6.4 BuurtzorgT

How investor partnerships based on trust can revolutionize the healthcare sector

 

In a nutshell

BuurtzorgT is a fast-growing provider of mental healthcare services in the Netherlands. The company focuses on patients with complex psychiatric and social issues. The services are delivered by local teams of health care professionals that are embedded in their neighborhood who put the patient central and seek to provide efficient, qualitative care. In 2020, BuurtzorgT transitioned to steward-ownership to reflect its transformative approach to health care and psychiatric care in particular.

Collaborating with Purpose Evergreen Capital (PEC), BuurtzorgT secured patient and aligned capital without compromising its mission. They created an ownership structure with steward shares, economic shares, and a veto-share to protect the principles of steward-ownership. The investment process was built on trust and mutual respect, resulting in a model that preserves the soul of BuurtzorgT while ensuring its independence and long-term stability.

 

An unhealthy healthcare system

Nico Moleman, co-founder of BuurtzorgT, had observed the rise of Dutch healthcare pioneer Buurtzorg, revolutionizing the home care system in the Netherlands by enabling patients to receive holistic care in their own homes. With a background in psychiatric care, Nico wondered if a similar concept could work for the mental health care sector.

"The idea was to bring psychiatric care into the homes of people“ Nico recalls. “Normally, in the mental health sector, there are two options. You can either treat people in outpatient care, meaning they come to a building, have treatments there and go home afterwards. The second option is that you admit people to a hospital. Option one is used for mild problems and option two for severe ones. But there is no option in between. Getting admitted is always a very heavy burden for people that must undergo it. So I thought that if we treat people at home we might be able to prevent admissions."

Nico reached out to Jos de Blok, the founder of Buurtzorg, who caught onto the idea after a few initial meetings. The co-founders set off to build an organization based on their values: simplicity rules over complexity, trust replaces control. This, they believed, would also open the space for comradery and connection between employees instead of the alienation and isolation which they had often observed in large organizations. And thus, the inspiring journey began.

 

Why steward-ownership?

In 2019, five years after its foundation, the organization had grown to 180 employees in 34 teams. The concept was very well established and successful, the organizational set-up stable and scalable. BuurtzorgT had become a blueprint for a more humane, effective future in mental health treatment.

However, the two founders faced two major challenges they needed to overcome: Companies in the mental healthcare sector in the Netherlands were only allowed to invoice the work done for a patient either at the end of the calendar year or when the treatment was completed. This regulatory requirement meant that BuurtzorgT had to pre-finance all the work delivered.

In addition, both Jos and Nico were getting closer to retirement age and started to look into succession planning and management-buy-out options for their company that would not require them to sell the entire business and endanger its special setup and values.

In 2019, the company urgently needed an external capital injection to finance the growth spur. Nico and Jos were faced with a dilemma. "Taking on capital from investors would have been the easy solution, they were all casting their nets at us," Nico recalls. "But we did not want to sell our soul." Both founders had seen over and over again how, especially in the healthcare sector, organizations started to change after investors had been taken on.

Through a mutual acquaintance, the co-founders got in touch with the Purpose Foundation and Purpose Evergreen Capital and learned about steward-ownership. It clicked right away, working perfectly with their vision for the company and its self-managed setup. So Nico Moleman and Jos de Blok decided to transition their company into steward-ownership and take on investment structured accordingly.

Purpose Evergreen Capital is an investment vehicle that provides patient, value-aligned capital to small and medium-sized enterprises in steward-ownership or transitioning to steward-ownership. With their vision to enable businesses to remain independent and true to their values, they presented the perfect investment partner for BuurtzorgT.

• Redeeming the ownership

As part of their new steward-ownership structure, BuurtzorgT included investors as shareholders of investor shares of the company. Because the investor shares are redeemable, BuurtzorgT retains the option to repurchase them. Unlike traditional private equity, where the buyback price can skyrocket based on external valuations, these shares have a predefined yearly dividend and a capped redemption price, equal to their initial nominal value.

The redemption timeline is not set in stone but rather depends on the company's actual cash flow situation. To navigate the payback process, a waterfall scheme was collaboratively designed. Such a scheme is commonly used to prioritize payments while ensuring that essential obligations like operating expenses and debt repayments are met before distributing excess cash to other stakeholders.

A health-care system aligned towards well-being

In a field plagued by bureaucracy and burnout, BuurtzorgT stands out. The vision on which the organization was built challenges the status quo in healthcare – and so does its ownership model. So, what lessons can the broader field of healthcare learn from BuurtzorgT's example about the potential benefits of rethinking ownership?

Ownership structures in which shareholders can both extract profits and realize large pay-outs can create misaligned incentives in healthcare.[43] Medical decisions may be influenced by the financial interests of shareholders, leading to a situation where patients might not receive the best possible treatment, but rather the most profitable one, thus driving up profits.

To achieve a higher exit price, profits must increase, often at the expense of patient care. "Many organizations today face internal tensions, translating into dissatisfied people," Jos de Blok observes, "but especially in mental health care, forming connections and fostering relationships with patients and colleagues is essential. It requires deep mutual trust, open communication, and viewing patients holistically – as individuals embedded in their communities, not merely as diagnoses. It's the frontline professionals, not distant managers, who truly understand patient needs." Establishing an organizational deep design that furthers trust and allows for a patient-oriented approach is, therefore, especially vital in mental health care.

While BuurtzorgT also needs to be financially healthy, high-quality patient care and the wellbeing of employees are not a means to the end of maximizing shareholder values but are the actual goal of the company. Steward-ownership represents a model that has the ability to alleviate some of the structural diseases which the healthcare sector has caught over the past decades. And it can help health care professionals to refocus on what they actually want: to help patients get better.

To learn more about BuurtzorgT, their governance model and what conscious contracting means, read their full case study at steward-ownership.com/bzt.

Source:

[43] Hoffmann, F. Gesundheitswirtschaft: Mehr Marktwirtschaft für das Gesundheitswesen. Tagesspiegel Background Gesundheit & E-Health (2023)