Academic journal article Business and Economics Research Journal

Strengths and Weaknesses of Financing Hospitals in Germany

Academic journal article Business and Economics Research Journal

Strengths and Weaknesses of Financing Hospitals in Germany

Article excerpt

Abstract: In this study strengths and weaknesses of financing hospitals in the German health care sector are examined. In the first part of the paper key data of hospitals, subsidies granted by federal states to hospitals, allocation of expenses in the statutory and private health sector are examined. Moreover, in the same part precautions taken in the German health care industry are analyzed. In the second part of the study compensation system, in particular Diagnosis Related Groups, as a financial resource for the activities performed in hospitals are investigated. For comparison the system before 2003 is also considered. In the third part critical view of the dual system in Germany is discussed. Change in financing of hospitals from 2003 shows improvement in financial situation of these institutions in Germany. However, the new implemented dual system reveals deficits in investment expenditures supported by federal states. The monistic model proposed by Rürup for a financing system from a single resource may provide a better financial base for well-eguipped hospitals to meet the challenges among the competitive German hospitals.

Keywords: Financing of hospitals, dual financing principle, diagnosis related groups, investment shortfalls, monistic financing principle.

JEL Classification: 111, 113, G22, G28

1. Introduction

In Germany, hospitals provide crucial contribution to high-quality health care services through their employees. These institutions not only meet fundamentally significant task for whole population, but also they are important for economic sector with high employment, innovation, and growth potential.

German hospital sector represents an economic power of 86.8 billion Euros in 2012 which is the biggest single item within the health care sector. Moreover, this service sector stimulates the economy particularly in economic recession time. So, more than 1.146 mio. people find employment opportunities in this sector where 5.2 mio. is the total number of workers in the health care sector. Financing of investments in health care industry plays major role for sustainable economic activity and for entrepreneurial behavior of hospitals. This should also be viewed in the context of increasing number of private hospitals in the German health care industry (IHK Essen, 2014; Statistisches Bundesamt, 2013 and Statistisches Bundesamt, 2014).

There are more than 2,000 hospitals in Germany, but only 32 university clinics. Nevertheless, these university hospitals provide services to around 10% of stationary treated patients. The role of university hospitals in stationary patient care should not be underestimated. That's why; financial situation of university clinics needs to be examined carefully. Modern medicine, however, can not be thought without continuing investment. Doctors can no longer pursue their jobs properly, if investments are absent and if they turn out to be too low. In this context the university hospital of Freiburg argued that; 12 of 32 German university hospitals expected a negative annual result of over one million Euros in 2013. Besides, 11 of 32 university clinics believed that they could achieve a balanced year- end result for the entire 2013. Only 19% of all university hospitals assumed positive annual earnings of over one million Euros. Furthermore, the German journal Ärzteblatt accepts the difficult financial situation of university hospitals as a consequence of applied dual system in Germany. Investment subsidies provided by federal states are not sufficient for years. Insufficient financial resources impact hospitals negatively by expanding the infrastructure or such a situation forces hospitals to cover these costs from their own funds at least in part. In addition, further progress can not be thought in the lack of financial means. However; personnel costs, expensive pharmaceutical, and energy costs permanently increase more than the payments made by health insurance funds for provided services. …

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