory insurance is set by the government making it difficult to differentiate). This makes scale important as it allows fixed costs to be covered by higher volumes. Financial results seem to support this as the profitability of the smaller companies has been declining while that of the larger companies has remained stable.
KPMG therefore expects that the smaller companies will be forced to merge, or at least cooperate and/or join their back-office operations. This will certainly not be something that happens overnight, and it will be interesting to see how the ACM (Dutch Competition Authority) and the government / politics reacts to any consolidation that takes place.
Hospital profitability improved
In the Netherlands there are currently approximately 110 hospitals. These can be divided into three levels. The first level consists of general / regional hospitals that provide general acute care. The second level are Top Clinical hospitals that provide complex care. Sometimes these hospitals are specialized. Examples are the Antoni van Leeuwenhoek hospital that specializes in cancer and the Eye Hospital in Rotterdam. The third level consists of seven University Medical Centers (UMC). These focus on a mixture of the most complex care, research and educating healthcare staff.
A recent analysis by BDO has looked at the financial results of the UMCs and reports that the profitability of this sub-sector has improved with profits for the seven hospitals increasing from €92 million in 2021 to €152 million in 2022. However, BDO also states that the sector ROS of 1.4% is too low given the major investments that these hospitals need to make in areas such as real estate, IT, education, and sustainability. BDO suggests that the hospitals will need to concentrate and further specialize in key high-complex care areas. It will be interesting to see how that goes. The process to concentrate heart surgery for children has taken many years, and is currently the subject of several court cases.
Two acquisitions by Co-Med blocked
A few years back we described the roles and responsibilities of the Dutch Healthcare Authority (NZA). We have also recently written about the challenges that companies developing chains providing primary care are facing. One of the companies in this process is Co-Med. Recently the NZA has blocked the planned acquisitions by Co-Med of two primary-care locations. The reason given by the NZA is that the overall quality of the provision of primary care in the relevant geographic area could be endangered by the acquisition and that Co-Med has not been able to show how they will provide the required care.
It is a bit unclear whether the NZA has the legal right to block acquisitions, but they do have a responsibility for ensuring that patients get appropriate care. In this case, they have passed the responsibility to the largest healthcare insurance company in the area. The healthcare insurance company has the responsibility for ensuring adequate care and there will need to arrange that the patients of the two locations continue receiving primary care. This will be a challenge, as the current GP is retiring, and there is a country-wide general shortage of primary care staff.