Germany to try and save German hospitals.

Graham Charles Lear
5 min readNov 4, 2022


The government has pledged billions to help hospitals face rising inflation and energy costs. It has also promised “the biggest hospital reform in 20 years” to fix the system. That is badly needed, but will it work?

German Health Minister Karl Lauterbach revealed on Tuesday that German hospitals would be receiving an extra €8 billion ($7.9 billion) as a buffer against spiraling energy costs.

The planned special funds “should come very quickly,” Lauterbach said in Berlin, adding that the money was also meant to cover additional needs to offset inflation.

The German Hospital Federation (DKG) had warned that the sharp rise in costs would send many hospitals to the brink of insolvency.

Ventilation of patients has become a lucrative business

Wrong incentives?

But the hospitals’ immediate cash-flow troubles are overshadowed by larger structural issues, which Lauterbach has made it his task to resolve: Germany’s understaffed and over-bureaucratic hospital system, where doctors and patients have for many years complained of too many financial incentives to “over-treat” patients, resulting in long hospital stays, unnecessary operations, unnecessary antibiotic treatments.

A recent documentary by public broadcaster ARD related several such stories. One was told by gynaecologist Katharina Lüdemann, who described a patient who had developed a so-called placental insufficiency in the first 25 weeks of her pregnancy.

Following two weeks of daily assessments on whether or not her baby had more chance of surviving inside or outside her womb, a colleague at a conference told her: “You do know that if the child weighs more than 1,500 grams, then we make only half as much money. So what are you waiting for?”

“That really knocked me off my feet at the time,” Lüdemann recounted. “What does it mean when it isn’t even about that anymore about what is medically reasonable?” Premature babies are one of the most lucrative income sources for hospitals, and Germany has a network of 170 hospital centres for premature babies, far more than other countries.

There are similar stories in all hospital departments: Artificial ventilation, a treatment that was needed more than ever during the first wave of the COVID-19 pandemic, costs nearly €11,000 for the first 24 hours, but anything over 25 hours, and the hospitals can earn twice as much and the sum goes up with time. And yet prolonged ventilation can cause significant damage to the lungs and heart.

When there is not enough money for nursing staff, hospital beds have to stay empty

Diagnosis-Related Groups

The villain in this is the classification according to Diagnosis Related Group (DRG), the system by which hospitals in many countries classify cases and how they are paid by health insurers. This “Fallpauschale,” or case fee, was introduced in Germany in 2003 partly to reduce the length of hospital stays and the ensuing pressure on hospital staff: Hospitals are now paid based on the case itself, not on how long the patient stayed in the hospital. It worked: The average length of a hospital stay in Germany has dropped from 10 days to 7 days since the introduction of the case fee. The occupancy of hospital beds remained low in 2021, despite the pandemic.

But this has only brought its own detrimental incentives with it: Namely, a pressure to get to treat as many patients as possible, and a pressure to over-treat them. There’s an old medical joke about this, which the doctor and journalist Werner Bartens repeated in the Augsburger Allgemeine newspaper last year: “There are no healthy people, there are only people who haven’t been examined thoroughly enough.” That, Bartens said, “was not irony anymore, but dangerous reality.”

Promising the “biggest hospital reform in 20 years,” Lauterbach has said he is determined to replace case fees with a better system and has instituted a 16-person experts’ commission, made up of leading doctors and legal experts, to come up with radical solutions.

Gerald Gass, board chairman at the German Hospital Federation (DKG), is happy enough with the government’s approach, but sceptical that the case fee system should be scrapped altogether. “We share the minister’s opinion that there’s a need to reform the financing of hospitals,” Gass told DW. “But we aren’t calling for the scrapping of the case fee system. We want it to be extended and adapted.”

The parallel often drawn by doctors is that of firefighters: They are not paid per fire, but to be ready for all fires. In a medical context, that would mean giving hospitals a basic budget. Gass says the best path would be a flexible one: Give hospitals a budget but also case fees for certain individual cases — especially out-patient treatments.

This, says Gass, would negate the incentive to “permanently treat new patients.” “This hamster wheel effect, which puts a massive strain on staff, would be reduced because the financing would also include other incentives,” he said.

More out-patients

Such a flexible approach would bring with it another reform that the DKG is calling for: Equipping hospitals to better mix out-patient and in-patient services — something that Gass says is already standard in many European countries. It would mean getting rid of hospitals that only treat in-patients with a variety of ailments and creating more specialized hospitals able to take more out-patients.

Other countries, including Switzerland, Sweden, and Norway, already have some kind of mixed system like the one Gass describes. Denmark has recently instituted a drastic reform of its hospital system that has resulted in the closure of some hospitals to make way for so-called “super-hospitals,” some of which required the building of new roads and infrastructure.

Something similar, though not quite as far-reaching, could also be possible in Germany: Fewer in-patient-only hospitals, some fusion of hospitals, and other hospitals specialized in certain conditions.

“I am convinced that the minister and the commission are aiming for such a major reform,” Gass concluded. “But I’m also sceptical whether the path they are choosing is the right one.”

His worry is that, since Germany’s health policy is largely determined at the state level, the state governments will block reforms like closing certain hospitals that might make them look like they mismanaged things for years. “The states aren’t represented in the current commission,” he said, “so everything that is being decided and proposed now will have to be approved later by the states.” As always with ambitious plans, the political hurdles may be the toughest ones.

Edited by: Rina Goldenberg



Graham Charles Lear

What is life without a little controversy in it? Quite boring and sterile would be my answer.