Medical Reform

Pinched by Overcharging, Germany Prepares to Revise Payments to its Public Hospitals

Operation in Klinik
Health minister wants to curb hospital costs.
  • Why it matters

    Why it matters

    Health insurance companies have long complained that hospitals in Germany manipulate the compensation system to be able to charge more for procedures.

  • Facts


    • Germany is ranked 20th in world in life expectancy.
    • Average hospital stay in Germany is nine days.
    • In the United States, the average hospital stay is five to six days.
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As part of hospital reform, Germany’s federal minister of health, Hermann Gröhe, a Christian Democrat, wants to change how some 2,000 clinics and hospitals in Germany are compensated. His demand comes in response to criticism by health insurance companies that hospitals have long manipulated existing laws to inflate prices.

In Germany, the Institute for Hospital Remuneration System is the organization responsible for determining compensation rates. Mr. Gröhe said that in the future, the body “can make a representative sample” of participating hospitals so that drops in material costs are reflected in price calculations. The details would be decided by a working group of federal states that will present key points on hospital reform this fall.

The price system could be manipulated from the beginning because participation in the calculating process is voluntary.

For 10 years, health insurance companies have paid real prices for each hospital service, instead of the agreed per diem rate.  The hospital compensation institute annually determines that flat rate payment for some 1,200 procedures, based on actual costs incurred.

But the price system could be manipulated from the beginning because participation in the calculating process is voluntary. The result: Only 13 percent of hospitals in Germany take part in the sampling. Even the head of the institute, Frank Heimig, sees signs that profitable hospitals don’t participate in the calculation to avoid loss of income.

Georg Baum, the president of the German Hospital Federation, said he won’t fight price calculation changes, acknowledging that the system for determining lump payments could be improved. But he said criticism by health insurance companies is exaggerated.

Mr. Baum pointed to research by the Organization for Economic Cooperation and Development that shows some health services in Germany – such as balloon catheters, bypass operations and artificial hip implants – are only cheaper in Slovenia and Israel. Moreover, the institute for hospital compensation has long used various statistical methods to compensate for “imbalances in the calculation samples.”

But Sigrid König, the president of Bavarian health insurance providers, the Bayerische Betriebskrankenkassen, claims hospital costs are artificially inflated.

“It is worth reading the OECD study cited by Mr. Baum all the way through,” she said. The study, she noted, specifically pointed out  that German costs used in the report are probably lower than actual costs.

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