This report does not constitute a rating action.
Large private hospitals in Germany will benefit from a stronger focus on specialization. German hospitals' operating conditions will remain challenging over the next 12-24 months due to slow and administratively cumbersome reimbursement and medical staff shortages. The hospital reform could provide some relief, but its implementation will be gradual and likely last until 2029. Hospital insolvencies remained high in Germany over the past two years, notably for non-profit and public hospitals. As a result, better capitalized and more profitable private groups could seize the opportunity and further consolidate Germany's hospital market.
What's Happening
In January 2025, the hospital reform came into force in Germany, with the objective of easing bureaucracy and improving efficiency in German health care. Additionally, the reform aims to improve the quality of care through increasing specialization. The restructuring of the hospital system will be gradual and start with the federal states assigning areas of specialization to hospitals by the end of 2026. The reform was tested in North Rhine-Westphalia in 2024 and was modified prior to further rollout. The new reform also aims to make the reimbursement system more performance- and quality-driven, as opposed to the currently purely volume-based model. The transition to the new reimbursement mechanism will be gradual, with the financing system coming into force over 2027-2028.
Why It Matters
A shift toward specialized care will benefit larger hospital groups with larger networks of sites. Under the new framework, hospitals will no longer be able to offer services across all medical areas. Instead, Germany's federal states will cluster hospitals into service groups and determine which medical departments or specialties each hospital will be responsible for. Hospitals will have to demonstrate that they have sufficient resources and can provide high-quality care to be assigned to a specific service group. We estimate larger hospitals, such as Helios Germany and Schön Klinik, will benefit from their scale--as they will continue to refer patients within the group--and cluster strategy.
The new funding system might cover 60% of hospitals' running costs. The current system reimburses hospitals with a set payment per treatment and incentivizes them to focus purely on volumes. After the reform, a fixed prepayment by federal states that is based on staff numbers, infrastructure, and special equipment will cover about 60% of hospitals' running costs. The coverage of the remaining 40% depends on the number of patients treated. We understand that specific quality criteria will be set at the federal level, while the service group structure will be determined by each state.
Cost pressure will continue affecting hospitals over the short term. The new reimbursement system should become effective by 2027, and we foresee limited cost relief for hospitals over the next 12 months. Hospitals are price-takers rather than price setters and since 2022, they have faced increasing inflationary pressure. We observe an 18-month delay for hospitals to get compensated for the inflationary effect on their cost base. This, coupled with a build-up in delayed nursing cost reimbursements from health insurance payors, increases working capital requirements for health care operators. We see public hospitals as financially less sound than private operators, which can address costs and liquidity pressures better. This is partly thanks to their therapeutic and real estate profile, and the better management of operations. According to Deutsches Ärzteblatt, about 24 hospitals filed for insolvency in 2024, of which 96% were non-profit or public hospitals.
What Comes Next
The upcoming snap election on Feb. 23, 2025, raises uncertainty. The next government could review, modify, or repeal the hospital reform, even though health care is not at the forefront of the political debate.
The calculation of the new fixed-cost allowance that hospitals will receive is unclear. This is a key variable to monitor, in our view, because it will determine if hospitals' current operating models can meet the specialization requirement.
Market consolidation could increase. This is because scale will become an even more important competitive factor due to patient referrals within groups, as well as purchasing and recruitment synergies. According to a July 2024 survey by consultancy Roland Berger, about 28% of German hospitals were at risk of insolvency by year-end 2024, with about 70% already operating at a financial deficit as of 2023. As the reform is being rolled out, we expect larger hospital groups will increase mergers and acquisitions activity to leverage their successful operating models and access to capital markets.
Related Research
- European Health Care Services In 2025: Can Private Health Care Operators Handle Looming Budget Austerity? Jan. 27, 2025
- Industry Credit Outlook 2025: Health Care, Jan. 14, 2025
- Tear Sheet: Schoen Klinik, Dec. 9, 2024
- Fresenius SE, Dec. 9, 2024
| Primary Contacts: | Francesca Massarotti, Frankfurt 49-69-3399-9130; francesca.massarotti@spglobal.com |
| Paloma Aparicio, Madrid 34-696-748-969; paloma.aparicio@spglobal.com | |
| Remi Bringuier, Paris 33-14-420-6796; remi.bringuier@spglobal.com | |
| Additional Contact: | Anna Overton, London 44-20-7176-3642; anna.overton@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.