Municipalities are responsible for the procurement of healthcare that falls under the Social Support Act (‘Wmo’) and the Youth Act (together referred to as the social domain). All municipalities are legally required to ensure that their residents receive the care to which they are entitled (the duty of care). In practice, municipalities fulfil this responsibility by procuring these care services from specialised Wmo or youth care providers.
Realistic rates in the social domain
Healthcare providers in the social domain who are engaged by municipalities are entitled to a realistic rate (Section 2.6.6 of the Wmo and Section 2.11 of the Youth Act). This means that there must be a good balance between the price and the quality of the (youth)care to be provided. The price must not be at the expense of quality.
Since 2017, Wmo care has been subject to the AMvB Reële Prijs Wmo (Order in Council on Realistic Prices Wmo). This AMvB determines the cost price elements that municipalities must factor into the real price for Wmo care. An evaluation of these rules shows that they have contributed to transparency about price structure and to knowledge about cost prices. In addition, the rules have increased awareness of and the importance of fair prices.
There is not (yet) a similar regulation for youth care. Nevertheless, municipalities must set realistic rates in accordance with Article 2.11 (formerly 2.12) of the Youth Act. While the term “realistic rate” is not defined in the Act, case law does provide a definition. In 2019, the Court of The Hague ruled that local authorities must be able to substantiate why the rates they have set are realistic and cost-covering. The Court of Appeal of The Hague and the Court of Appeal of 's-Hertogenbosch also confirmed that municipalities must set realistic rates with due care. Recently, the Midden-Nederland District Court ruled, with reference to the aforementioned case law, that municipalities had not set realistic rates. In short, this was because the municipality had not sufficiently investigated and demonstrated that the rates were realistic. As a result, it was not certain that the rates offered did justice to the reality of implementation (practice) and regional circumstances.
As a result of the (earlier) case law and the discussions about realistic prices, there was a desire for clarification in the field. In the summer of 2022, the Wet maatschappelijk verantwoord inkopen Jeugdwet en Wmo 2015 (‘Socially Responsible Procurement Act’) came into force. The Socially Responsible Procurement Act means that Article 2.11 of the Youth Act states that further rules could be laid down regarding the obligation to set realistic prices. Work has therefore been done on the Order in Council on Realistic Prices Youth Act. This is similar to the Order in Council on Realistic Prices Wmo and specifies the same cost price elements as a minimum when determining realistic prices for youth care.
In practice, the cost price elements are already incorporated into municipal regulations, such as those of the municipality of Leiden, the municipality of Amsterdam and the municipality of Almere. This anticipates the forthcoming Order in Council. The municipalities concerned must already comply with these municipal regulations when procuring youth care.
The Order in Council on Realistic Prices Youth Act has been submitted to the Council of State for advice. The Council of State recently advised the minister to further map out the financial and implementation consequences of the Order in Council. It is not yet known when the Order in Council will come into force.
At the same time, it is clear that the Dutch Healthcare Authority (NZa) and the Youth Authority also endorse the importance of cost-covering rates in youth care. The NZa and the Youth Authority have pointed out that many care providers are making losses on their youth care and are applying cross-subsidisation, whereby money intended for long-term or Zvw care is used to compensate for losses in youth care. However, according to the NZa and the Youth Authority, losses incurred because of non-cost-covering rates in youth care should not be compensated by means of cross-subsidisation. According to the NZa, this behaviour creates a distorted picture of what youth care actually costs, increases continuity risks and distorts market forces. Healthcare providers can, of course, bring this issue to the attention of the relevant healthcare procurers. They should do so with the message that it is necessary to apply cost-covering (youth care) rates at all times. This is because, according to the NZa and the Youth Authority, losses in youth care may not be covered by funds provided in the context of long-term or Zvw care. If a local authority refuses to act on this signal, it may be advisable to notify the NZa and the Youth Authority in good time and to inform the local authority of this.
In the meantime, the Guide to understanding Rates also offers guidance for determining realistic rates in youth care. This guide lists the cost price elements, cost price calculations and substantive points of attention for rates. The (draft) explanatory notes to the Order in Council on Realistic Prices Youth Act often refer to the Guide to Understanding Rates.
A reasonable rate must therefore be based on at least the following cost price elements:
- The costs of care personnel (e.g. salaries, allowances, taxes and labour market allowances);
- Client-related costs other than those of professional staff (costs of indirect client-related personnel, materials and aids);
- Overhead costs (staff, ICT, accommodation and general costs and business expenses such as bank/financing costs and travel expenses); and
- Indexation costs.
According to the Midden-Nederland District Court, when determining realistic prices, local municipalities must in any case take the following cumulative aspects into account:
- The expertise of the professionals and their terms of employment;
- The reality of implementation (practice);
- The cost price of a reasonably efficient youth care provider;
- Specific regional circumstances; and
- Certain organisation-specific aspects (e.g. the content of care, complexity of care, property costs, availability of sufficiently qualified staff, response times in crises and specialisations).
Reform of youth care
Youth care is currently undergoing reform. Nationwide efforts are being made to improve youth care by (among other things) phasing out residential care and focusing on small-scale residential facilities. To this end, the Youth Reform Agenda has been drawn up.
This Youth Reform Agenda is not only important in terms of healthcare content. An important theme within this Youth Reform Agenda is simplified procurement of youth care with rate differentiation. This means that healthcare providers are paid according to the intensity of the care provided. The House of Representatives has adopted eleven motions that were submitted during the parliamentary debate on the Youth Reform Agenda. The House of Representatives wants the regulations for realistic rates with rate differentiation to come into force at the beginning of 2024. The Order in Council on Realistic Prices Youth Act must also promote this rate differentiation.
Research and information obligation for municipalities
The government also wants municipalities to make prices more transparent. This task is being assigned to the municipalities that purchase youth care. Municipalities therefore have an information and research obligation regarding rates in procurement procedures. The Order in Council on Realistic Prices Youth Act is not expected to contain any specific rules on how municipalities should conduct their research. However, case law once again provides guidance.
Last October, the Midden-Nederland District Court confirmed that municipalities must carry out (or have carried out) careful and thorough cost price research into realistic rates. The rates must be established in a transparent process involving youth care providers. The openness of healthcare providers about (the structure of) their rates also plays a role in this. The rates must also be traceable and recognisable for youth care providers. In view of the Youth Reform Agenda, municipalities must also take into account the distinction between complex and non-complex youth care when setting and substantiating rates.
Based on the principle of due care, municipalities must – after conducting or commissioning a cost price study – voluntarily provide insight into how they arrived at the set rates. This is the municipalities' duty to provide information. The Midden-Nederland District Court ruled that this insight must be provided during the procurement procedure (and before the registration date). Only in this way can interested healthcare providers check whether the rates set are realistic before they must decide whether to tender. This is an independent obligation of the municipality. The municipality may therefore not wait to see whether care providers ask questions about the rates set (and how they were arrived at).
This obligation to investigate and provide information is precisely what municipalities failed to comply with in the October 2023 ruling, according to the court.
Disproportionate conditions
Healthcare providers should bear in mind that municipalities are not permitted to impose disproportionate conditions in tendering procedures. The principle of proportionality applies. This principle means that the conditions and criteria imposed on tenderers and tenders must be reasonably proportionate to the contract. This principle of proportionality is elaborated in the Proportionality Guide. Regulation 3.9A states that risks should lie with the party that can best control or influence the risk. For example, requiring a maximum treatment duration for a young person without including a safety valve for extending that treatment duration places the entire risk unjustifiably on a healthcare provider. This is a disproportionate requirement.
Conclusion
Practice shows that inadequate research and/or weak substantiation by municipalities in relation to realistic rates is sanctioned by the courts.
Are you unsure whether a municipality is applying realistic rates and/or has fulfilled its research and information obligations, and/or is applying disproportionate conditions in a tender? Please contact us.
Read our five practical tips for healthcare providers active in the social domain here. For more information about the rights of healthcare providers in the sale of healthcare, see: www.zorgcontractering.com
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