Implications of hospital financing on hospital strategies

The introduction of the DRG-System for reimbursement in German hospitals fundamentally alters the incentive structure, shifting focus from input measures like treatment days to output based on the number of patients treated, adjusted for severity. Consequently, the duration of patient treatment transitions from a revenue factor to a significant cost driver. While this change presents new opportunities for hospitals, it also introduces substantial risks that must be addressed to sustain high-quality healthcare in the future. The German hospital market is becoming increasingly transparent, and this transparency, combined with existing over-capacities and declining demand for hospital beds due to shorter average stays, subjects hospitals to competitive pressures previously unfamiliar to them. In light of these changes, the author explores how hospitals can successfully navigate this evolving landscape. The focus is on two key aspects: the external strategic positioning within the market and the internal organizational structure. The insights drawn from these considerations are compared to the experiences of the United States following the introduction of the DRG-System in the 1980s, providing a framework for understanding the implications of these developments for German hospitals.