A Unique Deal in Dutch Health Care: Private Insurers and Providers Find Common Ground to Address Covid-19 Effects

“The Covid-19 pandemic has added another twist in the U.S. health-care saga. While some providers initially struggled financially as elective and outpatient care were cancelled or deferred, private health insurers saw record profits in the second quarter. In fact, major insurance companies such as UnitedHealthcare, Anthem, and Humana doubled their profit margins, pushing Democrats to launch an investigation into insurers’ practices. During a time when public confidence in political and corporate institutions is low, the paradox of soaring insurers’ profits and unprecedented providers’ losses is painful, potentially detrimental, and likely unnecessary.

[..] Under Affordable Care Act (ACA) regulations, insurers’ excess profits should trickle down to members in the form of rebates, but the question remains as to how much and when the members will benefit from these rebates, if at all. Providers received grants from the federal government as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, yet the way in which these grants have been distributed has attracted significant criticism. Large hospital systems seem to have disproportionally benefitted from this program, leaving smaller practices and rural or safety-net hospitals financially vulnerable.

The experience in the Netherlands shows that a different approach is possible. Specifically, private insurance companies took a proactive role and struck an unique deal with providers (e.g., primary care providers, hospitals, mental health institutions) to ensure that they will stay in business and will be better prepared for future waves of the pandemic.

[..] Over the course of several months (March through July 2020), insurers and providers [in the Netherlands] came together and expressed their commitment to ensure continuity of care for the year 2020. To that end, both parties worked successfully on a deal to “neutralize” the financial effects of Covid-19 for providers. The purpose of this deal was to maintain an accessible, high-value, resilient health-care system. The deal is unique in that insurers now are paying for care that has not been (and partly will not be) provided.

[..] Both the Dutch Health Ministry and the Health Authority (Nza) were actively involved early in the process because the deal (1) required (temporary) adjustments to reimbursement and anti-trust regulations and (2) partly overlapped with the national economic stimulus package for employers. [..] In general, there are three components, all of which are designed to ensure provider continuity. First, providers receive a fixed budget, calculated as a percentage of their lost revenues (2020 vs. 2019 revenues). This percentage is based on the provider’s average turnover and the estimated fixed costs for the type of care provided. Second, providers are compensated for the additional costs associated with Covid-19 care, such as the costs of personal protective equipment. Third, providers receive a separate fee for care that is delivered on top of the estimated monthly volume after the first Covid-19 wave. The purpose of this component is to encourage providers to catch up on care that has been delayed, as quickly as possible, in order to keep waiting lists short. General practitioners are an exception to this system as they are mainly paid on a capitation basis; for those providers, the support consisted of a one-time add-on to the capitation fee.

For larger providers, such as hospitals, the final agreement was a result of negotiation between the health insurers’ association and the provider associations. For smaller providers, such as physiotherapists and dentists, the health insurers offered an arrangement in which the providers could choose to participate.

Six Principles Underpinning the Deal

  1. Ensuring Access to High-Quality Care
  2. [..] In March and April 2020, insurers actively reached out to providers to discuss any liquidity issues and to rapidly provide prospective payments, if necessary. This step helped providers to stay afloat, with no bankruptcies having been reported since the start of the coronavirus crisis.

  3. Safeguarding Market Competition
  4. [..] This deal will help to maintain a diversified marketplace with small and large providers, which gives patients enough options from which to choose (including the option to retain their current provider), gives insurers leverage with which to negotiate lower prices and higher quality, and gives providers an incentive to improve and differentiate their services.

  5. Encouraging High-Value Care and Preventing Low-Value Care
  6. [..] Both insurers and providers leveraged this deal to promote high-value care and avoid low-value care when resuming deferred care. Following the deal, they collaborated on determining what types of care to prioritize (e.g., prioritizing radial fracture surgery over carpal tunnel syndrome surgery) and, partly based on Choosing Wisely Initiative, what types of care not to deliver at all when resuming care.

  7. Expanding Digital Health Delivery
  8. [..] Regulators agreed to ease regulations and rules, thereby giving providers the flexibility to introduce new communication solutions with stable revenues. As patients seem to appreciate these digital services, insurers and regulators are currently working on developing new payment schemes to bolster the progress that has been made and to accelerate the adoption nationwide.

  9. Promoting Collaboration Between Providers
  10. The social capital within the Dutch health-care system is relatively strongly developed, as evidenced by stakeholders’ willingness to collaboratively seek solutions for major challenges. [..] providers were not afraid of losing revenues and were willing to quickly refer their own patients to other facilities. These developments have helped the Netherlands to avoid the situation that unfolded in New York City, where hospitals were reluctant or unable to refer patients to other facilities, leading to an unequal distribution of cases. In the Netherlands, a national coordination center at the Erasmus University Hospital effectively coordinated Covid-19 hospitalizations and intensive care unit admissions throughout the country during the first wave. At a regional level, primary care providers and hospitals accelerated their plans to move patients away from hospitals and to jointly organize care closer to patients’ homes.

  11. Protecting Frontline Workers
  12. This deal ensured that frontline workers did not have to worry about their jobs and could continue to focus on patient care. This aspect of the deal also will have strategic value in the long run. Providing job security to frontline workers will help to keep them motivated and will help to retain as many workers as possible, which will be vital during future waves of the pandemic. However, a poll of >1,400 nurses in July 2020 suggested that 50% of those who worked in Covid-19 units do not wish work there during a second wave, not only because of the psychological consequences (e.g., exhaustion, traumatic experience, burnout) but also because of a lack of appreciation by executives and politicians.

[..] We think that this deal is promising and timely, but it may have at least three downsides. First, as providers realize that the incurred costs will largely be covered, they might be less inclined to improve efficiency and reduce costs. [..] Second, it is not unlikely that the increased health-care costs associated with Covid-19 will partly be passed on to patients in the form of higher premiums or out-of-pocket spending. This development could affect not only access to care but also the already low public trust in insurers. A 2019 survey showed that only 30% of respondents believed that insurers add value to Dutch health care. [..] It should be noted [..] that virtually all health insurance companies in the Netherlands are not-for-profit cooperatives that allocate any profits to the reserves that they are required to maintain or return them in the form of lower premiums. Third, with stable revenues in 2020, provider productivity might go down, leading to longer waiting lists.”
Full article, Tanke M and Ikram U. NEJM Catalyst: Innovations in Care Delivery 2020.9.23