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Hospitals run inefficiently and underfunded for years

Nov 11, 2020

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“Even without the unprecedented challenges of the COVID-19 pandemic, hospital care in Germany is chronically underfunded. The federal states increasingly fail to meet their obligation to invest in hospitals. Each year, the funding gap totals €3 to €4 billion, with an annual funding need of €7 billion,” Kay Scheller, President of the German SAI, stated when he communicated an audit report to parliament on the funding of hospital care by statutory health insurance bodies. “This funding shortage has resulted in hospitals drawing on other sources of investment funding. For years, the hospitals have used a portion of the case-based payments made by health insurance bodies for investing and not for treating patients. This practice does not comply with the requirements set by the dual-funding system for hospital care.”

One reason for this situation is the federal states’ inadequate hospital planning. Hospital planning is a patchwork of different approaches that does not provide needs-based hospital care across Germany. The states rarely work together in coordinating hospital planning. They apply diverging criteria to location, specialist units, specialist areas, and total number of beds. Planning activities do not meet requirements set by demographic trends, morbidity rates and progress in medical research. Quality aspects only play a minor role in the states’ hospital planning. In addition to that, the states have no uniform criteria in place to determine as to whether hospital care falls short of or exceeds demand.

This situation has resulted in a hospital care system which has not only been chronically underfunded but largely inefficient for many years: There is an overlap in responsibilities and a lack of specialisation. Hospitals providing basic and standard medical care also carry out complex surgical operations that should only be dealt with by specialist hospitals. The potential for ambulatory treatment is not fully realised. On top of that, vacancies for registered nurses and physicians often remain unfilled.

Due to the funding shortage, hospitals explore other ways to fund investments. For years, they have used a portion of case-based payments, made by health insurance bodies to cover operational cost, for investing. What is more, the number of beds and treatments is surging: Within the EU, Germany has the highest hospital bed density and above-average periods of hospitalisation. The number of MRI examinations and hip and knee replacement surgeries also was significantly above the EU average.

As a result, Germany’s hospital system is inefficient: 40 per cent of all hospitals make losses, 13 per cent are facing the threat of insolvency.

The states should engage with the federal government to develop a supply structure that reflects current needs. All hospitals needed must receive sufficient funding. Where the federal government co-funds investment, the government should also have a say in the states’ planning activities. The same applies to health insurance bodies.

When it comes to the hospital system, the structural fund for hospital care and the planned hospital future fund are of little help. The two funds will not help enhance the supply structure. Funding structures are inefficient and not pro-active. The funds should reflect the principle that “the federal government should determine the rules where it gives the money”.


(Press release of 11 November 2020)

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