Rhoen Klinikum AG
XETRA:RHK
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Rhoen Klinikum AG
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Dear ladies and gentlemen, welcome to the conference call of RHÖN-KLINIKUM AG regarding the results of the first 9 months of financial year 2018. At our customer's request, this conference will be recorded. May I now hand you over to Julian Schmitt, Head of Investor Relations & Treasury of RHÖN-KLINIKUM AG. Please go ahead, sir.
Thank you very much. Good morning to those listening from the United States, and greetings to all participants from Europe and the Rest of the World. We are delighted to welcome you to our second conference call for this year, the presentation of the results for the first 9 months of the 2018 financial year.Today's call will be hosted by Stephan Holzinger, CEO and CFO of RHÖN-KLINIKUM AG and myself, Julian Schmitt, Head of Investor Relations & Treasury of RHÖN-KLINIKUM AG. Stephan will begin today's presentation with the highlights of the third quarter of 2018. I will follow up with our profit and loss statement as well as our balance sheet for the first 9 months of the 2018 financial year and our finance strategy. Stephan will then provide you some first impetus on the further regulation of the German hospital sector and an update on our financial outlook. Afterwards, we will be very happy to take your questions.Before we start and according to the usual practice, I'd like to draw your attention to the forward-looking statements and disclaimer wording on Page 2 of our presentation. This safe harbor language applies to the presentation and all comments to be made today. I would also like to mention that everything will be recorded. After the call, a replay will be available on our website. The time frame for today's call is about 20 minutes.Please note, our system provider for webcast has a technical problem at the moment, so apologize for that.Now I'd like to hand you over to Stephan. Stephan, please, the floor is yours.
Thank you, Julian. A warm welcome to everyone joining us today. Let me go straight into the matters. RHÖN continued the positive development of the first half of 2018 in the third quarter, despite difficult regulatory conditions, anticipated tariff increases and industry-wide shortage of medical personnel and likely fewer in-patient cases, we have delivered on our key figures as promised. This clearly speaks in favor of the path that RHÖN has taken following the company's realignment in 2014, and the further strategic configuration and expansion of our business model under my new leadership.Let me reinforce this argument, RHÖN has the right strategy in a difficult market environment. It continues to be characterized by increasing regulatory interventions. We're taking up the growing trend towards out-patient treatments with a flexible cross-sector care model, the prototype, as you've heard before, for this strategy is the new campus in Bad Neustadt, which will go live in a few weeks from now.With our unique model, we are courageously creating completely new paths in the German hospital sector. At the same time, we are focusing on the very complex medical disciplines in in-patient cases. We're the only provider on the German market able to benefit from the excellence of 2 university hospitals, namely Gießen and Marburg, in the care of our patients. With our various measures for the gradual digital change of the company, we increased our organizational efficiency as well as the speed and security of -- in the care of our patients.Our performance shows that with this strategic orientation, we can move forward successfully and in a targeted manner, even when navigating in difficult waters. And by this, I mean the current regulatory environment and the industry-wide decline in in-patient cases in the third quarter.I'd also like to take the opportunity to clarify once again that the operational measures I have initiated to improve our operating performance are reflective of our successful performance in the first 9 months. Particularly noteworthy is the use of our semantic coding assistance software for the complete and precise recording of the services we provide as well as our efforts in teaching our coding personnel and establishing a knowledge database across our clinical portfolio, all to contract the industry-wide increase in MDK inspection rates.I'd like now to directly address the most important key financials. Within the first 9 months, we achieved revenues of EUR 928.5 million, an EBITDA margin of 11% as well as a net profit margin of 5.1%. Despite the effects described above, we are able to increase the number of in-patient and out-patient treatments in our clinics and medical care centers by 2%, and thus treat a total -- treated a total of round about 644,000 patients.Our 11% EBITDA margins for the first 9 months of 2018 includes the positive one-time effect of EUR 20 million. This means the last important hurdle for -- in the sector separate accounting contract at AG -- AKGM (sic) [ UKGM ], the Universitätsklinikum Gießen and Marburg has now been overcome. The auditing firm, KPMG, successfully checked the separate accounting contract according to the arm's length principle for the third-party comparability. So let me repeat the message, the one-off effects from the separate accounting contract are now fully included in the 9-month figures.Finally, after almost 10 years of dispute, we will now -- from now on be adequately remunerated for our contribution to research and teaching at the 2 university clinics. This is a major step for the margin situation in the group, but all of -- for our UKGM side. The separate accounting contract is a forward-looking agreement, as it runs until 2021. We're confident that this can be the basis for permanent regulation. In addition, the new agreement for the first time provides for an annual inflation compensation of 2.5%. And even if this contract -- the current contract will not be renewed in 2021, we will not fall back behind to 2017 financial compensation scheme. And by the way, we will be taking up the new negotiations within the weeks ahead.Let's now turn to my next big point, which concerns the buzzword, digitalization. In contrast to the hype we're seeing in the market, we at RHÖN-KLINIKUM are already building the digital hospital of the future based on a stable IT landscape. As a pioneer of digital transformation in the health care sector, we've made significant progress in the use of digital applications in order to further improve the treatment quality of our clinicians, relief and support our employees, and further optimize processes into documentation of services, for example.One of the digital lighthouse projects is the now operational, Medical Cockpit, a search engine that helps to find relevant information in doctor's letters, x-ray findings and OR reports, for example, within seconds. When the newly-built Campus Bad Neustadt opens its doors, the Medical Cockpit will have been successfully introduced into regular operations, and is then used in an active dialogue with our patients. Besides that, we have integrated our completely redeveloped Doctors Portal in the electronic patient files into the Medical Cockpit. This is a real quantum leap in the daily work of our doctors, and will help us to perform more effectively.The efficiency gains and time savings in the anamneses process would enable us to treat more patients with the same staffing in the same period of time. This is good for us as a profit provider of medical services and cordial too, it's fit for our patients. Just imagine the difference it will make in annoying waiting times and the treatment process for our patients can be massively reduced. This ultimately leads to higher patient satisfaction and enhances our reputation as a sector leader in technology innovations. The Medical Cockpit actually is planned to be rolled out in the whole of the corporation, except of the University of Gießen at the moment for technical reasons.Another application I would like to point out to you is the planned introduction of the digital anamneses and digital surveys. By recording patient questionnaires in a tablet will make it possible to store treatment relevant information digitally. And again, this helps us to improve the processes for RHÖN and at the same time, give patients a better treatment experience.Telemedicine will also continue to gain importance, not at least due to the gradual abolition of the so-called ban on remote treatments. It's not too much set when I tell you today that we are already working on structures to further develop our business beyond the usual core operating fields through such novel models.Now I'd like to take you to the next item on my agenda, Landeskrankenhilfe or LKH, for short, a private insurance company from Lüneburg in Northern Germany, raised its stake in the RHÖN shares from 3.19% to 5.21% on 19, October 2018, a very much welcomed sign of confidence in our business model and campus strategy.Let's now come to the final point on my highlight slides, the Campus Bad Neustadt. Currently our largest investment project in new RHÖN-KLINIKUM campus. It's about to be completed. Around EUR 250 million will be invested in this unique construction project, fully financed by our own funds. On 6, December 2018, the first construction phase will be opened. The individual clinics and wards will move their beds directly afterwards. There is no question that we will not start our operating business into that Neustadt home at the turn of the year 2018-2019.Together with our out-patient and in-patient center, the RHÖN campus provides a comprehensive service model from a single source by combining prevention, treatment, rehab and care. The digital component is connected upstream from all those treatment sets.At this point, I would like to thank our employees at Bad Neustadt, as well as at our other sites, for their great commitment and excellent knowledge in turning this mission into reality. Also, on behalf of my colleagues on the executive board, thank you so much.With these words, I'd like to give the floor back to Julian. He will continue with our P&L for the first 9 months.
Thank you, Stephan. It's an honor to present our 9-month figures to you today. As already mentioned by Stephan, the last condition for the separate accounting agreement reached in 2017 with the State of Hesse and the Universities of Gießen and Marburg, has been fulfilled since its losability checks for the contractual agreement by KPMG has now been successfully completed.In terms of numbers, this means our key figures for the first 9 months of the 2018 financial year are positively influenced by a one-off earnings contribution of around EUR 20 million. From a technical point of view, the effects from the separate accounting are booked directly against the individual expense and income accounts of our P&L. For example, the portion of the one-off effect attributable to personnel expenses is booked directly against personnel expenses.Taking this into account, and compared to last year's period, there was an overall increase in EBITDA by EUR 24.9 million, or 32.1% to EUR 102.5 million, an increase in EBIT by EUR 23.7 million, or 70.7% to EUR 57.2 million, and a rise in consolidated net income by EUR 20.6 million, or 76.3% to EUR 47.6 million.Our organic performance will continue to be harbored by the negative impact of the hospitals through our drag. Meaning, regulatory interventions by the legislator such as reduced remunerations for material cost incentive services, in particular, cardiological and special orthopedic services. And the fixed cost degression discount, which has been applied since January 2017.In addition, the increase in revenue rate and the more restrictive audit of the so-called MDK, continues to burden our results. In parallel to the regulatory challenges in the health care sector, the whole German hospital sector is feeling the effect of increasing shortage of specialists. But we are not just standing hapless by, we are actively addressing this issue by undertaking numerous measures.Let me give you an example. First of all, we offer our employees a wide range of carrier opportunities and benefits. Our medical portfolio and our market reputation help us to attract best-in-class personnel. Beyond this, we offer modern remuneration structures and attractive working environment and our own kindergartens as additional benefits. Through our university clinics, we take advantage of the opportunity to gain access to highly trained junior staff. Furthermore, we are meeting staffing requirements at the different sites through the internal relocation of staff. In order to do so, we offer staff, who are willing to be relocated, discounted apartments at another location. This measure will help us all to tackle the current shortage of available resource.Let us now take a look at the most important income statement items. Our revenues increased by EUR 26.0 million, or 2.9% compared with the same period of the previous year. Please bear in mind that likewise the previous quarters, our revenues were negatively impacted by the implementation of the IFRS 15 revenue recognition standard with a minus 1% effect, mainly MDK-driven revenue reductions previously reported under writedowns on receivables within our expenses, are taken into account when revenue is recognized from this year onwards.Aside of this effect, our revenues benefited from the SPINRAZA drug application to treat spinal muscular atrophy, or SMA for short. This positive effect account for a plus of 2.2%. SPINRAZA will be reimbursed outside the DRG system on a cost basis. Hence, the incremental revenue growth is at 1.7%.Personnel expense rose by EUR 6.1 million, or 1.0% compared to the same period of the previous year. While personnel expense ratio fell from 65.0% to 63.9%, as already mentioned, the personnel expenses position includes counter-calculated positive effect from separate accounting as well as anticipated tariff increases.Please also note that when you compare the numbers to last year's period, we incurred a small single-digit million euro one-off payment for management realignment in 2017. The cost of materials rose by EUR 23.4 million, or 9.2% compared with the same period of the previous year. Without the EBITDA mutual SPINRAZA effect, cost of materials only went up by 1.3%. This means that the increases is without our fore -- it's within our forecasted range. Other expenses increased by EUR 5.9 million, or 6.3% to EUR 88.1 million. This change is mainly attributable to the effect of the aforesaid IFRS 15 implementation.Please move to the next page, and I will continue with our balance sheet. There is nothing new but plenty of positive information to report here. RHÖN continued to develop in a solid and positive way. We are a healthy group that still maintains a very high equity base of 78%, and available cash of EUR 147 million at the end of the third quarter of 2018.At the end of October, we issued a promissory loan note, or Schuldscheindarlehen, in the amount of EUR 100 million as part of our comprehensive finance strategy. Our clear objective was to secure the attractive conditions on the Schuldschein loan market for the long term. All tranches are equipped with fixed couples and have a maturity of 5, 7, or 10 years, thus providing long-term financing and planning security.The transaction was oversubscribed several times due to high demand from various investors. The funds raised are used for general corporate financing. We have reached an average duration of 8.7 years. More than 60% of the raised funds were placed in the 10th-year tranche. This is an extraordinarily high percentage rate in the 10-year tranche, which is currently anything but normal on the market. The sweet spot in the market is more or like 7 years at the moment. The result achieved self-confirmed the debt side, create confidence in our business strategy and the vision behind our campus concept.As a further part of our sustainable finance strategy, we see the syndicated credit line concluded last year as a means of covering short to midterm liquidity requirements. I'd like to quickly mention here that the syndicated backup facility has not been drawn by the end of Q3 2018. In addition to those facilities, we finance ourselves through a solid and sustainable internal financing capability.I would now like to hand you back to Stephan, who will close this call with the regulatory outlook and our guidance.
Thanks, Julian. Let me give you a brief synopsis of the actual regulatory environment as well as some thoughts on the planned additional measures from the next year onwards.To begin with, I'll certainly not be able to answer all of your justified and detailed questions about the additional regulation of the German hospital market today. I do like the answers, because the introduction of the measures under the new nursing staff strengthening that -- is -- has just been discussed in the German Bundestag a few hours ago. Rest assured, we will do our best and our homework to calculate all scenarios for a possible new law at RHÖN-KLINIKUM.Let me start with some fixed and nonparameters about next year's compensation. As this is the case every year, the so-called wage-sum increase rate established in September as the main price determining factor, this rate gives us an indication of inflation of our price tags for the next year. The actual rate for 2019 is at 2.65%, so a little bit below the 2018 figure, but still on a stable and feasible level.The exact base rates for the individual states in which RHÖN operates has not yet been published, and I expect it to follow until the end of Q1 2019. The federal base rate was released 1 week ago, it is at roughly EUR 3,545, and accounts for a plus of 2.24%. It is unclear to what extent the RHÖN's refinancing after tariff increases will affect the federal state base rates. So it is way too early to talk about exact price assumptions.On discount, I can share with you the following statements. The catalog effect will also accompany us next year with similarly high discounts on material cost-intensive services. We're now coming to minimum staffing levels for nursing care. We're going to take the positive view of the manifold efforts made by the Federal Ministry of Health to improve the care situation in hospitals, but also see some risks linked to the speed at which the ministry forces these changes.The regulation on minimum staffing levels in nursing care foresees the implementation of minimum staffing levels within -- for care-intensive units based on specific nurse-to-patient ratios within day and night shifts by the beginning of 2019. All other statements in these slides are somewhat vague because we do not have the final version of the law yet, so we can only talk about the latest status we have at the moment.The fixed cost degression and discount should remain at a frozen level of minus 35%. Additional minimum staffing levels for neurology and heart surgery shall be introduced by 2020. Another plan, but important component of the intended law is that each additional nurse and caregiver should be fully compensated. However, we take a critical view of minimum staffing levels for care-sensitive units, as we do not believe that there is any empirically proven evidence of a connection between the quality of treatments and the particular nurse-to-patient ratio for minimum staffing levels.The threatened discounts, in the event of noncompliance with the requirements, together with the current labor market situation in nursing professions, entail the risk of mutually poaching of employees with the consequence of restrictions in patient care due to capacity upper mix. From our point of view, this situation must be prevented.In general, very efficacious constructive discussions and systems that prevent too low staff levels in hospitals, these can be achieved by the introduction of personnel cautions in our minimum staffing levels for the entire hospital. In addition to the high demand on quality in patient care, time-consuming obligations to provide evidence at wards and shift levels for hospitals should be eliminated, as these times cannot be used for patient care.However, our any statements regarding the regulation that is being considered for 2020, and here I am referring to the care filed of the nursing remuneration from the DRG system. We are curious to see what the final status of the law will be on this, specifically. Again, rest assured that we'll do our homework extremely thoroughly, and have mapped all the effects of the planned considerations for 2020 in different scenarios. However, as we do not have the final version of the legislation analyzed by our different corporate departments and perspectives, we cannot and will not make any further comments on this today.In the meantime, we have heard nothing new about the policy and quality as criteria in the scheme, so we can assume that this will not play any role in next year's compensation. This last point leads me to our guidance, I'll make it short. Thanks to our solid operational performance and the successful fulfillment of the last condition of the UKGM separate accounting contract. We again fully confirm our guidance for 2018. You'll find our financial calendar for 2019, some additional information on pricing as well as our shareholder base, in the appendix of today's presentation.Last, but not least, I'd like to take this opportunity to promote our Capital Markets Day in 2019. It will take place on 10th of April 2019 at our Bad Neustadt site. The aim of the event is the live presentation of our new campus, with insights into the medical field and exclusive access to all 3 members of the management board. I'll be delighted if you could block this date in your calendar today. Our IR department will contact you imminently with the details of working program and schedule.Thank you very much for your attention so far. We are happy to take a few questions now.
[Operator Instructions] The first question is from Hans Bostrom, Crédit Suisse, London.
I had a couple, please. Could you elaborate on what types of qualified care staff shortages you are seeing? And does this go beyond nurses, or they obviously presented, so it's commented on their own issues relating to doctor losses, but is there something you are experiencing as well? And would this be driven by preemptive poaching by other players in the market? Secondly, could you also elaborate on what sites you are planning to take your campus concept to? And what level of investments that you expect will need -- be needed for that?
Thanks for the questions. Let me start with the first ones. I would like to underline that we do not have a general shortage of nurses within the corporation. We are in the good situation at every site of our -- and our operational site has its own nursing schools. We are doing very much to increase the capacities there as well as to undertake further measures to not just to gain more nurses, but to also ensure that the ones that are onboard stay onboard. That's actually more important than gaining new ones because there is a big competition out there. So there's no general shortage. We do see in -- on a few stations issues that we're addressing with the local management, but there is no general warning on that. And regarding the question of doctors, there is not really a shortage of doctors we are experiencing. We do -- and that's something that is unique for the RHÖN corporation. As we operate the only 2 privatized university hospitals in the country, we basically sit at the source of professional education in Gießen and Marburg, so we do have opportunities to bind medical students to the corporation at a very early stage. That's what I have to say on this issue. Regarding the campus rollout, first of all, I would like to remind you that we are already in the second campus project, as you know, in Frankfurt (Oder) site, which is the remodeling of an existing hospital into a campus model. I am personally in talks about the expansion of the campus model to other sites in Germany, and maybe even abroad actually. Regarding this issue, I do not see -- well, I want to put it the other way, I do see that the Campus Bad Neustadt is the structural and processual prototype for the campus. But I do not see necessarily, it is a prototype in terms of financial volume. By saying that, I mean that further campus models and further campus expansions might be on a lower level because we will be thinking about newer approaches here, too. If there is a campus expansion within Germany, for example, we might not necessarily be owning the buildings, right. This is more management expertise that's expanding RHÖN-KLINIKUM, and less owning the buildings, just to give you an idea behind that.
The next question is from Tom Jones, Berenberg.
I had several questions actually. The first is, just wondered if you could comment on your in-patient volumes in Q3. They were kind of flattish, but it'd be intriguing to know how they progressed through the quarter. Some of your peers are commenting that July and August were kind of soft as usual, but there wasn't the usual September rebound. Just wondered whether you saw the same thing. My second question is kind of tied to that. If I look at that average revenue per in-patient case, it was at about 3% at the H1 mark and then 2.5% by the 9-month mark, which suggest it kind of dropped a little bit in Q3. Was that just tied to the volumes in the mix? Or was there anything else going on there that we should think about? And I have one more question, but I'll come back to that.
Well, regarding -- Tom, regarding the in-patient development. First of all, I'm sure you're aware that in general we will be seeing an increased trend in terms of out-patient treatments, in general. With regards of the in-patient development in Q3, we have to take into account that we have a -- had a relatively weak August and September, and that as a matter of fact was actually related to the climate and the hot weather. We did have a certain drop in elective treatments. So patients -- the patients really decided not to go to the hospitals for elective treatments due to the very hot weather. But we see, as an outlook, that October developed better. So that's what I can say on the in-patient development.
Okay. And then on the revenue per case in Q3?
Tom, this is Julian from the IR department. Well, if you mean the revenue per case, I mean the revenues -- it's -- they not really increased. And I don't understand the question, look, can you just say something more about it?
Well, if I look at the average revenue per in-patient case for the first 6 months of the year, it grew roughly 3% year-on-year. If I look at it for 9 months, it grew roughly 2.5%, which suggest that for Q3, on a stand-alone basis, it grew, perhaps, around 1%, which is a bit of a drop from the 3% run rate you had for the first 6 months of the year. So I was just wondering if there was anything within the volume side of things that you just mentioned that, that drove that slightly lower increase in revenue per treatment in Q3.
So thanks, Tom, I now understand the question, but that's nothing else, it's just volume problem, which Stephan just described, a weak August and usually September recovers, but this was not the case this year for us and also not for the whole market.
Okay, that's perfect. And my final question, my follow-up one was a big-picture question for Stephan really. With the way -- the coming changes to the way nurses are reimbursed, how does this really affect how you run the business from an operational basis? Because at the moment, with your reimbursement per case fixed effectively through the DRG system, there is a certain optimum number of nurses to have in a facility to be at your most efficient. But when they're being reimbursed separately, well, the optimum number is as many as you can get, which is a very different kind of way of thinking and operating to the current environment. So just kind of wondering whether you actually see some opportunities coming out of this change in reimbursement for nurses to perhaps help use nurses more as a way of driving more volume through the facility. Because if you're not limited on how many you can have, you can certainly get more efficient in terms of your length of stay, and to get patients discharge quicker, all that kind of thing. So what -- most of the investment community seems to see this as a very bad thing. But I'm kind of wondering whether you actually see any opportunities to become even more efficient with the nursing reimbursement changes.
Well, yes, I mean, I think I can only comment on an aspect level, but -- I mean, of course, I have to leave the Berlin political sphere out of my comment. But if I do so, I think the challenge for the -- for operators like us will be on either hiring flexibility and shifting nurse personnel within the operational site. We, of course, will be looking at hiring nurses where we have shortages. And I am very skeptical given the run of numbers, numbers of required nursing in Germany starting at 8,000, over 13,000. Now we are up to 100,000. I'm not really sure where the -- where all these nurses should come from. And the discussion about nursing in Germany is -- especially from the nursing sector, and I've just been talking, giving a speech at a conference with over 1,000 of them, that the call from them is to get more on an ice level with the doctoral side. So what they're saying is, enriching their job profile as this is the case in other constituencies, like Finland, for example, but many others. If I look at it from an entrepreneurial point of view, and I know -- I actually know by background, I have been an entrepreneur for decades. And you would probably think about it, it's compensated one-to-one, on a 1:1 ratio, you would probably enrich the nurse job profile by adding other services that we have been outsourcing. So they would rather be additionally cleaning the patients department or delivering the food, because that's part of the compensation fees. I'm not sure if that's really adding to the productivity of the nurse profiles as it is requested by the nurses themselves, and always played by the -- always playing by the politicians in Berlin. So I would say, you can -- there are many contradictions out there. It's too early for us to judge, but rest assured, we'll look at the flexibility within our big sites, we'll look at if it makes sense from an entrepreneurial point of view to add services to nurses that, for example, have maybe even outsourced already, like food delivery or many others. So we'll see, and there is still a few months for us to make final decisions. But again, we'll have to have a look at the detailed law on that, of course, all the corporate departments' perspective on it. I'm sure we'll give an update in the calls ahead.
The next question is from Oliver Metzger, Commerzbank.
My first one is a more general question on this shift towards ambulatory care. So this shift, it happens over some quarters. It's something which, I would say, has come more or less out of the blue. And how do you explain the shift? Is it more like older doctors go into retirement, and new doctors from the university come in? And also, what do you think how sustainable this shift is? My second question is, given your efforts to strengthen also the ambulatory setup with your campus concept, when do you think or how much time does it take until you can neutralize this current headwind? And my third question is on the catalogue effect in 2018, if you compare the current magnitude through the headwind of previous years, I guess, you can elaborate how strong this incremental headwind is? And finally, just as a confirmation, is it -- have I understood it correctly that you expect the same negative magnitude for 2019 compared to 2018?
Okay. Let me start with the first. I think, Julian will follow with the others. If you look at the out-patient development, this is not of any surprise for us, this is expected by us. And it's basically driven by the huge advantages in the medical technology. We will see even further innovations and improvements when it comes to reducing in-patient stays and when it comes to getting things done within the same day. And again, with the -- our 2 university hospitals, we are really at the forefront in getting an idea of what -- how and to what degree this is impacting, especially our core business areas. So we really expected that, and this will continue. And the reason -- and this is the reason why we basically setup the campus model. If you -- basically, if you look at the campus model or beyond the campus model, what is the value, the actual value chain. And to formally answer, that is basically digital/telemedicine before out-patient, before in-patient treatment, before rehab. And we are strong with out-patient and in-patient, and I've just mentioned 2 other areas, where we will be thinking about how we deal this from an entrepreneurial point of view. As a matter of fact, it's not just a brand from an ambulatory to out-patient treatment, the matter of fact is that digital and telemedicine applications. And you've seen the fall of the Schulterchirurgie in Germany, the remote treatment ban basically aims at even reducing out-patient treatments by basically taking away a good bite of potential out-patient candidates. So what I'm saying is we will -- we were not surprised by that at all, we expected that. And the campus model is exactly, from our point of view, the right answer to it. And that's why we also included in the Campus Bad Neustadt, for example, several dozen resident doctors to make sure that we also -- are also able to better deal with the margins because we'll be with the -- we would like to focus in terms of the in-patient treatment on higher margin business, and make sure that people who do not belong in the in-patient center get instantly treated in the out-patient center. And we also expect that we do well on the entrepreneurial development of the company. We would also expect on a pro forma perspective to even discuss or analyze out-patient treatments in the sense of can even those be avoided by telemedical treatments. So that's what I can say on this issue. Julian has some answer on the queries.
So. Oliver, I guess your last question was on material cost-intensive services and the catalogue effect. So what we can say here is that overall it cost us this year roughly EUR 4.5 million on a group level. And in the last years, I can say, only Bad Neustadt it cost us roughly EUR 1 million a year, so you can see a split. And actually about 2019, it's very too early to talk about the effect, because the TROOPERS that's just been released this week. And I guess, calculations for each side are on an individual basis, so we have to do our homework here, and I guess, we will come up with a more precise answer in our next call.
We haven't received any further questions. I hand back to Julian Schmitt.
Thank you for joining our conference call today. I have -- if you have any further questions, please do not hesitate to contact our Investor Relations department. I look forward to hearing from you, and we'll be pleased to answer your questions. Thank you for now, enjoy the rest of the year and goodbye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.