Looking ahead at the financial situation in 2022
How will COVID-19 impact 2022?
Whereas the situation was still a source of concern at the start of 2022, we are now seeing the positive impact of the relatively mild Omicron variant. Government measures are being scaled down, and we see the pressure on hospitals steadily reducing. That does not necessarily mean that everything will return to normal in the summer. Before 2022, the entire sector, and therefore also UMC Utrecht, stood before the challenge to restore the balance in healthcare as a first priority. Before we have the capacity to catch up on care, the impact of COVID-19 must first be limited sufficiently, the deployment of medical staff must return to the desired level, and (regular) care must once again be stabilized at the intended 100%. After that, the challenge will be to catch up on postponed care.
In 2022, there will in principle no longer be a generic continuity contribution (CB) scheme. Financial continuity is guaranteed in individual contracts with health insurance providers. On 23 December however, under the denominator ‘Joint COVID agreements MSZ 2022’, wider agreements were established between the Dutch Association of Health Insurance (ZN), the Dutch Association of Hospitals (NVZ), and the Dutch Federation of University Medical Centers (NFU). These agreements are necessary because a number of COVID-19-related risks cannot (or not easily) be solved through bilateral contracts. To summarize, wider agreements for 2022 pertain to:
Once again a hardship clause stipulates that for hospitals and UMCs that announce a negative result due to insufficient compensation for the impact of COVID-19, the ‘Joint COVID agreements MSZ 2022’ will apply, and that for this purpose, a solution will be provided together with the two biggest health insurance companies.
Continuation of an availability compensation for additionally provided IC capacity.
Suitable compensation for production loss.
(Partial) coverage of generic additional costs due to COVID-19.
Compensation to cover COVID-19 care.
There is also an ‘Omicron clause’ as a safety net for currently unforeseeable risks of virus mutations. In these cases, ZN, NVZ and NFU will once more consult with each other to mitigate undesirable effects. Health insurers furthermore have the additional duty to compensate for the financial consequences of downscaled care, in any event during the effective execution of the ‘COVID-19 Upscale Plan’ that was proposed at the start of 2022.
To summarize, in the event of any uncertainty caused by COVID-19, in 2022 we as UMC Utrecht can again rely on individual and collective agreements with health insurance companies (as mentioned above) and allocations from the VWS Minister.
Before we have the capacity to catch up on care, the impact of COVID-19 must first be limited sufficiently, the deployment of medical staff must return to the desired level, and (regular) care must once again be stabilized at the intended 100%.
Impact on activities
Due to the large impact of COVID-19 on our organization, certain major strategic projects and investments were implemented in phases in 2021. For 2022 as well, certain decisions were made by our Executive Board and priorities defined to avoid putting too much pressure on our organization and staff. This means that certain actions and costs are shifted to following years.
Other areas of concern for the coming years
Besides the challenges due to COVID-19, other challenges will also require our attention in the coming period. These include:
Pressure on tariffs combined with a limiting of growth
In light of the public discussion on the availability of care, which has also been laid down in the Global Agreement, and the right care in the right place, we are keeping account of the pressure on our budgets and tariffs, knowing that our costs will increase in the coming years for a variety of reasons.
Significant investments in accommodation and ICT
Due to the age of our buildings, large-scale renovations in various places will be necessary in the next few years <link naar Huisvesting in Onze bedrijfsvoering>. The biggest part of these renovation projects will be in the next decade. To tackle these building and financial challenges in a proper way, we have drawn up an integral vision on accommodation. This vision defines an execution in several phases, with a recalibration and evaluation before the start of each subsequent phase. At the moment we are preparing the transition to a next phase. Hereby, the entire vision will once again be recalculated financially and submitted for external approval. An important issue here is the development of sharply rising building costs over the past period. We shall not start with the next phase before it has clearly been concluded that the entire package of renovation projects is financially feasible. We expect that attraction of additional funding will only take place from around 2025.
In the coming years we shall also have to invest in ICT due to the steadily increasing digitization of processes within UMC Utrecht, developments in the fields of e-Health and big data, and scheduled investments to replace IT components (hardware, system software, and applications).
Maintaining financial continuity
As indicated before, the financial impact of COVID-19, due to the currently visible ‘weakening’ of the impact of the virus and arrangements and agreements with health insurers and the authorities, is now relatively limited. We recalibrate our liquidity budget several times a week so that we can respond immediately to changes in our financial position if necessary.
As for other developments, we have explicitly moved them forward to the 2022 budget and to the longterm budget until 2025. These calculations are showing positive results, which means that we can maintain a healthy equity capital in the longer term. Our liquidity position is also sufficient to meet all obligations in the coming years.