Financial Struggles of Dutch Hospitals Threaten Integrated Care Agreement

ANPEa cleaner in the HMC Westeinde in The Hague

NOS Nieuws•vandaag, 12:11

The hospitals in the Netherlands are only just reaching a sufficient financial level, so they are not yet in trouble. But the necessary investment space is lacking to make the major reforms, as agreed in the Integrated Care Agreement (IZA), a success. This is the conclusion of accounting firm BDO in its annual report on the financial situation of the hospital sector.

Of the 60 general hospitals surveyed, 35 scored a sufficient score for the year 2023. In 2022 there were still 55. BDO emphasizes that the quality of care is not substandard, it is about the financial picture.

The average score for general hospitals is much lower at 5.5. In 2022, it was still more than sufficient with a 7.1. This deterioration is also partly because BDO has adjusted the research method. Elements such as the investment and financing capacity of the hospitals are taken into account and that is precisely where the Achilles heel lies.

Nearly half of hospitals only achieved a return of less than 1 percent in 2023. The hospitals that performed the best did not exceed 1.5 percent. This means that such a hospital has no more than 1.50 euros left to invest with a turnover of 100 euros.

Healthcare agreement in danger

This wafer-thin margin is not sufficient to finance both the rising costs of personnel and outdated buildings and the necessary investments for medical innovations, digitalization, greening and new buildings.

If this trend is not reversed, the implementation of the Integrated Care Agreement will be at risk, BDO warns.

This agreement is the blueprint for how Dutch healthcare should remain accessible and affordable. Crucial to this agreement is that care surrounding the increasing number of vulnerable elderly people is reorganized. If possible, they are mainly helped by general practitioners, care providers in elderly care and informal caregivers. They only go to the hospital if there is a medical need.

Response Dutch Association of Hospitals

Ad Melkert, chairman of the NVZ, the Dutch Association of Hospitals, confirms that the hospital sector is in financial trouble and that the financing system is getting in the way. “In addition, we see that money remains tied up with health insurers. That has to change. It is important that hospitals regain financial perspective and know where they stand. Fixed budgets for acute care, multi-year contracts and more like-minded purchasing are needed through health insurers.”

This concept is known as “appropriate care”. It should be more pleasant for the elderly and also more affordable for society. In addition, it has been agreed that overall public health must be improved through prevention policy, so that the demand for care increases less rapidly and thus healthcare costs remain manageable.

Fewer patients

On paper it is a nice plan, but previous research by the joint research editorial staff of the NOS and… News hour it turns out to be difficult to implement in practice. A major obstacle is the healthcare financing system. Hospitals are paid per medical procedure and because the agreement must lead to fewer patients, the hospitals run financial risks.

BDO also underlines this problem in the report. “As a hospital becomes better at providing appropriate care, its financial results continue to be eroded.” The accountant calls on the cabinet, the Dutch Healthcare Authority and health insurers to change the financing of care in hospitals, so that appropriate care actually pays off financially.

System change

The example given is that acute care should not be paid per medical procedure, but via availability financing. A hospital then receives payment for a number of beds, regardless of whether they are all occupied. At the same time, BDO calls major changes in the financing system undesirable, because they would only complicate the healthcare reforms.

But from a tour by the investigative editors of the NOS and News hour it has already become clear that many healthcare providers and hospital administrators view this differently.

Without changing the financing system, reforming healthcare remains only wishful thinking, the consensus was. The incentive to perform many medical procedures to remain financially healthy continues to exist. There have been agreements for years to tackle this problem without adjusting the system, but there have been no real results.

Hospital director Jaap van den Heuvel described the problem as follows: “You see examples of appropriate care popping up here and there, but if a financing system is still running in the background that says: do more, then it is as if you are driving hard in the car. accelerate and brake at the same time. Of course that doesn’t work.”

The State of Dutch Healthcare: A Laugh or a Cry?

It seems that the healthcare system in the Netherlands is in a bit of a pickle. Now, before we all jump off the nearest canal bridge, let me just say: no, it’s not entirely dire. But when an accountant starts throwing around phrases like “sufficient financial level,” it sounds a tad like a banker trying to make a trip to the grocery store sound like a day at Disneyland.

A Financial Tightrope

According to accounting firm BDO’s annual report, the Dutch hospital sector is balancing precariously on a financial tightrope. Out of 60 hospitals, 35 managed to score a ‘sufficient’ rating for 2023. Last year, 55 hospitals were riding the wave of satisfaction. Talk about a nosedive! The report tells us that, although the quality of care isn’t in shambles, the hospitals are operating with the financial equivalent of a penny farthing — charming but not exactly cutting-edge.

The Slim Margins of Healthcare

Let’s break it down. Nearly half of the hospitals are pulling in a retorn of less than 1%. For those of you who are like “1% what?” it’s 1% of 100 euros. So, basically, if you’re running a hospital and your turnover is 100 euros, you’ve got a whopping 1.50 euros left to invest. A budget for a celebratory coffee run, perhaps? You can practically hear the sound of nurses and doctors donning their best pained expressions as they ponder their budget for a new scanning machine.

Healthcare Agreement on the Edge

Now, hold onto your medical hats, because the upcoming Integrated Care Agreement is at risk. The deal is intended to reorganize care for our increasingly vulnerable older population — which sounds great, until you realize the hospital’s financial structure is akin to trying to fix a car that’s always in need of engine repair while you’re already stuck in traffic.

Response from the Industry

Ad Melkert, the chairman of the Dutch Association of Hospitals, has echoed these cries for help. He’s waving his hands like a conductor who’s lost control of the orchestra, complaining that “money is tied up with health insurers.” Shocking, isn’t it? Money being tied up in a system that should be freeing up our therapists and doctors to save lives rather than wrangle with paperwork!

Fewer Patients, More Problems

The irony is thick! Hospitals are paid per procedure — major “cha-ching!” moments that encourage them to keep those beds as full as a holiday train station. But the aim of the care agreement is to reduce patient numbers. A house of contradictions, if you will. It’s like saying, “Please only bring your best friends to the party, but here’s a list of things you need to do to keep the party going!” Well, at least we know how to throw a confusing bash!

System Change: Necessary, But Difficult

In response, BDO suggests that acute care financing should switch from per procedure to a more reasonable availability fee. So, rather than begging for pennies for procedures, hospitals would receive a consistent payment for readiness — revolutionary! But alas, BDO warns that this change may complicate reforms further. If we’re tugging a rope in opposite directions, the only thing we’ll pull is a muscle.

All Jokes Aside

So, what’s the bottom line? The healthcare system in the Netherlands is clinging precariously to a string of hope tinted with frustration. The reforms are necessary, but so is the overhaul of the financing system. It’s as if Jaap van den Heuvel, a wise hospital director, put it best: “It’s like trying to accelerate and brake at the same time!” And right there, ladies and gentlemen, you have the crux of it all. The road to healthcare reform is paved with good intentions and financial binders, just waiting to entrap the unsuspecting hospital administrator.

So let’s raise a glass — not just to our exceptionally hardworking health professionals who are determined to make a difference but also to the bright minds needing to re-wire a confused financial system! Because if we don’t sort this out, who knows? We might be left staging a healthcare soap opera — all drama and no resolution!

The hospitals in the Netherlands are beginning to stabilize financially after a tumultuous period, but they still lack the necessary investment capacity to successfully implement major reforms outlined in the Integrated Care Agreement (IZA). This critical assessment arises from the latest annual report by accounting firm BDO, which highlights ongoing challenges within the healthcare sector.

A survey of 60 general hospitals revealed that only 35 received a satisfactory score for the year 2023, a drop from 55 hospitals that met the expectations in 2022. While BDO points out that the quality of care remains acceptable, the financial condition of these hospitals raises concerns.

The average score for general hospitals has seen a significant decline, plummeting to 5.5 this year from a previously robust 7.1 in 2022. This setback is attributed in part to a refined research methodology where factors such as investment potential and financial resources now play a crucial role. These areas have been identified as significant weaknesses within the hospital sector.

In a concerning trend, nearly half of the surveyed hospitals reported returns of just under 1 percent in 2023. The highest-performing hospitals barely reached a return of 1.5 percent, leaving them with a mere 1.50 euros for reinvestment for every 100 euros in revenue generated.

Healthcare agreement in danger

This meager financial margin is inadequate for covering escalating personnel costs, maintaining aging infrastructure, and making essential investments in medical advancements, digital innovation, and new facilities. BDO cautions that if these trends continue, the execution of the Integrated Care Agreement could be severely compromised.

This agreement outlines a long-term strategy to ensure the accessibility and affordability of Dutch healthcare, which is particularly crucial for managing the needs of an increasing population of vulnerable elderly individuals. The goal is to prioritize care through general practitioners, elderly care providers, and informal caregivers, thereby minimizing hospital visits unless strictly necessary.

Response Dutch Association of Hospitals

Ad Melkert, chairman of the NVZ, the Dutch Association of Hospitals, acknowledges the financial predicaments facing the hospital sector, attributing this partly to an ineffective funding system. Melkert emphasizes the necessity for reforms, including fixed budgets for acute care and multi-year contractual agreements with health insurers, allowing hospitals to regain a clearer financial trajectory.

This strategic approach, known as “appropriate care,” aims to enhance the patient experience for the elderly while also being fiscally responsible for society at large. Additionally, it includes commitments to improve overall public health via preventive measures, thereby alleviating the rapid increase in healthcare demand that leads to soaring costs.

Fewer patients

While theoretically a sound initiative, the practical implementation of the agreement has proven challenging. Research by NOS and Nieuwsuur underscores that the current healthcare financing structure poses significant barriers. Hospitals receive payments per medical procedure; thus, a strategy aimed at reducing patient numbers places them in precarious financial situations.

BDO’s report reiterates this concern, noting that as hospitals excel in delivering appropriate care, their financial viability concurrently diminishes. The accountant urges significant entities, including the government and health insurers, to revamp the hospital funding model, ensuring that appropriate care becomes financially sustainable.

System change

One suggested reform is shifting the payment structure for acute care away from a fee-for-service model to a more sustainable availability-based financing system. In such a model, hospitals would receive consistent payments based on bed availability rather than patient volume. Nevertheless, BDO expresses reservations regarding substantial changes to the financing system, perceiving them as detrimental to healthcare reforms.

However, findings from NOS and Nieuwsuur highlight a contrast in opinion among healthcare providers and hospital leaders who argue that without reforming the financing structure, true healthcare transformation remains an unfulfilled ambition. The entrenched incentive to perform numerous medical procedures in order to maintain financial health continues unabated.

Hospital director Jaap van den Heuvel articulated the dilemma effectively: “While there are promising examples of appropriate care emerging, if the financing model perpetually pressures us to do more, it feels like trying to accelerate while simultaneously hitting the brakes. Clearly, that approach is unsustainable.”