Austria was one of the first European countries to introduce a DRG (diagnosis-related groups) system for hospital financing in 1997 (replacing the previous model based on a flat-rate per hospital day). In this system, regional health funds pool funds at the state level from tax revenues and social insurance contributions to finance the vast majority of public acute care services in hospitals through the so-called LKF – Leistungsorientierte Krankenanstaltenfinanzierung, also known as the Austrian DRG-based hospital financing system.
The LKF system is divided into a core area, which uses nationally standardized DRGs across all federal states covering at least 51% of ongoing operating costs and a steering area, which can be tailored by individual states to support region-specific priorities. In 2019, the model was extended to cover outpatient services.
DRG system reform
Significant reforms to the LKF system were implemented in 2025 to align with broader healthcare reform goals, emphasizing a treatment cascade of “digital before outpatient before inpatient”.
Since 2022, telemedicine is recognized as a reimbursable service within the DRG system, thereby formally integrating digital care into the official remuneration structure. This allows consultations and medical advice to be provided online.
Additionally, starting in 2025, a standardized calculation methodology is applied across both outpatient and inpatient care settings, thereby promoting the shift toward an increase in the usage of outpatient services.
Avoidance of supply-induced inpatient service provision
The most important change is the introduction of readiness costs (Vorhaltekosten) as a fixed component of the LKF core area. This marks a substantial shift: beginning with the 2025 LKF model, LKF points are calculated on the basis of 70% of total cost for both inpatient and outpatient care, while the remaining 30% is now covered as readiness costs. This change responds to recent trends – declining inpatient occupancy rates, rising staff levels and increasing overhead costs – that have driven up the share of costs unrelated to actual service delivery. Previously, this imbalance created incentives for supply-induced inpatient service provision and unnecessarily extended hospital stays. By decoupling a portion of reimbursement from service volume, the reform aims to reduce such inefficiencies and promote more needs-based care delivery.
Enhanced attractiveness of the outpatient LKF model
Since its inception, the outpatient LKF model has included a 50% share of readiness costs (Strukturkomponente). As of 2025, this share has been reduced to 30%, with a corresponding increase in performance-based points, which have been recalibrated to better reflect overhead costs. This adjustment marks a shift from contact-based to service-based weighting within outpatient flat-rate reimbursements. The rebalancing aims to strengthen the link between actual service provision and remuneration, enhancing both the transparency and attractiveness of the outpatient LKF model.