Hospital reform in Germany: revolution, reform, or label redesign? 

As lawmakers in Germany undertake hospital reform, health workers’ associations and others warn that it fails to address impact of commercialization of health

August 16, 2023 by Peter Hoffman
Members of the Association of Democratic Doctors, vdää*, during a protest.

There is still no clarity regarding the final shape of hospital reform in Germany, even for those within the health system. In December 2022, federal Health Minister Karl Lauterbach announced that a commission of experts will develop recommendations that will result in a dramatic de-economization“ of health care in Germany. After long discussions between the federal health ministry and the health ministers of the sixteen States about those recommendations, they finally shared a keypoint paper on the reform plans on July 10, 2023. While the outcomes arising from this are yet to be clarified, it is certain that the “dramatic de-economization” of hospitals will not occur. Let’s take a critical look at the keypoint paper.

Currently, a number of hospitals are grappling with exploding deficits, driven by several factors. Firstly, the COVID-19 subsidies provided by the federal government expired last year. Secondly, inpatient treatments have been declining, as well as revenues from each individual case.  The decrease is about 20% compared to pre-COVID times. Health economists working with the government claim that this indicates high overcapacity – an excess of beds – in hospitals. However, those of us working in hospitals know that the crisis actually stems from a shortage of skilled nursing staff and other professionals. Beds and treatment capacities remain unused due to a lack of staff to care for patients. Consequently, the utilization of effectively available beds is often quite high. The “low bed utilization” suggested by the government commission is only due to reliance on the count of existing beds, rather than beds that can be attended to by existing workers. Consider the example of municipal hospitals in Munich. If we had the necessary staff on hand, we could immediately admit and treat several hundred more people. However, at present, this large municipal provider, like many other hospitals, is facing a deficit of around 100 million euros for 2023.

According to the current plans, Phase 1 of the hospital reform will see a dramatic acceleration of the “cold structural change.” In Germany, hospitals can have private, public or non-profit owners. Currently, they are all primarily financed through a fee-per-case system called DRG (Diagnosis related Groups) system, enabling private owners to generate profits while also bearing the risk of financial losses.

Hospitals that lack financially robust and politically supportive sponsors, like the city of Munich, will likely be forced to declare insolvency due to high deficits in their current operating expenses. This will lead to the closure of hospitals, even if they are crucial for providing care to the population. So far, authorities at the federal level have allowed this situation to persist without intervention. In the first four years of the reform, no net improvement in hospital revenues is planned. The cornerstone paper merely includes a non-binding statement that the hospital fund for structural investments from 2016 will be extended and supplemented. When and how exactly this will happen is unknown. 

When it comes to changes of structure, “service groups“ are to be defined in the next few years. Equipment and personnel structure specifications will be established at the national level for each of these “service groups.“ The federal States will then award contracts to individual hospitals for the provision of “service groups.“ For patients, this process has the potential to significantly improve the quality of care, if the specific guidelines encompass treatment quality and their implementation is overseen at a national level. This approach would prevent hospitals from delivering treatments for which they lack qualification.

While these changes are welcome, proposals regarding hospital financing are devastating. The document foresees the continuation of the fee-per-case system, despite its disastrous economic disincentives. The effects of this system are the primary causes of multiple instances of irrational medical care. As mentioned earlier, this approach allows for-profit operations and creates strong incentives to expand profitable treatments while reducing non-profitable treatments and cutting costs wherever possible.

Over the past 20 years, this system has brought enormous pressure on health workers, playing a significant role in the current health workforce crisis. The promise that undesirable effects like this one, can be alleviated simply by reducing financing from per-case flat rates is unlikely to prove itself successful. The same is true for the government’s promise that the reform will create a more need-oriented balance through the introduction of new financing for maintenance costs. Both promises stem from health economic theories that will be difficult to put into practice, at least within the frameworks currently under discussion.

Alliance Krankenhaus statt Fabrik opposes the reform 

The announced budget for maintenance costs is not earmarked for a specific purpose. It will not necessarily be intended to maintain treatment capacities or provision of services. It could be used to compensate for deficits or distributed as dividends to shareholders in case of the private sector. In reality, the so-called “financing of maintenance costs” is a misleading label.

It is also clear that calculating these “reserve costs” will be extremely difficult and arbitrary. In any scenario where another bureaucratic monster arises, it will consume human resources that will be lacking in other hospital departments.

It is an illusion, possibly even a deliberate attempt at misinformation, that the planned reduction of per-case flat rates in favor of reserve financing will diminish the economization driven by DRGs (Diagnosis Related Groups). At present, we are witnessing a further surge of commercialization within the DRG system, triggered by the hospitals’ precarious financial circumstances and the bottlenecks in treatment capacities. Hospital managements everywhere are focused on keeping unwanted (i.e., unprofitable) patients from admission, expanding profitable specialties and treatments, and reallocating staff and resources without adequate consideration for the specific medical and nursing needs of the patients occupying the beds. Yet, what else should we expect from business-oriented economists in hospital management operating within the DRG framework? We know that even a gradual reduction of the flat rates per case in the future will not change anything, because the system logic remains the same.

It’s crucial for health workers and patients not to be distracted from the fundamentals by the cacophony of topics that prevails in the discussion surrounding the reform. This reform doesn’t truly bring us closer to a provision of public health services based on needs, because those in charge of its execution continue to bury their heads in the sand before the havoc brought about by the commodification, commercialization, and privatization of healthcare.

More information and detailed comments on the Commission’s proposals and the key issues papers can be found on the homepage of Krankenhaus statt Fabrik: Videos from the series of events in June on the reform proposals can also be found here (in German).

Peter Hoffmann is an anesthetist and member of the Workers’ Council in a Munich hospital. He is a member of the extended board of vdää* (Association of Democratic Doctors) and active in the alliance “Krankenhaus statt Fabrik” (Hospital not factory)

The article was first published in German in “Gesundheit braucht Politik” (Health Needs Policy) in July 2023. The English translation was provided by Karen Spannenkrebs (vdää*).

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