Update 1 October 2019
Here in the Netherlands the weather is still reasonable but early mornings definitely have an autumn feel. In this update we cover:
- Financials of operators in the psychiatric care sector worsen. Will the new financing structure improve overall profitability?
- Changes in the financing of palliative care from 2020. Will this make the sector attractive for commercial players?
- In our snapshot we give an overview of Tzorg, a large national provider of non-medical homecare
Annual reports highlight worsening financials for operators in the psychiatric care sector
This is the final write-up of the annual analytics that Verstegen Accountants carry out on the annual reports of organizations in the three main parts of the Dutch healthcare sector. In previous updates I have covered the hospital sector and the elderly care sector. In this update I cover the psychiatric care sector.
The sector has grown significantly in 2018. Total number of clients treated grew by 11% to 916.000 and revenues increased by 4.1% to €6.9 billion. Unfortunately, costs increased by 5.9% resulting in a decrease in net profit for the sector from €107 million in 2017 to €38 million in 2018 (ROS decreased from 1.6% in 2017 to 0.6% in 2018). As is often the case in the Dutch healthcare sector there are considerable differences in the profitability of small and large operators. Smaller, more focused operators had profit margins of 3.6% on average while the larger organizations typically only managed to be breakeven. Overall 60 of the 238 organizations covered made a loss in 2018 (including the largest organization – Parnassia Groep).
The main reason for the low profitability is that many organizations provided more care than agreed in their revenue ceilings with insurance companies and municipalities. Other reasons include a strong increase in staffing costs resulting from higher sick leave and more use of temporary staff.
As mentioned in an earlier update the government wants to change the payment model for psychiatric care. Hopefully this will also improve the financial situation of the sector.
Changes in financing of palliative care
Providing palliative care in the Netherlands is currently quite complex as there is no single financing focusing on the needs of the palliative patient. Financing changes as the patient moves from home to hospital or vice versa, and there is no specific financing of palliative home care.
Changes are now underway that will improve this situation. From 2020 the situation will improve as hospital financing will include a code for specialized care at home which will make the financing of the transfer from the hospital to the home seamless. In addition, financing for specialist geriatric care in the home situation will be changed from a subsidy to a structural financing form.
Many of the Dutch companies offering specialized home care provide palliative home care. An example is AllerZorg, which was acquired by Orpea earlier this year. As far as I know there are no commercial hospices in the Netherlands and no company specializing in palliative care in a home-setting and/or hospice. Maybe this is an opportunity?
Snapshot of a Dutch private-sector healthcare operator: Tzorg
Tzorg is a national provider of non-medical homecare. It is active in 300 municipalities, provides homecare to 50.000 clients, and has more than 10.000 employees. In 2018 the company had revenues of €145 million a made a net result of €7.4 million.
The roots of Tzorg are in the cleaning sector. It is part of Total Care which also includes one of the largest Dutch cleaning companies (CSU). Tzorg has grown by acquiring the activities of other companies. The most recent example is the acquisition of the home-care activities of Amaris Zorggroep. Amaris is a provider of elderly care in the central part of the Netherlands. It has decided to focus its activities on higher-end elderly care (nursing homes and medical homecare).
In their most recent annual report Tzorg reports that profits are under pressure due to the company having increased the salary of its home-care providers by 20%. This was agreed in a covenant between employers, trade unions, government and municipalities to stop a “race to the bottom” for home-cleaning activities that resulted in very low salaries for employees. However, Tzorg claims that a number of municipalities have not yet increased their rates to compensate the home-care companies for the extra costs.