GERMANY: An Introduction to Healthcare

Overview  

For over a century, Germany’s healthcare system has been defined by its statutory health insurance. Nowadays, approximately 73 out of 83 million inhabitants are covered by statutory health insurance whereas only 10 million patients are privately insured. Germany’s annual expenditure on health amounts to EUR390 billion. This corresponds to around 11% of GDP. The statutory health insurance funds spend approximately EUR220 billion a year on services for their insured. Hence, these insurance funds have an important impact on all stakeholders in the German life sciences sector. This leads to a highly regulated healthcare system with a major emphasis on the cost-benefit ratio of services provided.

In addition to the density and quantity of regulations, healthcare is one of the most complex and rapidly changing regulatory branches.

In-patient and out-patient services are regulated by national laws. Public and private hospitals as well as out-patient service providers also have to follow regulations at the state level and have to deal with local authorities. Overall, legal advice for the healthcare industry has to cover many areas. This obviously includes legal know-how and expertise on healthcare regulation and extends to, inter alia, mergers and acquisitions, antitrust and competition, public procurement and data protection issues.

Current Developments and Challenges for the Industry

The German healthcare industry offers interesting investment opportunities. The main targets for financial and strategic investors are out-patient medical care centres and nursing homes. Following market consolidation in the areas of radiology, laboratory medicine, and dialysis services, the focus has shifted to investment opportunities in orthopaedic service providers. However, the Minister of Health reiterated the need for legislation that would ban private investors from acquiring medical care centres. This is motivated by the assertion that private investors focus solely on their financial interest, to the detriment of their patients’ health. In addition, it is claimed that the anticipated profits outweigh the quality of the provision of care. This issue has sparked intense debate among stakeholders, necessitating the anticipation of potential legislative obstacles. Private investors are seeking legal advice on how to mitigate the risks of established investments and develop strategies to challenge potential regulations in court.

As the pace of legislative activity accelerates towards the digitalisation of service providers themselves and their technical means of communication with all stakeholders, the challenges of designing business models in compliance with the new regulations must be addressed.

Online pharmacies continue to face opposition from brick-and-mortar pharmacies, which seek to undermine the online pharmacy business model through (i) legal action and (ii) lobbying for the prohibition of online sales or state intervention to decrease the economic attractiveness of such a business model.

Out-patient services have historically been mainly provided by self-employed physicians. However, these physicians are often reluctant to invest in their own practices. Hence, stakeholders are constantly developing business models offering infrastructure and personnel as a service so that physicians are able to run their practices on a short-term model with lower financial risks. However, as existing regulations have not fully adapted to these models, legal advice is essential to navigate this changing landscape.

The legislature still plans to amend the statutory funding of hospitals on a federal level as well as on a state level. These plans are still being formed, but the general direction can be seen: the strict remuneration of in-patient services based on the diagnosis-related group (DRG) is being replaced. However, the specifics of what will replace it are still under consideration and await further regulation and clarification. In addition, the second branch of hospital financing at the state level is also subject to reform. Discussions on these aspects are heated and focus on ideas for the structure of a reformed funding system. However, no draft legislation has yet been published. Stakeholders are looking for advice on how to prepare for new regulations and how to adapt business models accordingly.