Trends in hospital building since the introduction of competition in 2009; the case of the Netherlands
European Health Property Network 2014 Workshop Thinking differently about healthcare buildings Innovative infrastructure planning and design to improve the quality and safety of care. Trends in hospital building since the introduction of competition in 2009; the case of the Netherlands. Fred Bisschop, Leo Mimpen and Theo Staats, nCZB.nl In this presentation we will give a picture of what happened in building hospitals in the Netherlands since 2009, the year when Dutch hospitals had to compete for contracts with health insurers, who in their turn had to compete with each other in order to get as much insured as possible. Because of this system change hospitals no longer needed government approval for their investment plans. On the other hand they cannot carry out any substantial project without banks being willing to provide loans. This again means that banks have to be confident about future earnings of the hospital involved. We will first summarise the relevant policy developments in the Netherlands from 2009 on. We will see that changes often took more time than initially expected and that at the same time other important developments took place which are also very relevant for building activities of hospitals. Second we will try to look at what was expected to happen from a theoretical point of view. What does economic theory say about competition in health care and what can be derived from experiences in other countries like the US and countries with a (partial) commercial hospital sector? Thirdly we interviewed stakeholders from the different parties in health care, such as the various types of providers, health insurers and banks involved in financing health care projects etc. At the conclusion of our presentation we will try to sketch possible future developments considering not only the effects of competition, but also the other relevant trends such as the need to cooperate between parties from a quality perspective, changes in the demand for health care, etc. We will also comment on the introduction of a law allowing hospitals to operate on a for profit basis in this context. In 2013 Fred Bisschop started, together with his two partners Leo Mimpen and Theo Staats, a consultancy network called nCZB. They continue to work in the tradition of the former Bouwcollege and Dutch Centre for Health Care and Architecture by looking at investment plans in a multidisciplinary and independent way. They have a permanent supporting role for CZ, one of the largest Dutch health insurers. They also have the mission to keep on publishing about subjects which are of general interest. Last year they published about the key figures to be used when making investment plan based on the former building guidelines. www.nCZB.nl
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Trends in hospital building since the introduction of competition in 2009; the case of the Netherlands
- 1. Trends in hospital building since the introduction of competition in 2009; the case of the Netherlands Fred Bisschop Leo Mimpen Theo Staats 1EuHPN 2 oct 2014 www.nCZB.nl
- 2. Who we are • 35 years of experience in healthcare building design and construction • Backgrounds in economics and construction • Reviewed numerous healthcare projects and businesscases • We support large insurance companies and health care providers • We make publications of general interest, including guidelines and standards • We do our work independent • Therefore our valuation of healthcare projects is important for attracting loans from banks EuHPN 2 oct 2014 www.nCZB.nl 2
- 3. The Netherlands Land surface: 37.000 km2 Inhabitants: 16,8 mln 7.6 mln living in the Randstad region Population density: 450/km2 EuHPN 2 oct 2014 www.nCZB.nl 3
- 4. Health care in the Netherlands 85 hospital organisations Including 131 hospital sites 8 university hospitals 4 large health insurers www.nCZB.nl 4EuHPN 2 oct 2014
- 5. The former government regulated system Projects had to fit into guidelines Managers tried to negotiate about extra m2 cost and risk of capital was zero Result “the bigger the better” www.nCZB.nl 5 Admission as a hospital Approval of investments Adding capital costs to the budget EuHPN 2 oct 2014
- 6. The design of the regulated competition system www.nCZB.nl 6 Patient / consumer Healthcare provider Care insurer care market health insurance market care purchasing market EuHPN 2 oct 2014
- 7. Time line transition of the system 7 2006 Announcement of the introducion of competition 2009 No approval for projects needed, no extra reimbursement 2015 For profit legalised EuHPN 2 oct 2014 www.nCZB.nl
- 8. Goals of the competitive health care system • To achieve substantial deregulation • To make hospitals produce more efficient • To use health insurers in controlling overall costs • To use the expected consumer preferences to get cheaper health care policies Nevertheless… The government still has an overall healthcare budget with the possibility of price regulation 8EuHPN 2 oct 2014 www.nCZB.nl
- 9. The system in practice • Health insurers have limited purchasing power • Specialists are a 4th party – They start working together in regions • Banks are the 5th party – Banks determine infrastructure when investments are needed • University and teaching hospitals are very powerful Conclusion Triangle becomes pentagon or hexagon EuHPN 2 oct 2014 www.nCZB.nl 9
- 10. Some results of the interviews • People value freedom of choice very high • For health insurers the market share in the regions is very important • Banks play a crucial role when a building project is involved • Building projects are also the moment for a hospital to change its strategy • Less competition means less risk • Hospitals arrange care with regional partners • Specialists start working together in regions • Government implements new laws to promote competition Conclusion There is very limited competition www.nCZB.nl 10EuHPN 2 oct 2014
- 11. Other important trends • Treatment low risk / high volume will change to “shop in shop” within the hospital • Medical, general and technical support services are being transferred to the free market • Patients will start to organise their care pathways • Technical innovations will support this • Simple diagnostics will leave the hospital and move to GP’s and patients at home • Outpatient department will become smaller www.nCZB.nl 11EuHPN 2 oct 2014
- 12. Time line What does this mean for building projects? www.nCZB.nl 12 2006 Government control over project is decreasing 2009 Banks starting looking at business plans, projects already developed become smaller Banks started requiring long term guarantees from health insurers 2012 Renewing hospitals in parts over the years becomes easier to finance than building complete new hospitals First newly designed projects become ready 2015 EuHPN 2 oct 2014
- 13. Three possible scenarios for the future 1. Big and powerful 2. Close to the patient 3. Commercial succes www.nCZB.nl 13EuHPN 2 oct 2014
- 14. Scenario: Big and Powerful • University hospitals and teaching hospitals are dominant • Small hospitals will disappear largely Hospital infrastructure is concentrated in large and very expensive buildings www.nCZB.nl 14EuHPN 2 oct 2014
- 15. Scenario: Close to the patient • Regional networks ecourage efficient care along care pathways • Health insurers and banks see this as a sustainable solution • Teaching hospitals become smaller, due to cooperation and shop in shop solutions. Small hospitals stay alive to a large extend. • Intermediate care centres with organised groups of GP’s are being developed Buildings are fit for purpose, excess m2 will dissapear, close to the patient www.nCZB.nl 15EuHPN 2 oct 2014
- 16. Scenario: Commercial succes • Foreign hospital chains take over a number of dutch hospitals. • With their capital new lean and mean hospital buildings are being constructed. • Their results serve as a benchmark in a system of yardstick competition Result the whole sector becomes more efficient Risk: banks will reduce loan volume to the sector, total amount of capital will not increase www.nCZB.nl 16EuHPN 2 oct 2014
- 17. What we do not expect • Common believe that general hospitals are over will not become reality • Health insurers determine fully what the health landscape would look like • Cost control by the government will not dissapear www.nCZB.nl 17EuHPN 2 oct 2014
- 18. Thank you for your attention EuHPN 2 oct 2014 www.nCZB.nl 18