In its fourth issue, the Hospital Rating Report examines for the first time the interrelationship between the quality of medical services and the economics of hospital operations. The result: economy (and profitability) need not be achieved at the expense of quality. There even appears to be a link between economic inefficiency and quality problems. This study - prepared jointly by the RWI Essen, the Institute for Healthcare Business GmbH and the ADMED GmbH - also examines the consequences of the anticipated shortfall of more than one billion euros in funding. After a recovery phase lasting through 2006, the financial situation for many clinical facilities became more acute once again in 2007. Closures and privatization are probable over the long term, as well as the concentration of health care services in medical centers. Efficient handling of scarce resources continues to be a major challenge for hospitals.

The economic situation at hospitals

Rising wages, higher costs for materials - for foods and energy in particular, and greater needs for both personnel and materials due to the rising number of patients treated are the three prime causes behind cost increases. Since budgets have been capped by the government, a funding shortfall of from 1.3 to 2.2 billion euros will appear this year already. That corresponds to from 2 to 3% of the previous total budgets for hospitals. Many hospitals were able to achieve a degree of economic recovery through the year 2006. They were able to turn a profit and in some cases even to finance investments from their own resources. The results of the Hospital Rating Report 2008, however, give cause to expect a distinct worsening of the situation in the near future.

The results of the rating: 18% of all hospitals endangered

The rating is based on a spot check of 471 annual reports for the years 2005 and 2006; these reports covered a total of 701 hospitals. The organizations were assigned to three categories (green, amber and red), based on their risk of insolvency. 18% of the hospitals were in the red range, 16% in the amber and 66% in the green category. The study forecasts, however, that in 2008 34% of all hospitals will slip into the red sector. The share of hospitals reporting losses will rise from 23% to 52%. Without countermeasures, the situation could worsen even further in the future. The share of organizations in the red range could rise to 49% by the year 2020.

Small facilities come off significantly worse in the ratings than the large or medium-sized facilities, hospitals in western Germany worse than those in the east. 22% of public hospitals are in the red zone, compared with only 17% of the charitable units and just 14% of the units in the private sector. Hospitals in North Rhine-Westphalia earn average ratings, those in Baden-Württemberg and eastern Germany above-average marks. The hospitals in all the other states fall below the national average.

Operating on the basis of data provided by the National Quality Assurance Bureau the Report examines for the first time the correlation between cost-effectiveness and quality. Hospitals showing peculiarities in regard to quality also tend to earn a worse - or at least no better - rating of their financial situation. This result shows that heightened cost-efficiency need not necessarily be achieved at the expense of quality. It might in fact go hand in hand with higher quality in medical services.

In the growing health care industry, many regions are striving to establish themselves as medical centers with drawing power beyond the immediate vicinity. The analysis of patient "migration" provides insights into which areas have in the past been particularly successful in the competition. Top positions are held by Munich, Frankfurt am Main, Heidelberg and the urban centers in the Ruhr Region.

Recommended measures at the operational and political levels:
Greater efficiency, no contribution to financial stabilization, higher remuneration levels

A combination of operational and political measures might make it possible to return to the relatively favorable position in the year 2006. A market shake-out affecting 10% of the hospitals was deemed acceptable at that time. National policies should also, during the course of the current year, eliminate the so-called "remediation contributions" made by hospitals to help shore up the statutory health insurance societies. Remuneration to clinics ought to be increased by 2.4% in 2009. The individual states should employ more efficiently their (already quite scarce) funds for investment grants and convert to a "monistic" system in which a single payer is responsible for financing hospital investments and covering clinics' operational expenditures.

If the mobilization of "societal efficiency reserves" - by increasing the number of persons gainfully employed and/or the number of persons paying premiums into the health care system - were to be successful, then hospitals' remuneration levels could rise more strongly over the long term than has been the case in the past. Assuming that additional optimization measures are implemented at the operational level, then - among the 90% of the hospitals remaining in the market - the share of units in the "red zone" could in the long run be reduced once again to about 20%. The share of clinics showing losses could shrink to 14% and the share of hospitals showing a surplus could rise to 70%.

For further information, please contact:
Dr. Boris Augurzky (RWI Essen), Phone:+49 201 8149-203, e-mail
Dr. Sebastian Krolop (ADMED GmbH), Phone:+49 163 744 4031,
Joachim Schmidt ( RWI Press Office), Phone: +49 201 8149-292, e-mail

This press release is based on the study entitled "Krankenhaus Rating Report 2008: Qualität und Wirtschaftlichkeit". It includes hospital benchmarks and graphic depictions of the results, shown against maps of Germany. The Executive Summary is available at www.rwi-essen.de/publikationen/rwi-materialien/ as Volume 41 in the series of "RWI : Materialien" and at www.admed.com as a PDF file. The complete study can be ordered, at a price of 260 euros including VAT, from RWI Essen, HCB GmbH or ADMED GmbH.