By 2020, about 10% of Germany’s current number of approximately 2,000 clinics will probably shut down unless counter measures are taken. In the coming years, economic conditions will be difficult, particularly for small establishments operated by municipalities. Rural areas are likely to be especially hard-hit. Yet, the secure supply of services in rural areas will probably not be endangered in most cases. These and many other findings have been published in the seventh edition of the Hospital Rating Report which, for the first time, was presented publicly at the 2011 Capital Congress – Medicine and Health in Berlin. The investigation into the economic situation of hospitals in Germany was prepared in a collaborative effort by RWI, ADMED GmbH and HCB GmbH.

Unless counter measures are taken, the currently favorable economic situation of Germany’s hospitals will deteriorate from 2011. It is forecast that about 10% will drop out of the market by the year 2020. Small establishments will be mainly affected, particularly those run by municipalities and located in certain areas of Bavaria, in Baden-Württemberg, in southern Hessen and in regions of Lower Saxony. A total of 12% of hospitals were in the “red” range in 2009 (i.e., running a high risk of insolvency), while 75% were in the “green” range, and the remaining 13% were in between. However, according to the hospitals’ annual reports, only about 30% of them were able to afford all necessary investments. Yet, without investments hospitals are not viable in the long run. The investment backlog among clinics has mounted to a level of 14 billion euros since 1991. Consequently, hospitals need to improve their internal financing options considerably. These are the findings of the seventh edition of the Hospital Rating Report (Krankenhaus Rating Report), prepared in a collaborative effort by RWI, the Institute for Healthcare Business GmbH and ADMED GmbH. The findings were presented publicly at the 2011 Capital Congress – Medicine and Health (Hauptstadtkongress 2011 – Medizin und Gesundheit) in Berlin.

According to the report, the best economic situation was seen among hospitals in the German states of Rhineland-Palatinate and Saarland, Saxony-Anhalt and Thuringia as well as Saxony, followed by North Rhine-Westphalia. The situation was the most critical in Baden-Württemberg, Hessen, Lower Saxony and Bremen, and in Bavaria. Despite a comparable regional population density, there were about 40% more hospitals per capita in Bavaria, for example, than in eastern Germany. The frequency with which patients sought hospital care also varied throughout Germany. Of cases per capita, the rate ranged from 14% below the average in Baden-Württemberg to 12% above in Thuringia. Per capita hospital expenses were between 717 euros in Baden-Württemberg and 988 euros in Saarland.

Clinics with good business managers also have happier patients

When the business situation of Germany’s hospitals is viewed in terms of ownership, clinics maintained by municipalities are seen to rate significantly worse than private or non-profit institutions. Specifically, 21% of municipal hospitals were in the red in 2009, but only 10% of non-profit and 4% of privately maintained clinics were in the red. Municipal clinics in eastern Germany were an exception to this trend, with a rating as high as non-public institutions. There are also substantial differences among municipal hospitals in western Germany, with some reporting good profits.

Among the other findings of the report is the observation that, in terms of the business situation, small hospitals rate significantly worse than large institutions. A relationship was also identified between profitability, quality and patient satisfaction: both institutions bothered by quality issues, as well as hospitals troubled by low patient satisfaction, had poor ratings. For the first time, differences among non-profit hospitals were able to be investigated. It was thus seen that Catholic hospitals were in a better-than-average economic position, significantly better than Protestant hospitals.

Hospital spending increased less than expenses for private doctors

The 2011 Hospital Rating Report is based on a sample of 687 annual reports from 2008 and 366 reports from 2009, including a total of more than 1,000 clinics. Hospital spending amounted to 71 billion euros in 2009, which represents an increase of 6.4% over the previous year. Yet, hospital costs also rose considerably in 2009, particularly the costs of medical personnel. Spending on hospitals increased by 15% from 2005 to 2009, which represents a smaller increase than for private doctors (22%) or for inpatient and outpatient nursing care (20%).

In the future it is likely that rural areas with poor infrastructure will be particularly confronted not only with an aging population but also with substantial drops in population numbers. The hospital infrastructure will consequently no longer able to be sustained to the full extent in such areas. Yet closing down facilities will probably not endanger the secure supply of services in most rural areas. Even today, facilities providing basic services in rural areas (and especially municipally run institutions) are in the worst position, followed by urban providers of basic services. Specialized providers in rural and urban areas rate better on the average, whereas large providers, whether municipal or non-public, with more than 300 beds show the best business results.

Public policy aims at preventing clinic shutdowns as far as possible

It is not to be expected that local government policymakers will support a purging of the market which would result in fewer but larger and more profitable hospitals. Politicians at the state level will also probably exercise caution in this regard in order to avoid their voters’ wrath. Consequently, the banks will probably be the ones to play a major role in purging the market, i.e. by extending or refusing to extend financing. In order for the changes introduced to be beneficial to patients and individuals contributing to the health system, it would be helpful if the demand for hospital services, which is funneled by health insurers, were to have a greater influence in determining the services offered.

For further information, please contact:
Dr. Boris Augurzky (RWI) Tel.: +49 201 81 49-203
Dr. Sebastian Krolop (ADMED GmbH) Tel.: +49 2238 47 53 00
Sabine Weiler (RWI Press Office) Tel.: +49 201 81 49-213

This press release is based on the study “Krankenhaus Rating Report 2011: Die fetten Jahre sind vorbei” (Hospital Rating Report 2011: The good years are over). The report includes graphic charts on maps of Germany and hospital benchmarks. The executive summary is available from www.rwi-essen.de/publikationen/rwi-materialien/ as Issue 67 of the “RWI : Materialien” and from www.admed.com as a PDF file. The complete study can be ordered at a price of 270 euros incl. VAT from RWI Essen, HCB GmbH or ADMED GmbH.