Context
Germany’s health system is characterized by strong sector boundaries between inpatient care (hospitals) and outpatient care (mainly office-based physicians). Hospitals are primarily paid through case payments (diagnosis-related groups, DRGs). The DRG system and general budget constraints have put hospitals under increasing financial pressure, evoking societal and media debates about access to and quality of hospital care. Additionally, the quality of inpatient care differs widely between hospitals. So far, hospital planning, a task of the 16 federal states, does not systematically include quality criteria.
Impetus for the reform
In 2022, the Government Commission for Modern and Needs-based Hospital Care proposed a comprehensive hospital reform, including
- a partial substitution of the DRG-based hospital payment system with flat fees,
- linking hospital planning and remuneration to the existence of certain hospital structures and processes with so-called service groups, and
- categorizing hospitals into different levels of care based on which service groups they can offer (see the policy analysis “Proposal for fundamental reform of hospital remuneration” from 12 December 2022).
In 2023, the legislative process started with the Hospital Care Improvement Act (Krankenhausversorgungsverbesserungsgesetz).
Main purpose of the reform
According to the Ministry of Health, the reform intends to
- improve treatment quality in hospitals,
- secure access to care, especially in rural areas,
- foster integrated, cross-sector healthcare, and
- relieve hospitals of bureaucracy and economic pressure.
Content
With the reform, the main content includes the introduction of the following policies:
- 65 service groups: Hospitals must meet certain requirements for staffing, equipment, and departments to apply for a service group (for example, general internal medicine, stroke unit). The respective federal state assigns these groups, which determine reimbursement.
- A new reimbursement model: The DRG-based hospital payment system has been partly replaced with flat fees. Reimbursement for inpatient operating costs will ultimately include three components: nursing staff, flat fees, and residual DRGs, derived for every service group based on average costs. The share of the flat fees depends on nursing costs and variable material costs.
- Intersectoral care facilities: A new hospital form, intersectoral care facilities, will be able to provide outpatient physician care, outpatient and short-term inpatient care for older people, outpatient hospital services (for example, day surgery), and some inpatient treatments (at least covering geriatrics and general internal medicine). The aims are to secure access to basic services, especially in rural areas, and to lower sector boundaries.
- A so-called transformation fund: Between 2026 and 2035, hospitals can apply for investments from a transformation fund with €50 billion to meet the requirements to apply for one or more service groups, mergers and closures of hospitals, or conversions into intersectoral care facilities.
- Staffing levels: For physicians (as in place for nurses) and assessing the need for staffing levels for other professional groups like midwives or physiotherapists.
- Measures to lessen bureaucracy: For example, regarding accounting procedures.
Implementation
The act passed parliament in October 2024, got approved by the federal states in November, and entered into force on 1 January 2025. Federal states will assign service groups to their hospitals in 2025 and 2026. The conversion of the remuneration system will take place between 2027 and 2029.