Financing reforms in the German hospital sector: from full cost cover principle to prospective case fees

The authors provide an overview of the hospital sector in Germany with a focus on the impact of recent reform legislation on this sector.

Data from the Federal Statistics Office, the Ministry of Health, and the Federal Association of Physicians are synthesized with information obtained from a general review of the literature.

Before the implementation of recent health-care reforms, the German health-care system has been sharply divided into inpatient and ambulatory care sectors, resulting in a fragmented system of care delivery. All hospital operating costs were fully covered through per diem charges. The 1992 Health Care Structure Act and subsequent pieces of legislation have introduced new mechanisms to improve cost efficiency in the hospital sector and increase coordination between the inpatient and outpatient care. These measures notably include implementing an inpatient prospective payment system and permitting ambulatory surgery and care services to be offered in inpatient settings.

Whereas prospective payments have greatly reduced the length of stay, hospitals were reluctant to offer ambulatory surgery due to budgetary constraints and the high level of ambulatory surgery by office-based physicians. The reforms passed have not yielded substantial cost savings. These reforms offer a natural experiment that could benefit from national and international studies on the impact of hospital sector redesign on management, financing, and patient outcomes.