Introduction

In the Netherlands, hospitals and other in-patient facilities cannot distribute their profits among their shareholders. As a consequence, most of these healthcare providers have organised themselves as 'foundations' – a legal configuration that by definition has no shareholders or members. This legal structure limits the possibilities to obtain equity. As such, Dutch healthcare providers have traditionally been dependent on bank financing. Luckily, attracting a loan from a bank has generally been relatively easy due to the stable cash flow of healthcare providers and the additional guarantees on such loans from a government-backed guarantee fund.

Current issues

However, much has changed in recent years. Free market elements to what was a heavily regulated sector. This new landscape is still occupied by the same legal entities that were operating under the bureaucratic, budgeted healthcare system. However, now when they turn to the banks for a loan, there is no stable cash flow, which complicates access to capital markets. Healthcare providers have taken on market risks, but cannot attract equity capital from shareholders.

Some healthcare providers have bypassed this injunction by setting up legal structures in which the formal hospital holding the permit is located in a foundation, but the actual business is performed by a corporate entity that has shareholders. Other structures seemingly aimed at circumventing this restriction have also emerged.

Potential legislative changes

Therefore, it is unsurprising that the question of whether it is wise to maintain the exclusion of for-profit healthcare providers is often raised. In 2012 legislation was proposed to allow for-profit hospitals in certain strict conditions. However, that legislative attempt was stalled in the Senate, where it is currently gathering dust.

For-profit care is a toxic political subject. Those in favour will achieve no political gain by fighting for it, while those opposed can easily cash in on the sentiment or conviction that healthcare is best provided if financial motives are neutralised.

Nonetheless, the current administration is carefully reviving the discussion about for-profit healthcare. In a recent address to Parliament, the responsible ministers have stipulated the pros and cons of for-profit healthcare. Such pros include:

  • improving access to capital markets;
  • stimulating innovation;
  • improving supply; and
  • enhancing efficiency.

Conversely, the cons include introducing incentives to maximise turnover and a focus on lowering costs instead of increasing quality. Of course, those who have followed this debate over the years are aware of these arguments.

Outlook

Although the administration seems reluctant to speak out on this subject, it has acknowledged that the exclusion of for-profit healthcare is not in sync with the transformation of healthcare in the Netherlands. Thus, it has concluded that further research is necessary, after which further steps may be announced. However, given the current political landscape, prolonging the regulatory twilight zone seems the most likely outcome.

For further information on this topic please contact Klaas Meersma at AKD by telephone (+31 88 253 50 00) or email (mjannink@akd.nl). The AKD website can be accessed at www.akd.nl.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.