Summary of the legislative proposal

The Wibz legislative proposal aims to guarantee the quality, affordability and accessibility of care and youth aid by amending several laws. The Wibz legislative proposal introduces provisions to guarantee sound business conduct and to set conditions for profit distribution by care and youth aid providers. In addition, the Dutch Healthcare Authority (NZa, Nederlandse Zorgautoriteit) is given additional tools to monitor this.

You can read more about the initial legislative proposal in this blog by Dieuwke Hooft Graafland of our Healthcare & Life Sciences Team. She also previously wrote this blog on the political developments regarding private equity in healthcare and profit distributions, which also discusses the advice of the Council of State in more detail.

The Council of State's reaction to the initial legislative proposal was critical and the Council of State recommended to not submit the legislative proposal to the House of Representatives. According to the Council of State:

  • the legislative proposal did not contain a clear problem analysis;
  • there was not sufficient reason to take the proposed measures;
  • the conditions for profit distributions should not be regulated in a General Order in Council (algemene maatregel van bestuur), but in the act itself; and
  • there is a risk that the new statutory standards deviate from healthcare governance codes.

Amended legislative proposal

Conditions of profit distribution in the Wmg

The Wibz has been amended on a few points. The conditions for profit distributions by care and youth aid providers who are allowed to distribute profits are laid down in the Healthcare Market Regulation Act (Wmg, Wet marktordening gezondheidszorg) as soon as the Wibz enters into force, instead of in a General Order in Council. This amendment is in accordance with the advice of the Council of State. This contributes to legal certainty; after all, it will be more difficult to change a law than to change a General Order in Council. According to the amended Wibz, the following conditions apply to profit distribution:

  • In the fiscal year over which the profit distribution is made:
    • The Health and Youth Care Inspectorate (IGJ, Inspectie Gezondheidszorg en Jeugd) did not impose a measure for not providing proper care or youth aid within the meaning of the Healthcare Quality, Complaints and Disputes Act (Wkkgz);
    • the healthcare provider must have published an independent client satisfaction survey no more than two years ago;
    • the NZa did not impose a measure and no administrative fine was imposed for claims, errors or failure to publish information that should have been published;
    • the (de facto manager of the) healthcare provider has not been irrevocably convicted in connection with a violation of the Wmg.
  • In addition:
    • the healthcare provider's board and internal supervisor (as referred to in the Care Providers Accreditation Act (Wtza, Wet toetreding zorgaanbieders)) have explicitly approved the profit distribution;
    • profit distribution is not at the expense of the quality and continuity of the care or youth aid to be provided;
    • the financial health of the healthcare provider is stable (concrete standards for current ratio, buffer capital, internal rate of return and EBITDA margin).

By laying down the conditions for profit distribution, the Minister recognises the legitimate interests of investors. Although the stipulation of the conditions in the Wmg offers some legal certainty, the condition relating to the quality and continuity of the care or youth aid to be provided is again an open norm, which the NZa will assess when assessing if the profit distribution was legitimate. Practice will have to show how actively and in what way the NZa will assess this standard. In addition, the requirement about the recently published independent client satisfaction survey involves an administrative burden. In this regard, we question whether this standard is sufficiently proportionate with respect to all care and youth aid providers to deviate from the provisions on free movement of capital, establishment and services according to European law. After all, the standards apply to all care and youth aid providers that are allowed to distribute profits.

Unlike the initial legislative proposal, under the Wibz, new healthcare providers are subject to slightly different conditions for profit distribution. For example, the new healthcare provider is not required to publish a client satisfaction survey, and the new healthcare provider must meet a lower internal rate of return and a different EBITDA standard in the first two years after the commencement of the provision of care.

An item which has not been amended compared to the initial legislative proposal is that no ban on profit distribution has been included for subcontractors, and that the legislative proposal does not include a maximum amount of profits to be distributed. In addition, as well as in the initial legislative proposal, the conditions apply mutatis mutandis to (legal) persons who cease to be healthcare providers, up to the highest amount of equity at the time immediately prior to ceasing to be a healthcare provider and up to five years after this time.

Sound business conduct - two concrete standards

In addition to these amendments, the broad open standard on having a "sound business conduct" has been replaced by following two more concrete standards in the Wmg, which (with two more indicators) were included not exhaustively in the initial legislative proposal as an indication of having a sound business conduct:

  • care and youth aid providers must make agreements in line with market conditions with each other in the case of significant transactions (such as ICT and real estate investments) with related parties (such as family members of a director)
  • care and youth aid providers must not take unwarranted risks in attracting or repaying equity or loan capital

In the response to the advice of the Council of State, the Minister explains that this standard is limited and concretized to avoid deviating from, or going against, the Healthcare Governance Code 2022. On this point too, the Minister follows the advice of the Council of State.

Expansion of grounds for refusal and revocation of Wtza license

In addition, the new grounds for refusal and revocation of a Wtza license have been broadened with an addition regarding the healthcare provider's (actual) management or internal supervisor. The Wtza license will be refused or revoked if a member of the general or daily management or internal supervisor of the healthcare provider or the de facto manager of the healthcare provider poses a "serious risk" to the "proper or lawful management" of the healthcare provider. In addition, unlike in the initial legislative proposal, the Wtza license can also be revoked if any of the circumstances that could lead to the refusal of the license is present.

At first glance, with the Wibz, the CIBG appears to have ample new bases for refusing or revoking a Wtza license. The explanatory memorandum is therefore extensive on this point and provides that the consequences of revoking the license will have to be considered on a case-by-case basis with the parties involved, such as the IGJ, NZa and the healthcare insurers. By way of illustration, the explanatory memorandum provides that the measure of revoking a license of a large healthcare institution will in principle not be proportional, and other measures will have to be considered first.

Additional notes to the amended legislative proposal

European Law requires that an infringement on the free movement of capital, establishment and services – such as imposing conditions for profit distributions through, for example, the Wibz – meets several conditions and is properly substantiated. Following the advice of the Council of State, the Minister has therefore provided further explanation in the explanatory memorandum to the amended legislative proposal why the necessity exists for the measures as proposed in the Wibz and why the measures are appropriate. In addition, on some points the explanatory memorandum contains example situations and substantiation with reports.

The Minister emphasises in the response to the advice of the Council of State (Follow-up report) that, according to the government, it is necessary that the law also states – in an enforceable manner – the conditions that are imposed on the business of care and youth aid providers, given the quality, accessibility and affordability of care and youth aid for society. At present, the NZa does not yet have sufficient public law standards to supervise this, which, according to the Minister, makes it difficult to identify the accuracy of signals and/or reports about non-integrated business operations.

Based on the Healthcare Governance Code 2022, the NZa has no grounds for supervision. This is because the Healthcare Governance Code 2022 is based on self-regulation and, according to the Minister, offers insufficient safeguards due to the broad principle-based nature of the code. In addition, the government cannot influence the content of and changes to the Healthcare Governance Code 2022. Therefore, according to the Minister, there is sufficient reason to introduce public law standards. However, the question remains whether the preventive introduction of public-law norms in the event of uncertainty about the correctness of signals and/or reports is a sufficiently sound basis for the infringement of the free movement of capital, establishment and services.

Future of the Wibz

Now that the legislative proposal has been submitted to the House of Representatives, the House of Representatives' Public Health, Welfare and Sport Committee will prepare the legislative proposal (debate, deliberate, ask questions, seek advice, etc.) and the legislative proposal may still be amended. Thereafter, the House of Representatives will debate and eventually vote on the Wibz. If the majority votes in favor of the legislative proposal, the legislative proposal will be submitted to the Senate, which will then also debate and vote on the legislative proposal. All in all, it remains unclear if, when and, moreover, in what form the legislative proposal will eventually enter into force.

We are closely monitoring developments regarding the Wibz legislative proposal. If you have any questions about the consequences of the Wibz legislative proposal for your organisation in the future, please feel free to contact our Healthcare & Life Sciences Team or your regular Loyens & Loeff contact.