Healthcare institutions in dire straits: almost a third ended 2022 with a loss It is an accumulation of problems.

More red figures, a halving of the return and failed bank agreements. The Dutch healthcare sector is experiencing a particularly difficult financial situation, concludes consultancy and consultancy firm EY in the annual healthcare barometer. The consultants take a closer look at the annual reports of healthcare institutions for 2022.

Nearly one in three healthcare institutions suffered a loss last year and the outlook is bleak. “It really looks different from other years,” says EY partner Rob Leensen. “We saw it coming last year, then it was still dark clouds and now they have turned into severe weather.”

The financial situation in healthcare is a multi-headed monster. First of all, there are the after-effects of the corona crisis. The schemes to help healthcare institutions have now ended, but the consequences have not yet. Sickness absence among staff has increased sharply, from 6 percent in 2019 to 7.6 percent in 2022.

Big differences

There are, however, major differences between the various sectors within the healthcare sector. Hospitals, rehabilitation centers and independent treatment centers maintain their financial results reasonably well. They also received some extra support at the beginning of 2022, but this was not the case in long-term care for the youth, the disabled and the elderly. Things are generally much worse there. Yesterday, accountant BDO concluded in an analysis that the financial situation for organizations that care for the elderly is becoming unsustainable.

Long-term care is having a hard time because absenteeism is very high compared to other care institutions. Due to a lack of personnel, more and more self-employed people are being hired who are more expensive than their own permanent employees. “A lot is currently being asked of healthcare,” says Leensen. “We have to ensure that the workload decreases and the work becomes more fun again. Absenteeism is very expensive.”

But there is also a difference between nursing homes, for example. Some are understaffed. “Due to corona, there was excess mortality and not all houses are completely full again. The modern houses are in demand, there are waiting lists, but the somewhat older houses with multiple rooms, the occupancy remains low. And if that is the case, the institution will already end up quickly in the red,” says Leensen in the NOS Radio 1 Journaal.

In addition, healthcare costs generally increase. Not only because of inflation and a higher collective labor agreement (plus 10 percent), but also because of an aging society. And government cutbacks are coming soon.

Prevention is necessary

The consultancy also warns that in order to maintain income, healthcare providers want to keep production running and fill beds, while society is not always served by this. EY believes that the healthcare system should pay more attention to prevention. “We need to get people to adjust their lifestyles, which will reduce the need for hospital visits and pills later in life. But you didn’t change that in a year.”

Whatever makes prevention more difficult: contracts with health insurers are for one year. Leensen: “Why, for example, would Achmea invest in me as a patient if I switch to VGZ next year? There are many such errors in the system.”

It makes a difference how a specific institution works and what the quality of management is, but the consultancy is concerned about the financial situation of the sector as a whole.

In addition, banks do not think that far ahead, but look at the current financial situation of institutions. Leensen: “Banks find this exciting, because it is uncertain where the sector is going. If your creditworthiness deteriorates, and that has happened at many institutions, it is more difficult and more expensive to take out new loans. But you need investments to become financially healthy again. Once red is allowed, after two times you come into special management.”

As an example, Leensen gives an elderly care institution. In good years it got the green light from the bank to renovate, because people still slept in a room with the two of them. Since corona, the institution has been running at a loss, so the bank has said that the investment will be stopped until black figures are seen again. The elderly are therefore in a renovation that will not be completed for the time being.

Perverse incentives

According to EY, situations like this lead to perverse incentives. As an example, Leensen gives hospitals where extra operations are performed, not because it is necessary, but because extra production leads to extra income. “The driver wants to keep his head above water, but it is not in the collective interest of course.”

So some things will have to change according to EY. “We have 30,000 healthcare providers in the Netherlands for 17 million people. You may wonder whether we need that many providers.”