For-profit nursing homes in the Netherlands: What factors explain their rise?

Abstract

This exploratory mixed methods study analyses the characteristics of the emerging for-profit nursing home industry in the Netherlands and identifies the interrelated set of factors (context, trends and sector conditions) that contribute to its growth. Until recently, the Dutch nursing home sector relied almost exclusively on non-profit providers. Even though profit distribution in nursing home care is still banned, the for-profit nursing home sector is currently expanding. The study uses economic theory on non-profit organizations and ‘mixed-form’ markets to understand this expansion. We find that changes in the regulatory framework have unlocked the potential of the for-profit nursing home sector, enabling for-profit nursing homes to circumvent the for-profit ban. The expansion of the for-profit sector was mainly driven by the low responsiveness of the non-profit sector to increased and changed demands. For-profit providers took advantage of this void. Moreover, they exploited ‘cream-skimming’ potential in the market, and used the wider care system to reduce their labor costs by relying on external specialist care. Another main driver was the access to financial capital from private investors (e.g. private equity firms).