Update 7 May 2024
As I am writing this we have the first day of what feels like summer. Lots of sun and temperatures north of 25C. Finally. There is also news to report from the Dutch healthcare sector. This update covers the following news items:
- Active M&A in the Dutch healthcare sector. Who will be next?
- Alternative to commercial primary care chains get financing from healthcare insurance company. Will this help to stabilize the sector?
- Absenteeism in Dutch healthcare sector is declining. Will this improve margins for the healthcare providers?
Active M&A in the Dutch healthcare sector
In our updates we often cover M&A related news. The trend an active m&A market Dutch for healthcare providers and companies providing healthcare-related services seems to be continuing. About one month ago it was announced that Paradigma has been acquired by Castik. Paradigma is a major supplier of occupational healthcare related services in the Dutch market. It was majority-owned by Mentha (a Dutch-based private equity investor), who have now sold their shares to Castik (a German-based private equity company).
It has also been recently announced that Enovation has been bought by Legrand for “more than €500 million”. Enovation is a 40-year-old Dutch company focusing on data and information transfer between parties in the healthcare ecosystem with annual revenues of €75 million. Enovation was owned by Main Capital (investor specialized in enterprise software companies). Legrand is a French company specializing in electrical and digital building infrastructures. Enovation will become part of their Legrand Care division, which is specialized in the innovative development of connected solutions for the health and social care sectors. Their service offering includes technologies to enable clients to live independently at home. It will be interesting to see how the two companies integrate and merge their knowledge and experience as Legrand seems to be more focused on hardware while Enovation is mainly a software company.
Buurtdokters gets financing from Dutch healthcare insurance company
The Dutch primary care sector is going through turbulent times. Working as an independent General Practitioner (GP) is becoming less attractive due to the long working hours (average 67 hours per week) and increasing administrative tasks. As a consequence, less young doctors are choosing to become independent GPs, rather choosing to work as salaried employees or as freelance doctors replacing GPs on short-term secondments (vacation, illness, etc.). This has given rise to a model where primary care chains acquire practices from retiring GPS. As reported in the previous update some of these chains have not been successful.
In an update in August last year we wrote about Buurtdokters and their alternative model for making it more attractive to run independent GP-practices by providing different kinds of back-office services without acquiring the practices themselves. Last year, Buurtdokters received financing from Buurtzorg. This financing has enabled Buurtdokters to grow to eighteen locations. However, the business model requires a larger scale to get to break-even (estimated to 30-40 practices).
The Dutch healthcare insurance companies are required to ensure that there is sufficient care provision to cover the needs of their patients. As GPs are the gatekeepers to almost all healthcare provision in the Dutch system, it is therefore vital for the insurance companies that there are sufficient GPs throughout the country. Zilveren Kruis is one of the largest Dutch healthcare insurance companies and it has now provided €0.5 million in financing to Buurtdokters to help them achieve further growth.
The Dutch primary care market desperately needs a major overhaul, and hopefully Buurtdokters can provide assistance that makes it possible and attractive to keep independent GP-practices in the less densely populated areas of the Netherlands.
Absenteeism is declining in the healthcare sector
As reported in an update in March, more than 20% of Dutch healthcare providers expect to report a loss for 2023 and, in general, it is expected that margins will continue to decline even for the profitable providers. The overall low profitability of the Dutch healthcare sector has many reasons, but a key reason has been the very high levels of absenteeism. In the first quarter of 2022 absenteeism reached a record level of 9.85%. For the full year absenteeism was 8.36%. (up from 7.29% the year before). Keeping healthcare organizations up and running with almost one in ten staff on sick leave at any given moment meant that the providers have had to hire expensive temporary staff putting further pressure on margins that were already thin.
The good news is that absenteeism seems to be declining. For 2023 as a whole absenteeism declined to 7.75%. In Q1 2024 8.53% of healthcare staff were absent due to illness. This is higher than the 2023 average absenteeism, but Q1 numbers are always higher and the absenteeism in Q1 2024 is lower than the level of Q1 2023. In fact, this is the fifth quarter in a row that absenteeism is lower than the same quarter one year earlier. Absenteeism is declining across all age-groups, but long-term absenteeism (longer than 365 days) is at the same level as one year ago.