‘the pied piper of hamelin’ strategists - pied...2 3 the pied piper of hamelin into the street...

Study of major developments in markets,

operations and fi nances of Dutch hospitals

2003-2004

‘The Pied Piper of Hamelin’

Which tunes are Dutch hospitals playing?

Gupta Strategists

Gupta Strategists

Study of major developments in markets,

operations and fi nances of Dutch hospitals

2003-2004

‘The Pied Piper of Hamelin’

Which tunes are Dutch hospitals playing?

Copyright 2005 Gupta Strategists. No part of this work may be reproduced, quoted

or used for any other purpose without the explicit consent of Gupta Strategists

2 3

The Pied Piper of HamelinInto the street the Piper stept, Smiling fi rst a little smile, As if he knew what magic slept In his quiet pipe the while; Then, like a musical adept, To blow the pipe his lips he wrinkled, And green and blue his sharp eyes twinkled, Like a candle-fl ame where salt is sprinkled; And ere three shrill notes the pipe uttered, You heard as if an army muttered; And the muttering grew to a grumbling; And the grumbling grew to a mighty rumbling; And out of the houses the rats came tumbling. Great rats, small rats, lean rats, brawny rats, Brown rats, black rats, grey rats, tawny rats, Grave old plodders, gay young friskers, Fathers, mothers, uncles, cousins, Cocking tails and pricking whiskers, Families by tens and dozens, Brothers, sisters, husbands, wives – Followed the Piper for their lives. From street to street he piped advancing, And step for step they followed dancing, Until they came to the river Weser Wherein all plunged and perished

THE PIED PIPER OF HAMELIN (Browning, Robert, 1812-1889)

The story of the Pied Piper of Hamelin may seem somewhat far-fetched for a study of Dutch hospitals, but we propose there is a beautiful analogy here. Transposing the old German fable to Dutch healthcare:

Hamelin = The NetherlandsThe council = Ministry of HealthThe rats =UnproductivityThe Pied Piper = HospitalsThe children = Patients

The city of Hamelin was plagued by rats, like the Dutch cure sector was with declining productivity. The council of Hamelin, read Ministry of Health, tried really hard to exterminate this vermin but all in vain. Till the pied piper, read the Dutch hospitals, played their magic tunes. Under spell of their tunes the cure sector gained in productivity and improved fi nancial health. If the results for 2004 are set forth, Dutch hospitals, or the pied piper are well on their way to get rid of the unproductivity vermin. But now the council of Hamelin, Ministry of Health, needs to come through on their part of the promise, to further liberalize healthcare markets. The hospitals have magic in their fl ute to sway the patients, like the pied piper did for the children. And we all do know how the tragic story of the pied piper ended.

Table of Contents

Executive Summary ...........................................................................................5

Chapter 1: Introduction ........................................................................................................ 19

Chapter 2: Market Performance ....................................................................................... 29

Chapter 3: Operational Performance ............................................................................. 53

Chapter 4: Financial Performance ................................................................................... 61

Chapter 5: Ranking ................................................................................................................. 67

The Pied Piper of Hamelin ...........................................................................71

4 5

+4.4%

Patiententities

More healthcare...Production change 2003-2004

... and shorter staysProduction change 2003-2004

Daytreatment

In patients

First outpatientconsultations

Nursingdays

-0.8%

+4.1%

+5.1%

+10.2%

Exhibit 1. Demand for

care remains

strong and..

Fighting fi t,

fi tting right

.. future fi nancing

is key issue

Executive Summary

Dutch hospitals recorded a remarkable recovery in 2003-2004. They improved

their operational productivity and strengthened their fi nancial base. And according

to our study, they did so under normal pressures of competitive markets in

which most of them operate. This indicates that already in 2004 hospitals were

competitively engaged well before the opening of the healthcare markets from

1st February 2005, when price-volume negotiations were initiated. We fi nd there

was already a shift of patients in 2003-2004 driven by competition between

hospitals. And factors such as cost of operation as well as fi nancial reward are

already somewhat correlated to market performance. Especially in more competitive

markets, the correlation is signifi cant. Dutch hospitals have become fi ghting fi t,

and it is fi tting right that they have done so.

The developments in the Dutch cure sector during the period 2003-2004 are

analyzed and presented in this study. The study addresses two major queries:

1) How did the Dutch hospitals rise to their key challenges: growth,

productivity improvement and fi nancial robustness?

2) Is it possible to evaluate which instruments are truly successful in

improving their performance? Specifi cally, do market mechanisms help

redress the productivity gap challenge?

We conclude that the demand for cure services again grew strongly in 2004. In

terms of patient entities the Dutch hospitals grew by 4.4%. In terms of revenues it

grew by 5% with an additional amount of above EUR 600 million spent in 2004. In

real terms this growth is in line with the projection that the cure sector will grow

by 4% per year, doubling to nearly EUR 30 billion by 2020 (Exhibit 1).

The fi nancing of this growth is one of the key policy challenges for the Dutch

society. We believe that boundaries for the actual need for healthcare have yet to

be reached. So far the consumed healthcare is dictated primarily by the available

budget. We postulate that introduction of “free” market mechanisms shall most

6 7

Totalproductivity

gain 2003-2004

Additional profitretained by

hospitals in 2004

Productivitygain returned

to society

102220

118

Finders keepers?Destination productivity increase 2003-2004 (EUR m)

Exhibit 2.

Dutch hospitals

became more

productive, cost

effective ..

.. and fi nancially

more robust

Can healthcare be

market driven?

likely further drive growth of the sector, as the potential demand is greater. The

introduction of a uniform basic insurance for all Dutch citizens is the fi rst step in

developing fi nancing instruments for the future. But we are of the view that both

more urgency and rigor are required in addressing the fi nancing challenge.

On the second key issue of effi cient delivery of care, Gupta Strategists conclude that

the Dutch hospitals have risen remarkably to the productivity gap challenge. Under

tremendous and sometimes unwelcome pressure, with strong winds of change

blowing from many directions, the Dutch hospitals have posted an unprecedented

improvement in their operational performance. Dutch hospitals saved above EUR

200 million on real basis, primarily by improving labor productivity. Given that this is

a huge upswing, and a breakthrough compared to the declining productivity of the

last years, this performance deserves special attention, analysis and recognition.

The productivity gain was utilized by the hospitals to improve their fi nancial

position. For example, the profi t margin of Dutch hospitals increased by nearly 1%

to 1.3%. However, had Dutch hospitals been fully compensated on a real basis for

the delivered services in 2004, they would have managed to retain another EUR

118 million as additional profi t. Or in other words, half of the productivity gain,

EUR 118 million was “returned” to the Dutch society by the hospitals as a “gift”, or,

depending on your perspective, debt incurred from previous years (Exhibit 2).

We were intrigued to what extent this productivity gain is a fruit of the various

policy initiatives undertaken to coax hospitals into performance improvement.

Specifi cally we have sought to seek whether this improvement is a result of market

mechanisms or of macro budget reductions.

The debate on the suitability of market mechanisms for healthcare has been

vociferous and sometimes even cantankerous, with both pro-market and anti-

market camps having valid arguments. The pro-market camp believes that the

“invisible hand” shall reshuffl e the playing fi eld to drive performance improvements.

While the anti-market camp believes that such improvements can only be driven by

regulatory insights and dictates, for example through “effi ciency frontier” analysis.

8 9

Exhibit 3.

High

Relativemarket

position2004

Low

475 275 200

Cost-to-serve [EUR/PE]

Strong

Financialposition

Weak

Low High

Relative Market position 2004

Cost efficiency yields market strength ..Strategic positions within Rotterdam region

4%

GrowthEPB[%]

-2%

475 214


.. and drives growthgrowth 2003-2004 within Rotterdam region

... creating better financial positionFinancial positions within Rotterdam region

High

Relativemarket

position2004

Low

475 275 200


Strong

Financialposition

Weak

Low High



4%

GrowthEPB[%]

-2%

475 214




High

Relativemarket

position2004

Low

475 275 200


Strong

Financialposition

Weak

Low High



4%

GrowthEPB[%]

-2%

475 214




Yes, cure was

already a

competitive

market in 2004

It pays to be

competitive

Market defi nition

proposed

Irrespective of the outcome of the debate, we fi nd that Dutch hospitals already

operate in competitive markets and are sensitive to market pressures. It is important

to emphasize that such pressures and sensitivities already existed in 2004, even

before price-volume negotiations in the B-segment were possible. We estimate

that at least EUR 100-200 million worth of revenues were competitively at stake in

2004, and hospitals actively strode for patient custom. This supports our conviction

that hospitals themselves are capable of undertaking the necessary performance

improvements, even in the absence of further explicit market or regulatory

pressure. Already the existing market mechanisms forced them to do so in 2004.

We conclude that on average Dutch hospitals are aware of their challenges, and

have risen remarkably up to them in 2004.

In this report, Gupta Strategists present a consistent and logical framework of the

Dutch markets. A framework of markets is essential to evaluate the effects of market

mechanisms. The market framework requires fi rst and foremost a consistent and

logical defi nition of “markets” for each hospital. Since providing care is mostly a

regional business, we have used postcodes and travel time1 as the relevant variables

to assign each hospital a market based on the same defi nition. Then, based on

relative growth, operational and fi nancial performance in a hospital’s own relevant

market, we have distilled the extent to which local market mechanisms prod

hospitals to improve their performance.

We fi nd that in competitive markets, hospitals with higher productivity gained

market share in 2004. This gain in share also translated in a further strengthened

fi nancial position of the market winners. This is the classic virtuous cycle of well

functioning markets – gain in market share as a means to strengthen hospital

performance.

1 Travel time is only one of the many market defi ning variables, though perhaps for the bulk of the care the

most important. See Market Performance, chapter 2, for further details.

10 11

Let there be

more “markets”

On the basis of our analysis of 2003-2004 it would appear that costs can indeed be

a market shaper, though the effect varies across the various regional markets, being

most pronounced in Rotterdam2. And market share is a hospital shaper in terms of

fi nancial strength (Exhibit 3). The rudiments of the virtuous cycle already existed in

2003-2004 and are likely to be reinforced in the coming years.

On basis of the analysis of Dutch hospitals in 2003-2004, Gupta Strategists endorse

further accelerated freeing of healthcare markets, and allowing more degrees

of entrepreneurial freedom to hospitals. We conclude that the sector is already

capable of leveraging the market sensitivities to meet the healthcare revolution

challenge of the coming decades3.

The key fi ndings of the study are:

1) The majority of the Dutch hospitals operate in competitive markets,

and within their markets actively stride for patient custom and

share.

(Chapter 2)

Based on competitive intensity analysis of all Dutch postcodes, we

conclude that citizens in most postcodes have ample choice in hospitals.

At least 12 million Dutch citizens can choose from 2 hospitals within 15

minutes reach while nearly 10 m can choose from 3 hospitals. Viewed

from a lack of choice perspective, less than 2 m Dutch citizens have only

one hospital within 30 min travel time.

2 We cannot rule out that quality of care may also be a relevant market shaper. It is possible that highly

productive hospitals also provide high quality care, and quality of care is the underlying reason for gain of

share.3 There is however one word of caution. The introduction of DBC’s as a means to further liberalize markets has

increased administrative burden, led to unnecessary complexity and from a specialist and patient perspective

even inaccurate registration of cure. There is a risk that such changes may cause undesirable distortions of

markets. Rather than achieve the desired aim of further liberalization, these may hinder openness, and ability

to make judged choices. It would appear to us, that even in the pre 1st February 2005 paradigm, the markets

were beginning to re-equilibrate to a more optimal position. It would be a shame if DBC’s should distort

this rather than accelerate it. In as much as not being fully addressed now, the authorities need to actively

monitor, and prevent DBC led distortions of an extremely welcome and good performance under competitive

markets in the Dutch cure sector.

12 13

Exhibit 4.Cure is becoming a real marketEPB churn (switches above market norm as% of hospital EPB size)

-8% 18%

Σ 120k EPB

0%

Cure is becoming

a real market

Lower costs leads

to higher share

leads to stronger

fi nancial position

And Dutch citizens do exercise their choice. On average about 1-2% of

the EPB seeking patients shifted their custom to a new hospital of choice

in 2004. The actual churn in terms of Dutch citizens is of course much

higher, as within the same amount of EPBs, the actual patient population

churn will be higher. A 1% shift in average share is huge for healthcare,

particularly in the context of the limited motive for mobility. In value

terms a 1-2% churn means that about EUR 100-200 million worth of

the healthcare market was at stake in 2004. Or there was already a “free

market” worth EUR 100-200 million in 2004. Enough motive for competitive

performance as an average hospital had EUR 1-2 million to win or lose,

based on relative competitive performance. Of all Dutch hospitals 10 had

positive churn rate above 5%, reinforcing the conclusion that already in

2004, signifi cant competitive gains were realized by the market winners.

(Exhibit 4)

Translated to hospitals4, more than 80 Dutch hospitals operate in

competitive markets. The effects of competitive arena are also clearly

measurable. We see that hospitals in more competitive areas have a much

larger spread in performance, and thus have both clear out-performers

and under-performers. And it pays to be competitive. (Exhibit 3).

The “invisible hand” already affected hospitals in 2004. We fi nd that in

a competitive area like Rotterdam, hospitals with lower cost-to-serve

compared to their market peers, had higher share. It appears that cost

is a market shaper. Moreover, with insurers actively negotiating on price

since 2005, one expects performance will become more cost sensitive.

Importantly we also conclude that it pays to gain share. The hospitals

that gained share in 2003-2004 in their markets also showed a stronger

fi nancial performance. Indeed, in other sectors growth and market share

are long enshrined measures of a successful business.

4 Given our model of patient choice based on geography and demographics

14 15

Exhibit 5.

Exhibit 6.

-1.4%

+4.4%

EUR/patiententity

Patiententities

+4.2%EUR

Inflation1.2%

1) inflation adjusted

More cost efficient care ...Real Cost-to-Serve change 1)

2003-2004

... at lower increase in costsHospital costs change2003-2004

... by delivering more care ...Production change2003-2004

-1.4%EUR/patiententity

-1.6%2003

2004

222

229

3.2%improvement

Labour costs/patient entity

-1%Procurement costs/patient entity

1) Inflation adjusted

Total real1) cost-to-serve declined2003-2004

Both labor and procurement cost-to-serve declined2003-2004

Labor productivity improvedpatient entity/FTE


-1.6%2003

2004

222

229

3.2%improvement








-1.6%2003

2004

222

229

3.2%improvement







Exhibit 7.-1.4%

-5 +4.4%

1.6

35.8

37.4

3565352

571

179 750 530

220

20032003 2004

Inflationaryunit priceincrease

2004real1)

Productivitygain

2004normal


More caredelivered

Inflationaryunit priceincrease

Justified costincrease

Actual costincrease

Productivitygain

351

Unit price for care decreasedCost-to-serve (EUR/PE)

resulting in substantial absolute savingsAbsolute increase healthcare costs 2003-2004 (EUR m)

While total care delivered increasedPatient entities served (million)

-1.4%

+4.4%

EUR/patiententity

Patiententities

+4.2%EUR

Inflation1.2%



2003-2004



-1.4%

+4.4%

EUR/patiententity

Patiententities

+4.2%EUR

Inflation1.2%



2003-2004



Cost-to-serve

declined

Financial position

improved

2) Dutch hospitals posted a strong productivity gain, both in labor and

in total cost-to-serve.

(Chapter 3)

After years of declining productivity, Dutch hospitals posted a major gain

in productivity in 2004. In cost-to-serve terms5 Dutch hospitals gained in

both nominal and real (i.e. infl ation corrected) productivity. The real gain

was 1.4%. This gain came along with a continued increase in production

of 4.4% in patient entities (Exhibit 5).

The productivity gain was both in cost of labor (1.6%) and in cost of

procurement (1%). The labor productivity (patient entities served per FTE)

increased by a remarkable 3.2% (Exhibit 6).

In value terms Dutch hospitals gained above EUR 200 m through

productivity improvement. (Exhibit 7)

While impressive, hospitals have still signifi cant potential for further

improvement. Improvement within the existing operational models

is possible given the large variation in performance. But there is also

signifi cant potential through next generation, innovative strategies,

for example, out-sourcing of procurement, or facility management. We

fi nd that Dutch hospitals have yet to employ competitively distinct out-

sourcing models and we conclude there is signifi cant untapped potential

here.

3) The fi nancial position of Dutch hospitals strengthened further, mainly

as a result of self-achieved productivity gain.

(Chapter 4)

The Dutch hospitals further improved their fi nancial position (Exhibit

8). The margins (net results as percentage of revenue) increased from

0.5% to 1.3%, a total profi t pool of EUR 169 m across all hospitals. An

average Dutch hospital increased its absolute net results from less than

EUR 0.8 m to EUR 2 m.

5 cost in euros required to serve one patient entity

16 17

Exhibit 8.

+5%

12,663

2003 2004 2003 2004

2003 2004 2003 2004

2003 2004

632

+152%

102

+14.1%

357 2,892

2,535

67

169

13,295

+2.3%

3.55 0.08

+7%

0.7 10.8

10.1

3.63

Higher top lineTotal revenues (EUR m)

Higher bottom lineTotal earnings (EUR m)

Less receivablesRevenues/working assets

More free cash flowOperational cash flow/totaldebt [%]

Stronger balance sheetTotal equity (EUR m)

Averages

improved but

performance gap

widening

Next to the profi t gains, the balance sheet of the hospitals also improved.

The total balance minus the total debt as percentage of revenue increased

from 20% to 22%, and absolute gain of EUR 357 m on the balance sheet.

On top of these improvements, fi nancial management of the hospitals

was also further strengthened. The operational cash fl ow as a ratio to debt

increased from 10% to 11%. At the same time turnover of current assets

also improved. Revenue as ratio of current assets improved to 3.63 from

3.58 in 2003. Thus hospitals required lower working capital in 2004 than

in 2003 and they have more room available to improve their solvability.

However, given the huge DBC billing problem in 2005, this measure is

clearly going to suffer in 2005.

4) While the average of all Dutch hospitals improved in operational

and fi nancial performance, the performance bandwidths continued

to diverge. Further entrenchment of winners and losers is ongoing.

(Chapter 5)

The 2004 analysis of hospitals shows that the sector is clearly segregating

further into winners and losers. We have ranked all hospitals on their market,

operational and fi nancial performance in three groups: out-performers,

on-par performers and under-performers. Based on the performance in

2003-2004 we conclude that the gap between out-performers and under-

performers is widening. Out-performers are leveraging their performance

premium to further gain ground on their competitors.

18 19

Shift from budget

driven to market

driven healthcare

But is healthcare

amendable to

market forces?

Chapter 1 - Introduction

Big C and small B characterize the business of healthcare. Thanks to economic

growth, technological advance, but foremost due to the fantastic return on every

euro invested in healthcare, a disproportionately large part of the economic growth

was channeled into healthcare.

But despite the continuously growing investments over half a century, the hunger

for further funding appears unlimited. The boundaries for healthcare have mainly

been dictated by the available budget rather than “normal” demand and supply

laws. And thus the role of “normal” business principles in healthcare so far has been

limited. A big C and a small B.

However, there is a clear realization that the state driven budgetary ways of the past

will not bring healthcare further in the future. The future needs, both in capital and

in labor, are huge6, and it is unlikely that these can be met through general, social

or labor taxation nor through available labor capacity. The reasoning goes that by

making healthcare more responsive to business principles, a more effi cient supply

will be realized for the exploding demand. A big B may perhaps help achieve an even

bigger C.

In this light the liberalization of the healthcare markets may be seen as a means

to achieve the goal of better healthcare for all in the future. The extent to which

healthcare is amenable to market forces has been subject of, ever since Adam Smith

himself, a raging debate. The two camps, the pro-market camp, and the anti-market

camp, both have valid arguments. The strongest argument from the pro-camp

is that pressure of “free” markets shall induce hospitals to provide better care at

lower price. The “invisible hand” will rearrange the healthcare markets to be more

effi cient.

6 Some projections suggest doubling for both in the next decade

20 21

Markets are

coming and ..

.. hospitals are the

market makers

However, as the anti-market camp clearly points out there are several market

deforming oddities in healthcare7. The information asymmetry and the “agent

problem” are often cited. An equally important argument is that in healthcare there

is also an extreme fi nancial asymmetry between the payers (the insured) and the

users (patients). Less than 15% of the patients are responsible for more than 40% of

total costs while more than 30% of the payers generate only 15% of the costs.

But while the debate continues to rage, the market forces, in as much as they

were not already present, have been unleashed on healthcare. It has thus become

necessary, as a pragmatic approach, to follow the consequences of “freer” markets

in healthcare.

It is pragmatic for hospitals to follow the market developments for the simple reason

that “if you cannot beat ‘em you better join ‘em”. All hospitals need to evaluate their

performance and strategies to respond to market forces. In free markets, the ability

to shape markets lies primarily in the hand of the market makers, in our view, in the

hand of the care providers, the hospitals. The mandate for change, the challenge to

change, but also the ability to change is clearly with the hospitals.

From a general societal perspective it is also necessary to follow the healthcare

markets because the consequences of this change are neither obvious nor reversible.

We need an objective and continuous evaluation of the developments in the

healthcare sector. Only by following the changes, and by understanding the results

of market forces on the sector, will we be in the position to evaluate the success of

the current policy.

This report presents a framework to analyze and evaluate the hospitals in their

market performance as well as in their operational and fi nancial performance.

To follow markets requires fi rst and foremost a defi nition of markets.

7 However it must be said despite honorable intentions it does not help the cause of the anti-market

camp that the track record of the “iron hand” in shaping effi cient markets everywhere has been rather dismal

so far.

22 23

Market defi nition

is required

A consistent

framework to

evaluate Dutch

healthcare

markets is

proposed

Currently each Dutch hospital uses its own defi nition of markets, the municipalities

lying around the hospital as the core care region. Experience shows that such a

defi nition cannot be used to analyze market performance across hospitals.

Rotterdam, Brielle and Midden-Delfl and could all be part of the market defi nition

of two Rotterdam hospitals. But in practice only few and different postcodes within

Rotterdam are actually relevant markets for each, and one hospital lying in the

south of Rotterdam has Brielle as nearly captive market while the other lying on

the west of the city has Midden-Delfl and as its nearly captive market. Further, only

a few postcodes within Rotterdam form the competitive zone for both hospitals.

Only by specifi cally assigning part of every postcode to each hospital, a logical and

consistent framework for market defi nition can be created.

In this report, Gupta Strategists present a logical and consistent framework of the

Dutch markets based on travel time. By defi ning the core care region identically for

all hospitals it is possible to measure the market performance of a hospital with

others in the same market, but also with other hospitals with comparable market

characteristics.

Having assigned markets, it becomes possible to follow the performance of each

hospital specifi c to its markets. It makes little sense in free markets for a hospital

in Delfzijl to compare its performance with one in Rotterdam. This might be a

valid approach in a centralistic regime or from benchmark principles. But the

improvement drivers for Delfzijl and Rotterdam hospital must emerge from the

pressures in their own respective markets.

To facilitate a relevant comparison across hospitals it is important to segment

hospitals based on comparable market characteristics. The obvious and in our view

relevant segmentation for most hospitals is based on regional markets. A competitor

peer basket consists of all hospitals with which a hospital shares common regional

markets. Or in case of hospitals with unique regional position, with other similarly

isolated Dutch hospitals. However, another relevant peer basket could be product

based, for example, all University Medical Centers (academic hospitals), or all STZ

hospitals.

24 25

Market,

operational

and fi nancial

performance of

each hospital in

own market

Market defi nition is also highly relevant from the perspective of the insurers. Most

large insurers utilize a portfolio of hospitals with a substantial regional position. By

comparing relevant hospitals within a mutually shared market, the opportunities to

guide hospital performance by a reward-punishment scheme become obvious.

The unique framework presented in this study allows us to measure how hospitals

operate in competitive markets. It also allows us to measure their performance in

their respective markets: both in absolute terms as well as in relative growth terms

on a year to year basis. Coupling this with their fi nancial and operational metrics

allows us to seek relationships between market and operational performance on

one hand, and fi nancial and market performance on the other hand.

Furthermore, this report presents a total sector view as well as analyses per hospital

on product mix, productivity, and fi nancial measures. In this report we have

clustered all hospital performance measures in three categories:

Market

✚ Market performance (Out-patient visits (EPB) - relative to market size, and

normalized for market competitive intensity)

✚ Gain or loss in market performance (hospital growth versus market growth)

Operational

✚ Cost-to-serve per patient entity

● Labor cost-to-serve per patient entity

● Procurement cost-to-serve per patient entity

✚ Labor productivity

✚ Average length of stay

✚ Absolute growth and ratio between

● Out-patients (EPB)

● Day treatment (Dagverpleging)

● In-patients (Opnames)

● Nursing days

26 27

Looking forward to

2005 performance

Financial

✚ Net results (as percentage of revenue)

✚ Equity8 (as percentage of revenue)

✚ Current assets (as times turned over in revenue)

✚ Operational cash fl ow (as percentage of debt)

In each of the subsequent chapters all the measures are further dovetailed. The

performance of all Dutch hospitals is evaluated across all of the above measures.

Both the performance in 2004, but also the change in period 2003-2004 is

analyzed. For each of the three performance categories, market, operational and

fi nancial performance a ranking of all hospitals is made based on a selection of

above metrics. Based on the three ranks, an overall performance rank is presented.

The available annual reports of all Dutch hospitals, demographic and time to travel

databases, and healthcare utilization databases were the primary sources used for

the study. These have been augmented by the expertise and knowledge developed

in assignments undertaken by Gupta Strategists for hospitals and insurers.

Gupta Strategists intends to repeat this study on an annual basis. By introducing

a logical and consistent market defi nition and thus allowing for a valid and

systematic comparison across all Dutch hospitals we hope to contribute to the

further strengthening of the healthcare industry. The challenge and ability to do so

is uniquely in the hands of the hospitals and the insurers. With this study we aim to

provide them with the relevant insights to evaluate their strategic options.

8 balance minus debt

28 29

Academic hospitalsProduct portfolio 2004

EPB: 42%Day treatment: 5%In patients: 7%Nursing days: 46%



General hospitalsProduct portfolio 2004

STZ hospitalsProduct portfolio 2004

Exhibit 9.

Large differences

exist in product

portfolios ..

.. and signifi cant

potential for shift

to shorter stay

Chapter 2 - Market Performance

Strategic analysis is about product-market combinations. Hospital products refer

to specialisms, and within specialisms to certain type of diagnostics or treatment,

for example Magnetic Resonance Imaging or open heart surgery. These products

are measured in four broad parameters: outpatient consultations, day treatments,

in-patients and total nursing days9. It was our intention to specify and follow these

for each specialism, but the publicly available data per specialism is limited to less

than half the hospital population. For this study we were practically limited to

follow the markets based on hospital wide data10.

We followed the developments in the four production parameters over the period

2003-2004. As in preceding years there is a considerable shift from in-patient to day

treatment (Exhibit 1). The total demand for healthcare continued to grow strongly

at above 4%. This is in line with our prognosis that the total sector would double

in volume and value by 2020. Also we note that by shifting to shorter stays, the

hospitals are managing demand better. There is no difference between hospitals in

total clinical admissions, whether for day treatment or in-patient longer stays. But

there is considerable difference amongst hospitals in the ratio between nursing

days to total care delivered (Exhibit 9). As expected, the general hospitals have

the lowest proportion of nursing days, and the academic hospitals the highest,

with STZ in the middle. But none the less within each hospital category there

are considerable differences. We conclude that several hospitals have signifi cant

potential to further shift to shorter stay.

For the rest of this section we focus on healthcare markets, the performance

of hospitals in their local markets, the characteristics of their local markets, the

market shapers, and the rewards of out-performing, and risks of under-performing

in individual local markets.

9 And perhaps in the future as DBC10 We report all results based on EPB but if required other FB parameters can be similarly analyzed, both

hospital wide or per specialism.

30 31

Defi ning markets

is key...

...and possible

Markets are all about patients (or insurers), and thus success in markets is about

infl uencing patient (or insurer) choices. To follow markets requires fi rst and foremost

to defi ne markets. With the Netherlands as the market of each hospital, the market

share varies between 0.5% for the small hospitals and 5% for the biggest. With an

entire big city as the market, a typical hospital in Amsterdam or Rotterdam has 10-

20% share. But neither defi nition is relevant because both are too broad.

To defi ne markets there are two points of departure. A hospital can start from

the current patient population – which postcodes does the hospital serve. Most

of the hospital’s patients come from a small number of postcodes. Some of

these postcodes are fairly captive, a dominant share comes to the hospital. Other

postcodes are competitive, a signifi cant share comes to the hospital but also takes

its custom to other hospitals.

Beyond the current catchment area, the ambition of the hospital can also form a

point of departure for defi ning the hospital’s market. For example a hospital may

have a marginal service base, let’s say less than 5% share in certain postcodes, but

might wish to consider these as competitive or even future captive markets11.

Currently each Dutch hospital has its own specifi c, and often legacy based

defi nition of its market. In general these are the municipalities lying around the

hospital. However such a defi nition cannot be used to analyze market performance

across hospitals. In this report, Gupta Strategists present a logical and consistent

framework of the Dutch markets based on time to travel. By defi ning the catchment

area identically for all hospitals it is possible to measure the market performance of a

hospital with others in the same market, but also with other national hospitals with

comparable market characteristics. Time to travel is of course not the only criterion

used by patients. General physician’s recommendation, insurer’s recommendation,

religious persuasion, landmarks, natural inclination, or even perceived or actual

11 Different product types will have different markets. For basic care, a patient can refer to all hospitals, but for

certain care needs, for example kidney transplant, the choice is limited to few hospitals. “Top care” is typically

a very small volume, and for the purposes of this study, we have not differentiated markets on products.

32 33

Exhibit 10. Attractors and repellersRelative market performance - share (LOG scale)

Weighted average

10.4 2.8

Time to travel

defi nes markets

quality may all play a role. As markets become more open and sophisticated it shall

become possible and necessary to consider these and other decision infl uencing

factors in defi ning markets. Our model is general enough to include such measures,

as they become available in the future.

For the purposes of this study, we have used time to travel from a postcode to

a hospital as the sole criteria for defi ning markets. We have assigned parts of all

relevant postcodes to all relevant hospitals in the inverse ratio of the travel time

to the hospital (with less than 5 min as the lower cut-off and 10 hospitals per

postcode as the upper cut-off). Thus both the regional demographics, as well as the

position of other hospitals are considered in defi ning a hospital’s market12.

Geographical basis for defi ning markets needs to be supplemented by a hospital’s

ambition. One hospital may have the ambition to be the dominant care giver of

choice in a wide region, while another may consider only a sub-region within a

metropolis as its natural market. Based on our database it is possible for each

hospital to individually defi ne and monitor its own market performance, based on

a combination of current patient population and ambition.

For the purposes of comparing the performance of all Dutch hospitals it is

important to have a consistent market defi nition that is ambition-independent. And

the defi nition we propose in this study is based on assigning parts of all relevant

postcodes in the inverse ratio of time to travel to all hospitals.

Having defi ned the market for which each hospital has a theoretical “right of

service” or the catchment area (shortest travel time) it becomes possible to measure

each hospital’s performance. The actual produced EPB as a ratio of the allocated

catchment area EPB, is the market performance of a hospital. A hospital with market

performance greater than one attracts patients above what may be expected from

geography and demography alone.

12 It is not our claim that this is the only relevant criteria. But we do believe that this is by far the most relevant

criteria in defi ning markets. Other criteria are most likely to have only second or higher order effects.

34 35

Exhibit 11.

slatipsoh noitacol dna ytisnetnI evititepmoC

Competitive intensity per postcode based on time to travel to 10 nearest hospitals

1

High

Medium

Low

0,880,830,780,720,650,560

Hospitals’ market

performance

varies

But also

competitive

intensity of local

markets vary

On the other hand, a hospital with less than one as market performance will have

patients within its catchment area who prefer to travel longer rather than come to

it for their care needs. The market performance of all Dutch hospitals is illustrated

in Exhibit 10. There is a considerable spread across the Dutch hospital population.

The spread varies from a score nearly three for Flevoziekenhuis in Almere to 0.4 for

Havenziekenhuis in Rotterdam. Even after correcting for demographic growth of

Almere region, Flevoziekenhuis attracts patients well above those dependent on it

based on travel time alone.

Whether a high market performance score is a sign of excellent performance, or

simply indicates that patients do not have real choice, depends on the competitive

intensity in a region13. In a competitive environment, a market score above 1.0 is a

clear indication that the hospital offers services and/or quality of care that attracts

patients away from its competitors. While operating in a highly competitive market,

such a hospital performs well. Whereas a score of 1.0 in a competitively not intense

market is not a refl ection on the hospitals performance.

We have calculated the theoretical competitive intensity14 of each hospital as well as

for each postcode in the Netherlands. This is plotted on the map of the Netherlands

in Exhibit 11. The color shading confi rms that most Dutch hospitals operate in

competitive markets. But importantly even outside the Randstad large competitive

zones exist, as patients can choose from multiple hospitals with comparable travel

time.

13 Many hospitals within a short travel time implies high competitive intensity. Just one hospital in a region

means, low competitive intensity or concentrated markets.14 The competition intensity is based on the Herfi ndahl Hirschman index (HHI): the sum of the squares of

the market shares of all hospitals in the market. In our model, the market consists of all postcode areas that

contribute EPBs to a hospital, where patients choose from the ten nearest hospitals. The share is the ratio of

the expected to the total EPBs in each postcode. The HHI is a well established measure used by competition

authorities in judging mergers and acquisitions. Competition authorities generally consider markets with

HHI below 1,000 competitive, between 1,000 and 1,800 moderately concentrated, and above 1,800 highly

concentrated or low competitive intensity. Of course the key in calculating the HHI is modeling patient

behavior. Please contact Gupta Strategists for a more detailed analysis.

36 37

Exhibit 12.

Near monopolists Competitors

Low

10

1Relative marketperformance

0.1

Competitive intensity High

Monopolists and competitorsRelative market performance of hospitals versus competitive intensity in local markets 2004

On par performers

Outperformers

Underperformers

Most Dutch

hospitals operate

in competitive

markets

Based on regional competitive intensity three cases emerge:

✚ Border regions. At the borders with Germany and Belgium, hospitals

operate in markets with relatively low competitive intensity15. In The

Hague, the same effect arises because of the North Sea as a natural

border. It limits patient choice given the assumed travel time preferences.

This geographical characteristic seems to be well leveraged by Haga that

has a high market share of one third of its own market.

✚ Randstad. Amsterdam is competitively the most intense region in the

Netherlands, closely followed by Rotterdam.

✚ Rural areas. As expected, in the provinces the markets are less competitively

intense. Zeeland is the least competitive market. In fact, taking out one of

the hospitals in the region may lead to too little choice. In some rural

areas however, the markets have nonetheless high competitive intensity

as the hospitals are spread evenly across the area so that travel time

differences are not very big. This happens for instance in the area north of

Meppel where the hospitals in Heerenveen, Drachten, Assen, Hoogeveen

and Meppel compete with each other.

How good a hospital performs can be visualized by plotting the theoretical

competitive intensity against its market performance (Exhibit 12). All hospitals in

such a graph fall in a tennis racquet shaped curve. In the handle of the racquet are

hospitals that operate in competitively less intense markets. These hospitals all have

a market performance score close to 1 irrespective of the competitive intensity.

These hospitals primarily serve their captive patients and their performance is a

refl ection of their geographical position and not of their operations. The head of

the racquet is crowded with hospitals that operate in competitively more intense

markets. Most Dutch hospitals operate in these more competitive markets. We

conclude that most Dutch regions fulfi ll an important criterion for the success

of market mechanisms: there is ample choice for patients in local markets. In

comparison to other countries, for example Germany or the USA, there are plenty

of hospitals per unit area across the Netherlands and this renders most of them

sensitive to local competitive pressures.

15 the model does not include cross border competition

38 39

Exhibit 13.

15%

Front runners

Followers

8%

Hospital growth

Market growth-7%

Some win, some looseMarketshare development EPB 2003-2004

Some hospitals are

gaining share,

others are losing

– a zero sum game

There was a “free

market” of about

EUR 100-200

million in 2004

Not surprisingly, competitive markets force hospitals to perform. And the pressure

to perform separates the out-performers from the under-performers. We have

ranked all Dutch hospitals in three groups based on their market performance.

All those that score around 1 are the on-par performers. Part of these are in the

handle of the tennis racquet and a part are in the middle group in the competitive

zone16. The group of market out-performers is defi ned as hospitals that operate in

competitive markets and score well above 1 in their market performance. While

under-performers score well below 1. For those hospitals that have found the key

to good performance in more competitive markets, it appear that it pays to be

competitive. While the gains of a “monopolist” is a lazy life!

A performance ranking of all hospitals relative to their markets in 2004 sheds

important light on their local, static position. However, it is also relevant to ask

how these different performance groups are developing. In our project experience

we have often encountered that despite a strong growth (above 5%), the hospital

has actually underperformed in its markets. Growth needs to be measured against

markets. We plotted the market growth of all Dutch hospitals against their own

growth in EPB for 2003-2004 in Exhibit 13. We fi nd that the markets are competitive

and in a dynamic fl ux. There is a group of hospitals that grew well above market

growth and thus gained competitive ground while the other group lost competitive

ground.

A relevant measure of the dynamics in a market is the churn rate of patients. We do

not have individual patient data and thus cannot report actual patient churn. But

we know the EPB a hospital gained or lost above the market norm17. We calculate

that at least 100,000 EPB churned, or shifted hospital in 2004. On a total of above

9 million EPB in 2004, this is a signifi cant number. Even a low churn rate like 1%

in EPB suggests a dynamic market. For example, a churn rate of 1% in EPB implies

EUR 100-200 million market at stake. Or up to EUR 1-2 million difference in the

16 Unlike the other hospitals in the low competitively intense markets, the on-par performers in the competitive

markets suffer the risk of degradation to under-performers in their markets, or have the upside of promotion

to the out-performers club.17 Based on available data we have calculated net churn. Gross churn is higher.

40 41

Exhibit 14.The winner takes it allMarket share development, % of hospitals 2003-2004

Followers Front runners

40%27%

37%

30%

23%

43%

Increase market share

Steady market share

Decrease market share

The

out-performers

are growing at

the expense of

under-performers

And that is

good news

bottom line of a single hospital. The largest EPB churn rate was above 10%, but 1%

gain or loss in share was not uncommon in the Netherlands (Exhibit 4).

In highly competitive and transparent markets like fast moving consumer goods,

where unlike healthcare consumer choice carries much less risk, the share battle

is also about no more that fractions of percentage points. And each percentage

point is also worth several hundred million EUR . Thus we conclude that the second

criterion for successful market operations is also present in the Dutch markets,

there is a shift of custom above and below the market norm. And importantly

such shift already took place in 2004, well before the regulation allowed for “free”

market for the B-segment. It appears it is already “normal” day to day business for

the majority of the Dutch hospitals to function competitively.

Having concluded that hospitals are in a state of fl ux, it is logical to investigate

which of the hospitals are gaining ground and which are losing it. Is it that the

under-performers have gained share, and the out-performers have shrunk and

thus the hospitals are falling back to the average? Or precisely the opposite that the

out-performers are further gaining share at the expense of the under-performers.

We fi nd evidence that on an average, the out-performers gained further ground in

2004. The gap between the out-performers and the under-performers is widening.

43% of all out-performing hospitals further gained share in 2004, while only 27%

lost share. The trend was precisely the opposite for under-performers, 40% of all

under-performing hospitals lost further share, while only 23% managed to gain

share. The markets seem to be self-reinforcing, rewarding the out-performers and

punishing the under-performers further (Exhibit 14).

From a public policy perspective the further delegation of the under-performers

may appear to be alarming. What happens to the under-performers if this trend

continues? The answer shall be specifi c to each local market, but in general we

conclude that there is not much reason for worry or interference in the current

Dutch competitive landscape. Most hospitals in the Netherlands operate in a

competitive market. And in competitive markets there are other hospitals that are

performing well. And these out-performing hospitals have patient preference.

42 43

Is it obvious what

under-performers

need to do?

Is cost-to-serve

the formula for

growth?

In some regions

under-performers

need to address

cost structure to

grow again

A more important question would be to ask what it is that enables an out-

performer to grow further. For if we can fi nd the formula for growth, we can help

the under-performing hospital narrow the performance gap in it’s own market. By

closing in on the heels of the front-runners, the under-performers can accelerate

the performance of the entire sector. It is to the formula for growth that we now

turn.

The formula to growth consists of both cost-to-serve and quality. Should quality

vary signifi cantly and the differences be transparent, quality would be the

dominant market shaper. However, measurements of healthcare quality in the

Netherlands are not yet suffi ciently objective and transparent and thus do not

allow for differentiation. Therefore in this report we focus on cost-to-serve as

the performance measure. Looking at cost-to-serve is also highly relevant as the

current policy is based on the premise that opening up the markets will result in

effi cient hospitals gaining more share, and thus enhancing the effi ciency of the

entire sector.

We asked ourselves: Is cost of operations, or effi ciency, the formula for growth?

To answer this question, we analyzed several local markets in detail, for relative

market performance as well as relative cost-to-serve. The advantage of our model

is that it allows us to defi ne local markets, both in terms of total healthcare, and

also the relative performance of each of the competing hospitals in a region.

We had expected to see no correlation at all in 2004. To our surprise we fi nd that in

some markets, cost-to-serve does already appear to be a market shaper, or driver for

change in 2004. The correlation or the lack of it has primarily to do with different

competitive intensities in different regions. But also other factors like the historical

budget lock-ins, the different type of competitor hospitals (STZ, UMC), and learning

curve effects may tend to distort the effect.

To illustrate the effect we show the correlation between cost-to-serve and its effect

on market performance for three regions, Rotterdam, Amsterdam and Eindhoven in

Exhibit 15. The local competitive markets and the position of the hospitals is also

44 45

Exhibit 15.

Albert Schweitzer

Ikazia

Erasmus MC

Havenziekenhuis

IJsselland

MCRZ

Reinier de Graaf

Ruwaard Van Putten

St. Franciscus Gasthuis

Vlietland

Vlietland

Cost efficiency yields market strength..Strategic positions within Rotterdam region

Relativemarketposition

2004

Cost-to-serve [EUR/PE]475

Low

High

200275

… and thus a better financial positionFinancial positions within Rotterdam region

Relative market position 2004HighLow

Financialposition

Weak

Strong

Cost efficiency yields market strength?Strategic positions within Amsterdam region


2004

Cost-to-serve450

Low

High

200

… and thus a better financial position?Financial positions within Amsterdam region


Financialposition

Weak

Strong

Cost efficiency yields market strength..Strategic positions within Eindhoven region


2004

Cost-to-serve370

Low

High

190

… and thus a better financial position?Financial positions within Eindhoven region


Financialposition

Weak

Strong

200

Rotterdam

shows the

best

correlation

between

cost-to-serve and

performanceHigh competitive intensityLow competitive intensity

Amsterdam is

still an issue

And a risk as no

reward mechanism

to reduce costs

seems to be in

place in Amsterdam

illustrated in Exhibit 15. All three regions are competitive, but to varying degree.

Theoretically Amsterdam is the most competitive, with Rotterdam following close

behind and than Eindhoven.

Of all the three regions, Rotterdam shows the best correlation. The hospitals in

Rotterdam that have a high market performance are also the ones with the lowest

cost-to-serve. A difference in cost-to-serve of EUR 50 makes a difference of several

percentage points market share. (The change in market performance was even

more strongly correlated to cost-to-serve in 2003-2004 – Exhibit 3, low cost-to-

serve means higher growth). It appears that despite historical budget lock-ins and

supposed lack of incentives, the insurers in Rotterdam have already been successful

in 2004 in rewarding more effi cient hospitals with more patients. Detailed analysis

on individual hospital performance reinforces this conclusion. Low cost hospitals

have gained share, while high cost hospitals have lost signifi cant share over the

last years. The ability of markets to react to hospital operations and costs is thus

confi rmed in Rotterdam and can serve as an example for other region.

However, the correlation between cost-to-serve and market share is not yet strong

in all competitive regions. Even though Amsterdam is the most competitive region

a correlation between cost-to-serve and market performance hardly exists. There

are of course several potential explanations for this. Part of the explanation is that

Amsterdam has several different types of hospitals with different funding. There

are two STZ and two UMC hospitals in Amsterdam, and these probably distort the

competitive fi eld. Furthermore, one hospital in Amsterdam did not have the annual

report available. But we also believe that, unlike Rotterdam, the local insurers in

Amsterdam have not yet suffi ciently and successfully guided the local hospitals’

performances.

Locked in regional ineffi ciency like Amsterdam forms a big risk. If effi ciency was

being rewarded, the local hospitals would have a motive to improve. However, if

there is no reward system in place, there is a risk of entrenched and long tolerated

ineffi ciency, forcing a single hospital to suddenly become redundant – a quantum

shock, that everybody saw coming, but did little to avert. Rotterdam can serve

46 47

Exhibit 15.

Academisch Medisch Centrum

BovenIJ Ziekenhuis

Onze Lieve Vrouwe GasthuisOnze Lieve Vrouwe Gasthuis

Slotervaartziekenhuis

St. Lucas Andreas Ziekenhuis

VU Medisch Centrum

Zaans Medisch Centrum

Ziekenhuis Amstelveen

Ziekenhuis Go



2004


Low

High

200275



Financialposition

Weak

Strong



2004

Cost-to-serve450

Low

High

200



Financialposition

Weak

Strong



2004

Cost-to-serve370

Low

High

190



Financialposition

Weak

Strong

200

St. Jans Gasthuis

Catharina ZiekenhuisElkerliek Ziekenhu

Jeroen Bosch Ziekenhuis

Máxima Medisch Centrum

Máxima Medisch CentrumSt. Anna Zorggroep



2004


Low

High

200275



Financialposition

Weak

Strong



2004

Cost-to-serve450

Low

High

200



Financialposition

Weak

Strong



2004

Cost-to-serve370

Low

High

190



Financialposition

Weak

Strong

200

Shall cost-to-serve

become an even

stronger market

shaper in post

2005 healthcare?

as a model for Amsterdam of how correlation of market performance to cost

effi cient operations can result in a total regional improvement. Since 2005 the

means available to insurers to guide hospital performance have been signifi cantly

expanded. And the Amsterdam hospitals and insurers should leverage these tools

to reshuffl e the Amsterdam competitive fi eld in favor of the effi cient operators.

The third region we followed is Eindhoven. Eindhoven has a medium to high

competitive intensity with eight hospitals. We fi nd that a very weak correlation

exists in Eindhoven between cost-to-serve and market performance. It is more

appropriate to think of a correlation zone, rather than a correlation line.

We conclude that cost-to-serve can indeed be a success factor in healthcare

markets and the effect shall become more pronounced in the coming years. This is

important news for the under-performing hospitals. By trimming their operations

and becoming effi cient they can narrow the performance gap with the out-

performers18. The risk of not doing so is further slipping in local markets. While the

formula for growth is redesigning one’s own operations to be effi cient.

We expect the increased freedom for price-volume negotiations from 2005 onwards

will further reinforce this effect. The success of current policy of “freer” markets,

can be measured by following the correlation between cost-to-serve and market

performance in the coming years. If through price-volume negotiations the insurers

are successful in shifting custom to more effi cient hospitals, than an increasing

correlation must emerge. We intend to follow this in our ensuing reports.

Having concluded that hospitals can gain market share, it is equally important

to ask: Why should a hospital bother to gain share if it comes with the pain of

realizing diffi cult productivity gains? In fact, one may even conclude that low cost

18 The urgency to do so would be even greater were there economies of scale affects. Then under-performers

would have inherent disadvantage. However in all our analysis we have yet to fi nd any signifi cant economies

of scale effects in Dutch hospital operations.

48 49

operations, may mean fi nancially poorer bottom line, and is thus not the preferred

option for a hospital. However just as in other sectors, we fi nd that in healthcare

effi cient operations, or low cost-to-serve, could translate in better bottom line.

By winning share the revenue increases, while a low cost-to-serve means higher

absolute net results. The classic virtuous business cycle of fi nancial gains through

share gains and effi cient operations also applies to hospitals. The overall current

correlation is however insuffi cient and must be strengthened if hospitals are to be

motivated to improve their operational performance.

The correlation between market performance and fi nancial success of the hospitals is

displayed in Exhibit15 for the three regions: Rotterdam, Amsterdam and Eindhoven.

We measured fi nancial success as the cumulative rank based on individual rank of

both the operational cash fl ow and current assets. In order to allow for comparison

we used the ratio of operational cash fl ow to debt, a measure of a hospital’s ability

to service its debt out of its own operations19. And we used revenue divided by

current assets as a measure of the working capital turnover19.

We fi nd that there is a weak and in our view insuffi cient correlation between

market performance and fi nancial success. As before, the degree of correlation

varies per market. Rotterdam appears to be the most sensitive to the market. In

Amsterdam there is no correlation, and like cost-to-serve, we are tempted to

conclude that the payers (insurers) have a clear task cut out for them. Rotterdam

shows that it is possible to improve the fi nancial performance of a hospital by

improving market performance. Eindhoven also shows no correlation. In fi nancial

correlation historical budget lock-ins, or legacy costs, play a strong role. We expect

that the effects of market success on fi nancial results will take longer to crystallize.

However, if hospitals are encouraged to improve their performance, it is important

that their market and operational success be highly correlated to their fi nancial

success soon.

19 These measures are used by analysts to rate the creditworthiness of hospitals, for instance in the more

liberalized hospital markets in the United States, France and Germany where some hospitals are quoted on

the stock exchanges.

50 51

Markets are

emerging and ..

.. more

entrepreneurial

freedom desired

Based on this, as well as other local market analyses, we conclude that across the

various competitive markets in the Netherlands, cost-to-serve can indeed be a

market shaper. And a low cost-to-serve was generally rewarded with a high market

performance, which in turn was rewarded by a stronger fi nancial position. We

cannot rule out that quality was also a relevant market shaper. In fact based on the

“Algemeen Dagblad” ranking, we fi nd a weak correlation with quality and fi nancial

performance. This may suggest that more effi cient hospitals tend to dominate in

their competitive markets, thus becoming fi nancially more robust giving room to

invest more in healthcare and thus deliver better healthcare. The virtues of market

forces, or the “invisible hand” are crystallizing in the Dutch curative sector.

On basis of the analysis of Dutch hospitals in 2003-2004, Gupta Strategists

endorse further accelerated freeing of healthcare markets by allowing for more

entrepreneurial degrees of freedom to hospitals. We conclude that the sector

is already capable of leveraging the market sensitivities to meet the healthcare

revolution challenge of the coming decades.

52 53

Exhibit 16.

+4.2%

Procurement

Labour

+4.6%

+3.9%

Salarycosts

FTEs

+2.8%

+1.1%

EUR

Inflation 1.2%

Cost increaseHospital cost change 2003-2004

Procurement outpaced labour costCost change 2003-2004

Higher wagesLabour cost change 2003-2004

+4.2%

Procurement

Labour

+4.6%

+3.9%

Salarycosts

FTEs

+2.8%

+1.1%

EUR

Inflation 1.2%




+4.2%

Procurement

Labour

+4.6%

+3.9%

Salarycosts

FTEs

+2.8%

+1.1%

EUR

Inflation 1.2%




Cost-to-serve

declined in both

real and nominal

terms

Chapter 3 – Operational Performance

Hospitals are extremely complex operations. On one side, there are on average

hundred different individual specialists working in twenty odd specialisms that

form the “front offi ce” for the patients. Nursing, diagnostics and surgery are the

continuation of the “front offi ce” for patients from nearly all specialisms. On the

other side, the “back offi ce” functions like fi nance, administration, procurement,

and human resources are getting even more complex, and under pressure to meet

the needs of the specialists and the patients.

The diffi culty in this complex environment is to defi ne simple metrics to follow the

operational performance of the hospital. Labor costs form the dominant portion

of the hospital costs, on average 60%. The majority of the additional costs are

procurement, including interest and depreciation. We fi nd it useful in most of our

analyses to look at operations of a hospital in terms of cost-to-serve. For individual

diagnostics and treatments it is possible to defi ne specifi c cost-to-serve, for

example a cost-to-serve for a cataract operation. On a macro level, hospital wide, it

is possible to follow hospital performance by defi ning cost-to-serve for all patient

entities served. Such cost to serve has a labor component and a procurement

component.

We fi nd that while total costs increased by 4.2% in 2003-2004, the delivered care

in terms of patient entities increased by 4.4%. Even before correcting for infl ation,

the hospitals cost-to-serve decreased in 2004. Accounting for infl ation (national

1.2%), the cost-to-serve declined by 1.4% (Exhibit 5). In absolute value terms, this

implies that Dutch hospitals saved EUR 220 million through productivity gains

(Exhibit 7). Dutch hospitals were compensated EUR 102 million extra in 2003-2004.

This implies that EUR 118 million of the gains made by Dutch hospitals in their

productivity were “returned” to Dutch society (Exhibit 2).

Most of the productivity gain can be attributed to labor productivity and not salary

or procurement costs (Exhibit 16). On a real basis, labor cost-to-serve improved by

54 55

Exhibit 17. Exh.18.Hospitals are increasing productivityLabour productivity change Dutch hospitals2003-2004 [Patient entity/FTE]

Average improvement:7.2

74 out of 90 analyzedhospitals have increasedlabor productivity 2003-2004

Increased labourproductivity

Decreased labourproductivity

110-22 0

Large differences in labour productivityLabour productivity 2004 [patients/FTE]

Average:

229

Higher labourproductivity

Lower labourproductivity

96068

Most hospitals

improved labor

productivity

But large

differences remain

1.6%. A single FTE served 229 patient entities in 2004, while it served 222 in 2003,

an improvement of above 3% (Exhibit 6). We believe there is signifi cant room for

more productivity gains in hospitals. The gains made in 2003-2004 show that it

is possible. Further gains are possible in nursing day reduction (see below), but

also in reducing the huge variation in care planned and delivered, more focus on

core activities and by reducing the often redundant, and sometimes self imposed,

administrative burdens.

We looked at the individual labor productivity improvement of all hospitals. We

fi nd that 74 of the 90 hospitals analyzed improved labor productivity in 2004

(Exhibit 17). The average increase was 7.2 patient entities extra per FTE on an

average labor productivity of 229 patient entities per FTE in 2004 (Exhibit 18). The

degree of change varied across hospitals. The largest gain made was 103 patient

entities extra per FTE, and thirtyfour hospitals improved by 10 patient entities or

more per FTE.

Is salary increase a driver to improve productivity? We did not fi nd evidence

that salary is an incentive to improve labor productivity. The average labor costs

increased by EUR 1,300 per FTE in 2004, a marginal increase compared to the average

costs of EUR 49,000 per FTE in 2004, but this is not correlated to labor productivity

(Exhibit 17).

We continue to be intrigued by the large difference amongst hospitals. The labor

productivity varies from 900 to 100 patient entities per FTE a factor of nearly 10

(Exhibit 18). The large differences are confi rmed by looking at the cost-to-serve

of Dutch hospitals which also varies, from EUR 100 for small basic hospitals to

EUR 1,500 for academic hospitals (Exhibit 19). A part of the difference should be

attributed to the product and patient mix, a large top clinical hospital versus a

small, basic care hospital. But nonetheless we believe, confi rmed by our project

experience, that there is suffi cient further room to improve productivity in the

sector. Only a fraction of the potential has been realized in 2004.

56 57

Exhibit 19. Order of magnitude differences in cost-to-serve, but not in type of costsCost-to-serve Dutch hospitals 2004 compared to national average[EUR/Patient entity]

Average:EUR 351

Higher than average costto serve

Lower than average costto serve

EUR 78 1,267

Academic hospitals

Personnel costs

Material costs

Competitive

out-sourcing

advantages yet to

be realized

Procurement

needs to improve

Delivering care is a hospital’s core business. Yet most Dutch hospitals are self-

contained monoliths, where the gardening department potentially requires as

much management attention, as does the kitchen serving the patients, and the

operation theatres. A simple measure to see the extent to which hospitals have

focused on core activities and out-sourced the rest is to look at the ratio of labor

costs to procurement costs. Should for example a hospital have out-sourced its

entire facility management (a substantial cost for most hospitals), or its ICT, there

would be a signifi cant increase in procurement costs as a ratio of labor costs, while

the total may remain the same. We fi nd that while the total costs of Dutch hospitals

vary considerably the balance between labor and procurement costs is nearly the

same everywhere (Exhibit 20).

Having optimized within the existing operations, hospitals need to look further to

more innovative operational strategies. This includes outsourcing (or carving out

own departments) to achieve further productivity, cost and quality benefi ts. The

VAT is currently a potential hurdle that dissuades hospitals from out-sourcing. It

needs to be addressed soon by the government as currently out-sourced services

need to be at least 19% cheaper in order to compete with in-hospital operations.

But the gains made through labor relationships, economies of scale, professional

and specialized management, should yield a much better price-quality proposition.

Examples are facility management, including the hotel and the technical services,

but also ICT where the complexity and criticality of technology requires seriously

more resources and management focus.

We believe that procurement and goods logistics is one of the key improvement

drivers for hospitals and also suitable for outsourcing. A hospital procures, stores

and distributes an extremely large range of commodities, some critical and highly

specifi c to operations, others much more generic. The administrative costs alone

of managing thousands of vendors and hundreds and thousands of orders are

large for an average hospital. And most procurement departments in hospitals are

little more than administrative units, that work the orders and ensure they are

paid and delivered. Given the cost and quality impact, procurement departments

need to quickly evolve from a plain administrative unit to a more sophisticated

58 59

Exhibit 20.

Lower

Procurementcost-to-serve

Higher

Higher Laborcost-to-serve

Lower

Ratio of procurement to labor costs are same for all hospitalsRelative cost-to-serve Dutch hospitals

Exhibit 21.

3

38 5

44

6.7

5.2

Averagelength of stay

2004

Average 7.2

Average length of stay 2003

8.8 5.7

8.3

Most Dutch hospitals can further reduce the average length of stayAverage length of stay in Dutch hospitals 2003-2004 and number of hospitals in each quadrant

Average length

of stay declining

but still shorter

stays likely

strategic and professional procurement organization that is a valuable partner for

all care units and specialists. Such evolution can take place within the hospitals but

requires substantial management attention and investment. But it can also take

place in partnership with other hospitals.

Looking at the extremely large concentration of hospitals in the Randstad, a shared

procurement and distribution center for hospitals can yield substantial gains. Such

a Group Purchasing Organization (GPO) is yet to emerge in the Dutch market,

but the conditions to do so are increasingly favorable. Whether it is a jointly

owned enterprise or an independent vendor; a group purchasing and distribution

organization serving multiple hospitals in an area is a proposition worthy of

investigation.

Lastly we looked at the average length of stay and conclude that it continues to

decline, having come down from 7.2 to 6.7 days in 2004 (Exhibit 21). While the

rate of decline is slowing, we believe that there are still opportunities for further

improvement. Only a handful of hospitals have reached the current effi ciency frontier

in managing nursing days optimally. The differences within the current care model

(all care within one roof in a complex hospital) are large. Further, benchmarks across

all specialisms, normalized for patient and case mix, reveal suffi cient room for lower

length of stay when compared to the best practice hospital for that specialism.

But also new innovative hospital care models can yield substantial improvement.

Within the current single hospital model we estimate the average length of stay

can be reduced to 5-6 days. But by infrastructural separation between out-patient

and in-patient clinics, and between acute and elective patients, further gains can

be made, for example as it exists in the USA.

To conclude we fi nd that Dutch hospitals have made a remarkable gain in their

productivity in 2004. Continued room exists within the current care organizations

for further improvement given the large difference between the front-runners

and the followers. But even for the front-runners, innovative new models for out-

sourcing of non-core activities as well other infrastructural forms of delivering

care, imply further room for operational excellence.

60 61

Exhibit 22. Almost all hospitals are comfortablyin the black figuresNet result/revenues 2004 [%]

1.3%

Weighted average0.84%

Average increase

Large improvements predominantly athealthier hospitalsChange in Net result/revenues 2003-2004 [%]

Above averageincrease

Below averageincrease

-7.1% 7.5%

Average improved from0.5-1.3%

61 out of 90 hospitalsimproved performanceAbove average: 83%improved, below average59%

-7.7% 13%

Above averageBelow average

Only 5 out of 90hospitals postednegative results in2004

0%

Almost all

hospitals posted

positive results

Is it sense of

urgency enough

that the strong are

getting stronger?

Chapter 4 – Financial Performance

The fi nancial health of Dutch hospitals has been improving since 2000. On the basis

of analysis for 2003-2004 we confi rm substantial further improvement of fi nancial

health. For the fi rst time this improvement came not as a result of extra money made

available (“boter bij de vis”), but because hospitals improved their productivity. And

the partial extra funds made available to deliver care were channeled to improve

both the balance sheet and the bottom line.

The improvement is most heartening to see. However, on average the Dutch

hospitals are still not fi nancially robust. But continued improvement along these

lines should see them by 2012 as truly private organizations capable of steering

their own specifi c strategic course backed up by their own fi nancial resources.

The net results posted by the hospitals showed a huge improvement in 2004. An

extra EUR 102 m was added to the net results, improving it from 0.5% to 1.3%

(Exhibit 22, and 2) . Only 5 out of 90 hospitals posted a negative net result in 2004,

a considerable improvement for 2003, where there were 27 such hospitals. 61 of

the 90 hospitals analyzed improved their bottom lines, with some gains well above

10%.

The fi nancial performance gap between the hospitals is widening. 83% of the

hospitals that posted above average performance in net results, made further

improvements in 2004, while 59% of the weak performers posted even lower

net results. The fi nancially strong are getting stronger, while the weak are falling

further behind. In our discussion with hospital management and specialists they

often bemoan a lack of sense of urgency within the hospital walls. According to

some, insuffi cient sense of urgency results in unwillingness to change the culture

and performance. It may console those who understand the need for change

that the sense of urgency must surely be rising given the further deterioration in

performance of some of the already weak hospitals.

62 63

Exhibit 23. Stronger balance sheetsEquity/revenue 2004 [%]

21.7%

Weighted average

Higher financialstrength

Lower financialstrength

1.7%

Average increase

Especially for the fitter hospitalsChange 2003-2004 [%]

Above averageincrease

below averageincrease

0% 48%

Average improved from 20.0%-21.7% 73% of the above

average hospitals havegotten stronger, whilstonly 33% of the belowaverage

-14.7% 20.8%

Balance sheets

improved

Financial war

chest slowly being

fi lled

The trend of overall improvement and widening performance gap is confi rmed by

analyzing the balance sheets of all Dutch hospitals (Exhibit 23). The average of the

equity (balance minus debt) as a ratio of revenues, increased from 20.0% to 21.7%

in 2004. The differences in balance sheet strength have been large, from nearly

+50% to even nill. But these differences are growing; 73% of the hospitals with

above average balance sheet strength further improved their balance sheet.

Finally, we looked at two other fi nancial measures for hospitals to analyze their

performance: the ratio of the revenue to current assets and the ratio of operating

cash fl ow to debt. Both ratios are often used in analyzing the fi nancial soundness of

hospitals. Higher revenues as ratio of current assets implies that the hospitals ties

up less capital in its business. By improving this measure, hospitals can potentially

shore up their solvability, a key issue for future strategic course. High operating

cash fl ow as ratio of debt suggests the ability to repay debt from own operational

business.

We defi ne both parameters as partial measures of the hospital’s war chest. A high

ranking hospital on these parameters has more fi nancial degrees of freedom in

pursuing its strategic course. These could include gaining share at the expense

of competitors, acquiring competitors, or undertaking a national alliance. In any

case, fi nancial strength is important to successfully navigate the slowly opening

and diffi cult healthcare markets. For both parameters we fi nd overall improvement

but yet the differences among hospitals are still large. The revenues as a ratio of

current assets increased from 3.55 to 3.63 (Exhibit 24). The gap between the best

and the weakest hospital was more than six in 2004. The operational cash fl ow as a

function of debt20 improved from 10.1 to 10.8, nearly 7% improvement (Exhibit 25).

At the same time the gap between the best in class with 46% to the worst in class

at -10% is large (Exhibit 25).

20 both long and short term

64 65

Exhibit 24. Receivables are managed betterRevenues/current assets 2004

3.63

Weighted average

1.57 8.72

Average improvedfrom 3.55 to 3.63

Exh. 25.Debt ratios are improvingOperating cash flow/debt 2004

10.8%

Weighted average

-10% 46%

Average improved from 10.1-10.8%

Picket fences

changing to

staircases

Signalling room

to climb

In conclusion, we note that on average on all fi nancial parameters analyzed, the

Dutch hospital sector improved its performance. The fi nancial performance gap

between Dutch hospitals is large. And this gap is growing further. What for decades

was a performance fence - all pickets neatly lined up at same height, is increasingly

looking like a staircase.

In some ways the growing gap is welcome news. It may create a sense of urgency

to improve performance of the hospitals. We show that in competitive markets

ingredients already exist to reward better performance with higher share and

stronger fi nancial results. By improving, the weak can begin the close the gap, thus

improving the health of the entire curative sector.

66 67

Exhibit 26.4002 sremrofreptuO

puorg3002 4002 sremrofrep rap-nO

puorg Under3002

puorg3002sremrofrep

3murtneC hcsideM hcsimedacA 3thcirtsaaM siuhnekeiZ hcsimedacA peorggroZ sisylA siuhnekeiZ suinotnA 1siuhnekeiZ reztiewhcS treblA siuhnekeiz aihpmA

2siuhnekeiZ adsehteB siuhnekeiZ JInevoB murtneC hcsideM muirtA2siuhnekeiZ animlehliW-suisinaC 1siuhnekeiZ anirahtaC snahcsregnojT eD 2siuhnessenokaiD thcizfleD siuhnekeiZ siuhnekeiZagaH

iDsiuhnekeizovelF iuhnessenoca dieL s siuhnekeiznevaHnelessJIsiuhnekeiZ keilreklEsiuhnekeiZ sucsicnarF neziuhnekeiZ reem

2siuhnekeiZ inimeG hcsideM sumsarE murtneC nekeinilK alasI3neziuhnekeiZ erleGsiuhnekeiZ aizakI siuhnekeiZ hcsoB neoreJ 1siuhnekeiZ traH eneorGsiuhnekeiZ suitneruaL siuhnekeiZ initraM

lessJIehgnillemS jiN siuhnekeiZ dnal murtneC hcsideM amixáMoZ ne hcsideM sibrO nrecnocgr rednaeMmurtneC hcsideM riatisrevinU sdieL murtneC hcsideM

nietnaP 3nednalgaaH murtneC hcsideM raamklA murtneC hcsideM 3siuhnekeiZ siurK edoR 1siuhnekeiZ ajafeR diuZ-dnomnjiR murtneC hcsideM 2siuhnekeiZ dnalegnilS 1siuhnekeiZ nettuP naV draawuR etnewT murtcepS hcsideM

peorggroZ annA .tS 1siuhnekeiZ htebasilE .tS 2murtneC hcsideM soseM siuhtsaG ewuorV eveiL eznOsiuhtsaG snaJ .tSsiuhnekeiZ suinotnA .tS

siuhtsaG sucsicnarF .tS 1obeN-ovonorB gnithcitS 2neziuhnekeizedlehcsretsoO ladsnaJ .tS 1grebsnoiS amlaT 2peorG faarG ed reinieR

gnithcitSsiuhnekeiZ adsehteB-leeW naV peorgsiuhnekeiZ retneveD siuhnekeiZ dnalnjiRsiuhnekeizdnalretaW xirtaeB nigninoK siuhnekeizkeertS peorG hgrubnexaS

t'nessA siuhnekeiZ animlehliW siuhnekeiZ enraapSsiuhnekeiZ dnaL egnaL1negninorG CMUmurtneC hcsideM snaaZ siuhnekeiZ saerdnA sacuL .tS 3duobdaR .tS CMUneevletsmA siuhnekeiZ 2grebsneveiL siuhnekeiZ

UVdrooN-iooG siuhnekeiZ murtneC hcsideM siuhnekeiz nedetSeewTmusrevliH siuhnekeiZ siuhtsaG seirftseW thcertU CMU

iZdnalnereiviR siuhnekeiZ nevohnreB siuhneke 2murtneC hcsideM iruCeiV 2nerehclaW siuhnekeiZ 2siuhnekeiZ-dnalteilViellaV esredleG eD siuhnekeiZ 2grobredrooN eitanibmocgroZ nerednaalV-swueeZ siuhnekeiZetnewT peorgsiuhnekeiZ

etdeerbredrooN peorggroZtlevedyuS peorggroZ2tseW thcertU peorggroZ

Chapter 5 – Ranking

On the basis of market, operational and fi nancial performance of all 90 hospitals

analyzed, Gupta Strategists have developed a rank index for the sector. The ranking

was done by fi rst developing a separate market, operational and fi nancial rank

in which each parameter within the three categories was given an equal weight.

All three categories: market, operational and operational were equally weighed to

end up with an overall rank. The metrics analyzed and scored for the ranking are:

Market Parameters

Market performance relative to competitive index (EPB)

Hospital growth relative to market growth (EPB)

Operational Parameters

Cost-to-serve (EUR/patient entity)

Day treatment as percentage of inpatients

Average length of stay

Financial Parameters

Net results as percentage of revenue

Equity (balance minus debt) as percentage of revenue

Revenue as a ratio of current assets

Operational cash fl ow as percentage of debt

A rank index for both 2004 and 2003 was developed. For 2003 growth was not

considered. The rank for 2004 as well as position in 2003, is displayed in Exhibit 26.

Exhibit 27 shows the shift in position between 2003-2004. We choose to present

the individual hospital performance in three groups rather than be persuaded by a

misplaced sense of accuracy and rank hospitals from 1 to 90. Of course, signifi cant

differences exist within the groups. But the performance measures used for the rank,

also imply that signifi cant differences exist across the three different categories. In

fact in the top 5 hospitals for market, operational and fi nancial performance there

is no overlap at all. Or in other words not one Dutch hospital scores in the top 5 of

all three rankings. This confi rms our contention that there is signifi cant room for

Dutch hospitals to improve.

68 69

Exhibit 27. Performance entrenchmentPerformance group dynamics 2003-2004

Out-performers

2004

On-parperformers

2004

2003 under-performers

2003 on-parperformers

2003 out-performers

Under-performers

2004

68%

26%

57%

6% 13%

30% 21%

79%

Room to improve Based on performance shifts in 2003-2004 we conclude that out-performers and

under-performers are increasingly getting entrenched as well as the performance

gap is widening. Two thirds of the out-performers in 2004, were also out-performers

in 2003. While more than three quarters of under-performers of 2003, continued

to under-perform in 2004. This is a strong indication of the diffi culty in changing

one’s performance. But by no means is change impossible. 6% of out-performers

in 2004, was under-performer in 2003. So 2 of the 29 under-performers found the

formula to the top.

70 71

The Pied Piper of Hamelin

Providing high quality, universal and affordable healthcare to all citizens is a

fundamental challenge for all countries. The expectations based on the quality of

healthcare from the last decades are high. But during the last decades, on top

of technological advances, economies were growing, and the labor participation

increased.

The picture for the future is much less rosy. Less robust economies and graying

population shall bring healthcare under enormous pressure. Most countries have

chosen to meet the challenge by relegating responsibility for healthcare to the

markets, or to the three players in healthcare markets: the payers, the providers and

the patients21. However, the interest of the three players are inherently confl icting.

The ability to align these interests would be the critical success factor of healthcare

markets.

In meeting the healthcare challenge all three players shall undergo quantum leaps

in roles and responsibilities. Based on our project experience, as well as on this

study, we believe that the tunes hospitals practice and play will be critical. Their

ability to provide best care to the patients at affordable cost to the payers will be

the key. Our conclusion that the hospitals’ ability to rise to the challenge is critical,

is based on two observations:

1) Healthcare is a critical service for patients. When in need costs are nearly

irrelevant. The patient tends to rely and trust the physician above all other

players. As and when cracks begin to appear in healthcare, patients shall

bear pressure on politics and insurers to enhance fi nancial support to the

hospitals. Or as supply capacities shrink it will gradually become a demand

driven business.

21 The fourth player, the suppliers already operate in free markets

72

2) Hospitals are extremely complex and therefore diffi cult to manage

operations. After having done detailed analysis for many hospitals, and

in many cases gone further than before, we are still befuddled by the

underlying complexity of operations and the inherent diffi culty in coming

to an optimal confi guration. It is not easy to arrange an effi cient supply.

This implies that the onus is clearly on the hospitals. Nobody has potentially better

insights, and the ability to change, and convince and bind patients than hospitals.

The tunes hospitals are playing are critical to follow.

In this light it is heartening to conclude that the hospitals are rising to the challenge.

After decades of being cocooned in a false security shell of fossilized regulations,

they are beginning to realize that they are the crucial player. Three conclusions

based on this study underpin our view:

1) Hospitals improved productivity in 2003-2004.

2) They used part of the productivity gain to become fi nancially stronger, a

critical need for the future.

3) In some regions rudimentary markets are beginning to emerge, where

effi cient operations were rewarded by higher share and stronger fi nancial

position.

The rats of an unproductive sector are being banished by the hospitals themselves.

Hospitals have the magic in their fl ute. In return it seems reasonable to provide

them with increased room to maneuver. By maneuvering in their local markets

for patients, by providing the required care at an optimal cost, the hospitals can

further rise to the challenge of providing high quality, universal and affordable

healthcare. The tunes they play to patients are going to be important. We hope it

is beautiful music.

The oncoming demand revolution in healthcare will fundamentally change the way

healthcare is managed. A paradigm shift is inevitable if we are to enjoy universal,

high quality, affordable healthcare. Managing the shift requires fresh, creative,

objective and rigorous strategic analysis and insights. Gupta Strategists strive to

provide the analysis and insights required to manage the shift.

Gupta Strategists is a new player with the ambition to reshape the strategic

consulting value proposition. Though young as a company, most strategists have

extensive experience both in strategic consulting, and in healthcare but also

importantly in other sectors. All strategists working in our company are driven

by one shared passion: success for our clients. This report is an example of our

thinking, our passion, and our investment in developing a rational knowledge base

for the sector.

Strategists in picture: Samuel Smits, Anshu M. Gupta, Jan-Peter Heida, Wouter

Klinkhamer and Jeroen van der Wolk

For further information please address:

[email protected]

Postbus 139, 3100 AC Schiedam

The Netherlands

www.gupta-strategists.nl

You can also reach

Dr. Anshu M. Gupta at

+31 6 512 19799

Gupta Strategists

Postbus 1393100 AC SchiedamThe Netherlands

‘the pied piper of hamelin’ strategists - pied...2 3 the pied piper of hamelin into the street...

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